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Timber Certification Progress and Issues

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					TIMBER CERTIFICATION:

PROGRESS AND ISSUES




             Report prepared by

 Baharuddin Haji Ghazali and Markku Simula

                   for the

 International Tropical Timber Organization




               January 1998
          Kuala Lumpur - Helsinki
List of Tables

Table 3.1  Intergovernmental Processes Related to Criteria and Indicators for Sustainable Forest
           Management                                                                              8
Table 4.1 Buyers’ Groups                                                                          23
Table 5.1 Market Shares of FSC-accredited Certification Bodies                                    26
Table 5.2 Certified Forests in the World 1994-97                                                  27
Table 9.1 Forest Land in Indonesia                                                                57
Table 9.2 Estimates of Cost/Benefits for Government. 1994                                         66
Table 9.3 Estimates of Cost/Benefits for Concessionaires. 1994                                    67
Table 12.1 US State and Local Laws and Proposed Legislation to Restrict Tropical Timber Trade 97
Table 13.1 Share of Asian Markets in Exports of Tropical Logs and Sawnwood in Selected
           Western African´Countries                                                             109

List of Figures

Figure 2.1      Forest Management-based Labels in the Context of Environmental Labelling          4
Figure 2.2      Elements of Certification and Labelling Schemes                                   5
Figure 7.1      Development of a Procedural System and Standards for Forest Certification in
                Finland                                                                          40
Figure 7.2      Levels of Finnish Certification System                                           43
Figure 9.1      LEI’s Certification Procedure for SFM                                            62
Figure 10.1     Forest Management Certification Process in Malaysia A Preliminary Structure      77
Figure 13.1     Industry Dependence on Environmentally Sensitive Markets in Sawnwood. 1995.     107
Figure 13.2     Industry Dependence on Environmentally Sensitive Markets in Plywood. 1995.      107
Figure 13.3     Industry Dependence on Environmentally Sensitive Markets in Wood Pulp. 1995     108
Figure 13.4     Industry Dependence on Environmentally Sensitive Markets in Paper and
                Paperboard. 1995                                                                108

List of Annexes

Annex 1.1            Decision 4(XX)
Annex 4.1            FSC Organogram
Annex 4.2            National-level Development and Initiatives Related to Certification
Annex 5.1            List of Forests Certified by FSC Accredited Certification Bodies




ITTO/Timber Certification: Progress and Issues/31/12/97                                           v
LIST OF ABBREVIATIONS AND ACRONYMS

 ABNT                        Asociacão Brasileira de Normas Tecnicas
                             (Brasilian Association for Technical Standardisation)
 AF&PA                       American Forest & Paper Association
 APHI                        Indonesian Association of Forest Concession Holders
 ATO                         African Timber Organisation
 BMP                         Best Management Practice
 CCAB-AP                     Consejo Centroamericano de Bosques y Areas Protegidas
 CCAD                        Comisión Centroamericana de Ambiente y Desarollo
 CEPF                        Confédération Européenne des Propriétaires Forestiers
 CERFLOR                     Certificação Florestal (ABNT’s scheme)
 CGIAR                       Consultative Group on International Agricultural Research
 C&I                         Criteria and Indicators
 C&L                         Certification of Forest Management and Labelling of Forest Products
 CIFOR                       Centre for International Forestry Research
 COC                         Chain of Custody
 CCMSS                       Consejo Civil Mexicano para la Silvicultura Sostenible
 CSA                         Canadian Standards Association
 DDB                         Dutch Working Group
 DFA                         Defined Forest Area
 DIY                         Do-It-Yourself
 DSN                         Indonesian Standards Council
 EFTA                        European Free Trade Association
 EIA                         Environmental Impact Assessment
 EMAS                        Eco-Management and Audit Scheme
 EMS                         Environmental Management System
 ENGO                        Environmental Non-Governmental Organisation
 EPA                         Environmental Protection Agency (U.S.)
 EU                          European Union
 FAO                         Food and Agriculture Organization
 FoE                         Friends of the Earth
 FICGB                       Forest Industries Committee of Great Britain
 FMA                         Forest Management Association
 FMU                         Forest Management Unit
 FOB                         Free on Board
 FPBG                        Forest Products Buyers’ Group (US)
 FSC                         Forest Stewardship Council
 GDP                         Gross Domestic Product
 GTZ                         Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH
 ha                          hectare
 IEC                         International Electrical Commission
 IFF                         Intergovernmental Forum on Forests
 IFW                         Initiative zur Förderung Nachhaltiger Waldbewirtschaftung (Germany)
 IGAD                        International Wood Products Association
 IHPA                        International Wood Products Association (US)
 ILO                         International Labour Organization
 IMAFLORA                    Instituto de Manejo e Certicação Florestal e Agrícola (Brazil)
 INMETRO                     Instituto de Metrologia (Brazil)
 IPAP                        International Project Advisory Panel


ITTO/Timber Certification: Progress and Issues/31/12/97                                            vi
 IPF                         Intergovernmental Panel on Forests
 ISO                         International Organization for Standardisation
 ISCI                        International Seminar on Criteria and Indicators
 ITW                         Initiative Tropenwald
 IUCN                        World Conservation Union
 ITTA                        International Tropical Timber Agreement
 ITTC                        International Tropical Timber Council
 ITTO                        International Tropical Timber Organization
 LEI                         Lembaga Ekolabel Indonesia (Indonesia Eco-labelling Institute)
 MAC                         Malaysian Accreditation Council
 MTK                         Central Union of Agricultural Producers and Forest Owners (Finland)
 MPI                         Indonesian Forest Community
 NFC                         National Forestry Council (Ghana)
 NLC                         National Land Council (Ghana)
 NGO                         Non-Governmental Organisation
 NRMP                        National Resources Management Project (Indonesia)
 NTCC                        National Timber Certification Council (Malaysia)
 NWG                         National Working Group
 OECD                        Organization for Economic Cooperation and Development
 P&C                         Principles and Criteria
 PPM                         Processes and Production Methods
 PFE                         Permanent Forest Estate
 SA                          Soil Association
 QSAR                        Quality Systems Assessment Recognition
 SCS                         Scientific Certification Systems
 SFI                         Sustainable Forestry Initiative (AF&PA)
 SFM                         Sustainable Forest Management
 SGS                         Société Générale de Surveillance
 SLL                         Nature Conservation Union (Finland)
 SNF                         Swedish Nature Conservation Union
 SSG                         Scientific Support Group
 SW                          SmartWood Programme of Rainforest Alliance
 TC                          Technical Committee
 TBT                         Technical Barriers to Trade (Agreement)
 TPTI                        Selective Cutting and Planting Silvicultural System (Indonesia)
 UK                          United Kingdom
 UN                          United Nations
 UNCED                       United Nations Conference on Environment and Development
 UNEP                        United Nations Environment Programme
 UNCTAD                      United Nations Conference on Trade and Development
 US                          United States
 USAID                       United States Agency for International Development
 USD                         United States dollar
 WRI                         World Resources Institute
 WG                          Working Group
 WTO                         World Trade Organization
 WTP                         Willingness-to-Pay
 WWF                         World Wide Fund for Nature




ITTO/Timber Certification: Progress and Issues/31/12/97                                            vii
                                               EXECUTIVE SUMMARY

This report is the third in the series of ITTO´s global reviews on certification of forest
management and labelling of forest products which together, are called timber certification.
The focus is given to the overall developments since 1996 including details of experiences
gained in seven preselected countries. Some progress has been observed in the development
of certification schemes but its pace in general is rather slow. Several issues and shortcomings
still need to be resolved before this instrument can prove to be effective in achieving its main
objectives of contributing to sustainable forest management (SFM) and improved market
access, both of which are still very relevant today.

1.          POLICY CONTEXT

Certification and labelling are not a sufficient condition, nor are they necessary for SFM but
they may play a useful complementary role in achieving it. As a policy tool, they belong to
the group of market-based instruments. As long as certification is voluntary and brings
benefits to forest owners and managers, it is considered a “soft” policy tool making it
different from statutory regulation, taxation, etc. In the policy context, certification features as
an interface of trade, environmental and social attributes. It embraces a broad range of issues
such as market access and trade barriers; full-cost internalisation; market transparency;
ecological stability; security of tenure of resource; well-being of forest dependent
communities; and care and safety of workers.

One underlying assumption of an effective use of certification is the existence of a market
where certified products are preferred by buyers and consumers. The other is that forest
owners and managers, processing industry, suppliers and distributors could enjoy equitable
benefits from certification. Benefits should preferably outweigh costs but this is not necessary
for as long as certification is voluntary and not, for example, a condition of market access.

The policy element of certification is contained in the performance requirements of the
standards which serve as a basis for assessment of forest management. In individual countries
such requirements are typically contained in legislation, forest management rules, regulations,
etc. At the international level, they are contained in UNCED Forest Principles, Agenda 21,
and IPF’s action proposals and various regional processes concerned with developing criteria
and indicators (C&I) for SFM. These provide a framework for aspects to be considered in
certification standards. Compliance with the law is a basic requirement for certification.
Certification standards tend to be higher or more specific than the legal requirements but,
being based on voluntary participation, they are not of course mandatory. If SFM is provided
for in legislation, there is no need a priori for certification standards to be different from it,
and the focus would then be on its verification through law enforcement.

2.          DEVELOPMENT OF CERTIFICATION STANDARDS

In the near future there will be perhaps up to 10 intergovernmental processes to develop
criteria and indicators for SFM. They are being implemented at the national level and also
provide the framework for setting certification standards. There is an obvious need to identify
more common ground, be it comparability, compatibility, convergence or harmonisation
between national, regional and international processes.




ITTO/Timber Certification: Progress and Issues/31/12/97                                         viii
The international and regional processes to develop C&I provide a useful framework for the work
     carried out at the country level. The purpose of these processes has not, however, been to
     provide a common basis for certification standards. The Pan-European process is generating a
     set of operational level guidelines which is an encouraging sign of international willingness to
     develop common frameworks which could be linked with certification.

The development work on certification standards for forest management certification has taken
     place mainly under the national processes. These exercises are sometimes led by
     governments, sometimes by standards bodies, other independent institutions, or non-
     governmental organisations. Nationally developed standards have been designed for
     particular local conditions. In view of possible future need of harmonisation or comparability,
     it would be useful if a common general framework could be formulated to guide and facilitate
     the national-level development of standards.

Based on CIFOR´s work it appears that there is a strong common element between the various sets
     of regional criteria and indicators at tropical sites, but the degree of commonality varies by
     subject area. The development of a “core” common set appears possible and is called for by
     some parties and will be facilitated by CIFOR’s toolbox to develop criteria and indicators.

     3.          CERTIFICATION SCHEMES

     3.1         Forest Stewardship Council

     Forest Stewardship Council (FSC) has continued to expand its membership and resources as
     well as to develop its guidelines and activities. The system development is not yet complete
     and several key issues require further work, such as (i) verification of chain-of-custody, (ii)
     certification of smallholders, (iii) treatment of wood coming from conversion forests, (iv)
     harmonisation of national FSC standards in similar ecological zones, and (v) certification of
     non-timber forest products.

     The complexity of certification and labelling operations in the forestry sector has made FSC’s
     system somewhat slow moving. On the other hand FSC’s visibility in the international arena
     has steadily increased. The experience of FSC shows that an international NGO-based
     initiative can lead to an important development work both within and outside the
     organisation. Its achievement is significant enough to have prompted similar initiatives,
     national and regional, to operate as alternative to FSC’s. FSC’s concept, designed by NGOs
     was, probably targeting a small market share initially. This is apparently changing as the
     mainstream forest industry is now coming into the focus. This would also be a precondition
     for self-financing. The next two-three years will be critical for FSC as it is going to be a test
     of FSC’s ability to “deliver” having raised the market’s expectation for bigger supplies of
     certified wood and wood-based products.

     As it is today there is still limited support for FSC from the mainstream forest industry; the
     experience in other sectors and on general environmental labelling schemes shows that such a
     support is necessary for the long term success. It is not foreseen that FSC would enjoy a
     monopolistic position for too long despite its position today as virtually the sole accreditation
     and labelling program for forest products worldwide.




     ITTO/Timber Certification: Progress and Issues/31/12/97                                        ix
3.2         Certification of Environmental Management Systems

The application of ISO 14001 standard on environmental management systems (EMS) has
been clarified by an ISO Working Group which has prepared a draft technical report for this
purpose. The ISO 14001 standard provides a harmonised basis to develop management
systems. Forestry organisations will have to define themselves which performance targets
they want to commit themselves and how these performance targets are developed. These two
issues are likely to require further work which may, however, take place at national level.

Applying ISO 14001 in forest organisations would be complementary to schemes based on
certication of performance standards if the aim is to have both types of certifications. ISO
14001 makes the respective performance requirements an integral part of the organisation’s
management system in a systematic manner. A single certification assessment could
eventually reveal whether the EMS of an organisation meets ISO 14001 and whether the
performance requirements adopted by the organization are achieved in the forest. ISO
certificates may not be used in on-product information on environmental performance on
which they do not convey information beyond continual improvement.

3.3         Regional Schemes and Initiatives

The regional initiatives to develop common certification standards or schemes have not yet
led to any concrete results. Regional cooperation has, however, been useful in the exchange of
information and experience. The work is still in the early phase of development, much too
early to make any impact. Besides, different national priorities have, for the time being, been
so important that the slow moving regional cooperation has to take the back seat.

3.4         Forest Management Related Labelling Schemes

Several types of labelling schemes have emerged for forest products in recent years. Some are
based on third-party certification, while others on self-declarations; some refer to the quality
of forest management, others to the country of origin only. Wood-based products are also
included in multi-issue (life cycle-based) environmental labelling schemes. A certain degree
of proliferation of certificates and labels is foreseen which has the risk of creating confusion
among buyers and consumers and undermining the credibility of claims. On the other hand,
the industry is keen to have options in giving information on its environmental performance
as part of marketing strategies.

Independent national-based labelling schemes have been developed in Germany and the
Netherlands to facilitate marketing of certified wood products in the domestic markets. The
basic idea is to assign a body to undertake the verification of certified timber reaching the port
of entry, or, in the case of domestic supplies, the mill gate, and subsequently institute a chain
of custody tracking system, and finally issue a “stamp of approval” onto the product upon
delivery to the consumer.

Three key issues have been raised in this context: (1) which certificates can be recognised
(minimum acceptable standards); (2) which labelled products can be accepted by the market –
 a contention that can be raised particularly by Buyers’ Groups and ENGOs, if these products
are certified by non-FSC accredited bodies; and (3) how will the verification of the chain of




ITTO/Timber Certification: Progress and Issues/31/12/97                                         x
custody be carried out in the case of products containing certified and uncertified raw
materials.

3.5         Marks of the Country of Origin

Several countries have in the past issued their exporters with certificates or marks of the
country of origin of forest products which were often accompanied with statements on the
quality of forest management. These self-declarations have been challenged as being
unsubstantiated statements which had led to the withdrawal of some of them. Other schemes
are aimed at promoting domestic timber in the national markets through marks of domestic
origin (e.g. Austria, Germany, Switzerland and the UK). There schemes have partly emerged
as a countermeasure as it is feared that non-labelled domestic timber may be discriminated
against by some retailers. There are bound to be problems arising out of the use of mixed
domestic and imported certified timber or fibre in marketing them as end products.

3.6         Multi-issue Environmental Labels

Multi-issue national environmental labelling schemes are found in several countries and
regional versions. Of particular interest is the EU Eco-label Award Scheme which already
covers copy paper, kitchen rolls and toilet paper. Their raw material criteria make reference to
the Resolution H1 of the Helsinki process or to the UNCED Forest Principles for states which
have not adopted the Helsinki Resolution. Forest management certificates could be the
appropriate instrument to provide credible information on the environmental (and social)
aspects of the sustainability status of the sources of the raw materials for these products.

3.7         Buyers’ Groups

Eight countries are reported to have active buyers’ groups which have made commitments to
buy certified forest products. In addition, action has been taken by local governments or
institutional buyers in some countries to communicate their commitment or preference to
buying certified wood products. These initiatives impose further pressure on suppliers to get
their products certified. However, no significant increase in the actual volumes of certified
timber traded has been observed due to its limited supply. It is not clear how the committed
buyers will react to varying market situations, e.g. if uncertified timber products are sold at
lower prices than certified. Customer activity appears to be increasing in countries with high
environmental awareness but this may take new forms in the future (e.g. buyer-specific
purchasing policies). Certification programmes would eliminate the need by the suppliers to
meet varying buyer-specific requirements thereby contributing to efficiency.

4.          PROGRESS IN IMPLEMENTATION

4.1         Certification and Accreditation Bodies

The number of accredited forest certification bodies around the world is still small. FSC has
completed only five exercises. The original four, i.e. SGS Forestry and Soil Association (SA)
in the United Kingdom, and Scientific Certification Systems (SCS) and the SmartWood
Programme of the Rainforest Alliance (SW) in the United States have been recently followed
by SKAL from the Netherlands.



ITTO/Timber Certification: Progress and Issues/31/12/97                                       xi
The limited certification capacity of the existing bodies is a notable constraint in the
development of timber certification, which may aggravate if demand for such services
expands. Linked with this is the narrow human resource base of the existing organisations.
This is a constraint that may affect both the volume and quality of the certification activity.
Innovative solutions toward decentralisation are expected to emerge to eliminate this
bottleneck.

If there are capacity constraints among certification bodies, the situation may be even more
difficult with accreditation. FSC has a permanent staff of six, covering administration and
information. FSC, like certification bodies, has to rely on specialists under short-term
contracts. Several certification bodies from Brazil, Costa Rica, Germany, and Sweden have
applied for FSC accreditation. With the current resources FSC may not be capable of coping
with the demand of prospective certification bodies. This problem is already reflected by the
lengthy periods of time taken to process accreditation applications.

Much of the problems mentioned above could be eliminated, if accreditation were to be
carried out by national accreditation bodies. This is happening, for example, in the case of
ISO 14001 and could be a possibility for FSC as well if it subcontracts accreditation to
national bodies. In circumstances of many developing countries where there are no national
accreditation arrangements, this would not, however, be the solution.

4.2         Certified Forests and Forest Products

The recent progress in new certifications has been relatively slow if measured in terms of area
(Table 5.2). The area of certified forests dropped in 1996 to about 3 mill. ha while some
certificates issued earlier were not renewed. The term “forest” can include any forested land
between 8 ha in Solomon Islands and 635 000 ha of state forest in Katowice, Poland. The
number of certified forests and particularly their area is expected to increase relatively fast,
but the rate may fall short of the ambitious targets set e.g. by the World Bank and WWF.

The consultants’ estimate of the roundwood production from certified forests (March 1997) is
in the region of 9.5 million m3/year. This would correspond to an average annual level of
harvesting of 3.2 m3/ha. Of the total estimated wood production, the three Polish state forests
account for 4.6 mill. m3 /yr. The theoretical wood production volume is expanding but in
practice it is still marginal since production is spread over 57 forests in 16 countries

Most product certificates and labels have been issued to special products or products which
enjoy market niche. The limited supply volume has represented a constraint for major
promotional efforts. This situation is, however, expected to change in the near future as more
large-scale certifications are completed (e.g. Poland and Sweden).

4.3       Certification of Environmental Management Systems in Forestry
          Organisations

At least five certifications of forestry organisations to the ISO 14001 standard have been
reported: two in Brazil and one each in Finland, Sweden, and Indonesia. In Canada, a recent
survey has revealed that sixteen forest enterprises and organisations have the intention, or are
in the process, of applying the new Canadian standard on environmental management systems
(CSA Z809) which corresponds to ISO 14001. Their total forest area is more than 8 million


ITTO/Timber Certification: Progress and Issues/31/12/97                                      xii
ha with an annual wood production of 10 to 12 million m3. The purpose of the organisations is
to seek certification.

5.          COUNTRY CASE STUDIES

Seven country case studies were carried out representing different national situations. Brazil,
Ghana, Finland, Indonesia and Malaysia are all developing national standards or schemes for
certification (mainly to meet the requirements of their export markets) but are applying
somewhat different approaches. The other two countries were the Netherlands and the United
States of America. The Netherlands viewed the issue from the importing country’s
perspective while in the case of the United States, the situation is probably the most complex
where certification is an issue that applies to (i) the domestic market concerning locally
produced and imported products as well, and (ii) US exports to environmentally sensitive
markets where certification is required.

The case studies show that countries have taken different approaches to develop certification
and labelling in the forestry sector. There are countries where the work was initiated or is led
by the government (eg. Ghana, Malaysia) while in other cases the development of the matter
has been taken up by forest owners, industry and NGOs (eg. Brazil, Finland). In the latter
case parallel schemes have also emerged, i.e. those driven by the industry and those by NGOs
(eg. Brazil and Canada). Whether such parallel schemes can sustain in the long run is unclear
and in some cases their convergence may be foreseen.

The main lessons learned from the country cases are summarised as follows:

• Appropriate certification criteria may only be developed nationally (or subnationally) in
  order to duly consider the peculiarities of local ecological and socio-economic conditions.

• The process of developing certification standards is an arduous and time-consuming
  exercise which needs to be followed by testing of the criteria and indicators on the ground.
  Clarity and measurability are important considerations for standards design.

• The participation of all the main interested parties (stakeholders) in the standards
  development process is desirable as it contributes to the credibility of the outcome. Some
  national initiatives are probably based on too narrow a process to incorporate all the main
  interested parties.

• The standards should preferably be agreed upon through consensus but provisions should
  be made to allow the process to move on in situations where consensus may not be reached
  yet. Experience has shown, however, that, if consensus cannot be achieved among the key
  stakeholder groups, implementation will become difficult.

• Several approaches to the broad-based standards development process are possible.
  Countries may choose arrangements which are applicable to their particular socio-
  economic situations.

• Government regulations will go a long way in pushing toward SFM in many countries
  when duly enforced. Certification standards complement the regulatory framework which



ITTO/Timber Certification: Progress and Issues/31/12/97                                     xiii
    is broader in scope. They are often more specific and broader in the requirements and
    sometimes set higher performance targets.

• Adequate grievance procedures which should be included in certification arrangements in
  order to improve transparency of the system are lacking in many cases.

• The level of perception of interested parties on the possible role of certification varies and
  expectations tend to be unrealistic at times due to a lack of full understanding of this
  instrument. There is a need to improve the understanding of timber certification among all
  quarters, including forest owners, forest industry, NGOs and the governments, especially
  on the potentials and limitations of certification and labelling as instruments to promote
  SFM and export trade.

• Certification of smallholdings is a key concern in the countries where small-scale non-
  industrial private ownership is important. Without forest owners’ support and participation,
  it will not be possible to implement certification; they have to be fully involved in the
  development process.

• Adequate information on national initiatives should be disseminated internationally if they
  are to gain recognition and acceptance. Communication should be forward looking and
  cover all the necessary target groups in both local and international markets.

• Governments can play an active role in the development of certification as the experience
  in Ghana and Malaysia indicates. Credibility problems may, however, occur if the govern-
  ment’s role is seen to be too dominating.

• Market benefits appear uncertain as there is no wide-scale demand for certified products at
  present. In addition, it is unlikely that certification could influence such fundamental
  factors as changes in taste for colour, for example.

• The main reason for embarking on the national certification schemes in many exporting
  countries appears to be the fear of losing market share. Through national initiatives it is
  possible to have certification standards and arrangements designed in an appropriate
  manner to correspond to the specific country situations. Also, one must not ignore the fact
  that the countries concerned have opted to go for certification realising that it would be to
  their own interest to do so. This would also reflect favourably in the international scene,
  the good efforts that they are making to manage their forests sustainably.

• International recognition is a major success factor in national initiatives. Good design of
  the certification scheme, transparency and openness, as well as broad participation in
  standard setting are important elements in gaining international recognition. There are,
  however, no ready mechanisms for it apart from FSC. Many producers and some
  governments tend to be concerned about FSC’s possible monopolistic role.

• If forest owners, forest industry and ENGOs would cooperate rather than take conflicting
  positions, as is happening presently, it would give a tremendous boost to certification in
  many countries.




ITTO/Timber Certification: Progress and Issues/31/12/97                                      xiv
6.          KEY ISSUES

6.1         Development of Standards

Several issues have been raised on (i) how forest management standards should be developed
and by whom, (ii) what “level” they should be targeted at, and (iii) whether the standards
should be harmonised internationally. Traditionally, forest management standards are
considered a national issue and in many federations forestry is basically a state-level affair. It
is also argued whether “sustainable forest management” only, or “well-managed forests”,
should be certified which has conceptually different implications. The time factor is also
important in the sense that any forest rehabilitation or improvement work takes time, quite
often over very long periods to show results. A snapshot state of the forest is therefore a
cumulative output of decisions which have been made in different stages of development in
the past, over a long period of time, usually by several different forest managers or owners.
The current management practices may be good but the forests are not necessarily yet
managed from the sustainability point of view. These aspects need to be considered when
certification standards are prepared.

There is a need to clarify what is the role of the certification standard in the SFM process:
whether the standard and its performance elements should describe the “final” SFM status as
what CIFOR C&I work aims at, or whether the standard should be a tool which, after periodic
revisions, will lead to SFM allowing learning by doing based on accumulating scientific
knowledge and practical experience. In the consultants’ view, the latter role would be more
appropriate.

There is an increasing stand in favour of participatory approaches in setting goals and
objectives of forest management. This is also considered equally applicable when setting
certification standards. The extent and mechanisms of participation are likely to be a key
aspect when the credibility of national certification standards is judged by the market. It
would be helpful to have common, internationally recognised guidelines for participatory
processes.

6.2         Trade Rules and Certification

WTO has recognised that well designed environmental labelling programmes can be effective
instruments of policy to encourage the development of an environmentally conscious public.
As a voluntary instrument and if applied by private sector organisations, certification and
labelling of forest products can be considered compatible with the international trade rules,
not falling within the jurisdiction of the Agreement of Technical Barriers to Trade (TBT). In
this context ambiguity has arisen with regard to what are the “recognized bodies” referred to
in the Agreement. Furthermore, it has been suggested that if labelling programmes are trade
distorting they may be challenged in WTO.

The Agreement does not call for harmonisation of standards related to processes and
production methods (PPMs) but they are covered by GATT 1994, if applied as governmental
measures. TBT compliance could be used as a guidance in the design of any certification and
labelling schemes to avoid friction with the trade rules. In spite of the fact that non-
governmental bodies basically fall outside the competence of the TBT Agreement, the
willingness of such bodies to follow its provisions would contribute to their recognition.


ITTO/Timber Certification: Progress and Issues/31/12/97                                        xv
If standards are harmonised and they result in requirements which represent significantly
different costs of compliance by countries, the issue of unequal treatment of like products or
discrimination could be raised. An appropriate level of standards could avoid unnecessary
obstacles to trade. This situation applies when their level is higher than what is implied by the
legitimate objective of “protection of plant and animal life or the environment”. The standard
should not however be set higher than necessary in order to achieve such objectives, and
relevant elements to be considered are, inter alia, available scientific and technical
information.

From the viewpoint of developing countries, the TBT Agreement recognises the need to
consider their specific local conditions in standard setting. A transition period would be
desirable to enable these countries to improve their systems to achieve internationally
compatible performance levels. Such provisions are not contained in the current certification
standards and procedures. Since certification is voluntary such a transition period has
probably been considered irrelevant. This issue should, however, be considered both in
standard setting and conformity assessment procedures.

6.3         International Harmonisation and Recognition

The main justification of harmonisation derives from the proliferation of certificates and
labels which makes their recognition cumbersome or even impossible and creates confusion at
the consumer level. In addition, a certain degree of harmonisation in certification standards
could avoid unequal treatment of individual producers. From the trade point of view,
harmonisation of environmental claims could facilitate trade and improve efficiency.

Harmonisation may be achieved through (1) competition between different certificates and
labels in the market place (the strongest ones will win), or (2) it could be instituted through
common guidelines and implementation mechanisms. Both options are possible.

Harmonisation in certification and labelling in the forestry sector through institutional
arrangements could proceed through two non-exclusive strategies: (i) by individual elements
(standard setting, conformity assessment, accreditation, labelling), or (ii) through integrated
solutions. The latter may be developed at the international level (such as e.g. ISO or FSC), or
through regional arrangements (e.g. ATO, EU or other regional organisations could provide
an appropriate framework). The existing ISO tools already provide a useful basis for
harmonisation of many individual elements related to certification and labelling in the
forestry sector.

In standard setting, an appropriate degree of harmonisation of national performance standards
may be identified. In addition, the procedures for developing nationally applicable
performance standards could also be harmonised to facilitate comparability of individual
national standards. However, if harmonisation leads to too low a level of standards, it may not
succeed in achieving an acceptable solution to the market.

In view of FSC representing a possible integrated solution to harmonisation, the organisation
could develop its program towards comparability with the relevant ISO standards and guides,
and toward recognition of national (non-FSC) processes and country initiatives to set




ITTO/Timber Certification: Progress and Issues/31/12/97                                      xvi
standards and arrangements for certification. Its worldwide acceptability would be
significantly improved. The difficult issue of sovereignty could be avoided.

Complete harmonisation may never be reached in forest management standards, or related
certification and labelling arrangements. Neither would it be desirable if it runs the risk of
getting suboptimal solutions on the ground. Therefore, much more important than
harmonisation per se would be the appropriate mechanisms of international recognition.

In view of the short history of implementation and limited experience on the use of this
instrument, it is too early to seek harmonisation in such an evolving discipline. In due course
with expanding trade volumes, the issue of harmonisation will, however, have to be addressed
and it is foreseen that a certain level of harmonisation will be needed. On the other hand, the
process of international harmonisation is time-consuming and therefore its development,
which could proceed through incremental steps, should be started early enough.

6.4         Credibility

The issue of credibility has several dimensions in certification and labelling in the forestry
sector. First, there is a potential conflict of interest if the same body which carries out
assessment also issues certificates. Separation of the two activities to be carried out by two
different entities would solve this problem. A similar conflict prevails if a certification body
also acts as an advisory consultant.

The second reason for lack of credibility can be the poor quality of the assessment work A
number of FSC-accredited certifications have been challenged in the public for a number of
reasons including (i) the quality of assessment work (e.g. in Costa Rica), (ii) contradictory
and ambiguous information and interpretations presented by stakeholders (e.g. in Gabon), and
(iii) the participatory element in defining the standards and consultations with interested
parties (e.g. Poland). The number of qualified assessors of forest management for certification
purposes is increasing but still very small. The training needs are not limited to external
assessors, there is as much a need to strengthen the internal auditing capacity and the
management systems at large in forestry organisations. A review of the public summaries of
the assessment reports indicates that there is considerable variation in how the quality of
assessment work is being viewed at and how various interpretations have been made.

Thirdly, ENGOs have criticised national non-FSC certification initiatives as “not being cre-
dible”. Several arguments have been raised, such as (i) low level of standards leading to the
continuation of business as usual, (ii) a lack in transparency of performance indicators as well
as (iii) inadequate participatory provisions. These problems could be eliminated through
integrating the necessary provisions for standards setting and certification arrangements.

Finally, it is the market which in the end gives recognition of certificates and labels. In
general, buyers, traders and specifiers are not able themselves to establish whether a
particular certificate or label is credible. They, therefore, have to rely on other sources of
information. This emphasises the need for establishing common ground rules and codes of
conduct for all work involving certification and labelling in the forestry sector.

6.5         Impact on SFM



ITTO/Timber Certification: Progress and Issues/31/12/97                                     xvii
The impact on sustainable forest management of certification is difficult to assess in view of
the very limited experience in practice. As it will probably be the best managed forests which
will be certified first, the impact on their management is likely to be limited. If improved
practices spread to poorly managed forests, a significant impact can be expected.

Without tangible benefits deriving from certification in terms of improved competitiveness,
enterprises will have little incentive to improve forest management with higher costs. There
would be even less motivation for the industry to submit themselves to stricter controls than
those at present. The problem is particularly serious in developing countries and may not be
solved through piecemeal partial solutions like certification which still has not proved its
effectiveness. Comprehensive development strategies towards SFM would be needed where
certification and labelling can sometimes play a useful complementary role.

6.6         Costs

Incremental management costs to achieve sustainability may be substantial and will vary by
ecological zones and countries. They cannot, however, be considered due entirely to
certification as all countries are already committed to SFM. Costs may also be due to loss of
sales to those producers who do not wish to participate in certification. Direct costs of
certification can be high for smallholdings and small and medium-scale enterprises, thus
putting them at a disadvantage against the large enterprises. Developing producers countries
are not generally well equipped to absorb such additional costs.

6.7         Impact on the Market

The prevailing differences in the environmental sensitivity of international markets for forest
products on one hand, and the different market distributions of major exporters on the other
hand would mean that the market impacts of certification and labelling will not be uniform.
The highest dependencies on sensitive markets are observed among Nordic exporters in
general and African solidwood product exporters but significant economic interests would be
at stake also for such countries as Indonesia, Malaysia and Brazil as well as North American
exporters.

Trade diversion may occur due to certification and labelling and it will also be influenced by
the globalisation of the forest products industries. As an example, the recent changes in export
destinations of African timber toward Asia have probably been mainly driven by the
increasingly evident supply constraints and fast demand growth but difficulties to sell tropical
timber in Europe have also contributed to these trends. The emergence of new market
opportunities and changes in consumption patterns by species and type of wood products in
individual markets have compounded the problems of assessing the impacts of certification on
trade flows.

If certification becomes widely applied, it will influence competitiveness of individual
producers. Likely winners are companies (i) which have large own forests or long-term
concessions, or (ii) those which are able to procure their raw material from state-owned
forests or plantations, or (iii) which are large with the advantage of economies of scale, or (iv)
which are integrated either vertically or horizontally. Likely losers are (a) smallholdings, (b)
community forests, and (c) small and medium scale enterprises, particularly in developing
countries, as certification costs will be in relative terms higher for them than for large-scale


ITTO/Timber Certification: Progress and Issues/31/12/97                                      xviii
operations, and their information and control systems tend to be less developed. To avoid
undue adverse effects, there is a need to facilitate the access of these parties to certification
and its potential benefits through special measures. This need requires due consideration in
the design of standards and certification arrangements.

There is a major uncertainty related to the demand for certified and labelled forest products.
In most countries no large-scale demand can be detected and its emergence in the short run
appears unlikely. Demand will be influenced by supply and the picture may change in those
markets where larger certified volumes can be made available. The action taken in many
major exporting countries could suggest that a certain supply push could happen, perhaps
even in the short run.

Single-issue labels related to the quality of forest management could have an impact on
substitution between forest products and their competitors. Substitution may occur not only
between the same group of materials, e.g. tropical and non-tropical timber, or between wood
and non-wood materials but also with regard to alternative means to satisfy the same needs.
Estimation of substitution effects is currently purely speculative and is not attempted here.
Some studies suggest e.g. that a certification system could result in an increase in tropical
timber imports in such markets as Germany.

6.8         Smallholdings

Smallholdings are a common or dominating form of forest land ownership in many countries,
notably Europe, North America and Japan. These forest owners tend to play an important role
in the industry’s wood supply and in many countries certification can never become effective
if it does not attract smallholdings. Particular concerns have been expressed by forest owners
about the usefulness and appropriateness of certification in their case. Due to the economies
of scale in certification, there is risk that smallholdings are put at a disadvantage in the market
place if this instrument is not applied in a cost-effective way.

A number of options for group certification has been proposed but commonly agreed
principles have yet to exist. This is a major concern in countries where certification is
inevitable due to high dependence on the environmentally sensitive European markets, and
where the bulk of industrial wood supply comes from smallholdings.

6.9         Social Issues

Social aspects are equally important to economic and ecological criteria in assessing the
sustainability of forest management. The key groups to be considered include communities
situated in and around forest areas, small-scale forest owners, forest workers, and the general
public for whom forests may represent important recreational, cultural or other social values.
The questions related to social rights are complex and may not be easily solved at a sectoral
level such as forestry which often has a low political priority.

Typical social issues related to SFM include (i) the benefits that the different groups obtain
from the forest and the way how these benefits are shared; (ii) the participation of the groups
in the management of forests, particularly in setting goals and objectives and selecting
technology, (iii) tenure systems related to access and use of forest resources, and (iv) methods
to resolve conflicts. Of particular concern have been the rights of indigenous people. Social


ITTO/Timber Certification: Progress and Issues/31/12/97                                        xix
rights and obligations are generally considered sovereign rights of nations and governments
regulate them through appropriate legislation. At the international level, a number of relevant
provisions have been established by ILO. Adequate participation of all the main interest
groups in setting certification criteria is an appropriate way to duly integrate social aspects in
forest management. Transparency of the process with appropriate grievance procedures would
improve equitability.

Social issues have received probably less attention than environmental criteria in the
development of certification. They tend to raise fundamental questions for which ready
solutions are not available. International harmonisation in this field is likely to have even
more limitations than in the case of environment. This emphasises the importance of the
participatory processes to develop locally applicable certification standards.

6.10        Role of Governments

Government regulation in forestry is necessary to ensure that due considerations are given to
secure environmental and social benefits as purely market-based decision-making would not
ensure sustainability. Governments are also large forest owners in many countries, or they
may be the ultimate custodians of forest lands owned by the people or local communities. In
many cases government agencies implement forest management and grant utilisation rights.

In the market place the government provides the necessary ground rulesfor competition. With
regard to certification and labelling, there is a danger that such schemes, if abused, may lead
to inefficiency and damage to forestry, which could encourage substitution. In addition, cost
effects may not be equitably shared as market forces may work unjustifiably against some
groups and therefore government policy intervention may be appropriate.

Certification is a market-based instrument which should work without government interven-
tion. Parallel schemes could, however, create confusion among consumers, and there is a risk
that labelling could represent an obstacle to the market access of forest products. There is also
the difficult question of adopting different standards in government forests from those of the
existing regulations. Another issue is how locally based third party assessments can be
justified when the government’s existing supervision and control mechanisms are already
well in place although they may yet to be recognised as “credible” by the market. The other
side of the coin is to what extent the overall supervision and control of forest management in
all ownership categories could be transferred to the private sector (through “privatisation” or
deregulation process) reducing the public sectors’ involvement in these activities.

All these issues may need government consideration and they will have to be addressed at the
national level case by case. Governments may also wish to act jointly to agree on common
rules on certification and labelling and how these instruments are to be implemented in their
countries.

7.          OPTIONS FOR FUTURE WORK

It is concluded that certification and labelling will be increasingly applied in the forestry
sector as a complementary tool for marketing and improving forest management. It is
important that this instrument maximises its potential net benefits and avoids unnecessary
adverse impacts. A series of options for action have been identified for this purpose.


ITTO/Timber Certification: Progress and Issues/31/12/97                                        xx
7.1         International Cooperation and Coordination

At the international level, there is a need to identify or establish a suitable forum for a
continuous exchange of information based on experience in timber certification and labelling
aimed at achieving co-ordination and cooperation among different initiatives. This forum
should complement the political level discussions within the Intergovernmental Forum on
Forests. The need for exchange of information on certification standards and arrangements
has increased in tandem with growing number of countries actively involved in its
development. The current mechanisms are not particularly effective as their focus is mainly
on the political and policy aspects of this instrument whereas the suggested forum delves on
the technical aspects of implementation. It is important that future exchange of information
will include all the involved parties at both the national and the international level including
relevant non-governmental organisations.

A certain degree of comparability or harmonisation between certification and labelling
schemes would be needed to facilitate their mutual recognition. It would be too early to aim at
full harmonisation of this complex instrument at this stage, otherwise the necessary
development work would not be able to seek for optimum solutions. The process to develop
feasible recognition mechanisms at international level may well be interminable and the
appropriate kick-start could come from this the exchange of information and experience in an
appropriate forum.

7.2         Development of Certification and Labelling as Policy Instruments

The potential role of certification and labelling as an instrument to achieve sustainable forest
management needs clarification through policy research. Preconditions under which
certification can be feasible in individual country situations have not yet been identified. In
addition, as this instrument is not a sufficient condition for SFM, it should be made clear what
complementary action is needed in specific country conditions.

There are a number of areas where the proposed arrangements for certification and labelling
are not considered adequate, requiring further development work. These include cost-
effective certification of smallholdings, avoidance of adverse impacts on community forests
and small and medium-sized enterprises, certification of non-timber forest products, and
suitable arrangements for the verification of chain of custody.

When experience is accumulated on the use of certification and labelling, there is a need to
carry out impact assessments to improve effectiveness and efficiency and to avoid
unnecessary adverse impacts.

7.3         Capacity Building

The need to develop trained manpower cannot be over-emphasized. The human resource base
to implement certification continues to be a serious constraint to proper implementation of
this instrument. Part of the allegations made against past certification assessments may have
been due to the lack of experience and expertise of the assessment teams. The capacity
building needs to focus on training of professionals involved in


ITTO/Timber Certification: Progress and Issues/31/12/97                                     xxi
• internal auditing of forestry organisations to make them certifiable and to reduce the costs
  of certification
• external assessment work carried out by certification bodies or independent assessor
  enterprises
• development of certification schemes and appropriate bodies for standards setting,
  conformity assessment, and accreditation

Capacity constraints are also applicable in institutional development. Many developing
countries do not have national institutions for accreditation and their standards bodies tend to
be weak and would need strengthening. Even in developed countries these bodies would need
to develop sector-specific arrangements designed for forest management certification and
labelling of forest products.

7.4         Market Promotion of Certified Products

Based on the experience of suppliers of certified forest products, there are likely to be
marketing difficulties, especially when such products must be sold at higher prices owing to
the added costs of certification. High expectations are also put on this instrument to promote
tropical timber in markets which were lost due to ENGO campaigns. Areas of future action
may include:

• market research
• market promotion to make certified products known and preferable to the general public,
  distributors, industrial and institutional buyers and specifiers
• generic promotion of certified non-wood forest products
• comparative environmental impact studies on forest products and their substitutes
  considering the whole life cycle of products

7.5         Development Cooperation

Tropical timber producing countries would need assistance both to implement certification
and labelling in their own specific conditions, and to eliminate possible negative impacts on
competitiveness of this instrument. Areas of intervention could include:

•       development of national certification standards
•       local capacity building
•       improvement of forest management to achieve SFM
•       support to pioneer enterprises implementing certification
•       systems for chain-of-custody verification
•       market promotion of certified tropical timber products
•       development of suitable financing schemes and other incentives to promote SFM where
        certification may be used as a complementary instrument

Substantial funding will be needed to implement these activities and it is doubtful, in the case
of the developing tropical countries, whether they have the financial resources to carry them
out. Yet these activities have direct relevance to the ITTO Year 2000 Objective. Direct
participation of the industrialised countries through some form of partnership programmes



ITTO/Timber Certification: Progress and Issues/31/12/97                                     xxii
would be invaluable in ensuring success. A suitable instrument would be the Bali Partnership
Fund (established in the ITTA, 1994).




ITTO/Timber Certification: Progress and Issues/31/12/97                                xxiii
1.          INTRODUCTION

1.1         Background

This report was prepared at the request of the International Tropical Timber Organization
(ITTO), Yokohama, as follow-up to the two previous studies, also carried out by the same
authors, viz. “Certification of All Timbers and Timber Products” which was presented at the
International Tropical Timber Council’s (ITTC) Sixteenth Session in May 1994 at
Carthagena, Columbia, and “Timber Certification in Transition: Study on the Development in
the Formulation and Implementation of Certification Schemes for All Internationally Traded
Timber and Timber Products” which was presented at the ITTC’s Twentieth Session in May
1996 at Manila, Philippines.

The framework and background of this Report is contained in Decision 4 (XX) of the ITTC’s
Twentieth Session (Annex 1.1) and refers in particular to the following operative paragraph:

            “Recognising the potential role of timber certification in relation to forest
            management and market access for forest products.... and the work of the Open-
            ended Intergovernmental Panel on Forests (IPF) and other relevant institutions on
            the issue of trade and environment in relation to forest products and services, ...
            (ITTC)... decides to continue to follow relevant developments in the formulation
            and implementation of certification schemes for internationally traded timber and
            timber products.”


1.2         Objectives

The objectives of the report are detailed in the following items of the Work Assignment:

• Update further the document entitled: “Timber Certification in Transition: Study on
  Developments in the Formulation and Implementation of Certification Schemes for All
  Internationally Traded and Timber Products”;
• Review relevant new and evolving developments regarding any schemes and initiatives
  related to the formulation and implementation of certification and labelling of all timber
  products, including their cost implications;
• Carry out selected relevant case studies on national experiences in planning and
  implementing certification and labelling schemes;
• Discuss any other issues considered relevant to the certification and labelling of all timber
  and timber products, in particular the strategies for attaining ITTO’s Year 2000 Objective
  as entrenched in the new ITTA, 1994 and the state of discussions within the Open-Ended
  Intergovernmental Panel on Forests (IPF) on the U.N. Commission on Sustainable
  Development.

Fundamentally the work is aimed at studying current developments and issues related to
timber certification that may help to provide direction to the future efforts of ITTO and its
members in promoting Sustainable Forest Management (SFM) within the context of its Year
2000 Objective. Much has been said and ascertained on SFM and timber certification over the
last few years, but little can be claimed by way of real progress, especially in timber
certification as developments on the ground have been painfully slow. As we approach year
2000 there is an air of anticipation about new measures at SFM and subsequently, timber



ITTO/Timber Certification: Progress and Issues/31/12/97
                                                                                                  1
certification. But there are several serious impediments on the way, not the least are a lack of
technical knowledge of the forest itself, of trained manpower and infrastructural back-up
needed to implement the massive tasks at hand.

Results of this study hopefully will throw some light on how ITTO should approach the
subject further, recognising the useful role that timber certification can play in encouraging
sustainable level development of the tropical forests.


1.3         Method of Study and Report Structure

A great deal of the material gathered in this study was sourced from the latest available
reports and findings at forums, local and international, related to timber certification and
SFM. Much was gained as well, from correspondence with government authorities,
international and other organisations, and personal communication.

Visits were made to five countries to undertake case studies on them, i.e. Brazil, Ghana,
Indonesia, the Netherlands and the United States of America. The Consultants also covered
their respective countries, Finland and Malaysia, to complete the case studies. Field
information was collected through interviews with government agencies, forest industries,
forest owners’ associations, certification bodies, labelling schemes, and non-governmental
organisations. The authors would like to express their gratitude for the excellent support
received from all the parties contacted.

The report begins by giving, within a broad conceptual framework, an overview of the
situation with regards to timber certification and the standards used (Chapter 2.). Central to
the study is the progress of work towards the development of standards (Chapter 3), and the
certification and labelling schemes (Chapter 4), highlighting especially the growth, albeit
slow, of national and regional-based initiatives and the anticipated competition that may arise
between parallel schemes. Chapter 5 describes the implementation progress based on the
work done by the currently practising certification and accreditation bodies. The picture is
complemented with information on labelling schemes and buyers’ groups which are
committed to certified supplies.

National case studies in Chapters 6-12 provide information on the developments taking place
and the situation with regards to timber certification work; the stand of the market towards the
concept of certification, and certified timber products. They reveal important indications of
problems and uncertainties over the cost-benefits of certification. Key issues are identified in
each case and lessons learned are summarised.

Another major section of the reports deals with a number of key issues (Chapter 13) to reflect
the prevailing debates on the concern and need for timber certification. Impacts and
implications are indicated in this section and these are followed by suggestions for future
work (Chapter 14) to address the main problems raised in the above issues.

Conclusions are separately given following each major chapter thus obviating the need to
include another chapter on general conclusion at the end of the report. The report is rounded
up into an executive summary.




ITTO/Timber Certification: Progress and Issues/31/12/97
                                                                                              2
2.          DEFINITIONS AND CONCEPTUAL FRAMEWORK

2.1         Definitions

No terminology has been established yet to cover the various aspects of “timber certification”
which in this report is meant to include certification of forest management and labelling of
forest products (C&L). The following definitions are used in this study (cf. also Baharuddin
& Simula 1996, Indufor 1997):

Certification is a procedure by which a third party gives a written assurance that a product,
process or service conforms to specified requirements (ISO/IEC Guide 2).

Certification of forest management to performance standards is an established and recognised
procedure leading to the issuance of the certificate, based on an independent (third-party)
assessment of the quality of forest management in relation to a set of predetermined
requirements (criteria). It may be accompanied by an agreement on the right (licence) to use a
new label on traded forest products.

Forest management is a practical application of scientific, economic and social principles to
the administration and working of a forest estate for specified objectives (Ford-Robertson
1971). It covers planning and implementation of the various interventions carried out for
conservation of the forest resources and production of forest products and services.
Sustainable forest management (SFM) objectives include economic, social and ecological
considerations.

The chain of custody refers to all the changes of custodianship of forest products and products
made thereof during the transportation, processing and distribution chain from the forest to
the final end use. When the chain of custody (COC) is verified, the origin of forest products is
established.

Environmental management system (EMS) is the part of the overall management system that
includes organisational structure, planning activities, responsibilities, practices, procedures,
processes and resources for developing, implementing, achieving, reviewing and maintaining
the environmental policy. Certification of EMS results in a certificate of approval on the
quality of an organisation’s management system having met a set of predetermined
requirements of such systems.

Environmental label or declaration-claim indicates the environmental aspects of a product or
service that may take the form of a statement, either symbolic, or graphic or a product or
packaging label, product literature, technical bulletin, advertisement, and other publicity
measures, etc. Such a claim may be on product (attached to the product or its package) or off
product (e.g. promotional literature, advertisement, letterhead, or other publicity measures).
ISO divides environmental labels into three different types. Environmental labelling Type I
refers to programmes which are voluntary, multiple criteria-based, with third-party
verification and award labels claiming overall environmental preferability of a product within
a particular product category based on life cycle considerations. This type of labels is
commonly referred to as eco-labels (OECD 1996). Type II labels are informative self-
declaration claims made by suppliers. Type III labels contain quantified product information
based upon independent verification using pre-set indices (Figure 2.1).



ITTO/Timber Certification: Progress and Issues/31/12/97
                                                                                              3
Labelling of forest products is here defined as a process which results in a claim which may
be used on product referring to the quality of forest or forest management at the origin of the
raw material (wood, fibre) of which the product is made. Labelling is based on certification of
forest management and verification of the chain of custody. This kind of label is not specified
by ISO as it refers to one single-issue characteristic of the processing and production methods
(PPMs). In this case the issue is the quality of forest management which is a non-product
related (unincorporated) characteristic. In other words, the quality of forest or forest
management is not reflected in the technical quality of the end product.

Product labels based on the quality of forest management at the origin of the raw material are
classified as single-issue PPM criteria, verified by a third party. These labels are not currently
covered by the ISO typology (see Figure 2.1).

Figure 2.1             Forest Management-based Labels in the Context of Environmental
                       Labelling
                                                                                                                 o n -p r o d u c t
                                                                E n v ir o n m e n ta l
                                                               la b e ls a n d c la im s
                                                                                                                 o f f -p r o d u c t




            IS O T y p e I                  IS O T y p e II                   IS O T y p e III
            M u lt i p le c r i t e r i a   S e lf -d e c la r a t i o n      Q u a n tifie d p r o d u c t    S i n g le -i s s u e
            li f e c y c le b a s e d ,     c la i m s b y s u p p li e r s   in fo r m a tio n o n e n -      P P M c r ite ria ,
            th ird p a r ty                                                   v iro n m e n ta l im -          th ir d p a rty
            v e r ific a tio n                                                p a c ts , th ir d p a r ty      v e rific a tio n
                                                                              v e r ific a tio n


                                                                                                              Q u a li t y o f f o r e s t
                                                                                                              m anagem ent
                                                                                                              in th e o r ig in o f
                                                                                                              fo re s t p ro d u c t


Multiple-criteria labels are generally granted only to the environmentally best products (less
than 15 to 30% of all products in a group subject to labelling). In SFM labelling of forest
products, all suppliers who meet the requirements may be granted the labelling right. This
view, adopted in the study, may however be argued in the case of some existing systems. The
choice depends on how the target has been established and how the standards have been set. If
the purpose is to certify SFM, which is a broadly accepted goal by all countries, all the forests
meeting the established criteria should be certifiable and therefore their products would be
eligible for the respective single-issue labelling.


2.2         Conceptual Framework

Certification and labelling are perceived an instrument which under certain conditions can
promote sustainable forest management. It is not a sufficient or necessary condition for SFM
but it may play a useful complementary role in achieving it. As a policy tool, C&L belongs to
the group of market-based instruments. As long as certification is voluntary and brings
benefits to forest owners and managers, it is considered a “soft” policy tool making it
different from statutory regulation, taxation, etc. In the policy context, certification is



ITTO/Timber Certification: Progress and Issues/31/12/97
                                                                                                                                             4
considered an essential element of trade and environment interface. Certification is pertinent
to other issues such as market access and trade barriers, full-cost internalisation, and market
transparency.

One of the underlying assumptions for an effective use of certification is the existence of a
market where certified products are preferred by buyers and consumers. The other assumption
is that forest owners and managers could reap benefits from certification which outweigh the
costs involved.

The two principal objectives of certification, i.e. contribution to SFM and improved market
access, are still very relevant today, especially when viewed from the standpoint of the
environmentally sensitive market. There is a growing argument from the producers’ end that
efforts at SFM arise from the nations’ own sense of responsibility rather than pressure of the
market place. Certification may therefore not necessarily be the cause of SFM; it may in fact
be the natural consequence of SFM. While other objectives may also be attached to this
instrument (improved control, productivity increase, etc.), it is difficult to assess at this point
of time the impact of these attributes until there is enough experience to make a proper
judgement (cf. Baharuddin & Simula).


2.3             Elements of Certification and Labelling Schemes in the Forestry Sector

Certification of forest management and labelling of forest products may involve the following
elements (Figure 2.2):

•   standards for sustainable forest management
•   certification of forest management (conformity assessment)
•   accreditation
•   verification of chain-of-custody
•   labelling of forest products

Figure 2.2.                  Elements of Certification and Labelling Schemes
                     Body                                   A c t iv ity                                   O u tp u t


           S ta n d a r d - s e ttin g                      S ta n d a rd                     C e r tific a tio n s ta n d a r d s
                    body                                     s e t t in g                     o f fo r e s t m a n a g e m e n t



               C e r tific a tio n            C o n f o r m ity a s s e s s m e n t                   C e r tific a te o f
                     body                      o f fo r e s t m a n a g e m e n t               fo r e s t m a n a g e m e n t



                                                       V e r if ic a t io n o f                      C e r tific a te o f
                                                     c h a in - o f - c u s t o d y               c h a in - o f - c u s t o d y



              A c c r e d it a t i o n        A c c r e d it a t i o n b a s e d o n                R e g is tr a tio n o f
                     body                     s p e c i f ie d r e q u ir e m e n t s            c e r t if ic a t io n b o d i e s



            G o v e r n in g b o d y                       L ic e n s i n g o f
                                                                                                      P r o d u c t la b e l
      o f la b e l li n g p r o g r a m m e   p a r t ic i p a t i n g e n t e r p r is e s


Source: Indufor 1997




ITTO/Timber Certification: Progress and Issues/31/12/97
                                                                                                                                      5
The role of standard setting is fundamental as it forms the basis for conformity assessment
during certification. The result of such an assessment is typically a written certificate but it
may be a registration of the certification assessment by a competent body as well. Certificates
are issued to applicants, which are forestry enterprises, organisations, groupings of forest
owners, communities, etc.

The object of forest management certification is a defined forest area (DFA) which is
typically managed towards a specified set of objectives, forming a Forest Management Unit
(FMU). Such a unit may be defined according to the cadastral boundaries or other criteria
depending on the organisational set-up related to the management of the forest area. The
interpretation varies depending on the socio-economic or ecological conditions or
administrative arrangements prevailing in the area. Limits of DFA is important for standard
setting as small holdings and large areas usually call for different criteria and indicators.

Verification of the chain-of-custody involves auditing. This takes place through the review of
documentation and accounts of sales and purchases of certified products, as well as physical
checks in warehouses and industrial processing plants. Auditing results in an audit report, a
certificate, or a registration. Certificates are issued to the audited individual enterprises
participating in the processing and distribution chain.

The above elements form a successive chain of activities as labelling is not possible without
forest management certificate and the verification of the chain of custody. In addition to on-
product label, the certified enterprises may use the certificates for other means of
communication.

The role of accreditation, i.e. verification of the competence, reliability and independence of
certification bodies, is complementary in the C&L process as its purpose is to increase the
credibility of the third-party certification bodies. The arrangements for accreditation,
certification and verification of the chain of custody need to include necessary appeal
procedures. The procedure to be applied in each activity have been reviewed earlier
(Baharuddin & Simula, 1996) and are not repeated here.


2.4         Certification Standards

Two types of standards are relevant: (i) performance standards, and (ii) procedural
(management) standards. The former establish quantitative and qualitative targets or
indicators against which the assessment of forest conditions or management interventions can
take place. The latter define the characteristics of the management system to be applied.

Generic management system standards are defined in ISO 9001 standard for quality
management and in ISO 14001/14004 standards for environmental management. ISO is in the
process of finalising informative material on the application of environmental management
system by forestry organisations (ISO TC207/WG2, 1997).

Performance standards of sustainable forest management can be hierarchically derived from
the principles, criteria, and their verifiers’ indicators (Lammerts van Bueren & Blom 1997).
Values are assigned to indicators which serve as targets and can be used as yardsticks in
performance assessment (e.g. Coulombe 1996). Criteria and indicators are, therefore,



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necessary because only with the specification of target levels it is possible to define
performance standards.

The policy element of certification standards is contained in their performance requirements
which define what kind of forest management should be practised. In individual countries
such requirements are typically contained in forest legislation, forest management rules and
regulations in national or sub-national forestry programmes. At international level, UNCED
Forest Principles, Agenda 21, and IPF’s action proposals and various regional processes to
develop criteria and indicators (C&I) for SFM provide a framework for the various aspects to
be considered in setting certification standards. All these elements are also usually considered
when certification standards are prepared.

The relationship between legal requirements and performance elements of certification
standards need clarification. In general, compliance with the law is a basic requirement for
certification. Certification standards tend to be higher or more specific than the legal
requirements but, being based on voluntary participation, they are not of course mandatory. It
has been proposed that certification standards be an instrument for raising legal standards
(Bass 1997). If, however, SFM is provided for in legislation, there is no need a priori for
certification standards to be different from it and the focus now will be on the verification of
law enforcement Finally, it is pointed out that, even if conceptually performance and
procedural standards are clearly different, in practice they may be combined into one set of
criteria. Presenting performance and system elements as separate sub-sets of the standard
would, however, be desirable to facilitate auditing and comparability of assessment results.

The relationship between various standards, objects of assessment, the resulting certificates
and product labels are schematically summarized in Figure 2.3. At the moment, there is no
meeting point of the two standards (i.e. performance and procedural) at the product label
stage, although e.g. Hortensius, et. al (1997) are working towards achieving such a
congruence.

Figure 2.3           Relationship between EMS and Forest Management Certificates

                                        Object of           Certificate
         Standards                                                            Product Label
                                       Assessment

           ISO                                            ISO 14001 EMS
                                     Organisation’s
       14001/14004                                          Certificate
                                         EMS
       EMS Standard




        Performance                 Quality of forest     Forest management
     standards of forest            management in a           certificate
        management                 defined forest area

                                                                                Product label
      Requirements of             Chain of custody of     Chain of custody
      chain-of-custody            forest products from
                                    the forest to the        certificate
           control
                                         market




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                                                                                                7
 Source: Adapted from Mankin, pers. comm.


 3.        PROGRESS OF WORK TOWARDS DEVELOPING CERTIFICATION
           STANDARDS

 3.1         International and Regional Processes on Criteria and Indicators

 There are currently eight regional on-going processes at intergovernmental level related to the
 development of criteria and indicators which provide a general framework for work to
 promote sustainable forest management (Table 3.1). The national-level C&I are not meant to
 be used as certification criteria. However, as state above, they provide a useful framework and
 serve as one of the starting points for countries when developing their certification standards.

 ITTO, the Pan-European process and the Tarapoto Proposal have also produced draft FMU or
 operational level guidelines. Concerns have been expressed by small-scale forest owners on
 their applicability as it does not appear possible to assess or establish sustainability of forest
 management in small holdings at a given point of time. Many aspects of C&I that have been
 expressed in the context of a larger geographical unit (landscape, district, ecological zone) are
 not relevant to small-sized forests (see for more detailed discussion Baharuddin & Simula
 1996, chapter 4.).

 Some countries and environmental non-governmental organisations (ENGOs) have expressed
 their concern about a direct link between national level C&I and certification (e.g. Global
 Forest .....1966).

 Table 3.1            Intergovernmental Processes Related to Criteria and Indicators for
                      Sustainable Forest Management
Process          Geographical                 Date of                Criteria &          Application       Remarks
                 Scope                        completion             Indicators
ITTO             Tropical forestry in         (1992):Guidelines      Various sets        Training in       C&I
                 ITTO producing               for Natural Forests                        several coun-     currently
                 member countries             (1992): Criteria &                         tries.            under
                                              indicators for                             Progress report   revision
                                              production forest                          on Target
                                              (1993): Guidelines                         2000 and
                                              for plantations                            revision
                                              (1993): Guidelines                         experience
                                              for conservation of                        (1995)
                                              Biological Diversity
ATO              12 African Countries         1996                   7 principles with   Testing by
                                                                     criteria and        CIFOR
                                                                     indicators
Pan-             38 European                  (1993): Helsinki       - 6 criteria        (1995):           FMU-
European         Countries                    Resolution             - 20 quantitative   Interim Report    levels
Process                                       (1994): Criteria and   - descriptive       on examples       Guidelines
                                              Indicators               indicators        and testing       being
                                                                     - national                            finalised
                                                                       application
Montreal         12 countries (non-           (1993): Conceptual     - 7 criteria        Interim survey    Technical
Process          European in boreal           basis                  - 67 indicators     of data avail-    Advisory
                 and temperate zone)          (1995): Santiago       - national          ability           Group
                                              Declaration on C&I       application       Progress report   working on
                                                                                         (1997)            termino-
                                                                                                           logy



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                                                                                                                  8
  Table 3.1            Intergovernmental Processes Related to Criteria and Indicators for
                       Sustainable Forest Management (cont’d)
Process           Geographical                 Date of                 Criteria &             Application   Remarks
                  Scope                        completion              Indicators
Tarapoto          8 countries in the           1995                    - 7 criteria and 47                  Under
proposal          Amazon Basin                                         - 4 additional and                   review and
                                                                         FMU level                          approval
                                                                                                            by govern-
                                                                                                            ments
Dry-zone          27 Sahel and other           First meeting in 1995   - 7 criteria           Case study
Africa            dry-zone countries                                   - 47 indicators        carried out
(UNEP/
FAO
Initiative)
North Africa      30 countries                 First Expert meeting    - 7 criteria                         Endorse-
and Near                                       in 1996                 - 65 indicators                      ment by
East                                           Workshop for                                                 Near East
                                               Country                                                      Forestry
                                               Focal Points in July                                         Commis-
                                               1997                                                         sion
Central           7 countries                  Forest meeting in       -   4 criteria
America                                        1997                    -   40 indicators at
                                                                       -   8 criteria
                                                                       -   52 indicators at
  Source: ISCI 1996, ISO 1997



  In the former case there are reservations about the development of C&I frameworks that may
  lead into an agreed normative requirement. In the latter case, there are fears that C&I may
  become certification standards without performance requirements, and subsequently a basis of
  premature harmonisation. In view of the possibility of immediate application for certification,
  the Pan-European process has also been criticised by ENGOs for lack of a platform for a
  participatory process (WWF 1997a).

  Intergovernmental C&I processes are complemented by non-governmental initiatives, of
  which the Forest Stewardship Council (FSC) process has been developed specifically for
  certification purposes. Its Principles and Criteria (P&C) cover a set of performance and
  management system elements which are used as a basis when national FSC standards are
  being developed (FSC 1996). As another example, WWF and IUCN have recently developed
  their own criteria and specific elements to assess whether “forest quality” corresponds to
  “good forest management” (Dudley 1997).

  A common core set of criteria and indicators for SFM has been called for (e.g. Harcharik
  1996) but also other views have been expressed. In the future there will be perhaps up to 10
  intergovernmental processes, some may be closely linked to one another alike others,
  overlapping. These processes are being implemented at national level and used also as a
  framework for setting certification standards together with the criteria of non-governmental
  initiatives (Annex 4.2). There is an obvious need to identify more common ground, be it
  comparability, compatibility, convergence or harmonisation (Harcharik 1996).




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3.2         National-level Development of Criteria and Indicators and Certification
            Standards

The development of national-level criteria and indicators has emanated out of two main
causes: (i) response to international concern for proper management and utilisation of the
forest resource, and (ii) follow-up to the emerging international and regional processes. These
initiatives can be grouped into five categories:

(a)     Multi-stakeholder processes; of which, examples of those with direct relevance to
        certification, include
-       the criteria and indicators of the Canadian Council of Forest Ministers which are
           used as a performance specification in the Canadian Forest Management System
           Standard (CSA Z-809, 1996)
-       the New Zealand Forest Accord which has defined a set of principles for      plantation
           forestry
-       the Malaysian Criteria and Indicators (see chapter 10)
-       the Finnish Certification Standard which was accompanied with arrangements for
           application in the national conditions where smallholder forestry dominates (see
           chapter 7)
-       the criteria and indicators developed by the Living Forest Project in Norway
(b)     Voluntary codes of conduct which have been developed by industry such as the
        Sustainable Forestry Initiative of the American Forest & Paper Association (AF&PA)
        and the criteria and indicators of the Indonesian Association of Forest Concession
        Holders (APHI) (see chapters 9 and 12).
(c)     Standards developed by national certification schemes and standards bodies such as
        - the draft standard of the Lembaga Ekolabel Indonesia (LEI) or the Indonesian
           Eco-labelling Institute (see chapter 9)
-       the draft standard of CERFLOR scheme by the Brazilian Association for     Technical
            Standardisation (ABNT) (see chapter 6).
-       the draft National Standard of Quality Forest Management developed by the
            Ghanaian Standards Board (see chapter 8)
(d)     Certification standards (draft) developed by the FSC through a national Working Group
        in the UK, Sweden and under progress in 11 other countries including Belgium, Bolivia,
        Brazil, Canada, the Netherlands, Switzerland, and the U.S. (Aryal 1997).
(e)     Standards developed by importing countries: in the Netherlands there is an agreed set of
        minimum requirements for forest management to be applied for imported timber based
        on the national labelling scheme, Stichting Keurhout, has developed its own
        requirements (see chapter 11); and the standard developed by the Initiative Tropenwald
        in Germany.

Several other countries are pursuing the development of criteria and indicators for SFM as a
follow-up to regional processes. Market-based initiatives have been launched in Cameroon
and Gabon supported by WWF-Belgium under EU funding.

There is a wide variation in the situation of different countries. This may arise from a mix of
any of the following factors:
- importance of the forestry sector as a source of GDP, employment and foreign exchange

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- competing use of forest lands for different economic purposes
- the strength of campaigns by ENGOs
- vulnerability to market pressures or the relative dependence of exports on environmentally
  sensitive markets
- political commitments and priorities
- priorities of donor support


3.3         CIFOR: Testing of Forest Management Standards

CIFOR is the Institute formed under the Consultative Group on International Agricultural
Research (CGIAR) System and is devoted to strategic research in forestry. It is now
undertaking a project called “Assessing the Sustainability of Forest Management: Developing
Criteria and Indicators”, with the following objectives (i) to identify and develop a minimum
set of criteria and indicators applicable to the sustainable management of forests under a
variety of forest conditions; the indicators may be either generic or site specific; (ii) to
develop a methodology for the objective evaluation of criteria, and (iii) to develop a tool-box
approach to evaluate the sustainability of forest management as a whole, based on the
recommended criteria and indicators.

This project contributes to improving the scientific understanding of the sustainable use of
forests at the Forest Management Unit (FMU) level. CIFOR has completed the first phase of
the project with a comprehensive draft of the Guidelines for Developing, Testing and
Selecting Criteria and Indicators for Sustainable Forest Management. (Phrabu et al. 1996).

The project first focused on developing a methodology to evaluate and generate C&I. Based
on comparative field testing, the minimum number of cost-effective C&I was derived which
would be quick, simple and understandable, and transparent and plausible. The recommended
C&I are being further developed based on tests in several regions of the world (Indonesia,
Côte d’Ivoire, Brazil and Cameroon). Basis for these tests were the C&I of Initiative
Tropenwald Germany (ITW), SmartWood, Woodmark (Soil Association), Lembaga Ekolabel
Indonesia and the Dutch Working Group (DDB). Although CIFOR’s focus is on the tropics,
in order to capture the global quality of C&I development, a comparison with tests in
temperate countries was deemed necessary. This resulted in tests in Germany and Austria.
The work is being extended further with tests planned in the USA, Germany, and possibly the
Netherlands. In the context of plantations C & I tests will also be extended to India.

The CIFOR’s project is, as yet, the only international effort to evaluate and develop C&I at
the forest or FMU level for SFM, not just for good forest stewardship. CIFOR has also looked
into the commonality between various sets of C&I as tools which can be used to
conceptualise, evaluate and implement SFM. At the FMU level, all C&I to date have, in
practice, been designed to test whether management is in accordance with current perceptions
of best management practices or good forest stewardship. “This is not really the same as
assessing sustainability, as good forest stewardship is simply a statement of the “state of the
art” of the means to reach the goal of SFM.” (Prabhu, 1997).

In the current second phase, the project aims to develop a ‘toolbox’ approach to sustainability
assessment, giving special attention to C&I identified as being weak during the first phase,
such as impacts on biodiversity and social sustainability. CIFOR’s experience indicates that
more than one tool would be required. The toolbox will enable the large number of initiatives


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                                                                                            11
that have recently sprouted in several countries to develop C&I sets that were not only locally
relevant but scientifically sound and internationally compatible (Phrabu, 1997). The research
will continue to focus on improving C&I especially with regard to their cost-effectiveness and
reliability, and application in forests managed by local communities, thereby adding variation
to both the question of spatial scales and management objectives. Finally the project will seek
to evaluate and develop appropriate multi-criteria decision support tools. Collaboration will
be continued with 24 international partners in the Americas, Africa, Southeast Asia and
Europe.

CIFOR expects that the tools in the toolbox will make a significant impact on the
development of C& I and consequently, SFM for the following three reasons: (i) there is a
need to have common approaches worldwide, (ii) CIFOR’s neutrality ensures acceptability of
the results, and (iii) CIFOR’s collaboration and communication mechanisms.

The CIFOR initiative is a bold and creditable effort in promoting the development of SFM,
particularly in the face of the highly varied and complex tropical rainforest environment,
where most of the difficulties are encountered. The guidelines that CIFOR is producing will
have an important bearing in this direction as they form a workable baseline for determining
the state of the art of the forest. It could provide an excellent basis for designing an instrument
to carry out forest rating, i.e. a measurement of how close the forest is in approaching
sustainability.

There is wisdom in the sharing of experience and information with CIFOR for countries that
are engaged in developing national C&I. Indonesia and Malaysia, for example, have reached
an advanced stage of developing country-specific C&I. They may find benefit in comparing
notes with CIFOR, especially in the area of harmonisation and the application of C&I, in the
context of the selection of tools derived from CIFOR’s toolbox. This could help
internationalise their valuable work apart from lending further credence to their effort.

Due credit must be given to CIFOR for successfully developing C&I and the toolbox to
enable adaptations of use in different situations. The acid test lies in their application which
calls for sound decision making and consistency in judgement at the fieldworkers’ level. The
most challenging situations will lie in the evaluative aspects of assessment, especially of
social impacts and implications where different disciplines and varying training backgrounds
could possibly lead to a host of divergent mindsets among the assessors.


3.4         Conclusions

(1)     A considerable on-going progress can be observed in the development of criteria and
        indicators of sustainable forest management in several countries. Often linked with this
        is the processes of setting national-level standards for forest management certification.

(2)     The development work on certification standards has taken place under the national
        processes, sometimes led by governments, sometimes by standards bodies, other
        independent institutions, or non-governmental organisations.

(3)     Nationally developed standards have been designed for particular local conditions. In
        view of possible future need of harmonisation or comparability, it would be useful if the
        national development work could take place within a common general framework.


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(4)     The international and regional processes to develop criteria and indicators provide a
        useful framework for the C&I work carried out at country level. The purpose of these
        processes has not, however, been to provide a common basis for certification standards.
        The Pan-European process is generating a set of forest management unit level
        guidelines which is a sign of international willingness to develop common frameworks
        which could be directly referred to when setting national certification standards.

(5)     Based on CIFOR´s work it appears that there is a strong common element between the
        various sets of criteria and indicators at tropical sites, but the degree of commonality
        varies by subject area. The development of a “core” common set appears possible and is
        called for by some parties.

(6)     CIFOR´s toolbox to develop criteria and indicators has proved to be useful and will
        assist countries to consider the relevant elements applicable to particular situations.


4.        RECENT DEVELOPMENTS IN CERTIFICATION SCHEMES AND
          INITIATIVES

4.1         International and Regional Initiatives

4.1.1                Forest Stewardship Council

Decision Making

The General Assembly held in Oaxaca in June 1996 was in a way a turning point in the
organisation’s short history as several important resolutions were made related to the
important area of decision making procedures.

The voting power in the General Assembly was originally divided between two chambers:
economic (25%) and social/environmental (75%). In 1996, after strong criticisms from the
trade and industry side, the structure was modified into three chambers: economic (1/3),
environmental (1/3) and social (1/3). In each chamber the Northern and Southern members
have their own sub-chambers each having 50% of the votes of the chamber (Annex 4.1). The
principle of no one party dominating in the decision-making process was thereby instituted
and the voting structure does not appear to be a major issue since then.

The current membership (170) does not provide adequate representation for each subchamber
(minimum set at 15 members) and transition period was therefore provided. In addition, the
membership of individuals in the organisation was expanded to all chambers (previously only
the economic) but their voting power was limited to a maximum of 10% in each chamber to
avoid FSC being driven by individual members.

There are, however, still criticisms especially those concerning the composition of the
economic chamber which incorporates certification bodies, forest industry and forest owners.
Some small-scale forest owner organisations consider themselves more part of the social
chamber, together e.g. with forest communities, than as negotiators on the same side with
certifiers and industry to cater for their interests (e.g. Lillandt 1997).




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Decision making can be effected through meetings of the general assembly and postal ballot.
The complex structure of chambers and subchambers is aimed at equality and balanced power
between interest groups. At the same time, it may also constitute a significant constraint for
effective decision making and in the course of that strengthens further the role of the Board
and the Secretariat in running the organisation. It is also foreseen that further changes in
voting rules may be needed to accommodate the interests of non-industrial private forest
owners which are not duly represented in FSC.

Governments, often large forest owners, are not entitled to participate in FSC, not even as
observers. This is likely to be changed as governments are not interested in submitting
themselves to scrutiny by FSC if they are not allowed to participate in its activities (see
chapter 13.9).

The current (August 1997) Board contains 9 members (5 northern and 4 southern), of which 4
represent environmental, 3 social and 2 economic interests. The principle of balanced
interests in the General Assembly is not fully reflected in the membership of the Board, a
point which has been subject to criticism (Berg 1997). Only one member is female.

System Development

The FSC is still at a developmental stage as most of the relevant documentation is yet in draft
form. The ratified elements include the Statutes, the Principles and Criteria, guidelines for
minimising conflicts of interest, staff rules and work plans and policy documents on
communication, education and training, as well as protocols for national initiatives and
guidelines for developing regional certification standards. A manual for evaluation and
accreditation of certification bodies is also available in draft form and used as a basis for the
accreditation process. The FSC system is not yet complete as many key issues remain to be
resolved through detailed guidelines to allow for harmonised procedures within FSC. These
include:

(a)     Verification of the chain of custody in the case of multiple sources which include both
        certified and non-certified forests. The current rules (August 1997) require that 100% of
        the raw material of a product needs to be physically tracked to the forest before
        certificates/ labelling rights can be issued. In practice, this is not always the case, and
        would in fact be impossible to achieve when dealing with large trade volumes. A draft
        position paper has been prepared on the subject suggesting that claims should be
        divided into two categories basing on input percentages of certified raw materials (FSC
        1996a);
(b)     Group certification of smallholdings on which a discussion paper (FSC 1996b) has been
        prepared suggests a fairly rigid and bureaucratic approach. At present, each certification
        body is requested to prepare its own method for the certification of smallholdings. The
        draft discussion paper on the subject raises the prospects of having common guidelines
        for the assessment of smallholdings.
(c)     Treatment of wood coming from conversion forests.
(d)     Harmonisation of national FSC standards in similar ecological zones
(e)     Certification of non-timber forest products.

The experience on FSC shows that an international NGO-based initiative can lead to
important development work both within and outside the organisation, significant to the

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extent that it had prompted similar initiatives, national and regional, as alternative to FSC’s.
FSC’s concept was designed by NGOs, probably with small market shares targeted initially.
This is apparently changing as the mainstream forest industry is now becoming into the focus.
This would also be a precondition for self-financing.

The complexity of certification and labelling operations in the forestry sector has made FSC’s
system somewhat slow moving. On the other hand FSC’s visibility in the international arena
has steadily increased for four reasons: (a) strong support from NGOs, (b) there has been no
truly viable alternative to FSC todate in the market place, (c) availability of significant
external funding, and (d) quality and commitment of the secretariat staff. FSC is currently
highly centralised and operationally driven by the secretariat and the Board.

The next two-three years will be critical for FSC to “deliver” certified wood and wood-based
products including to Buyers’ Groups in various countries in required quantities (see chapters
4.4 and 13.6). Other alternative bodies may otherwise be sought for to provide consumers
with the necessary assurance that there has been no adverse environmental or social impacts
of the forest products that they are using.

There is still limited support to FSC from the mainstream forest industry; the experience in
other sectors and on general environmental labelling schemes shows that such a support is
necessary for the long term success. In other words, there has to be a strong need for the
industry to use the instrument which will also have to be seen to be feasible from the
industry’s point of view. In particular, non-industrial private forest owners who are involved
at the start of the production chain tend to be so remote from the markets for end products that
they may not be able to have a share of the benefits, despite having to bear most of the direct
and indirect costs of certification. In this particular case they will not see the feasibility of
participating in timber certification work.

Box 4.1 summarises the development of certification in Sweden as an example of national
FSC processes which demonstrates how extensive work is involved but it also suggests that
there are serious risks related to processes which do not end up with a consensus.


4.1.2                ISO 14001 EMS in Forestry Organisations

The implementation of ISO 14001/14004 standard on environmental management systems
(EMS) by forestry organisations was analysed in 1995-96 in an ad hoc ISO Study Group. As
a follow-up, the ISO Technical Committee (TC) 207, developing the ISO 14000 series
standards, formed Working Group 2 (Forestry) in June, 1996. The purpose was to “prepare a
report describing informative reference material for the implementation of ISO 14001 and the
use of ISO 14004 for forest organisations” through “an open and inclusive consensus process
which should seek to involve all affected and interested parties”. It was further decided that
the report “must not specify performance levels for forestry and therefore the Report in itself,
cannot form the basis for performance claims” and that the report “must not create a product
label” (ISO/TC 207 Resolution 11/1996). The purpose was to develop a tool for forestry
organisations for continual improvement in their environmental performance and
management systems. The purpose was not to develop a sector-specific standard of ISO
14001.




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Box 4.1              Development of Certification in Sweden
Sweden is a major exporter of forest products depending heavily on the environmentally sensitive
European markets (cf. Figures 13.1-13.4). This is why Sweden is one of the most active countries in
developing certification. The actual work has been carried out by the private sector as the government
sees certification as a voluntary market-driven instrument rather than to be implemented by the public
sector.

Most of the interested parties have opted to develop certification within the FSC framework. A
national working group started to develop a standard in 1996. It organized its work into several
subgroups to prepare specific issues related to the various aspects of standards and to the chain-of-
custody. In April 1977, the main forest owners’ organisation (Skogsägarna) pulled out the process as
some elements of the standard proposal were not acceptable to them. In the summer 1997, a draft FSC
standard was agreed upon by the remaining National Working Group and it was released for public
comment. In September 1997 the proposal was sent to FSC for endorsement which is expected in
January 1998.

In the meantime the industry has been active in preparing for certification. Already in 1996 Stora Skog
had one of its forest districts (Ludoviga) certified by SCS. Some companies are preparing themselves
for EMAS (the Eco-Management and Audit Scheme of the European Union) through pilot projects.
One large forest industry corporation (AssiDoman) has become an FSC member and is represented in
the FSC Board of Directors. Swedish consulting and auditing companies have been established or
some of the existing ones have taken measures to become FSC accredited certification bodies.




Several reasons led to this initiative including a desire (i) to improve environmental
performance, and (ii) to assist in communicating with customers and interested parties
through the use of a cost-effective framework. In addition, (iii) such reference material would
help forestry organisations seeking consistency with the various intergovernmental and non-
governmental sets of SFM principles, criteria and indicators and the performance indicators as
they develop their own policies, objectives and targets. It is to be noted that certification to
ISO 14001 concerns a forestry organisation and its management system, not the condition of a
forest or quality of forest products.

ISO 14001 does not contain environmental performance requirements; their specification is
left for the organisation itself. Therefore, in the draft report of the Working Group, the
reference material on performance elements to be used for setting policies and objectives
contains a listing on (a) international processes to develop SFM Principles, Criteria and
Indicators which may also include general performance requirements, (b) non-governmental
initiatives promoting good forest management including examples of voluntary codes of
conduct, and principles and criteria developed by FSC, WWF and national-level stakeholder
agreements, as well as (c) the interpretation on ISO 14001 requirement to identify and commit
to comply with relevant laws and regulations.

The scope of an EMS is identified for forestry organisations which are typically involved in
forest management and wood procurement. Their relationships with suppliers and contractors
are also covered as far as an organization can be expected to have an influence on their
operations. Explanations are provided for the various phases of EMS development, including
(i) policy, (ii) planning (identification of environmental aspects, and legal and other
requirements, establishment and maintenance of environmental objectives and targets, and
preparation of an Environmental Management Program), (iii) implementation and operation,


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(iv) monitoring and measurement, (v) auditing of EMS, and (vi) Management Review.
Information on small-scale forest ownerships, EMS certification and communication is also
included. According to ISO 14001 the organisation’s specific environmental policy,
objectives and targets which are internally set are put into practice through an environmental
management programme including responsibilities, means and time frames. In practice, these
elements could often be detailed as part of the preparation of forest management plan.

The key consideration as regards the TC207/WG2 has been how the performance criteria are
dealt with. The current draft offers the widest possible range of criteria and indicators which
can be used as a reference by forestry organisations when they identify relevant
environmental aspects and define their own environmental policy, objectives and performance
targets. ISO 14001 requires that “the environmental policy shall be appropriate to the nature,
scale and environmental impacts which means that any general principles, criteria and
indicators need be translated into the specific objectives of the forest organization. While ISO
14001 refers to environmental management system, the criteria in forestry are broader, also
covering economic and social aspects. Other concerns have also been expressed (Hauselmann
1997).

The draft WG report points out that various categories of forests are quite different in their
species composition, intensity of management, and the goods and services they provide to a
growing world population. Consequently, criteria and indicators will have to be applied very
differently depending upon the category of forest and objectives of forest management and
ownerships structure (ISO/TC207/WG2 1977). The lack of a more specific position on
performance standards has been the main reason for the conflict between supporters of FSC
and the ISO, the latter consisting mainly of the industry and forest owners. ISO 14001
requires that the views of interested parties are taken account when an organization sets its
objectives. A structural public consultation process may be implemented for this purpose but
the decision is left for the organisation. As an example, the Canadian forest management
system standard includes explicit provisions for the participatory process.

Recent work by Hortensius et. al (1997) to integrate the two systems (performance, e.g. FSC,
and EMS-ISO 14001) is worth noting. It is commonly observed that whereas ISO 14001
provides for a sound system to achieve environment objectives, it does not specify absolute
environmental performance requirements. On the other hand, the performance based system
of principles and C&I for SFM “do not detail what these imply for a specific forest in a
specific context, nor how these should be achieved” (sic). The authors propose a system that
bridges the two approaches to assure stakeholders that “forest management will improve
continually towards the ultimate goal of achieving SFM”. No cost implications, however,
were given.

As a conclusion, applying ISO 14001 in forestry organisations would be complementary to
schemes like FSC if the aim is to have both types of certifications. Because it must be
remembered that the extra cost of having another scheme (e.g. ISO 14001) could be
prohibitive to the managers. ISO 14001 would make the respective performance requirements
an integratal part of the organisation’s management system in a systematic manner. A single
certification assessment could eventually reveal whether the EMS of an organisation meets
ISO 14001 and whether the performance requirements adopted by the organization are
achieved in the forest.




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As mentioned earlier, the Canadian stardard CSA Z809 is compatible with ISO 14001 but it
contains a number of important additional elements: (i) public participation, (ii) Canadian
SFM Criteria and critical Elements, (iii) and thrid party audit of on-the-ground performance.


4.1.3                Regional Initiatives

African Timber Organisation

The Green Label scheme of the African Timber Organisation (ATO) has not made progress
other than the agreement reached on the criteria and indicators of sustainable forest
management. They will be further tested in practice with the European Union’s support. Their
possible application for certification will also be considered.

European Union

Certification has been intensively discussed in the Union member countries. The emergence
of national FSC initiatives in some member countries, notably the UK and Sweden, and WWF
Buyers’ Groups (see chapter 4.4) has led to further consideration of the issue since the
preparation of a staff discussion paper on the subject which identified four non-exclusive
options for future action (EU Policy ... 1996). The idea of introducing an EU Wood Passport
System was mooted. The System would consist of four elements: (1) origin of the product
(country and region of origin), (2) (plant) health-phytosanitary control, (3) technical
classification (type, quality and/or end-use of roundwood), and (4) sustainability of forest
management.

The process of exploring and assessing other options continues within the EU and stakeholder
views differ significantly. The Confederation of European Forest Owners (CEPF), uniting
about 14 million private non-industrial forest owners, is opposing certification for the reasons
of costs and lack of suitable ways to implement it in Europe where smallholder forestry
dominates. On the other hand, many ENGOs provide strong support to FSC.

The European Union has a mandate to promote certification in its development cooperation as
a tool toward sustainable forest management. Several projects are being financed in this field,
mostly related to the development of certification standards, capacity building and pilot-level
implementation.

Nordic Certification Project

The Nordic Certification Project is a cooperation forum for coordination and harmonisation of
the development of forestry standards that is being carried out in Finland, Sweden and
Norway. It is participated by the forest industries and forest owners’ associations in the three
countries. The project has served as a useful forum for the exchange of other information on
certification as well. It has contributed to common perceptions on how certification can be
implemented in the Nordic countries but, due to differences in socio-economic conditions, the
project did not lead to a subregional scheme.




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4.2         National-level Certification Schemes and Initiatives

There is on-going work directly or indirectly related to certification of forest management in
about 45 countries (Annex 4.2). The emphasis has for the time being been on the development
of certification standards or criteria and indicators within which the standards could be
developed in due course. National criteria and indicators can, however, provide only a
framework for the definition of certification standards. Actual standards are currently being
developed in only about 25 countries (cf. chapter 3.2). It is also observed that the forest
management standards issued by the governments are under active development and this
work, which is also related to certification, gives attention to requirements for compliance
with the law. In addition to standards there exist also in some countries forest management
recommendations which may not be obligatory but applied all the same as a general rule.

National initiatives toward the development of certification standards have been taking place
in 14 countries and FSC-based initiatives are reported in about 16 countries partly
overlapping with each other as there are cases of parallel action occurring.

The development of certification standards is a time-consuming process where experience is
also needed for application. Therefore, it is only in Canada, Finland, and the Netherlands that
a set of agreed standards exists while elsewhere the process is still on-going. In the Finnish
case, the interpretation and testing of the standard is being carried out and the standard will be
reviewed in five years’ time.

Only Canada can be said to have an operational national certification scheme for forest
management in existence at present but no certification to the respective CSA Z-809 standard
has been made as yet, probably because of the uncertainty about the market acceptance of
such certificates. This has discouraged the forest industry from applying for them. However,
the system is complete and several companies are reported to be in the process of preparing
them for certification. Its elements are summarized in Box 4.2. Brazil and Indonesia have
definite plans to implement national schemes (see chapters 6 and 9).


4.3         Labelling Schemes

The Brazilian CERFLOR and the Indonesian LEI certification schemes will include
provisions for labelling. There are other initiatives as well which are aimed at issuing a mark
or a label for timber products. These may be based on (i) third party certificates such as
Keurhout in the Netherlands, (ii) the country of origin, and (iii) multi-issue (life cycle-based)
labels where forest management is part of the raw material related criteria.




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  Box 4.2                      Canada’s National Systainable Forest Management (SFM) System
                               Standards (CAN/CSA Z808 & Z809)
PROCESS AND PROGRESS                                                CANADA’S CRITERIA AND CRITICAL ELEMENTS
•  The standards were drafted over a 2 year period by a multi-      1. Conservation of biological diversity
   interest CSA SFM Technical Committee composed of 4                     Ecosystem Diversity
   equal chambers:                                                        Species Diversity
         Academia, scientists & auditors                                  Genetic Diversity
         Governments                                                1. Maintenance and enhancement of forest ecosystem
         General interest groups (consumer, aboriginal, ENGO,          condition and productivity
         social interest, and labour representatives)                     Disturbances and Stress
         Producers (industry, private woodlot owners, forest              Ecosystem resilience
         cooperatives)                                                    Biomass
•  Consultations with non-governmental organizations were           2. Conservation of soil and water resources
   held to receive input, followed by a Canada-wide public                Soil and water quality
   review which generated requests for over 1500 copies of the            Conservation practices
   draft standards.                                                 3. Forest ecosystem contributions to global ecological cycles
•  Six pilot tests were held on public and private lands.                 Global carbon budget
•  Information and new ideas developed in the review process              Forest land conversion
   were incorporated in the standards.                                    Carbon dioxide storage
•  The standards were overwhelmingly approved by the CSA                  Policy factors
   Technical Committee in the summer of 1996.                             Hydrological factors
•  In September 1996, the Standards Council of Canada               4. Multiple benefits to society
   approved the standards as National Standards of Canada.                Productive capacity
•  In 1997, at least 15 major Canadian forest product                     Competitiveness
   companies and 12,000 private woodlot owners in                         Contribution to economy
   cooperation with their associations began implementing the             Non-timber values
   standards to gain certification on a combined forest area of     5. Accepting society’s responsibility for sustainable
   approximately 20 million hectares – almost equal to the             development
   entire Swedish forest area. The goal for many is to reach              Aboriginal rights
   certification on 100% of the forested lands under their                Forest communities
   management, which would result in an even larger forest                Effective decision making
   area being certified to the Canadian standards.                        Informed decision making

                                                                                                         ISO EMS       CSA SFM
SYSTEM AND PERFORMANCE                                              COMPARISON
• The CSA Standards use the ISO 14001 System elements as a          • Commitment & Policy                     √             √
   foundation, in addition to other requirements summarized in      • Planning                                √             √
   the table on the right.                                          • Forecasting                                           √
• The performance requirements begin with the criteria and          • Implementation                          √             √
   critical elements for SFM that were approved for Canada by       • Measurement & Evaluation                √             √
   the Canadian Council of Forest Ministers. These criteria         • Review & Improvement                    √             √
   provide a road map to sustainability and guide the forest        • Continual Improvement                                 √
   managers and the public in the development of forest             • Public Participation                                  √
   management values, goals, performance objectives and             • Canadian SFM Criteria &
   indicators.                                                        Critical Elements
• The forest manager must develop forecasts using forest level      • 3rd Party Audit of On-The-              √
   computer models to help ensure that the SFM plan when              Ground Performance
   implemented will provide results in the forest which meet the
   criteria, local values, and performance objectives.
• The standards call for a third-party audit to evaluate the SFM
   System elements as well as field performance to ensure the
   criteria, local values and performance objectives are being
   achieved.

          Source: Abusow International




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4.3.1                Labelling Schemes Based on Third Party Certificates

Independent national labelling schemes have been developed in Germany and the Netherlands
to facilitate marketing of certified wood products in the national markets. The basic idea is to
take care of the verification of the chain of custody from the port of entry, or, in the case of
domestic supplies, from the mill gate to the final consumer through a national arrangement.
The main features of such a scheme are as follows:

• The governing body of the scheme recognises credible certificates that may accompany
  deliveries. Such a recognition is based on a set of minimum criteria set for certifications
  carried out on suppliers.
• Monitoring of the intermediate and final product flows in the domestic market through an
  appropriate arrangement involving regular reporting by the licensed participants and
  independent third party verification.
• Monitoring of the use of the trademark in the market place, the scheme being the owner of
  the collective mark.
• Participation in the scheme is through voluntary membership; a fixed annual fee and a fee
  based on the traded volume to be applied to finance the scheme which would be self-
  supporting.

This kind of scheme is presently operational in the Netherlands where Keurhout Foundation is
the owner of the collective hallmark (see for details chapter 11). In Germany, the planning
phase has been completed and the scheme is being run by the Initiative zur Förderung
nachhaltiger Waldbewirtschaftung (IFW, initiative to promote sustainable forestry), which is
the successor of Initiative Tropenwald.

Three key issues have been raised in this context: (1) Which certificates can be recognised,
apart from those issued by FSC-accredited certification bodies. (2) Will the label be accepted
by the market, particularly by Buyers’ Groups and ENGOs which are supporting FSC. (3)
How will the verification of the chain of custody be carried out in the case of products
containing certified and uncertified raw materials. Keurhout requires that eligible products for
labelling must be 100% of certified origin.


4.3.2                Marks of Origin of Domestic Timber

Several countries have in the past issued their exporters certificates or marks of the country of
origin of forest products which were often accompanied with statements on the quality of
forest management. These self-declarations were challenged in countries like the UK as being
unsubstantiated statements. This led to the withdrawal of many such schemes. Of special
interest in this context have been similar schemes to promote domestic timber in the national
markets through marks of domestic origin. Such schemes exist today in Austria, Germany,
Switzerland and the UK. With the exception of the British Woodmark run by the Forest
Industries Committee of Great Britain (FICGB), and the German mark they are not actively
promoted at present. As an example, the German SFM label (Holz aus nachhaltiger
Forstwirtschaft. Gewachsen in Deutschlands Wäldern – Timber from sustainable forestry.
Grown in German forests) was launched in 1996 and may be used free of charge under a
licensing arrangement with the foundation promoting sales of the German forest industry


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(Absatzförderungs-fonds der deutschen Forstwirtschaft). The FICBG has approached the
WWF Buyers’ Group with the purpose of getting their Woodmark accepted, arguing that the
legal standards are high and well respected and thereby ensure sustainable forest mana-
gement. The Austrian mark (Holz-OK, natürlich Österreich; Wood-OK, naturally, Austria) is
available for any organization wishing to use it. The details of the Swiss scheme have been
provided in an earlier ITTO study (Baharuddin-Simula 1994).

The schemes based on marks of origin have emerged as a countermeasure by local producers
as they are afraid that non-labelled (domestic) products may be discriminated by retailers.

Labelling of timber for domestic markets may become more attractive in the future if
significant volumes of certified imported timber and timber-based products are readily
available on the market. The result could be that, in spite of the lack of market apprehension
about the quality of management in the domestic forests, uncertified products will be
perceived by buyers to be inferior to certified ones. This could lead either to intensive
promotion of marks identifying the domestic origin of the products, or to the development of
third party certification for domestic forests. There are bound to be problems arising out of
the use of mixed domestic and imported certified timber or fibre in further processing and
marketing of end products.


4.3.3                Wood-based Products in Multi-issue Environmental Labelling Schemes

Multi-issue national environmental labelling schemes are found in several countries and
regional versions, such as the Nordic Swan. Their effectiveness and problems have been
analysed elsewhere (OECD 1996, UNCTAD 1996). Some of these schemes are relevant to
the subject of this study with regard to consumer products derived from forests and including
paper and wood products. Of particular interest is the EU Eco-label Award Scheme which
already covers copy paper, kitchen rolls and toilet paper and will extend to other further
converted paper products. General requirements for sustainable forest management are
included in the criteria on renewable resources making reference to the Resolution H1 of the
Helsinki process and to the UNCED Forest Principles for states which have not adopted the
Helsinki Resolution. Such direct linkage with SFM criteria and indicators is not apparent in
other schemes.

One long-term scenario could be that such single-issue labels as those related to forest
management will disappear if the respective criteria are adequately addressed in the multiple
criteria. Forest management certificates would be adequate instruments to provide credible
information on the environmental (and social) aspects of the raw material supply.


4.4         Buyers’ Groups and Other Demand Creating Initiatives

Forest management certification has been suffering from the chicken-and-egg syndrome: if
there is no supply, there is no demand; and if there is no demand, why should supply come
forward. To break this vicious circle, WWF and some other ENGOs have been active in the
development of so called Buyers’ Groups which are now reported to exist in eight countries
(Table 4.1). There are plans to set up groups also in Australia, France, Ireland and some other
countries. Most of them are in their initial stages still but the largest one, the WWF 1995 Plus
Group in the UK has been in existence since 1991. It has currently about 80 members who are


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estimated to account for about 25% of the sales of wood products in the country. The
estimated market share of the Group members in Belgium is 50-70% of the timber trade and
import while in the UK the share of group trade in relation to the total UK wood consumption
is estimated at 14%. However, only 3% of the total group trade is currently in certified
products1

The WWF-initiated groups largely share similar purchasing policy statements which imply
buying “substantial and increasing” volumes of wood from certified forests. The certification
should be independent against agreed standards and include product tracing and labelling. It
should be globally applicable. The WWF 1995 Plus Group believes that currently only the
FSC provides for these elements (WWF 1996). Not all groups, however, have exactly the
same statements. For instance, the Buyers’ Group in the US is committed to “increase the
volume of independently certified products as supply becomes available”. An emphasis is
also given to adopt company-level policies and programs and to develop individual,
confidential action plans and targets and timetables to guide purchasing (Forest Products ...
1997).

Table 4.1            Buyers’ Groups
    Country                                               Date    Number of   Commitments
                                                                  members
    Austria                                                           19      Start trading FSC-certified
    - WWF Gruppe 98                                        1996               wood in 1988
    Belgium                                                                   50% of wood supplies
    - Club 97                                              1995        84      certified in 2000
    Germany                                                             ..    ..
    - Gruppe ‘98 (*)                                       1997
    Netherlands                                                               Buy FSC-certified wood
    - Heart for Wood                                       1992       265     whenever possible
    Spain
    - Group by WWF (*)                                     1997               Planning stage
    Sweden                                                                    Influence that raw material
    - Interested party group                               1996        78     originates from FSC-
                                                                              certified Swedish forests
    UK                                                                        Certified FSC wood by
    - WWF 1995+ Group                                      1995        77     1999
    USA                                                                       Site specific 3rd party
    - Forest Products Buyers’ Group                        1997       ~10     certified wood,
      (FPBG)                                                                  performance criteria
      (*) Buyers’ group in the planning process
      Sources: Data collected from the groups

Not all buyers groups have been created with WWF initiative. In the Netherlands, Dutch
NGOs launched a campaign called Heart for Wood (Hart voor Hout) under the coordination
of the Friends of the Earth and Oxfam in 1992 which was later joined by WWF. The Dutch
initiative has involved 252 municipalities, 10 state departments, 72 real estate developers, 139
housing associations and 3 biggest DIY chains with a common resolve to buy FSC certified
timber whenever possible. The campaign was later followed by the establishment of a Dutch
Buyers’ Group (van Roosmalen, pers. comm.).

1         Sources: WWF Groups


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Another promotional instrument is listing of acceptable wood sources by ENGOs and
dissemination of the information to interested parties. The best known effort in this field is
probably the US-based Good Wood Alliance which compiles annually selective lists of
recommended suppliers including both certified and uncertified sources. The latter may
include well-managed, recycled and salvaged sources as well as sources of unknown origin
(Good Wood... 1996).

In addition to the buyers’ groups, there have been complementary initiatives to develop
purchasing policies for the institutional sector, particularly local governments. Two
approaches can be observed: (1) through by-laws, and (2) through voluntary purchasing
policies. State-level laws have been passed in the United States for this purpose (see chapter
12) and local government by-laws have been passed e.g. in Germany and the Netherlands.
Most of these instruments have been targeted at tropical timber. In the UK voluntary
purchasing policies are being developed for all timber products by some local governments
with WWF´s assistance.


4.5         Conclusions

(1)     Forest Stewardship Council has continued to expand its membership and resources as
        well as to develop its guidelines and activities. The system development is not yet
        complete and several key issues require further work, such as verification of chain-of-
        custody, certification of smallholders, treatment of wood coming from conversion
        forests, harmonisation of national FSC standards in similar ecological zones, and
        certification of non-timber forest products.

(2)     There is a strong opposition against FSC in many countries, mainly among organised
        private forest owners and forest industry. It is not foreseen that FSC would enjoy a
        monopolistic position as the only accreditation and labelling program for forest
        products worldwide.

(3)     The application of ISO 14001 standard on environmental management systems has been
        clarified by an ISO Working Group which has prepared a draft technical report for this
        purpose. The ISO 14001 standard provides a harmonised basis to develop management
        systems. Forestry organisations will have to define themselves which performance
        targets they want to commit themselves and how these performance targets are
        developed. These two issues are likely to require further work which may, however,
        take place at national level.

(4)     The regional initiatives to develop common certification standards or regional schemes
        have not yet led to any concrete results. Regional cooperation has, however, been useful
        in the exchange of information and experience. Due to the early phase of certification
        development, differing national priorities have, for the time being, been so important
        that slowly moving regional cooperation has had to wait for its time.

(5)     Several types of labelling schemes have emerged for forest products, some based on
        third-party certification, others based on self-declarations, and some referring to the
        quality of forest management, others to the country of origin only. Wood-based
        products are also included in multi-issue (life cycle-based) environmental labelling


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                                                                                             24
        schemes. A certain degree of proliferation of certificates and labels is foreseen which
        has the risk of creating confusion among buyers and consumers and undermining the
        credibility of claims. On the other hand, the industry is keen to have options in
        communicating of its environmental performance as part of marketing strategies.

(6)     Eight countries are reported to have active buyers groups which have made
        commitments to buy certified forest products. In addition, other action has been taken in
        some countries by local governments or institutional buyers to communicate their
        commitment or preference to buying certified wood products. The market impact of
        these initiatives has been more pressure on suppliers to get themselves gradually
        certified than a significant increase in the actual volumes traded due to the limited
        supply. It is not clear how the committed buyers will act in varying market situations,
        e.g. if uncertified products are available at lower prices than certified. Customer activity
        appears to be increasing in countries with high environmental awareness but may take
        new forms in the future. Certification programs would eliminate the need by the
        suppliers to meet varying buyer-specific requirements thereby contributing to
        efficiency.


5.          PROGRESS IN IMPLEMENTATION

5.1         Certification and Accreditation Bodies

The number of accredited forest certification bodies around the world is still small. FSC has
completed only five exercises: SGS Forestry Soil Association (SA) in the United Kingdom,
and Scientific Certification Systems (SCS) and the SmartWood Programme of the Rainforest
Alliance (SW) in the United States were the first to emerge and their credentials now also
include plantations which were not originally included due to the lack of agreement on the
FSC Principle 10. The most recent accreditation is SKAL in the Netherlands which has long
experience in certifying organic agricultural produce like SA.

In terms of market shares, SGS is the largest body with 29 valid certifications that account for
1.7 million hectares by March 1997 (Table 5.1). SCS has carried out 11 evaluations over a
total area of about 1.1 ha. SW has issued 11 valid FSC certificates but they carried out large
certifications already before FSC was established. If the cumulative area is used as a basis,
SW is still Number One among the existing certification bodies.

SA has only domestic experience while SGS has operated in this field in all continents except
North America. SCS has experience in North and Latin America as well as Europe. SW has
carried out certifications in the Americas and Asia.

The human resources are a major constraint in certification. The currently largest body, SGS,
has less than 20 full-time staff in this activity. As there are less staff in other organisations, it
is estimated that only a few dozens of permanently employed specialists are involved in
auditing work. Assessors on contract are frequently used coming from research and
educational institutes, consulting companies, or who are working independently. The reliance
on ad hoc specialists makes quality control difficult.




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Table 5.1            Market Shares of FSC-accredited Certification Bodies
Certification                   Number of                 %                Area       %
body                             forests                                  1000 ha
SA                                  6                     10                  0.7      0
SCS                                11                     19              1 124.9     34
SGS                                29                     49              1 733.6     53
SW                                 13                     22                414.6     13
TOTAL                                591)                 100             3 273.8    100
1)          Note that 2 forests have been certified both by SCS and SW.
            Sources: FSC and SCS

The FSC accreditation process is a lengthy and complex exercise and acts as an effective
threshold to the entry of small enterprises which have not been working in the certification
field before. The requirement to translate internal documentation whether into English or
Spanish is also a time-consuming and costly activity discriminating countries where neither of
these two languages is used. Elaboration and translation of necessary internal documentation
is often beyond the means of smaller enterprises. An innovative solution to the problem is
applied by SW which has set up a network of independent assessors who may carry out
evaluation when needed according to the SW rules. After a review, SW can issue FSC
certificates based on these assessments. The SW network has a total of 14 members in
Bolivia, Brazil, Costa Rica, Honduras, Mexico and the United States.

If there are capacity constraints among certification bodies (which may aggravate if demand
for services expands), the situation may be even more difficult with accreditation. FSC has a
permanent staff of six, covering administration and information. FSC, like certification
bodies, has to rely on specialists under short-term contracts. Several certification bodies from
Brazil, Costa Rica, Germany, and Sweden have applied for FSC accreditation. With the
current resources FSC may not be capable of coping with the demand by prospective
certification bodies. This constraint is already reflected by the long processing periods of
accreditation applications.

Much of the problems mentioned above could be eliminated, if accreditation were to be
carried out by national accreditation bodies. This is happening, for example, in the case of
ISO 14001 and could be a possibility for FSC as well if it subcontracts accreditation to
national bodies. In circumstances of many developing countries where there are no national
accreditation arrangements this would not, however, be the solution.

The same problems have been experienced already in the accreditation of quality management
certification bodies (ISO 9000 series of standards). ISO has subsequently taken the initiative
to set up a global accreditation system (QSAR) in cooperation with the International
Accreditation Forum which is a cooperative body of national agencies. Such models, when
operational, could serve as reference when accreditation capacity is developed for the needs
of the forestry sector worldwide.


5.2         Certified Forests and Forest Products

The recent progress in new certifications has been relatively slow if measured in terms of area
(Table 5.2). The area of certified forests dropped in 1996 while some earlier certificates were



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not renewed. The FSC-accredited certifications amount to 55 “forests” covering 2.9 million
hectares. In addition, there are at least two non-FSC certifications that is by SCS in Brazil
(total area 178 000 ha). The term “forest” can include any forested land between 8 ha in
Solomon Islands and 635 000 ha of state forests in Katowice, Poland.

Table 5.2            Certified Forests in the World 1994-97

          Year                               Number of forests      (Area 1000 ha)
          1994                                     ..                   3 000
          1996                                     25                   5 060
          1997 (March)                             58                   3 093
            Source: Consultants estimates based on FSC and data from certification bodies

Reliable data on how much wood was produced from the certified forests are not available
and even less information exists on the internationally traded volumes. Only SGS reports
production volumes for each assessment. Based on their data, figures collected from various
sources and the consultants’ estimates, the roundwood production from certified forests
(March 1997) was about 9.5 million m3/year. This would correspond to an average annual
level of harvesting of 3.2 m3/ha. Of the total estimated wood production, the three Polish state
forests account for 4.6 mill. m3/yr. The above figures include 51 900 ha of state forests in the
Wallone Region, Belgium (286 000 m3/yr), but the forest owner has recently asked the
certification body to withdraw the certificate.

It appears that most of product certificates and labels have been issued to special products or
products which enjoy market niches. The limited supply volume has represented a constraint
for major promotional efforts. Examples of such niches are guitars, wooden household
utensils, door knobs and handles, etc. Certified doors are offered by many suppliers, and
certified mouldings, flooring and other joinery products are also being introduced to the
market. This situation is, however, expected to change in the near future as more large-scale
certifications are completed (e.g. Poland and Sweden). It has been estimated that as a result of
the on-going certification of forest industry-owned forests lands in Sweden, 20% of the
Swedish exports could be marketed as certified by 1998, corresponding to about 7.8 million
m3 per year in wood raw material equivalent. The reliability of these estimates could not,
however, be confirmed at the time of this study.

WWF and the World Bank are in the process of developing cooperation to conserve the
earth’s forests under four programmes. One of them was aimed at the promotion of
independent certification of well-managed forests through private sector approaches
combining interventions on both the demand and supply side of the international forest
products markets. A quantitative target has been set to certify a total area of 200 million ha by
year 2005, of which 100 million ha would be in the tropics and another 100 million ha in the
boreal and temperate regions (WWF 1997b). This would represent about 6 percent of the
world’s production forests and, in terms of industrial roundwood output, the volume could be
in the range of 600 million m3 annually. The target is obviously ambitious in view of (i) slow
progress in the development of national certification standards, (ii) uncertainty about the
“level” of certification standards and its relation to the respective statutory requirements as
well as about how to achieve an acceptable measure of sound forest management practices,
(iii) whether there will exist so much certifiable forests in view of the slow process of
changing management practices, (iv) limited experience in the application of this complicated
instrument, and (v) the current certification and accreditation capacity which can only be built


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up through a systematic effort. Finally, (vi) it is not clear how such a large-scale operation
could incorporate the needs of smallholdings and community-owned forests avoiding their
discrimination.


5.3         Forest Organisations Certified to ISO 14001

There is no comprehensive information available on certification of the environmental
management systems in forestry organisations as such data are not systematically collected.
However, at least five certifications to ISO 14001 have been reported: two in Brazil (Bacell
and Riocell, both pulp producers), one in Finland (Metsäliitto which is a wood procurement
organisation owned by forest owners and integrated in industrial processing of pulp, paper,
sawnwood and panels with an annual wood procurement volume of about 11 million m3),
another in Sweden (Korsnäs AB Forestry, a pulp, paper and sawmilling company), and one in
Indonesia (PT Wirakarya Sakti in Jambi, Sumatra). At least three of these certifications have
been motivated by similar action taken in the industrial processing side.

In Canada, a recent survey has revealed that sixteen forest enterprises and organisations have
an intention, or are in the process of, applying the new Canadian standard on environmental
management systems (CSA Z809) which corresponds to ISO 14001. Their total forest area is
more than 8 million ha with an annual wood production of 10 to 12 million m3 (Sustainable
Forestry ... 1997). The purpose of the organisations is to seek for certification.

The work of the ISO TC207/WG2 has already resulted in efforts in capacity building on
environmental management systems within forestry organisations in several countries, not
only in the wood procurement department of industrial companies but also among private
forest owners and their organisations.


5.4         Conclusions

(1)     Both certification and accreditation capacity of the existing bodies is a constraint for the
        development of certification in the forestry sector. Innovative solutions toward
        decentralisation may emerge to eliminate this bottleneck.
(2)     Linked with this is the narrow human resource base of the existing organisations. This
        is a constraint both for the volume and quality of certification activity.
(3)     The number of certified forests and particularly their area are expected to increase
        relatively fast, but the rate may fall short of the ambitious targets set e.g. by the World
        Bank and WWF.
(4)     The theoretical wood production volume is expanding accordingly but is still marginal
        being spread between 57 forests in 16 countries
(5)     Most certified products in the market have been aimed at niches. This is expected to
        change in some markets as large-scale forest industries obtain certificates.
(6)     Certifications to ISO 14001 have started in forestry organisations and their number is
        expected to increase, especially when the ISO Working Group on Forestry (TC207/
        WG2) has completed its work. These organisations are mostly large-scale operations
        managing, extensive forest areas and producing significant wood volumes.



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6.          BRAZIL

6.1         Introduction

The Brazilian territory can be divided into three main ecological zones: (1) the tropical rain
forest in Amazon and the Atlantic Coast, (2) dry tropical forests in the Central and North-
eastern regions, and (3) the humid subtropical forest in the Southern highlands. These zones
are also economically and socially different. From the economic point of view the plantations
established in the southern and coastal zones, and the natural forest in the Amazon region are
the most important ones, both are supplying timber to international markets. The Amazon
exports are mainly sawnwood, plywood and veneer while the plantation-based exports are
mostly chemical pulp, fibreboard and other wood panels as well as solidwood products,
mainly further processed. Of the total industrial wood consumption about 45% comes from
natural forests and the balance is from plantations. The country is practically self-sufficient in
forest products. The share of exports in total production (1996) varies by products from 8% in
sawnwood to 60% in plywood and 35% in pulp. In the case of paper and paperboard, and
plywood the export shares are lower, 21 and 19%, respectively (SBS 1997).

Brazil has been active in developing certification in the forest sector since 1993. Two parallel
initiatives have been going on, one aimed at a national labelling system and the other one
within the FSC framework. The export industry has been concerned about the development of
eco-labelling schemes in their export markets in view of their potential as new barriers to
trade. On the other hand, it has been advocated by some NGOs and certification bodies that
small-scale and community producers could use certification to gain access to markets which
otherwise would not be easy to approach.

Due to the vast Amazon forests, Brazil has been continuously in the forefront of international
attention on deforestation and forest destruction. A special issue has been illegal harvesting of
mahogany, which used to be a major export item. The Brazilian industry has taken several
measures to provide information on the reasons and mechanisms of deforestation.
Certification has been proposed as a means to improve the credibility of such information.


6.2         Normative Framework and Development of Certification Standards

6.2.1                Regulation and Control

The federal forest law provides for the general regulation of forests and establishes criteria for
protected areas. Forest management in the Legal Amazon is also regulated through the federal
law. Forestry is, however, a decentralised sector and states are expected to issue their own
forest legislation. Six states have presently state level forest legislation in force. The most
comprehensive one is probably the forest law in the Minas Gerais state. In the legal
framework, plantations are considered agricultural crops and may be therefore regulated at
municipal level. However, State forest laws also include provisions for plantations.

Federal level control of forest harvesting and transportation has been linked with the payment
of fees (fiscalização). The past methods have not been effective and therefore new, high-tech
solutions are being introduced making it easier to control logging, land clearing and log
transportation. Small-scale intermediaries are common in operations in natural forests which


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makes control difficult. Industrial companies operating based on plantation forests are often
large and vertically integrated in forest production making control easy.

Brazil applies both the Criteria and Indicators of ITTO and the Tarapoto Proposal in assessing
her progress in the area of forest management. National-level criteria and indicators do not
exist but, on the state level, specific measures have been developed in a few cases. In
addition, a major ITTO training project has been implemented to disseminate the ITTO
Guidelines in the public and private sectors. The ITTO and Tarapoto C&I have provided a
general framework for the development of local certification standards as well.


6.2.2                CERFLOR

In 1993 the Brazilian Society of Silviculture (SBS) started to develop a national scheme for
certification, CERFLOR. The first proposal for certification standards was soon produced,
together with a plan for institutional arrangements. The initiative was taken by the industry
association with the participation of research institutions but it did not lead to implementation.

In 1996 a decision was made to revise the plan and make a fresh start considering
international developments such as the ISO TC207 Working Group on Forestry and FSC. The
national standards body, ABNT, assumed the responsibility for independently managing the
development process and operating the scheme based on an agreement made with SBS
(Garlipp, pers. comm.).

A Technical Committee on Forests was established under the ABNT Commission on
Certification as part of the implementation of the Brazilian Ecolabelling Program (Selo
Verde). Similar work on certification of environmental quality had already been carried out in
the leather and footwear sector (ABNT, undated). A total of 17 members representing
industry associations (5), research institutes (3), NGOs (3), ministries (4) and ABNT (2) have
participated in the development of environmental criteria for the certification of origin of
forest raw material. The first draft of the criteria for plantation forests was produced in March
1997 (ABNT 1997a). When the final draft has been completed it will be submitted to public
consultation in a similar way to that used with national standards. The final proposal will be
established following the consensus process according to the ISO/IEC Guide 59 and the
WTO/TBT Code of Good Practice for Preparation, Adoption and Application of Standards.
When the criteria and the respective certification procedures have been accepted by the
relevant parties, the final proposal will then be submitted to the ABNT Certification
Commission for adoption.

The first draft of the CERFLOR standard for plantation forests is hierarchically built upon
five principles and the respective criteria and indicators are identified. Principles are
considered permanent while criteria and indicators may be adjusted based on accumulated
knowledge. Evaluation should always consider regional peculiarities and local level
regulations.

A system of weighting has been proposed for discussion. Principles would be assessed
separately, each having a maximum value of 100. The weights for individual criteria are
derived by dividing 100 by the number of criteria which describe that principle. A minimum
threshold value (300) has been set for the total number of points which needs to be achieved
for the operation to obtain a certificate. The number of points is proposed to be linked with


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the validity of the certificate varying from 3 to 5 years. On each principle, an acceptable level
of performance is required. The assessment will apply the following concepts: adequate,
adequate with restrictions, inadequate and inexistent. (ABNT 1997a).

The criteria include various environmental aspects related to forestry operations, planning,
appropriate technologies, provisions for tracing of timber, socio-economic aspects as well as
compliance with the relevant laws. Discussions with various parties revealed that the draft is
considered broadly acceptable. The final version will be applied in voluntary certification, not
as national (minimum) standards to be generally met. The CERFLOR system will therefore
serve as a tool for self-regulation through a transparent consultation mechanism in standard
setting, which is adapted to the national conditions. The system will be non-discriminatory
and voluntary to be applied in a flexible and gradual manner educating enterprises. The plan
is to seek for international recognition to serve as basis for mutual and reciprocal
arrangements (ABNT 1997b).


6.2.3                FSC Process

The national FSC process has been on-going since 1993 when the first working group was
formed in the FSC General Assembly in Toronto. It was working in parallel with another
national group which started in April 1994. In September 1994 the two groups were merged
and became part of a national working group on forest policy which served as a forum for
NGOs to have dialogue with the Government. Certification was set aside for a period but in
October 1995 a new national FSC working group was formed with the participation of NGOs
and academic institutions while the Government was an observer. There was intensive debate
on the national FSC strategy and priorities to be adopted and it was only in August 1996 when
the work really started. Three principles were considered: (1) independence and autonomy of
FSC, (2) consensus of a broad participatory process, and (3) transparency and technical rigor
in assessment (Faillace 1996). Main reasons for the long preparatory phase were lack of
financial resources and clear rules of operation.

In January 1997 an Executive Secretary was contracted to assist the National Coordinator,
representing WWF-Brazil. Internal rules were agreed upon to provide an established
framework. The current membership includes 18, representing economic, social and
environmental interests. Three members represent the government, academic institutions and
certifiers, without voting right. The economic interests included key industry associations
some of which were already participating in the previous FSC group. It is important to note
that there are several organizations which are participating both in the FSC and ABNT
working groups. This is likely to contribute to the harmonisation of the two sets of standards.

As the first priority, the development of certification standards for plantations and non-
flooded forests in the Amazon has started according to a clearly defined process where a
strong element of consultation is included. The process is expected to take 18 months which
means that the standards should be completed by July 1998. The export oriented enterprises in
pulp and furniture/joinery industries are reported to be interested in the FSC process while the
plywood and sawmilling industries have not defined their final positions even though the
regional timber export association, AIMEX, is a member of the FSC group.




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6.2.4                Existing Certification Standards

IMAFLORA is a Brazilian NGO specializing in environmental certification in the forestry
and agricultural sectors. In forest products it belongs to the network of SmartWood, acting as
their auditor. IMAFLORA’s work programme includes assessor training courses, research on
integrating certification and forest policy, and development of markets for certified products.
The organization has developed three sets of standards for certification of forest products: (1)
Brazil nuts, (2) natural rubber, and (3) caixeta (Tabebuia cassineoides) forests (IMAFLORA
1997). Non-wood products were selected because of their importance as a source of income to
local populations. Caixeta standards were motivated by the availability of scientific
information on silviculture of this species as well as a possible export market interested in
certification (UK). There was supposed to be a need for a special standard because of the
dominance of small-scale producers. None of these standards have, however, been applied in
practice, nor have they been endorsed by other bodies.


6.3         Progress in Certification

6.3.1                Certified Forests

There is currently only two forests in Brazil which presently (July 1997) have a valid FSC
certificate. In addition, the plantation forests of Duratex and Eucatex, the two major
fibreboard exporters in Brazil, have been certified by SCS. These two certifications do not
qualify for FSC certificate as SCS was not at the time of assessment accredited by FSC for
plantation forests. The motive for certification in both cases was that a major US customer
insisted on having these suppliers certified.

IMAFLORA has been involved in seven certification assessments out of which four are in a
way or another special cases, mostly in the Amazon region, representing different strategic
options of forest management (management for timber production, indigenous community,
extractive reserve, national forest, etc.). In addition, IMAFLORA has been leading the
assessment of the plantations of a major pulp and paper group (Klabin) with an area of
218 000 ha, which is reported to be essentially completed (A Klabin sai ... 1997). The process
has proved to be more complex than ISO 14001 certification in the industrial operations and
the interpretation of FSC criteria has involved a higher degree of subjective assessment
(Certificação da Klabin ... 1997). The certification process of large operations appears to take
a long period of time. From time to time, the process needs to be stopped for a while to build
up adequate information, and to improve performance. The certifier can easily get involved in
advising on the necessary improvements.


6.3.2                Certified Organisations

Two important pulp and paper companies have been recently certified to ISO 14001, Bacell
and Riocell. Their certifications also included the company’s forest organization.




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6.3.3                Certification and Accreditation Bodies

The only local organization involved in certification of forest management is IMAFLORA,
which is a relatively small group working also in other fields. IMAFLORA has not sought for
FSC accreditation in spite its support to FSC because of the lack of resources to prepare the
necessary documentation and to build up the required management systems. Therefore, the
current system where IMAFLORA carries out assessments but certificates are issued by
SmartWood has been convenient. In addition to IMAFLORA, SGS is represented in Brazil
and SCS has carried out two certification assessments.

Apart from being the national standards body, ABNT is in the process of getting accredited to
certify ISO 14001 standards, among others. Such an accreditation can be obtained locally
from INMETRO (Instituto Nacional de Metrologia, Normalização e Qualidade). Brazil has
currently about 1000 enterprises certified to ISO 9000 and a considerable interest is expected
also in ISO 14000 (Bueno 1996). The demand for the services of both certification and
accreditation bodies is expected to increase rapidly as 75% of the 500 major Brazilian
companies have or are in the process of establishing an environmental management system
(Empresas... 1996).


6.4         Key Issues

6.4.1                Convergence between Parallel Initiatives

Convergence between the two parallel initiatives in order to develop certification in Brazil is
possible. There are good chances for that as certification is customer-driven, i.e. led by the
industry. If the ABNT and FSC standards prove to be mutually compatible, it will facilitate
their parallel use. Both standards could serve as performance standards for forest management
whose certification assessment could incorporate the requirements of ISO 14001 as well. FSC
sees the CERFLOR standard as part of ABNT’s own labelling scheme, not as a national or
regional certification standard. As the industry is playing a major role in developing the
CERFLOR scheme, its independence may be challenged (Suiter, pers. comm.).


6.4.2                Competitive Advantage

Certification is now attracting a lot of attention in the large export-oriented companies whose
operations are based on plantation wood. If several of them, in seeking for a competitive
advantage, get themselves certified, but the progress is slow elsewhere in the sector, this
could raise a number of issues. Firstly, the competitiveness of Amazon timbers would be
negatively affected, if the interested buyer could more easily get environmental assurance on
plantation-based products. Secondly, the NGO community might reconsider their support to
certification if the instrument is mainly benefiting the large plantation-based companies at the
expense of community producers and SMEs.




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6.4.3                Chain of Custody of Amazon Timbers

The verification of the chain-of-custody is particularly problematic in the Amazon region.
Exporting companies do not generally manage their own forests but use intermediaries, and
several of them may be involved in one particular log delivery. The buyers have currently
limited means of being certain about the origin of the timber procured even though the
government rules should provide for this from harvesting areas under management plans. A
special problem in this respect is wood coming from areas which are converted into
agriculture or grazing (conversion wood). Bar-coding of individual shipments is being tested
by IBAMA as a potential solution to improve tracing of logs to their origin.


6.4.4                Social Aspects

Brazil is a vast country with different social and cultural situations where individual states are
in different phases of socio-economic development. This diversity is also reflected in how
forestry influences local people and their livelihood. Social issues are therefore important in
assessing forest management but it appears that they have not been adequately considered in
some previous certification assessments. Consultations with local stakeholders have been
criticized as minimal. Transparency of the consultative processes will be one of the key issues
in future certifications. Also some companies which have unsolved issues related to the land
rights of indigenous people in their operating areas would have difficulties to get themselves
certified before such issues are locally solved.


6.4.5                NGO Representation

Brazil is a large country with many NGOs most of which work independently and without
proper coordination on policy questions. In addition, their views are often divergent. It is not
always clear which organisations should be invited to participate in the development of
certification as full participation of all of them is not feasible.


6.4.6                Local Certifier Capacity

The competence of foreign certification bodies to carry out proper work in the Brazilian
conditions has been challenged. Expatriate experts with no or limited knowledge on local
conditions are alleged to be incapable of assessing whether or not forests are “well managed”.
An outsider, even with international recognition, who tends to generate an opinion within a
short period of time will stand the risk of revealing how little he knows of the local
peculiarities of a particular operation. Sometimes such experts do not even speak the local
language fluently, making any consultations with local stakeholders a haphazard exercise, the
outcome of which can be easily challenged. There is a clear need to develop local assessment
and certification capacity. The challenge is, however, how to ascertain that such local
certifiers will have international credibility. (Viana 1996b).

On the other hand, the Brazilian forest industry tends to favour high professional standards in
any conformity assessment work. It is therefore not easy for them to justify seeking the
services of NGO-based certifiers who may not have fully developed management systems for
this purpose.


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6.4.7                Market Development

Lack of a need for certification in the domestic market has been singled out as one of the key
constraints as, with a few exceptions, the forest industries are geared towards supplying
Brazilian consumers. ABNT/CERFLOR programme covering consumer goods in general
could play an important role in introducing a national environmental label for forest products
to the domestic market.


6.4.8                Costs

Costs induced by certification is in Brazil a key issue as elsewhere. The direct costs of the
assessment appear to vary with organization and the type and size of operation. Individual
exercises have been generally costed in the range of USD 20 000 to 100 000. In large
operations the unit costs have been around USD 0.60 to 1.40/ha.


6.5         Lessons Learned

(1)     Adequate participation of all the key interested parties is necessary for the standard
        development process. Improvised procedures are not enough and documented rules
        appear to be necessary for operating effective consultative processes. Industry and
        NGOs should always be together participating in the same events, to avoid any
        disintegration of the standard development process.

(2)     Convergence of parallel standards is likely to be facilitated when the development
        process is participated at least partly by the same parties as in the Brazilian case.

(3)     Adequate resources in terms of funding of the consultative process and staff are
        necessary for the standard setting process.

(4)     The level of initial standards may not be as important as generally thought. Brazil has a
        good regulatory framework and therefore, if the compliance with the law is ensured,
        many issues are adequately covered. Certification could play a useful role in law
        enforcement. In the Amazon, long-term contracts of forests utilization are introduced in
        government owned forests. If these forests are certified, it could eventually be subjected
        to less control by the Government but this remains to be seen.

(5)     In plantation forestry practices which have been based on highly efficient monocultures,
        several aspects may need to be reconsidered to incorporate biodiversity considerations.
        Examples are (1) size and form of compartments, (2) scheduling of mature compart-
        ments for harvesting, (3) mixture of the genetic material (clones) at stand and FMU
        level, (4) dimensioning of harvesting machinery with regard to soil compaction and
        water runoff, and (5) planting of sloping areas. However, “cosmetic” changes should be
        separated from improvements which will really have a positive environmental impact.

(6)     NGOs tend to see certification as an important tool to democratise decision-making on
        the use of forest resources in the absence of other effective channels of influence.


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(7)     The Brazilian industry still has various perceptions on the possible role of certification
        as a management tool and individual sub-sectors have somewhat different interests.
        Adequate information should be disseminated through appropriate channels to
        enterprises to facilitate a proper understanding of the situation to enable them to make
        appropriate decisions on possible own action. There has been a lot of misinformation
        which has created reservations and unrealistic expectations about certification. Each
        company should make its own judgement on possible actions to be taken based on its
        specific needs and opportunities.

(8)     Enterprises should prepare themselves before starting the certification process to reduce
        costs. The process should not be started before the essential preconditions exist.
        Advance information to the parties to be consulted could ensure their cooperation and
        eliminate possible negative attitudes. (cf. Leroy & Fatheuer 1996).

(9)     Enterprises have been concerned about the monopolistic role of FSC making many
        companies reluctant to be active in certification. The other constraint is uncertain
        benefits, particularly in cases where exports play a marginal role.

(10) Plantation-based pulp and paper industry sees certification as a tool to obtain
     competitive advantage in the international markets. Certification of origin is seen as
     complementary to ISO 14001 certifications. Companies are expected to have the two
     carried out at the same time.

(11) If certification is implemented purely because of client requirements, its effect on
     improving management systems and practices may remain limited.


7.          FINLAND

7.1         Introduction

Finnish forestry is characterised by private ownership (54% of the total forest area of
23 mill. ha), small size of the holdings (average 28 ha) and long traditions in timber
production. Over 63% of the private forest holdings have an area below 20 ha. Forest industry
owns 8% of the total area and the state 19%. The private forests account, however, for 69% of
the growing stock and 72% of the annual increment. About 80% of annual commercial
removals (about 40 mill. m3) come from private forests.

There are about 440 000 private forest owners. Annually about 120 000 wood purchasing
contracts are made and the average size of contract is 300 – 400 m3. The forest industry is
heavily concentrated. There are three major integrated groups which together account for 78%
of the total industrial roundwood consumption. Their wood procurement organizations are
spread over the whole country and the annual volumes are in the range of 11 to 14 mill. m3
each. The three groups are Enso, UPM-Kymmene, and Metsäliitto which is owned by private
forest owners. The other buyers are mostly medium and small-scale sawmills.

The forest sector has traditionally been the backbone of the Finnish economy. Forest industry
contributes about USD 12 bill. per year to the total exports corresponding to about 50% of the
net foreign exchange earnings (taking account of the imported inputs). It is for this reason that


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Finland is particularly concerned about any external changes influencing the international
competitiveness of her forest industries, including certification. About four fifths of the total
sectoral exports is destined to Europe and the share of the environmentally most sensitive
markets is about 45%. Due to the sector’s national importance, there is a long tradition of
close cooperation on major sectoral issues and programmes between the government, forest
industry, forest owners and environmental organisations. Consensus-based decision making
among stakeholder groups is typical in the Finnish society in general.

According to the surveys made, the Finnish public tends to have a considerable degree of
confidence in the forestry sector in managing the resource, as 78% of the country is covered
with forests which have been utilized for centuries. Forests are the only major natural
resource in the country and therefore their state and management have been under a close
scrutiny. During the past three decades, intensive management practices oriented towards
wood production were applied and became the subject of national debate. Awareness of
biodiversity and other environmental values has increased significantly in the 1990s which
has led to changes in forest management strategies and practices.

Based on this background, it is apparent that certification is primarily a market issue. Finland
has not been fully successful in her external communication about how the country’s forests
are managed. The country has been criticized by NGOs in customer countries for two main
reasons: (1) harvesting in old-growth forests, and (2) roundwood imports from Russia. Due to
the pressures from the market, the Finnish forestry sector has embarked on the development
of certification.


7.2         Normative Framework

7.2.1                Legislation and Other Policy Instruments

Forest devastation has been illegal for decades and final cuttings have been accompanied by
active measures to ensure regeneration. These normative regulations have been enforced
effectively since 1922.

Finnish legislation is extensive covering well most aspects of sustainable forestry: laws on
land tenure, labour and indigenous peoples’ rights are of high standard and well enforced.
Several acts define the duties and functions of private and state forest organisations engaged
in extension, control or implementation. The legislation has been considerably revised during
the last few years to meet the present perception on sustainable forest management and, more
specifically, to comply with the requirements of EU (e.g. Habitat Directive, 92/42/EEC) and
international agreements (e.g. Convention of Biological Diversity). The UNCED Earth
Summit and the Ministerial Conference on the Protection of Forests in Europe, held in 1993
in Helsinki were key reasons why forest legislation and administration have recently been
reformed.

Nature Conservation Act and the Act on Sustainable Use of Forests issued in January 1997
were prepared side by side to ensure full mutual compatibility. The acts draw the general
guidelines and targets for nature conservation and forestry, and, more specifically, define
protected biotopes and biotopes where only special management interventions are allowed.
The related Act on Financing of Sustainable Forestry provides support to selected measures
that improve wood production or ecosystem management.


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Legislation defines the minimum level of performance for all forests. The main issue related
to certification has been whether the quality of forest management is adequate for biodiversity
conservation. Emphasis has been given to the maintenance of the high level of wood
production by promoting tending of sapling stands and intermediate cuttings. There has been
no need to regulate recreational values of forests, as there is an ancient every man’s right to
enter on anybody's forest property and collect berries and mushrooms. This traditional right
has decreased the need for establishing special recreational forest areas.

A range of other policy instruments has been effectively used to promote forest management
and utilization. They have included public financial support to activities which are not
economically justified by private forest owners. Effective implementation of these
instruments has been made possible by forest administration and good organization of private
forest owners. Extension and training have been essential tools in promoting good forestry. In
1994/95 vocational training was given through 550 courses generating 20 000 student days.
About 17 000 forest owners are trained annually.


7.2.2                Criteria and Indicators

Finland has internationally been active in developing the criteria and indicators (C&I) for
sustainable forest management. As a follow-up of the Ministerial Conference in Helsinki,
national C&I were developed by a broad working group consisting of all the key stakeholders
and scientific expertise. A national a monitoring report has been recently published (Ministry
of Agriculture ... 1997a). In 1996, a pilot project was carried out to apply the national level
C&I at provincial level (Pirkanmaa province). The sustainability framework considering
environmental, social and economic aspects was also applied to develop a regional long-term
development strategy from the pilot province.


7.2.3                National Programmes

Since 1960s Finland has applied national forest development programmes to mobilize the
public and private sectors in investing in resource management and utilization. The earlier
programmes were focused on roundwood production. As a result of the changing perception
of sustainable forest management and the country’s international commitments, the
environmental strategy for forestry had to be redefined. This led to a joint effort between the
Ministry of Environment and the Ministry of Agriculture and Forestry, which, together with a
large stakeholder group, prepared in 1994 a new Environmental Programme for Forestry. It
defines a goal to be achieved by 2005, and a strategy for forest protection and forest
management. Development needs for forest administration, forest research and forest
legislation are also set out. The implementation of the Programme is monitored by a
permanent body of specialists, including key stakeholder groups. The Programme also defines
the responsibilities for biodiversity monitoring on state and regional levels.




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7.3         Certification Development Process

7.3.1                Initial Steps

The first initiatives towards certification and standard development were taken independently
by environmental organisations and forest industry. Several projects concerning timber
certification have been carried out by various interest groups during the past years. Forest
owners and forest industry have been active in the Nordic Certification Project which has
been an important channel for the exchange of information on the certification development
processes in the Nordic countries. In 1995 WWF-Finland started a working group aiming at
the development of FSC standards for Finnish forestry but it soon proved more feasible to
proceed with standards development without any commitment to a specific certification
scheme.

The ongoing national initiative to develop certification was divided in the early stage into two
processes. In the beginning environmental organisations were not willing to participate in the
government-led committee which was assigned to study the feasibility of certification
alternatives in Finland, but rather insisted on the voluntary and market-oriented approach in
timber certification (i.e. FSC). NGOs had doubts that the government-led process was not
likely to produce such management standards which could exceed the present normative
level. Therefore, standard setting was separated from the committee work and it was
organised as a non-governmental process where, with one exception (Greenpeace), all the
invited interest groups representing economic, ecological and social aspects participated
(Figure 7.1).


7.3.2                Forest Certification Committee

Because of the importance of smallholder private forestry and the Government’s active role in
regulating and promoting it as a strategically important sector, certification has been
considered a high-priority national issue. In spring 1996 the Ministry of Agriculture and
Forestry appointed a committee with an objective to assess the basis and preconditions for a
widely accepted certification system applicable in the whole country. Committee members
included the Ministry of Agriculture and Forestry, the Ministry of Environment, and
representatives from private and state forestry, forest industry, labour unions and
environmental organisations. The committee established a working group which analysed (i)
the need for certification, (ii) advantages that certification could generate to various interest
groups, (iii) the institutional and normative framework related to certification, and (iv) the
feasibility of the optional certification schemes which could be implemented.

The Committee identified four strategies for forest certification in Finland: (1) passive
strategy with concentration on less demanding market segments (2) market-driven strategy by
applying the existing foreign alternatives (FSC), (3) EMS-based strategy to build-up certified
environmental management systems in forest organisations, and (4) national strategy
implementing arrangements which would be compatible with FSC, ISO and EU requirements.
The committee concluded that the last option best corresponded to Finland’s aims. It was
proposed that all the interested parties make the decision to build up capability to implement
certification. This would require establishment of necessary procedures and human resources
for auditing, development of certification standards, and active participation in international


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developments related to forest certification. A goal was set to have in place a certification
system that would be suitable for the Finnish conditions in 1998. A national follow-up and
coordination group for forest certification was also to be set up.



Figure 7.1           Development of a Procedural System and Standards for Forest
                     Certification in Finland

        Cooperation between forest industry,                Governmentally convened and
             forest owners and NGOs                           coordinated cooperation


          WORKING GROUP ON FOREST                                 FOREST CERTIFICATION
          CERTIFICATION STANDARDS                                     COMMITTEE
                                                                             Defining:
         Defining criteria for forest certification in
         Finland                                          ∗ options for forest certification in Finland
                                                          ∗ strategies and outlines for progress




                                                                    WORKING GROUP ON
                                                                     CERTIFICATION
                      = cooperation
                     = direct subordination


Source: Ministry of Agriculture and Forestry, 1997b



7.3.3                Working Group on Standard Development

The national associations of forest owners and forest industry as well as two key
environmental organisations (WWF-Finland and the Finnish Nature Conservation Union)
took the initiative to establish a working group to develop in consensus forest certification
standards for Finland in summer 1996. The application of the standards was to be market-
driven and voluntary, and they should be internationally acceptable incorporating both
performance criteria and requirements for environmental management systems. Compatibility
with FSC, ISO and EU was to be achieved.

The working group based their work on (i) UNCED Forest Principles and Agenda 21, (ii) the
European Ministerial Conference in 1993 and criteria and indicators for sustainable forest
management, (iii) FSC P&C, (iv) National Environmental Program for Forestry (1994), (v)
forest legislation, (vi) Nature Conservation Act, and (vii) forest management guidelines
applied in the Finnish forests. In addition, the environmental management system of ISO and
EU were also considered.

Working group members (29) represented environmental, social and economic interests (one
third each). The group worked for nine months without commitment to any certification
process and produced 37 criteria for sustainable forestry against which auditing and
certification decisions could be made (section 7.4.1). The standards are valid for five years
after which their validity is reconsidered and amendments may be made. The working group
also agreed upon the arrangements for implementing certification (section 7.4.2). All the


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participating stakeholders, except one environmental organisation, expressed their
commitment to accept the standards as a basis for certification in Finland.


7.3.4                National FSC Process

WWF-Finland has been leading the FSC process in the country. First action was taken in late
1995 when a meeting was organized for interested parties. Pilot projects were carried out to
test draft certification standards developed by WWF and SNF in Sweden. Among other
things, it was concluded through these efforts that application of such standards would be
costly for individual forest owners and would discriminate some of them depending on the
age and development class distributions of stands.

Several meetings and seminars were organized to promote FSC in Finland but as the industry
and forest owners had serious concerns about the organisation’s objectives, accountability and
decision-making rules (section 7.6.6), they did not want to participate.

WWF-Finland together with the Finnish Association for Nature Conservation (SLL), played
an active role in the development of national certification criteria and therefore the FSC
process was set aside for the time being. This was also justified as the development process of
the national standard rather strictly followed the rules of FSC. When soon after its publication
in April 1997 the agreed Finnish standard was blasted by the NGOs participating in the Taiga
Rescue Network (including WWF International) and it was declared as “propaganda” by
Greenpeace, WWF-Finland and SLL decided that they will not support the follow-up process
of the Finnish standard if it is not carried out within FSC framework with the purpose to
develop the standard so that its credibility is achieved among supporters of certification
(Karjalainen 1997). This statement apparently also refers to foreign parties, particularly in
Sweden, where some FSC members had strongly criticised the Finnish standard. This raises
the important issue of how far international harmonization can and should be aimed at.

As a result, a new start was given to the national FSC process in June 1997 by NGOs
supporting FSC and a decision was made to establish a formal FSC representation in the
country. The group has tentatively agreed that only those (1) who are FSC’s members, or (2)
who have applied or will apply for membership, or (3) who have in writing expressed their
support to FSC can be accepted to the national FSC group (Karjalainen 1977). Such
conditions are not, however, in conformity with the FSC rules which require that half of
National Working Group should be FSC members while its composition should be similar to
the FSC board of directors (FSC Document 4.1). At present (August 1997), there is only one
FSC member in Finland while four NGOs have submitted their application.

The group is planning to develop a national FSC standard for Finland, drawing on the existing
certification standard as a basis. The latter will be assessed in view of FSC’s provisions
(P&C, process, technical requirements), regional compatibility (particularly with regard to the
Swedish FSC standard), as well as the compatibility of the Finnish group certification model
with the respective FSC principles.

The Finnish FSC process will have a major dilemma if the industry and forest owners as the
primary interested parties are not involved. A new standards process would be difficult to
justify when the existing certification standard was already developed through a process
where practically all the interested parties were involved.


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7.4       National Standards for Sustainable Forest Management and Their Application

7.4.1                Certification Criteria

The 37 certification criteria developed were based on the various existing elements (see
above) to ensure good management in certified forests with regard to ecological, social and
economic aspects. The number of criteria was divided fairly evenly among the three
categories. Environmental criteria deal with protection of endangered species and their
habitats, diversification of forest composition, increasing volumes of dead and burned wood
as well as broadleaved species. Environmental impacts of road construction and ditching are
included as well. A system to monitor the quality and impacts of forestry operations is also
established.

The economic criteria concentrate on the maintenance of timber production and promotion of
such measures as regeneration, intermediate cuttings and forest protection. Criteria include
also adequate guidelines for soil preparation, road construction and logging as well as for the
maintenance of drainage in forested peatlands.

Social criteria concentrate on skill development of forest professionals and forest owners,
proper supervision of labour as well as on the conservation of cultural landmarks and
landscapes. Participatory planning is required in the elaboration of regional development
plans for forestry. For indigenous Sami people living in the northernmost part of the country
the participatory provisions are more extensive than elsewhere.

By increasing the amount of dead and burned wood in forests and by conservation of valuable
key biotopes, suitable habitats for most of the endangered species will be established. Due to
the lack of scientific knowledge, it was not possible to define performance tresholds to each
criteria, particularly in the case of ecological aspects. Time horizons of ecological changes are
long in the boreal zone. Habitats and resources used by species which are introduced to
forests should be adequately abundant for decades to ensure significant improvements in the
situation.

The Finnish standard covers both performance and management system requirements. The
performance elements address both ecological, social and environmental aspects of forest
management. Criteria have been designed with the purpose that they could be assessed and
verified in an unambiguous manner.

7.4.2 Elements of Certification Scheme

The National Working Group on Forest Certification Standards identified three optional
levels for certification (Working Group... 1997) (Figure 7.2).

Area of Regional Forest Center (option I)

This is considered the most feasible unit of certification (typically 1-2 mill. ha). The area is
divided into several Forest Management Associations (FMA) which are committed to fulfil
the criteria for certification. Forest owners being members of the Associations are committed
to certification standards through decisions made in respective governing bodies. The


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                                                                                              42
applicant for a certificate in this option is the regional Union of Forest Management
Associations, if such a decision is made with a majority of two thirds.

Figure 7.2           Levels of Finnish Certification System

                             F o r e s t r y C e n t e r D is t r ic t
                  ( a p p lic a n t R e g io n a l U n io n o f F o r e s t       3 7 c r ite r ia
                          M a n a g e m e n t A s s o c ia t io n )



                           I f f a ilu r e a t d is t r ic t le v e l o r
                                   v o lu n t a r y d e c is io n




                     F o r e s t M a n a g e m e n t A s s o c ia t io n           1 3 + 2 4 c r ite r ia




                                          I f f a ilu r e a t
            F o r e s t M a n a g e m e n t A s s o c ia t io n le v e l o r v o lu n t a r y
                                             d e c is io n



                                         F o re s t E s ta te                      2 3 c r ite r ia




Forest Management Association (option II)

In case the certification on the level of Regional Forest Center is not possible (e.g. not
meeting the preconditions for application procedure, insufficient commitment to certification,
or a low level of forest management compared to the criteria), a FMA may apply for a
certificate for its area (typically 10 000-50 000 ha) after having made the respective decision
with a majority of two thirds.

Thirteen criteria need to be assessed also in this option at the level of Regional Forest Center.
The remaining 24 criteria are relevant on the association level and they are measured
accordingly.


Forest Holding Level (option III)

In case group certification is not feasible, a forest owner or several owners together may
apply for a certificate. There are 23 criteria out of the total 37 of which can be applied in
certification of individual holdings. On this level several aspects of SFM have to be left out
from the certification assessment due to the small average size of holdings.

Commitment is an essential element in certifiable forest management. At the level of region
or Forest Management Association, commitments are made by (i) forest owners through
Forest Management Associations, (ii) the Regional Forestry Center as an organizational unit
of supervision and promotion, (iii) forest industry companies operating in the area, (iv)
communities owning forests, as well as (v) forest contractors enterprises and (vi) forest


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workers through their own organisations. In this way all the parties operating in the forest are
committed to meeting the certification standards in their particular fields of operation.

Any forest owner or FMA can refuse to participate in the group certification of their
respective area.

In group certification the commitments are made by forest owners’ association and their
regional unions in general (annual) meetings. All the forest organisations operating in the area
become committed to certification at the same time as their performance will be assessed as
part of the certification audit.

All forest organisations are expected to integrate forest certification criteria in their internal
auditing and monitoring systems to minimize costs. Regional Forestry Centres are acting as
coordinators of this process and compile the necessary background information. Random
sampling is applied for ground checks.


7.5         Progress in Certification

7.5.1                Testing of Certification Standards

In Finland, no certifications of forest management quality have been carried out as yet.
Several pilot assessments at holding level have been made using various sets of criteria. A
large pilot project has recently been launched to test the national certification standards in
three regions (Pirkanmaa, Northern Karelia and Lapland) including testing of criteria at FMA
and individual holding levels. Appropriate auditing procedures will be developed and the
results of the project will be available by the end of 1997. The project is a technical exercise
by nature but it involves the participation of the key organisations working in the fields of
forestry and environment at provincial level. At the national level, ENGOs are not, however,
participating in the work as they wanted testing to be carried out under a national FSC
Working Group.


7.5.2                Environmental Management Systems

Quality management systems have been actively put into use in Finnish forestry organisations
and they are now being expanded to incorporate the necessary elements of environmental
management systems making them certifiable to ISO 14001. One of the large wood
procurement organisations (Metsäliitto) has recently obtained ISO 14001 certificate. The
management system approach is also applied in private smallholder forestry and the Forest
Management Association of Kuusamo has been pioneering work in this segment (Simula
1997). It will be relatively easy for forest organisations with adequate environmental
management systems to apply any performance standards and thereby get themselves certified
both to ISO 14001 and a selected performance standard at the same time.




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7.6         Key Issues

7.6.1                Level of Standards

Forest management must be in accordance with normative guidelines in order to achieve a
certificate within any certification scheme. In Finland where the legislation is fairly
demanding the required performance levels of certification standards are not necessarily
significantly higher than the legal requirements. There is full compatibility and close
interrelationship between the certification standards and the normative guidelines. If this were
not the case, forest owners and managers would have difficulties in simultaneously meeting
parallel requirements. Especially, as a larger and larger share of forests meets the standards
and more knowledge on the environmental, social and economic effects of forestry is accum
ulated, the standards and normative guidelines tend to become close to each other.

The applicability and advantages of performance-based certification schemes (FSC)
compared to environmental management systems (ISO, EMAS) have been widely discussed
in Finland. Legislation defines a fairly demanding performance level and the commonly used
voluntary guidelines provide objectives and tools for sustainable forest management. The
marginal contribution of certification to forest management has not therefore been easy to
assess, particularly when many owners have voluntarily applied much higher than legal
standards in their management.


7.6.2                Group Certification of Small Forest Holdings

Due to the scattered ownership pattern and relatively uniform forest management systems in
general, regional or group certification would be an appropriate method in Finland. Such an
approach would have a larger contribution to sustainability of forestry and it would be
economically more feasible than certification by individual forest holding. It has been
tentatively estimated that a forest holding-level with an annual auditing coverage of 10%
would be 8 to 10 times more expensive than regional certification. While the current costs of
supervision of legal requirements are estimated at about USD 3 mill./year, the additional
auditing costs of the certification standard would be USD 2 to 27 mill./year depending on
which option (regional, Forest Management Association, forest holding) is applied.

Confidentiality of information needs to be addressed in groups certification when internal
auditing is used to compile the necessary background information for verification by an
independent certification body.


7.6.3                Costs of Forest Management

The application of the national certification standard would mean that, on the national level,
1-1.5 mill. m3 of forest growth would be lost from production per year. The net income from
forestry may be reduced up to 5% but at holding level there would be wide variation (2-15%).
On the other hand, the standard also encourages timely implementation of silvicultural
measures and rationalization of management interventions which will bring about long-term
economic benefits.



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7.6.4                Imports

About 20% of the industrial wood consumption in Finland is met by imports, mainly from
Russia and the Baltic States. This raw material is mixed in production processes with
domestic wood. Certification of imports – often involving several intermediaries – would
require that certification standards are developed and applied also in these countries and that
information systems allow tracking of export deliveries up to the source in the forest.


7.6.5                Chain of Custody

Appropriate measures for the chain-of-custody verification have not yet been developed in
Finland. The current information systems of wood procurement organisations allow tracking
of each truckload up to the forest stand/holding of origin. However, 100% tracking of fibers
and solidwood through various phases of processing is not possible. Feasible cost-efficient
solutions need to be developed for this purpose.

The cost of the chain-of-custody verification will likely depend on the targeted shares of
certified timber flows in the country. If the shares are low (say 10-20%) or high (say 80-
90%), tracing will be easier to arrange than in case an intermediate level is to be attained.
With low market shares, those raw material and product flows which are easy to track would
be first covered; e.g. large state and company forests, mills relying on concentrated supply
areas. With high market shares, the planning and control system of all the organisation would
be upgraded to provide reliable information on all sources. Such data could also timber
volumes exchanged between industrial users.

Tracing of wood and fiber in the various phases of processing would become cumbersome or
even impossible if a mill is relying on two types of raw material which need to be segregated.
Such a situation would occur if say about half of the total national production would be
certified. To avoid unjustified additional investment, in extra handling stocks and storages
and respective construction and equipment, individual mills should aim at producing 100%
(or a high share) of certified products. If this approach leads to a situation, where such single
mill has to collect its wood requirements over a much larger area than at present, the
environmental impact of additional transport would be negative while mill wood costs would
also increase.

It may be concluded that in the type of conditions prevailing in Finland, where wood mainly
comes from a large number of smallholdings and the industry is highly concentrated, a high
market share of certified products would enable efficient arrangements also for tracing of
wood raw material and products made thereof. The impact on SFM could be maximised, the
negative environmental impacts of unnecessary transportation handling and storage could be
avoided, and cost increases could be kept as a minimum.


7.6.6                Harmonisation of Certification Standard within the FSC Framework

The Finnish certification standard has been challenged because it is said to represent weaker
performance criteria than the draft FSC standard for Sweden. Both standards were developed
through a participatory process where all the relevant stakeholders were involved. However,


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the processes were organized in a different way. In the Swedish case, forest owners pulled out
of the process as they could not agree upon some of the proposed requirements, so the result
was not a consensus. In the Finnish case, one environmental NGO did the same, but clearly a
higher degree of consensus was achieved than in Sweden.

FSC has no agreed procedures for regional standards or regional harmonization of national
FSC standards but draft technical guidelines for the former (FSC Draft Document 4.5.9)
exists. It contains four requirements: (1) endorsement by an FSC-endorsed working group, (2)
the process used to develop the standards, (3) technical considerations; and (4) consistency
with the FSC P&C. The notion of a region refers to an entity the boundaries of which have
been drawn along ecological, social, political and economic circumstances. If boundaries are
drawn along lines other than ecological, the working group should identify neighbouring
regions with similar forest ecosystems and forest cover types. In view of these (draft)
provisions, it appears that, if the region is extended over national boundaries, the working
group in question should include members from all the countries covered by the region. How
such an arrangement could incorporate different socio-economic aspects prevailing in the
countries involved in an equitable way is likely to be a complicated question.

If the region is drawn along national boundaries, national working groups are apparently also
considered regional ones and a different modus operandi would be applied to achieve
harmonised standards. The proposed mechanisms for harmonization include mutual
consultations between working groups and other collaborations such as sharing advisory
group members, staff and working group members, inter-regional meetings and periodically
exchanging draft documents and lessons learned.

FSC discourages wide variations in ecological indicators and verifiers across regions with
similar ecosystems which could lead to a downward harmonization of standards. In addition,
it is stated that the level of specificity in regional standards may vary from region to region
and at minimum most criteria of the FSC P&C should be covered. These statements do not
provide clear guidance how differences should be treated in case two sets of regional (or
national) standards are recognised as compatible with the FSC P&C. In any case it appears
that FSC will seek a “higher degree” of harmonisation between national standards within
ecological zones than provided by the generic FSC P&C.

The general draft guidelines by FSC raise several practical issues if they are applied in
harmonising national standards between countries in the same ecological zone. In the case of
Nordic countries one scenario could be a process where the Swedish draft FSC standard is
endorsed by the FSC Board of Directors and it then becomes a baseline or point of reference
to the other four countries. The national FSC working groups in the other Nordic countries, if
they get established, would have to consult and collaborate with the Swedish working group
which could even lead to some kind of “pre-endorsement” by the first-country FSC national
working group before the others may submit their draft standards to the FSC Board.

The FSC guidelines for the development of regional standards appear to bring in a new
element to the work of national FSC working groups when first national standards have been
endorsed in a region. It is likely that such provisions would reduce the acceptability of FSC to
many stakeholder groups.




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7.6.7                FSC’s Acceptability

FSC’s acceptability to forest owners and forest industry is subject to a debate for the
following reasons (cf. Lillandt 1997): (i) harmonised rules for smallholder forestry applicable
to Finnish conditions, (ii) consideration of national specific conditions in certification, (iii) is
the purpose to certify large forest areas or exclusive forest operations only, (iv) arrangements
for certification of the chain of custody, (v) image and credibility of FSC (cf. assessments in
Poland, Gabon and Costa Rica which have been criticized), (vi) assurances of the
acceptability of FSC logo worldwide, (vii) financing of FSC, (viii) reasons for continuous
criticisms against ISO, (ix) unbalanced decision-making in the FSC Board, (x) linkages
between FSC and ISO, (xi) costs and their sharing,(xii) true voluntary nature and consumer
drivenness of certification when the sector feels strong pressure from some key NGOs.


7.7         Lessons Learned

(1)     International communication is extremely important during the development process of
        national certification standards and arrangements. Finland did not realize that more
        information should have been provided to outside parties during the standards
        development process. This was one of the reasons for early negative reaction by
        international NGOs.
(2)     Lack of suitable international solutions to certify smallholder forestry was a key reason
        why Finland embarked on the development of her own model for this purpose. It is
        possible that each country will have to define its own ways to solve this issue as
        feasible solutions should be tailored to specific socio-economic and institutional
        conditions.
(3)     It is important to note that sustainable forest management and its eventual certification
        relies on the following elements in the Finnish conditions:
Performance requirements
      (a) the existing institutional framework where the normative requirements set
          the base line for the management of all forests
(b)     adequate protected areas
(c)         certification criteria which specify additional/more detailed requirements to be
               applied in production forests and which are broader in scope than those defined in
               the current legislation, rules and regulations
The difference between (a) and (c) can be seen in a time perspective: laws are more
     permanent by nature while certification criteria are to be revised regularly based on
     accumulated scientific knowledge and practice experience.
Management system requirements
(a)         regional-level planning through a structured participatory process where all
               aspects of sustainability can be duly considered
(b)     holding-level management planning within the framework of the regional
           planning to meet multiple objectives of the forest owner
(c)         supervision and control mechanisms for management interventions



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(d)     an effective monitoring system of the state of forests
(4)     As for the FSC process, the following issues will need clarification:
(i)         can national FSC working groups set different rules of membership than
               those defined by FSC
(ii)    the FSC P&C compatibility and the FSC rules on the development process
              of national standards are supposed to be the harmonising elements between
              national FSC standards; in the Finnish case, regional compatibility is asked for in
              relation to the Swedish FSC standard even though the countries are different. This
              willraise broader question on a how the draft FSC standards are processed after
              national working groups have completed their own tasks and what is the desirable
              level of harmonisation within an ecological zone.
(iii) methods of verifying the chain of custody
(5)     The strong pressure from some environmental organizations and organised buyers
        insisting on suppliers to commit themselves to FSC may put into jeopardy national
        development of certification schemes in countries which extensively depend on the UK
        and other environmentally sensitive markets. This is unnecessary and can be even
        counterproductive, as more groundwork is needed in the development of standards and
        assessment, including testing of alternative approaches, to solve the complex question
        of forest management performance evaluation within an international harmonised
        framework.


8.          GHANA

8.1         Introduction

The total area of forest estates in the high forest zone is 1.63 million ha where 94% of the
country’s forest reserves are located. The rest are found in the savanna regions. It is estimated
that only about 0.4 million ha of forest cover exists outside forest reserves (off-reserve
forests). Forest reserves are managed by the Forest Department and harvesting is carried out
under logging concessions by private companies.

The Ghanaian timber industry comprises around 250 logging firms and 130 primary
processing companies supplying about 200 furniture and woodworking enterprises. There are
also 26 bushmills. The wood industry is reported to contribute to 18% of the total
merchandise exports and 6% of the GDP. The main industrial sector is sawmilling which is
characterised by excess capacity relative to the availability of raw material and is operating on
mainly obsolete and inefficient equipment. About 75 % of the total exports is directed to the
European Union.
Ghana has made considerable progress towards bringing her natural forests under sustainable
management. A proven forest management system for regulation of harvests and silvicultural
treatment is in place. However, the country has suffered from past overexploitation and
encroachment of the forest reserves and the original size of forest area has been reduced by
75%. Several policy measures have been taken to improve the situation and to demonstrate
Ghana’s international commitments to ITTO Objective 2000, Agenda 21, etc. (Kofi Smith
1996).




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8.2         Development of Certification Standards

8.2.1 Regulatory Framework

Logging is regulated by dividing the forest into a number of compartments of sizes ranging
between 128 and 140 ha. Annual felling takes place in one or more of the compartments
depending on the length of the felling cycle and the total area of concession. There are
currently 282 and 528 concessions within and outside forest reserves, respectively. Over 60%
of concessions are smaller than 500 ha. Forest management is based on the Selection System
which involves commercial logging, with or without prior or posterior treatments (Amoako
Nuama 1996).

All forest reserve land is either held communally or privately and it has been vested in the
President who holds them in trust for the landowners. Management objectives are therefore to
the benefit of landowners and the interest of the nation. Legally, the Forest Department
assumes the responsibility of the management of forests and is accountable to the landowners
and through the parent ministry (Lands and Forestry) to the nation. Concession holders or
contractors fell the trees under the guidance of the Department to provide income and
industrial timber to the landowners and revenue to the nation.

Strict regulation of felling under contracts, backed by sanctions, is practised. Forest
management plans are prepared by the Forest Department in consultation with landowners
and forest users. Contractual obligations are defined in Timber Utilization Contract and the
Logging Manual. In spite of considerable research carried out on Ghana’s forests, only little is
known of the ecology and population dynamics of major species notwithstanding the
ecosystem as a whole. Therefore, it may not be claimed that forest management is sustainable
but the system is adaptive applying a precautionary principle with strong elements of
monitoring, research and review. (Planning Branch 1996). Each forest reserve will have its
own management plan and the planning procedures are set centrally and could be evaluated
nationally. A programme of work has been worked out to complete such plans for 200 high
forest reserves (Wong 1996).

Only 12% of the total timber supply comes from forest reserves. Off-reserve land, supplying
more than 80% of the total timber production, is under private or communal ownership.
Although trees are owned with the land they are vested in the President. This establishes the
regulatory powers used as the basis for off-reserve concessions, royalty collection and the
Interim Measures. However, planted trees belong to the planter. Regulation on the “non-forest
lands” takes precedence of regulation of felling to maximise the utilisation of trees and
development of private planting. In Timber Utilization Contracts owners and contractors
agree upon operational plans guided by the Logging Manual. But while no formal plans are
required if harvesting is unencumbered, compliance with interim measures is foreseen. The
role of the Government in these forests is only advisory and regulatory. In addition to the
Forest Department, the Forest Products Inspection Bureau (FPIB) operates a system of
roadside checkpoints at which Log Measurement Certificates are issued for every log in
transit (Planning Branch 1996). The off-reserve areas are effectively designated as
agricultural lands and their logging is in principle according to a land use plan that makes
sufficient and effective provision for a permanent forest estate. Overall levels of harvesting
are foreseen to be regulated through a District quota and it is planned to institute some sort of
incentive scheme to encourage replanting by farmers (Wong 1996).


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The detailed guidelines for operators in the forest are contained in the Forest Department
Logging Manual. Its revision is under way and it will explain the policy and legal framework
and specify how planning for timber harvesting needs to be done in and outside forest
reserves. It also contains Timber Harvesting Standards with provisions for logging practices,
environmental and social responsibility requirements, as well as health and safety at work.
The Manual specifies procedures for monitoring of timber harvesting operations and
inspections.

In spite of the policy reforms instituted by the Government, illegal logging is claimed to be
common, mostly in off-reserve land but also in forest reserves, as a result of encroachment.
Availability of the market, high royalty rates, absence of an effective law enforcement,
cumbersome procedures to obtain permits, and political protection of illegal chainsaw
operators are said to be the main reasons why some landowners bypass the current system
(Illegal Logging ... 1997). This is a formidable problem and cannot be solved purely through
simple regulatory measures.

The Ghanaian recently revised regulatory framework for forest management is comprehensive
and it is systematically implemented but it has not yet taken its full effect on the ground. The
Government’s role as the manager of forest reserves and regulator of off-reserve forests led to
the conclusion that the Government has to play an active role in the development of
certification so that the arrangements would be suitable for the Ghanaian conditions.


8.2.2 Standards Development Process

At the national workshop in June 1996, participants agreed that certification was likely to
form an important tool in improving forest management and accountability, and was an
essential part of a marketing strategy aimed at the environmentally discriminating markets,
notably in Europe. The Forest Department’s forest management system should form the basis
for certification. A national accreditation board was foreseen and a technical committee led
by the Ministry of Lands and Forestry was proposed to develop the scheme. The active
participation of all stakeholders was to be pursued. Local standards to be adopted were to be
approved by an independent international body. The workshop recommended the
establishment of a national committee to guide the process. (Kofi Smith 1996).

These decisions have been implemented by (a) creating a National Certification Committee
with the participation of related agencies, the private sector, landowner groups and two
leading environmental NGOs, and (b) commissioning a Technical Group of the Committee to
develop options of action. The work has been facilitated by the Ghana Standards Board and
technical assistance has been provided by IIED with the participation of SGS Forestry, funded
by ODA. Relevant documentation and the current management system have been reviewed
and a draft of the forest management standards has been produced (A System ... 1996).
During the preparatory stage there was interaction with the Canadian certification initiative
and, as a result, the standard has a number of similarities with the CSA Z808 standard. The
draft standard has been circulated among stakeholders for consensus building. Work is still
going on to develop a strategy to introduce the draft certification system.

The development process has been essential in changing the views of the interested parties on
certification. The Government is already committed to ITTO Objective 2000 but certification
imposed from outside has raised the issue of sovereignty which led to government


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participation in the development process. Through the revision of the regulatory framework
landowners had been given increasing opportunities to participate in forest management and
therefore did not see certification as particularly relevant. However, its potential contribution
to illegal harvesting would be welcome from their point of view. The trade and industry were
reluctant to support certification seen as an unknown instrument that could possibly lead to
higher costs and increased bureaucratic procedures. Market signals from the main trading
partners have, however, changed this view. The national dialogue has been instrumental in
changing the general opinion among stakeholders from negative to positive. (Kofi Smith
1996).


8.2.3 Draft Standard

The standard describes the requirements of Quality Forest Management System for Ghana in
all types of forest lands. It provides both the minimum performance levels to be achieved and
the components of a management system which have to be in place to ensure that these levels
are attained. As in Canada, the standard would be applied to Defined Forest Areas (DFAs)
which are subject to uniform management (single forest reserve, groups of them, or groupings
of individual ownerships of off-reserve land). The standard is intended to be implemented by
any Forest Management Organisation (FMO) entrusted with such duties. FMO may be the
Forest Department or its units, or organisations serving private landowners in managing forest
resources on their lands.

The performance elements of the standard include principles, criteria and indicators that
describe environmental, ecological, social and economic requirements of quality forest
management. Ecological elements are related to conservation of biological diversity, and
maintenance and enhancement of ecosystem productivity. Environmental principles and
criteria are broken down into conservation of soil and water resources, and use of
environmentally appropriate materials and practices. Social criteria address resource tenure
and use rights, community rights and workers rights. The economic criteria require
description of forest resource, and define economic benefits which should be derived in a way
that does not diminish the future availability of any product or service.

The forest management system elements include (1) forest management policy, (2)
compliance with laws and regulations, (3) establishment of the Defined Forest Area, (4
assignment of responsibilities, (5) stakeholders and key issues, (6) forest management plan,
(7) objectives and targets, and (8) the elements for the implementation of the forest
management system, including (a) personnel and resources, (b) responsibilities and
accountabilities, (c) timber utilisation contractors, (d) communication, (e) documentation, (f)
controls, (g) measurement and assessment, (h) internal audit, and (i) review and improvement.

The draft standard can be considered by and large comprehensive but it needs further
precision and specification. It is not yet determined whether indicators will be developed to
be used in assessment work, or whether this will be left for FMOs or external auditors. There
are also a number of other issues which need to be clarified during the finalization process.
Field testing of the standard is foreseen.

The standard is intended to be compatible with existing international principles, criteria and
guidelines (ITTO, ATO, FAO, FSC) and it has been drafted using the ISO format (Kofi Smith
1996).


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8.3       Certification Arrangements

The practical arrangements to implement certification have not yet been defined. The
governance and organization of the system will most likely be developed by the National
Committee on Certification as steering body. National accreditation was originally foreseen
but there is no accreditation body in the country which is common in many developing
countries. ATO has been thought to play a central role in this regard (Kofi Smith 1996) which
would be an important expansion of its mandate. Among the national institutions, the Ghana
Standards Board would be a logical choice for accreditation, but its mandate should be
expanded and its in-house personnel should be strengthened to include forestry skills. If the
Board acts as accreditation body, there may be problems of conflicting interest if it is at the
same time also involved in certification work. The country is keen on developing local
certifier and assessor capacity and the Ghana Standards Board may be expected to have a
central role to play in the same way as in the case of ISO 9000 and 14000 standards. In any
case, the Board should be assigned the task of organising the updating and revision of the
standard on a continuous basis when it has been put into use.


8.4       Market Aspects

Most of the industrial timber production is targeted for export but there exists also an
important domestic market for such timber in Ghana, although it traditionally absorbs non-
exportable grades. The share of processed timber products is high in sectoral exports by
African standards a result of a deliberate long-term government policy. Short-term changes
also influence the situation as in the case of the influx of Korean traders in 1994 which led to
an overproduction and port congestion. It was followed by a temporary log export ban in
1995. Ghana’s exports are particularly vulnerable to environmental market pressures due to
the high shares of such markets as the UK, Germany, the Netherlands and Belgium. In
Europe, there is a common belief in some quarters that certification could help tropical timber
to regain the lost markets due to environmental concerns (e.g. Plouvier 1996) but this
hypotheses has not been proven in practice due to very small volumes of certified products
available to the market, particularly from Africa. For the time being none has come from
Ghana.

Certification is seen as a marketing strategy option for the Ghanaian timber industry (e.g.
Eastin 1996). If certification costs do not adversely influence the international
competitiveness of Ghanaian exporters, it is believed that not much effort is required for
export promotion, since certification in itself could ensure market access, particularly in
environmentally conscious markets. Additionally, certification is also seen to induce high
quality standards in manufactured wood products originating from sustainably managed
forests. In particular, a positive promotional impact is expected in value added products where
new markets could be opened up.(Coleman, pers. comm.).


8.5       Key Issues

8.5.1 Standards and Policy

Compliance with laws builds a close relationship between the certification standard and the
regulation. The Ghanaian standard makes a reference to the Government policy as well which


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indeed should be one of the underlying elements. There is, however, a risk that when the
policy changes in the future, its contents may no more be necessarily compatible with
certifiability. This risk is probably theoretical as tighter policies and stricter standards go hand
in hand when pressure on the remaining forest resources increases. An example of potential
conflicts could be priorities to be set between production and environmental conservation.
Other areas where clarification may be needed are the exact roles of landowners and other
stakeholders when management objectives are set and the role of landowners in the
certification process.

There is a plan to codify all forest related legislation. A new Timber Rights Bill is under
preparation which is likely to introduce competitive bidding of long term leases. This would
lead to a redefinition of the role of the Forest Department which may be transformed into an
independent corporation. It is possible that further work will be needed to harmonise the
national certification standards with the forthcoming legislation.

Ghana Timber Association (1996) has pointed out that the process of certification may be
enhanced by other market based instruments such as a quota system based on species
allocation to potential industrial uses. The use of higher royalty rates to reflect the true cost of
a dwindling resource would promote in the same direction as certification contributing to a
more judicious application of the forest resource. Such interesting options remain to be
studied further in the future when experience on certification has been accumulated. External
financing through grants and soft loans could be linked with the management of certified
forests, or e.g. to the promotion of lesser used species from such sources.


8.5.2 International Recognition and Credibility

International recognition of the Ghanaian standards and certification system is foreseen. At
present, FSC represents the only formal source for such a recognition and the country may
end up in seeking recognition from the Council. However, FSC is not considered acceptable
as the (sole) body where such endorsement would be sought for because it is not conceivable
that the Government submits itself to the scrutiny of an NGO in such a nationally important
matter as forest management certification.

In view of possible endorsement of the Ghanaian standard by FSC there will be two main
aspects to be considered: (1) the development process in terms of representation of all
stakeholder groups (representativeness, FSC membership, transparency), and (2) the
compatibility of the performance elements of the standard with the FSC P&C. Concerning the
development process, there appears to be a need to continue with the consultative process
through structured steps to fully address the issue of broad participation and transparency of
the standard setting process. On the other hand, no problems are foreseen if the Ghanaian
standard is applied as the performance criteria in possible ISO 14001 certifications of forest
organisations.

Regional cooperation is another avenue for international recognition which could be
organised within the framework of ATO which already has developed criteria and indicators
for sustainable forest management to provide a common framework for national development
work. A common approach by ATO members would contribute to the overall recognition of
certification in the African region. Ghana is spearheading the development work at national
level and therefore its experience should be effectively shared by other countries. This is


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already taking place but further political level decisions may be required on how the member
countries should proceed with their mutual cooperation.

Another mechanism to seek recognition is through bilateral arrangements. The Netherlands is
organising pilot projects with countries which are developing certification and Ghana is one
of them. If successful, such efforts could result in market recognition and eliminate the need
for Ghana to get herself engaged in labelling.


8.5.3 Certification of Chain of Custody

The draft standard only covers forest management aspects. If labelling is aimed at, adequate
arrangements for the verification of the chain of custody will be needed. The current
regulations and procedures of the Forest Department and the Forest Products Inspection
Bureau (FPIB) provide a useful basis for the design of such arrangements. The current
recording and control system establishes how in on-reserve harvesting individual logs can be
traced up to the stump and in off-reserve harvesting up to the felling area. Further
specification of the supporting documentation on how external auditing could complement
internal auditing by the Department and the Bureau may be necessary.

The current process of monitoring of log harvesting and movement involves a tree marking
system with such details as stock survey number, concessionaire’s property mark and tree
number, log number, special code, reserve code, together with a Conveyance Certificate,
issued by the Forest Department, and a Log Measurement Certificate issued by FPIB. The
latter one provides the input data based on which timber production, concessionaire
performance and royalty payments are monitored. FPIB has plans to improve the system by
introducing hand held computers and a special stump/log tagging or labelling method which
links the log with the stump facilitating electronic recording of information. Industrial users
report monthly to FPIB on log input and product output with details on logs received. In the
future the Bureau will provide coded tags to each bundle of wood products graded and
inspected by FPIB graders. They will be equipped with scanners and hand held computers to
enable them scan the logs before processing which would provide the link between logs and
wood products made thereof. Random sample checking will also be included. (Coleman, pers.
comm.).

In view of the slow process of preparing management plans, it is foreseen that the industry
will have to use both certified and uncertified raw materials for a fairly long transitory period.
This is likely to lead to the segregation of raw material and intermediate products in the
process, as well as to the problem of using mixed raw materials in further processed products.
Respective problems should be solved by the user industry.


8.5.4 Role of Government

The government is bound to have an important role in certification if it is an owner or
manager of large areas of forest land or when the sector’s economic contribution is
strategically important, as in the case of Ghana. The government’s role has two facets:
standard setting and certification process, It is generally recognised that the government
should not have control over either of them (Regional Certification ... 1996). In Ghana, the
majority of the Certification Committee membership were government agencies. This


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strengthens the role of certification as a policy instrument and ensures compatibility with the
regulatory framework. As for certification process, external auditing will be applied but at the
same time the internal auditing procedures will be developed further to meet the requirements
of certification, thereby reducing the costs of external auditing.


8.5.5 Costs

Detailed cost estimates on certification are not available. They would be subject to testing of
the draft standard and the necessary arrangements for the verification of the chain of custody.
The current legal provisions for forest management and tracing of logs are rather strict and
additional work required by certification bodies may therefore be reduced.

Of particular concern is the possible cost effects to be borne by small-scale producers, whose
operating technology is considered environmentally appropriate and who account for 60% of
the members of the Ghana Timber Association. They are not well equipped to absorb
additional costs if operating in parallel with uncertified producers. The industry’s view is that
the cost of certification should be borne by the buyer or seller depending on who nominates
the certifier (Wireko-Broby 1996).


8.6 Lessons Learned

(1)     The government can play an active as well as positive role in the development of
        certification as has happened in Ghana. This role has, however, also limitations and
        therefore due regard should be given to the organisation of transparent consultative
        process in standard setting where all the key stakeholder groups should be adequately
        represented. Consultative process has proved to be a useful way of achieving consensus
        among the involved parties in spite of initial conflicts of views that would invariably
        occur.

(2)     There is no clearcut answer to the issue of how the balance could be struck between the
        landowners and other stakeholders in setting the standard if a full consensus is aimed at
        and views differ.
(3)     A well developed regulatory framework – as in Ghana – makes it easier to develop
        certification standards, and the performance requirements do not necessarily have to be
        significantly different from the statutory ones. Certification has a potentially important
        role in improving the enforcement of the government regulations.
(4)     Integration of performance and management system requirements as clearly separate
        elements in the certification standard is useful and will facilitate both external and
        internal auditing of forest management.
(5)     The industry’s expectations on the use of certification as a marketing instrument suggest
        that certified or labelled products will sell on their own. This remains to be proven in
        practice, and market promotion may be required especially when supplies expand
        rapidly.
(6)     Due to the weak institutional structures related to standardisation, it will be difficult for
        many developing countries to organise national accreditation of certification bodies, or
        even certification services themselves. International arrangements, such as FSC, the


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        Quality Systems Accreditation Registration, or the International Accreditation Forum
        (see Chapter 5.1), are one option; the other one is to seek accreditation from appropriate
        bodies in other countries. In the long run, national accreditation capacity should be
        aimed at.
(7)     Regional cooperation in certification is desirable and potentially also cost-effective. The
        African Timber Organization can play a useful role in coordinating and promoting
        common standards and approaches. Cooperation should be organised through a clear
        commitment by individual countries, based on a common work programme, and
        effective mechanisms for continuous exchange of information.


9.          INDONESIA

9.1         Introduction

9.1.1 Forest Resources and Their Management

About 144 million ha of Indonesia are classified as forest land, representing 75% of the
country’s total land mass (Table 9.1). Some 60.3 million ha or 94% of the production forests
are under forest concession rights. There are now 423 licenced forest concessions.


Table 9.1            Forest Land in Indonesia

Type of forest                                            Area (million ha)   % of forest land
      • Protection Forest                                       30.0                21
      • Nature Reserve and Recreation forest                    19.0                13
      • Production Forest                                       64.0                45
      • Convertible Forest                                      30.5                21
Total                                                          144.0                100


Today, Indonesia’s timber industry supports 14 million persons including dependants
(Tantara, Hutabarat, 1996) and the country is a major world producer and exporter of tropical
wood products. Approximately 800 000 hectares have been harvested annually using the
polycyclic Selective Cutting and Planting Silvicultural System (TPTI). Individual
concessionaires are given the right to harvest with the responsibility of managing their
specific portions of the production forest. This polycyclic minimum input system is designed
to produce a sustainable supply of logs, at a forest rotation of 70 years and a harvesting cycle
of 35 years (every 45 years in the case of mangroves is applied). Under TPTI, no tree under
50 cm (20 inches) in diameter may be felled for timber.




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9.1.2                Forest Industry

Currently, Indonesia has 1 618 sawmills, 107 plywood mills, 78 blockboard mills, 39 particle
board mills, 5 chip mills, 6 pulp mills, 2 MDF mills (one of which is under final
establishment) and 606 various secondary wood processing mills (including 47 chop stick
mills, 8 match mills and 6 pencil slate mills). The pulp and paper industry is growing rapidly.
At least 13 prospective pulp mill sites have been identified, many of them are now embarking
on plantation establishment.


Log production to meet the raw material demand of the industries during the last five years
has been relatively stable in the order of 28.3 million cubic metres.

In recent years, the export of sawn timber showed a marked decline as opposed to the increase
in the export of further processed timber especially plywood. The total export value of forest
products (including pulp and paper) in 1994 amounted to USD 6.62 billion increased steadily
reaching USD 7.9 billion in 1996. Indonesia’s biggest export item is plywood which at
9.7 million m3 in 1992 captured some 60% of the world market.


9.2         Regulatory Framework

In an attempt to bring forest management more in line with the ITTO Year 2000 Objective
and its guidelines for SFM, the Indonesian government in 1993 issued three decrees on C&I
of SFM and technical guidelines for their application at management unit level (No. 252/93
followed by 576/93; (No. 610/93); and No. 208/1993). In addition, the following punitive
measures in various degrees of severity from simple fines to the withdrawal of forest
concessions rights, will be imposed for breaches of harvesting rules:

•     Decree of Minister of Forestry, concerning Sanction of Violation in Forest Utilization
      (No. 493/89 followed by No. 393/94), with the inclusion of the following sanctions:

      1. Stopping services, among others:
          ∗ Annual and 5 year working plans will not be validated, until the company has
             carried out forest survey work (timber cruising).
      2.    Stopping timber cutting for a certain period, when among others
           ∗ The company does not mark the boundaries of its working areas or has not paid
              the cost of cutting the boundaries.
           ∗ The company uses unsuitable logging equipment in carrying out its harvesting
              operations
      3.    Reducing the allowable output of timber, when among others:
           ∗ The company does not deliver air photographs of the area and its interpretation
           ∗ Late in delivering the annual working plan or work schemes.
      4.    Imposing fines:
           ∗ 15 x forest royalty, when timber cutting is carried out before the annual working
              plan is legalized.
           ∗ 15 x forest royalty, when timber cutting is carried out over unapproved blocks.


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          ∗     20 x forest royalty, when timber cutting is carried out in logged-over blocks
                without permission
          ∗     20 x forest royalty, when cutting protected timbers without permission
          ∗     30 x forest royalty, when cutting mother trees without permission
      5. Cancelling of Forest Concession Right or other Forest Utilization Right in case of:
         ∗ Sub-contracting and or delegating all forest utilization activities to another party
            without permission.
         ∗ Failure to make annual working plan for two consecutive years, and or inactivity
            within this two-year period, although the annual working plan has been legalized,
            and or failure to employ forestry technical workers in the same period of two years
            and/or leaving the forest areas without activities before the period of Concession
            Right expires and or handing over the Concession Right to another party without
            prior permission of the Minister of Forestry
         ∗ The company receiving stolen timber

Several concession agreements have been cancelled or put on hold for a variety of reasons
over the last few years.


9.3           Certification and Related Initiatives

LEI (Lembaga Ekolabel Indonesia) or Indonesian Ecolabelling Institute, has since its
inception in 1994, obtained the support of the government, non-governmental organisations
(local and foreign) and the private sector in its efforts to devise an independent and
transparent certification system. It is headed by Dr. Emil Salim, former Minister of
Environment. LEI established a Working Group and set out the task of (a) establishing a set
of C&I of SFM, (b) designing a decision making method in certification process, and (c)
designing a formal institutional arrangement for LEI.


9.3.1                C&I Development

The development of criteria and indicators was carried out through discussions with various
parties; the government, experts and academicians, forest concession owners, forestry
consultants and non-governmental organizations. In the first phase, the stakeholders were
divided into three groups: forest management group, environmental management group, and
socio-cultural group. In June 1994, the results of Sustainable Forest Management criteria by
the three groups were tested in three concessions in Riau, East Kalimantan and Central
Kalimantan. The resultant criteria improvement was discussed at the International Conference
on Forest Product Certification System held in September 1994. In 1996 the Working Group
developed the decision-making procedure for certification. The second version of the C&I
and the procedure were then tested again in 11 concession areas in Aceh, North and West
Sumatra, Riau, and East and West Kalimantan. The trial project was assisted by experts from
various backgrounds, grouped into expert panels, an evaluation team, and a task force. The
field assessment was assisted by forestry consultants who acted as assessors.

The C&I were elaborated over three management dimensions and three outcome dimensions.
The former are (i) forest management of the area, (ii) management of forest stands, and (iii)
institutional management. The latter were broken down into (i) production, (ii) ecosystem,


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and (iii) social elements of sustainability. The C&I are presented as a comprehensive matrix
where sustainability is defined for forest resources, production, business profitability,
ecosystem stability, survival of endemic/protected species, social equity and community
participation (LEI 1996). The outcome-based indicators of sustainability are perceived by LEI
to be simple and practical to operate, particularly under community forest systems. They are
designed to keep the forest managers better focused on the overall objective of achieving
sustainability and at the same time, they allow room for managerial process in decision
making.


9.3.2                Certification Scheme

Benefiting from the 1996 tests, LEI’s Working Group developed (May, 1997) what it calls
“Eco-labelling Certification Programme for the Sustainable Management of Production Forest
at the Forest Management Unit Level,” consisting of the following five components.
(a)     Certification procedure for natural production forest management;
(b)     Decision making procedure using Analytic Hierarchy Process method;
(c)     Criteria and indicators for sustainable forest management and
(d)     Principles of certifying institutions
(e)     Chain of custody for certified timber

The manual of the certification procedure which is now presented to the National Standards
of Indonesia for inclusion as the country’s standard for SFM, is a solid document based (as
mentioned earlier) on two series of testing and consultations with the evaluation team, the
Ministry of Forestry, APHI and various other stakeholders, notably NGOs within and outside
the country. This, it is believed, has resulted in wide support for the LEI certification system.

The Working Group is subsequently gathering educational experts to prepare curricula and
training manuals. Currently, the Working Group is preparing a pilot project plan to fully
implement the forest certification scheme. A number of concessions have already shown
interest in the plan, and the Ministry of Forestry has expressed strong commitment to co-
operate with the Working Group in implementing the project. The project’s overriding aim is
to gain learning experience for relevant parties, as well as to evaluate the strengths and
weaknesses of the scheme, and to improve on it accordingly from time to time.

Figure 9.1 gives a flowchart of the procedure involved in the certification process.
Concessionaires apply to LEI for assessment. LEI then instructs assessors (appointed by LEI)
to gather information about the concession. Assessors report back to LEI who pass on the data
to LEI’s Expert Panel I for review and decide whether or not the assessment work should
proceed. Upon approval to proceed a scoping visit may be made (optional) and this is
followed by field investigations. The field data will then be evaluated and presented to Expert
Panel II. The outcome of the Expert Panel II’s review of the field data evaluation will form
the basis for recommendation (or against) for certification. Before a certificate can be
awarded the recommendations are made open to public consultation at a forum of
ecolabelling parties for endorsement. In the event that the forum fails to support the
recommendations, its findings will be examined by Expert Panel III which will then arrive at
the final decision whether or not to pass the results for certification.




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To safeguard the integrity of the system and independence of decision making, the expert
panels constitute different groups of persons where each individual member is appointed
specifically for the review in question. There is no permanency of membership in any of the
expert panels.

LEI is determined that the certification scheme it has developed will satisfy the underlying
principles of: (i) independence of process and financing, (ii) transparency, clarity and
credibility of criteria and indicators of sustainability, and (iii) international credibility of its
systems and processes.

The scheme is based on the ITTO’s principles of SFM but suited to the Indonesian forestry
situations. Independence and credibility, especially at international or market level, are the
pre-requisites for long lasting viability. It is not clear yet until the system is fully put into
practice how both attributes will be developed. What is apparent is that members of the three
expert panels that review the evaluation work of assessors (Panels I & II) and objections of
the public forum to the applicant’s certification (Panel III) will be independently appointed
for those specific purposes alone with no assurance of future appointments to the same or
other expert panel.

Assessors to be appointed by LEI’s are expected to be from the local resources suitably
trained for the purpose and their services will be paid by LEI rather than the applicant. LEI
has also indicated that international assessors may be invited as well to offer their services.
LEI has scheduled for the training of assessors to begin in September 1997.


9.3.3                Other Certification Schemes

Several other certification schemes have emerged in Indonesia over the last few years. As
mentioned earlier from 1994 – 96 the Indonesian Association of Forest Concessionaires
(APHI) conducted internally assessments of the members’ forests totalling altogether 61
units. The seven best concessionaires out of the first 11 to be assessed were selected in 1995
for a Ministry of Forestry programme of “self-approval”. The idea behind “self-approval” is
that these concessionaires are permitted (by decree, Ministry of Forestry 1995) to approve
their own annual management plans and do not therefore have to go through the time-
consuming and bureaucratic process of approval by regional Ministry of Forestry offices. This
initiative however, is expected to be superseded by LEI’s latest move (see section 9.2.1).

Two FSC-accredited certifiers have been involved in various aspects of forest certification in
Indonesia, SGS Forestry and the non-profit organisation, Rainforest Alliance. SGS Forestry’s
ideas on certification were widely discussed in Indonesia from 1993-1995. The company’s
proposals for wood tracking underwent initial field testing in 1994. The company was
contracted to audit some concessions as a precondition for the concession companies being
permitted to go public on the Jakarta stock exchange.

Rainforest Alliance’s SmartWood label was given to the teak plantation of Perum Perhutani, a
state company, in 1991. The SmartWood label for Perum Perhutani is in the process of being
reviewed for renewal. Smart Wood, like SGS Forestry, has frequently contributed to the forest
certification debate at workshops and seminars in Indonesia in recent years.




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                                                                                                 61
  Figure 9.1           LEI’s Certification Procedure for SFM


             Application for
        Certification Concession
           Management Unit


                   Forestry
                documents and
                secondary data


             Expert Panel I               No                     PRE-FIELD STUDY


              Decision for
              Field Study
      Yes
                                           Scoping Visit
                                            (Optional)
             Field Study by
               Assessor
                                                              FIELD DATA COLLECTION
               Field Study
                 Result



            Expert Panel II                                 FOREST OPERATIONS

          Recommendation                                          No
           for Certification

                            Yes

          Recommendation                                                                 No
            Made Public                        Communication            recommendation        Expert Panel III
                                                  Forum                   endorsement




                             PUBLIC CONSULTATION                             Yes


               NO                                                          decision
          CERTIFICATION                                                    to certify
                                                       No
                                                                  Yes



Source: Lembaga Ekolabel Indonesia
                                                                    CERTIFICATION




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                                                                                                                 62
Rainforest Alliance’s SmartWood label was given to the teak plantation of Perum Perhutani, a
state company, in 1991. The SmartWood label for Perum Perhutani is in the process of being
reviewed for renewal. Smart Wood, like SGS Forestry, has frequently contributed to the forest
certification debate at workshops and seminars in Indonesia in recent years.


9.4         Market Aspects

9.4.1                Consumer-driven vs. External Pressure

According to the LEI’s mission, Indonesia requires that due recognition be given to the value
of its increasingly scarce natural resource, the forest. The forest must be managed in a way
that is commensurate with its true worth which is above and beyond the mere sustained yield
of its timber and timber products. Forest management must reflect the rising expectations of
the general public of the full potentials that the forest can offer – its environmental and
protection attributes, socio-economic benefits and the value addedness that comes in the face
of active market demands for its non-wood produce such as for the manufacture of
pharmaceutical products and herbal food supplements. The driving force behind this mission
of LEI lies internally – the demand of the consumers, rather than the international market.


9.4.2                Unclear Signals

Market signals for certified or labelled forest products such as furniture, toys and the like are
generally weak and signals reaching forest managers are weaker still. Relatively few of these
products are produced in Indonesia. The growing domestic market is not likely to be
ecosensitive in the short and medium-term despite the increasing awareness. There is
evidence of growing “green” pressure, however, in Europe and North America, particularly,
U.K., Germany, Canada and the U.S. But most of Indonesia’s wood exports are to non-
ecosensitive Asian markets. The few “green” premia that may exist currently provide little
incentive for labelling. Contingency surveys have tended to exaggerate how much consumers
are willing to pay.


9.5         Costs and Benefits

9.5.1                Costs and Benefits to Government

The National Resources Management Project (NRMP) of BAPPENAS and the Ministry of
Forestry has carried out an initial assessment of the cost implications of current LEI proposals
and options based on information available in 1994 (Table 9.2 and Table 9.3). First, the cost
implications for the government were assessed. The main costs to be incurred by LEI are
auditing costs and on-going operating costs. The main revenues for LEI would come from the
audit/certification fee charged to concession or forest industry and probably from some form
of endowment fund provided from the Ministry of Forestry’s Reforestation Fund. The World
Bank has earmarked USD 500 000 as a grant for the LEI endowment fund and are awaiting a
formal request from LEI. There is also a recently approved ITTO project for the training of
Indonesia’s forest assessors, pending the provision of funds.




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Box 9.1                  Supporting Factors and Constraints in Promotion of SFM - Industry
                         Views in Indonesia
Supporting factors
(1) The forest concession managements in general welcome the assessment, mostly because of
    prestige and the need to sustain business.
(2) Certification and ecolabelling are new to them and arouse curiosity and many members want to
    learn more about it. They are not convinced as yet whether certification and labelling can serve as
    market incentives or not.
(3) A standard for performance by way of a set of C & I, is needed by concession managements as a
    necessary component of their forestry business. It will provide the certainty that they need for
    long-term performance of good forestry practice.
(4) Most forest concessions in Indonesia are readily accessible to government scrutiny and have been
    inspected for one purpose or another by the forest agencies. It has been accepted as a routine duty
    by the concessionaires to allow for government inspection and evaluation.
(5) APHI is a strong institution with a strong leadership and can provide useful support to
    government initiatives to promote SFM.
Constraints
(1) The shortfalls in the quality and competency of assessors due mainly to a lack of training and
    difficulties in the selection of the right people.
(2) The lack of proven standard and guidelines in the past about the right silvicultural treatment and
    procedures for the development of the forest resource. While the assessment results are sometimes
    not consistent due to the different backgrounds of assessors.
(3) Many factors related to their performance are beyond the control of the management such as
    illegal removal and changes in land use.
(4) Project performance in the field of community development, for example, may take a long time to
    show results and this may lead to inaccuracies in current evaluation.
Source: Soemitro 1996a




Based on the assumptions detailed in Table 9.2, it is estimated that LEI would have to charge
somewhere between USD 15 000 and USD 30 000 on average per audit to break even (i.e. to
achieve self-financing). This compares favourably with the USD 26 000 paid to Rainforest
Alliance by Perum Perhutani for its two-yearly SmartWood audit. The Government, it is
claimed, would also benefit from opportunities for improved collection of tax revenues and
eventually lower supervision costs related to law enforcement.


9.5.2                    Costs and Benefits to Concessions

The cost/benefits of the proposed system for concessions was also considered (Table 9.3). A
market-driven strategy will only work if concessions benefit financially from labelling. Based
on available figures, it has not been possible yet for NRMP to demonstrate unequivocally that
labelling and certification and in the economic interests of concessions unless it results in the
reduction of current regulatory costs.

Estimates of average costs per cubic meter (USD/m3) for tracking, compliance and auditing
costs are deducted from estimates for efficiency gains and possible labelling premium. Using
these figures a “best” position of a profit of USD 6.20/m3 profit and a “worst” position of a
USD 11.90/m3 the loss can be calculated. These figures depend critically on assumptions


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made about compliance costs and efficiency gains, which will vary considerably between
concessions. The assumptions used by NRMP are as follows:
• Compliance cost assumptions made in Table 9.3 are taken from the Jaakko Pöyry (1992)
  study and assume at best a zero cost of compliance; that there will be compliance costs for
  many concessions is not in doubt; as Table 9.3 indicates, at most, only 30% of concessions
  are classed as “good” performers by the Ministry of Forestry.
• In the longer term a net gain from compliance (as has been demonstrated in other
  countries) is expected but has not been incorporated in this analysis; these compliance
  “gains” would in theory come from:
-       Improved management systems
-       Reduction of waste
-       Better inventory control
• Better utilization
The above assumptions would lead to improved efficiency and better profitability. The
efficiency cost saving estimate of 20% of operating costs is taken from PT Surveyor who
admitted that this was a rough estimate.


9.6         Key Issues

9.6.1                Credibility and International Support

Certification was aimed at catalysing the process of forest management sustainability more
than accommodating to the international call for environmental labelling. Be as it may, the
elements of credibility and international support remain a dominant feature of the design of
LEI’s certification programme. On the question of credibility Prof. Salim argues that, when
the process of implementing SFM principles becomes transparent to all and the integrity of its
certification is well established, international recognition will follow. This would be the
natural sequence of the Indonesian process.

On the micro-level perspective the biggest challenge is in improving sectoral efficiency and
maintaining as a result, competitive edge. This is achievable by means of cost-saving benefits
derived from government incentives and exemptions that the Ministry of Forestry has
committed itself to offering, as encouragement for forest concessions to adopt SFM and opt
for certification. The resultant impact on the forest sector would be market recognition, good
image and a higher value of forest resource apart from improved environmental security.

Transparency of the system requires elements of independence of operation (e.g. data
gathering and decision-making will be done free of government intervention) and
accountability. LEI, for example, is as much responsible for assessing the integrity of
assessment work as it is for the quality of assessment.

LEI has yet to gain international recognition of its country-specific certification scheme. Its
C&I for SFM is a corner stone of its credibility, and may be enhanced by means of cross-
references with the work of CIFOR (Section 3.3).




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Table 9.2            Estimates of Cost/Benefits for Government. 1994


       Cost/Revenue Item                          Key Factors                                           Estimated Costs/Revenues        Assumptions
       A. COSTS
       1.    Inspection/Auditing Costs            •   Inspection levy                                   Low: USD 9.2 mill. p.a.         588 concessions
                                                  •   Length of audit                                   High: USD 16.8 ill. p.a.        Annual audits
                                                  •   Frequency of audit                                                                Low cost 30 ill. Rp per audit
                                                  •   No. of concessions to be audited                                                  (certifier)
                                                  •   Profit margin for assessor companies              < USD 0.5 ill. p.a.             High cost 50 ill. Rp per audit (MoFr)
       2.    Certifier’s Operating Costs          •   Scale of certifier operations                                                     Certifier has 20-staff (or so)
                                                  •   Mandate and targets for certifier                                                 secretariat

       B. REVENUES
       1.    Endowment from                       • Level to be agreed by GOI                           Low: USD 0.0 ill. p.a.
             Reforestation Fund, interest                                                               High: USD 2.0 ill. p.a.
             to be used to support
             certifier operations                 • All the above assumptions                           Low: USD 15 000 per audit       (figures calculated assuming certifier
       2.    Audit fee to concessions to                                                                High: USD 30 000 per audit      just covers costs)
             cover all costs of auditing
             and balance of certifier
             operation costs

       C. OTHER BENEFITS
       1.    Sustainable Forest                   Extent to which inspections contribute to SFM         • Huge long-term economic benefits to Indonesia from SFM
             Management (SFM)                     Improved management practices                         • Huge potential economic benefits to Indonesia
       2.    Watershed/Soil Erosion               Extent to which production forests can protect this   • Some possible gains through improved management
       3.    Biodiversity                         Carbon-fixing potential of production forests         • Significant gains possible for the world from improved forest
       4.    Climate Change                       Communities in/or dependent upon forests for their      management in Indonesia
       5.    Socio-Cultural                       livelihoods                                           • Significant gains possible for local communities
      Source: Bappenas - Ministry of Forestry




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Table 9.3            Estimates of Cost/Benefits for Concessionaires. 1994
       Cost/Revenue Item                      Key Factors                                                 Estimated Costs/ Revenues   Source
       A. COSTS
       1.    Tracking Costs                   •   Extent of tracking (to mill? final consumer?            USD 0.3/                    World Bank
                                              •   Choice of tracking technology                           USD 1.3/m3                  SGS-Indonesia
                                              •   Area of concession                                      (USD 7.0/m3)                (SGS-New Zealand)
                                              •   Topography                                                                          (SGS estimate tracking costs total
                                              •   Distances involved                                                                  2.5-8% of at wharf prices
                                              •   Level of detail/data required
       2.    Compliance Costs                 • Current forest management practices                       Low: USD 0.0/m3             Jaakko Poyry (Annex II, pg. 47)
                                                                                                          High: USD 13.0/m3
                                              • Target forest management practices
                                              • Will change greatly over time
       3.    Auditing Costs                                                                               Low: USD 0.2/m3             NRMP 9from certifier)
                                              •   Frequency of audit
                                                                                                          High: USD 0.4/m3            NRMP (from MoFr)
                                              •   Length of audit
                                              •   Size of audit team
                                              •   Composition of team
                                              •   Profit margin required by assessors
                                              •   Extent to which certifier costs to be recovered
       B. BENEFITS
       1.    Efficiency gains                 • Current efficiency of concession operations               Low: USD 2.8/m3             PT Surveyor savings estimates
                                              • Current operating costs                                   High: USD 4.0/m3            Jaakko Poyry cost estimates
                                              • Impact of tracking
       2.    Possible eco-premium             • Ecosensitivity of product markets (in turn dependent on   Min: USD 0.0/m3             NRMP estimates, based on max 10%
                                                many factors)                                             Max: USD 2.7/m3             revenues earning max 15% premium
                                              • International trade factors e.g. scope for diversion,
                                                substitution
                                              • Domestic market factors, e.g., rapid growth
       C. NET GAINS TO                        • All of the above                                          Best: USD 6.20*/m3 profit   * = Based on the figures   estimated
          CONCESSIONS                         • Therefore will vary considerably between concessions      Worst: USD 11.90*/m3 loss       above
          (Revenues less Costs)               • Sensitive to potential premium, compliance costs and
                                                efficiency savings

      Source: Bappenas - Ministry of Forestry



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9.6.2                Adequacy of Local Capacity

One of the most pressing issues on the agenda of LEI is the training of assessors with
sufficient capacity to undertake the mammoth job of forest auditing over five hundred
concessions in line with ITTO Year 2000 Objective. This is its immediate concern with plans
for training to be partly implemented with ITTO’s assistance. Until the products of such
training courses are available in the field, the lack of trained specialists to implement the
certification scheme will remain a major obstacle to the progress.


9.6.3 Stakeholders’ Participation

There is a strong component of a participative process in the development of LEI’s C&I and
its certification system. The Ministry of Forestry is having the Indonesian Forest Practice
Code developed and scheduled to take effect in January 1998. In addition to forest
management practices codes the document will also cover socio-economic aspects and local
community participation.


9.6.4 Socio-economic Implications

Efforts at SFM in a country of 198 million population will inescapably face competition for
land with other users. Of immediate concern is the well-being of forest dwellers and local
communities. Current policies allow for extended rights and tenure of forest land by these
sectors of the society provided that land capability permits occupation and that the local
communities show willingness to cooperate by way of involvement “in the design of SFM
systems” (Tantra and Hutabarat, 1996). Work is in progress to study in detail prospects for
more effective local community contribution towards SFM in particular those positive aspects
of their make up that may help enhance forest conservation and environmental protection.

In the context of timber concession, NRMP claims that the welfare (or well-being) of the
people does not deteriorate as a result of corporate forest management (e.g., focus on readily
quantifiable human health and income indicators) and that their say in forest resource
management is adequate. Of course, there are proxy elements to some of the above examples
but they imply more freedom of action on the part of both local peoples and corporate
concessions than is the case with most current certification protocols. Thus, in pursuing the
social outcome goal of a fair share in the forest and maintenance of human welfare,
certification stipulations for integrity of cultural diversity or for significant access to
employment in concessions/forest management units for local people in concession
companies, are overly prescriptive and should be left to the local community and
concessionaire to handle. One irony of excessive prescription is that contradiction among
individual stipulations becomes more likely (e.g. safeguarding traditional ways) while
mandating employment in an alien, if not modern, corporate concession. (NRMP 1997)


9.6.5                Tracking of Logs

Tracking of logs is carried out by many concessions already, but not always systematically,
and not always in a way that is tamper-proof (SGS 1994). Currently concessions use a variety
of paper-based systems for log tracking with varying degrees of success. Perum Perhutani is


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cited by some as having an effective, non-computerized tracking system for teak logs (Not all
observers would agree). SGS Forestry has proposed that certification in Indonesia be
supported by the adoption of a more sophisticated tracking system (SGS 1995). In 1995, SGS,
with EU funding, carried out a trial of a computerised system using bar codes, touch memory
and satellite communications in one concession (Inhutani I) with some moderate success. Bar-
coded logs and touch memory coded processed products were tracked from the stump to a UK
wholesaler. The system was apparently shown to be technically feasible.


9.6.6                Labelling of Wood Products

LEI are currently thinking of a label where concessions are awarded “gold”, “silver” and
“bronze” for each of forest management, environment and socio-economic performance. For
some customers, if not all, it may be better to provide a “score-card” (as in the case of
Scientific Certification System) so they can make their own weighting or judgement. Some
initial marketing and consumer education may be used to help buyers to interpret the LEI
label.

All forest certification in Indonesia will likely be under LEI and that, therefore, only LEI may
issue certificates and labels (open entry would be encouraged for companies willing to work
as assessors for LEI). The Indonesian Standards Council (DSN), on the other hand has argued
that only companies meeting their national standards should be permitted to undertake forest
certification.

Under the scenario of LEI as the exclusive certifier of forest management, concessions would
be inspected by assessor companies selected by LEI and only LEI would be permitted to issue
an ecolabel for wood from certified forests. The overriding concern of those who propose LEI
exclusivity is to prevent collusion between assessors and their clients. Thus the need for LEI
to impose strict rulings on the composition the forms of reference of expert panel members
and avoid permanency of such membership.


9.7         Lessons Learned

(1)     The Indonesian certification scheme developed by LEI utilising the outcome-based (as
        opposed to the prescriptive-based) C&I for SFM at the FMU level shows a significant
        progress towards closing the gap between concept and application. It is seen to be a
        more practical approach to the forest managers and assessors alike, providing the
        flexibility required to facilitate decision making. It is claimed to be a better alternative
        to the prescriptive mode of C&I that is more inclined to land the management into a
        quagmire of subjective interpretations in the more difficult areas of social and
        biodiversity evaluations. But it is still largely untried. Apart from the two series of trials
        and consultations at the formative stages, LEI is not likely to have the scheme fully
        tested until there is sufficient cadre of skilled people passing out of its impending
        training programme.
(2)     LEI´s scheme is an exemplary move worthy of the attention of both the market and
        other timber producing countries in the tropics that are contemplating certification of
        their forests. The value of certification lies in the good reputation internationally that it




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                                                                                                   69
        provides as an indication that SFM practices are taking place and that the nation’s wood
        products will be expected to gain significant marketing edge.
(3)     Several issues have yet to be resolved or considered in anticipation of wide application.
        Certification is not critical for the survival of Indonesia’s forest industry since its most
        important markets are in the Far East where pressure for the “green” label remains
        minimal. Furthermore the downstream products which are the main targets of the “eco-
        sensitive” market constitute a very small fraction of its exports.
(4)     Credibility of the system will be a major determinant of international recognition. But
        this will be apparent only when the certification system is well under way. There are
        some views that credibility and international acceptance could be enhanced when there
        is easy entry (by international certifiers) into the system. This is yet to be seen as it may
        also touch into the sensitivities of national sovereignty, etc.
(5)     The system of open dialogues espoused in the LEI process enhance transparency and
        credibility to the scheme. The effectiveness of the planned arrangements again remains
        to be seen when the scheme is put to practice.
(6)     Voluntary participation is to be expected and as incentives there need to be some form
        of deregulation of certified forests as this would mean lesser costs to the concession.
(7)       The LEI scheme offers prospects for the development of SFM practices in Indonesia.
          A great deal depends on how soon forest certification work will begin and how much
          can be done in order to show the effectiveness of the system.


10.         MALAYSIA

10.1        Introduction

10.1.1               Forest Resource

The total area of forests in Malaysia is in the region of 18.9 million hectares or 57.5% of the
land area, with the proportion of forested land being higher in Sabah (60.4%) and Sarawak
(69.8%) than in Peninsular Malaysia (44.5%) as the latter has undergone more development.

Recognising the fact that the crucial role of the forest does not lie simply in the production of
timber but rather in its holistic function of benefiting the society through its economic as well
as environmental attributes, the Malaysian government has designated a considerable extent
of its forested land, totalling 14.28 million hectares as Permanent Forest Estate (PFE). The
PFE which is administered by the respective State Forestry Departments, under sustainable
management. Approximately 10.85 million hectares of the PFE are production forests and the
remaining 3.43 million hectares, protection forests.

In addition, Malaysia has 4.82 million hectares of agricultural tree crops which are mainly
rubber, oil palm, coconut and cocoa. These agricultural plantations are similar to reafforested
land and are increasingly looked upon as alternative sources of wood supply. This is
particularly true in the case of the rubber plantations that produce an excellent wood for
furniture. At the end of 1995 the total area under tree cover in Malaysia was to be 23.7
million hectares or 72.2% of its land area.




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Since the 1930s, Malaysia has been establishing a network of protected areas for the
conservation of biological diversity. Currently, Malaysia has 2.12 million hectares of
conservation areas protected by the appropriate legislation. Of these, 1.79 million hectares are
located outside the PFE, whilst another 0.33 million hectares are located within the Estate.

Save for occasional instances of customary rights, occurring mainly in Sarawak, Malaysian
forests are government-owned, and all land administration falls within the jurisdiction of the
states concerned.


10.1.2 Industry and Trade

Malaysia is a major producer of tropical timber. The 1995 log output of its forests was
31.6 million m3 with additional 880 000 m3 of rubberwood. In the same year over 9 million
m3 of sawntimber and 3.7 mill m3. of plywood were produced, the bulk of which went for
export. For example 94% (nearly 3.5 million m3) of the plywood and 52% (4.8 million m3) of
sawntimber reached diverse destinations in the Far East, Europe, West Asia and America.
Some, mainly wood mouldings and plywood, were exported to Australia.

Malaysia also enjoys a well distributed global market for its wooden furniture (mainly of
rubberwood). With an export value of some USD 670 million (1995), Malaysia is the biggest
exporter of such category of furniture in Southeast Asia. The major buyers in recent years
have been consistently USA (39.5% in 1995), Japan (24.8%), Singapore (9.8%) and the EU
(7%) with the United Kingdom accounting for half of the European market.

The above production is based on more than a thousand sawmills, 70% being located in
Peninsular Malaysia, and 177 plywood mills mainly located in Sabah (76) and Sarawak (53)
and over 2 000 furniture mills of which around 100 are export-oriented.


10.2        Certification and Related Initiatives

10.2.1               Development of C&I and Certification Standards

National Level

Malaysia is fully committed to achieving sustainable forest management (SFM) in the overall
context of sustainable development. In this regard, Malaysia has taken action to elaborate and
operationalize the ITTO Guidelines for the Sustainable Management of Natural Tropical
Forests and its Criteria for the Measurement of Sustainable Tropical Forest Management in
the management of its natural forest.

In this connection, a National Committee on Sustainable Forest Management was established
in February 1994 at the Ministry of Primary Industries comprising representatives from the
Ministry; the Forestry Departments of Peninsular Malaysia, Sabah and Sarawak; the Forest
Research Institute, Malaysia; the Malaysian Timber Industry Board; the Malaysian Timber
Council and the Faculty of Forestry, University Putra Malaysia. The Committee was given the
task of ensuring that the ITTO’s Criteria for the Measurement of Sustainable Tropical Forest
Management will be elaborated, developed and appropriately adapted and made
implementable in the way best suited to the local conditions. To render further support to this


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work, the ten State Forestry Departments in Peninsular Malaysia had also formed a Working
Party on Sustainable Natural Forest Management, Peninsular Malaysia based at the Forestry
Department Headquarters.

The Committee arrived at a total of 92 activities based on ITTO’s 5 criteria and 27 indicators
on SFM at the national level covering forest resource security, continuity of flow of forest
products and services, socio-economic effects, community consultation and an acceptable
level of environment impact, including the conservation of biological diversity. In the
process, the Committee had added two additional indicators, while omitting two of the
proposed ITTO’s indicators. The two additional indicators were the indicator on Plantation
Establishment of Non-wood Forest Produce and Annual Planting Targets under the ITTO’s
criterion on the Forest Resource Base and the indicator on Expenditure Budgets for Forest
Administration under the ITTO’s criterion on Socio-Economic Effects. ITTO’s indicator on
Availability of Environmental Assessment Procedures under the criterion Socio-Economic
Effects was omitted as this indicator was already included under the criterion on the Level of
Environmental Control which the Committee deemed to be more appropriate. The omission
of another indicator on the Relationship of National Policy to ITTO Guidelines under the
criterion on Institutional Frameworks was because the National Forestry Policy of Malaysia
had adequately met the objectives of the ITTO guidelines in terms of SFM.

Forest Management Unit (FMU) Level

Currently, each individual state in Malaysia is defined as the FMU in view of the following
legal and administrative requirements:

• Under Article 74 (2) of the Malaysian Constitution, forestry comes under the jurisdiction
  of the respective State Governments. As such, each state is empowered to enact laws on
  forest and to formulate forestry policy independently. The executive authority of the
  Federal Government only extends to the states, the provision of advice and technical
  assistance, training, the conduct of research and maintenance of experimental and
  demonstration stations.

• The implementation of Criteria, Indicators and Activities, as well as Management
  Specifications are monitored and evaluated at the state level by the Federal agencies and
  bodies, such as the National Forestry Council.

• Decisions with regard to the management, conservation and development of the forest are
  made at the state level by the respective State Authorities.

• The National Committee on SFM in Malaysia had subsequently identified a total of 84
  activities to be implemented at the FMU level under the 6 criteria of the ITTO and its 23
  indicators. In its development, the Committee had added 7 additional indicators from those
  identified at the national level to this level which are as follows:

          •    the length of cutting cycle;
          •    areas of Protection Forests and Production Forests within the PFE;
          •    establishment of forest plantations for wood production;
          •    establishment of forest plantations for non-wood production;
          •    availability of environmental assessment procedures;


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          • expenditure budgets for forest management; and
          • expenditure budgets for forest administration

Of the 84 activities that will be implemented at the FMU (State) level, a total of 70 activities
or 83% are identical to those identified at the national level. This level of management will be
further reviewed once the present silvicultural and management systems are further refined
for application at a lower management level, perhaps at the forest district level, forest reserve
level or even at the compartment level. In this connection, the work of the Deutsche
Gesellschaft fur Technische (GTZ) project on Sustainable Forest Management and
Conservation in Peninsular Malaysia in testing the implementability of all the current forest
management systems, the refinement of silvicultural practices and the development of a cost-
effective forest planning system for application at the operational level is expected to greatly
enhance this review exercise.


10.2.2               Management Specifications

In Peninsular Malaysia, the respective Forestry Departments had also formulated management
specifications (benchmarks) against each of the activities identified at the national and FMU
levels for effective monitoring and evaluation. Currently, a total of 201 and 191 management
specifications have been formulated at the national and FMU levels, respectively. Of the
FMU level specifications, a total of 161 or 84% are identical to those formulated at the
national level.

In formulating the 92 activities and the 84 activities for implementation at the national and
FMU levels respectively, the National Committee on SFM had also considered FSC’s
Principles and Criteria for Natural Forest Management and those of the Tropenwald
Initiative. It had taken into account as well the principles and recommendations of ITTO’s
Guidelines on the Conservation of Biological Diversity in Tropical Production Forests.


10.2.3               Monitoring and Evaluation

The monitoring and evaluation of activities implemented in the field by the respective State
Forestry Departments in Malaysia, is done through a Task Force comprising representatives
from the Ministry of Primary Industries, Malaysia; the Forestry Departments of Peninsular
Malaysia, Sabah and Sarawak; the Forest Research Institute, Malaysia; the Malaysian Timber
Industry Board; the Malaysian Timber Council and the Faculty of Forestry, Universiti Putra
Malaysia. A Technical Monitoring Committee at the Forestry Department Headquarters,
Peninsular Malaysia will monitor specifically the implementation of all the activities
undertaken by the respective State Forestry Departments. It serves as a technical extension to
the national-level Task Force concerning the work carried out in the States.

The Task Force would develop an effective mechanism and procedure for the periodic
monitoring on the implementation of all the activities, and produce reports on their progress
to the National Committee on SFM. Benefiting from the recently completed European Union
project on the Development of Mapping and Geographic Information Systems for the
Effective Planning, Management, Conservation and Sustainable Development of Forest
Resources in Peninsular Malaysia there is now a strengthened monitoring capacity on the



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implementation of the criteria, indicators, activities and management specifications in
Peninsular Malaysia.

An internal assessment on the implementation of each of the activities at the FMU level was
conducted in 1996 in several places in Peninsula Malaysia. It was found that currently a total
of 64 activities (76%) have been fully implemented while 9 activities (11%) are partially
implemented. These partially implemented activities, together with the balance of the 11
activities (13%) that are yet to be carried out, are expected to reach full implementation by the
year 2000.

There is a great deal of interest in the SFM-related work done in Malaysia. Besides the GTZ’s
complementary effort mentioned above, Malaysia and the Netherlands, through its
Foundation Keurhout, are jointly undertaking a Pilot Study to identify the requirements for
timber labelling, develop an operational system for forest certification and tracking
timber/timber products through the chain of custody, and quantify the cost involved. It will
cover sawntimber, plywood and mouldings and will use a phased approach in accordance
with the Malaysia’s criteria, indicators, activities and management specifications which have
been elaborated from the ITTO guidelines with due references to the FSC and Tropenwald
documents. A third party, SGS Malaysia Sdn Bhd has been appointed to undertake this study
which is expected to be completed at the end of 1997.


10.2.4               Related Environmental Management Prescriptions

To minimise the detrimental effects of forest harvesting on the environment, harvesting and
all related infrastructure development in the PFE are to be carried out in compliance with the
SFM principles. Specific regulations and guidelines with special emphasis on environmental
conservation measures for forest harvesting have been introduced as supplements to the forest
management and harvesting plans. They include ‘Forest Harvesting Guidelines’, ‘Forest
Engineering Plan’ and ‘Standard Road Specifications”. These are incorporated into harvesting
licences. Implementation is closely supervised and monitored by the Forestry Department’s
staff.

In the attempt to minimise the detrimental effects of forest harvesting for a better management
of its forest resource, Malaysia is applying a number of low impact logging techniques
including helicopter logging and skyline yarding. The advantage of using helicopters is that
fewer roads will be needed to transport the logs, thus reducing disturbance to soil and
vegetation. The system minimises damage to the residual stand, soil erosion, sedimentation
and compaction of the forest floor. Helicopter logging system is currently being evaluated for
its technical and economic viability in Sarawak. Due to encouraging results the number of
aircrafts used was recently increased from two to five. Skyline yarding which is commonly
used in Sabah, particularly in the harvesting of planted forests, is now being tried out in the
natural forests in Peninsular Malaysia with the assistance of the German-Malaysian project on
SFM and conservation.


10.2.5               Availability of Environmental Assessment Procedures

Recognising the potential negative impacts of logging on the forest stand, the Environmental
Quality Act 1974 was amended to include Environmental Impact Assessment (EIA) in 1985


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and the order came into force in 1987 which prescribed for activities that involved forest land
uses.

“Forest Harvesting Guidelines” and “Forest Engineering Plan”, as well as the regulations in
forest road construction such as the ‘Standard Road Specifications’ have provisions for the
protection of the environment which are similar to those of the EIA. However, in order to
streamline and ensure more effective implementation of forestry activities affecting the
environment, EIA guidelines are currently being formulated specifically for the various
forestry activities by the relevant agencies. In fact, EIA Guidelines for forest harvesting in the
natural forest has been developed by a Working Committee on EIA for Forest Harvesting of
Natural Forest in Peninsular Malaysia with members from the relevant forestry and
environmental agencies.


10.2.6               Legislative Framework

In order to facilitate the adoption of a coordinated and common approach to forestry
development, the National Forestry Council (NFC) was established in 1971 by the National
Land Council (NLC). The NLC is empowered under the Malaysian Constitution to formulate
a national policy for the promotion and control of utilisation of land for forestry, agriculture
and mining. The NFC serves as a forum for the Federal and the State Governments to discuss
and resolve common problems and issues relating to forestry policy, administration and
management. All the decisions of the NFC are to be endorsed by the NLC. The responsibility
for implementing the decisions of the NFC lies with the State Governments.

To ensure an effective forest management implementation in Malaysia, various forestry
enactments and ordinance were formulated and enforced by the respective State Authorities
since 1910. These legislations were further harmonised and strengthened in areas of forest
management planning and forest renewal operations with the endorsement of the National
Forestry Act and the Wood-Based Industries Act by an act of the Parliament in 1984. These
two Acts are currently being enforced by all the States, especially in Peninsular Malaysia.

In tandem with the National Forestry Act was the institution of the National Forest Policy in
1978 based on the de facto Interim National Forest Policy which had been in force since
1952. The National Forest Policy has since been revised (1992) to incorporate developments
of the forest resource in compliance with the principles of SFM.

As a further back-up to the revised National Forestry Policy and appreciating the urgency to
safeguard the forest resources against illegal logging and timber theft, the National Forestry
Act, 1984 was amended in 1993 to incorporate more stringent penalties for such forest
offenses which include a mandatory jail sentence of at least one year. Actions are under way
to revise the Wood-Based Industries Act 1984 as well.

In the State of Sabah, the Forest Enactment, 1968 was amended in 1992. Together with the
Parks Enactment, 1984 and the Fauna Conservation Ordinance, 1963 they provide the legal
basis for the conservation and management of the forest resources in the State of Sabah.




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10.3        Certification Scheme

For the purpose of forest management certification which is undertaken at the FMU level,
Peninsular Malaysia had taken a sub-set of the activities and management specifications
formulated for sustainable forest management at the FMU level on a state basis. It
encompasses 71 activities under a total of 6 criteria and 28 indicators.

The rationale for this is that forest management certification only involves the sustainability
of the PFE, especially its production forests. Hence, the activities that had been omitted from
those formulated for measuring sustainable forest management at the FMU level include:

• identify areas for forest plantation of wood and non-wood forest produce outside the PFE
• determine the optimum concession length;
• harvest and replant the forest plantation;
• project the level of wood production from conversion forests, plantation forests and
  perennial agricultural tree crops (rubberwood);
• establish forest plantations outside the PFE for wood and non-wood production; and
• report on the contributions in terms of forest revenue to the State Governments.

The National Forestry Council has recently approved a process for forest management
certification based on a preliminary structure illustrated in Figure 10.1. The central player will
be the National Timber Certification Council (NTCC) accredited by the Department of
Standards Malaysia, which house the Malaysian Accreditation Council (MAC) as well as
standards setting body, to administer and issue timber certification. Whereas the Department
of Standards is a government body, NTCC which is yet to be formally instituted, is an
independent body whose governing body is expected to comprise representatives of the
government (Ministry of Primary Industries and its relevant departments and agencies such as
the Forestry Department, Malaysian Timber Industry Board and Forest Research Institute,
Malaysia), academic institutions like the Universiti Putra Malaysia, the industry perhaps from
the Malaysian Timber Council, and NGOs which are likely to be WWF and Malaysian Nature
Society. NTCC will provide the forum for an appeals procedure.

NTCC, with reference to SIRIM Bhd. (the recently incorporatised Standards and Industrial
Institute of Malaysia) as the existing standard writing organisation will redraft the Malaysian
C&I into a standard document on SFM. The Malaysian C&I was developed by the National
Committee on SFM through its C&I Task Force. The standard, however, will require
subsequent approval of the Department of Standards under the Ministry of Science,
Technology and the Environment. In the same manner there may be inputs from SIRIM Bhd.
on ISO procedures which may be relevant and applicable to SFM as the system develops.




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Figure 10.1          Forest Management Certification Process in Malaysia
                     A Preliminary Structure



                                           Malaysian                  ISO
                                          Accreditation
                                            Council

              National
             Committee                                                SIRIM
              on SFM



                 Task                   National Timber
               Force on                  Certification
                                            Council
                 C&I




                                                                              FMU
                   Certification
                     bodies                               Assessors           Forest

                                                                        Forest Industry

                                       Peer Review
                                    (Technical Working
                                         Group)




Applications for certification may be received from such enterprises as State Forestry
Departments, forest concessionaires or the industry engaged in logging activities (e.g. logging
companies). Assessors engaged by NTCC will be assigned to the client’s areas for forest
auditing which includes evaluation of forest management practices in the FMU using the
Malaysian standard as basis. Assessment work will also include chain of custody of timber
production. The outcome of such assessments will be examined at the Peer Review stage. The
Peer Review Board is expected to include mainly the people appointed into the Technical
Working Group. Upon recommendations for approval, the NTCC will consider the issuance
of Certificate from its own resources or from an appointed certifying agency. At this
formative stage of the process. assessors and certifiers can be from the same organisation
(Chew 1997) but this may be reviewed in the future.

There is no indication of a platform for consultation with other stakeholders or the public at
any stage of the process.

There will be an endowment fund for NTCC, coming from the government as a launching
grant to cover establishment and initial administrative costs. NTCC will need to set up a



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revolving Certification Fund financed mainly by the timber trade and industry as well as the
applicant enterprises as fees for assessment and certification.


10.4        Market Aspects

The immediate concern of the wood processing industry is, on the one hand, the exacerbating
cost of production (due to the rising labour cost and an increasingly tight supply of logs) and
on the other, a downturn in the overseas demand for plywood, especially the Chinese
market (China is believed to be making a move to cool down its over-heated economy),
and the fluctuating price of sawntimber. In the case of contract loggers, only the most
efficient and cash rich operators are competitive enough to succeed in bidding for forest areas

External factors like the anti-tropical timber campaigns in Europe have helped develop a
tendency to avoid the use of tropical timber. Controversies among many municipalities in
western countries about its use have triggered a fresh wave of preference for temperate timber
in areas of application which had traditionally been the realm of tropical hardwoods. Likewise
a resurgence of non-timber substitutes like PVC in interior use has added further to the
difficulty for tropical timber to return to its former position in the market place.

The call for certification originates mainly in Western Europe and North America. The former
is a very important market for high quality Malaysia hardwoods but is also the area that has
been most badly affected by competition from temperate timber and non-timber substitutes.
The sawmilling and wood moulding sectors may be more sensitive than the other to the need
for timber certification. Plywood will not be significantly affected by the certification issue as
90% of its products (1990) are exported to the Far Eastern markets where environmental
concerns are rare. Only 1.5% of the plywood exports goes to Europe and a further 6.5% is
shipped out to USA. In the case of sawntimber, despite a certain emphasis on the European
market (11.5% of the total), the bulk (77%) of the remaining exports again serves the Asian
market.

As a whole there is truly no real pressure for the certification of Malaysian timber, except in
one industry segment only, although the potential usefulness of this marketing tool is often
recognised. The progress towards certification is really government-led. It is an outcome of a
national initiative rather than sectorally derived sentiment aimed at appeasing the market.
Malaysia has made it clear to the outside world that it does have the political will to ensure
the security of its tropical rainforests through the practice of SFM.


10.5        Costs and Benefits

No reliable estimates are available yet on the cost of SFM in Malaysia. But the government is
working on a budget of nearly USD 1.2 billion (1996) to cover the cost of implementing SFM
over a period of three years into the year 2000.

The recent pilot study, related to forest management certification entailing testing of
Malaysian C & I in three different areas, indicates cost figures that are comparable to the
estimate given by Upton and Bass (1995) i.e. USD 130,000 for an area of 100 000 ha of
natural forest over the six-year life of the certificate. This would give an annual cost of around
USD 22 000 per year. This is a direct cost which can be subject to significant variations


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depending on the feasibility and ease of assessment. Organisations with proper documentation
and inherently strong management systems in place should enjoy a lower cost of certification
as there would be lesser need for extended verification work.

Indirect costs are more difficult to ascertain. They are associated with the installation of the
appropriate management and monitoring systems to ensure adherence to the Malaysian C & I.
Such work may require from minor to major revisions in forest management plans and up-
front investments, including EIA prior to harvesting.

A lack of empirical studies and exposure to forest management assessment work for purposes
of certification prevents further inputs on the cost and benefits of such an operation in
Malaysia. If anything, the recent trials had given indications of some US 4 cents per cubic
metre of log as direct cost. The chain of custody work varies from 2-3 work-days for a small
company to 3-7 work-days for a large one. At a professional fee of USD 600 per day, a
participating company will need to pay between USD 1 200 and 4 200 for the chain of
custody verification, excluding expenses and possible licence fees. For a five-year
certification period requiring some eleven surveillance visits, the company concerned will
have to pay a total of between USD 7 800 and 24 000 (Chew 1997).


10.6        Key Issues

10.6.1 Credibility and International Acceptance

Quite similar in a way, to the situation in Indonesia (see Chapter 9), is the certification now
being developed by Malaysia. Both have not experienced the passage of time. They have yet
to produce timber that is labelled according to their prescribed systems and delivered to the
ecologically sensitive markets, some for the shipment of about 500 m3 of sawn timber from
the recent Dutch-Malaysian pilot studies to the Netherlands (see chapter 11) .

No doubt the preliminary structure of the institutional arrangement, illustrated in Figure 10.1,
will need to go through the process of further elaboration and refinement by the time it is
ready for real world application. But one can sense even at this initial stage, that the
certification system is liable to criticism with respect to the independence of the NTCC until it
is made clear that its administration and decision making will not be laced with government
influence and bureaucracy. The same degree of independence will need to be seen in the
operations of the assessors, the review panel and certifiers. There needs to be a mechanism
that will protect them from the influence of the applicants for certification. The idea of the
same organisation doing certification and assessing may create problems of conflict of
interest (see also section 13.3).

Further credibility can develop when the system is seen to be fair by giving a clear provision
for appeal against the first decision of the NTCC whether or not to certify. The appeal body
should be independent of both NTCC ands the Technical Working Group (peer review).
International recognition may be enhanced when the Malaysian standard (i.e. the Malaysian
C&I) are harmonised with those developed at CIFOR (cf. section 3.4) or when they show
compatibility with international bodies such as FSC.




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10.6.2 Socio-Economic Implications

The forestry sector in Malaysia supports a significant number of people whose livelihood is
dependent on the forest resource and its industry. A total of 243 000 people were directly
employed by the forestry sector in 1995. This is in addition to the aborigines and other forest
communities. Overall, the total employment in the forestry sector had shown an increase of
68.4% between 1991 and 1995 with the plywood/ veneer mills and moulding mills recording
highest increases of 159% and 322%, respectively.

The total income generated through export earnings of forest and timber products, in
Malaysia in 1995 was USD 5.4 billion which constituted 7% of the total export revenue. The
earnings from forestry help sustainable development of the country, including the upgrading
of services for the people and setting up forest recreation facilities to encourage ecotourism.

In 1995, the total revenue collected from the forestry sector by the various states in Malaysia
(including royalty, silvicultural cess, premium and others) amounted to USD 769 million. A
sizeable portion of this amount was utilised for forest management and administration. For
example, in 1993 USD 51.2 million or 36.4% of the total revenue collected for that year was
utilised for this purpose. The share has showed a significant increase compared to the period
of 1988 to 1992 when only 10.9% of forest revenue was ploughed back to the sector. The
trend will continue with Malaysia’s current effort to achieve SFM status.


10.6.3 Adequacy of Local Capacity

A problem common to countries engaged in SFM and its certification is the difficulty to
garner sufficient resources to implement activities required by the system including forest
auditing for certification purposes. Malaysia will not have sufficient human resources to fulfil
all the needs for supervision, monitoring and assessment in the immediate future. Similarly,
the parties engaged in timber harvesting (logging contractors) have yet to be made fully
familiar with the technical requirements in the field, let alone putting them into practice. This
is particularly important with work per-taining to reduction of logging damage to the forest
environment and attention to biodiversity conservation.

Massive training programmes will be needed before an effective way can be found to achieve
SFM nation-wide. Professional training and local knowledge will be necessary to understand
the complexities of the tropical rainforest and further specialised skills will be required to
handle the sociological peculiarities of the populations associated with the forest in the
interest of maintaining their well-being.


10.6.4 Participation of Interested Parties

Consultations with stakeholders are already taking place at several points in the SFM process
in Malaysia. For example, in the establishment of PFE there is a legal requirement for a
public notification of the preliminary gazettement, to provide opportunities for any member of
the public to give his/her views, or to raise objections for the consideration of the Government
before the final gazettement takes place. But little else seems to be the practice, apart from the
occasional consultations (formal and informal) normally carried out by logging operators,


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district officers, and Forestry Department personnel whenever the need arises. Further work
may be needed to identify appropriate ways for adequate consultations on a more regular
basis.


10.7        Lessons Learned

(1)     It is clear that Malaysia stands on her conviction that for long-term viability and sound
        management of the forest resource, its development needs to be balanced by
        conservation. To this end, all forest management plans will prescribe socio-economic,
        environmental and ecological measures – the essential elements of a forestry practice
        which is in conformity with the principles of SFM. Such a vision, backed by a strong
        political will, is an essential instrument in pulling the various interested parties together
        in working towards a common national goal.

(2)     Malaysia has elaborated a comprehensive set of C&I and translated them into field
        activities. Perhaps the biggest constraint in the whole process of implementing SFM is
        the lack of a sizeable body of trained manpower to do the job. This occurs at both the
        operators’ level (Forestry Department staff and the logging contractors’ personnel) as
        well as the assessors’. The need for immediate training of additional scientific, technical
        and professional staff cannot be overemphasised.

(3)     There needs to be transparency in the management of certification process where the
        independence and integrity of the operation are essential elements, for they hold the key
        to its viability and subsequently, international recognition. In this context a more visible
        participation of NGOs, especially the environmentalists, in the administration of the
        certification scheme would be desirable.

(4)     There is apparently, no dire need among the industry people for certification. In fact
        their immediate problem at hand is to maintain some element of competitiveness of
        their timber products in the increasingly tough international market place. This concern
        ironically may detract all ideas of benefiting from better market access through the
        promotion of certified timber. To the industry for as long as it will cost more to have
        their products certified, with no indication at all of a premium offered for certified
        timber, it is always regarded as an added burden. But this is not to deny that the recent
        pilot studies on testing of the Malaysian C&I has opened the eyes of most of the
        industry.

(5)     From the national viewpoint, timber certification will be seen as a status symbol as it
        implies good forestry practices. Being the owners of the forest resource themselves, the
        state governments are expected to favour the development of certification as long as it
        can convey the correct signals to the world and that is, their forests are in good hands
        and are subject to sound management practices.




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11.         THE NETHERLANDS

11.1        Background

The Dutch government’s international forest policy of embracing ITTO’s Year 2000
Objective promotes the conservation and expansion of forests, suggesting that all forests
should reach sustainable management status by the year 2000. It would be expected that the
Netherlands would be importing timber and timber products from sustainable sources by that
date. The joint effort of the government and industry to attain this objective results in the
development of a voluntary hallmark system to enable the consumer to distinguish
sustainably produced from the non-sustainably produced timber. A voluntary certification
scheme in the country of origin is considered a useful means of providing reliable,
information to the consumer and the end-user, of the sustainability status of the forest of
origin. Besides, the scheme would promote better forest management.

The hallmark system is run by the Keurhout Foundation formed at the initiative of the private
sector with the support of the government.. A twin approach is adopted for this. Firstly the
timber must have been issued with a valid certificate at the country of origin; and this will be
verified by Keurhout Foundation. Secondly, the tracking of the certified timber imported into
the country from the port of entry through to the end-user, also by the Keurhout Foundation,
which will then provide the end product with a hallmark before it reaches the consumer.

Joint Working Groups have been established through bilateral arrangements between the
Netherlands and four major tropical timber producing countries, namely Cameroon, Gabon,
Indonesia and Malaysia, to discuss and work, inter alia, on critical issues of SFM such as
Criteria and Indicators to be used in assessment, as well as on arrangements for voluntary
certification, verifying,tracking and marketing of certified timber products. In addition, the
private sector is currently investigating the opportunities to carry out pilot studies on
voluntary certification and tracking, together with relevant counterparts in Ghana and Canada,
and possibly other countries as well. This timber tracking system had been successfully
developed by the auditing firm Coopers and Lybrand, at the request of Keurhout Foundation.
The work was jointly funded by the Dutch government and the private sector.


11.2        Role of Keurhout Foundation

Central to the process of hallmarking of certified timber in the Netherlands is the operation of
the Keurhout Foundation whose specific functions are to
• set up and manage a hallmark system for timber coming from sustainably managed sources
   with a view to providing information to the consumer, of the origin of the product and its
   sustainability status

• verify whether certificates of sustainably produced timber that reach the Dutch market
  (regardless of whether it was imported or locally sourced) meet the criteria of the
  Foundation

• monitor the chain of custody from the Dutch point of entry (or the mill gate in the case of
  domestic timber) to the end user by means of an auditing and visual inspection system,



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• grant members of the scheme throughout the chain of custody, with the right of use of such
  certificates and issue a hallmark stamp to the end products,

Whether these tasks (of granting rights, issuing hallmark and supervision of chain of custody
activities) will remain as a permanent function of the Keurhout Foundation or later “be
transferred to certification bodies, duly recognised by the Dutch Accreditation Council”
(Busink, 1997) is still unclear as there are differing views on this. The view in favour of the
former is that the Keurhout Foundation deals only with tracking and labelling, while not being
involved in certification work (Braeken, pers.comm.).

Keurhout Foundation has deemed it fit to accept a phased approach to certification of timber
sources from forests scheduled for SFM in the year 2000 in the case of the pilot study on
voluntary certification agreed upon within the framework of bilateral cooperation with
Malaysia in April 1996. A total of 568 m3 of timber reaching the Dutch market from forests in
the transitional state of development enroute to sustainability in the framework of the pilot
study has been put on to the Dutch market by Keurhout accompanied by a declaration of the
Foundation to this effect.

This allowance for flexibility has been well received by the industry, including end-users such
as the municipalities in the Netherlands. This flexibility on the part of the Keurhout
Foundation and of the Dutch market is reciprocated by Malaysia by the scheduling of forestry
activities prescribed in the forest management plan aimed at attaining sustainability by the
year 2000. The effort made by the producer countries to reach SFM status by that year is
evidently boosted by a sense of anticipation shown by the Dutch side. The arrangement is,
however, currently opposed by the Heart for Wood campaigners of the ENGO, Friends of the
Earth (FoE) (which is a strong proponent of the FSC-accredited certification for timber
sourced from “well managed forests”), until it is satisfied that there is transparency in the
scheduling of the forest management activities to ensure that sustainability may be reached by
the year 2000 (Boetekees, pers. comm.). Heart for Wood is in principle, opposed to timber
coming from forests that, according to its campaigners, had not been subject to
“internationally recognised,” standards of management and which are not compatible with
those set by FSC. Under such circumstances Heart for Wood does not see reason to support
the move to recognise timber coming from the pilot studies in Malaysia.


11.3        The Government’s Support

Whereas all timber can be traded on the Dutch market without restrictions, the Dutch
government policy encourages a healthy timber trade that promotes SFM. The policy is
designed to promote practices that will lead to reduced incidence of deforestation and forest
degradation. In March 1997, at the request of the Parliament and in consultation with the
business community and the ENGOs, the Ministry of Agriculture, Nature Management and
Fisheries, sent to the Parliament the Government’s paper “Timber Certification and
Sustainable Forestry” including ,inter-alia, so called “minimum requirements” in conformity
with WTO obligations, for the labelling of timber originating from SFM forests (Braeken,
pers. comm.). The set of “minimum requirements” forms the basis of assessment of
certificates providing the sustainability status of timber traded on the Dutch market is as
follows.




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• A certificate declaring that timber comes from a sustainably managed forest only meets the
  minimum requirements if (Ministry of Agriculture, Nature Management and Fisheries,
  1997)
• the forest management has paid sufficient attention to securing the integrity of the
  ecological functions as well as the continuity of the socio-economic and socio-cultural
  functions of the forest on the basis of internationally agreed criteria and indicators (e.g.
  ITTO 1992, Helsinki 1993 and FSC);
• the forest manager acts in accordance with an adequate forest management system;
• the certifier is independent, complies with international guidelines concerning organization
  and procedures, and has sufficient expertise in the field of forest management;
• the procedures regarding the chain of custody are foolproof and fully transparent.2

As mentioned in the foregoing section, the Keurhout Foundation assesses the certification
system, on the basis of the above criteria, on a voluntary basis, for verification purposes and
of administers the operation of chain of custody tracing for the purposes of the issuance of the
Keurhout hallmark. But the Dutch government insists that the Dutch system of “minimum
standard” is voluntary and that there is no obligation to use the Keurhout channel: all timber
can be traded on the Dutch market without restrictions. (Braeken, pers. comm.).

It is useful to note the Netherlands government’s stand that while it is in full support of timber
certification, the process is primarily the responsibility of the timber traders. Certification
should facilitate market access. In this way it will serve to promote sound forestry practice
and sustainable timber production. The government’s newly introduced sustainable
construction programme policy stimulates the use of sustainably produced timber. The policy
is spearheaded by energy-efficient building, high quality construction and the use of
environmentally friendly materials of which wood is a good example. One aim is to use 20%
more timber in construction compared to the early 1990s (Markets Holland ... 1997). Other
possible instruments include the provision of tax advantages through green mortgages and tax
relief through green investments; and preference for SFM timber in public sector contracts.
(van der Assen, 1997).

The Government’s paper “Timber Certification and Sustainable Forestry” also contains the
national criteria and indicators for SFM in the Netherlands according to the Pan-European
C&I. The document has yet to be read in the parliament where the perennial issue of
imposition of trade restrictions on the entry of non-sustainably produced timber onto the
Dutch market remains a hot subject for debate. It is also understood that a FSC working group
has started to develop standards for sustainable management of the Dutch forests at the FMU
level.


11.4        Dutch Timber Trade

The Netherlands imports 90% of her timber requirements and at an average tropical timber
consumption of some 960 000 m3 per annum (1991-1995). It is third only to France and Italy


2This last condition of the “minimum requirements” has evoked a comment from the Dutch timber trade of
whether the word “foolproof” was in fact a Freudian slip.


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as the biggest market in Europe (ITTO 1997) and is quoted as the second only to Japan in its
per capita consumption of tropical timber (Friends of the Earth 1997).

Regarding the pilot project on voluntary certification with Malaysia, there are several
construction projects in the Netherlands including those of the municipalities willing to use
timber from the project. The demand is more than what can be supplied from these trial areas.
It is important to the timber trade between the two countries that the pilot studies be enhanced
to the commercial scale. Despite the position taken by the ENGOs (specifically Heart for
Wood campaigns), there is a visible change in the attitude of the municipalities towards
acceptance of timber from the pilot studies the results of which are documented in an audit
statement issued by a qualified assessor (SGS Malaysia).

The Dutch timber trade is in full support of the hallmark system adopted by the Keurhout
Foundation.

The trade has no qualms about receiving FSC-certified timber if such timber is available on
the market but does not endorse the Friends of the Earth’s insistence for the support of the
FSC-certified timber to the exclusion of the rest. “The reality is that there will be no
monopoly, neither for Keurhout nor for FSC (timber)” (de Boer, pers. comm.). The trade is
also keen to see compatibility of the Malaysian C&I with those of the FSC and work towards
the comparability of the two systems (de Boer; Kuperus; Diemont, pers. comm.). While it is
‘business as usual’ today with regards to the trading of non-certified timber in the
Netherlands, the market looks forward to trading in certified and labelled timber in the future.
Certification will provide an excellent opportunity for tropical timber to recover some of the
lost ground that had been taken up by temperate wood and other substitutes, over the recent
years due to the unrelenting anti-tropical timber campaigns run by the European ENGOs.

Certified timber, however, will not be expected to command a “green premium”. The drastic
price fluctuations that have occurred with regularity in the past, and many a time troubled the
traders, could likely re-occur and render irrelevant any efforts at attaching a premium over
such products. But the trade is of the impression that certified timber will have a definite edge
over the uncertified timber by way of easier market access. In fact in the long run, once
certified timber has gained entry onto the market, it could well generate a wave of demand
that would exceed supply (de Boer, pers. comm.). It is the incentive for the tropical timber to
gain greater market access and recover the lost ground, rather than the “green premium” that
should motivate producers to go for certification.


11.5        Environmental Campaigns

Environmentalist campaigners had made a strident crusade all over Western Europe since the
late 1980s against the use of timber from “non-sustainable forests” in particular tropical
timber, for fear of severe, irreversible losses of the invaluable rainforests. The campaigns
caught the imagination of the largely unsuspecting public with horrifying images of
destruction and annihilation of the tropical rainforests as the habitat of rare species of flora
and fauna. The significant drop in the volume of tropical timber traded in Western Europe
especially on the Dutch and German markets, in recent years was attributed to, inter alia, the
ENGOs’ anti-tropical campaigns.




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The most successful and influential of the ENGOs in the Netherlands is the Friends of the
Earth, Netherlands which has a well established head office in Amsterdam. The Dutch FoE
led a drive against the use of tropical wood in 1986. By 1992 it launched its Heart for Wood
(Hart voor Hout) campaign in coordination with several other ENGOs, including Oxfam
Netherlands and WWF Netherlands. The stress is now for the use of certified timber. Heart of
Wood is fully engaged in creating a buyer’s group “pledged to carry timber coming from
good forest management (in compliance with FSC standards whenever possible).” Heart for
Wood actively promotes FSC’s goals and mission and claims to have garnered in the process,
the support of more than one-third of the Dutch timber market today (Boetekees, pers.
comm.). Some of the more specific achievements in 1996 quoted in its report for the year are
quoted as follows:

• The biggest magazine printer in the Netherlands (Roto Smeets de Boer) publicly stated that
  from middle 1997 on, it expects their suppliers to be able to make statements that pulp is
  free from old growth forest and that the suppliers are involved in a certification process;
  FSC is explicitly mentioned in the statement.

• The “forerunner-group” of Heart for Wood has been extended by the recruitment of
  Kinnarps (Europe’s largest supplier of office furniture). Intergamma (DIY), Johan Matser
  (real estate), Buhrmann Ubbens (paper), Rijkswaterstaat (waterworks) and Burginvest (real
  estate). They are each working on a selected project either with FSC-certified timber or
  paper. All companies committed themselves to promoting FSC, with the exception of
  Rijkswaterstaat, which is a government related organisation.

• Staatsbosbeheer, the State Forests of the Netherlands, has announced that all of its forests
  will be inspected and evaluated according to FSC’s criteria and principles.

• seven municipalities are actively working toward FSC compliance, either they want their
  forests to be inspected and evaluated according to FSC’s criteria and principles, or they
  have selected a housing project to use timber coming from well managed forests according
  to the principles and criteria of FSC. Amongst them are Amsterdam and Rotterdam, the
  two biggest cities in the Netherlands.

Consultation with Heart for Wood confirmed its stance, which is against the apparent
flexibility shown by the Keurhout Foundation to allow its hallmark be given to timber coming
from a forest that is “not yet well managed (according to the FSC principles) but is expected
to be well managed in time, according to the management plan” to meet the ITTO Year 2000
Objective. At least, until it is satisfied that there is a realistic schedule to that effect.
Inferences were made by Heart for Wood, to its recognition of FSC criteria and principles to
the exclusion of the others until the latter have shown to be “internationally recognised and
compatible” with FSC’s. Under such circumstances Heart for Wood refused participation in
Keurhout’s work despite being invited to become a member of its Council of Experts. The
principal reason being, “there is no need for a national hallmarking system, that is doing
FSC’s work all over again”. (Boetekees, pers. comm.).




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11.6          Lessons Learned

(1)     The anti-tropical timber campaigns waged in the Netherlands and the neighbouring
        markets in Western Europe had met their objectives of reducing the market intake of
        tropical timber. But the real objective of “saving the forests” is hardly met as the recent
        rate of decline in forest destruction, according to FAO reports, remains marginal. This is
        not surprising since in many countries, population pressure compels good forest land to
        be cleared for the growing of food crops and emerging economies need it for other
        alternative economic uses.

(2)     Several possible long term developments resulting from the impacts of loss of the
        traditional markets for tropical timber have been listed elsewhere but the most important
        one is a permanent market diversion. It is probable that “things will never be the same
        again” despite the potential introduction of certified tropical timber in increasing
        volumes on, say, the Dutch market. This is because:

          •     temperate wood and other non-wood substitutes (e.g. aluminium, PVC, etc.) have
                already by now found their permanent place in the industry and they are likely to
                continue to maintain foothold in the vacuum left previously by the tropical timber
          •     diversion of tropical timber from the lucrative markets of Western Europe to
                alternative markets, such as Japan which is buying in increasing amounts, African
                logs and Asian wood mouldings
          •     lesser volumes of tropical timber available in the international marketplace now
                and in the future as more and more producers will have to impose restrictions in
                logging in order to meet their respective SFM objectives.

(3)     There is likely to be continuing opposition of the ENGOs (Friends of the Earth in
        particular) to certifications that are “not compatible with” FSC-accredited certification.
        To what extent the Heart for Wood will continue with its stance on non-FSC-certified
        timber will remain to be seen but its current move to develop a buyer’s group loyal to
        FSC may lead to a split in the Dutch market.

(4)     Attempts at achieving compatibility of SFM standards and certification systems
        between FSC and other non-FSC (including national) initiatives will be a most
        worthwhile undertaking. But if there is to be any veritable meaning to the concept of
        “the right to choose”, this compatibility work should not be turned into a parity exercise
        where parity with FSC principles is a condition for acceptance of other, non-FSC
        certified timber.

(5)     Be as it may, the introduction of industry-supported Keurhout hallmark system coupled
        with the stress on the right of the consumer to choose (certified or uncertified timber)
        seems to signal a return to normalisation of the Dutch market’s openness to all timber. -
        Or is it?
(6)     It is still unclear whether the recognition of certifiers as “independent” (see “minimum
        requirements” in section 11.3), will also apply to home-bred assessors and certifiers.
        This is relevant in cases of national initiatives in certification. In most cases the same
        local professional assessors are engaged in certification work in their own countries by
        international certification bodies such as SGS and SW.




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12.         UNITED STATES

12.1        Introduction

The United States has a strong tradition of industrial self-regulation but strong government
regulation also exists on many environmental issues. The forest industry operates mainly
based on the domestic market but in some products significant exports also take place
(temperate sawn hardwood, market pulp, kraft linerboard, etc.). The economy is strongly
driven by the market forces. Environmental information and arguments are used in the
marketplace but this is not common with forest products.


12.2        Development of Forest Management Standards and SFM Systems

Sustainable forest management systems are being introduced through various approaches,
including certification. They have been mostly developed by the private sector and they are
voluntarily applied by the industry. From the forestry point of view, the vast size of the
country means that management standards vary by state and ecosystem. This presents a
limitation to the generic approach to system development which needs to be tailored to
specific local conditions. In the following, we first briefly review the regulatory situation and
then proceed with the private sector initiatives, including the Sustainable Forestry Initiative
(SFI) of the American Forest & Paper Association (AF&PA), FSC and action taken by
customer industries.


12.2.1               Government Regulation

States are individually responsible for providing land management guidance for state-owned
and private forests which account for about 8% (15 million ha) and 58% (180 million ha),
respectively, of all US forests. There are 10 million private forest owners in the country
whose land comes under State jurisdiction. Nationally, several agencies of the federal and
state governments are responsible for managing the remaining 35% (105 million ha) which
are publicly owned and located largely in the western part of the country (Montreal Process
1997).

Since 1976, at the national level, the National Forest Management Act requires each federally
managed National Forest to develop a Forest Plan that includes standards, guidelines,
objectives, goals and monitoring requirements for each National Forest. States can regulate
the use of private lands but only in certain cases, such as where Endangered Species and
Clean Water regulations apply. State laws differ from each other. In some cases, the state laws
require management plans for private lands (e.g. California and Oregon). In other states,
forest practices may be regulated or guided by state laws or programs even though no plans
are required. As for state-owned lands, there are requirements for the development of plans
with standards, indicators, etc. There have been controversies over forest management
practices which have led some States to revise their regulations or to develop sustainable
forestry programs (Coulombe, pers. comm.).

All the major timber producing states (38) have long standing programs addressing the
environmental impacts of forestry, particularly water quality. Currently, ten states have
comprehensive forest practices acts, one state has regulations with limited scope, an


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additional seven have quasi-regulatory programs or mandatory best management practices
(BMPs), while twenty have non-regulatory BMPs (Berg et al. 1993). Comprehensive state-
level forest practices acts have been enacted because of the proliferation of local and
municipal ordinances restricting forestry which may not have taken into consideration sound
silviculture practices. BMPs to mitigate the impacts of forest management on water quality
and wetlands protection are substantial and widespread. Their effectiveness is not, however,
universal. Regulatory measures and non-regulatory programs have been adopted in some
states to protect forest values other than water quality (Paper Task ... 1995).

Other legislative activity affecting forestry is in the form of right to practice forestry statutes.
These statutes recognize a local community’s interest in forestry by establishing protection
against local regulation. Two states that do not have comprehensive forest practices acts have
enacted right to practice forestry statutes (Berg at el. 1993).

For federally owned National Forests the purpose of the plans is not to have uniform
standards for all forests but managers of public lands are encouraged to consult with
constituents to agree on appropriate management standards. It is recognised that standards
must be site specific and acceptable to local/state level stakeholders. This represents a
constraint for harmonising site-specific forest management standards in the country.
(Coulombe, pers. comm.). Harmonisation may not, however, be necessary in the presence of
overarching principles to guide the development of site-specific standards.

Major federal and state land use laws addressing private forest practices are currently being
reviewed and updated. All levels of government are being pressured to increase the regulation
of private forest practices (Berg et al. 1993). This is taking place at the same time when
market-based environmental requirements are imposed on the suppliers of forest products
(e.g. Paper Task ... 1995).

State governments have also become interested in the certification of their own lands.
Through a foundation grant, Pennsylvania has contracted SCS to carry out a study with the
purpose of certifying about 470 000 hectares of state forest land to FSC standards (Wagner
1997) and a similar exercise is almost complete for Minnesota as well. Some other states have
also indicated interest.


12.2.2               National-level SFM Criteria and Indicators

The United States is part of the Montreal Process which has developed national-level SFM
criteria and indicators. These are perceived to be assessment tools in the broad context of
sustainable development. The purpose is not to apply C&I in any performance evaluation
work and therefore they will serve as a general framework for monitoring progress in forest
management.


12.2.3               Sustainable Forestry Initiative

SFI is based on a set of Sustainable Forestry Principles and Implementation Guidelines
developed in 1992 through an AF&PA Task Force. It was a response to public opinion
research which had revealed that the industry had a communications problem and that the
public was concerned about how forests were managed. According to AF&PA, the SFI is


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essentially a process to promote, monitor and report on continuous improvement of the
management of the private forest land, particularly those directly managed by AF&PA
members. Five broad elements of sustainable forestry were identified providing for objectives
and performance measures indicating the commitments the AF&PA members have made. The
operations of contract loggers and non-industrial private forests are also referred to in
Guideline No 10 and require companies to promote SFI with loggers and landowners. State
implementation committees are formed in 20 states to conduct education programs. The
guidelines also commit members to public reporting and involvement (AF&PA 1994). Details
on the public involvement have not, however, been specified. Reporting procedures include
annual report.

SFI is being implemented by all AF&PA members as a condition of membership. In 1996 this
led to the withdrawal of some members from the Association while about 200 companies
remained committed to SFI. Another 17 members failed to meet the SFI requirements and
their membership has been suspended. A progress report is annually prepared using an expert
review panel (Berg et al. 1993). The panel represents an element of third-party assessment of
the information provided by participating companies. The panel reviews a sample of progress
reports. As the companies define themselves how to apply the principles and guidelines,
progress reports vary in content. This makes it difficult to review the progress made in terms
of common quantitative indicators.

Several governmental, professional and other NGOs have indicated support to, or
endorsement of, SFI. It is still too early to assess the impact of the initiative on the public
perception on the environmental performance of forest industries.

SFI is not a certification scheme but its principles and guidelines could be used as a generic
basis for such assessment criteria. It has been viewed as a strategic move to circumvent or
provide an alternative to the FSC certification framework (Taylor 1996). However, the
development of SFI started already in 1992, i.e. before FSC formally was established. It may
be observed that, if the market requires a forest management certification, or the industry sees
a business opportunity in such a move, a fully-fledged program could be developed by an
independent body drawing on e.g. SFI as performance criteria.


12.2.4               Development of FSC-based Certification Standards

The FSC Principles and Criteria have been used as a basis in certification assessments carried
out by SCS and SmartWood (SW), being the only two FSC-accredited bodies in the US.
There does not exist a set of nationally applicable FSC certification standards. The Forest
Conservation Program of SCS is generic and is applied in all types of forests as a commercial
activity. Four regional sets of evaluation guidelines have been drafted (California, Maine,
Pennsylvania and specific standards for small landowners in California). It is essential to
observe that SCS auditing teams select the assessment criteria and assign weights to them
only after the data have been collected and analyzed. Obviously, the actual standards are
developed case-by-case within the generic framework. This may lead to a conflict of interest
if the process is not transparent and comprehensive.

SW has also developed its own generic certification standard which is compatible with the
FSC P&C. The standards have been refined before the assessment starts and an input of
public consultation has been included in the process. This is of course cumbersome and time-


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consuming and therefore SW has embarked on the development of regional standards. They
have currently five such sets for guidelines.

Under the US national FSC initiative eight groups are in the process of developing regional
certification standards addressing relevant local issues (Northeast, Central Appalachia, Great
Lakes Region, Pacific Coast, Southeast, Southwest, and Mississippi Alluvial Valley and
Ozarks Ouachita Interior Highlands). On average the development process is expected to take
18 months. Many groups are still in their initial stages but four sets of standards are expected
to be completed in 1997. The key issues vary by region, including certification of numerous
small landowners, indigenous peoples and ethnic enclaves, and a wide range of questions
related to forest management practices. The available regional standards developed by
certification bodies and others will be used as a basis, tougher with FSC P&C (US Initiative
1997). The regional standards would significantly rationalize the certification process as less
ad hoc work would be needed to adjust standards to specific local conditions. However, it is
not clear whether there will be full compatibility between such regional standards and state
regulations (Berg, pers. comm.). The FSC process is expected to be accelerated when its
recently elected National Working Group starts providing guidance to regional groups and
formulating national FSC policies.

There is a vast array of ENGOs interested in forestry issues having different profiles and
strategies (Ozanne & Smith 1993). Many of them and in particular the most vocal ones are
supporting FSC as the solution for certification. These ENGOs strongly oppose such
management system-based approaches as ISO 14001 standard alone, as a sufficient means of
achieving sustainable forest management, or as an adequate basis for certification, labelling or
public claims for the same (cf. Global Forest... 1996). The regional processes to develop FSC
standards have been broadly based involving a large number of stakeholders. The
participation of large forest industry corporations will be crucial in these processes and it may
be constrained by the industry’s general concerns about FSC as it is seen a means to insert
potential elements into companies’ environmental policies (Berg 1997). This is also due to the
fact that some key ENGOs advocate for reducing consumption of wood products while
promoting FSC-based certification (Ward 1996).


12.2.5               Customer Industries

Paper using industries are in the same way concerned about their future as the raw material
suppliers. Their concern has been how the environmental impacts of paper could be reduced.
A Paper Task Force was set up to identify ways to integrate environmental criteria into paper
purchasing decisions. A review was made of the entire life cycle of selected major paper and
board grades. Forest management was one of the key areas for which 10 recommendations
and 22 supplier implementation measures were identified, some of which would require
substantial changes in the present situation and have significant cost implications. More
specific performance measures were set out than those of SFI to be used by purchasers in
assessing and comparing individual suppliers’ practices. The legal and SFI requirements are
incorporated. The scope of recommendations covered industrial and non-industrial lands as
well as advancing environmentally sound forest management on a landscape level in all lands
where industrial wood is procured from. Purchasers were given several options how to
implement these guidelines in their supplier relationships, one of them being
auditing/certification by the supplier, the purchaser, or a third party. (Paper Task ... 1995). To
what extent the recommendations made have been applied in the industry is not known.


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12.3        Progress in Certification

An important national program to be referenced here is the American Tree Farm Program;
probably the oldest and largest forest certification program in the world. It is 56 years old
having certified some 72 000 landowners covering 32 million hectares. It is a privately funded
effort to encourage excellent forestry on private lands. Certified lands meet the standards of
the Program. The program contains certification standards set by a Tree Farm Committee, an
initial inspection by a professional forester, reinspection every five years, and mechanisms for
desertification. Standards address forestry and environmental parameters with treshold
measures of performance required for certification (Berg et al. 1993).

Progress in FSC-based certifications has not been rapid in the US in spite of the fact that 20%
of the world’s certified forests are located in this country. There are only two certification
bodies (SCS and SmartWood Program of Rainforest Alliance) which already operated three
years ago. However, they now report to have a total of ten offices throughout in the country.

SCS has carried out more than half of the assessments representing 78% of the total certified
area in the US. Certifiers have been also successful in selling their services abroad.

The number of certified forests has not significantly increased during the last two years as
only few recent certifications have been completed in the country. In March 1997 there were
12 certified forests in the country covering a total area of 670 000 ha. During the five months
since March 1997 five new certifications have been completed. The number of certified
landowners is increasing more rapidly thanks to group certification programs (Ervin, pers.
comm.).

The reasons for certification vary from company philosophy to market advantage. The
experience has been generally postive but mixed (Box 12.1).

No ISO 14001 certifications of forestry organisations have been reported in the US. However,
several companies are in the process of carrying out gap analyses to identify possible lacunae
in their environmental management systems. If customer industries are satisfied with the
information provided by their suppliers on their environmental management, it is unlikely that
costly third party assessments will be carried out to a significant extent (Berg, pers. comm.).


12.4        Markets for Certified Products

12.4.1               Environmental Certification Programs

Several surveys indicate that a majority of Americans consider themselves to be
environmentalists and would prefer to buy products with a lessened environmental impact
when quality and cost are comparable (EPA 1993). Environmental consumers want to protect
themselves and their world through the power of their purchasing decisions (Ottman 1992).
On the other side, corporate environmentalism has emerged recognizing environmental
marketing and integration of environmental issues in the business strategy as potential tools of
competitive advantage.




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Box 12.1                   Examples of FSC Certified Forest Enterprises in the US

Big Creek Lumber, California
2 700 ha
Reason for certification: to avoid sabotage and tree occupations by ENGOs in old-growth harvesting
areas frequently experienced by the company.

Collins Pine, California
39 000 ha
Reason for certification: to increase profit and seek differentiation from competitors. The plan was to
create a brand name for itself.
Investment in certification has been recovered through increased market recognition.
Marketing of products is mainly to long-established customers who do not need certification. They
cannot however be lost at the expense of uncertain market for certified products. It is difficult to
balance the various interests in the marketing strategy. Certification of the company’s particle board
plant was not possible due to the 100% requirement of certified raw material.
Dependence on Home Depot as the a main outlet for certified shelving was risky as the retailer
discontinued the trade. New markets have been developed.

Menominee Tribal Enterprises, Wisconsin
95 000 ha
Reason for certification: idealism, corporate philosophy
Forest management is based on smalll-sized clearcuts and selective thinnings as well as, in some parts
of the forest, shelterwood system. Good starting level of forest management made it an easy decision
to seek for certification. Sawmilling is not driven by the market but by the silviculture.
Orders received were several times the existing capacity and could not be delivered which led to lack
of customer confidence. Price premium is reported for orders received.

Seven Islands Land Company, Maine
364 000 ha of hardwood and pine forests
Marketing has been expanded to cover the whole US including California. Only about 10% of
products are sold as certified


In general, there has been a rise in the number of new products making environmental claims,
many of them based on third-party certification programs. These programs have emerged in
an effort to eliminate common consumer mistrust in first-party claims. Programs have been
implemented by the private sector which is a different situation compared to most other
countries where national programs are typical (EPA 1993). The forest products sector may
not be particularly suited to environmental marketing based on forest management
performance in spite of certain consumer concerns about the state of forests. This is due to the
fact that the industry is not typically vertically integrated and about half of the wood supply is
produced by 10 million private landowners.




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12.4.2               Consumer Perceptions and Potential Demand

A large number of studies have been carried out on environmentally concerned consumers but
their results tend to vary (Ozanne & Smith 1996). This appears to be also the case with the
studies made on the timber sector. In 1993, a study was carried out about consumer
perceptions and willingness to pay (WTP) for certified products from the US hardwood
forests (Winterhalter & Cassens 1993). The sample was targeted at affluent, well-educated
consumers (annual income USD 50 000 or higher) who were found to be potentially
responsive to environmental marketing. The results further revealed that, in spite of lack of
full understanding of various claims, consumers tend to place more trust in labels than
salespeople, advertisements, brochures or promotional material.

A larger and more representative sample targeted at homeowners was applied by Ozanne &
Smith (1996). Due to the target audience, the sample was somewhat biased disproportionally
towards, male, married, higher average age and higher education level, urban consumers
compared to the average population characteristics in the country. The survey was aimed at
identifying the importance of 24 furniture attributes (of which 4 were environmental) in
purchasing decisions. Two customer segments were found to be environmentally conscious
representing 39% of the respondents (corresponding to 53 million US consumers). The first of
these segments (23% of the total) was relatively concerned about the environmental impact of
products, together with other intangible attributes (brand name, status of owning, product
warranties), but they were not going to pay a price premium for environmental attributes
seeking for a good value for their money. The other segment (16%) was the least price-
sensitive, possibly would be willing to pay a premium to receive environmental performance,
but they were not likely to exchange other important furniture attributes for environmental
performance.

Another more recent study by McWilliams Cosgrove Smith Robinson is reported to have
revealed that a large group of consumers (44 million) consider companies’ and products’
environmental performance when making purchasing decisions (FPBG 1997). Details on how
the study was prepared were not available for the consultants to judge the reliability of results.

It is reported by FPBG that the market share of organic food products in the US is about 2%.
Achieving the same level in forest products would mean a business potential of about
USD 1 billion per year. If the mainstream companies decide to embark on large-scale
promotion of certified products, higher market shares could be expected. However, it is to be
noted that the two types of products are dissimilar and direct comparisons may not be
justified. There is no indication about large forest industry companies embarking on forest
management certification in the near future (Berg, pers.comm.).

The demand for certified products should also be assessed at the level of distributors and
industrial buyers. A recent independent study by Lawton King Fricke & Johnston is reported
to reveal that the vast majority of the US distribution chain for wood products prefers to
receive information on the wood products they buy through industry channels (suppliers and
industry associations) (Market Study ... 1997). Third party certification may not be needed if
self-declarations are considered credible. Details on the method of the study were not
available for the consultants to judge the representativeness of the results.




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12.4.3               Price of Certified Products

The affluent consumers polled by Winterhalter & Cassens (1993) were found to show certain
willingness to pay premiums for assurances of sustainability. In fact, one third (34%) would
pay 6-10 percent more. The study by Ozanne & Smith (1996), which can be considered more
representative with a more rigorous analysis, conflicts with this view and correctly cautions
that behaviour does not always follow the attitudes or responses to WTP surveys. Apart from
niche markets, there appears to be a broad view among the industry circles that no price
premium can be obtained through certification. This is also confirmed by companies such as
EcoTimber and Collins Pine which have been selling certified products in the US markets
(Wagner 1997). However, some recent research results are reported to suggest that a few
companies are obtaining a price premium (Ervin, pers. comm.). There appears to be a clear
unwillingness in the marketplace to pay additional costs for certification (Market Study ...
1997).


12.4.4               Marketing Aspects

Companies are interested in certification for a variety of reasons (cf. Hansen 1997): (i)
competitive advantage, (ii) corporate image, (iii) ethical or philosophical reasons, (iv)
effective market communication, (iv) minimizing the risk of becoming a target of
demonstrations. A precondition for the use of this instrument for marketing purposes is the
existence of differentiated demand, or that such a demand can be created.

There is little evidence that there exists mass market demand for certified products in the
United States. While supply volumes are small and unsteady, effective distribution systems
have not yet been developed. In fact, the typical distribution arrangements do not favour
parallel product flows of certified and uncertified goods with otherwise similar specifications
as this tends to increase distribution costs. Part of the certified products may be sold making
use of the respective label but markets need to be found also to the rest of production. At
present, some larger certified producers can only sell part of their production in the “open”
market as certified, i.e. seeking for market share benefits through this instrument. In general,
industrial companies appear to be reluctant to get involved in this market segment due to
uncertainties of demand.

Certification alone is not enough to sell a product. Rather, it is necessary that the product is
competitive in every other way, only then certification can influence consumer choice
(Hansen 1997). Effective positioning and communication strategies also need to be employed
where proper market segmentation is the first step. In the US market, the most attractive
segment could be environmentally conscious but not price sensitive consumers who are
highly educated, with a moderate to high income levels, liberals or Democrats, members of an
environmental organization, and participating in many environmental activities (Ozanne &
Smith 1996).

The Home Depot has been the largest retailer which has tried to introduce certified products
to the consumer market. This effort lasting for two and a half years in the San Francisco Bay
area was not, however, successful and was discontinued for the reasons of lack of consumer
demand. Parallel sourcing of certified and uncertified products was costly and impractical and
the company preferred to stock its 500 stores from one large supplier instead of carrying a
dual inventory (Wagner 1997). The Home Depot sees that manufacturers should create the


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demand as marketing of such an intangible attribute as forest management quality is difficult
and should not be distributors’ responsibility. Before demand truly exists on a large scale
through such image catchers as e.g. WWF´s panda, there is unlikely to be a major increase in
the supply. The mainstream companies would have probably already developed certified
products, were there a sufficient demand.


12.4.5               Buyers’ Group

Under the financing from the MacArthur Foundation, Environmental Advantage was assigned
to plan and get established a Forest Products Buyers Group which was set up in April 1997. It
is an independent, not-for-profit, voluntary business initiative. It is open to buyers, resellers or
secondary manufacturers, and the Group works in partnership with a wide range of
stakeholders. Antitrust compliance is provided and all members act independently.

The aim is “to improve forest management worldwide by championing and promoting
responsible forest product buying practices”. The members are committed to adopt respective
policies and programs and to continually increase the purchase of independently certified
forest products. They will also communicate their purchasing commitments in this respect and
develop individual, confidential action plans to achieve the Group’s goals. The Group is not
committed to any particular certification scheme but certifications should be carried out by
certifiers accredited by an internationally-recognised body. The Group is supported and
assisted in increasing consumer demand by four key NGOs which all are committed to FSC
(Natural Resources Defense Council, Rainforest Alliance and the SmartWood Program, WRI
and WWF).

Four types of activities by enterprises are envisaged in the initial phase: (1) development of
certified forest products guidelines, (2) education and training, (3) pilot projects, and (4)
establishment of a network of certified product suppliers.

The Group has a Board of Directors, an Advisory Council, a President and staff. The Board
members represent buyers (1), buyer-sellers (1), foundations (2), not-for-profit buyers (1),
manufacturers (2), and the membership is expected to include also universities, commercial
construction and the Government sector.

The new name for the Buyers’ Groups is the Certified Forest Products Council, based in
Braverton, Oregon. It recently merged with the Good Wood Alliance. The new organisation
now services both the buyers and suppliers of certified products and it will also maintain the
public education and information program about certified sources to the general public (Ervin,
pers. comm.).


12.4.6               Imports of Tropical Timber

Tropical timber imports have been subject to some pressures as they have been associated
with deforestation. As a result, some local governments have instituted regulations to rule out
or limit tropical timber use in public projects (Table 12.1). A new feature has recently
emerged. Arizona’s restrictive tropical timber purchasing bill (1990) has been recently
amended. It called for state and local governments to prohibit the use of “endangered tropical
woods” in government projects. In its revised form it refers to all types of wood, rather than


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tropical wood only, and notes CITES Appendix I as the recognised source for listing of
“endangered wood”, being the first time that the Convention is directly linked with local
legislation (IHPA 1997).

Table 12.1           US State and Local Laws and Proposed Legislation to Restrict Tropical
                     Timber Trade
State               City/area                 Date        Status                  Restriction
Arizona             State                     1990        Enacted and replaced    Ban of use of endangered tropical
                                                                                  wood (specific reference to teak,
                                                                                  ebony, mahogany and lauan)
Arizona             State                     1997        Enacted                 Ban of all types of wood of
                                                                                  endangered species as listed in
                                                                                  Appendix I of CITES
California          State                     1992        Vetoed                  Ban of tropical timber in State-
                                                                                  funded projects
California          Santa Clarita             1991        Enacted                 Ban of tropical woods
California          Berkeley                  1990        Enacted                 Ban of city purchases of wood or
                                                                                  paper from the rainforest. Mecha-
                                                                                  nism: statement by contractors.
California          San Francisco             1990        Enacted                 Ban of tropical woods
California          Los Angeles               1995        Enacted                 Only FSC certified tropical
                                                                                  hardwood allowed
Hawaii              Honolulu                  1993        Proposal in             Ban of all tropical hardwood
                                                          Committee of
                                                          Council Policy
Maryland            State                     1992        No further hearings     Restriction of government
                                                          scheduled               purchases of tropical woods
Maryland            Baltimore                 1990        Enacted                 Ban of tropical woods
Minnesota           Minneapolis               1992        Defeated                Ban of tropical hardwood use and
                                                                                  wholesale/retail sale within the
                                                                                  city limits
New Jersey          Atlantic City             1996        Enacted                 Bids affecting tropical wood to be
                                                                                  verified as sustainably produced
                                                                                  by a certified organization
New Jersey          State                     1994/       Pending                 Allows use of tropical woods
                                              1996                                verified as sustainably produced
                                                                                  by a certification program
New York            New York City             1997        Pending                 Ban of tropical wood except FSC
                                                                                  certified
New York            State                     1991        Enacted                 Need to identify that wood used
                                                                                  is not produced endangering
                                                                                  Rainforest
Pennsylvania        State                     1997        Pending                 Ban of tropical woods except if
                                                          (fourth introduction)   deemed sustainably produced by
                                                                                  a certification program
Pennsylvania        Harrisburg                1991        Enacted                 Ban of tropical wood
Rhode Island        State                     1993        Pending                 Ban of tropical wood
Tennessee           State                     1992        Enacted                 Need to conduct a study on wood
                                                                                  purchases
Washington          Bellingham                1990        Enacted                 Ban with exception for products
                                                                                  produced in an environmentally
                                                                                  friendly manner
National            U.S. Conference           1991        Defeated                Ban of use of all tropical wood
                    of Mayors                                                     products in municipal projects
                                                                                  nation-wide
Source IHPA 1997




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12.5        Key Issues

12.5.1               Demand for Certified Products

In spite of the various studies and estimates on the environmental consciousness of US
consumers, there has not been sufficient permanent demand to make any mainstream forest
industry corporation to embark on selling certified products. Certified wood is now being
specified in some federal and municipal projects (Ervin, pers. comm.) and, if this practice
spreads, a more permanent demand by institutional buyers could develop. The benefit, as
promoted, would be through increased market shares but there is no assurance that this will be
achieved. The Buyers Group in its present form may not be sufficiently effective to create
sufficient demand. The Group may have difficulties to impose their requirements on suppliers
if the members do not meet the same requirements themselves (Berg, pers.comm.).
Cooperation and support from ENGOs could assist in developing an highly visible, wide-
spread positive image for certified forest products. Strong support from mass media would
probably be necessary to establish such a general image.


12.5.2               Certification of Small-scale Non-industrial Private Forests

Landowners appear to be unclear of the benefits which they could obtain from certification
and how the additional costs could be recovered. In general, due to the importance of small-
scale non-industrial forest owners (about 10 million), the costs of individual assessment of
holdings are likely to be rather high which could be compounded by the costs of chain-of-
custody verification.

About half of the US wood supply comes from non-industrial private woodlands most of
which have no management plans. The size of individual woodlands vary extensively and can
often be less than 20 hectares. Individual certification of such holdings would not only be
costly but it would also present a constraint to a comprehensive chain-of-custody verification.
Three models have been tried out for this unresolved issue (Ervin 1996): (1) a single certified
forest resource manager who provides certification services to a number of small, private
forest landowners, (2) a single certified chain-of-custody manufacturer serving as a contact
point for small forest owners and distributors, and (3) a single forest owner forming a
landowner cooperative. None of these concepts are likely to provide a general solution but
may work in specific conditions. In the present group certifications, the costs have been paid
by the land resource manager, and the issue has not been raised with the owners (Ervin,
pers.comm.).

Landowners are already cooperating in various ways which could serve as a basis for group
certification: (a) the long-established American Tree Farm Program which requires
management plans and compliance with certain harvesting restrictions; as mentioned this
Program already includes a certification element, (b) cooperative management programs, (c)
homeowner associations cooperating with adjacent landowners, and (d) state and local land
trusts with conservation easements. Landowners themselves appear to prefer certification by
professional foresters working for the landowners (Argow, pers. comm.). This view is
apparently based largely on their positive experience with the American Tree Farm Program.




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To persuade private landowners to embark on market-based certification of forest
management may not be possible if they do not receive a financial benefit to justify extra
costs. The owners are not themselves involved in marketing of wood products and there is no
clear mechanism foreseen to provide a necessary incentive for them.


12.5.3               Chain of Custody

The chain-of-custody verification is one of the major concerns of the business enterprises
which buy from several sources and mix various raw materials in further processing.
Experience has shown that 100% control is difficult or impossible to attain in many
operations without substantial extra costs. Secondary processors and retailers have not
generally been interested in exploring what the chain of custody for their raw materials and
products would entail (Ervin, pers. comm.), and it may not be obvious to them when they
should get involved in such issues in their procurement. This problem must be borne in mind
when considering claims related to the origin of raw materials and legal standing of such
claims.

Suitable ways to verify the chain of custody in large-scale production where fibres are mixed
have not been found and their design would require full cooperation from the industry and
trade which should implement such arrangements. As long as there is a lack of willingness
from their side to implement certification and labelling programs which involve the chain of
custody verification, it is difficult to see how workable solutions could develop.


12.6        Lessons Learned

(1)     There has not been a force strong enough in the US market to pull the ENGOs and the
        industry together to develop markets for and supplies of certified forest products. The
        present forms of certification may not prove to be feasible as such due to the lack of
        involvement of the industry in the design stage but new approaches are under
        development.
(2)     There is yet no large-scale or permanent demand for certified products which has been
        sporadic and unsubstantiated. The need for third party certification has not been
        established and more than one source of information is likely to be needed to inform
        consumers about the quality of forest management in the origin of the products
        purchased. This could be changed if the industry and ENGOs could develop a unified
        message on what constitutes good forest management.
(3)     In the absence of a clear market benefit, the mainstream industry is unlikely to become
        involved in third-party certification. On the other hand, ENGOs have not implemented a
        cohesive and coordinated campaign around certified products which could have had an
        impact on common purchasing behaviour. Without the support of the mainstream
        industry for large-scale implementation of certification of forest management, it is not
        likely to have a significant impact on consumer behaviour. Certification cannot be
        forced on forest owners or industry - on the contrary they should be the driving force.
(4)     The traditional market-orientation of the US industry requires that certification must
        make business sense before the instrument is worthwhile to implement. This means that
        wood producers, the primary and further processing industries as well as their
        customers should be able to gain net benefits from certification. The price-conscious US


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        consumer may opt for substitutes rather than be burdened with additional costs of
        getting certified timber delivered efficiently. Market claims are likely to be the driving
        force behind forest management certification in the US. Other possible benefits from
        certification tend to be indirect and may only have a complementary minor role.
(5)     The American Tree Farm Program shows that development programs accompanied with
        certification which are well designed, do not represent additional costs, and are in the
        interest of landowners can be effective.
(6)     The high and increasing level of forest management quality required by regulation and
        induced by non-mandatory programs and voluntary action has made landowners
        doubtful about the possible incremental effect on forest management of market-based
        certification programs.
(7)     The FSC approach of developing regional standards for the country introduces a new
        “level” between the national and state standards. Overlaying an independent set of
        regional standards over the state level regulations may run into difficulties in the area of
        compatibility, if this issue is not properly considered during the development process.
(8)     The strong tradition of self-regulation in the manufacturing industry is compatible with
        such approaches as ISO 14001 or SFI.
(9)     There has been a lack of clear strategies in the US in the development of forest
        management certification, not only because of differing views of the industry and
        ENGOs, but also due to differing views among ENGOs and certification bodies.
(10) There is potential for ENGOs and the industry to find more common ground if
     promotion of wood utilisation becomes part of the certification agenda. Such a message,
     however, may run counter to the strategy of some major ENGOs.
(11) Environmental marketing is a new field for the forest products industry and represents a
     change in the traditional corporate cultures and business strategies. Environmental
     marketing is feasible if performance can be capitalised in the market place and suitable
     means of communication are available. Certification to a relevant standard is a potential
     tool to communicate good performance.
(12) Financial institutions – by insisting on third party assessment on forest management to
     avoid environmental risks – could promote certification. There is a certain interest in
     getting such assurances from their clients among these institutions, especially insurance
     companies, socially responsible mutual funds and the like. This interest is partly related
     to green investment in forestry.
(13) Several different environmental claims and marks competing with each other are likely
     to be used in the marketing of forest products in the US. This situation may reduce
     consumer confidence in the industry and may even promote substitution.



13.         KEY ISSUES

13.1        Development of Standards

The policy element in certification and labelling of forest products is mainly contained in the
standards to be used as a basis of assessment. This is why much of the debate has focused on
standard setting. Several issues have been raised: how standards should be developed and by
whom, what “level” they should be targeted at, and whether the standards should be


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harmonised internationally. Traditionally, forest management standards are considered a
national issue and in many federations forestry is basically a state-level affair.

It is also often argued whether “sustainable forest management” only or “well-managed
forests”, should be certified. This issue has conceptually clear indications. SFM is a dynamic
concept which is embedded in the prevailing values about economic, social and
environmental benefits of forests and their mutual weighting. Due to societal change these
values change over time. In the same manner better knowledge of the ecosystem may reveal
new uses, especially in the area of medicinal properties of some of the non-wood produce. All
this might alter the economic status of the forest. Forests as living ecosystems are never
perfectly stable but rather under a continuous state of change, and this point needs to be
considered. The time factor is also important in the sense that any restoration or improvement
of the forest condition takes time, sometimes over very long periods. A snapshot state of the
forest is therefore a cumulative output of decisions which have been made in different stages
of development in the past, over a long period of time, usually by several forest managers or
owners. The current management practices may be good but may not yet reach of what is
perceived as sustainability. These aspects need to be considered when certification standards
are prepared.

There is a need to clarify what is the role of the certification standard in the SFM process:
whether the standard and its performance elements should determine the “final” SFM status,
or whether the standard should seen as a tool, and only, after periodic revisions, can lead to
SFM. This allows for learning by doing, utilising the accumulation of scientific knowledge
and practical experience. In the consultants’ view, the latter role would be a more appropriate
approach to attaining sustainability.

There is a growing sentiment in favour of participatory approaches in setting goals and
objectives of forest management (cf. e.g. IPF 1997). This is also considered equally
applicable when setting certification standards where such goals and objectives are taken into
account. Many guidelines for standard setting already require participatory provisions (e.g.
FSC 1995, CSA 1996). This is one of the criteria that is most liable to subjective assessment,
and, it is not clear how decisions should be made in cases where consensus cannot be reached.
Previous practical problems may recur for instance when a key stakeholder group pulls out of
the process disputing on standards being unacceptable. This happened in Sweden in 1997
when forest owners could not agree on the proposed draft FSC standard.

The nature and mechanisms of stakeholder participation are likely to be a key aspect when the
credibility of national certification standards is judged by the market. It would be helpful to
have common, internationally recognised guidelines on how the participatory processes can
be organised, and on how the results are taken into account in the formulation of the standard.


13.2        Trade Rules and Certification

WTO has recognised that well designed eco-labelling programmes can be effective
instruments of environmental policy to encourage the development of an environmentally
conscious public (WTO 1996). As a voluntary instrument and if applied by private sector
organisations, C&L of forest products may be considered compatible with the international
trade rules, not falling within their jurisdiction. The relevant provisions are contained in the
Agreement of Technical Barriers to Trade (TBT). It sets the requirements for mandatory


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technical requirements and it contains a Code of Good Practice for the preparation, adoption
and application of standards which are voluntarily applied. The TBT Agreement does not call
for harmonisation of standards related to processes and production methods (PPMs) but they
are covered by GATT 1994, if applied as governmental measures. The TBT Code of Good
Practice could be used as a guidance in the design of all certification and labelling schemes to
avoid friction with the trade rules.

If standards are harmonised and they result in requirements which represent significantly
different costs of compliance by countries, the issue of unequal treatment of like products or
discrimination could be raised. Therefore, it is important that an appropriate level of standards
is chosen. An unnecessary obstacle to trade may arise due to inappropriate or unreasonable
certification standards. This situation applies when their level is higher than what is implied
by the legitimate objective of “protection of plant and animal life or the environment”. The
standard should be set not higher than necessary to achieve such objectives, and relevant
elements to be considered are, inter alia, available scientific and technical information.

Finally, the TBT Agreement contains provisions for cases where the certification assessment
is carried out by a non-governmental body, or if respective standards are issued by a non-
government standardising body that provides for common and repeated use, rules, guidelines
of characteristics of production method. The WTO members shall take such reasonable
measures as may be available for them to ensure that non-governmental bodies within their
territories, which operate conformity assessment procedures, comply with the same
provisions as those specified for central government bodies. In spite of the fact that non-
governmental bodies strictly appear to fall outside the competence of the TBT Agreement, the
willingness of such bodies (e.g. FSC) to follow these provisions would contribute to their
recognition.

From the viewpoint of developing countries, the TBT Agreement recognises the need to
consider their specific local conditions in standard setting. A transition period would be
desirable to enable these countries to improve their systems to achieve internationally
compatible performance levels. Such provisions are not currently contained in the
certification standards and procedures (with the exception of short periods within which
corrective action recommendations need to be implemented). This issue should be duly
considered both in standard setting (including their periodic revision) and conformity
assessment procedures. It is interesting to note that a transition period is also applied in
certifying organic agriculture where production cycles are much shorter.


13.3        Credibility

The issue of credibility has several dimensions in certification and labelling in the forestry
sector: (1) independence of the certification body and the assessment team, the two being
preferably from different organisations; (2) quality of the assessment work; (3) the acceptance
of certificates and labels by ENGOs, and (4) recognition of certificates and labels in the
market place.

The potential conflict of interest due to the fact that the same body which carries out
assessment also issues certificates has been discussed in the earlier ITTO study (Baharuddin-
Simula 1996). Separating the two activities as planned e.g. by LEI would be a natural solution
to this problem. The SmartWood network applies, in a way, the same concept when its


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member organisations carry out assessment while SmartWood reviews the result before it
issues the certificate. These two cases are however more the exception than the rule. Within
the ISO system it is common that the two functions are combined (e.g. when certification to
ISO 9000 series or ISO 14001 is carried out). It appears unlikely that separation will be the
case widely in the future and this is going to remain a potential cause for serious concern.
Again, there will be allegations of a lack of a level playing field between the well established,
big certifier-assessors vis-à-vis the newly emerging small competitors. Similarly, it is highly
possible that the ENGOs will support FSC-accredited certifier-assessors at the expense of
those accredited by the national bodies.

The number of qualified assessors of forest management for certification purposes is still very
small but increasing. At least SGS and SW have organised training courses but, in view of
applying certification world-wide, much more effort needs to be made, especially national-
level training programmes. The training needs are not limited to external assessors, there is as
much a need to strengthen the internal auditing capacity and the management systems at large
in forestry organisations to make them certifiable. This is major responsibility of the
management. Field managers and their operators must be made fully aware of their respective
tasks and techniques and understand what certification criteria mean to their work, and how
the respective data collection should be organised to facilitate evaluation.

A number of FSC-accredited certifications have been challenged in the public for a number of
reasons including (i) the quality of assessment work (e.g. economic evaluation in the case of
Flor y Fauna in Costa Rica), (ii) contradictory and ambiguous information and interpretations
presented by stakeholders (e.g. Leroy-Gabon), and (iii) the participatory element in defining
the standards and consultations with interested parties (e.g. the Polish state forests). The last
matter has also been raised in non-FSC certification of two large plantation areas in Brazil. It
is important that, while the certification activity is still in the early stages of the learning
curve, every criticism should be carefully and objectively analysed in order to straighten out
procedures and practices. A lack of transparency in any aspect of certification work could
jeopardise the candidates of the whole system.

A review of the public summaries of the assessment reports indicates that there is
considerable variation in how the quality of assessment work is being viewed at and how
various interpretations have been made. For instance, whether a corrective action request is to
be considered major (ruling out the issuance of certificate) or minor (to be corrected within a
period of a few months), appears to be subject too much to personal interpretation.

ENGOs have criticised national non-FSC certification initiatives as “not being credible”.
Several arguments have been raised, such as (i) low level of standards leading to the
continuation of business as usual, (ii) a lack in transparency of performance indicators as well
as (iii) inadequate participatory provisions. These problems could be eliminated through
integrating the necessary provisions for standard setting and certification arrangements.

It is the market which in the end gives recognition of certificates and labels. In general,
buyers, traders and specifiers are not able themselves to establish credibility even though
some of them have carried out assessment on their own to verify the acceptability of their
forest products supplies. They, therefore, have to rely on other sources of information. This
emphasises the need for establishing common ground rules and codes of conduct for all work
involving certification and labelling in the forestry sector.



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13.4        Impact on SFM

The impact on sustainable forest management of certification is difficult to assess in view of
the very limited experience in practice. Based on the available information, it appears that the
most common reasons for certification have been linked with market demands or competitive
advantage. The principal purpose has not been to use the instrument to improve forest
management and the interviews among managers of the certified enterprises did not indicate
that new methods or practices would have been found as a result. As it will probably be the
best managed forests which will be certified first, the impact on their management is likely to
be limited. If improved practices spread to poorly managed forests, a significant impact can
be expected. It is also worth pointing out that in many well managed forests, the management
system may have to be better documented or improved to allow verification by an external
assessor.

It is quite apparent that without tangible benefits deriving from certification in terms of
improved competitiveness, enterprises will have little incentive to improve forest ma-
nagement with higher costs. There would be even less motivation for the industry to submit
themselves to stricter controls than those at present. The problem is particularly serious in
developing countries and may not be solved through piecemeal partial solutions like
certification which still has not proved its effectiveness. Comprehensive development
strategies towards SFM would be needed where certification and labelling can sometimes
play a useful complementary role.

The necessary preconditions to make certification and labelling a market-based feasible
instrument for SFM include the existence of (1) an environmentally differentiated market, and
(2) of a relatively high quality of forest management considering economic, environmental
and social criteria. If certification is instituted for other purposes (e.g. control of tax and
royalty payments, elimination of corruptive practices), the above preconditions are no more
valid.


13.5        Costs

Cost implications of certification and labelling are (i) indirect or related to incremental forest
management costs to achieve SFM, and (ii) direct costs related to assessment in the forest,
verification of the chain of custody, and labelling rights. We have earlier argued that
incremental management costs may not be considered due to certification, as all the countries
are anyway committed to SFM (Baharuddin & Simula 1996). The issue is discussed in the
following from the viewpoint of tropical forests where incremental costs are assumed to be, in
relative terms, higher than in the boreal and temperate forests.

Two major impediments to progress in forest management work and subsequently,
implementation of certification schemes, are evidently the lack of trained manpower and
funds. The transition to SFM means a shift from the traditional management of exploitation to
that which promotes “sustainable logging” (Bruenig, 1996). Sustainable logging is the
harvesting of the forest that complies with management directives adhering to SFM
principles. There are other pre-requisites to SFM such as security of tenure of the forest base,
forest management plans, forest rehabilitation work, preservation of the well-being of forest-
dependent communities, ecological conservation, etc. that must also be in place. All these


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activities which must involve planning and management, conservation and protection, require
funds, people and time if they are to get anywhere near to restoring the logged over forest to
its sustainable condition.

It is a common notion that SFM is financially feasible (e.g. Bruenig 1996, Soemitro 1996b,
Vallejo 1996) but to the logging companies the cost of investing into SFM activities would
appear inordinately high.

Bruenig (1996) claims that the high net stumpage value of the tropical timber, as in the case
of the area under study in Sarawak, could absorb SFM costs on top of the production costs
and government charges, and yet yield a margin of 25%. But it was not clear whether the
SFM costs applied to the incremental costs only or whether they cover a gamut of forest
management activities from the pre-harvesting planning to forest rehabilitation. Bruenig’s
mention of “additional funds” required (and equivalent to) USD 11 per m3 . for SFM work is
based on the 1995 ITTO report which presumably is the cost of the total management
operations leading to sustainability. But the figure itself is too tentative to provide much
guidance.

Who must bear the responsibility of implementing sustainable forest practices? The answer to
this question may be all too obvious in the case of privately-owned forests which are being
managed by the owners themselves. But in the prevailing circumstances of the tropical
forests, whether private or government owned, there seems to be an outright dependence upon
government initiatives to see this through. In Papua New Guinea, for example, where the
forests are community-owned, the developers (logging contractors) appointed by land owners
with the approval of the government, are given the task of enhancing the living standard of
the land owners through income-sharing, and development of infrastructural and social
amenities (including health care). Besides they are also responsible for ensuring sustainable
logging takes place and for carrying out growth and yield studies, etc., but these developers
are not required to carry out silvicultural operation which is a key component of SFM work.

No standard cost of SFM may be arrived at in view of the incomparable ecological
complexities of one forest from the other and variation in economic, social and policy
situations. Moreover, inaccessibility to detailed accounting related to forestry operations will
render all estimations speculative. A case in point is the second study of ITTO on the
resources needed and cost incurred to achieve Year 2000 Objective. Accuracy, and to a
certain extent incompleteness of the estimates (by excluding some of the activities listed by
ITTO) led to the inconsistency of the estimates between the countries. The estimated unit area
cost of the financial equivalent of the resources needed ranges from less than USD 1 per ha.
to USD 300, a result which is hardly credible (Leslie and Chandrasekharan, 1997).

It is necessary to make reference to the cost of SFM as it bears important implications on the
capability of developing countries to implement sustainable forestry practices. The probability
that few tropical rainforest countries are able to achieve Year 2000 Objective will also mean
that there will be small volumes of certified tropical timber in the market place by then.
Countries that can barely afford the cost of SFM may similarly face difficulties in having
enough resources to have their forests certified.

The cost of certification is not small. In order to break even LEI will have to charge in the
range of USD 15 000 to USD 30 000 per audit, and companies pay USD 6.20 to USD 11.90
per m3 for chain of custody tracking (see chapter 9). Malaysia’s preliminary estimation of the


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direct cost of certification based on the recent pilot studies (see chapter 10), US cents of 3-
4 per m3. of log appears to be underestimated and may require further investigation. Its chain
of custody tracking work may incur a participating company a direct cost of USD 1 200 to
USD 4 200, and for a 5-year period of certification some USD 8 000 to USD 24 000.
Royalties or licence fees collected from the use of labels are not included in the above
estimates.

With simply an easier market access as the carrot and with no indication from the market of
getting a price premium for certified timber, it does appear that companies practising timber
certification will be limited to those whose business is critically dependent upon the
environmentally sensitive markets.


13.6        Impact on the Market

The prevailing differences in the environmental awareness and sensitivity of international
markets for forest products on one hand, and the different market distributions of major
exporters on the other hand would mean that the market impacts of certification and labelling
will not be uniform.


13.6.1               Trade Flows

We have singled out eight European countries as the most environmentally sensitive markets
in view of the significance of the Buyers’ Groups, the active role of ENGOs in forest products
and action taken by the government or trade to promote certification (Austria, Belgium,
Denmark, Germany, Luxembourg, the Netherlands, Switzerland and the United Kingdom).
The Nordic countries as important net exporters were not included as markets as their imports
tend to be marginal. The results of the analysis can be summarised as follows (Figures 13.1-
13.4):

• In sawnwood, the dependence of individual exporters from the environmentally sensitive
  markets varies extensively being high for the Nordic and West and Central African
  producers and Brazil (30-70%), moderate for Malaysia (16%) and low for North
  American, and Indonesian exporters (less than 10%).

• In plywood the Indonesian and Malaysian exporters would lose 12 and 3% of their total
  exports, respectively, if they would be phased out of the environmentally sensitive
  European markets. This would have a significant impact on the demand and supply
  situation in Europe as the Indonesian volume is large (1.0 mill. m3 in 1995). In the case of
  US, Canada and Brazil the dependence on these markets is significant (43-52%), while the
  Finnish plywood industry sends two thirds of its output to these markets.




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                                                                                          106
Figure 13.1                                                    Industry Dependence on Environmentally Sensitive Markets in
                                                               Sawnwood. 1995.


               Exports to Environmentally Sensitive Markets*   100
                                                                90
                                                                80
                                                                70
                            % of Total Exports




                                                                                                                Ghana
                                                                60
                                                                                                                  Sweden              Finland
                                                                50
                                                                40                                  Cameroon
                                                                                Brazil
                                                                30                                                               Ivory Coast

                                                                20
                                                                                                             Malaysia
                                                                10       USA    Indonesia                                                 Canada
                                                                 0
                                                                     0     10        20     30      40     50      60       70      80       90      100
                                                                                                 Exports, % of Production

        * UK, Germany, the Netherlands, Denmark, Belgium, Switzerland and Austria




Figure 13.2                                                    Industry Dependence on Environmentally Sensitive Markets
                                                               in Plywood. 1995.


                                                               100
           Exports to Environmentally Sensitive Markets*




                                                               90
                                                               80
                                                               70
                        % of Total Exports




                                                                                                                                               Finland
                                                               60
                                                               50              USA
                                                                                             Brazil       Canada
                                                               40
                                                               30
                                                               20                                                                   Indonesia
                                                               10
                                                                                                                                          Malaysia
                                                                0
                                                                     0     10        20     30      40      50     60       70       80        90    100
                                                                                                 Exports, % of Production

         * UK, Germany, the Netherlands, Denmark, Belgium, Switzerland and Austria




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                                                                                                                                                           107
Figure 13.3                                                         Industry Dependence on Environmentally Sensitive Markets
                                                                    in Wood Pulp. 1995

                   Exports to Environmentally Sensitive Markets*   100
                                                                    90
                                                                    80
                                                                    70                    Finland
                                % of Total Exports




                                                                    60                             Sweden
                                                                    50
                                                                    40
                                                                    30
                                                                    20                               Brazil
                                                                                  USA             South Africa             Canada
                                                                    10
                                                                                           Indonesia
                                                                     0
                                                                         0   10     20      30        40     50       60      70    80       90    100
                                                                                                   Exports, % of Production

        * UK, Germany, the Netherlands, Denmark, Belgium, Switzerland and Austria




Figure 13.4                                                         Industry Dependence on Environmentally Sensitive Markets
                                                                    in Paper and Paperboard. 1995

                                                                   100
          Exports to Environmentally Sensitive Markets*




                                                                    90

                                                                    80
                                                                    70
                       % of Total Exports




                                                                    60                                                                    Sweden

                                                                    50                                                                        Finland

                                                                    40

                                                                    30                            South Africa

                                                                    20
                                                                                         Brazil
                                                                    10        USA
                                                                                             Indonesia                              Canada
                                                                    0
                                                                         0   10     20      30        40         50   60      70     80      90     100
                                                                                                   Exports, % of production

        * UK, Germany, the Netherlands, Denmark, Belgium, Switzerland and Austria




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• In market pulp, the Nordic countries sell 60-70% of their total exports to the sensitive
  markets and in paper and board the share is 50-60%. This leaves little option for these
  countries but to comply if certification is requested by their main clients. In the case of the
  Republic of South Africa the dependence is also high (30%) but the actual volumes are
  much smaller. The North American and Brazilian producers send less than 20% of their
  total exports to Europe and are therefore less exposed to environmental pressures but as
  their volumes are large, significant economic interests are at stake.

Trade diversion may occur due to certification and labelling and it will also be influenced by
the globalisation of the forest products industries. As an example, the recent changes in export
destinations of African exporters toward Asia have probably been mainly driven by the
increasingly evident supply constraints and fast demand growth in that market but difficulties
to sell tropical timber in Europe may have also contributed to these trends (Table 13.1). The
emergence of new market opportunities and changes in consumption patterns by species and
type of wood products in individual markets will make it difficult to assess accurately the
impact of certification on trade flows.

Table 13.1           Share of Asian Markets in Exports of Tropical Logs and Sawnwood in
                     Selected Western African Countries

Country                             1992                  1993             1994      1995
Logs                                                               - % -
Cameroon                        4.0                         n.a.            12.0       16.3
Congo                           n.a.                        8.8              5.1        n.a.
Côte d’Ivoire                 0.003                        23.9             28.6       22.5
Gabon                           4.8                         9.8             46.4       35.4
Ghana                            2.3                       74.6             91.4       73.8
Total                           3.3                        17.8             36.7       24.8
Sawnwood
Cameroon                        0.6                        n.a.             2,0         0,9
Congo                           n.a.                       n.a.             n.a.        n.a.
Côte d’Ivoire                   n.a.                       0,1              0.1        0.03
Gabon                           n.a.                       n.a.             n.a.        n.a.
Ghana                            0.2                       0.5              3.5         2.0
Total                           0.1                        0.2              0.4         0.6
Source: Calculated based on ITTO, 1996.


13.6.2               Competitiveness

If certification becomes widely applied, it will influence competitiveness of individual
producers. Likely winners are companies (i) which have large own forests or long-term
concessions, or (ii) those which are able to procure their raw material already from state-
owned forests or plantations, or (iii) which are large because there are economies of scale
involved, or (iv) which are integrated either vertically or horizontally. These factors play
different roles in achieving certifiability but they are all facilitating elements. Likely losers
are (a) smallholdings, (b) community forests, and (c) small and medium scale enterprises,
particularly in developing countries, as certification costs will be in relative terms higher for
them than for large-scale operations, and their information and control systems tend to be less
developed. To avoid undue adverse effects, there is a need to facilitate the access of these



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parties to certification and its potential benefits through special measures. This need requires
due consideration in the design of standards and certification arrangements.


13.6.3               Demand

The review of country situations (chapters 6 to 12) revealed that there is a major uncertainty
related to the demand for certified and labelled forest products. In most countries no large-
scale demand can be detected and its emergence in the short run appears unlikely. Demand
will be influenced by supply and the picture may change in those markets where larger
certified volumes can be made available. The action taken in many major exporting countries
could suggest that a certain supply push could happen, perhaps even in the near future.

The picture is, however, far from clear. A recent survey by TTJ (1997) among 675 timber
industry’s representatives in 13 countries revealed that their environmental awareness has
significantly increased over the last five years. However, action taken was lagging behind
awareness and aspirations. Most respondents expect pressure for customers to trade in timber
from “properly managed forests” to increase in the short and medium term future. One fifth
(21%) has stopped or reduced trading in tropical hardwood and Canadian softwood, over the
last five years. However, very few respondents expect to stop trading in any particular
products or species in the next 10 years. Less than half (48%) have wanted to be ensured that
their suppliers work to manage their forests properly. This survey took place mainly through
correspondence (71%) and personal visits (58%).

To what extent certification and labelling can influence the demand for forest products is an
open question. It may be more seen as a complementary marketing instrument between
suppliers offering similar products. Demand changes between different products may be
determined by more fundamental factors such as consumetr preferences related to visual or
other characteristics of products.

If certification and labelling will be used as pronounced marketing instruments by the
industry, it is likely to influence demand. Enterprises may have different motivations to do
this as part of their overall philosphy or environmental strategies. The purpose would be to
add the perceived values of their products from the consumer´s perpective who wish to
contribute to solving global environmental problems, such as deforestation, through their
purchasing decisions.


13.6.4               Substitution

Single-issue labels related to the quality of forest management could have an impact on
substitution between forest products and their competitors (Brooks 1997). Substitution has to
be considered in a broad context, not only between the same group of materials e.g. tropical
and non-tropical timber, or between wood and non-wood materials (steel, aluminium, plastics,
mineral-based, etc.) but also with regard to alternative means to satisfy the same needs
(digital storing and transmission of information, alternative uses of leisure time, interactive
educational techniques, etc.). Estimation of substitution effects is currently purely speculative
and is not attempted here.




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There is no standard methodology to compare the environmental impacts of different
materials over their entire life-cycles which means that it is not possible to convey reliable
information on their relative environmental friendliness. Forest products have the advantage
of being based on a renewable natural resource which plays an important role in
environmental conservation. The primary processing industries based on this resource are,
however, raw material intensive and, together with the bulkiness of wood, transportation is an
important input in the sector. It remains to be established what is the long-term role of forest
products in the development of sustainable consumption patterns. Some ENGOs have on their
agenda the reduction of the consumption of forest-based products as a means to conserve
environment. To what extent certification and labelling of forest products can be useful tools
in cross-sectoral environmental assessment still remains to be seen.

Possible substitution between alternative forest products also needs consideration. As an
example, certification and labelling have been proposed as promotional instruments to regain
the lost markets for tropical timber in Germany and the Netherlands where trade has been
declining. Two factors have been singled out as reasons for the past trends: (i) change of taste
in favour of light coloured timbers, and (b) ENGO campaigns against tropical timber. There is
no experience as yet to indicate what potential role certification could have in market
promotion in such situations. Some studies suggest, however, that a certification system could
result in an increase in the consumption of tropical timber in such markets as Germany (e.g.
Brockmann et al. 1996)


13.7        Smallholdings

Smallholdings are a common or dominant form of forest land ownership in many countries. In
Europe alone, it is estimated that there are about 14 million small-scale non-industrial private
forest owners while in the United States their number is about 10 million. These forest owners
tend to play an important role in the industry’s wood supply and in many countries
certification can never become effective if it does not attract the smallholders.

Particular concerns have been expressed by forest owners about the usefulness and
appropriateness of certification in their case. Due to the need for economies of scale in
certification (see e.g. chapter 7.4 in Baharuddin-Simula 1996) there is a risk that
smallholdings are put at a disadvantage if this instrument is not applied in a cost-effective
way.

As the average size of forest holdings may be as low as 2.5 ha (e.g. in the Walloon region in
Belgium), their individual certification is evidently not practical. Several reasons make
individual certification difficult or unmeaningful (cf. chapter 7.3.2 in Baharuddin-Simula
1996). A number of options for group certification have been proposed by FSC (Ervin 1997)
but commonly agreed principles have yet to exist. This is a major concern in countries where
certification is imperative due to high dependence on the environmentally sensitive European
markets, and where the bulk of industrial wood supply comes from smallholdings. In such
cases, suitable arrangements have been developed nationally (see e.g. chapter 7 for details on
the Finnish model).




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13.8        Social Issues

In many countries, forest-based industries have made progress in environmental performance
in their operations partly as a result of regulatory pressure and partly, of the resultant cost
savings (IIED 1996). There is, however, less evidence of similar improvements in social
performance (Bass 1997).

Social criteria are as important as economic and ecological criteria in assessing the
sustainability of forest management. The key groups to be considered include communities
and people living in and around forest areas, small-scale forest owners, forest workers, and
the general public as a whole. They attach a great deal of importance to the forest, aside from
its economic contribution, for its recreational, cultural or other social values. Five factors
determining the importance of forests to different groups may be identified: (1) proximity to
the forest, (2) existing and pre-existing rights which may be formal or traditional, (3)
dependency as a source of living, (4) the role of forests in culture, and (5) power deficits as a
sign of failures in democratic decision making (cf. Pierce Colfer 1995).

Typical social issues related to SFM include (i) the benefits that the different groups obtain
from the forest and the way how these benefits are shared; (ii) the participation of the groups
in the management of forests, particularly in setting goals and objectives and selecting
technology, (iii) tenure systems related to access and use of forest resources, and (iv) methods
to solve conflicts (cf. Merino 1996). Of particular concern have been the rights of indigenous
people to use and manage forest lands where they are living.

Social rights and obligations are generally considered sovereign rights of nations and
governments regulate them through appropriate legislation. At international level, a number
of relevant provisions have been established by ILO, including (a) rights relating to Freedom
of Association and Protection of the Right to Organise (ILO Convention 87), (b) rights to
Organise and Collective Bargaining (ILO Convention 98), (c) rights concerning Conditions of
Employment of Plantation Workers (ILO Convention 110), (d) rights specific to Rural
Workers’ Organisations (ILO Convention 141), (e) rights related to indigenous peoples (ILO
Conventions 107 and 169), and (f) workers’ rights related to health and safety, equality, and
participation (ILO Conventions 100, 111, 135 and 155). Some of these conventions have only
a limited number of ratifications. Additional concerns have been expressed e.g. on workers’
training and job security (World Rainforest...1996).

The questions related to social rights are complex and may not be easily solved at a sectoral
level such as forestry which often has a low political priority. The problem of weighting of
individual social criteria which are in conflict with each other, or with economic and
ecological criteria, also needs to be addressed. These constraints have to be recognised when
expectations are set for certification as an instrument toward social sustainability. Merino
(1996) has pointed out that sustainable forest management requires very long-term
commitment from the people living in and around forest areas, and that, to achieve this
commitment, sharing of benefits is necessary. There are, however, no clear guidelines on to
what extent an economic activity like forest management (or industrial processing of forest
products) should assume responsibility for social development such as housing conditions,
medical assistance, primary education facilities, and other social amenities.




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Adequate participation of all the main interest groups in setting of certification criteria is an
appropriate way to duly integrate social aspects in forest management. Both the possibility to
participate and the possibility to influence decision making are relevant in this context.
Transparency of the process would allow a proper judgement on the quality of participation.
Grievance procedures available for those who feel that their viewpoints have not been duly
taken account would improve equality.

As already stated (section 13.7), certification can have adverse impacts on smallholders and
community forests if they do not have access to cost-efficient arrangements. External support
may help in this temporarily but it cannot provide a lasting solution. In many instances, there
also appears to be no clear case of which category of interests (social or economic)
smallholder forest owners are deemed to represent.

As a conclusion, social issues have received probably less attention than environmental
criteria in the development of certification. They tend to raise fundamental questions to which
ready answers are not available. International harmonisation in this field is likely to prove
even less practical than in the case of environment. This emphasises all the more the
importance of the participatory processes in the development of certification standards. The
nature of participation will depend on each particular situation (i.e. a case that calls for
situational management).


13.9        Role of Governments

Governments regulate forestry through legislation and apply appropriate sectoral policies to
achieve national goals. In order to ensure a balanced development in forestry, due
consideration needs to be given to environmental and social attributes of the forest. Purely
market-based decision-making in forest resource management would not ensure
sustainability; temporal scales and value priorities of private forest owners and managers need
to be reconciled with national objectives. The legitimate role of the government to ensure
sustainable development, therefore, must be appreciated. On the other hand, under economic
duress and socio-political pressures, the government may be obliged to incur policy failures in
the search for ameliorative measures. Sometimes these policy failures may contribute
significantly to forest degradation and deforestation and should be realised in time and
corrected. Care should be taken when transferring such responsibility in cases of key natural
resources like the natural forest. It runs a high risk of failure which may be costly to the long-
term environmental security of the country.

Governments are large forest owners in many countries, or they may be the ultimate
custodians of forest lands owned by the people or local communities. Quite often government
agencies implement forest management, either partially or entirely, on lands under their direct
responsibility. In cases where the private sector undertakes forest management on such
lands, government grants in return, utilisation rights. In general, supervision and control of
forest management on all types of lands is the incumbency of the government’s forestry
administration. In the spirit of reducing the government’s direct role in productive activities,
there has been a long-term trend to transfer more and more management responsibility to the
private sector.

In the market place the government provides the necessary ground rules to ensure efficiency.
With regard to certification and labelling, there is, however, a danger that such schemes could


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be developed in a way which leads to inefficiency, damaging to forestry and which could
even lead to undue substitution. In addition, cost effects may not be equitably shared.
Smallholders and community forest owners are examples of economic agents which may
require special provisions in policies to help eliminate possible adverse impacts. Such
measures are justified because these forest owners contribute very importantly to
environmental and social benefits in the course of managing their lands – all will be lost if
this has to be discontinued wearily for economic reasons. As a conclusion, market forces may
work unduly against some groups and therefore government intervention through regulation
in this case may justified.

Certification is a market-based instrument which in principle should work without
government intervention. A proliferation of parallel schemes could, however, create
confusion among consumers and there is also a risk that labelling could represent an obstacle
for the free trade of forest products. Such a situation would justify government intervention.
The governments, in their role as regulators, developers and forest managers, may find that
certification and labelling are desirable in policy context and deserve recognition as a
potentially effective tool to promote SFM, or to gain market access for forest products.

There is also the difficult question of adopting a new set of internationally introduced
standards in government forests which may be quite different from those under the existing
regulations. Of course much of the difficulty had been circumvented through negotiations and
technical discussions at the international fora such as ITTOand IPF. Another issue is how
locally based third party assessments can be justified when the government’s existing
supervision and control mechanisms are already well in place but may yet to be recognised as
“credible” by the “market”. The other side of the coin is to what extent the overall supervision
and control could be transferred to the private sector (deregulation) reducing the public
sector’s involvement in these activities? Manpower shortage to carry out enforcement could
bring debilitating effects on the system deflating the very purpose of improving efficiency and
enhancing productivity.

These and other issues have been raised in different fora (e.g. IPF 1997) and they will have to
be addressed at the national level case by case. Governments may also wish to act jointly to
agree on common “rules” on certification and labelling and how these instruments are to be
implemented in their countries.


13.10       International Harmonisation

Harmonisation is here understood as the process of bringing various systems and schemes for
certification of forest management and labelling of forest products, or their elements, into
agreement (in other words, compatibility), with each other, or rendering such systems and
schemes comparable.

The main justification of harmonisation derives from the proliferation of certificates and
labels which make their recognition cumbersome or even impossible and creates confusion at
the consumer level. As pointed out in chapter 5, there are already a number of certificates and
labels which have varying objectives and uses. From the trade point of view, harmonisation
could facilitate trade and improve efficiency. Harmonisation of (product) standards is also
called for by the TBT Agreement.



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Harmonisation may be achieved through (1) competition among different certificates and
labels in the market (the strongest ones will prevail), or (2) it could be instituted through
common guidelines and implementation mechanisms. Both options are possible but they
should also reduce costs and ensure that certification does not become an unnecessary
obstacle to trade (cf. Chapter 13.2). Yet another possibility is to work on the commonality
approach out of the various sets of C&I of SFM now being developed. The common
denomination of the C&I may be selected using the tool-box concept of CIFOR (see section
3.4). These common SFM principles must be the basis of the chosen harmonisation.

In view of the short history of implementation and limited experience on the use of this
instrument, it is apparent that it is too early to seek for harmonisation in such an evolving
discipline (Indufor 1997). In due course with expanding trade volumes, the issue of
harmonisation will, however, have to be addressed and it is foreseen that a certain level of
harmonisation will be needed. On the other hand, the process of international harmonisation is
time-consuming and its development would probably proceed through incremental steps
incurring interminable argumentation. It should be started early enough.

Harmonisation in certification and labelling in the forestry sector through institutional
arrangements could proceed through two non-exclusive strategies: (1) by individual elements
(standard setting, conformity assessment, accreditation, labelling), or (2) through integrated
solutions. The latter may be developed at the international level through an appropriate body
or through regional arrangements (e.g. ATO, EU or other regional organisations could
provide an appropriate framework). The existing ISO tools already provide a useful basis for
harmonisation of many individual elements (ISO standards on management systems, ISO
Guides on standard preparation, conformity assessment and accreditation). These tools do not
cover performance standards for which further work would be needed., An appropriate degree
of harmonisation of national performance standards may be identified. In addition, the
procedures for developing nationally applicable performance standards could also be
harmonised to facilitate comparability of individual national standards. A detailed review of
harmonisation options is available in Indufor (1997).

In view of FSC representing a possible integrated solution to harmonisation, its current tools
are inadequate and would need further development for their completion (see section 4.1.1). If
the organisation could develop its program towards comparability with the relevant ISO
standards and guides, and toward recognition of national processes and country initiatives to
set standards and arrangements for certification, its worldwide acceptability would be
significantly improved. The difficult issue of sovereignty could be avoided.

As a final comment, complete harmonisation may never be reached in forest management
standards, or related certification and labelling arrangements. It may neither be desirable
having a risk to lead to suboptimal solutions on the ground. Therefore, much more important
than harmonisation per se would be appropriate mechanisms of international recognition.




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14.         OPTIONS FOR FUTURE WORK

It is concluded that certification and labelling will be increasingly applied in the forestry
sector as a complementary tool for marketing and improving forest management. It is
important that this instrument maximises its potential net benefits and avoids unnecessary
adverse impacts. A series of options for action have been identified for two purpose.


14.1        International Cooperation and Coordination

At the international level, there is a need to identify or establish a suitable forum for a
continuous exchange of information based on experience in timber certification and labelling
aimed at achieving co-ordination and cooperation between various initiatives. This forum
should complement the political level discussions within the Intergovernmental Forum on
Forests. The need for exchange of information on certification standards and arrangements
has increased when the number of countries where active development is taking place has
increased. The current mechanisms are not particularly effective as their focus is in the
political and policy aspects of this instrument whereas the suggested forum delves on the
technical approach of implementation. It is important that future exchange of information will
include all the involved parties at both the national and the international level including
relevant non-governmental organisations.

A certain degree of comparability or harmonisation between certification and labelling
schemes leading to mutual recognition would be needed to facilitate their recognition. It
would be too early to aim at full harmonisation of this complex instrument at this stage,
otherwise the necessary development work would not be able to seek for optimum solutions.
However, as the process to develop feasible recognition mechanisms at international level
may well be interminable and the appropriate kick-start could come from this exchange of
information and experience.


14.2        Development of Certification and Labelling as Policy Instruments

The potential role of certification and labelling as an instrument to achieve sustainable forest
management needs clarification through policy research. Preconditions under which
certification can be feasible in individual country situations have not yet been identified. In
addition, as this instrument is not a sufficient condition for SFM, it should be made clear what
complementary action is needed in specific country conditions.

There are a number of areas where the proposed arrangements for certification and labelling
are not considered adequate, requiring further development work if certification is going to
succeeed in the market. These include cost-effective certification of smallholdings, avoidance
of adverse impacts on community forests and small and medium-sized enterprises,
certification of non-timber forest products, and suitable arrangements for the verification of
chain of custody.

When experience is accumulated on the use of certification and labelling, there is a need to
carry out impact assessments to improve effectiveness and efficiency and to avoid
unnecessary adverse impacts.



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14.3        Capacity Building

The human resource base to implement certification continues to be a constraint for proper
implementation of this instrument. Part of the challenges made against past certification
assessments may have been due to lack of experience and expertise in the assessment teams.
The capacity building needs include training of professionals involved in

• internal auditing of forestry organisations to make them certifiable and to reduce the costs
  of certification
• external assessment work carried out by certification bodies or independent assessor
  enterprises
• development of certification schemes and appropriate bodies for standards setting,
  conformity assessment, and accreditation

Capacity constraints are also related institutional development. Many developing countries do
not have national institutions for accreditation and their standards bodies tend to be weak and
would need strengthening. Even in developed countries these bodies would need to develop
sector-specific arrangements designed for forest management certification and labelling of
forest products.


14.4        Market Promotion of Certified Products

The past experience of suppliers of certified forest products indicates that marketing
difficulties may arise for a variety of reasons. High expectations are also put on this
instrument to promote tropical timber in markets which were lost due to ENGO campaigns.
Areas of future action may include:

• market research
• market promotion to make certified products known and preferable to the general public,
  distributors, industrial and institutional buyers and specifiers
• generic promotion of certified non-wood forest products
• comparative environmental impact studies on forest products and their substitutes
  considering the whole life cycle of products


14.5        Development Cooperation

Tropical timber producing countries would need assistance both to implement certification
and labelling in their own specific conditions, and to eliminate possible negative impacts on
competitiveness of this instrument. Areas of intervention could include

•       development of national certification standards
•       local capacity building
•       improvement of forest management to achieve SFM
•       support to pioneer enterprises implementing certification
•       systems for chain-of-custody verification
•       market promotion of certified tropical timber products




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•       development of suitable financing schemes and other incentives to promote SFM
        where certification may be used as a complementary instrument

Substantial funding will be needed to implement these activities and it is doubtful, in the case
of the developing tropical countries, whether they have the financial resources to carry them
out. Yet these activities have direct relevance to the ITTO Year 2000 Objective. Direct
participation of the industrialised countries through some form of partnership programmes
would be invaluable in ensuring success. A suitable instrument would be the Bali Partnership
Fund (established in the ITTA, 1994).




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A Klabin sai na frente em manejo de reflorestamento. 1997. SBS Fatos-síntese 49. Marco.
Assen (von der), F.H.J. 1997. Dutch Government Measures Regarding the labelling and Use
       of Sustainably Used Timber. Unpublished note.
A System for Quality Management for Ghana’s Forests. 1996. A Standard Prepared by a
      Working Group under the Chairmanship of the Ghana Standards Board. Draft. 22
      October 1996.
ABNT. 1997a. CERFLOR. Procedimentos de avaliação para florestas plantadas.
ABNT. 1997b. Sistema de certificação de origem de matéria-prima florestal. Diretrizes.
ABNT. Undated. Rótulo ecológico ABNT - qualidade ambiental.
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                                                                                       124
                                                                                ITTC(XX)/14

INTERNATIONAL TROPICAL                                                     23 May I 996
TIMBER COUNCIL

                                                                                Original: ENGLISH
ITT0

 TWENTIETH SESSION
 15-23 May 1996
 Manila. Philippines

                                        DECISION 4(XX)

                          UPDATE OF STUDY ON CERTIFICATION
                       OF ALL INTERNATIONALLY TRADED TIMBER
                                AND TIMBER PRODUCTS

       The International Tropical Timber Council,

    Recognizing the potential role of Timber certification in relation to forest management and
market access for timber products;

       Noting the on-going international debate on timber certification;

     Recognizing further the work of the Open-ended Intergovernmental Panel on Forests (IPF) and
other relevant institutions on the issue of trade and environment in relation to forest products and
services;

    Mindful of the importance to continue dialogue on timber certification in the light of the various
schemes and initiatives on timber certification,

     Taking note of the “Study of the Developments in the Formulation and Implementation of
Certification Schemes for All Internationally Trade Timber and Timber Products” which was the
subject of consideration at its Twentieth Session;

       Decides to

       1     Continue to follow relevant developments in the formulation and implementation of
             certification schemes for internationally traded timber and timber products;

       2.    Authorize the Executive Director to engage two consultants (one from a producer
             member country the other from a consumer member country) to prepare a
             comprehensive update;

       3.    Authorize the Executive Director to arrange for financing the consultancy report from
             the Special Account and invite members to contribute to the financing and
             implementation of this ITTO activity;

       4.    Request the Executive Director to table the report for consideration at its Twenty-third
             Session.
              NATIONAL-LEVEL DEVELOPMENTS AND INITIATIVES
                       RELATED TO CERTIFICATION
Country          Standard development                       Certification arrangements and
                                                            exercises
EUROPE
European Union
Austria          - C & I tested in 1995 by CIFOR            - Feasibility study on timber
                                                              certification control system
                                                              (1996)
                                                            - Manual on the application of
                                                              quality mark and manual on
                                                              monitoring and control in the
                                                              field are under preparation.
                                                            - Country of origin mark for
                                                              domestic timber launched in
                                                              1996.
Belgium          - Draft standards 1996, partial consen-    - No national arrangements; a
                   sus, tested and approved by SGS            regional level scheme proposed
                   Forestry                                   by the Wallonian government
                                                              based on periodic forest
                                                              inventory, public information
                                                              and a collective mark.
Denmark          - National C&I and draft on field guide-
                   lines for SFM
                 - Draft standards within FSC framework
Finland          - National Working Group agreed on         - The Working Group proposed a
                   certification standard in April 1996.      certification model allowing
                 - Testing of the standard is underway in     assessment at three levels
                   three provinces.                           (region, Forest Management
                 - An FSC working group is in planning        Association and holding).
                   phase
France           - National C&I were assessed in 1995      - Working Group Forest - ISO
                                                             14000 preparing possible
                                                             implementation of ISO 14001
                                                             in French forests.
Germany          -   ITW standards for tropical timber,    - A national SFM label was
                     tested by CIFOR                         introduced in 1996 (Timber
                                                             from SFM produced in German
                                                             forests).
                 -   An FSC Working Group is planned to - Initiative zur Forderung nach-
                     start standards development             haltiger Waldbewirtschaftung
                                                             (IFW) to develop chain-of-
                                                             custody control and
                                                             certification
Ireland          -   A Code of Best Forest Practice is
                     under development
                 -   Preliminary initiatives to form a NWG
                     under FSC framework
Netherlands      -   Dutch minimum standards approved - Keurhout foundation: chain-of-
                     NWG under FSC framework in spring       custody control system, recogn-
                     1997                                    ition of certif. schemes
                                                           - SKAL, FSC accredited certifier
Portugal         -   Rules of good practice for SFM are - Working group studying
                     under preparation                       application of ISO 14001 in
                                                             Portuguese forestry.
Spain            -   Together with Portugal forest
                     associations signed an Iberian
                     declaration on the SFM Principles

Country          Standard development                       Certification arrangements and
                                                                 i
                                                                          exercises
Sweden                        - FSC Working Group has developed a         - Under FSC Working Group,
                                draft standard but private forest           subgroups on application and
                                owners pulled out of the process            markets have prepared
                                                                            proposals and another subgroup
                                                                            estimated their effects
                                                                          - First ISO 14001 certifications
                                                                            completed and three trials on
                                                                            EMAS application are under
                                                                            way.
                                                                          - One forest is FSC certified
United Kingdom                - A national Forest Standard is under       - FICGB Woodmark system to
                                development by the Forestry                 track timber from UK forests is
                                Commission.                                 operational.
                              - A national FSC group has produced a       - SGS, Soil Association operate
                                draft standard                              as FSC accredited certification
                                                                            bodies.
                                                                          - Certified forests
Other Europe
Estonia                       - First draft national C&I completed        - Prefeasibility study on arrange-
                                                                            ments in 1997
Latvia                        - National Working Group under
                                preparation
Norway                        - Certification standards being finalised
                                under the ”Living Forest -project”
                              - Initiatives to establish an FSC WG
Poland                        - National C&I prepared                     - SGS certified state forests

Russia                        - National C&I prepared                     - National arrangements being
                                                                            studied.
Switzerland                   - Initiatives to establish a NWG            - Pilot studies on certification
                              - National C&I under process                - SGS assessed feasibility for
                                                                            certification
                                                                          - Lignum project on ISO
                                                                            certification for pulpmills
C&I      criteria and indicators
NWG      National Working Group
NFCI     Nordic Forest Certification Initiatives
SGS      SGS Forestry, SA Soil Association
Country            Standard development                       Certification arrangements
AFRICA
Cameroon           - WWF supported NWG; technical sub- - Initiatives supported by WWF
                     committee issued local draft standards   Belgium, pilot certification
                   - C&I test by CIFOR.                       in 1997
Congo              - NWG to develop standards being
                     planned
Côte d’Ivoire      - Testing by CIFOR
Ghana              - National Certification Committee       - Government led NCC
                     (NCC)                                    designing national certif.
                   - Technical group issued draft standards   scheme
                     based on ISO framework
Gabon              - NWG supported by WWF Belgium           - Initiatives supported by WWF
                     under development                        Belgium
                                                            - One forest tentatively certified
Kenya              - Adopted regional C&I for SADC and
                     IGADD countries
Malawi             - Adopted regional C&I for SADC and
                     IGADD countries
South Africa       - C&I will be included in National       - Certified forests
                     Forestry Action Plan
Uganda             - National guidelines for SFM

Zimbabwe                                                      - FSC-certified forests

ASIA, OCEANIA &
PACIFIC
Australia          - National working group established       - Preliminary discussions on
                                                                FSC, ISO based systems
Indonesia          -   National C&I for SFM.                  - LEI-Lembaga Ecolabel
                   -   LEI’s certification standards approved   Indonesia setting up
                       and being tested                       certification    arrangements
                   -   Testing of standards by CIFOR
Japan              -   Experiments on data collection for
                       C&I
ASIA
Malaysia           - A joint working group following - National Timber Certification
                     ITTO guidelines and FSC P&C          Committee (NTCC) planning
                   - Testing of standard in 3 States in   mechanisms of certification
                     Peninsular Malaysia                - Pilot studies under way
                                                        - One certified plantation
New Zealand        - Principles on Plantation Forest
                     Management
Papua New Guinea   - NWG standards within FSC           - Certified forests
                     framework
Solomon Islands    - Interim working group and eco- - Soltrust pilot project on
                     forestry standards within FSC        certification
                     framework                          - SGS forestry certified on
                                                        islands
Sri Lanka                                               - Certified plantations
Country                       Standard development                                 Certification arrangements
LATIN AMERICA
Bolivia                       - Draft standards based on FSC                       - Independent compliance audits
                                framework prepared by Council for                    required by Forest Law (1996)
                                Voluntary Forest Certification (CFV),              - One certified forest
                                supported by WWF, USAID
Brazil                        - CIFOR testing of C&I                               - Certified forests
                              - CERFLOR draft standards                            - CERFLOR scheme under
                                completed by ABNT                                    planning
                              - FSC NWG developing two sets of
                                standards (plantations, terra firme)
                              - IMAFLORA standards for caixeta and
                                Brazil nuts
Central America               - Draft regional C&I developed by                    - Regional reference document
                                FAO, CCAD, CCAB-AP                                   prepared
Chile                         - Standard development foreseen with
                                the support of EU
Colombia                      - Interim FSC working group                          - Initial workshops to raise
                                                                                     awareness and promote FSC
                                                                                     certification
Costa Rica                    - Government-led National Commission                 - Fundación Amplio cooperation
                                on Forest Certification has mandate to               with SW
                                develop standards for natural forests.             - Informal WG to draft FSC
                              - Workshop on C&I for plantations                      based guidelines for
                              - Testing by CIFOR                                     certification
                                                                                   - Recursos Naturales applied for
                                                                                     FSC accreditation
                                                                                   - One certified forest
Honduras                                                                           - One certified forest
Mexico                        - Preliminary manual for evaluating                  - Consejo Civil Mexicano para la
                                SFM, may be a basis for standard                     Silvicultura Sostenible
                                development                                          (CCMSS) to develop standards
                                                                                     and procedures, case studies
                                                                                   - CCMSS cooperation with SW
                                                                                   - Certified community forests
Nicaragua                     - Preliminary criteria for national and              - Interim working group within
                                local levels                                         FSC framework

Peru                          - Initiatives towards SFM basing on
                                Tarapoto process
NORTH AMERICA
Canada                        - ISO-based standard (CSA) approved                  - The CSA standard can be
                                where CCFM criteria as performance                   certified through national
                                standards                                            certification bodies.
                              - Interim steering committee on                      - Elected body to design FSC
                                working groups to prepare FSC NWG                    standards will be formed in
                                and plan draft standards for maritime                1997
                                and some other provinces (FSC)                     - Silva Forest Foundation applied
                                                                                     for FSC accreditation
USA                           - Sustainable Forest Initiative by                   - SW and SCS operate as FSC
                                AF&PA                                                accredited certification bodies
                              - Regional FSC standards under                       - Certified forests and forest
                                preparation                                          products
Abbreviations: NWG- National Working Group, WG- Working Group, SFM-Sustainable Forest Management, C&I- Criteria & indicators,
             P&C-Principles & Criteria, FSC-Forest stewardship Council, ISO- International Standardization Organization,
             EMAS-Environmental Management and Auditing Scheme,
             RW-SmartWood, SA- Soil Association
             CIFOR- , ITTO, WWF
                                                                       Annex 5.1
                            LIST OF FORESTS CERTIFIED BY FSC ACCREDITED
                                                          (March 1997)
                            CERTIFICATION BODIES
Country/                             Applicant              Location          Area           Certification
Region                                                                         ha               body
AFRICA
South Africa                Bracken Timbers            Kwazulu-Natal              4.500          SGS
                            SAFCOL                     Kwazulu-Natal             51.922          SGS
                   -farms   Soetmilk Boerdery          Vaalkop                      300          SGS
                            ass. African Charcoal
                            Kanhym Landgoed                          ..                602       SGS
                            Majuba Hill Farms                                        1.458       SGS
                            ass. African Charcoal
Zimbabwe                    Durawood Products          Matabeleland North        24.850          SGS
Total                                                                           83.632
ASIA and PACIFIC
Malaysia                    Kumpulan Guthrie Berhad    Johor state                  251          SGS
Papua New Guinea            Bainings Community-Based                             12.500          SGS
                            Ecoforestry Project
Solomon Islands             Eulala Trust               Malaita Province                880       SGS
                            RAD Enterprises            Gerea Comm. Proj.               110       SGS
                            RAD Enterprises            West Kwaara'ae                  950       SGS
                            RAD Enterprises            Guadalcanal                   1.250       SGS
                            SWIFT                      Parara Island                   200       SGS
                            SWIFT                      Sikuni 2 Land                   205       SGS
                            SWIFT                      S-W Parara Island                30       SGS
                            SWIFT                      N-W Vella Lavella               200       SGS
                            SWIFT                      Sikuni 1 Land                   200       SGS
                            SWIFT                      Vangutu Island                  200       SGS
                            SWIFT                      Tomba Tuni Island                25       SGS
                            SWIFT                      Burabe, New Geogia               38       SGS
                            SWIFT                      Makuhae                           8       SGS
Sri Lanka                   Dipped products Ltd.       Kelany valley plant.          4.582       SGS
                                                 RPK Management Services           Kegalle plantations              5.476     SGS
                                                 Horana Plantations Ltd.           Horana plantations               2.668     SGS
Total                                                                                                          29.773
Rainforest Alliance (RA), Soil Association (SA), Scientific Sertification System (SCS), SGS Forestry (SGS)
Country/                                                   Applicant                     Location            Area           Certifier
Region                                                                                                        ha
EUROPEAN UNION
Belgium                                          State Forests                     Wallon region                  66.915      SGS
Sweden                                           Stora                             Ludvika region                309.000      SCS
United Kingdom                                   Darlington Hall Trust             Devon                               92      SA
                                                 Dyfed Wildlife Trust              Wales                              65       SA
                                                 Dutchy of Corwall                 Cornwall                          254       SA
                                                 Jac by the Stowl                  Lincolnshire                       0,2      SA
                                                 National Trust                    Essex                             240       SA
                                                 Camphill Village Trust            Gloucestershire                     13      SA
Total                                                                                                         376.579
OTHER EUROPEAN COUNTRIES
Poland                                            Directorate State Forests        Gdansk                        294.000      SGS
                                                  Directorate State Forests        Katowice                      635.000      SGS
                                                  Directorate State Forests        Szczecinek                    622.563      SGS
Total                                                                                                        1.551.563
LATIN AMERICA
Bolivia                                          Central Intercommunal             Santa Cruz                     52.000       SW
                                                 Campesina del O.de Lomerio
Brazil                                           Florestas Rio Doce                Minais Gerais state             1.734       SGS
                                                 Amacol Ltda                       Portel                         59.000       SW
Costa Rica                                       Portico S.A.                                 ..                   3.900       SCS
Honduras                                         Proyecto Desarr.Bosque Latif.     La Ceiba                       25.000       SW
Mexico                                           Plan Estatal Forestal, Chetumal   Quintana Roo                   86.215     SCS, SW
                                                 Union de Communid. For.           Oaxaca                         24.191       SW
                                                 Zapotecas-Chinantecas
Total                                                                                                         252.040
NORTH AMERICA
USA                                            Big Tree Lumber Company           California             2.700     SCS
                                               Collins Pine Company              California            39.000     SCS
                                               Hardwood MacKenzie Co             California             4.800      SW
                                               Kane Hardwood, Collins Pine       Pennsylvania          47.000     SCS
                                               Keweenaw Land Association         Michigan              63.000      SW
                                               McCellan Mountain Ranch           California               121      SW
                                               Menominee Tribal Enterprise       Wisconsin             95.000    SCS, RA
                                               Seven Islands land Co             Maine                364.000     SCS
                                               Jean Stam Property                Washington                3,6     SW
                                               Two Trees Forestry                Maine                  3.557      SW
                                               N-E Ecologic. Sustainble Timber   New Hampshire          1.360      SW
                                               Keith's Meat Market               California               364      SW
Total                                                                                               620.906
GRAND TOTAL                                                                      54 forests       2.914.493
Soil Association (SA), Scientific Sertification System (SCS), SGS Forestry (SGS), Smart Wood SW