Forest certification and small forest enterprises: key trends and impacts - benefits and barriers..
There are important developments underway in the global forest industry that are changing the opportunities for both small and large scale operators. A major trend is the increasing consolidation of the forest industry—the 50 largest forest companies now process forty percent of the world's wood. This consolidation is taking place throughout the commodity wood sector, including pulp, paper, and all types of structural wood. Consolidation in the commodity wood sector is a response to the greater competition created by globalization of trade. The share of transport costs in the final cost of wood products has decreased as a result of the use of standardized containers and efficiencies in the shipping industry, making the origin of the wood less significant a factor than the other costs of production. New competition from distant producers puts pressure on companies and SFEs to reduce production costs to match their competitors. Two responses from the industry to the need to control production costs and be more flexible are (1) more investment in new technology and more sophisticated equipment and (2) streamlining the business by divesting the plantation and forest management operations and increasingly relying on specialized timber managers, including smallholder outgrowers or contract growers. Countries with good growing conditions for plantation wood have responded to the new demand of the industry by investing in plantation programs as an incentive to private industry and farmers. Chile, New Zealand, Argentina, Brazil and South Africa have all invested in plantations, and this has dramatically increased the supply of commodity wood in the marketplace. The hardwood sector or other higher quality wood product segments are less consolidated, with more opportunities to find competitive niches even for small-scale production. In this environment today's smallholder wood producers are making choices about sustainable forest production and about the advantages and/or feasibility of entering markets and market chains for certified wood products. This leads to a greater differentiation between two types of smallholder timber enterprises—those producing commodity wood from plantations and those producing hardwoods or wood from natural forests. For those smallholders who manage natural forests, there is increasing competition from less expensive sources of plantation wood in some of their traditional niches, particularly in Latin America where large quantities of plantation wood are maturing in the temperate regions of South America. For those smallholders who are outgrowers of plantation wood for community wood markets, cost of production is an increasingly important factor for their ability to stay in the marketplace as are the relationships with wood processing companies and other potential buyers. For those smallholders in the higher value timber markets – hardwoods and tropical woods for higher wood product grades and finished products – certification is attractive if it can help them to access niche markets that recognize their products' quality and, in the case of timber from natural forests, the multiple social and environmental values of sustainable forest management. In this competitive marketplace, smallholders seeking certification in response to demand from their buyers for certified raw material can find themselves subject to forest management criteria and standards that are not compatible with their scale of production or operation. With certified wood markets still in their early stages of growth, smallholders can find it difficult to justify the added expense of running certified operations. Smallholders in North America and Europe include those who manage forests for their non-market values and only harvest commercial products intermittently. The affordability of certification becomes an even greater issue to them. As forest certification moves into a second decade, the issues of equity and autonomy in forest certification standards are being approached in new ways. A global scheme with multiple stakeholders like that of the Forest Stewardship Council was not originally designed for the specific situation of small forest enterprises (SFEs) and currently struggles to streamline procedures for SFEs which would lower entry barriers. The FSC and its accreditation bodies have responded to the issue by introducing modifications to its auditing and assessment procedures geared to the smallholder producer. It has introduced group certification to spread the costs of evaluations and audits and "Small and Low Intensity Managed Forest" standards (SLIMFs) to simplify the certification process for smallholders and communities whose scale or frequency of harvest puts less pressure on the environment. Neither of these new options, however, has yet been able to significantly reduce the cost of forest certification in the developing countries or emerging economies. This review looks at case material from a range of international and national forest certification schemes to evaluate the emerging issues for smallholder certification. It finds that forest certification schemes following industry standards, like the Sustainable Forest Initiative (SFI) in the United States and the Programme for the Endorsement of Forest Certification (PEFC) standard have developed more organically around the significant participation of smallholders in timber supply as outgrowers and as natural forest managers. PEFC has paid special attention to smallholder cooperatives and tried to fit in their cost and operating structures, while SFI has partnered with the Tree Farm program to reach out to U.S. smallholders and help address the added cost of certification. However, the adaptability of these systems, especially PEFC, which depends on strong underlying regulatory structures, to developing country situations is not yet clear. For all of the forest certification schemes, the inherent barriers to smallholders continue to limit the percentage of smallholder producers seeking and achieving certification, particularly where there is very little presence of cooperative organization. As the most active certification program in developing countries, the ability of FSC to offer certification to smallholders is important. It is timely that those supporting FSC forest certification pay attention to the lessons learned in the other certification schemes on how best to incorporate smallholders. The time is now to effectively modify FSC procedures and standards need to be effectively modified to fit the reality of smallholder forestry. The lowering of entry barriers to smallholders is a topic of high importance for sustainable forestry, one that will only increase in importance as smallholders become a more significant source of wood supply. If smallholders and small forest enterprises are to be able to compete equitably with other types of producers in an expanding marketplace for certified products, all of the certification schemes need to find better ways to reach them and to modify their approach and criteria to lower these barriers.