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Using market forces to improve rural livelihoods and conserve smallholder forests   lessons in certification of smallholder community forests

Using market forces to improve rural livelihoods and conserve smallholder forests lessons in certification of smallholder community forests



Cecile Lachaux

Cecile Lachaux

Presentation for the conference on
Taking stock of smallholders and community forestry
Montpellier France
March 24-26, 2010



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  • Slide 1:My name is Cecile Lachaux, I work with the organisation ‘The Forest Trust’ or ‘TFT’ (formerly Tropical Forest Trust); and today I will be presenting on our paper entitled ‘Using Market Forces to Improve Rural Livelihoods; Lessons in Certification of Smallholder Forestry’ which summarizes some of our experiences working for the last 7 years on Forest Stewardship Council, or ‘FSC’ Certification of smallholders in the Tropics. I should mention that I am not the principle author of the paper, she was unable to attend the conference, but I am a contributing author and will do my best to answer any questions you might have later.
  • Slide 4So, following on that, the Goal of TFT’s Community Forest program is to facilitate communities and smallholders managing forests for timber to: implement international Best Management Practices for forest management, achieve FSC Certification, and link to international markets paying a price premium for certified wood.
  • Slide 5Thus far our Community Forest Program includes 6 projects worldwide, in 4 different countries; 3 in Indonesia, (*click* 1 in SE Sulawesi, *click* the 2nd in Central Java, *click* and the 3rd in Yogyakarta Province, also in Java). We have another project in *click* Laos, *click* 1 in Vietnam and *click* 1 in Brazil. We have also done scoping from projects which we did not end up implementing in Madagascar and China. The one in Madagascar was prevented due to a governance problem, there was a coup d’etat. The one in China has not yet secured funding, and we are still in scoping to determine how smallholders might be organized under Chinese law.
  • Slide 6As a quick overview of our projects, the projects in Indonesian and Laos all involve smallholders growing high-value timber, such as teak or Mahogany. In fact, three of the 4 projects are smallholders growing teak, and one is smallholders growing Mahogany. In each of the projects the smallholders are agrarian households, reliant on farming annuals as their primary source of income, and grow the timber as part of their agroforestry systems. So in these cases, timber is not their primary source of income, but rather a form of savings.In each of these projects, the smallholders planted the trees long before the project began—so we established certification projects in places where the farmers has already independently planted the trees, and where they had a long history of growing these species. This meant there was little risk of the timber species not being successful in the area, or not being culturally accepted. Also, since there was already a long history of growing the species, the project can work on documenting sustainable techniques for management that have already been developed in the area, as well as introduce new techniques for experimentation, as needed.
  • Slide 7The situation in Lao Cai Province, in northern Vietnam is slighly different. Here, farmers planted acacia mangiumon their smallholder plots as part of a ‘government afforestation/ greening’ program approximately 12 years ago. The trees are now nearing their harvest age, and the district government, who also manages its own Acacia mangiumplantations in the district, is preparing to buy from smallholders to supplement the wood it grows on government land. Here, there is less shared knowledge about the species management, and the risk that trees are not replanted is therefore higher. I should also mention that for all the projects in Vietnam, Laos and Indonesia; the size of the smallholder plots containing the trees is extremely small. It can range from as large as 15 hectares, to as small as 1/8th of a hectare, as we sometimes find in Java. So we are talking about extremely small plots of land here, and relatively poor households—although I wouldn’t characterize them as the ‘poorest of the poor’ because they do own land and have enough land to plant trees!
  • Slide 8In Brazil, the situation is quite different. Here we are working with smallholders who actually manage 100 hectares per family, and this is because that is the amount of land that the Brazilian government allows them to legally claim and manage. Of the 100 hectares they may legally claim, 20hectares may be cleared for agriculture, but the remaining 80 hectares are natural forest which must be managed as natural forest for production of timber and non-timber forest products. Since most of the settler or ‘colono’ families are farmers, many do not have any background in how to manage 80 hectares of natural forest sustainably for timber or NTFPs. As a result, we are working with a logging company, called ‘MAFLOPS’ , to help organize them into a group, so that a larger forest area may be collectively and sustainably managed for timber.
  • Slide 9To help you better understand our approach to Certification of Smallholders, I will use our first community forestry project, that of the KHJL in SE Sulawesi as a case study. Many of the experiences and difficulties we experienced in this first project are typical of what we’ve experienced in our later projects, which were able to build on the lessons learned here.In 2003, there was a high demand for teak among our members, especially those sourcing from factories in Indonesia. As a result, our staff were following our members’ teak supply chains to find out where the teak was coming from. Although most of it was coming from government plantations in Java, we also found a good deal was coming from Muna Island in SE Sulawesi.So we sent our staff to Muna to investigate the source, and there we found two main sources of the teak; one was District-owned plantations and the other was smallholders growing teak on the privately owned plots of 1-10 hectares.The District plantations were actually in the process of being destroyed by uncontrolled, large-scale illegal logging. The illegal logging operations were well-funded and well connected, and had the unofficial support of the District Government, who was likely getting some sort of kick backs. As a result, we definitely knew that there was no way we could work with the District government on sustainable forest management or FSC Certification!We did try for a few months to work with smallholders, though—but we were prevented from ever getting the project off the ground because the District government refused to issue them a harvesting license, and we refused to pay a huge illegal fee for the license. In this way, it was clear from the very beginning that Good Governance, or at least a government that is willing to issue harvesting licenses to its people, is a basic pre-requisite for a project of this kind.
  • Slide 10Although the project in Muna failed, we were also aware that there was teak coming from other parts of the SE Sulawesi province, and so we continued to scope out these sources until we came to the District of Konawe Selatan, on the main island of Sulawesi. Here, a very interesting project entitled ‘Social Forestry’, and funded by the UK Department For International Development, was underway. The goal of the project was to organize 36 villages surrounding a Provincial teak plantation into a cooperative which could be put in charge of managing the plantation. The plantation was already harvestable age, and was being rapidly depleted by illegal logging. The project had gotten as far as organizing the villages into a cooperative, with ‘forest community groups’ in each village, only to have the project stall because there was no Indonesian leglislation which would allow a cooperative to take over management rights for a plantation on government land. As a result, there was a ready-made structure for a project (great ‘social capital’!) that was in danger of falling apart quickly if something was not done. TFT worked with the local NGO who was running the project, called ‘JAUH’ to analyze what could be done. We discovered that, in addition to the state-owned teak plantation, most of the cooperative members also grew their own teak on private land, which they sold to travelling buyers. We all agreed that while the legislation for management of the state teak plantation was being processed, we could begin training the cooperative members in sustainable forest management practices using the teak they grew on their own private land. In this way, TFT’s first community forest project was started. We also learned an important lesson : that one should always explore what systems and structures already exist in a community or region, before starting the project, so that your project could build on the strengths that are already in place.
  • Slide 11Our general approach to the project was to meet with the member groups at the village and District level, and train them in the FSC Principles and Criteria—to translate these into simple terms that everyone could understand. Then we would faciliate discussions around (1) whether or not the farmers felt that they already met these principles, and if so how –or, if they felt they did not yet meet them, what could they all do to ensure that they did meet them. We also supplemented the meetings with information and trainings on what are considered ‘best management practices’ for teak, so that the farmers could also borrow from these as needed. Once the farmers had defined their own guidelines for best management, we helped them to document, or write these down. In all of our projects we have found that documentation is a major hurdle for most community groups, who do not have easy access to computers and are not accustomed to reading and writing long documents.All of the trainings we gave the groups were done in the field, through implementation of real activities. For example, trainings in safe harvest practices involved actually harvesting a series of trees while employing the safety considerations. Trainings in chain of custody monitoring involved marking and tracing wood that the cooperative would actually sell. In this way, the trainings were empowering because it gave participants the confidence to actually implement the skills—and gave us the opportunity to test the quality of the trainings we developed for the project. When confusions existed over legality rules, or getting contracters to implement the cooperative’s rules, we found that sitting all stakeholders down together to discuss the issue and then documenting the resulting agreement led to resolution of the vast majority of problems. We also began by focusing on only 12 of the 36 villages, so that we could test out the guidelines and trainings being developed on ‘pilots’ before scaling it up to include all of the villages.
  • Slide 12Some initial challenges that we faced, and which we find common to many of our projects include Lack of land certificates: In most of the countries where we operate smallholders do not usually hold title certificates for the land that the manage. To figure out how to determine ‘tenure rights’ we facilitate the members to define how they determine which families have the rights to manage which plots, and then help them document this. In the case of KHJL, most people had receipts for the property tax that they paid on their plots, so we were able to use these as proof of tenure rights for the plots. But every project a different solution has been developed. Quite often it is very difficult for smallholders to get the necessary harvesting and transport licenses—usually the procedures for issuing these are not clear even for the people issuing the licenses, since the regulations are usually created with large forest managers in mind, and then informally adapted for smallholders. In the case of KHJL, the harvest license was very expensive so we helped them pool funds among all the members, dedicate staff to push forward the processing, and TFT provided a short-term loan to help them to pay the fees for the first harvest license. We also discovered some unexpected positive impacts—by helping to organize village and district-level meetings, communication between farmers and their leaders began to improve, and they began to use these forums for discussing other pressing matters and finding resolutions to these, as well as the issues facing the project. The reviews of licenses and laws also often helped the government to understand where their laws were complex or conflicting, and how these should be adapted to better fit the smallholders’ needs.
  • Slide 22That is why it is so important to create a group structure through which the farmers can sell their wood directly to the factories, thus capturing the profit that was previously made by middlemen. However, not all the group structures for certification that have been developed are the same. This is because we facilitate the project participants to form a group structure that makes the most sense for their locality. So, in 2 of our projects—KHJL & KOSTAJASA, the group structure formed has been a locally-oned and managed cooperative. In one, Dipantara, it is an NGO-owned business that serves as the group structure. In both of the Socialist countries where we work, Vietnam and Laos, structures that are co-managed by local forestry departments and local village groups have been most appropriate. And in the case of Brazil, it is a forward-thinking logging company which will serve as the group structure.
  • Slide 13Setting up a more direct market link between factories and groups of smallholders is a key component of all of our community forestry projects, and part of the way we can help farmers get a higher price for their wood—by cutting out the middleman, in addition to achieving FSC Certification.We also provide important training to the community groups on how to calculate their operational expenses per cubic meter so that they can negotiate a price that will bring them a profit; how to manage contractors, such as chainsaw operaters or truck drivers; how to estimate their own capacity not only for production in terms of cubic meters, but also in terms of how long it will take them to harvest and deliver a certain amount; and then how to negotiate a sales contract with a factory so that the wood requirements are clear, and there are provisions for protection of the community group in case the factory decides to reject the wood or not pay up (which has happened multiple times!)Finally, we facilitate the community to ensure that a chain of custody system is in place and implemented, so that every piece of wood they sell can be traced back to the member’s plot it came from. And how to meet every legal requirement at each stage of production, to ensure that all the wood they sell is 100% legal. In the case of KHJL, by taking this approach, they successfully negotiated with a factory for a price which allowed the members to sell their wood for 50% more than the price they received selling it to a local middleman! And this was before they became FSC Certified!
  • Slide 14Once they had made a few sales, and were confident with implementing the system, they went through an FSC Assessment, and became FSC Certified in May 2005. Now, almost 5 years later, the cooperative has grown to include 28 villages, over 750 members, and has maintained its FSC Certificate through each annual audit.
  • Slide 15The FSC certification has brought a number of benefits to the cooperative. First, it helped them get another price jump of an additional 50%, and has helped them to maintain a price for their teak that is consistently 25-100% higher than the price offered by middlemen.Second, it has helped them link to factories that might not otherwise want to risk buying from such a small vendor, but who seek out the cooperative due to its FSC Certified teak.Third, the cooperative now has a much easier time getting its harvesting and transport licenses, since the FSC Certification has brought good press to the District Forest Department, and been recognized for excellence by Indonesia’s national forest department. Finally, leaders of the cooperative are now being invited to sit on various government panels and working groups, or speak at conferences, to share their opinion on issues affecting smallholder wood growers. The certification has thereby brought opportunities to greatly broaden the influence and world view of cooperative members.
  • Slide 16Based on the success of the KHJL cooperative, we decided in 2006 to test out whether or not a similar project could work in Kebumen District of Central Java with Mahogany growers. We became interested in this also based on the demand of TFT members for mahogany, and the discovery that factories in Java were getting large amounts of the wood from smallholders in this district. We started this project out from scratch—this time organizing the village forest groups, and facilitating them to form their own cooperative structure. In 2008 they legally registered their cooperative under the name ‘KOSTAJASA’. And last year, in 2009 they became FSC Certified, for the 10 ‘pilot’ villages, with more than 500 members. However, this is growing rapidly since once a group structure is formed with rules, the group can add as many members as it wants, as long as they all agree to follow the rules, and the group has the capacity to monitor and enforce them. Thus, these numbers should not be considered static.
  • Slide 17Based on the success we were having in Indonesia, in 2007, based once more on a members’ request, we visited LuangPrabang, a Province in Northern Laos, to look into the possibility of starting a community forestry project there. We were able to partner with the Lao government, international development agencies like SIDA & JICA, and WWF to form a coalition for implementing this first project; and the program was launched in 2008.Last year, in 2009 the village group made its first wood sale, and formed a group structure, which will be co-managed by farmer-led groups at the village level, and a co-managed multi-village structure at the Provincial level. We are on track to help this group structure achieve FSC Certification this year.
  • Slide 18In late 2007 we also did a scoping visit to Lao Cai District, in Northern Vietnam, to explore the options for group certification of smallholder Acacia mangium, once more based on the market demand of our members. Based on this and subsequent visits, we agreed to work with the District Forest Department on setting up a group structure for certification of both the Acacia coming from the government plantations, as well as that from surrounding smallholder plots. However, in early 2009 the members previously buying wood from this source found alternative Acacia sources, and the project has thus been greatly delayed due to lack of market demand for the FSC Certification. This only highlights the importance of market demand to project success.
  • Slide 19Also in 2007 we were approached by an Indonesian NGO, called ‘Dipantara’ which was working with smallholders on agroforestry management in Yogyakarta Province (in Java). They worked with many farmers growing teak, and since the demand for teak among TFT members was still extremely high, we agreed to work with them on setting up a structure for group certification. In this case, we helped the NGO also register a business arm, and trained the NGO to work with farmers to form village-level groups, and create their own guidelines for sustainable teak management. The NGO will manage the group structure and membership, as well as carry out the business operations of buying from the members and selling to the factories. In late 2008 they made their first factory sales, already improving prices for local people by 25%, and they are on track to achieve FSC Certification late this year or early next year, 2011.
  • Slide 24Looking ahead, TFT plans to continue to support FSC Certification of smallholder forestry based on our member demands, but we would also like to be able to partner with more NGOs or businesses which are already operating in source areas, rather than forming entirely new organisations.To achieve this, we are working on a simple handbook for Smallholder Certification which NGOs or businesses can use to learn about how to develop their own group structures, and their own guidelines and rules to meet FSC Principles and Criteria. We are working on training modules so that TFT can intensively train interested NGOs or businesses on how to carry out these projects, as well as provide monitoring and mentoring support in the field. Finally, as part of the partnership, TFT can help the group structures link to TFT members’ supply chains, thereby supplying the necessary market link. We are also exploring the possibility of labelling wood from smallholders in the market place as ‘community wood’, so that consumers know when they are buying products using wood originating from smallholders. And FSC is working with Fairtrade International to explore the possibility of a joing FSC-Fairtrade label for wood, which could bring extra price premiums to smallholders. Finally, as more and more plywood factories in Indonesia, China and other parts of the world begin to transition from using natural forest timber to timber from smallholder trees, we are hoping to work with plywood factories on how to set up group certification of Albizia, Gmelina, and other plentiful fast-growing species that smallholders typically grow.
  • Slide 25I hope this presentation has been able to give you a quick idea of the work we are doing and the types of issues we are encountering. Thank you for your kind attention.

Using market forces to improve rural livelihoods and conserve smallholder forests   lessons in certification of smallholder community forests Using market forces to improve rural livelihoods and conserve smallholder forests lessons in certification of smallholder community forests Presentation Transcript

  • Using Market Forces to Improve Rural Livelihoods
    and Conserve Smallholder Forests;
    Lessons in Certification of Smallholder Community Forests
    25th March 2010
  • Linking Business with Responsible Forest Management
    The Forest Trust (TFT)
    A Non-profit company registered in UK
    Started in 1999
    A Membership Organization
    Focus on Forest Industry & Trade
    Financed by Members & Donors
  • TFT Buying Members
    External Funding Partners
    TFT Supplying Members
    (Wood factory)
    TFT Forest Partners
    (Forest Concessions & Communities)
    Financial Support
    Advice, guidance, and technical support
    Purchase payment
  • Community Forest Program
    Goal: To facilitate communities and smallholders managing forests for timber to:
    Implement international Best Management Practices for forest management,
    Achieve FSC Certification, and
    Link to international markets paying a price premium for certified wood.
  • Progress to date
    Existing Community Forest Projects; 6 Worldwide
    3 in Indonesia
    1 in Laos
    1 in Vietnam
    1 in Brazil
    In Scoping or Development
    1 in China
    1 in Madagascar
  • Indonesia & Laos
    Independent smallholders planting high value wood (teak and mahogany) on private plots
    Agrarian households; agroforestry systems
    Wood planted on farmers’ own initiative
    Long history of cultivation of these species by smallholders
  • Vietnam
    Acacia plots planted on private smallholder land
    Part of government ‘greening’ initiative
    Government forest agency buying wood from smallholders
  • Brazil
    Settlers (colonos) receiving 100 ha natural forest from government
    80 ha to be managed as forest
    20 ha for agriculture
    Natural forest managed as a contiguous unit; contracted to logging company MAFLOPS
  • How it got started; KHJL Case Study
    2003: High demand for certified teak among garden furniture factories in Indonesia
    Exploration of teak sources in SE Sulawesi
  • SE Sulawesi; Konawe Selatan District
    Pre-existing program aimed at community management of state teak plantation
    Pre-existing social capital of a 36 villages organized into a cooperative
    Farmers growing teak on their private land
    Local partner ‘JAUH’ (JaringanUntukHutan)
    Build on the existing strengths, or social capital of the location in which you start a project
  • Approach
    Facilitate farmers to agree on group guidelines and rules for management
    Empowerment through action-oriented trainings (such as forest inventories, chain of custody, accounting, contract negotiation)
    Help with documentation
    Bringing stakeholders together; farmers, government officials, market actors
    Pilot first, then scale up
  • Initial Challenges
    Legality & Land Tenure
    Lack of land certificates
    Harvesting License Expensive & bureaucratic
    Unexpected Positive Impact
    Used receipt for payment of land tax + letter from Head of Village
    Organized large number of farmers to spread out cost (>500)
    Dedicated cooperative staff to process license
    Short-term loan from TFT
    Better engagement between community members and government
    Increased understanding of the laws among farmers AND local officials
  • Large Wood trader owning multiple sawmills & log yards
    Medium Wood traders 135 total; 50 permanent & 85 non-permanent
    10-25 small wood traders per medium traders; or approx. 2,300 people
    tens of thousands; throughout Java
    Complex Supply Chains
  • Trends: Defining a Group Structure
    Cooperative’s All- Member Meeting
    2 of 6 (KHJL & KOSTAJASA in Indonesia) are cooperatives
    1 (PT Dipantara in Indonesia) is an NGO-owned business
    2 (Vietnam & Laos) are co-management structures between local government and local communities
    1 is a logging company (Brazil)
    KHJL elected leadership council
    Village farmer group
    Hired Staff; such as accountant, secretary & forester
  • Market Linkage
    Selling as a group to overcome middlemen
    Calculating expenses per cubic meter
    Contracting for transport & sawmill
    Estimating time required
    Negotiating a Sales Contract; down payments
    Ensuring Chain of Custody was applied, and wood was 100% legal
    Result: Price immediately increased by 50%
  • KHJL
    12 villages Assessed February 2005
    FSC Certified!– 20 May 2005
    2010 28 villages,; 750+ members; FSC certificate maintained
  • Benefits of Certification
    Price Premium
    Link with appropriate market;(small volumes ok; commitment to FSC & CSR principles )
    Increased credibility in the eyes of government & market
    Increased access to information, & inclusion in national policy discussions
  • Replication of the ApproachJava Mahogany Program
    2006 began program to certify mahogany smallholders in Kebumen, Central Java, based on demand from TFT member
    • 2008 KOSTAJASA mahogany cooperative formed
    • 2009 Achieved FSC Certification; 10 villages, 500+ members
  • LuangPrabang Teak Program; Laos
    2007 Scoping Visit
    2008 Program Launch with partners SIDA, JICA, WWF & Laos government
    2009 first wood sales; formation of co-managed group structure (farmers & provincial government)
    Expected Certification 2010
  • Lao Cai District, Vietnam
    Scoping in late 2007
    Signed MOU to work with the District Forest Department on group certification for surrounding smallholder acacia + government acacia plantations
    Delayed due to lagging market demand
  • Central Java Teak; Dipantara
    NGO focused on empowerment of smallholder forestry
    Now developed business largely owned by local communities; aimed at group certification and improving local prices
    Started 2007; expected certification 2010
  • Moving Forward
    Developing a Smallholder Certification Handbook with trainings for how other NGOs can facilitate similar projects; partner with TFT for market linkage
    Exploring possibilities of ‘community wood’ labels or FSC-Fairtrade
    Options to work with plywood factories
  • TFT Community Forest ProgramSustainable Forests, Improved Livelihoods, Good Governance