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Governance key to achieving COP 26 forest goals, London seminar concludes

Nov 22, 2021 | FLEGT Market News, FLEGT Policy News

The headline-grabbing COP26 Declaration on Forests and Land Use pledged signatories to  halt and reverse forest loss and land degradation by 2030, while delivering sustainable development. The theme of a seminar at the World of Wood Festival in London (WOW) a week later, featuring presentations by the Independent Market Monitor (IMM), was that strengthening tropical forestry and timber trade governance is central to meeting that objective.

 The six-week WOW Festival coincided with COP26 and is co-organised by Timber Development UK (TDUK – formerly the UK Timber Trade Federation), the European Confederation of Woodworking Industries and other partners around the world. The aim was to underline the vital role legal and sustainable forestry and timber sectors – and general increased wood use – can and must play in combating deforestation and the climate crisis.   

 Alongside carbon benefits of wood-based construction and manufacture, the Festival spotlighted the critical importance to ensuring long-term maintenance of the forest and timber resource of improving timber trade governance, through a combination of regulatory enforcement and market incentivisation. It included messaging on FLEGT  and flagged up the new Tropical Timber Accord (TTA). The latter is being developed by TDUK with fellow trade bodies in timber consumer and producer countries worldwide. Also discussed at the recent seminar, it was officially unveiled by TDUK Chief Executive David Hopkins at COP26. It proposes a new international framework to help tropical countries strengthen legality performance and reward them for doing so with ‘green lane’ access to consumer markets globally.  

 The WOW seminar was titled ‘Global Forests need Global Governance’ and moderated by ITTO operations director Sheam Satkuru. It opened with a snapshot from IMM trade analyst Rupert Oliver of FLEGT Voluntary Partnership Agreement (VPA) countries’ timber trade set in the context of the global wood market.   

 In 2020 FLEGT VPA implementing countries, including Indonesia (the only country to have completed its VPA and start FLEGT licensing), accounted for 11% of global timber products trade. “And this share is rising due to the staggering rate of increase in exports, largely of furniture, from Vietnam to the US at the expense of China,” said Mr Oliver. “Currently this trade is running at $1 billion per month.”

 Underlining Viet Nam’s eagerness to consolidate this buoyant business, he added, is the recent far-reaching agreement it has just concluded with the US to further strengthen its timber legality assurance system (TLAS) and ensure illegal timber, both from Vietnamese domestic sources and imports, is barred from American supply chains. 

 Timber product exports from fellow leading VPA supplier Indonesia dipped 3% to $12 billion in 2020 as the pandemic hit trade worldwide, but are forecast to rebound 10% in 2021. The country, which started FLEGT licensing in 2016, saw an ‘encouraging rise’ in exports to the EU from 2017-19 and, while they declined 11% to $1.17 billion in 2020, they are expected to grow 10% this year. 

 Indonesia’s share of EU and UK markets has changed little recently due to greater increases in imports from  other sources. And, said Mr Oliver, bar some trade gains in niche products, there was ‘no strong signal of significant market benefits’ that could be attributed directly to FLEGT licensing.  However the FLEGT process had achieved considerable ‘reach and influence in global forest trade and needed to be built on’.

 Ostensibly, he added, FLEGT should also gain relevance as more countries and regions implement market legality requirements. At the latest estimate, such regulating importers accounted for 49% of global timber product trade and growing and 46% of Indonesia’s exports. 

 When assessing the significance of the FLEGT initiative, said Mr Oliver, the role of Viet Nam as a global timber processing hub and the importance of fellow VPA country Cameroon as a key player in African trade should also be particularly highlighted. Likewise recent steps towards TLAS implementation of Ghana and the Republic of the Congo.

 He concluded that FLEGT was a ‘slow burn, not a silver bullet’, but, with certain provisos, had potential to evolve.

 “Efforts to further develop VPA timber legality assurance systems must be responsive to significant competitiveness challenges,” he said. “VPA partner country progress also needs to be rewarded with concerted efforts to promote a favourable market position for licensed timber. That includes effective enforcement of EUTR, UKTR and similar legislation and positive communication of FLEGT’s contribution to sustainable forest management in partner countries.”

 Besides tracking trade flows and market impacts of FLEGT, IMM’s role, mandated in certain VPAs, also includes gauging market perceptions of the initiative and FLEGT licensing’s status in private and public sector procurement, green building schemes, codes of practice and other market related measures in the EU and UK.

 In the last five years, IMM correspondents in the five leading EU timber importing countries plus the UK have undertaken more than 700 interviews with operators, traders and other market players. Lead Consultant Sarah Storck said these trade surveys showed growing understanding among respondents of FLEGT VPAs and appreciation of their impacts on the ground in supplier countries. Most also said FLEGT licensing made importing from Indonesia easier and they valued the zero risk of infringing the EUTR it conferred.

 IMM also has trade correspondents in three VPA countries; Indonesia, Vietnam and Ghana. Their surveys found that timber suppliers felt FLEGT had improved forest governance.

 “Also 80% of respondents in Indonesia saw FLEGT increasing in importance in line with international growth in timber market legality regulation,” said Ms Storck.

 However, IMM survey respondents also felt there were key factors limiting FLEGT’s market   traction. One is that FLEGT is insufficiently communicated down the supply chain, or endorsed by government. An IMM study of FLEGT in public procurement in the EU 27 and the UK found the number of governments mentioning FLEGT in procurement policy had recently increased, but only from 18 to 21.

 Survey respondents additionally felt inconsistent enforcement of the EUTR across the EU undermined market uptake of FLEGT-licensed timber.

 “The fact that still only one country is issuing FLEGT licences also continues to be seen as limiting FLEGT’s relevance to buyers and its market development,” said Ms Storck.

That said, she added, many EU and UK survey respondents stated that they would give preference to FLEGT-licensed products where other commercial considerations were comparable. “So, it seems, licensing can be a competitive advantage where other procurement criteria are equal,” she said.

The IMM has also undertaken market sectoral studies on FLEGT awareness and perceptions. Perhaps the key takeout from the latest, a survey of paper and pulp sectors, is further evidence of the seeming paucity of communication of the initiative.  Author George White said a common view among respondents in the business in the EU and UK, which has total sales of 71 million tonnes of paper  annually and imported $375 million worth from Indonesia in 2019, was that the initiative was still little known in the paper sector.

 Respondents also indicated that there was a market hangover from Indonesia’s past poor record on deforestation, which FLEGT alone to date had been unable to allay. Consequently customers wanted the added assurance of certification for Indonesian paper products.

 A conclusion of the survey was that the EU+UK paper market is a potential vehicle to boost business to business communication of the FLEGT programme. But to realise that potential required increased efforts to raise awareness of its operation and benefits.

 “If it could be concluded FLEGT licensed paper and pulp from Indonesia was a force for good, improving silvicultural and conservation standards, a licence could play a role in opening or reopening European markets,” said Mr White. 

Mr Hopkins stresses that the TTA should not be seen as a criticism of FLEGT – in fact the latter has in part laid its ground work. But a limitation of  the FLEGT programme is that it is only recognised in the EU and UK, when other countries and regions, such as China, the US, Middle East and Japan are such major tropical timber consumers. This restricts its leverage with timber producers.

The proposition of the TTA is a global framework to drive improvement in tropical forest and timber trade governance, drawing in these major markets and others besides.

The premise, said Mr Hopkins, is that good governance leads to growth in a legal, sustainable timber trade and forests.

“This has been amply demonstrated in temperate areas,” he said.  “We believe it can apply to the tropical belt too.”

The proposal is that the TTA should be based on enforcement of national laws in tropical supplier countries, which meet a set of international criteria.

On the demand side, importer countries would give suppliers with these effective governance systems preferential market access ‘backed by communications and promotion through the supply chain’. An international secretariat would be developed to manage operation of the TTA, with its roles including ‘directing finance for tropical countries to enact reform’.

Mr Hopkins acknowledged that the TTA was still embryonic. But, in encouraging forest industry development and investment, which would create jobs and build skills, the concept had benefits over carbon and ecosystems payments and at COP26, he added, it received ‘good feedback and sparked imaginations’.

“Our key point was that without effective tropical forest and timber sector governance, you don’t get the trade. Without that trade you don’t get the finance coming in and without the finance what incentive is there to keep the forest standing?” said Mr Hopkins.

Click here for the full seminar and here for the slide presentations.