Promoting sustainable forest management and a competitive forest industry in Peru
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- Beryl Wilkerson
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1 Financed by ProMadera project Within the framework of the Contribution to the Environmental Objectives of Peru programme (ProAmbiente) Promoting sustainable forest management and a competitive forest industry in Peru
2 Service Package 1: Support to reach FSC Controlled Wood Certification Rationale FSC 1 Certification in Peru goes back to 2005 when a community managed forest of hectare in Ucayali received the first FSC certificate. In 2006, the first private company in the same region reached FSC certification for a hectares forest concession. Through the combined forces of various innovative forest companies, national and international cooperation projects, Peru reached a total FSC certified area of just over hectares in Due to various factors and challenges in the Peruvian forest sector, a number of companies have terminated their certification (see figure 1) FSC forest area in Peru (ha) ProMadera sees FSC Controlled Wood as a low investment option for those forest companies that want to sell reasonable volumes of timber on the international market that requires timber from verifiable legal sources. Increasingly also the national market is asking for timber from verifiable legal sources. Besides, FSC Controlled Wood is a first recognition for good forest management practice, and a significant step towards reaching FSC 100%. Peruvian law allows producers of Controlled Wood a discount on the harvesting fee that concessionaires have to pay yearly to the state. Controlled Wood Controlled Wood (CW) was introduced by FSC 1 as a strategy to increase the volume of FSC certified wood in the market. Its producers apply standard FSC STD and generate an input to companies that work with FSC 100%. The mixed product (up to 30% CW), called FSC product from Mixed Sources, may bear the FSC label with the same name. Both import regulations in the EU and the US (EUTR and Lacey act) acknowledge the verified legal origin of Controlled Wood products FSC CW (Controlled Wood) FSC 100% FSC Terminated ProMadera supports forest companies that want to reach FSC Controlled Wood certification in acquiring knowledge on the certification requirements (5), in preparing the forest company and its personnel for the FSC audit, and in lifting Corrective Action Requests after the audit. Essential requisites to obtain a Controlled Wood Certificate are: Figure 1: Development of FSC 100% and FSC Controlled Wood area in Peru from 2005 until 2015 IDH financed programmes, like The Amazon Alternative (TAA) and the Peru Tropical Timber Programme (PTTP), started supporting Peruvian forest companies reaching FSC Controlled Wood Certification as of So far two Peruvian companies work with Controlled Wood (approx ha). Because of its interesting cost/benefit ratio, various other forest companies have shown interest to do the same. The timber is of verifiable legal origin The timber originates from forest where high value conservation attributes have been identified and are monitored The timber does not originate from forest areas that are in danger of land use conversion The forest area doesn t conflict with public or indigenous rights The trees are not genetically modified (forest plantations) 1 Forest Stewardship Council in Bonn, Germany:
3 In order to reach the above-mentioned requisites ProMadera supports forest companies in the following technical issues: Planning of forest management (including inventories) Design of forest operations (including road network) Improving harvesting skills (including reduced impact logging, safety measures, etc.) Electronic timber traceability systems Costs analysis of forest operations, log transport, etc. Others relevant forest management issues forest company, ProMadera can co-finance up to 50% of the costs of: High Value Conservation Forest study The review and preparation of company documents and operation manuals Training of company field staff and other personnel A community relations staff or consultancy The FSC audit implemented by an accredited FSC Certification Body 2 Time period and costs The time investment to reach FSC CW certification depends of the size of the forest concession, the complexity of the forest operation processes, and above all on the existence of interactions between the forest concession area and local communities. If no mayor legal issues are identified, usually 6 to 12 months is sufficient to reach the FSC CW certificate. Cost of a FSC CW certification depend mainly on the accessibility of the forest area (travel time), the size of the forest concession area, and the audit fee charged by the Certification Body. Experience shows that an average FSC CW certification costs no more than Peruvian soles during the first year, including both indirect and direct certification costs. Costs to maintain the FSC certificate during the following years does not exceed 35% of that amount. 2 With presence in Peru: Control Union, SCS, SGS, Smartwood and TÜV Nord
4 Service Package 2: Support to mantain the FSC Certificate Rationale A study carried out by GIZ on reasons for certified companies suspending or losing their FSC certificate shows that, besides market access, often certain technical or social factors need additional attention. ProMadera recognizes the existence of these bottleneck issues and the related elevated costs of the FSC certificate also in the years after obtaining the certificate. Therefore, already certified companies (both FSC 100% and FSC CW) may cooperate with ProMadera in lifting observations and preparing for the annual FSC audit. ProMadera support under this service package consists Forest inventory techniques and skills Permanent sample plot design and implementation High conservation value forest evaluation and monitoring Community relationship management, conflict resolution Advice on improving labor conditions and working safety Other relevant issues related to maintaining the FSC certificate forest company, ProMadera can co-finance up to 50% of the costs of: Sample plot design and implementation High conservation value forest study Community relationship fieldwork A consultancy on improvement of working conditions and safety A training on reduced impact logging Other relevant issues related to maintaining the FSC certificate Service Package 3: Support to reach FSC Chain of Custody Certification Rationale Forest industries that want to process and sell FSC certified timber (products) need a FSC Chain of Custody (CoC) certificate 3. Through an unbroken chain of Forest Management certification (both FSC 100% and FSC CW) complemented with the Chain of Custody (CoC) certification, FSC maintains its system credibility. In Peru at present about 30 forest industries 4, mostly Lima based timber exporters, have a CoC certificate. They either work with FSC timber from their own forest or with FSC timber bought from FSC certified timber producers. These timber industries may mix FSC Controlled Wood with FSC 100% timber producing the FSC Mixed sources product. ProMadera aims at certifying key timber industries in each of the mayor timber regions in order to create CoC certified timber transformation opportunities for those certified (small) producers that don t avail of own timber transformation facilities. Creating FSC certified value chains will eventually increase certified timber volumes at both international and domestic markets. 3 Applying standard FSC STD See FSC certificate database:
5 Expert guiding the company through the preparation trajectory Consultant on labor issues and working safety Other relevant issues related to obtaining the FSC CoC certificate forest company, ProMadera can co-finance up to 50% of the costs of: as it helps them in complying with the necessary requirements for a Verified Carbon Standards (VCS) certification. From 2004 onwards (start of the forest concessions system in Peru), NGOs, international cooperation programmes, and conservation organizations have supported forest companies and communities reaching FSC 100% certification. Until now at least 25 forest areas ranging from hectares until hectares were certified. Currently 16 forest concessions or communities hold valid FSC 100% certificates. The remaining number was suspended or terminated (see figure 2). A consultancy for preparing the company for the CoC audit Training for company management staff and plant personnel on CoC certification CoC audit costs by an accredited FSC Certification Body. Other relevant issues related to obtaining the FSC COC certificate FSC forest area in Peru (ha) Time period and costs The time investment to reach FSC CoC certification depends of the size of the company and the complexity of the transformation process, and above all on the existing organizational and administrative structure of the company. Usually 4 to 6 months is sufficient to reach the CoC certificate. Costs for the first CoC audit for an average seize plant will normally not exceed US$3500. Service Package 4: Support to reach FSC 100% Certification Rationale Peruvian forest companies that want to export their products to European, USA, or the Australian market prefer to offer FSC 100% timber. In addition, foreign investors that invest in the Peruvian timber industry want to secure a green and positive image through working with FSC labelled timber. Also forest companies and forest communities that are planning to engage in carbon credit projects (e.g. REDD) prefer the FSC 100% Figure 2: Development of the FSC certified forest area in Peru ProMadera recognizes the existence of elevated effort and costs related to reach the FSC certificate under this FSC standard. Therefore, companies that aim at FSC 100% may cooperate with ProMadera in preparing for the FSC audit and are eligible for receiving co-financing. FSC Valid FSC Terminated Forest inventory techniques and skills Permanent sample plot design and implementation High conservation value forest management and monitoring Training on reduced impact logging Labor conditions and working safety Community relationship management Other relevant issues related to reaching the FSC certificate
6 forest company, ProMadera can co-finance for a selected number of companies up to 50% of the costs of: High Value Conservation Forest study The review and preparation company documents and operation manuals Training of company field staff and personnel A community relations staff or consultancy The FSC audit implemented by an accredited FSC Certification Body. Service Package 5: Support to International Market Linkages Background During the past five years Peru exported up to about a value of 160 million US$ of timber products each year to over 100 countries worldwide. Current main countries importing timber products from Peru are China (38%), USA (15%), and Mexico (15%). France is the most important European importer of Peruvian timber products (8%) 5. In 2014 the export share of FSC timber represents 3.2% for total exports and 26.4% of timber exports to Europe 6. As there is more demand for FSC timber in European countries then elsewhere in the world, ProMadera supports Peruvian FSC certified companies or companies that have access to FSC certified timber to connect them with the European timber market. Companies that qualify for export to the European market must produce products of high quality in sufficient volumes, offer their FSC certified products professionally, and should react flexible to European clients demands. Punctuality in delivery and reliability are regarded as more important factors by the buyer then the price. ProMadera helps Peruvian companies preparing for the export market through applying the 4Ps principles: Product, Price, Place and Promotion. When ready it helps connecting to the export market through participation in international wood fairs, buyer s missions and business round tables, amongst others. 5 ADEX trade data: Boletín forestal, April Data Aduanas Peru: PTTP interpretation.
7 Strategic partners: The German Import Promotion Desk (IPD) and The Sustainable Tropical Timber Coalition (STTC) The German Import Promotion Desk (IPD) is supporting forest companies in gaining market access in Germany, if legality and quality demands are fulfilled. FSC certified tropical timber is preferred on the German market as it can more easily fulfill the requirements of the European Timber Regulation (EUTR). IPD has already offered legality trainings, study tours and trade fair visits to selected Peruvian companies. Furthermore, IPD is planning to offer sales trainings for Peruvian companies as well as joint trade fair visits in Germany and buyer missions for European importers willing to buy FSC timber from Peru. Being established by The Dutch Sustainable Trade Initiative (IDH) in 2012, The Sustainable Tropical Timber Trade Coalition (STTC) is a European member driven platform of various actors related to the promotion, use and trade of certified tropical timber. ProMadera hopes to work together with this coalition that may be able to enhance the demand for FSC timber and timber from Peru even further. Marketing strategy development Product design Website improvement EUTR import requirements Receiving European buyers missions in Peru Business to Business matchmaking (B2B facilitation) Acquisition of second-hand machinery and equipment from Europe Developing lesser-used tree species potential (LUTS) Other relevant issues related to marketing to Europe forest company, ProMadera can co-finance up to 50% of the costs of: Visits to Timber Trade Fairs abroad Exhibiting at Timber Trade Fairs abroad Participation in Business Round Tables (Rueda de Negocios) English language trainings in Peru A short term commercial specialist in your company Other relevant issues related to marketing aimed at Europe Service Package 6: Support to National FSC Market Access Background An estimated 80% of all timber harvested and traded in Peru is used on the Peruvian national market. Short FSC boards and second quality FSC timber finds is way usually on the national market where for its price it has to compete with timber of the same species but without FSC label and often also illegal timber. This is not very profitable for a FSC certified company. On the other hand, especially in Lima, during the last years there is a growing demand for legal and sustainable timber. During the international Lima Climate Conference (COP 20), concerned public institutions, private sector companies and civil society organizations signed a declaration of intent called National pact for legal timber ( Pacto Nacional por la Madera Legal ) empowering Peru to trade and use only timber from verified legal sources from 2021 onwards. This underlines the need and willingness to work with timber from legal sources. Peruvian public procurement programmes like FONCODES are already pioneering with green public procurement criteria for school furniture that favor FSC timber providers. However, the paradox exists that FSC timber is neither sold as FSC timber in Lima, nor in other Peruvian cities. Many good willing and green projects that have tried in the past to acquire FSC timber, have failed for not availing, in time, of the FSC timber needed for their projects. Some companies now import FSC timber products from the USA, in order to satisfy their domestic clients. Another reality is that Peru presently imports more timber (mainly dried and standard seized Pine from Chile) than it exports from its own forests to abroad. Apparently, there is no sufficient link or match between the FSC timber supply from the Peruvian Amazon, and the consumers in the coastal regions, that want to work with FSC timber.
8 FSC sales points ProMadera wants to support those companies that want to become actively involved in concrete sales opportunities for FSC timber and FSC products on the national market (starting in Lima). The Vitrina concept 7 was designed and is presently being validated in order look for options to bridge this gap between supply and demand of FSC at the Peruvian national market. Where local private companies want to invest in a viable commercial solution to close this gap, ProMadera can support these entrepreneurs. Market intelligence Sales points development Product design Business to Business matchmaking (B2B facilitation) Developing Lesser Used Tree Species potential Based on a verifiable own financial contribution by private sector companies, ProMadera can co-finance up to 50% of the costs of: The promotion and improved visibility of FSC timber in Lima Implementation of a FSC outlets system aimed at domestic market FSC consumers Consultants hired by the private sector (FSC outlet design, FSC sales promotion, etc.) Other relevant issues related to a FSC outlet system in Lima The exact content of the technical and financial support under this service package will be determined in close cooperation with the private companies involved. 7 FSC Timber outlets, also implemented in Bolivia, under The Amazon Alternative German Cooperation, implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Central Office: Av. Los Incas 172, piso 6, El Olivar, San Isidro, Lima 27 Peru Tel.: Web: Design: Fábrica de Ideas Photos: Thomas J. Müller/El Taller: pp. 5, 8 (1, 3), Fabian Schmidt-Pramov: pp. 1, 3, 6, 8 (2) Year: For further information contact: Jeroen Ex - Technical advisor jeroen.ex@giz.de
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