Herry Purnomo

Green Economy and Timber Value Chains

Is it certified?

Is it legal?

Look at your table

• Is the major way to define sustainable forest management

• Leading to inclusive green economy of timber

Forest Certification

Green Economy

• Advocated after Rio+20 summit in June 2012.

• ‘The Future We Want’ (UN 2012):

• Poverty eradication

• Promoting sustainable patterns of consumption and production

• Protecting and managing natural resource development

UNEP 2011

Global Value Chains

• Globalized trade make fragmenting of production

• Linking to global value chains provide better market access

• SMEs are becoming global players

Kaplinsky and Readman (2000)

Global furniture trade US$ 130 billion

Indonesia’s share was about 1.5%, Malaysia 1.5%, Thailand 1% and Vietnam 4%, and China is the biggest.

Why furniture?

1. The most labor intensive industry in forestry – millions people

2. Real business -- $ billions

3. Dominated by SMEs – strength in numbers

4. Women play key roles

5. Stocking carbon outside forest and connected to everyone

Jepara Furniture

• 10% of Indonesia’s export - $110 million annually;

• 11,981 businesses; 0.9 million m3 wood annually

• Hit by global financial crisis in 2008

• Facing legality certification

– EU, USA and Australia

• Women paid less than men

Action research to improve SMEs through five scenarios:

1. Moving Up

– National and international trade exhibitions

2. Green Product: SVLK/TLAS (legality certification) and FSC

3. Small-scale producer Association

Furniture value chain governance

4. Collaborating Down

5. Furniture industry Roadmap 2014-2024: A district regulation will be issued by Jepara Parliament in July 2014

Certification process

• SVLK became mandatory – 21 December 2011 (Ministry of

Forestry Regulation P. 68/Menhut-II/2011).

• Trainings and facilitation for APKJ members

• APKJ members individually and by group obtained SVLK certification in June 2013.

• Pengeringan kayu

– Observasi kondisi pengeringan kayu di Jepara saat ini

– Pembuatan bagan pengeringan 10 jenis kayu

– Pembangunan demplot pengeringan dalam skala IKM di Jepara

– Pelatihan pengeringan kayu (2011, 2012, 2013)

Legality is a part of improving SMEs for capturing greater value added

Understanding cost and benefit for certified forest products

• Cost for producers

– TFT (+6%), FSC (30%), LEI (+10%), SVLK (1-3%)

• Willingness to pay more from consumers

– Forest products: +10-25% (Aguilar dan Vlosky, 2007)

– IKEA product (+16% in England), (+7.5% in Norway) (Veisten, 2007)

Buyer Perspective for certified furniture

Urban buyers (Wulandari et al. 2011)

Conventional 41%

Green23%

Greener20%

Greenest16%

0

5

10

15

20

25

30

35

40

1 5 10 15 20 25

Willingness to pay more (% )

Consumers (%)

Putro, 2010

Role of women

Potential impacts of actions in each scenario on women’s roles

Scenario Potential impact

Very

low

Low Medium Strong Very

strong

Score

Mode

Moving up 0 0 2 6 2 Strong

SME

association

0 0 3 7 0 Strong

Collaborating

down

1 0 1 8 0 Strong

Green product 1 0 3 4 1 Strong

HOW TO: Actions need to be designed specifically for women

MAIN IMPACTS

Improved incomes (statistically significant)

They produced certified furniture

Issuance of District Law (PERDA)

Example of small-teak plantation

Legality

District Law

Securing raw material Small-scale teak

Market penetration

Stocking carbon outside forest

Indonesia is leading in legality verification in ASEAN

• 5 million ha forests under SVLK FLEGT License

– It can be affected by BREXIT

• 5 million ha forests are certified by

– FSC (Forest Stewardship Council) – 2 million ha

– PEFC (Program for Endorsement Forest Certification) – 1 million ha

– LEI (Indonesian Eco-labelling Institute) – 2 million ha

5 million ha certified after 20 years is not good enough, how to move forward?

Brexit impacts on timber trade in Asia Pacific

• Economy

– Declining economy of UK and EU (2-3%)

– EU China Asia Pacific

• Politics

– Less support from UK in EU-FLEGT license negotiation

• Rattles EU-Asia Pacific timber trade

Green Economy and Timber Value Chains

1. Globalized trade and international processes -SDGs

2. Buyer driven

3. Legality and certification

4. Inclusion of SMEs

5. Multi-stakeholder processes – bottom up, government support and women participation

Thank You