2016 ANNUAL REPORT

The Borneo Initiative FoundationPublic version

IntroductionThe Borneo Initiative is a Dutch non-profit foundation

established in 2008 with offices in The Netherlands

and Indonesia. The Borneo Initiative operates in

Indonesia in partnership with APHI (Indonesian

Forest Concession Holders Association).

With this public version of the 2016 annual report,

The Borneo Initiative (TBI) aims to inform a broader

public about its work. This version is fully based on

the financial statements 2016 as externally audited

and approved by Baker-Tilly-Berk accountants.

The Borneo Initiative operates as a platform that en-

hances cooperation and synergy among sustainable

forest management initiatives especially those ope-

rated by TFF, TNC, GFTN, APCS and Wana Aksara.

Therefore, any achievements mentioned in this report

are the result of the combined efforts of these plat-

form partners.

Mission and visionThe continued loss of tropical forests is a global con-

cern when it comes to biodiversity conservation, the

prevention of carbon emissions, and the defence of

land rights of forest dwelling communities. Globally,

Borneo is one of the last remaining intact forest

blocks with its 35 million ha of tropical rain forest.

WWF conducted a campaign for a green Heart of

Borneo in 2005, and this concept became institu-

tionalised in 2007 via the so-called heart of Borneo

Declaration signed by the governments of Indonesia,

Malaysia and Brunei.

The Borneo Initiative takes its inspiration from the

Heart of Borneo campaign. Its mission is to halt the

process of forest degradation and deforestation

in Borneo via the promotion of sustainable forest

management in and around the Heart of Borneo,

forming a so-called ‘green belt’ around the core area.

Ultimately, as from year 2020, the Heart of Borneo

core area and the sustainably managed boundary

area must connect via eco-linkages to other protec-

ted areas or sustainably managed forest areas on

Borneo, forming a future eco-network.

ApproachThe Borneo Initiative aims to counteract forest de-

gradation and forest loss on Borneo via promotion

of forest certification and international trade of cer-

tified forest products. Before The Borneo Initiative

became operational, the FSC®-certified forest area in

Indonesia amounted to 0.9 million ha. The Borneo

Initiative targets a growth of the certified forest area

of 4 million ha by the end of 2017, up to 6 million ha

by the end of 2020.

The Borneo Initiative has a business focus and mainly

supports forest concessionaires managing natural

forests, but participants also include state-owned

companies and forest plantation companies, as long

as these can meet criteria of scale, feasibility and

market relevance. The Borneo Initiative offers forest

concessions support via funding, transfer of know-

how and market linkages. It provides a 2 to 3 $/ha

subsidy to forest concessions to cover part of their

costs of certification of forest management.

With the funding provided, forest concessions need

to hire a certification coach. These coaching services

are provided by TFF, GFTN, TNC, APCS and Wana

Aksara who also dedicate their own resources to this

joint initiative. Specific training or studies are provi-

ded by a list of selected subject matter experts who

are selected by the forest concessionaires via a bid-

ding process.

The Borneo Initiative’s unique characteristics are its

scale of operations; its fast-track approach to certifi-

cation; substantial direct financial support to forest

concessions; integrated with promotional activities

aimed at the establishment of new international mar-

ket links for Indonesia’s certified wood processing

industries.

With current resources, the focus is on Indonesia, and

Kalimantan in particular. But, to achieve scale and to

build a track record, participants have included forest

concessions from other parts of Indonesia too e.g.

Papua, Moluccas and Sulawesi. With time, the inten-

tion is to extend support into Malaysian Borneo too.

Forest certificationIn 2016, The Borneo Initiative signed two support

agreements with Sumalindo Lestari Jaya Units II

and V (267,600 ha 61,645 ha) aiming for full FSC and

Controlled Wood certification in 2017. Interestingly,

SLJ V is a re-entry into our program. On the other

hand, four companies had to quit the program before

achieving a certification result. In sum, at the end of

December 2016, The Borneo Initiative was suppor-

ting 38 forest concessions with 3.6 million ha, close to

our target of 4 million ha. And, given a forest area of

about 14 million ha that is still under active logging

in Indonesia, it follows that The Borneo Initiative is

supporting asbout one-quarter of all active logging

concessions. This is a major achievement by itself and

has confirmed TBI as the leading certification pro-

gram in Indonesia.

In 2016, 3 new FSC certificates could be celebrated,

with a total area of 490,521 ha plus one new Control-

led Wood certificate (169,170 ha). This raised the

Borneo Initiative’s total certification outcome to 19

FSC certificates and four Controlled Wood certifi-

cates, together 22 certified companies with 2.25 mil-

lion ha (one double certification). These 19 FSC certi-

ficates cover 2.0 million ha of natural forest, implying

that TBI has achieved 50% of its target and has more

than doubled the previous existing FSC certified fo-

rest area in Indonesia.

Another 16 forest concessions are still implementing

their certification action plans, whereby TBI expects

to reach at least 3 million ha extra FSC certified area

by December 2017, which will mean a compliance of

75% of target.

Looking beyond the current group of participants,

TBI sees a sustained interest in its support program.

TBI has a waiting list of 11 companies with 1.3 million

ha so the target of 4 million ha is still feasible as a

minimum, given a longer time span, and provided

that extra funding can be accessed.

Milestone achievements The Borneo Initiative

• Supporting 38 forest concessions with 3.6 million ha

• 19 full FSC certificates, 4 CW certificates

(1 double certification)

• Together 2.25 million ha – all natural forest

• FSC certified area in Indonesia from 0.9 million ha

in 2009 to 2.3 million ha in 2016 (net increase)

• The first ever FSC certificates for mangrove forests

globally

• The first FSC-certification in Papua

• The first FSC-audits ever for merbau concessions

in Papua

• The first FSC corporate group certification scheme

in Indonesia

Forest concessions supported by TBI (Dec 2016)

Actual

Certified FSC CW FSC FM/CoC Certification

Name concession Area (ha) Area (ha) Coach PHPL certificate certificate status

1 PT Sari Bumi Kusuma Delang 60.700 41.445 TFF average 2013 terminated

2 PT Wanasokan Hasilindo 49.000 49.000 TFF average 2013 terminated

3 PT Suka Jaya Makmur 171.340 171.340 TFF good 2011 valid

4 PT Sarmiento Parakanca Timber (Sarpatim) 216.580 216.580 TFF good 2011 valid

5 PT Narkata Rimba 41.540 41.540 TFF good 2011 valid

6 PT Belayan River Timber 97.500 97.500 TFF good 2012 valid

7 PT Roda Mas Timber 69.330 69.330 TFF average 2012 valid

8 PT Dwimajaya Utama 127.300 127.300 TFT good 2012 valid

9 PT Cloudy Bay (PNG) 148.900 148.900 TFF - 2013 terminated

10 PT Indexim Utama 52.480 50.734 TFF good 2013 valid

11 PT Ratah Timber 97.690 85.261 GFTN average 2013 valid

12 PT Gema Hutani Lestari 148.450 148.450 TFF average 2013 valid

13 PT Kandelia Alam 18.130 18.130 GFTN average 2015 terminated

14 PT Bina Ovivipari Semesta 10.100 10.100 GFTN average 2015 2015 valid

14 Certification achieved, support agreements completed 1.309.040 1.275.610

15 PT Kemakmuran Berkah Timber 82.810 82.810 TNC average 2012 valid

16 PT Carus Indonesia 72.170 72.170 TFT good 2014 valid

17 PT Bintuni Utama Murni Wood Industries (BUMWI) 82.120 82.120 GFTN good 2015 valid

3 Certified, still receiving support with annual audits 237.100 237.100

18 PT Gunung Gajah Abadi 74.980 74.980 TNC good 2015 valid

19 PT Bina Balantak Utama 298.710 298.710 TFF good 2016 valid

20 PT Telaga Bhakti Persada 63.405 63.405 TFF good 2016 valid

21 PT Wijaya Sentosa 130.755 130.755 WA average 2016 valid

4 Fully certified, preparing for first annual audit 567.850 567.850

22 PT Wapoga Mutiara Timber Unit II 169.170 169.170 TFF average 2016 valid

1 CW certified, preparing for full FSC 169.170 169.170

23 Sumalindo Unit V 61.645 APCS average

24 PT Rizki Kacida Reana 55.150 TNC good

25 PT Inhutani I Meraang 70.700 TNC good

26 PT Inhutani II Malinau 29.040 TFF average

27 PT Graha Sentosa Permai 44.970 WA good

28 PT Utama Damai Indah Timber (UDIT) 49.250 TNC good

29 PT Karya Lestari 49.123 TNC good

30 PT Gorontalo Citra Lestari 46.170 TFF VLK

31 PT Gema Nusantara Jaya 29.750 TFF average

32 PT Sumalindo Lestari Jaya IV 63.550 GFTN good

33 PT Wanabhakti Persada Utama 44.402 TNC average

34 PT Aditya Kirana Mandiri 42.700 TNC average

35 PT Hanurata Papua Barat 234.470 TFF good

36 Sumalindo unit II 267.600 APCS average

37 PT Inhutani II Semamu 71.375 TFF average

38 PT Multi Wahana Wijaya 107.740 TFF average

16 Certification action plans under implementation 1.267.635

38 Grand total Dec 2016 3.550.795 2.249.730 269.715 1.823.085 valid

37 Grand total Indonesia Dec 2016 3.401.895 2.100.830 269.715 1.823.085 valid

Legend

FSC certified concessions (1.53 mil. ha.)

FSC in progress concessions (0.90 mil. ha.)

FSC decertified concessions (0.14 mil. ha.)

Other logging concessions (16.24 mil. ha.)

Forest plantations (15.60 mil. ha.)

Kalimantan national parks (1.3 mil. ha.)

Forest Cover Kalimantan (28.2 mil. ha.)

Non Forest Kalimantan (22.5 mil. ha.)

HoB boundary (modified by TBI) 23.27 mil. ha

Kalimantan total area: 53.7 mil ha

1. Logging concessions from APHI 2016

2. Forest plantations from MoEF 2013

3. Forest cover from MoEF 2015

4. Conservation area from MoEF 2016

The Borneo Initiative Status Map 2016FSC concessions in Kalimantan

ID NAME PROGRESS LICENSE CERTIFIED AREA (HA)

1 Pt Inhutani Ii Semamu Progress 71.375 2 Pt Inhutani Ii Malinau Progress 48.300 3 Pt Rizki Kacida Reana Progress 55.150 4 Pt Sumalindo Lestari Jaya Iv Progress 100.000 5 Pt Aditya Kirana Mandiri Progress 42.700 6 Pt Wanabhakti Persada Utama Progress 44.402 7 Pt Karya Lestari Progress 47.063 8 Pt Narkata Rimba Fm/Coc 41.540 9 Pt Belayan River Timber Fm/Coc 97.500 10 Pt Sumalindo Lestari Jaya Ii Progress 267.600 11 Pt Kemakmuran Berkah Timber Fm/Coc 82.810 12 Pt Roda Mas Timber Fm/Coc 99.520 13 Pt Inhutani I Meraang Progress 70.700 14 Pt Sumalindo Lestari Jaya V Progress 61.645 15 Pt Ratah Timber Fm/Coc 93.425 16 Pt Sari Bumi Kusuma Delang Decertified 75.200 17 Pt Carus Indonesia Fm/Coc 73.281 18 Pt Graha Sentosa Permai Progress 44.970 19 Pt Dwimajaya Utama Fm/Coc 127.300 20 Pt Utama Damai Indah Timber Progress 49.250 21 Pt Gunung Gajah Abadi Fm/Coc 81.000 22 Pt Sarmiento Parakanca Timber Fm/Coc 216.550 23 Pt Suka Jaya Makmur Fm/Coc 171.300 24 Pt Wanasokan Hasilindo Decertified 49.000 25 Pt Indexim Utama Fm/Coc 52.480 26 Pt Kandelia Alam Certified 18.130 27 Pt Bina Ovivipari Semesta Fm/Coc 10.100 28 Pt Sari Bumi Kusuma (Unit I And Ii) Fm/Coc 208.300 29 Pt Erna Juliawati Fm/Coc 184.206

Total FSC Progress 903.155 Total FSC Certified 1.539.312 Total FSC Decertified 142.330

Market linksThere are no specific measurements on the number

of companies reporting increased sales to Europe or

USA, nor on FSC trade flows. The status of December

2016: 15 Dutch accounts, 20 European accounts and

24 USA accounts.

TBI maintains relations with a group of companies in

NL, Europe and US but the concept of a ‘coalition of

the willing’ still needs real operationalization. The

idea is to have a circle of business contacts on the

market side that prioritizes FSC-certified wood

products in their sourcing policies and who together

can absorb the target volumes according to the target

levels as indicated. The Borneo Initiative will service

these business accounts in the Netherlands, Europe

or USA with information, arrange meetings whenever

traders are visiting Indonesia, or will organize busi-

ness trade encounters.

Yet, Indonesian forest concessions and wood proces-

sing industries are faced with relatively high produc-

tion costs and small margins, with modest or no price

premiums. Therefore, to motivate markets to source

from Indonesia despite the price differential, a con-

certed promotion drive is needed for Indonesian

certified wood products that emphasizes the intrinsic

social and ecological qualities of Indonesian FSC cer-

tified wood products.

In 2016, A two day trade encounter was facilitated

from January 25 to 26 in Hotel Majapahit, Surabaya

with the motto: ‘Indonesian tropical hardwood pro-

ducts. Sustainable. Quality. Guaranteed’. The event

was attended by representatives of 19 overseas

timber trading companies and 28 Indonesian wood

processing industries.

TBI participated in the IWPA World of Wood annual

convention in Austin in April. Both IWPA and GFTN

are interested to host an Indonesian delegation in

next editions.

To promote also non-timber market links, The Borneo

Initiative co-funded a TNC pilot for testing its audit

protocol for a proposed VCS method (verified carbon

standard) towards quantification of the carbon sa-

vings implicit in improved forest management prac-

tices following reduced impact logging (RIL-C).

A report became available in January 2016. The pilot

was instrumental in getting the VCS method ratified

on April 28th. TNC will now implement this RIL-C car-

bon quantification method on a full harvest block in

one of the FSC certified forest concessions over the

period 2016/2017.

The Surabaya trade encounter 2016 offered a mee-

ting platform between the newly certified suppliers,

and leading overseas trading companies who have

buying policies dedicated to legal and sustainable

origin of wood products. The Indonesian manufactu-

rers present in the trade encounter offered a broad

range of wood products including wood panels (ply-

wood), veneer, indoor flooring, outdoor decking,

truck flooring, construction wood, doors and window

frames, scantlings, and garden furniture. They realize

that to grow their market share in the international

markets, quality and legal origin are key factors

Lenny Shibley, President of Inter Continental Hard-

woods explains: “sustainability, certification and le-

gality are the core values of the tropical timber trade.

TBI has facilitated all of the values effectively. The ini-

tiative to bring suppliers and customers together in a

working format has helped our company to find good

suppliers that value all of the same things that we do

as responsible buyers”.

“Certification is vital to our company to maintain mar-

ket share”, explain Henry Kumala Putra and his part-

ner William Goh of PT Jatim Sentra Utama, a manufac-

turer of hardwood garden products and decking.

“Because of the difficult market conditions in the

European market these past few years, we receive

little price margin only for being certified, however,

we managed to attract to new buyers because they

gave us preference over others. The share of FSC®

certified products was 30% in 2010, and went up to

80% in 2015. We sell mostly to do-it-yourself outlets

in the Netherlands, Germany, France, and in other

European countries and Australia.” An exit poll indi-

cated that all respondents made new trade contacts

and request a repeat event next year.

(Cited from TBI press release February 25, 2016)

Adessium Foundation e 950,000 0 e 950,000 2008-2011

Adessium Foundation e 950,000 0 e 950,000 2012-2015

IDH e € 1,492,265 e € 1,343,039 e € 149,227 2009-2014

IDH e € 1,085,532 e € 976,979 e € 108,553 2010–2016

Postcode Lottery e € 2,300,000 e € 2,070,000 e € 230,000 2010–2015

BAM e € 250,000 e € 225,000 e € 25,000 2009–2013

Bouwfonds e € 250,000 e € 225,000 e € 25,000 2009–2013

Skantrae e € 39,274 e € 35,347 e € 3,927 2012–2013

Aldrik Lifttechniek e € 1,500 e € 1,350 e € 150 2011

Foreign and

Commonwealth Office e € 19,219 e € 0 e € 19,219

25 housing corporations e € 275,000 e € 245,250 e € 27,250 2010-2016

GIZ/Forclime e € 234,223 e € 209,223 e € 25,000 2015-2016

Others e € 500,000 e € 125,000 e € 375,000 2015-2017

TOTAL (core + programme) e € 8,344,513 e € 5,456,187 e € 2,883,326

Financial report

Expenditures 2016

Certification e 415,783

Market links e 170,478

Organisation and management e 238,441

Financial income e - 2,204

Total e 822,498

Programme donors: Total donation Forest Organization Period

(90% forest certification & certification and support

10% organisation & support)

Core donors: Total donation Forest Organization Period

(100% organization & support) certification and support

Income

visit the website www.theborneoinitiative.org June 2017

OrganisationThe Borneo Initiative runs its activities from two offices in the Netherlands and in Indonesia.

Head office

De Corridor 7

3621 ZA Breukelen, the Netherlands

Email: info@theborneoinitiative.org

Mobile phone: +31 610 665564

ColofonPictures: Mark van Benthem, Alain Compost,

Maurice Spees and The Borneo Initiative

Design: Studio 10, Tineke Kooistra

Printer: drukkerij Mart. Spruijt BV, Amsterdam

This annual report is printed on 250gr FSC paper.

Indonesia office

Gedung Graha Simatupang Tower 2 Unit C floor 4

Jl. LetJen. TB. Simatupang Kav. 38

Jakarta Selatan 12540, Indonesia

Email: sekretariat@theborneoinitiative.org

Office phone: +62 21 7884 8908

Fax: +62 21 7884 8909

AbbreviationsAPHI Asosiasi Pengusaha Hutan Indonesia (Indonesian Forest Concession Holders Association)

APCS Asia Pacific Certification Solutions

CW Controlled Wood

FSC Forest Stewardship Council

WWF World Wide Fund for Nature

GFTN Global Forest & Trade Network

IDH Sustainable Trade Initiative

MoEF Ministry of Environment and Forestry

PT Perseroan Terbatas (Limited Liability Company)

TBI The Borneo Initiative

TFF Tropical Forest Foundation

TNC The Nature Conservancy