Unlike extracted and mined resources, wood is a renewable and recyclable resource that is also essential in carbon sequestration. However, illegal and unsustainable logging practices in many developing countries are threatening the availability of this vital resource. The World Bank estimated in 2006 that weak forest governance costs $15 Bn a year. The situation is particularly alarming in African countries like Kenya, which has banned logging in 1999.
There, forested areas have come down from 10% in 1963 to less than 2% in 2006 according to Transparency International. Wangari Maathai, who passed away last September, received the Nobel Peace Prize for inspiring her home country of Kenya, and the rest of the continent, to restore forests and alleviating poverty with The Green Belt Movement. Forestry in Africa is responding to transforming political, environmental and economic interests from leaders around the world.
Timber may have changing use over time but it has never been replaced in thousands of years. The U.S. has seen a dip in domestic wood product consumption related to housing market weakness. As a result, large ventures have sufferred poorer returns, prompting further consolidation. Meanwhile, emerging market economies have demonstrated that forestry is a business notable for socially-equitable success. Several companies like Foresteca in Brazil have succesfully fought native forest deforestation while providing good local jobs, and new funds like Greenwood Management offer reasonable financial returns.
The long crop cycles, ranging from 3-5 years for charcoal to 10-15 years for lumber, offer tremendous opportunity for social impact in emerging markets beyond environmental consciouness. Forestry can provide local farmers economic diversification, complimenting traditional food crops, as well as revenue at many points in time during a crop cycle.
There are still significant financial risks in Africa due to political instability and the lack of protections for land tenure. While established European companies have sought to grow large forests to provide carbon offset on the European regulatory market, social entrepreneurs in the United States are looking at a bottom-up approach that may give them the time to develop the right “recipe”.
This new recipe may honor forest-border dwelling people as the custodians of their forest. It will constitute a shift away from large plantation enterprises toward small-scale and private ventures that lift rural communities out of poverty. The business of growing trees requires low capital to start, thus encouraging new micro-forestry approaches in Africa that can improve the standard of living of populations in rural areas. One example of US-based social enterprise active in Kenya is Komaza.
The overall wood industry in Kenya is a $850M market according to its founder, Tevis Howard. Komaza received funding from The Mulago Foundation for turning arid areas into valuable assets. The main point that Komaza makes is to deal with the social forces that are stronger than environmental alarms in poor areas. As a result Komaza selected a type of eucalyptus tree that can grow faster in remote and semi-arid areas.
Indeed, it is difficult to fight climate change in Kenya without dealing with extreme poverty: illegal logging or burning of trees can provide a residual revenue that is hard not to miss. Moreover, the elite in urban areas is often the only part of the country benefiting from state-endorsed native forest logging concessions where water is more abundant.
Global warming creates profound concern from the international community over logging these native forests. Said former U.S. president, Bill Clinton, “Clearing and burning tropical rainforests is responsible for approximately 15% of global carbon emissions, but conserving forests is one of the most affordable ways to reduce pollution.” Kenya is one of a dozen African countries most at risk from climate change (picture below - courtesy of Oxfam).
Avoided deforestation is not recognized as carbon credit, but, carbon credit remains in itself an incentive for forestry. The World Bank recently estimated the annual carbon market at $30B without a strong contribution of the US, and Terra Global Capital reports that it could grow to $1Tr by 2027. However, efforts at the administration level of carbon credit continue to present challenges within Africa. And that is not due to the mainly arid climate.
Large tree plantations managed by foreign companies trading carbon credits on the European regulatory market, or the smaller US voluntary market, have met strong critiscm. The Guardian published last year several stories in Africa where farmers were displaced to make space for carbon-offset forestry projects. In one case, a Ugandan farmer told that the land gave him everything but he is now the poorest after the UK-based New Forests Company moved in the area to plant trees and earn carbon credits.
As in the case of the seafood industry with fisheries, restoring a sustainable wood industry must start at the bottom with farmers. The value of sustainable forestry practices and social welfare can be reinforced through branding and purchase power. As result, a number of products labeled by the Forestry Stewardship Council (FSC) are appearing in the wood product market. The largest paper firm, International Paper, now uses FSC certified wood for its Copier Grade product.
At the home furnishings store Williams Sonoma, Pat Conolly, Executive Vice-President and Chief Marketing Officer, was quoted saying, “We believe that FSC is the gold standard when it comes to forest products certification systems. FSC certification is a key component in our ongoing efforts to deliver on our commitment to our employees, customers and shareholders to operate in an environmentally sound manner.”
In addition, consumers may drift from traditional choices in hardwood to choices that they may perceive to have greater social and environmental impact. Integrative approaches, including bottom-up business models with local farmers and top-down acountability with FSC certification, will build up consumer confidence and help restore forests in countries like Kenya. Africa is not out of wood yet.