0736-C1

Mutually beneficial partnerships between corporate and smallholder partners: relating partnerships to social, economic and environmental indicators

Ani Adiwinata Nawir, Christine Holding Anyonge and Jim Carle ¹

Abstract

Demand for forest products will continue to grow as world population and incomes grow. The environmental and social impacts of planting schemes pose the greatest challenge to foresters in the new millennium. In the future, the key questions will not be whether there will be enough wood, but rather where it should come from, who will produce it, and how it should be produced. The major challenge in coming decades will be to improve the sustainable management of forests and to ensure equitable distribution of the benefits of forest use.

Responding trends have been moving: from large-scale state industrial planted forests toward private sector and smallholder plantings, and the partnership between the two.

The necessity of multi-stakeholder negotiation and dialogue increases as greater initiatives are being created between the private sector and smallholders and farm foresters. However, there have been no systematic assessment guidelines or checklists to assist companies or farm foresters when entering into production forestry partnerships. Many partnerships failed in the past due to lack of transparency and accountability in the process of setting up the agreement, and lack of equitable sharing of benefits. The key to sustaining partnerships in the long term is by ensuring mutually beneficial partnerships for both parties (company and farm foresters, private forest associations, community). This paper describes the development of guidelines aimed at facilitating the transparency of negotiations and the development of mutually beneficial partnerships, specifically at the operational and management unit level between corporate and smallholder partners investing in planted forests. The guidelines are based on principles of sustainable planted forest management, and relate corporate smallholder partnerships to social, economic and environmental indicators.

Overview

The predicted, reduced forest production of industrial roundwood from natural forests, owing to a combination of factors including changes in land use patterns, depletion of the resource or withdrawal of forest areas from production for the provision of environmental services, is well documented.

The potential production of intensively grown high-yielding planted forests is such that in theory the present global demand for raw material for pulp could be supplied from an area equivalent to only 1.5 percent of the worlds closed forest area (IIED, 1996).

Demand for forest products will continue to grow as world population and incomes grow. However, projections of wood consumption are lower than in the early 1990s and there have been improvements in forest management, productivities and yields from harvesting and processing technologies, expansion in new planted forest areas, and recognition of the critical role of trees outside forests.(FAO 2002).

Role of planted forests for industry

The average annual demand for industrial roundwood is projected to increase by 1 percent a year over the coming decade. These projections reflect an increasing trend in the consumption of pulpwood for reconstituted wood panels and paper. Pulpwood consumption is projected to increase from 700 million cubic metres in 1995 to around 1.33 billion cubic metres by 2045.

Table-1: Predicted Industrial Roundwood Supply from Planted Forests by Region

This level of industrial roundwood production from planted forests will require a significant increase in production area and/or gains in productivity.

The future expansion of planted forests and their role in supplying wood products will largely reflect the competitiveness of planted forest wood against other sources of wood and product substitutes, and the competitiveness of planted forests against agriculture, urban and other land uses. With prudent planning and management they provide renewable sources of wood and are energy efficient compared to product substitutes.

Transition

Since the expansion of planted forest programs in the tropics in the 1970s, planners have increasingly adopted participatory approaches in planted forest programmes. Examples are widespread in smallholder plantings involving the rural poor (Arnold and Dewees 1999) and multi purpose planted forests for biodiversity, production and protection purposes (Kanowski, 1997). However, examples of industrial planted forests established as a result of multi-stakeholder dialogue are less prevalent (FAO / CIFOR 2003, Tynella 2002). The necessity of multi-stakeholder negotiation and dialogue increases as fewer planted forests are established directly by the state on permanent public forest land and more is being established by the private sector in a range of land tenurial instruments (management contracts, leases, partnerships, outright ownership) with a range of partners.

Kanowski (1997) indicated that the sustainability of planted forests will be enhanced and the benefits of investments fully realized, where their purpose and practice are embedded within the broader social and economic context. In the future, the key questions will not be whether there will be enough wood, but rather where it should come from, who will produce it, and how it should be produced ( FAO 2002) .

Kanowski (1997) indicated that the environmental and social impacts of planting schemes pose the greatest challenge to foresters in the new millennium. To date there has been no widely available guidelines or checklists to assist corporate and smallholder investors entering into partnerships for industrial roundwood production. This paper describes the development of such guidelines aimed at facilitating the transparency of negotiations and the development of mutually beneficial partnerships between corporate, medium enterprises and smallholder partners.

Tools for Sustainable Management

In 1993, the International Tropical Timber Organization (ITTO) published Guidelines for the Establishment and Sustainable Management of Planted Tropical Forests. These guidelines focused on large-scale management operations and included ecological, economic and social considerations within the policy and legislation; feasibility assessment, establishment and post establishment management of plantations. The principles and recommendations largely apply to smallholder investors and management with some adaptation.

In 2000, CIFOR published a set of Criteria and Indicators (C&I) for Sustainable Plantation Forestry in Indonesia and India. The focus was at the forest management unit level but added considerations to enhance the well being of local communities, including increased people's incomes, employment, training by companies, and opportunities for smallholders to independently grow and trade roundwood with the companies

The two sets of criteria agreed on the need to address social and livelihood issues by actively involving the local people/communities in more economically productive ways.

Lesson Learned for Partnerships in Practice

In the agricultural literature there is extensive documented experience of contract farming of agricultural tree crops (CDC 1989; Daddieh, 1994; Little, P. and Watts M. 1994). Arrangements under which small farmers grow wood and fibre crops under contract to a forest industry company can be beneficial to both sides, but need to be carefully designed and implemented if they are to avoid having adverse impacts (Arnold, 1997/98). The reports mentioned in this paper are based on numerous case studies of the various forms of partnership between the corporate sector and small holders currently being practiced however there is no reliable data on the full extent of these phenomena.

FAO and CIFOR have been developing an analytical framework and assessment guideline for "outgrower" schemes for the past two years. In 2000 FAO commissioned a Global Survey and Analytical Framework for Forestry Outgrower Arrangements" (Desmond and Race, 2000) to assess the extent and main characteristics globally. The study highlighted key factors for successful outgrower schemes:

• Appropriate arrangements (e.g. partners should have a reasonable likelihood of deriving benefits, contribute to the strengthening of the socio-cultural and economic context of local communities);
• Security in arrangements (e.g. land tenure, business viability) and partnerships;
• Equitable sharing of production and market risks and benefits are accurately calculated.
• Genuine negotiation arrangements with partners with the social and technical expertise;
• Realistic prospects and opportunities (e.g. flexibility of options) known by partners;
• Principles and practices of sustainable forest management form the basis of arrangements; and
• Contribute to wider community well-being.

CIFOR published comparative case studies between Indonesia and Philippines under the titles: "Towards Mutually Beneficial Partnership on Outgrower Schemes" ( Nawir and Calderon 2000) and Nawir, Santoso and Mudfofar 2002). The Generic Template of Criteria and Indicators for Sustainable Forest Management in Natural Forests (CIFOR, 1999); Criteria and Indicators for Sustainable Forestry in Indonesia (CIFOR, 2000); and the Global Survey and Analytical Framework for Forestry Outgrower Arrangements (FAO, 2000); provided a solid basis for assessment guidelines for mutually beneficial partnership developed to assess the outgrower schemes in Indonesia and Philippines.

IIED (International Institute for Environment and Development) completed a series of six detailed cases studies and 60 examples of various types of partnerships published as: "Company-Community Forestry Partnerships: From Raw Deals to Mutual Gains? (Mayers and Vermeulen IIED, 2002) Under their Instruments for Sustainable Private Sector Forestry Programme, IIED framed their study into a typology of "Company-Community Forestry Deals", that included outgrower schemes, farm forestry support and crop share arrangements; joint ventures, corporate social responsibility projects, contracts, and concessions, and credit/ product supply agreements. The partnerships were between companies and smallholder land owners, individual tree users and groups of land owners, tree growers or tree users. Community, in this sense was used as a collective noun for these disparate groupings.

Many partnerships failed in the past due to lack of transparency and accountability in the process of setting up the agreement. As a result of the cases reviewed Mayers and Vermeulen (2002), proposed ten principles for more equitable deals in which terms are negotiated between both parties - company with smallholders / farm foresters/private forest associations/community:

Mutual respect; Fair negotiation process; Learning approach; Realistic prospects of mutual profits; Long-term commitment; Equitably shared risks; Sound business; Sound livelihoods; Contribution to broader development strategies; and Independent scrutiny.

Potential partners require specific guidelines to ensure that companies invest in partnerships that will be socially and economically feasible in the long run. In fulfilling these needs, the following proposed Assessment Guidelines for Mutually Beneficial Partnerships focus on the operational level, specifically at the forest management unit of small-scale plantations.

In May 2002, a workshop co-hosted by CIFOR and FAO was held in Indonesia the proceedings of which have been published under the title: Equitable Partnerships between Corporate and Smallholder Partners - relating partnerships to social, economic and environmental indicators. (FAO/CIFOR 2003). The meetings brought together private companies, NGOs, government representatives, research and extension agencies from South Africa and Indonesia as well as IIED and the Australian National University (ANU).

The meeting provided an opportunity for those with stakes in the plantation sector, particularly in South Africa and Indonesia to present their experiences and discuss different perspectives with regard to establishing economically, environmentally and socially sustainable outgrower schemes (FAO / CIFOR 2003). The workshop proceedings and the revised assessment tools form a basis for supporting stakeholder partnership activities in the future (FAO/CIFOR 2003).

These processes, however, incur significant transaction costs of human energy and material resources to liaise and negotiate with all relevant forest interest groups, to develop platforms (unbiased space to meet) in which their interests can be communicated effectively, and the legitimacy and autonomy of each group is respected.

An important issues is how key stakeholders are represented in the platforms and how their representatives are held accountable (transparency and democracy within their stakeholder groups) to their constituencies. A mechanism for platforms to interact with conventional decision-making bodies is also required to ensure that platforms have legitimacy and efficacy (Roling, N.G. and Jiggins, J. 1998).

An Evolving Framework for Mutually Beneficial Partnerships

Table 2. Initiatives to Assess Forest Practices ^a

Guidelines for Mutually Beneficial Partnerships

The CIFOR guidelines (Nawir et. al, 2002), were as part of the workshop discussed and enhanced by the represented stakeholders (public and private sectors, NGOs and research) from South Africa and Indonesia. The revised guidelines, and indicators, framed in the principles of sustainable planted forest management (policy; management; economic; social cultural and ecological aspects) are reported in the workshop proceedings (CIFOR/FAO 2003). A summary of these guidelines follows:

Policy

Principle 1. Policy and institutional framework are conducive to partnerships and agreement within the framework of sustainable planted forest management.
Principle 2. Government commitment in supporting partnerships
Principle 3. Transparency and broad understanding of policy
Guidelines
Crucial policies include coherent inter-sectoral to support planted forest development, land and crop tenure, management and market rights and the existence of environmental and social covenants. For companies and smallholders to use the policies and implementing regulations these need to be simple, achievable, minimize bureaucracy, provide facilitating and enabling governance (all levels) and provide incentives if necessary.

Management

Principle 1. Fair cooperation in the management of partnerships
Principle 2. Partnerships encourage sustainable management of planted forests
Guidelines
Social learning approaches including negotiations in defining the agreement and management plan, mechanisms to enhance transparency and accountability definition of services and service providers, compliance with codes of practice and management guidelines.

Economic

Principle 1. Long-term viability of key stakeholders' financial objectives.
Principle 2. Equitable share of benefits based on the proportional inputs by the partners
Guidelines
Commercial viability is a prerequisite or driving force for sustainable partnerships, however, they need to anticipate and forecast economic risk. Partners maintain an equitable account for inputs as the basis for setting-up a benefit-sharing agreement. Information, particularly regarding wood buying from smallholder tree growers and cost-efficient management of small-scale operations, should be made available to the commercial partners to enhance transparency and accountability.

Social / Cultural

Principle 1. Implementation of partnerships satisfies social objectives of key stakeholders.
Principle2. Partnerships recognize different stakeholders power, and create an operational negotiation/renegotiation mechanism.
Guidelines
Address different socio-cultural characteristics in formulation of partnership agreements and arrangements using the comparative advantages of each partner. Meeting and recognising essential social objectives in the agreement, securing the diverse nature of the local livelihoods of small and medium scale tree growers, ensuring that equity of power is achieved and establishing strong institutional frameworks.

Ecological

Principle 1. There is a mechanism for ecological monitoring.
Principle 2. Ecological integrity is maintained.
Guidelines:
Address the maintenance of ecological integrity, mainly to ensure the sustainability of essential environmental services. Partners jointly compile and commit to implementation of environmental covenants within management plans, joint identification of ecological parameters before project initiation, meet the balance of social and ecological integrity and ensure that ecological risks are minimized.

Use of the Assessment Guidelines.

The Assessment Guidelines can be applied in the planning, implementation and the monitoring phases of partnerships.

Table-3: Application of Assessment Guidelines at Different Stages

In 2003, FAO and CIFOR will extend the testing of this assessment tool to South Africa and Latin America. Concurrently an economic evaluation of partnerships in planted forests is scheduled. If the assessment tool is found to be applicable in a broad range of situations then training materials will be developed.²

Conclusions

In the future planted trees will continue to be an important source of industrial roundwood and fibre worldwide. They will be grown not only by large private enterprises but also on a small-scale by farm foresters, private forest owners associations and community land owners (Ball 1993). The move to "outgrower" schemes for industrial wood supply is now well established and growing rapidly in many parts of the world. (Ball and Pandey, 1998). While some of the privately owned plantation programmes are large, and borrow from the methods of agriculture monocultures, others are smaller, less intensive and more concerned about meeting multiple objectives (Ball and Pandey, 1998).

The emerging partnerships in production forestry call for multi-stakeholder negotiation and dialogue as fewer plantations are established directly by the state on permanent forest estate land, and more are being developed by the private sector in a variety of tenurial situations. It is imperative that arrangements under which smallholders grow wood and fibre crops under contract to a forest industry company are beneficial to both sides and need to be carefully designed and implemented if they are to avoid having adverse impacts (Arnold 97/98).

The assessment guidelines under development will enable and support planted forest schemes based on principles of equitable partnership and sustainable forest management. The guidelines will enable stakeholders to address, in a substantive and transparent manner, negotiations towards economic, financial, social and environmentally sustainability. The guidelines provide a framework and checklist to a process of joint action research and/or joint action learning reflecting the multi-stakeholder dimension and concepts of mutual respect, equity and balance in negotiations between smaller landowners, corporate and medium scale enterprises, research and extension agencies, NGOs and other development actors.

References:

Abare 1999 Global Outlook for Plantations ABARE Research Report 99.9

Arnold, J.E.M. 1997. Trees as out-grower crops for forest industries: experience form the Philippines and South Africa. Rural Development Forestry Network, Network paper 22a (winter 1997/98) Overseas Development Institute, London, United Kingdom.

Arnold, M and Dewees P.A. 1997 (eds) Farms, Trees and Farmers: responses to agricultural intensification. London. EarthScan

Ball, J. 1993. Development of Eucalyptus plantations, an overview. A paper presented to the Regional Expert Consultation on Eucalyptus, Bangkok, Thailand, October, 1993.

Ball J. and Pandey D, 1998. The role of industrial plantations in future global fibre supplies FAO Unasylva Vol. 49 No. 2 (Issue No. 193)

Broadhead J. FAO 2002. Forest Products Trade and Policy in Relation to outgrower schemes. Document commissioned for FAO Rome, Italy.

CDC 1989 Review of smallholder agricultural program: Final report Vols 1 and 2. London: Commonwealth Development Corporation

CIFOR C and I Team 1999: The CIFOR Criteria and Indicators Generic Template ( Tool Box Series no 2) Bogor: Center for International Forestry Research.

Daddieh, C. 1994 Contract farming and Palm Oil Production in Cote d'Ivoire and Ghana in Little,P. and Watts, M ( eds) Living under contract: Contract farming and agrarian transformation in sub-Saharan Africa. Wisconsin, University of Wisconsin Press

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FAO/CIFOR 2003: Equitable partnerships between corporate and small holder partners - relating partnerships to social, economic and environmental indicators. Proceedings of workshop to develop joint action learning programme between farm foresters, private companies, NGOs, research and extension agencies. Bogor, Indonesia. May 2002

FAO 2002 World Agriculture: towards 2015/2030

IIED 1996 Towards a sustainable paper cycle. London

ITTO 1993 Guidelines for the establishment and sustainable management of planted tropical forests. ITTO Policy Development 4.

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Little, P. and Watts M 1994 Living under contract: Contract framing and agrarian transformations in sub-saharan Africa: Wisconsin: University of Wisconsin Press.

Mayers, J. 2000 Company-community forestry partnerships: a growing phenomenon. Unasylva 200 Vol.51 33-41 FAO Rome.

Mayers and Vermeulen, 2002 Company-community partnerships. From raw deals to mutual gains? IIED 2002

Mansson M. 2002 A review of principles, criteria and indicators of best practice in outgrower schemes. For FAO, Rome, Italy

Nawir, A.A. and Calderon M. 2002 (forthcoming) Towards mutually beneficial partnerships in outgrower schemes: learning from experiences in Indonesia and the Philippines. CIFOR, Bogor, Indonesia

Nawir, A.A., Santoso, L. and Mudfofar, I. 2002. Towards mutually beneficial partnership in outgrower schemes: lessons learnt from Indonesia (Draft). PLT Program - Plantation Forestry on Degraded or Low-Potential Sites. Center for International Forestry Research. Bogor

Muhtaman, D.R., C.A. Siregar, and P. Hopmans 2000. Criteria and Indicators for Sustainable Plantation Forestry in Indonesia, Bogor CIFOR (Center for International Forest Research) with the support of ACIAR (Australian center for international agricultural research).

Rolings, N.G. and Jiggins, J. 1998 The ecological knowledge system . in N.G. Rolings and M.A.E. Wagemaker (eds). Facilitating sustainable agriculture p 218 - 307 Cambridge university Press, Cambridge UK.

Tyynela, T; Otsamo A and Otsamo Riikka 2002 Changes and alternatives in farmers livelihoods planning in an industrial forest plantation area in West Kalimantan Forests, Trees and Livelihoods (in press)

Waggener. T. 2001 Role of Plantations as substitutes for Natural Forests in Wood Supply - lessons learned from the Asian-Pacific region. FAO Forest Plantation Thematic Papers. for FAO,Rome, Italy.

¹ Socioeconomist, Center for International Forestry Research, CIFOR, P.O. Box 6596, JKPWB, Jakarta 10065, Indonesia. [email protected]

² By the time of the WFC, specific information on the testing these guidelines will be available for presentation to the conference.