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Guiding hand
Guiding hand
News Feb 3, 2015

The Indonesian wood industry is booming but factories need support, explains TFT’s Anton Prasojo.

The Indonesian wood product industry is growing. The Ministry of Forestry reported the country’s wood export value grew from US$3.4bn in July 2013, to US$3.8bn by July 2014. They believe this 11.8% increase is largely due to the Indonesian government’s commitment in promoting the Timber Legality Assurance System (SVLK) – that ensures buyers that timber comes from a legal source. But regulations can create their own challenges for wood factories.

Getting SVLK certification has several requirements for those in industry to contend with. Then there are other government and foreign regulations from each export destination country to adhere to. These laws and regulations can be a daunting prospect for Indonesian wood factories. It’s not that they don’t want to comply with them, it’s more a case of them not knowing how to go about doing so.

The Wood Control System (WCS) is part of TFT’s programme to ensure wood products are fully traceable. Our work with a factory begins with a gap assessment. We gather thorough information about the factory – from how well they currently comply with timber laws; how well they record paper trails of business transactions; and the health, safety and rights of factory workers. We use our findings to decide how to best help them.

We help factories set up a paper trail (Chain of Custody) showing evidence of who they have bought their wood from. We don’t rely solely on this paper trail though. We have also set up workshops and discussions, inviting the wood industry to provide factories with updates on new information concerning national and international policy. We then continue to regularly monitor all aspects of how the factory is run in order to offer ongoing support.

Much progress has been made. At present, TFT has supported more than 40 wood factories to implement the WCS system. Our support has provided them with the necessary guidance to fulfill SVLK requirements – at present, we have supported 30 wood factories to obtain a SVLK certificate.

We have also run the TFT SURE System for wood factories, helping them meet the EU’s Due Diligence requirement. SURE is a web-based database platform which allows companies to communicate with its suppliers about the source of the raw materials before placing an order and then monitoring its progress through the supply chain. SURE provides access to information about the type of product, type of wood, the time that wood was harvested, the quantity, supplier details, and documents proving the legality of the timber.

Of course, we have our own challenges in supporting wood factories. When our WCS team meet them for the first time we are often met with doubts. When we explain our environmental and social values we are often met with replies like: ‘We cannot do that, it’s impossible.’ But with our support to put practices in place, they can achieve what they previously thought was impossible.

Part of factories motivation to adapt to these laws is to benefit their business. The wood industry is a very competitive global market. Buyers need assurances that wood has come from a responsible and traceable source. This has put pressure on furniture factories in Indonesia. If they cannot increase their innovation and market scope, they will no longer be globally competitive. We have found that some furniture factories in Indonesia have lost export orders by around 30 to 50%. Some of them have turned to exporting in a small-scale capacity, or have switched to producing for local markets with irregular, small orders. The worst case scenario for them is having to lay-off employees due to tight budgets, and sometimes complete shut downs of furniture businesses.

We help to tackle this by encouraging and supporting communication between the buyer and the Indonesian wood industry to ensure the credibility of the product. This credibility has been built by our track record of delivering responsible products through the WCS. This has helped to provide added value for our wood industry and helped Indonesia to compete in the global furniture market.

Wood as a main raw material is something we have noticed to have progressively declined over the years. The wood industry has difficulty in getting enough raw materials for industrial processes. The state forests have been the main source for some decades, but productivity has been declining. This is due to unbalanced activities between harvesting and planting in Indonesia. Logs are now only available at a small capacity. This has resulted in a high selling price and difficulty for small and medium scale industries to afford it.

We have seen some starting to use community forest logs. However, the continuity and quality of community forest logs cannot be guaranteed yet. The wood quality is below that of state forests because of the lack of planting management activities. So the industry faces two choices: buy the raw materials with good quality but expensive prices from state forests, or buy the raw materials from community forests at a lower price, but lower quality materials.

The WCS programme collaborates with TFT’s Forest Programme to guarantee the availability of raw materials from TFT forest projects. There are currently ten TFT forest projects, consisting of five natural forests, one state forest, and four community forests.

These TFT forest projects will ensure the existence of the sustainable raw material sources. This is especially so for the quantity and quality that is needed by the wood industry. We are continuing to build strong communications between the wood industry and community forest holders by conducting business forums. At these forums, community forest holders have a chance to promote their sources, while factories can get information on where they can get new raw materials.

We hope to continue putting wood industries in Indonesia in a better position, enabling them to become successful players in the global furniture market. This is good. But there is still much more we are working on to achieve. Our work isn’t only about legal compliance – it also helps those in he industry to trace their supply chain. Just as importantly, it forms the building blocks for much broader industry change that addresses the impact the industry has on the environment and the workers in wood factories.

Transformation in the production process is taking place. We provide guidance for the health and safety of factory workers – many of whom don’t have the adequate protective clothing to work with machinery. We have facilitated more than 30 wood factories to implement health and safety standards. Going forward we are making this a bigger focus of our work. This is very important for the wood industry, particularly small- and medium-scale factories who might not have sufficient measures in place. We hope our work continues to support the Indonesian wood industry to transform.

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