Eco-Certification as an Incentive to Conserve Biodiversity in Rubber Smallholder Agroforestry Systems: A Preliminary Study Anne Gouyon Developing Mechanisms for Rewarding the Upland Poor in Asia for Environmental Services They Provide Acknowlegements: A peer review of this report was conducted by Jeffrey Hayward, Asia-Pacific Manager of the Rainforest Alliance Smartwood Programme. Published in 2003 The Program for Developing Mechanisms for Rewarding the Upland Poor in Asia for Environmental Services They Provide (RUPES) is supported by the International Fund for Agricultural Development (IFAD). Published by: World Agroforestry Centre (ICRAF) Southeast Asia Regional Office PO Box 161, Bogor 16001, Indonesia Tel: +62 251 625415, 625417; fax: +62 251 625416, email: [email protected] ICRAF SEA webstite: http://www.worldagroforestrycentre.org/sea Layout by: Kusuma Wijaya Cover design by: Dwiati Novita Rini TABLE OF CONTENTS EXECUTIVE SUMMARY....................................................................................................................................... III ABBREVIATIONS................................................................................................................................................... VII BACKGROUND AND OBJECTIVES.................................................................................................................. 1 Finding incentives for the conservation of rubber agroforests................................................................ 1 Marketing agroforestry products to eco-sensitive markets...................................................................... 1 Preliminary objectives...................................................................................................................................... 3 GREEN RUBBER AND TIMBER MARKETS..................................................................................................... 4 The Users of Natural Rubber: a High-Tech Industry................................................................................. 4 Latex goods: gloves, balloons and mattresses............................................................................................. 4 Dry rubber goods and the tire industry....................................................................................................... 4 An increasing competition with synthetic rubber....................................................................................... 6 Natural Rubber Production: Issues of Quality............................................................................................. 7 The predominance of Asian smallholders..................................................................................................... 7 The need for consistency................................................................................................................................ 8 Quality constraints of Indonesian smallholder rubber............................................................................... 9 Strategies around Green Rubber?.................................................................................................................. 10 The production side: emphasizing the benefits of trees............................................................................ 10 Latex goods suppliers: targeting the consumer with green products..................................................... 11 The tire industry: global high-tech brand strategies................................................................................... 12 Conclusion: a potential around leading tire brands and latex goods...................................................... 14 Eco-sensitive Markets for Timber from Rubber Agroforests................................................................... 15 Rubber wood: questions of quality, volume and costs............................................................................... 15 Hardwood species: a question of volume.................................................................................................... 16 Softwood: a question of demand.................................................................................................................... 17 Conclusion: the need to investigate potential market linkages................................................................ 17 CERTIFYING RUBBER AND TIMBER FROM AGROFORESTS: POTENTIAL, CONSTRAINTS AND BENEFITS....................................................................................................................................................... 18 Forest Management Certification?................................................................................................................. 18 Strengths and weaknesses of the FSC system............................................................................................. 18 Certifying smallholder products from agroforestry systems................................................................... 21 Organic Growing Certification....................................................................................................................... 29 A growing consumer demand......................................................................................................................... 29 Possible compliance and discrimination towards smallholder agroforestry systems........................... 29 Labelling Agroforestry Products..................................................................................................................... 30 CONCLUSION AND RECOMMENDATIONS FOR FURTHER STUDIES.............................................. 32 Developing FSC Timber Certification for Agroforests.............................................................................. 32 Options for the Certification of Rubber from Agroforests...................................................................... 33 Investigating Options for other NTFPs......................................................................................................... 34 Cost and Financing Issues................................................................................................................................ 34 A Long Term Prospect..................................................................................................................................... 34 REFERENCES........................................................................................................................................................... 35 Web sources...................................................................................................................................................... 35 Bibliography........................................................................................................................................................ 36 GLOSSARY............................................................................................................................................................... 39 Appendix 1 – Natural Rubber Market Statistics......................................................................................... 41 Appendix 2 – The Standards: The FSC Principles and Criteria (P&C)................................................... 43 Appendix 3 – Draft Principle 11 of FSC Certification on NTFPs............................................................ 49 Appendix 4 – Institutions involved in FSC Certification, roles and relations........................................ 51 EXECUTIVE SUMMARY Rubber agroforests managed by smallholders, a low intensity cultivation system with a forest like structure, cover more than 1 million ha in Indonesia and contribute significantly to the conservation of forest species. In the face of the rapid deforestation that is taking place in Indonesia, their importance for conservation is of fundamental importance. Rubber agroforests offer many economic advantages to smallholders, such as low development costs and minimal risks. However, they offer a smaller return on land and labour than alternative land uses, such as the monoculture of high-yielding hevea clones, oil palm, and, in areas close to urban markets, intensive food crop production. In the absence of specific incentives, there are no reasons why smallholders should forego the benefits of more profitable land uses for the sake of biodiversity conservation. This means that the conservation community must be ready to reward the services rendered by smallholders willing to conserve their agroforests instead of converting them to higher-productivity land uses. One way of internalising the cost of the conservation services is through eco-labelling of the products coming from the agroforests. Selling eco-labelled products at a higher than average price would increase the economic returns from the agroforests. This report examines prospects for selling eco-certified products from agroforests and the potential benefits and constraints of eco-certification. Prospects for selling eco-certified rubber from agroforests At present there is no market for eco-certified natural rubber. Seventy percent of the world rubber production and almost 90% of the Indonesian production is absorbed by tire manufacturers. This market segment mostly requires medium quality natural rubber, the bulk of Indonesian smallholder production. It is probably the least permeable to eco-certification in the short term. Marketing campaigns by tire manufacturers focus on the performance and safety of the tires, concentrating on the high technology used to produce them. Some of the leading brands are increasingly incorporating environmental concerns in their communication and management strategies. These concerns are at present focussed on reduced energy consumption of cars through better tire technology, limiting the negative environmental impact of the manufacturing process, reducing waste by increasing tire lifespan, and increasing the re-use, recycling and recovery of tires. No mention is made of the plantations origin of natural rubber and its possible social and ecological impacts. The fact that smallholder agroforestry plantations have the reputation of producing a heterogeneous product with a high impurity content has a negative impact on their technical properties, making them less attractive to the leading tire manufacturers, who are the most concerned with environmental aspects. In addition, strong competition amongst tire manufacturers and the competition of synthetic rubber (although not entirely substitutable to natural rubber) puts pressure on natural rubber prices, leading to a situation which is not favorable to the payment of premium prices for eco-friendly natural rubber in the tire industry. Unlike tires, latex goods produced from high quality liquid latex are mostly consumer products and may be more conducive to eco-certification in the short term. A number of manufacturers of latex mattresses, for example, are already marketing natural latex as a product of tree plantations in the tropics, which gives a green and eco-friendly image to their products. However, the post-harvest methods used by agroforestry smallholders at present do not enable the exportation of liquid latex. Shifting to the production of high quality, liquid latex in agroforests would imply significant changes in the harvest, collection and early processing of latex, the feasibility of which need to be examined carefully. Developing an image for eco-friendly agroforest products will face the additional difficulty of differentiating between natural rubber from any type of low-biodiversity plantations and high-biodiversity agroforests. Some segments of the natural rubber industry, such as mattress manufacturers, are already marketing natural rubber goods as “green”. The green image of natural rubber - as opposed to synthetic latex - stems from its natural origin and renewable nature, plus to a certain extent, from the abusive equating of the environmental services (watershed protection, biodiversity conservation and carbon sequestration) provided by rubber plantations and natural forests. Prospect for eco-certified timber from agroforests Contrary to the case of natural rubber, eco-sensitive markets for timber do exist. Large international furniture and other wood products companies actively seek eco-certified timber (mostly under the Forest Stewardship Council label). The market for eco-certified timber may be more immediately accessible to products from rubber agroforests as rubber agroforests produce timber from both rubber and non-rubber trees. There is a well-identified demand for rubber wood, which is largely used in industrial furniture manufacturing. In order to have a commercial value, rubber wood needs to be treated 72 hours after felling in order to avoid the growth of fungi which stains the wood. Harvesting and chemical treatment of rubber wood produced in agroforests will be more expensive to organise than in plantation areas because they are scattered, may have limited accessibility, and have a lower volume of rubber timber per area to be harvested (the number of trees per ha when an agroforest is renewed is approximately four times lower than in a plantation). An additional constraint to reaching a viable commercial value that is faced by agroforest rubber timber is that of quality related to the conical shape of the rubber tree coming from unselected origin and stains related to tapping practices. Analysis is needed to see if the benefit of a premium price due to eco- certification can offset those handicaps. The demand for hardwood timber products for export to eco-sensitive markets is at present much higher than the supply. Competition for smallholder rubber agroforesters would mostly be with the natural forest management companies, and not with plantations. This would put smallholders in a better position since they would not suffer from problems of remoteness. The major issue would be the one of volume since the stock of timber from these species would be much lower, on a per hectare basis, than in natural forests. Apart from hardwood species for higher-end usages such as furniture, there is also the possibility of exploiting eco- certified softwood species from rubber agroforests. PT Xylo Indah Pratama, a company manufacturing pencil slats out of pulai wood (Alstonia scholaris) sourced in rubber agroforests from South Sumatra, already does this., a. Levels of demand and local processing capacity need to be explored to assess the possible future expansion of such markets. Potential, constraints and benefits from various certification types Forest management certification schemes are designed to provide consumers with guarantees that a product – timber or non-timber – comes from a well-managed forest, usually based on a combination of economic, environmental and social criteria of good forest stewardship. The most widely recognized scheme in this category is that endorsed by the Forest Stewardship Council (FSC). Since its creation in 1993, 30 million ha of forests have been certified worldwide by FSC accredited certification bodies. The FSC is strongly supported by some of the major international environmental NGOs, who are putting pressure on wood buyers to give preference to products coming from certified sources. The FSC Principles and Criteria are concerned with economic viability and diversity of the forest products, social justice (respect of the rights of local people, especially indigenous communities, and forest workers) as well as ecological soundness. In the first analysis, they seem largely compatible with the general management practices observed in rubber agroforests. Through a group certification approach and with the backstopping of ICRAF, the feasibility of FSC certification for a few villages seems well at hand. An important technical issue to be carefully addressed, however, is setting-up an adequate chain-of-custody, ensuring that no products from illegitimate sources are entering the certified pool. The financial cost of a certification operation (compliance cost, certification per se by outside bodies and marketing costs) is also of concern. External aid would need to be secured to launch a pilot project. Only when large enough areas are involved could these costs, which would then be much lower per unit area, be borne by the agroforesters themselves. The major issue with FSC certification is that it would not discriminate between latex or hevea timber from agroforests, and latex or hevea timber from monoculture plantations. Hence it cannot be expected to contribute to filling the profitability gap between both cropping systems. Discrimination could possibly be achieved via an association with another, more specific certification scheme, provided that market linkages with buyers can be made under the joint certification. iv The organic certified food market (organic certification) is developing rapidly especially in some European countries. Organic consumption is starting to include other products such as clothing and bedding, and could therefore potentially apply to a range of rubber goods. Such a certification scheme would better discriminate rubber agroforests from more intensively managed plantations. It would probably not be widely applicable to timber. No demand for organic rubber senso stricto has been established at present, although a lot of consumer products such as mattresses are marketed under claims of being free of chemicals and produced in a nautral way. Such claims would be better backed-up by organic certification. Another alternative would be to target a system certifying that a given raw material comes from high- biodiversity agroforests (an agroforest certification label). The Rainforest Alliance certification program called Conservation Agriculture, or the Forest Garden Products (FGP) label originating from Sri Lanka appear as potentially interesting. Since promoting biodiversity conservation through adequate agricultural practices is one the major objectives of such certification schemes, they would better fit the Indonesian rubber agroforest case. However the above-mentioned labels have limited market recognition and, as in the case of organic certification, potential market incentives need to be investigated carefully. It is concluded that using certification schemes to provide incentives for the conservation of biodiversity of smallholder agroforestry in Indonesia has good long term perspectives. It holds a significant potential of incentives, especially if timber and non-timber products can be combined and marketed to adequate buyers. However, identifying the right markets, developing linkages and forming the right institutional arrangements to handle certification will take time and will require resources. v ABBREVIATIONS ADB Asian Development Bank CAP Conservation Agriculture Program CFC Cloro-fleuro carbon CIRAD International Center for Cooperation on Agricultural Research and Development EMS Environmental Management System ENGO Environmental Non Government Organisation FELDA Federal Land Development Authority FMU Forest Management Unit FGP CS Forest Garden Products Certification Service FSC Forest Stewardship Council GAPKINDO Gabungan Perusahaan Karet Indonesia. Indonesian Rubber Industry Association GFTN Global Forest and Trade Network GMO Genetically Modified Organism ICRAF International Center for Research on Agroforestry IRRDB International Rubber Research and Development Board IFOAM International Federation of Organic Agriculture Movements ISO International Standards Organisation LEI Lembaga Ekolabelling Indonesia MREPC Malaysian Rubber Export Promotion Council MTCC Malaysian Timber Certification Council NES Nucleus Estates and Smallholders NGO Non Government Organisation NTFP Non-Timber Forest Products NR Natural Rubber NSRC NeoSynthesis Research Centre ORRAF Office of the Rubber Replanting Aid Fund PEFC Pan European Forest Certification PIR Perkebunan Inti Rakyat (Nucleus Estates and Smallholder) RAS Rubber agroforestry systems RISDA Rubber Independent Smallholder Development Authority RMA Rubber Manufacturers Association SFI Sustainable Forestry Initiative SCS Scientific Certification Systems SGS Société Générale de Surveillance SIR Standard Indonesian Rubber SLIMF Small and Low Intensity Managed Forests SNCP Syndicat National du Caoutchouc et des Pneumatiques SR Synthetic Rubber SRDP Smallholder Rubber Development Program TCSDP Tree Crop Smallholder Development Program TFT Tropical Forest Trust TNC The Natural Conservancy TSR Technically Standardized Rubber WWF World Wildlife Fund vii