Fairtrade, forestry and the fast-buck

There has been some reflection on the continued rise in sales of Fairtrade goods in the UK as we approach Fairtrade day on 12th May.  The UK is a significant market for such goods, with £1.3 billion spent each year, a figure that rose by 12% between 2010 and 2011.  Of this total, some 82% is accounted for by sales of coffee, cocoa products, sugar products and bananas.

The arguments for and against the efficacy and effectiveness of the Fairtrade system are often conflated with those of the so called ‘ethical’ or ‘green consumer’.   In other words, it is the consumer through their buying decisions that is driving the demand for Fairtrade products.  This argument was also deployed twenty years ago when the issue of imported tropical timber products became a cause celebre of the environmental movement.  From these scuffles independent certification schemes emerged such as that established and controlled by the Forest Stewardship Council or FSC.

Here the argument ran that individual consumers would go into their local DIY store and be faced with either a non-certified hardwood furniture set or an FSC certified hardwood furniture set.  The view prevailing that the latter would come at a premium because of the costs associated with sustainable management and certification.

As someone that helped to formulate the rules of the FSC and managed some of its pioneering audits in south-east Asia, I was able to observe its effects at close quarters and with interest.  The first thing to note is that history has shown that in the retail context, the price premium for certified timber products was a myth.  In addition, while the ‘chainsaw massacre’ campaigns played their part, the idea of the consumer driving the agenda was also misplaced.  Retailers such as B&Q observed the campaigns, however, they also saw the growing pressures on the supply side so took the decision out of the hands of the individual shopper by making it policy to supply, as far and as rapidly as possible, all of its timber products from certified sources.  Thus the family DIYmeister was relieved of the burden of choosing between clean or sullied rubberwood doors. 

Since those early days, some twenty years ago, the FSC has achieved a great deal and as of May 2012, 151 million hectares, or just over  5% of the world’s production forests had been certified.  However, it is worth noting that North America and Europe between them accounted for about 82% of the total certified forest areas, while the whole of Asia, including China, accounted for a mere 3.44%, consisting of 145 certificates out of a world total of 1125.  This is certainly progress since my mid-nineties forays into the forests of south-east Asia and in particular Indonesia, but what the numbers do perhaps illustrate is the scale of the challenge in this part of the world to establish a real and acceptable market value for standing forest and maintain it as such.  This scenario, as opposed to the continued pressure to extract valuable timber at an unsustainable rate and in a poor way and then convert what is left to a mono-crop or grazing.    Hence we see the continued shrinking in the area of standing natural forest and the efforts taken by the UN to initiate global schemes to price and monitor the existence of what is left for ‘ecosystem services’.

As it was then, so it is now, with big money continuing to talk in the south-east Asian forestry realm, despite the improved efforts of Governments to control malpractice.  Indeed, the rise of China as a major market has affected management and prices across the globe.  In my experience, the companies looking to buy FSC certified timber were small, insignificant players compared to those customers not too interested in the source and willing to buy hardwood timber, no questions asked, subject to quality, price and shipping suitability.

While both FSC and Fairtrade have undoubtedly achieved a great deal, facilitating fair and environmentally sound supply chains, the major challenge of making sustainability a mainstream business dynamic remains.  This will only happen when the global investment community recognises that the dynamics of sustainability are not soft, blurry and irrelevant, but are risk-based, fundamental drivers of value.  Perhaps surprisingly, given the ongoing claim and counter-claim in the climate change and carbon debate, things are starting to happen in the world of capital markets.  New models of management and investment are emerging and multinational corporations are actually starting to pay more than lip-service to sustainability.  While mechanisms that were designed to shape and by-pass capitalist models have had moderate success, it seems ironic that the true saviours of the planet may be local, national and international markets, the multinational corporations and marauding entrepreneurs.