Paper to the UNFF Conference on Sustainable Forest Management

By Devon McLean Chairman of the New Zealand Forest Industries Council

For delivery at: UNFF Intersessional Experts Meeting on the Role of Planted Forests in Sustainable Forest Management, 24-30 March 2003, New Zealand

This conference of experts, which continues the process of consultation commenced in Chile in 1999, comes at a time of increasing international focus on the relationship between Planted Forests and human society. I commend the UNFF and the New Zealand Ministry of Agriculture and Forestry for this initiative, and all delegates for their willingness to engage in this important debate.

Welcome to New Zealand, a place where Planted Forests are not only seen as vital to the sustainability of our diverse forest systems, but also form the basis for an important and rapidly growing sector of our economy.

By 2025 the Planted Forest based industry could contribute close to 15% of New Zealand’s GDP and be a major source of export earnings, regional development and employment.

During this presentation I hope to convey to you three key messages:

Planted forests, and within that category Industrial Planted forests, are contributing to SFM objectives and are an essential source of fibre for the world.
We can further enhance the commitment to sustainable management on these estates by better aligning the incentives of forest owners with those who advocate for better SFM
It is possible to create a virtuous cycle of positive messages and actions around wood as a sustainable raw material, which will change the behaviour of all forest stakeholders and flow on to other raw material sectors with positive benefits.

My presentation comes under the conference " banner" of Challenges. The Challenges that lie in the path of Planted Forests fully contributing to Sustainable Forest Management. The sustainability of such an important component of our economy should be of vital interest to all New Zealanders.

During this week much will be spoken about various important technical aspects of the nature of Planted Forests, which in different contexts represent a challenge to certain views on SFM. Among these could be listed such factors as biodiversity, aesthetics, monoculture risk, application of biotechnology and regional socio - economic impacts, including in a New Zealand context, on Maori as tangata whenua in this country and kaitiaki of the land.

We believe that the New Zealand planted forest story presents an outstanding example of sustainable forest management in action, which, while still having room for improvement, provides a useful model for others to consider.

I hope during this conference we take time to reflect on the remarkable contribution the world’s planted forests are already making to peoples well being.. The flows of wood, and wood products, for a vast range of uses, the contributions to land conservation, to employment, to recreational enjoyment are but a few. These are all matters which need to be understood, debated and communicated to our stakeholders in ways that do justice to the essential beneficial impact that trees and wood have on our world. .

Others among you are much better informed and qualified to present on these issues. In the time I have available today I would like to explore a broader context for sustainability particularly as it relates to the Industrial Planted Forests.

For I fear that if we become too engrossed in the ebb and flow of debate about the detail of SFM regimes, no matter how well intentioned, we risk losing the essential international public and political support which is vital if we are to see SFM contribute significantly to human wellbeing and development. There is a risk that the world "won’t see the wood for the trees". Sometimes the complexity of the issues, and the vigorous and necessary debate over the detail, can leave non-forestry audiences confused about the simple message that well managed forests are a valuable source of an essential raw material, wood.

One could argue that even the worst forester will produce a more sustainable outcome over the long term than those who produce steel, oil and concrete. By and large, and left to their own devices, woody vegetation and trees will regrow. This is not to argue that the goals of SFM should not be vigorously pursued, but rather to ensure that in the process of debating and refining the concepts we ensure that we keep our eye on the big picture and bring our respective audiences along with us.

Yesterday you heard a number of eloquent presentations extolling the virtues of wood as an essential raw material, and forests as the source of a vast array of benefits to human society.

The proportion of those benefits, which derive from Planted Forests, has expanded remarkably in recent decades. Within the category of Planted Forests the component attributable to so called Industrial Forests is estimated to contribute 60% by area and continues to grow in importance as a source of the World's wood.

The pattern of ownership of Industrial Planted Forests is of significance to this debate. One of the key trends, certainly in Southern Hemisphere countries with substantial Industrial Forest estates, has been a move over the last two decades for forest ownership to shift from the public sector ownership (Government Ownership) to private integrated ownership. By integrated ownership I am referring to ownership by private sector firms and individuals with wood processing interests or affiliations. That trend has been very evident in countries such as Chile and New Zealand, and to some extent Australia and South Africa where Governments have chosen to redeploy taxpayer funds invested in trees through a privatisation process. Even where that privatisation process has not fully progressed many Governments have moved to create "corporate" structures for the Government forest businesses creating a much more direct commercial focus.

A second very noticeable shift has been the rise of farm forestry with its unique blend of production and diversity values. In New Zealand for example the proportion of the planted estate in non-industrial ownership is now approaching 50%. Much of this planting is on farms and small land holdings.

A further trend, increasingly apparent in North America and now in the Southern Hemisphere involves the transfer of Industrial Planted Forests from "integrated" forest ownership to "non integrated" ownership particularly in the form of investment companies who find the attributes of Industrial forests attractive as part of their investment portfolio. A good example is the acquisitions in recent years by specialist investment companies acting on behalf of Superannuation Funds in various parts of New Zealand and Australia.

The effect, and indeed the purpose, of these progressions of ownership is to increase the focus on the "financial viability" of forest ownership and development. Managers of Industrial Planted forests under Government ownership have frequently struggled to balance the competing demands of their "political" stakeholders and as a consequence found the sustainable management of these estates threatened by conflicting expectations and short-term policy changes. The transition to "integrated" forest ownership has similarly encountered challenges as informed shareholders seek to understand the true returns on a mixed portfolio of investments. Returns and risks associated with the tree investment being very different from those of a processing facility or in market distribution capability.

At the same time as these changes are progressing it is also apparent that many public forests are continuing to be taken out of production and reserved for specific ecological and recreational values.

These trends indicate that across a wide spread of geographies and ownership categories there are greater focus on the commercial viability of the Industrial Planted Forests than ever before. For the Forest Manager this means greater focus on any factor, which can enhance or detract from the financial returns. If wood is to provide the benefits we have been discussing here, we must recognise the significance of private forests with a weighting of their SFM values towards production.

If I summarise these points then:

More of the Sustainable Forest area and harvest is associated with Planted Forests
An increasing proportion of those Planted Forests are so called Industrial Forests
Ownership of Industrial Forests is changing in ways that intensify the focus on commercial returns
Industrial owners of forest land will seek a return on their investment at least equivalent to its best alternative land use

What then are the implications of this for SFM?

The key in my view is to establish processes around the transition towards Sustainable Management systems for Forests, which more directly align with the interests of those who own and manage them. To the extent that these processes rely on regulation and audit as their primary means of implementation they contribute to negative perceptions both within the industry and in the wider community. Far better that they become the catalyst for a renewed pursuit of the benefits to be gained by sound implementation of SFM principles. Increasingly forest owners and managers are concerned about returns. Even small imposts which increase the costs of compliance or the efficiency or effectiveness of forest operations will meet resistance. UNLESS there are clear counterbalancing benefits from pursuing the SFM agenda.

How difficult would it be to create a virtuous spiral of benefits and perceptions around SFM?

Wood is a remarkable material. It is a material that every person on earth has some use for. It is produced by a combination of water, nutrients, air and sunlight. In comparison to most other materials, which could be used to substitute for wood, it has highly desirable environmental and social credentials.

Wood is Good - but the process of nurturing its growth and gathering the product is fraught with negative perceptions. In many cases the source or significant contributor to those perceptions is the Forestry Sector itself as it struggles to contend with the interests of a wide range of stakeholders while securing a profitable share of the international consumers purse. This is a path well littered with the debris of failure.

Internationally there would seem to be a remarkable opportunity to significantly change this scenario. There is after all substantial stakeholder interest in how forests are managed. There are well advanced discussions about what makes up the key elements of "sustainable management" as it relates to forestry. There are also the beginnings of processes for accrediting forest management, which achieves a level consistent with accepted principles.

None of these processes are perfect or complete and like any system of this nature they must be designed for evolution. Importantly in my view and will only be sustainable if the key stakeholders derive a measurable benefit from them.

We cannot wait for a perfect system. What we are close to now is an excellent beginning and should be shaped to provide:

Reasonable certainty of SFM criteria and clear mechanisms to evolve those criteria as best practice evolves
Reasonable certainty and commitment to the promotion of the benefits of wood and wood products derived from sustainably managed forests.
A readily communicable process of accreditation
A commitment from all key players to abide by the principles of SFM and actively promote the products derived from such processes
A commitment from all key players to advocate and pursue the benefits of wood first, and their proprietary interests second, rather than the other way around.

A committed effort is needed from all stakeholders to promote the virtues of wood grown and managed according to principles of sustainability coupled with a transparent process for enhancing our understanding of what SFM means and aligning the incentives of the forest stakeholders around a continued enhancement of SFM practices.

Forest managers charged with achieving an acceptable return on the estates under their control will be more willing to embrace new practices and incur some increase in costs if they can see that by doing so they can enhance the image and commercial viability of wood in general and their products in particular.

Each day that is not used to promote the benefits of wood and build the virtuous cycle of benefits arising from its sustainable management and use is a day, which frees non sustainable competing products to take market share and exploit the confusion that exists in the consumers mind about the "appropriateness" of using wood.

The present mechanisms for determining and communicating the status of management practice on a forest estate involve accreditation against a standard. The manager either achieves accreditation or he does not. Accreditation involves assessment of a number of reasonably complex criteria and is necessarily subject to a degree of interpretation.

Other sectors of the business environment face similar challenges and have developed there own approaches which offer some insights which may be relevant to the task of accrediting SFM performance.

The financial sector is one area of business which has had success in taking an area of technical complexity and deriving from it indices of accreditation which simplify the process of communicating risk in commercial relationships. Moody's and Standard and Poors both establish and publish financial credit ratings which allow parties to a transaction to take a view of compatibility. Those who wish to transact business only with an AAA rated party are free to do so. In doing so they have confidence that a reasonably objective and independent process has been used to characterise that risk. Those whose appetite for risk is greater can find the match they need. From the other side those seeking to borrow funds can determine the balance between the price they will pay for a low rated debt and the financial prudence required to achieve a higher rating.

A similar concept has application to SFM. Having one or more entities establish a rating system for SFM accreditation and having the parties actively promote the benefits of such a rating to the consumer of wood products would provide a sound underpinning to the virtuous cycle of changing perception among stakeholders.

A single step certification process such as those currently being promoted provides limited guidance to consumers or incentive to forest managers. If the standard is set very high there will be many who never buy into the concept because they cannot attain the "threshold" level that would allow them to participate in the benefits. If the standard is set too low the accreditation is devalued in the minds of both consumer and forest owner. If the standard is set inconsistently or is perceived to be other than independent the currency will quickly be debased.

For SFM to really work a forest owner should be able to determine with some confidence what is required to achieve say a "B" rating and assess the costs and benefits. A purchaser of wood or wood products needs to be able to determine what rating, or blend of ratings is required to meet their customer’s needs and chose a supplier accordingly.

The key to success in such a system is the "independence" of those determining the standards applicable at each level. The process must be as objective as possible. And where judgement is required this must be exercised in a fair and consistent manner.

Some may see a risk in such an approach in that it could promote a race to the bottom of the SFM scale of practice. The success of the financial ratings suggests that a system can be devised to provide appropriate levels of incentive by unleashing the power of the market through customer preference as a driver for the achievement of progressively higher standards. This is likely, in my view, to be a very effective way of expanding commitment to SFM among industrial planted forest owners and aligning them with the interests of those who advocate the virtues of SFM for less directly commercial reasons. As I mentioned earlier the challenge is to find a way to ensure that key stakeholders derive a discernable benefit from SFM.

Let me conclude by revisiting the key points.

Planted forests and among them Industrial planted forests are increasingly contributing to the flow of wood and other forest benefits enjoyed by man.
The owners and managers of such forests must achieve acceptable returns on their investment.
Wood is an essential raw material for mankind with excellent environmental and social credentials and yet.
The world’s consumers are increasingly sceptical or confused about the merits of forest management and the products derived from forests.
Both the forest industry and other stakeholders need to urgently address this confusion with effective communication and accreditation processes.
The key to enhanced commitment to SFM is the alignment of the interests of forest owners with those of other stakeholders through the promotion of wood as a vital sustainable raw material.
Models exist in other sectors of the economy such as the financial sector which could usefully inform the debate about how best to design SFM processes
It is possible to create a virtuous cycle around the promotion and use of wood from sustainably managed forests which aligns the interests of the key stakeholders

I thank you for your attention.

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