Assuring that Large FSC Certified
Plantations make appropriate
social contributions.
Discussion Document
H.J. van Hensbergen, K.
Bengtsson, D. Bernas
Development of this paper has been sponsored by WWF International
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Executive Summary
FSC stakeholders have been concerned about the social impacts of large scale plantation management.
Those concerns have been centred around the apparent failure of large plantation companies to make
adequate socioeconomic contributions to the development of local communities associated with
plantations. The plantations working group has addressed this issue and called for plantation companies
to contribute to sustainable local economic development as a means to poverty reduction.
Auditors have found it difficult to determine if large plantation companies are making adequate social
contributions for both technical reasons and because there is no decision making framework for them to
use in this respect.
We believe that the social contributions to be made by plantation companies should as far as possible
be aimed at reducing the dependency of local communities on the single activity of forestry by offering
them sustainable alternative livelihoods. We further believe that plantation managers should use their
special skills of business management and analysis to help communities to establish sustainable
businesses.
Where land use at the community level is dominated by plantations to the exclusion of other activities
there will not be many opportunities for members of local communities to develop independent
businesses. We believe that where there is a diversity of land uses this will result naturally in a
diversity of economic opportunities which can be used by local entrepreneurs to develop sustainable
businesses.
There are a wide range of business opportunities possible and recent technological developments mean
that many of these can be implemented with a relatively low capital requirement. We discuss these in
more detail in the paper but they include, wood processing, biomass energy, outgrowers, NTFPs and
Carbon Credits.
We propose the matrix model of forest management as an alternative to the single land use model
employed by many plantation companies. We believe that plantations should form part of a matrix of
diverse land uses at the local level (10-20,000ha) and that the plantation compartments should exist
within a landscape of alternative land uses and natural area set asides.
We strongly believe that a key issue in determining the opportunities for members of local
communities is the diversity of the system. This includes diversity of land use, land ownership,
incomes and economic activities, amongst others. Where diversity is high it will be relatively easy for
local community members to achieve satisfactory livelihoods.
We suggest that measures of diversity such as the Simpson Index are used to determine the situation of
local communities. And that these measures are used to determine the types of interventions that should
be carried out by plantation companies. The types of interventions proposed range from the provision
of basic services, through the establishment of systems to support business development, to the
establishment of business partnerships on equal terms.
We understand that there are significant differences between the situation in different countries and as
far as possible the national initiatives should be left to determine what types of intervention should be
required of plantation managers at different levels of diversity.
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Contents
Executive Summary.................................................................................................................................. 2
Contents .................................................................................................................................................... 3
Problem statement. ................................................................................................................................... 4
Objectives ................................................................................................................................................. 4
1. Introduction .......................................................................................................................................... 4
1.1 FSC standards, The Plantation Working Group and local benefits ............................................... 4
1.2 Problems of Auditing ..................................................................................................................... 5
1.3 Sustainable Benefits from Viable Businesses ................................................................................ 6
2. Key approaches for equitable distribution of the optimized benefits from the plantation ................... 7
2.1 Ensuring diversity: ‘The Matrix Model’ ........................................................................................ 7
2.2 Local employment ........................................................................................................................ 10
2.3 Local Processing .......................................................................................................................... 10
2.3.1 Wood Mechanical Industries ................................................................................................ 11
2.3.2 Bio Energy ............................................................................................................................ 13
2.3.3 Biomass for local use or export ............................................................................................ 13
2.4 Small Scale Timber Production ............................................................................................... 14
2.5NTFPs ....................................................................................................................................... 15
2.6 Non Consumptive Use ............................................................................................................. 16
2.7 Sources of Funding and Microfinance ......................................................................................... 16
2.8 Revenue or Equity Sharing .......................................................................................................... 17
3. Implications for FSC Standards and Auditing .................................................................................... 18
3.1 Capturing the Matrix Model. ........................................................................................................ 18
3.2 What should be required of plantation managers? ....................................................................... 20
References .............................................................................................................................................. 23
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Problem statement.
Large scale industrial forest management forms the core of the FSC certified forests both in natural
forest management and in the case of forest plantations. The FSC standard calls for an equitable
distribution of the benefits between the different forest stakeholders. In practice this has proved
difficult to achieve since the standard is open to interpretation by the auditors and no framework for
defining minimum performance standards on a case by case basis exists. In many cases it is easy to
determine that the large scale benefits accrue to the plantation investors and that the other stakeholders
receive a relatively small portion of the benefits. This situation is clearly not the wish of the large
majority of FSC stakeholders and some means to address it must be found.
The issue has been particularly strongly felt by stakeholders concerned with large scale plantations so
that this paper focuses on the case of large scale industrial plantations. Where the major exports from
the plantation are logs for processing elsewhere or for the production of pulp it is rare for local
communities to receive any of the benefits of downstream processing or opportunities for acquiring
timber and carrying out their own value adding activities. Addressing this issue is a major challenge for
the credibility of the certification system
Objectives
The objectives of this paper are twofold.
Firstly we have tried to analyse the current situation and to identify ways in which the benefits of
plantation management could be distributed more equitably between stakeholders. In addition the
opportunities for increasing the value of plantation products will also be discussed so that the more
equitable distribution of benefits can be based on an increase in the total benefit available thereby
reducing the costs of this action to the plantation managers.
Secondly the paper is designed to open a debate amongst FSC stakeholders about how the issues
addressed in the paper should be handled by the FSC certification system. This will include the way the
issues should be addressed by the standards and what instruction should be given to auditors in the
form of guidance for implementing the standards at an FMU level.
This paper focus on the socioeconomic aspects of large plantations as this is the aspect that has
received most criticism in the past.
The present document will also set out the ways in which the integration of local communities and their
members into the plantation based businesses can lead to higher retained value in those communities
and therefore improved livelihoods for their members.
1. Introduction
1.1 FSC standards, The Plantation Working Group and local benefits
The FSC forest management standard requires plantation managers to ensure that there is a return of
benefits from the plantation to local communities and their members and this is set out in the existing
standard in principles 4 and 5 as shown in the text box below. However it is the finding and concern of
many FSC stakeholders that in particular large plantation companies (often owned by remote investors)
are being certified while not adequately addressing the issues and values enshrined in principle 4 and 5
of the FSC standard.
The standard itself is weak (although the elimination of the word encourage in the draft standard of
August 2009 has improved it somewhat) since it is unable to offer any guidance as to the types of and
levels of diversification and employment required of a certified company. These weaknesses could and
should be addressed by the development of national standards. However it is important to recognise
that in many countries where the plantation issue is particularly relevant there are no national
standards. These include Mozambique, South Africa, Chile, Brazil, Uruguay and Argentina.
Text Box 1. Extract from the FSC Standard of 1996
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Principle #4: Community relations and worker's rights
Forest management operations shall maintain or enhance the long-term social and
economic well-being of forest workers and local communities.
4.1 The communities within, or adjacent to, the forest management area should be given
opportunities for employment, training, and other services.
Principle #5: Benefits from the forest
Forest management operations shall encourage the efficient use of the forest's
multiple products and services to ensure economic viability and a wide range of
environmental and social benefits.
5.2 Forest management and marketing operations should encourage the optimal use and local
processing of the forest's diversity of products.
5.4 Forest management should strive to strengthen and diversify the local economy,
avoiding dependence on a single forest product.
The plantations working group, a multistakeholder process of the FSC have identified key social issues
that should be addressed by the new standard and by auditing processes. The key social
recommendations are given below and it is to be noted that they call for a focus on poverty reduction
through sustainable economic development.
Text Box 3. Key social recommendations of the plantations working group.
Social Objectives
 Ensure “good neighbour” relationships with local communities and other stakeholders;
 Increase opportunities for, and contribute to, positive local sustainable development with an
emphasis on reduction of poverty;
 Uphold the legal rights of workers, ensure worker’ rights to organise and maintain or improve
workers’ health and social security;
 Uphold the legal and customary rights of indigenous peoples to own, use and manage their lands,
territories and resources.
Aspects of an adequate social management system.
 Analysing and mapping socially important features in the landscape, such as
habitations, areas that provide resources to local communities, etc.;
 Identifying, in cooperation with affected stakeholders, the social objectives of the management
unit in relation to employees (including contractors and subcontractors), the local community
and indigenous peoples;
 Systematic management of personnel, including local employment policies and actions related to
employees, contractors and subcontractors;
 Detailed, participatory social assessments of positive and negative impacts of the plantation
management on the local community;
 Clear strategies for preventing, remedying, mitigating and/or compensating local communities in
the event of negative impacts;
 Locally appropriate actions to participate, together with other stakeholders, in improvement of
livelihood, local development and poverty reduction.
1.2 Problems of Auditing
One of the key problems in interpreting the standard from the point of view of the auditors is that the
differences in situations between plantations is too large to be described in a standard document. The
range of possible benefits social, environmental and economic, the types of potential local processing,
the variety of plantation products, the differences in social situations are such that it is practically
impossible to write a standard that will include those operations we wish to certify without excluding
some we would consider to be showing good practice and including some whose performance in
practice is undesirable.
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There are a variety of questions that need to be answered by auditors at the local level in order to
determine if there is an equitable division of the benefits from plantation management.

What are the social development needs of the local population?

How should the responsibility for development be divided between local businesses, including
plantations, and government?

What types and intensities of plantation related economic activities should be required of
certified companies?

Has the land for plantation establishment been acquired with adequate compensation for the
land occupiers?

What is a fair rate of financial return for the plantation investors?
These are questions that are not easy to answer and yet auditors should be required to address them
when determining if the social development contributions of the plantation is sufficient to allow for
certification.
Even the relatively straightforward question of what is a fair rate of financial return on an investment is
in practice difficult with difficulty. The question requires comparison with the return on alternative
available investments and the rate must be adjusted for the risk associated with the social, political,
economic and environmental risks.
It is important for auditors to identify the opportunities that exist for local communities to benefit from
participating in the plantation business in order that they are able to create value and thereby
employment and improved livelihoods.
In a number of cases the problems surrounding plantation management relate to the land tenure and in
particular the way in which plantation owners achieved land tenure. In many African countries land
cannot be owned outside of large cities so that government agents are often able to allocate land at will
and without consultation with land occupiers.
1.3 Sustainable Benefits from Viable Businesses
It is important that the benefits from the plantation achieved by the communities are themselves
sustainable.
Many communities have received benefits in the form of direct interventions in health, water supply or
educational services. These benefits although highly desirable in areas where governments do not
supply them, create a culture of dependency amongst the communities. Interventions should make the
communities less dependent on direct donations from the company. Thus the communities should have
opportunities for their own socioeconomic development and should be supported to realise economic
activities which will improve their livelihoods.
Sustainable development must be based on a sustainable partnership between community members and
plantation managers. This partnership is likely to be most successful if it fully uses the core abilities
and interests of the managers, which is, in running businesses.
These opportunities may derive in a number of ways. Plantation managers can allow local
communities access to a part of the plantation resource. This should include the use of timber whose
properties render it more valuable in an alternative processing stream and the use of timber in processes
which return a higher value per unit volume than the processing carried out by the plantation managers.
It is however vital that the businesses carried out are themselves viable and competitive.
It is vital that projects developed in a co-operation between the company and the local people under the
“socioeconomic umbrella” have a market-oriented approach and are based on a generally long term
financially sound business idea.
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We are convinced that successful small-scale businesses are not easy to develop and the local people
involved will very often need serious support in all the different steps of the production and marketing
chain – from the plantation to the final market set out below.

Identification of Potential Values of the raw material.

Analysis of Market opportunities for potential products.

Communication with potential ‘end user’ industrial customers.

Design of optimal production system

Competitive pricing.

Development of integrated business plan.
This type of preparation is often neglected in development linked projects and is an important reason
for their frequent failure. Where certified companies are involved this should be a minimum
requirement for a project which is to be counted as community development assistance.
Where locally trained staff are not available plantation managers import workers from other areas. In
the worst cases forest labourers are brought in as legal or often illegal immigrants from neighbouring
poor countries and paid at rates below the minimum legal wage for the country and often kept in debt
bondage.
Often community members have had very little experience of forest work and are therefore incapable
of carrying out tasks in a safe and efficient way. This is a common reason for bringing in better trained
and efficient itinerant labour from outside the region. In these cases the solution of training local forest
workers is relatively straightforward.
2. Key approaches for equitable distribution of the optimized benefits
from the plantation
The following key issues for ensuring an equitable distribution of the optimised benefits from the
plantation to local plantation stakeholders have been identified; The Matrix Model, Local employment,
Local Processing, Small scale timber production and Non Consumptive Uses including ecosystem
services.
2.1 Ensuring diversity: ‘The Matrix Model’
We believe that there are significant social and environmental advantages in systems where the
plantation compartments exist as a significant minor component inside a matrix of other land uses .
Many of the social (and environmental) problems associated with large plantations can be ascribed to
the lack of diversity in the system. This lack of diversity manifests itself in a number of ways:





Low diversity of economic activities
Low diversity of ownership of economic activities
Low diversity of ownership or tenure rights to land
Low diversity of incomes
Low diversity of land uses
Low diversity of stand ages
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Some of these aspects of low diversity can be ascribed to lack of diversity in other aspects thus low
diversity of economic activity can be ascribed to low diversity of land uses, amongst others.
In systems having high diversity of economic activity, high diversity of ownership and high diversity
of land uses (figure 2) it is likely that many economic opportunities will arise for local communities to
benefit from an association with land based activities and plantation management. In these types of
situations local communities are likely to be benefitting sufficiently from these activities not to require
special intervention on the part of certified plantation managers in order to assure that they receive
adequate benefits from the system to satisfy their needs and aspirations. On the other hand where
plantation managers are sole owners of large areas of land growing a single species for processing at a
relatively remote site (figure 1) it is likely that plantation managers would need to carry out a variety of
activities to ensure that communities received adequate benefits from the land associated with those
communities in order to be able to achieve FSC certification.
We support a vision for plantation management (and by implication land management in general)
which will satisfy the needs for timber as a multi-purpose raw material as well as the needs for
biodiversity and resource conservation. This vision is based on a division of the plantation landscape
into 3 components namely high intensity production management, low intensity production
management (or non plantation extensive land use) and biodiversity conservation management. This
division is made on the basis of approximately 4:3:3 proportion of these management objectives. We
believe that this concept should be applied the level of individual plantation estates. (We use the term
estate here deliberately to differentiate it from the term FMU, an estate will normally be an area of an
FMU ranging from 5,000 to 30,000ha) This will ideally lead to a forest estate where the high
production component forms a set of islands set in a matrix of natural habitats and low intensity
managed habitats. Since the high production component (which may be plantation or high intensity
natural forest management) forms less than 50% of the total area of the forest estate it is relatively easy
to design the estate to ensure connectivity between the natural and low intensity managed habitats.
Figures 1 and 2 above, show high landscape diversity estates and low landscape diversity estates.
Figure 3 shows islands of teak in a natural forest setting in El Salvador.
Figure 1 An area of plantation forestry (c10,000ha) near monoculture. There are only two types of land use
in this image, plantation compartments of one species and riparian protection zones. Lighter coloured
blocks are recently harvested compartments. Compartments are large and rectangular.
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Figure 2 An area of plantation forestry (c10000) in a diverse landscape. Plantation compartments are
interspersed with agricultural crops and areas of native grassland. Compartments are smaller and follow
natural boundaries.
Figure 3 Islands of teak in a matrix of natural forest in El Salvador, agricultural fields can be seen at the top
of the hills.
The low intensity managed habitats offer a greater variety of natural resources for both consumptive
use and non consumptive use. In areas where forest cover is not the natural state these low intensity
managed and biodiversity managed areas are unlikely to have many trees. For example in Uruguay the
low intensity managed areas may be unploughed grazing lands for cattle.
This model of plantation design gives rise to a variety of benefits at both the social and environmental
interface. The higher level of habitat diversity and the greater connectedness which results should give
rise to a higher natural biodiversity than is the case with highly intensive plantation systems. The
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greater age diversity of the intensively managed stands will also lead to greater biodiversity in most
cases.
Social benefits are assured by the higher local level diversity of management objectives and systems
which will give rise to a more diverse and therefore more constant flow of employment. In addition the
greater diversity of the landscape will give rise to other benefits such as better recreational
opportunities.
We believe that there is a strong link between the plantation management strategy and the possibility
for successfully fulfilling not only the biodiversity aspects requirements of the FSC standard but also
the demands in respect of “Community Relations” and “Benefits from the forest”.
In many situations the “large scale monoculture model”, practiced by many of the biggest actors in the
pulp and paper industry, leaves the Plantation Manager with only a few possible alternatives for
positively intervening in socioeconomic development. There must be clear guidelines to auditors, for
how the companies based on the “large scale monoculture model” should compensate socially for the
losses of possible activities (the opportunity costs for local communities) that are caused by the loss of
landscape level diversity.
This compensation will probably be in the format of industrial support (technical, financially, market
etc) for investment in small-medium investments like wood mechanical industries, bio energy projects
etc. This type of investment will in many cases lead to win-win situations where both the local
communities and the plantation managers benefit from increased economic activity and a
diversification of opportunities and social benefits.
Using a diversity based approach to plantation management we believe that large scale plantation
companies have the potential to cause large scale positive changes in local socioeconomic conditions.
We should certainly not discourage this type of investment since in many parts of the world there are
no other opportunities for substantial economic development in the short or medium term.
2.2 Local employment
When plantation management is practiced over large areas it is often the case that interventions are
planned in very large stands (2000ha in plantations and in these cases labour is only required during the
period of the intervention and not in the intervening years which may be long periods (30-40 years). In
these cases the work available is so intermittent for a community that it is not possible for anyone in the
community to live there and become a specialist forest labourer. The solution to this problem cannot
presently be found in the relevant principles of the standard since it requires a replanning of the
plantation management in order to ensure that there is a steady flow of work requirement in the
neighbourhood of each community. However this solution can be best developed in the matrix model
of plantation design.
It is clear that in areas where there is underemployment, plantation managers of certified plantations
should be required to employ local people, training them where necessary. This training should result
in a situation where the most efficient and productive workers showing leadership ability are able to
progress through the ranks to the top of the organisation.
It is also the case that alternative employment in associated processing industries can be an important
provider of employment opportunities where these are situated in close proximity to the plantation.
2.3 Local Processing
Local processing of timber is an important way in which the benefits of plantation products may be
transferred to local communities or to nations. It is important for both national and local economies that
the processing really adds value to the timber that can be recovered locally. For example during the
1980s at sawmills in Mozambique (a country with a partial log export ban) the value of the sawn
timber produced was less than the value of the logs that entered the sawmill.
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There are many opportunities to add value to the timber close to the plantation and when these are
combined with savings in transport costs due to the reduced volumes that need to be transported. It
should result in a win-win situation for all of the participants in the system.
Large plantation companies, particularly those using fast growing plantations, have usually been
created for the production of one or a very few types of products. Their processes, plantation sizes, and
financial systems have been designed to optimise this limited product range, often at the expense of the
real potential value of the timber or timber products. Thus there are many opportunities for increasing
profits and local benefits by expanding the range of plantation products.
The failure of plantation managers to optimise the value of the products from the plantation has a direct
negative consequence on the financial resources available for social and environmental work which is
desirable in order to meet the FSC standard’s goals and objectives.
2.3.1 Wood Mechanical Industries
It is our view that one of the key supports that can be given to communities by plantation managers is
support for the development of small scale timber based industries in local communities. This is an area
where the plantation managers will have good knowledge and can be expected to result in significant
benefits to both parties due to the synergies between the operations.
For the Plantation Manager and the Pulp and Paper Industries support for sawmill developments will
lead to an improved image and support from the local communities will be one of the first results. For
the first grade logs delivered to the sawmill a better price can be expected than is usually paid to the
forest department by the pulp and paper industry. Possible losses in volume (let say 5% of total
volume) can be compensated by 1/ buying back chips from the sawmill (normally 35%of the volume)
and 2/ a small expansion of the total area under plantation (possible based on the much better relations
with the local societies).
Industrial development in rural areas and small communities far from the big business centres is a
challenge in developed as well as in developing countries. This is especially difficult if the goal is a
sustainable industrial development with safe working conditions and adequate payment for the
workers. Often the only feasible opportunity is to look for high quality production oriented to the
export (regional or international) market. Competition on the local market is often very strong and in
developing countries is often dominated by illegal competitors who have the cost advantages of not
following existing laws and regulations or of paying taxes and royalties.
Sawmilling is in many situations one of the few realistic possibilities for local industrial development
in the short-medium time perspective. By sawmilling we also include here the different stages of
further processing of the local raw material supply up to the level of blanks or components.
There are a number of reasons for the suitability of sawmilling for this type of development. The
profitability of small sawmills is relatively independent of the mill capacity so that it is possible to
conduct a sound business based on the processing of small volumes for specific markets. The quality of
the sawmill outputs is much more dependent on the quality of the management than on the level of
technology involved in the production. Thus it is possible to develop sawmills producing high quality
outputs with a small capital investment. This makes it possible for local community members to
achieve ownership of a viable business with a low reliance on capital. This should assist in the
financing of this type of development in the face of the high level of risk aversion often found in rural
areas. A small sawmill can, with the right management, skilled workers and the right equipment,
produce just the same (and sometimes better) products, as huge industries where tens of millions of
dollars have been invested.
In contrast to the situation in many types of industrial development it is perfectly possible for a sawmill
to start out on a small scale and then to grow organically in line with the capital created by its activities.
This is particularly important since it is possible for small scale sawmills to reach export markets with
quality products (Figure 4). If the sawmill is planned and built in a “modular” structure so they can
grow with the knowledge and experiences of the organisation and even more importantly with the
access to markets. This is critical for the success in areas with limited infrastructure facilities (such as
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secure electricity and well maintained road systems) and limited experience of export oriented quality
production.
Figure 4 Small Sawmill in Tanzania based on new and technology and parallel production lines.
All this taken together indicates that in rural areas, especially poor rural areas, with a relevant supply of
timber raw material, successful industrial development is likely to start with a sawmill and the related
further processing industries as occurred in Sweden many yeaers ago.
Historically sawmills in developing countries have been based on the purchase of ‘cheap’ second hand
sawmilling equipment (often 20-40 years old) from Europe. This equipment is usually of high
throughput capacity in a single production line.
This has several negative consequences:
Small breakdowns stop all production

Machines are already at end of useful working life leading to poor precision and high
breakdown rates.

High capital investment requires high volumes achieved at the expense of quality.

High risk associated with using old unsafe equipment.
In most cases an approach based on small high precision equipment used in parallel flows as a way to
increase production is a more affordable and altogether better approach. During the last twenty years
there have been significant advances in small scale sawmilling that now make it perfectly feasible and
indeed desirable to move away from the traditional large equipment based model. There are also a
number of developments in small scale drying technology that can be implemented in order to ensure
that wood is free from the risk of rot and insect attack and to reduce transport costs.
The key step towards the development of a successful sawmilling industry is the identification of
markets for products that can be produced based on the level of technology and the properties of the
timber resources available. This requires communication with the market in order to achieve success.
The properties of the available raw material in the plantation must be linked to the optimal mix of
industrial end users. This requires product development based on relevant market information. As the
technical capabilities of the sawmill managers increase then higher levels of production difficulty can
be achieved enabling the production of increasingly valuable products for sale. Thus starting with the
production of dried dimensioned lumber it should be possible to progress to planed lumber and blanks
for furniture or boards for flooring.
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2.3.2 Bio Energy
We believe that small bio-energy plants located close to the plantation and supplying local
communities with electricity and heat offer an opportunity to both significantly improve the livelihoods
of people and also to return a good investment yield for potential investors. There is a good possibility
that establishment of local sawmills and power plants will create a classical win-win situation.
Bio energy has been used by large companies to meet the power demands of processing plants either in
full or partially by the burning of waste materials. In sawmills much timber is still burnt to waste. More
recently large pulp mills have been using the plantation slash and stumps to meet their energy demand.
Due to the low cost of pulp timber it makes economic sense to burn a part of the raw material in order
to lower the costs of energy and to sell electricity to local markets.
There are two possible sources of improved income for plantation managers from bioenergy
generation. The sale of biomass in the form of plantation trash is now an important addition to the
income for the plantation in a number of countries. Power plants in rural areas can also contribute to
business income. Electricity prices in remote areas are often higher than the price in cities. Furthermore
the sale of heat from power plants for processing agricultural crops or dairy products can be an
additional income stream.
In addition to providing the immediate electricity needs of the people, power plants also attract further
development since the availability of a reliable source of electricity and in many cases heat is a strong
attractor for light industrial and agricultural processing development. Siting the power plant close to
rural communities means that they can also benefit from reduced power costs since transmission
distances and losses are much lower. Without an external source of power small industries are faced
with very large capital and running costs to generate their own needs. These costs can be so large as to
render the investments uneconomic.
The availability of reliable electricity is beneficial both at the level of individual households and at the
level of communities as a whole. Important infrastructure such as schools, hospitals and water
treatment facilities require electricity in order to function well. The surplus heat from the power plant
(about 65% of the total energy) can be used for the purpose of either heating or cooling which can be
used both for space heating and for industrial or agricultural processes. These activities will create
direct employment in the areas close to power plants and result in development. In addition there is a
significant demand for forestry labour in order to supply the power plants which must be kept operating
throughout the year.
There are many examples of the impact of electricity availability having a positive impact on rural
communities. The case of the FSC certified sawmill and wattle bark extract plant at Njombe in
Tanzania, is an excellent example. This operation has been providing electricity in the Njombe rural
district for approximately thirty years. As a result Njombe is now one of the best developed areas of
Tanzania with standards of living much higher than in other parts of the countryside.
Smaller scale power plants can be developed with the use of small steam piston engines which are
more efficient than traditional steam turbines and technologically less complex. In addition these can
be run at above or below their design power output without significant loss of efficiency. Steam
engines of a capacity of 0.5MW can be used individually or in groups to generate power using steam
generated in a biomass fired boiler. A Single boiler can generate sufficient steam to drive a 3MW
plant. A 3MW plant will typically consume the waste biomass from a plantation area of 15-20,000ha.
A limiting factor to the use of power plants is the relatively high capital cost of approximately
US$5million since the boiler size needs to be similar for all generating capacities. Given the high
demand for small scale generating capacity it is very likely that there will be significant technological
developments to lower the capital costs for smaller generating plants in the 0.5MW to 1MW range.
2.3.3 Biomass for local use or export
In many areas where there is no use of biomass for power generation or for use in processing plants
there is a large amount of timber left lying in the field after harvest or as a result of plantation thinning
or pruning. This material can be made available for local communities who can use it for space heating
and cooking. In many cases in developing countries there is also a high use of charcoal for cooking in
the cities. Charcoal is favoured due to its relatively low weight to energy ratio and its ease of lighting.
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There is also a high demand for charcoal for recreational barbecues in developed countries so that there
is a potential for marketing charcoal into higher paying areas. Charcoal dust which is often discarded
can also be simply processed into briquettes that can be used in special efficient stoves.
In some cases sawdust generated in processing plants has been compressed into pellets for use in
specially designed stoves. This can be done on a small scale for local consumption although for larger
markets the capital costs are at present very high since the required scale of production is too big for
local plantation resources.
2.4 Small Scale Timber Production
Small scale timber production can be carried out in a number of ways, with and without support from
larger organisations. Thus private landowners will readily plant land if it becomes in their interest to do
so. Even in the poorest parts of South Sudan and in Tanzania teak trees are planted by individuals as a
means of diversifying their interests and of giving long term security. In some cases this is done with
the assistance of large organisations through formal outgrower schemes while in other cases the
activity is entirely independent.
Many organisations with a large demand for timber for processing use outgrower schemes in order to
bring land into production that does not belong to them. Where these schemes are well and fairly
managed they can lead to large mutual benefits. The level of support given to outgrower members is
highly variable and may be restricted in some cases to making improved genetic stock available along
with technical advice. In other cases the organisation may become involved in the funding
(securitization) of the entire operation in order to ensure that the landowner is able to survive during the
rotation (Figure 5).
Figure 5 Small Plantation Owner in her plantation, member of a securitized scheme in South Africa. She
built her house from the profits.
In developing countries farmers are increasingly making use of trees in order to diversify their
production and to reduce their dependence on a single product. A wide variety of agroforestry systems
have been developed some of which are suitable for use with industrial timber crops and these systems
should be encouraged in order to add diversity to the forest management matrix.
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Figure 6 Porang growing under a seed stand in Indonesia. Porang starch is exported to Japan as noodles.
Taungya systems for the establishment of plantations are a particularly beneficial form of agroforestry
since they result in a win win situation for those given access to land and to the plantation owners since
they generally result in free weed control and if the crops are nitrogen fixing may lead to increased tree
growth. Usually Taungya is possible during the first two years of stand development so that on a thirty
year rotation 8% of the plantation land becomes available for agriculture. In Brazil soybean cultivation
in Eucalyptus grandis stands gives good yields and residual nitrogen is beneficial for the trees.
Figure 7 Taungya rice growing in Indonesia.
The grazing of animals within plantations can be beneficial if managed properly. In some cases for
example goats have been successfully used for weed control. Cattle grazing in plantations has been
widely practiced and provided that cattle are not introduced at times when they can cause damage to
developing trees they can provide an important supplement to the plantation derived resources. Even
when cattle cannot be allowed into plantation stands there are often areas of suitable vegetation within
the plantation complex.
2.5NTFPs
In some cases NTFPs can provide substantial financial returns and employment opportunities whilst in
other cases they can be an important contributor to the subsistence economy.
Honey is an important NTFP in many of the countries of the south and it is also targeted as a fair trade
product giving specific benefits to small producers. It is in many cases the best developed of the NTFPs
and is frequently the backbone of larger corporations actions to support local community activities.
This is often a win-win situation since villagers gain access to land and plantation fires caused by
smoking out bees are much reduced.
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Fungi are present in many plantations often in some abundance but also with unpredictable weather
dependent appearance. Community members who collect and process these fungi for sale can achieve
a significant improvement in livelihoods.
Oils, Gums and Resins are important resources available from some forest types and can provide
significant incomes if collected and processed locally.
Game can be managed for sale by plantation managers or may be kept for hunting by third parties on a
fee paying basis.
Figure 8 Boletus mushrooms collected from pine plantations in Chile by local entrepreneurs for sale in the
cities.
2.6 Non Consumptive Use
Many forest plantations occur on land that has significant potential for ecotourism. Ecotourism is
usually entirely compatible with plantation activities except at harvesting sites, sites of chemical
application and during extreme fire risk. It should therefore be possible to develop ecotourism activities
as means of employing local people and as an additional source of revenue. These activities can
include, walking, fishing, hunting, climbing, camping, cultural events, local handicraft from natural
resources and photography amongst others.
Clean Development Mechanism payments for carbon offsets have been used by some plantation
managers to gain additional income for their plantations. However the difficulties of obtaining and
presenting the information in an acceptable way makes this very difficult to achieve for smallholder
tree farmers. However it may be possible to access these types of payments under well managed group
schemes. In these cases larger organisations could support groups of small owners in gaining access to
these payments.
There are a number of alternative markets available for the sale of carbon credits outside of the Kyoto
framework and some of these could be used to obtain additional revenue for funding community
oriented developments
2.7 Sources of Funding and Microfinance
In most cases communities in developing countries have little or no access to finance. It is for example
impossible to access finance based on land or on residential houses as is common in developed
countries because land title is vested in the state or more rarely the community. Thus there is a need for
systems that provide unsecured finance for people wishing to invest in improvements to their
livelihoods. Microfinance systems may make these types of finance available to people. There are a
variety of different types of microfinance organisations which range from informal loan clubs,
revolving village funds, through cooperative societies to formal banks. In situations where there is no
access to finance certified companies can to become involved in providing seed money to clubs or
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societies. There are many cases where plantation companies already do this to a small extent for their
own employees by providing finance for bicycles or similar goods.
Outgrower schemes have received funding from a large variety of sources and at differing intensities.
Often single schemes may be financed from more than one source. For example it is common for
governments wishing to promote the establishment of plantations to subsidise their establishment by
giving grants for some or all of the establishment costs. In some cases governments even subsidise the
intermediate silviculture for some or all of the plantation life. Many large plantation companies have
developed outgrower schemes with different levels of support. Some companies have different schemes
aimed at different target groups. The support provided can range from the provision of improved
seedlings either free or with a subsidy, the payment for technical advice, through to complete
securitisation of the final crop. In securitisation systems the company generally pays an annuity against
the future value of the crop which is then discounted from the final selling price. In between these
extremes there are a variety of systems for giving loans or for paying for the costs of maintenance.
Frequently the schemes require that the timber in supported stands is sold to the company at a ‘fair’
market price at the end of the rotation.
2.8 Revenue or Equity Sharing
Fair trade systems are designed to improve the livelihoods of people living in communities in
developing countries. They do this by the payment of a fair trade premium at the retail end of the
production chain and by returning this to the primary producer. There are two types of fair trade
beneficiaries under the system now under discussion between FLO (fair-trade labelling organisation)
and the FSC. The first type is a system for small producers and the second type is a system to benefit
the hired labour of large organisations.
A number of the different types of activity discussed above could be carried out under a fair trade
system. In particular the production of NTFPs such as honey from plantation trees have already been
certified. Large organisations could also implement fair trade systems for their labour in the plantation
and in processing plants.
Some companies have developed systems in which a portion of the equity of the company is
vested in some way in the local community. This is often done through a trusteeship system so that
revenues are responsibly handled and so that the risk of corruption in the system is minimised. An
example of this is the Chikweti forest in Northern Mozambique where 10% of the equity is allocated to
a church development fund.
It is important to recognise that communities in developing countries have often contributed a
significant portion of the capital resource to the plantation management system by making the land for
the development available. This is particularly the case in the many countries where there is a conflict
of interest between the communities who occupy the land and the governments (or Heads of State) who
nominally have title to the land. In such cases an equity sharing arrangement may be a good way of
recognising the capital contributions of the two parties; company and community.
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3. Implications for FSC Standards and Auditing
3.1 Capturing the Matrix Model.
As we discussed in 2.1 we believe that diversity of landscape and land uses is strongly associated with
positive socioeconomic development of local communities because of the many opportunities for
diversification of economic activities offered by a diverse landscape. We further recognise that there
are a variety of other diversities that are indicators of social wellbeing and of an equitable allocation of
resources amongst stakeholders.
These diversities include:

Land use diversities
o Diversity of habitats
o Diversity of land uses
o Diversity of Species used in plantations
o Diversity of stand ages in plantations
o Diversity of compartment sizes in plantations
Socioeconomic diversities
o Diversity of economic activities
o Diversity of ownership of economic activities
o Diversity of ownership or tenure rights to land
o Diversity of incomes
We believe that it is important that these diversity factors are properly considered in the evaluation
forest management situations when determining the types of community support that should be
required of FSC certified managers.
Figure 9 below illustrates two different land use allocation situations. In the low diversity land use
situation (in blue on the chart) 75% of the land is allocated to short rotation plantations which dominate
the landscape. In the high diversity situation (in red on the chart) short rotation plantations account for
25% of the land use while many other land uses are also important. We believe that the socioeconomic
situation for communities is likely to be better in the high diversity situation due to the wider range of
employment opportunities and the diversity of economic activities associated with them. The high
diversity situation fits the matrix model of land use management with 40% of the land being used for
high intensity forest management.
It is possible to measure the diversity of the two alternatives using the Simpson index. The Simpson
index is a measure commonly used by ecologists to compare the diversity of plant and animal
communities and by economists to measure the diversity of income allocation in national economies.
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Figure 9 Land use allocation in a high diversity landscape and a low diversity landscape
The percentage of land allocation to different land uses and the calculated Shannon Diversity Index is
given in the table below. The index can have values between 0 and 1 with higher numbers indicating a
higher diversity. In the example given the index value for the low diversity case is 0.43 and for the high
diversity case it is 0.85
Table 1 Allocation of land to different land uses in a high diversity and a low diversity situation
Land Use
Low Diversity
High Diversity
Percent of Land
Percent of Land
Short Rotation Plantation
75
25
Long Rotation Plantation
10
20
Native Forest Management
5
10
Conservation Management
5
10
Grazing
2
10
Maize
1
10
Potatoes
1
10
Market Gardening
1
5
Total Percentage
100
100
Simpson Index
0.43
0.85
The Simpson index is one of a number of similar tools for measuring aspects of diversity which are
widely used. And it should be possible to identify suitable measures for all of the diversities listed at
the beginning of this section. By use of appropriate measures it should be possible to calculate an
overall diversity for a given plantation management situation.
For example the diversity of ownership of economic activities as measured by their contribution to
local GDP in a high and low diversity situation is given in the table below.
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Table 2 Diversity of ownership of economic activities as measured by contribution to local GDP.
Economic Activity
Low Diversity
High Diversity
Percent of Local GDP
Percent of Local GDP
HJVH Plantation Company Ltd
50
25
KB Cattle Ranch Ltd
25
20
Local Government
15
20
DB Maize Ltd
5
10
Supermarket
2
10
Small Shop
1
5
Garage
1
5
Honey Producers Coop
1
5
Total Percentage
100
100
Simpson Index
0.67
0.84
The overall diversity would be the sum of all of the component diversities measured using an
appropriate index and properly weighted as shown in the example in the text box below.
Overall Diversity =
W1*Land Use Diversity + W2*Land Tenure Diversity + W3*Diversity of Stand ages in
plantations + W4*Income Diversity + W5*Diversity of ownership of economic activities +
W6*Diversity of economic activities + Wi* ????
It is important to note that the example in the text box is not intended to be the definitive measure but
that we believe that something like it could and should be used to evaluate the diversity in plantation
management situations.
Operations where the overall diversity index is low would be required to carry out more socioeconomic
development related activities than those where the diversity index is high. We recognise that land use
diversity is not always under the sole control of the organisation seeking certification however we
believe that it is necessary for plantation managers to include the activities of their neighbours in the
evaluation of their own socioeconomic impact analysis.
The details of the measures of diversity to be used, and the relationship between the levels of diversity
and the types of socioeconomic development activities required of certified plantation managers should
be strongly influenced by national initiatives.
3.2 What should be required of plantation managers?
Plantation managers should as part of their social impact assessment be required to calculate
appropriate indices of diversity for their management situation. We believe that these should be
calculated at an appropriate scale for local communities and this is likely to cover areas of 10,000 to
20,000ha of land
Auditors should be required to work within a framework of what is an appropriate type of socioeconomic intervention to be made by a certified plantation company.
We understand that this will differ between countries and that the requirements in countries will differ.
The Simpson Index (sometimes referred to as the Gini Index by economists) is already calculated for
many of the world’s countries on the basis of income distribution. We can see from figure 10 that many
of the world’s poorest countries are also those with the highest income inequality.
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Figure 10 Diversity of personal income in different countries as measured by the Gini Index. Developing
countries generally have a higher Gini coefficient (Gini = 1-Simpson) illustrating that most of the income is
earned by a small group of individuals while most of the population is very poor. Scandinavian countries
have the highest diversity of personal incomes illustrated by a low Gini index.
We believe that there should be a strong relationship between the types of socioeconomic interventions
that should be carried out by plantation managers and the level of diversity of the plantation situation.
We also understand that this would differ between countries and we believe that using the calculated
Gini index of income diversity is a good means of encapsulating the difference between countries.
Table 3 Types interventions expected of plantation managers under different diversity scenarios
Country Gini Index
G > 0.45
Very Low
Diversity
Direct support for immediate needs, health
water etc.
Economic development projects. Microfinance,
Local processing. Business development,
outgrowers
Technical support. Business partnerships.
X
Avoidance of monopolising resource and
anticompetitive behaviour.
Country Gini Index
G < 0.3
Low
Diversity
Medium
Diversity
X
X
x
X
X
X
x
X
X
X
X
Very Low
Diversity
Low
Diversity
Medium
Diversity
High
Diversity
x
x
x
X
X
X
Direct support for immediate needs, health
water etc.
Economic development projects. Microfinance,
Local processing. Business development,
outgrowers
Technical support. Business partnerships.
High
Diversity
x
Avoidance of monopolising resource and
anticompetitive behaviour.
X
As stated above we also believe that the system diversity needs to be taken into account by auditors
when determining if the support of the plantation managers to the local communities is appropriate.
Thus in developing countries where the system diversity is very low resulting in a very high
dependency relationship between plantation managers and local communities we believe it is
appropriate for certified companies to make provisions for basic services for communities inside and
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immediately adjacent to their plantations. In addition they should be asked to carry out development
projects aimed at increasing the economic independence of the communities. These projects could be
of a number of types but may include aspects of microfinancing, local processing, development of
outgrowers etc.
On the other hand in countries where there is a higher level of system diversity it is probably more
appropriate for FSC certified plantation managers to be required to investigate and evaluate the
opportunities for joint business ventures with local communities aimed at increasing the local value
added from the plantation resource. Additionally support for local independent plantations can move
away from formal outgrower schemes to systems of technical support and advice to local growers
designed to increase both their incomes and the supply of raw materials into the processing facilities
associated with the plantation.
In countries with high income diversity the requirements can be relaxed for each level of system
diversity so that even in systems with very low diversity it is unlikely that there is a need for more than
technical support and the avoidance of anticompetitive behaviour.
In all cases we believe that auditors should be required to evaluate the socio-economic contributions of
certified plantation managers using a framework of this type. Certification reports should be required
to demonstrate that auditors have justified the certification decision on the basis of the implementation
of the types of interventions provided in the framework.
It must be recognised that the different types of intervention discussed in chapter 2 will be able to
satisfy different aspects of the groups of requirements given in the figure above. Thus a biomass power
plant would provide support for immediate needs in the form of electricity, electricity and heat supply
are clear drivers of economic development and the supply of fuel will lead to additional local
employment. Due to the high profitability potential of electricity supply it is also possible that business
partnerships can be developed to manage the system. The development of local wood processing
capacity will contribute relatively little directly to satisfying immediate needs but will provide
employment and may require technical support in the long term.
For the plantation managers it should be clear that as they make interventions aimed at causing local
economic development at the local level they will be causing an increase in system diversity, moving
from left to right along the bottom axis of figure 4. Thus as time passes the level of demands for
intervention and the types of intervention will change. After some time for example there should be no
further demands for direct support but technical support or business partnerships may need to increase.
We believe strongly that national initiatives should take the lead in determining what is appropriate
development support in their country.
The key issue we believe is that there are a variety of measures that could be used to form the basis of a
decision making framework for auditors, national initiatives and plantation managers when considering
the type of socioeconomic development support that should be required in an FSC certified plantation.
It is not within the scope of this discussion document to determine which particular measures should be
used and we are in no way suggesting that the examples we have used are the only ones or the best
ones. It is however vitally important that there is a more rigorous approach to determining the
requirements for certified plantation managers in order to avoid situations where these managers have
been able to avoid taking significant beneficial actions.
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References
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Karumbidza J. (2003) ‘Green Gold or Green Deserts? Contestations between the choice of poverty or
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Peter Kanowski1 & Hannah Murray (2008) Intensively Managed Planted Forests: Toward best
practice. The Forests Dialogue, New Haven
van Dam C & Gomes R (2008) ¿Necesita el FSC herramientas adicionales para certificar Mega
Operaciones? Lecciones de un estudio de caso en Brasil. (Does the FSC need new tools for
certifying mega operations: Lessons from a case study in Brazil). Is FSC Coping with Mega
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Assembly 3 November 2008.
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