May 28, 2010
Balancing Sustainability with Economic Development in Developing Countries – The Case Study of Indonesia
Natural resources have historically been responsible for growing economies. Much of the developed world has long ago been through the cycle of utilizing natural resources to bring people out of poverty. By contrast, developing countries are relatively new to this process. Yet despite their newcomer status, some emerging economies have been quick to learn from both the successes and failures of developed nations in the quest to build their economies, while simultaneously conserving their natural heritage. Indonesia is one of these countries.
Indonesia: Nation on the Move
Revered as the world’s largest archipelago, Indonesia is spread over thousands of islands spanning from Asia to Australia and contains some of the most diverse flora and fauna populations on earth. Indonesia is home to the world’s third largest tropical forest, which is considered not only a national asset and global public good, but also an important contributor to the country’s GDP. World Bank figures show that forestry, agriculture, and mining together contribute approximately 25 percent of Indonesia’s GDP and nearly 30 percent to overall government budget revenue. Importantly, the forest also remains central to the livelihoods of nearly 35 percent of Indonesians who live in rural areas, below the poverty line.
In recent years, Indonesia has suffered an unprecedented number of setbacks that have impacted its economy, including the tsunami of December 2004, earthquakes in 2005 and 2006, a global spike in rice, and other food and energy commodity prices, along with random terrorist attacks. Against this backdrop, Indonesia has established priorities to ensure sustainable development occurs. These priorities are economic development to alleviate poverty, social welfare and environmental protection, which includes protection of high conservation value forests, biodiversity, endangered species and actions to tackle climate change. As in the developed world, it requires the government, NGOs, consumers and the private sector to work together to take action on these priorities and ensure success.
The Corporation’s Role in Sustainable Economy Building
Multinational corporations, NGOs and governments around the world each play a critical role in helping to solve the challenges of effecting societal improvements with natural resource preservation. This begins of course with job creation. In Indonesia, we know that the income multiplier effect for non-food agriculture, such as forestry is estimated at 2.30. For every $1 (USD) increase in non-food agriculture production, Indonesian incomes are estimated to rise by $2.30 (USD) . Indonesians employed by the forestry industry and those in ancillary industries enjoy a better quality of life, often preventing a slide into poverty when basic living costs outpace standard incomes.
Corporations can also provide direct private investment in country programs that support education, skills-training, some provision of medical care, entrepreneurial community enterprises and disaster relief, which often make a dramatic and immediate impact in the lives of the people who need it most. Clearly, it’s important that the corporation evaluates where these investments are earmarked, but the fact remains that many organizations in the developing world are the true drivers of change and positive growth for populations who are otherwise underserved.
Sustainability in Tandem with Economic Development
While corporations making these and other economic development investments are critical drivers of growth in developing countries, their focus must also be rooted in drivers that in turn enhance sustainability. Irrespective of geography, the focus of a company’s sustainability program most readily ties to the company’s core business.
Climate change is an increasingly pressing and critical global issue, which can only be addressed through a strong commitment to sustainability. Whether at the international, national or sub-national level, sustainability is everybody’s business. The global paper industry, like others, is in the process of making significant changes, which in turn opens the opportunity to reduce its environmental impact.
Some forest companies operating in the Asia-Pacific region are deploying more efficient paper making technology, which allows them to produce on average, lower carbon emissions than most Northern European or American paper makers. What’s more, regional pulpwood plantations sequester 30 times more carbon than those found in other major paper-making geographies. Unlike other industries such as fossil fuel and mining, pulp and paper making is a 100 percent renewable, recyclable resource. Taking reforestation efforts one step further, in addition to supporting government and NGO-backed conservation reserves, corporations can also develop their own land conservation programs to protect and manage areas of significant biodiversity and/or cultural significance.
Given the size of the challenge though, reforestation is a concern that can only be properly addressed when governments, NGOs, indigenous people and the private sector work together to ensure sustainable forest management. In so doing we also alleviate poverty. In Indonesia, like many developing nations, poverty is the root cause of illegal logging. Eliminate poverty and you eliminate the root cause of unsanctioned forest management.
The twin needs of economic development and sustainability make effective program development and implementation in developing countries a particular challenge. In the end, the same drive, dedication and collaboration evidenced in the private sector will also lead the effort to innovate lasting improvements for developing countries. Together, we have much to gain for the generations to come.
Ian Lifshitz is the Sustainability & Public Outreach Manager for Asia Pulp and Paper in North America. APP is one of the largest vertically integrated pulp and paper companies in the world, with production facilities among the most advanced and environmentally efficient in the global pulp and paper industry. The company recognizes that a combination of social and economic best practices is the foundation for long-term business success, and is a leader in economic development in all of the communities in which it operates. The APP Group operates within globally recognized and verified standards in all of its production facilities; ensuring pulpwood suppliers meet stringent guidelines, guaranteeing sustainable forest management.
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Reader Comments
FLLY AGREE WITH many developing nations, poverty is the root cause of illegal logging, BUT NOT ONLY IN LOGGING, BUT IN ANY HUMAN ACTIVITY
arturo CROSBY | May 28th, 2010
http://news.mongabay.com/2010/0527-hance_moratorium.html
Indonesia announces moratorium on granting new forest concessions
Jeremy Hance
mongabay.com
May 28, 2010
GeorgeYuri | May 29th, 2010
The vision of sustainable development as described here by Mr. Lifshitz doesn’t seem to be fit his company’s actual practices. An article on Mongabay.com (http://news.mongabay.com/2010/0418-hance_april.html) reminded readers last month that APP “lost its FSC certification in 2007 due to similar problems. A number of big paper purchasers have also dropped APP—including Office Depot, Unisource, Tiffany and Co., Wal-Mart, Staples, Woolworths, and Gucci—to the tune of an estimated loss of $300 million in 2008.” Lafcadio Cortesi of the Rainforest Action Network (RAN)is quoted on the article saying “”Business as usual practices by APRIL, and its competitor APP, are failing to meet the most basic international standards for environmental and social responsibility.”
And RAN are not alone in their criticism of APP. In February 2008, a report by WWF, Remote Sensing Solution GmbH and Hokkaido University found that “deforestation, peat decomposition and forest fires in Riau Province resulted in annual carbon emissions equivalent to 122 percent of the Netherlands total annual emissions, 58 percent of Australia’s annual emissions, 39 per cent of annual UK emissions and 26 per cent of annual German emissions. That report also found that the province had Indonesia’s highest deforestation rates, substantially driven by the operations of global paper giants APP and competitor Asia Pacific Resources International Holdings Limited (APRIL).” The repot can be found at http://assets.panda.org/downloads/riau_co2_report_short__wwf_id_27feb08_en_lr_.pdf.
In all, it looks like APP is still very far from operating sustainably and it has a lot of work ahead of it if it really wants to “lead the effort to innovate lasting improvements for developing countries”.
raz godelnik | May 30th, 2010
Arturo: Thank you for your feedback.
George and Raz: Thank you, your input is appreciated. Unfortunately, rumors and unsubstantiated facts about APP efforts for long-term sustainability in Indonesia keep influencing many people’s opinions.
As you may know, APP and its pulpwood suppliers in Indonesia are certified by the official national forestry certification system as defined by the Government of Indonesia. We also earned Programme for the Endorsement of Forest Certification (PEFC) Chain of Custody certification for our pulp and paper mills. Moreover, APP’s pulpwood supplier has the largest plantation forest certified by the Indonesian Ecolabel Institute (LEI), a robust and internationally recognized independent certification system for sustainable forest management. Today in Indonesia, 30 percent of APP’s pulp raw materials originate from certified sustainable forest management sources, 35 percent originates from independently audited legal origin sources and the balance is recycled material. APP’s consumption of certified raw material is higher than global standards, considering that only around 10 percent of the world’s forests and less than two percent of Asia’s forests are certified.
APP’s pulpwood suppliers implement multiple environmental and social assessments using independent third party auditors. APP’s pulpwood suppliers have set aside nearly half of their production forest areas for environmental protection, community use, indigenous species protection and infrastructure. APP also supports around 400,000 hectares for pure conservation efforts, from maintaining vital carbon sinks to protecting endangered flora and fauna.
No other company in the pulp and paper industry worldwide has ever implemented conservation and carbon storage initiatives similar to these on such a scale.
Our sustainability commitments, like those of any company, are works in progress. We believe our progress is not considered in the wider picture. For those who are concerned that APP is not doing enough to protect the environment, I urge you to contact me directly.
Ian Lifshitz | June 1st, 2010
Ian,
Thank you for you reply. Just one follow-up question: If everything you describe with regards to your sustainability efforts is right, how come a number of big paper purchasers have stopped working with APP, including Office Depot, Unisource, Tiffany and Co., Wal-Mart, Staples, Woolworths, and Gucci?
Best,
Raz
raz godelnik | June 3rd, 2010
Raz,
Like any business, APP loses—and gains—customers on a daily basis and this is not an uncommon occurrence in any industry. Customers are motivated by various business decisions. But we do know that some companies are the victims of distorted campaigns by NGOs who promote misinformation about APP’s record to unfairly pressure these companies. Some of that pressure includes insisting that our customers only source FSC-certified materials, a standard that NGOs founded and arbitrarily favor, despite the existence of other recognized certifications. FSC certification is nearly impossible to obtain in Asia. Only 10% of the world’s forests are FSC certified, and less than 2% of Asia’s forests are FSC certified. As an alternative, APP has sought and achieved PEFC certification, a larger global certification scheme which is internationally recognized and that accounts for more than two times as many hectares of forest as FSC.
-Ian Lifshitz
Sustainability & Public Outreach Manager, the Americas
Asia Pulp & Paper
Ian Lifshitz | June 4th, 2010
Ian,
It’s true that it’s common to gain and lose customers on daily basis, but nevertheless it’s very uncommon to see a company losing many prominent customers because of environmental issues. I actually know very few similar examples similar to your case.
I’m wondering what the lessons that APP is learning from the NGOs campaigns against it and the lost of customers – if I look at recent history of similar clashes between companies and NGOs on environmental and social issues – usually companies one way or another find themselves eventually working with the NGOs to meet their demands (although there’s always some compromise on both sides of course), and I wonder if you see a similar path with APP or you’re seeing a different future?
Best,
Raz Godelnik
CEO, Eco-Libris
raz godelnik | June 4th, 2010
Raz,
As I noted, we believe many companies are unduly influenced by misinformation from NGOs which promote unsubstantiated facts about our environmental efforts. That being said, we are more than willing to meet with and work with any NGO, especially those that are prepared to take a broad, balanced and responsible view of sustainability issues and the importance of poverty alleviation in Indonesia and elsewhere. We agree with you that constructive dialogue is the first step in the path toward a sustainable future in Indonesia and around the world.
Ian Lifshitz | June 7th, 2010
Ian,
Well, I’m happy to see we agree on the need in a constructive dialogue. I think the ball is in APP’s court now, as you have a lot at stake here.
If you want to continue our discussion, please feel free to email me to raz@ecolibris.net
Best,
Raz
raz godelnik | June 8th, 2010