Forest products in China: a growing industry with an increasing impact on the environment
According to the United Nations, the annual trade in forest products is nearly USD 250 billion. This trade is responsible for deforestation and forest degradation accounting for 17% of global annual carbon emissions, driven in large part by unsustainable or illegal forestry practices. As a large and growing importer of such products for domestic use as well as export, Chinese companies and government entities participate and invest in forestry enterprises worldwide.
Thus, the China-UK Collaboration on International Forest Investment and Trade (InFIT) was established to reduce impacts of China’s international trade in forest products affecting forest degradation.
In collaboration with a number of key Chinese government agencies who acted as in-country partners for the programme, the UK Department for International Development (DFID) funded phase I (2014-2018) and phase II of InFIT, which began in the summer of 2019. LTS International, part of the NIRAS Group, is responsible for implementing and managing the programme along with British consultancy Efeca
Over the past two decades, international regimes geared towards reducing deforestation and forest degradation have grown in scope, both as a part of UN agreements and national trade policy requiring timber legality verification. This means that in order to sell into North American and European markets – two of the key export markets for China – ensuring that timber is legally sourced and processed is both an economic and reputational imperative. Other forest products, such as palm oil and rubber, pose additional risks for the forest environment. From a policy perspective, the Belt and Road Initiative (BRI) has set broad goals to improve the governance and legal compliance of Chinese firms operating internationally. Coming from a history of cooperation with the UK government on issues of forest resource management, the InFIT programme is a result of these overarching trends.
Meeting the challenge with policy, collaboration, and capacity development
Phase I of InFIT included several key components that helped to contribute to the overall objective of reducing the impact of Chinese worldwide investment activity in the forest industry:
- Development of a policy framework to ensure the legality of timber production;
- Facilitation of the application of guidelines;
- Sharing lessons from Chinese tenure reform policies;
- Capacity development and concerted action to promote sustainable forestry practices.
The first component of the programme met the challenge of verifying the legality of timber production through the development of a common policy: the Chinese Timber Legality Verification System (CTLVS). CTLVS is a national framework for meeting international market requirements, including management and due diligence systems. InFIT provided support to the key implementing partners in working collaboratively to develop a robust verification system that takes into account the needs of international and domestic actors, as well as a series of bilateral and multilateral discussions on verification with trading partners and blocs. This framework has not yet been implemented across the country, but it represents the blueprint for continued efforts to regularise the policy landscape in the country.
Beyond creating an overarching policy framework for timber legality verification, the second component of the programme consisted of developing and facilitating guidelines that Chinese enterprises could incorporate in their work. As this remains a voluntary process – enterprises must themselves decide to follow these guidelines – InFIT helped to develop specific recommendations and promoted their application by creating inventive mechanisms for their implementation. Country-specific handbooks were created on sustainable overseas investment, and the InFIT team worked closely with regulators and the banking industry to align incentives to encourage adherence to these guidelines.
The third component of the programme shifted focus away from developing new policy and focused instead on summarising and disseminating lessons learned from several decades of experience in reforming forests tenure policy in China. Forest tenure policy is an important way to encourage sustainable use of resources by incentivising long-term sustainable forest management, but information on China’s experiences in reforming this sector had neither been collected nor synthesised nor made available in English for the use of developing countries. Thus, InFIT developed Info-Briefs and training materials drawing on the Chinese experiences with forest tenure reform and ran training workshops attended by multiple countries and agencies from around the world.
The final component of InFIT was an overall push to build capacity and organise concerted action to promote the sustainable production of timber. At the outset of the programme, many wood processing companies and other stakeholders demonstrated both limited awareness of the importance of ensuring timber legality but also in some cases little commitment. The Chinese Responsible Forest Investment and Trade Alliance (China-RFA) was launched to bring the issue into the mainstream, and by the end of the InFIT programme, counted more than 5,000 members – 90 of whom signed commitments on responsible timber sourcing. Capacity building efforts included training staff from more than 100 organisations, establishing multiple certification bodies to help enterprises demonstrate their commitments publicly, and linking international bodies with government officials and individual enterprises in dialogue on timber legality verification.
Taking stock and reviewing achievements
Overall, phase I of InFIT achieved a number of key goals and made progress on many others. Chinese stakeholders, including government agencies acting as implementing partners and specific enterprises in the industry, demonstrated strong ownership and participation. The programme wrapped up in early 2018, but the goal of improving verification for forest products in China had been advanced in multiple areas. After a review of the programme outcomes, DFID decided to renew InFIT at the beginning in July 2019. Phase II will seek to build on the achievements of the first phase by more robustly implementing the CTLVS policy framework, equipping stakeholders with more tools to prioritise sustainable forestry, and supporting research and analysis within the sector.
At the strategic level, the involvement of political actors in InFIT in phase I and their continued involvement in phase II sends a strong signal that the government takes the issue seriously. At the industry level, InFIT acts as a focal point for gathering expertise and bringing stakeholders together, as well as building an industry-wide movement towards better verification. At the enterprise level, practical tools and instruments for complying with verification requirements have been developed and their continued utilisation will be an important part of the project going forward.
Read the news release for phase II of the programme here.