Regulating the journey of timber: legality and sustainability governance in Indonesian wood value chains

Abstract

Illegal logging and the trade in illegal timber are significant contributors to deforestation and forest degradation in the Global South. Both public and private forest governance initiatives have emerged to address these problems, internationally and nationally. In Indonesia, a Timber Legality Verification System (in Bahasa, Sistem Verifikasi Legalitas Kayu - SVLK) was introduced in 2009 in conjunction with negotiations on a Voluntary Partnership Agreement under the European Union Forest Law Enforcement, Governance and Trade (EU FLEGT). SVLK requires all wood in Indonesian value chains to be legally harvested, transported, processed, and traded. SVLK comprises sustainability (PHPL) and legality (VLK) standards.

This thesis explores the architecture and implementation of SVLK, actors' compliance with SVLK, and implications of the results for forest governance in Indonesia. It draws on the concepts of transnational experimentalist regimes, smart regulation, holistic compliance, and interactions between public and private governance; and uses a value chain framework to structure case study value chains representing the different forest resources bases in Indonesia, viz. natural, plantation, and private smallholder forests. Around two months of value chain mapping, field observations and semi-structured interviews were conducted for each case; these were complemented by literature review, and analysis of audit reports and policy documents.

The results show that some elements of the architecture and implementation of SVLK at each stage of the value chain worked well, but others did not. Sustainability and legality standards are assessed inconsistently and less emphasis on field performance, and provide no incentive for continuous improvement; inadequacies in the wood traceability system may allow illegal wood to be included into value chains; and witness auditing and independent monitoring are inadequate. In the natural forest and tree plantation concession cases, sustainability assessment was problematic in various respects, and less rigorous than that under voluntary forest certification. In the plantation case, other reports suggested SVLK assessments had not identified significant sustainability issues. In the smallholder case, there was evidence of non-compliance - in the forms of wood legalisation and illegalisation - at various stages of the value chains.

Nevertheless, results suggest that SVLK has been successful in fostering legality compliance, primarily in the value chains dominated by large-scale actors. This outcome is consistent with previous studies of both regulatory and voluntary systems, and reiterates the challenges for small-scale actors. However, the non-compliant elements of smallholder-based value chains are largely administrative, and have little adverse environmental or social impact. This is not necessarily the case for the natural forest and plantation-based value chains, where the limitations of SVLK architecture and implementation, and of actor compliance, appear to be associated with adverse environmental or social impacts.

The results are consistent with those of other studies of SVLK as an element of the transnational experimentalist timber legality regime, of the interplay between mandatory and voluntary instruments, of smart regulation, and of actors' compliance. While SVLK has been successful in enhancing stakeholders' participation, and in fostering the legality of wood products, primarily those directed to international markets, it is not improving the sustainability of forest management to the extent it could. Nor SVLK is designed to address other long-standing underlying challenges in Indonesia's forestry sector, such as corruption and tenurial conflict. Therefore, refining elements of each of the architecture and implementation of SVLK, and of compliance mechanisms, will be necessary to further foster sustainability and legality compliance in Indonesian wood value chains. Show more