Forestry, Pulp and Paper

The world is rapidly losing its natural forest cover, and with it the ten thousands of species essential for life to flourish on earth. Only around 30% of the earth's land surface - almost 4 billion hectares - is still covered by forests. Of this area, about 271 million hectares are not natural forests but wood plantations and semi-planted forests. Forests play a crucial role on earth. Apart from their intrinsic value, forests provide us with a wide variety of essential ecological services, having an enormous impact on worldwide agricultural productivity and human health.

Environmental

• Forests are the most biodiverse terrestrial ecosystems on earth; they are home to at least 70% of all land-based plants and animals; intact forest areas act as crucial biodiversity pools in areas severely affected by human activities.
• Intact forests are critical climate buffers; the remaining forest cover provides essential climate protection services such as carbon capture and dampening changes in regional weather patterns.
• Forests help maintain soil fertility, protect watersheds and reduce the risk of natural disasters such as floods and landslides by regulating water supplies and reducing soil erosion.
  

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Socio-economical

• Over 1.6 billion people worldwide depend on forests for at least part of their livelihood.
• About 350 million people call forests their home. Their economic well-being is inextricably linked to the use of timber and non-timber products. Forests play a very important role in their social, cultural and religious life.
• The forests product industry is a source of economic growth, providing wood and non-timber forest products such as edible nuts and fruits, medicinal plants, fibres and rubber. The global annual trade in forest products is estimated to be US$ 270 billion, of which around 20% comes from developing countries. About half of all tropical timbers entering global markets, however, are estimated to come from illegal sources. The economic importance of the informal and local trade in timber and non-timber forest products probably vastly exceeds this figure;
• Forestry activities create employment, yet there are enormous differences between the job-creating value of various types of forestry activities. Small-scale and informal forestry can be an important source of employment, especially in combination with agro-forestry. Large-scale plantations, however, generate fewer jobs than alternative land uses. In Brazil for instance, timber plantations employ less than one person per 45 hectare, while agricultural activities employ at least 18 people per hectare.

Despite their value for human beings and our global environment, forests continue to be destroyed at unprecedented rates. Experts estimate that approximately 16 million hectares of natural forests were lost annually during the 1990s. The speed of deforestation may have slowed down during the current decade, yet we are still clearing forests much faster than they can regenerate themselves. Besides deforestation, other areas of tropical, temperate and boreal forests are significantly degraded by over-exploitation each year.

Deforestation and forest degradation can deprive communities of their land and livelihoods, cause severe biodiversity loss and soil erosion, and cause surface and ground water levels to fall, often dramatically. Additionally, deforestation activities sometimes cause severe forest fires, such as those in Indonesia in 1997/1998. Because of the air pollution caused by the Indonesian fires some 40,000 people were hospitalized for respiratory and other pollution-related ailments. Most of these fires were caused by the expansion of large-scale industrial pulpwood and oil palm plantations.

Deforestation is also accelerating global climate change. When a forest is logged or burned, carbon is released into the atmosphere, and the storage capacity of the forest is diminished. According to the Stern Review greenhouse gas emissions from deforestation represent more than 18% of global greenhouse gas emissions-more than the global transport sector.

Important drivers of deforestation and forest degradation are:

Unsustainable and illegal logging practices

Unsustainable logging occurs forests are exploited at a rate or in such a way that regeneration is not possible. Not all unsustainable logging is illegal, as forestry legislation in many countries does not yet incorporate sustainable logging practices. And not all illegal logging is unsustainable, such as small-scale logging for agricultural purposes by forest-dependent communities (shifting cultivation).

Illegal logging costs governments of timber-producing countries an estimated €10 to €15 billion per year in lost revenues, which otherwise could be used for the provision of better healthcare, education and other public services, and the implementation of better strategies for managing forests. Legal yet unsustainable logging also causes enormous environmental damage. Biodiversity is lost through conversion of biodiverse primary forests into degenerated secondary forests or plantations. Moreover, legal unsustainable logging creates roads and other infrastructure that opens the forest to illegal loggers and poachers.

In some forest-rich countries, corruption - fuelled by profits from the allocation of concessions and the resulting illegal forms of large-scale logging - has grown to such an extent that it is undermining the rule of law, principles of democratic governance and respect for human rights. In some cases illegal exploitation of forests is associated with large scale violent conflict (e.g. in the Democratic Republic of the Congo). In other cases illegal exploitation of forests may contribute to the financing of a military power (e.g. in Burma). This specific subject is further dealt with on the issue page on Operation in conflict zones.

Conversion of natural forests into timber or pulp plantations

One of the most important drivers of unsustainable logging is the establishment of large-scale pulp, paper and ply mills. These mills often exploit natural forest lands, and replant them with monoculture plantations of fast-growing tree species. Although plantations are sometimes classified as forests - e.g. in the bi-annual study State of the World's Forests by the UN Food and Agriculture Organisation (FAO) - they do not offer the same social and ecological qualities as natural forests. The vast areas of monocultures required to feed modern pulp mills have severe impacts on biodiversity, water, land rights and livelihoods.

According to a World Bank study on timber production in Africa, the forestry sector has failed to play a constructive role in conserving and managing the world's forest resources. "Over the past sixty years, there is little evidence that it has lifted rural populations out of poverty or contributed in other meaningful and sustainable ways to local and national development." The Inspection Panel of the World Bank - assessing the World Bank's role in local industrial forest management in Cambodja - concluded that "one could hardly overemphasize the negative effects of the logging on a natural habitat of world class value and most importantly on very poor and vulnerable rural communities and indigenous peoples."

Conversion of forests for agricultural expansion

Agricultural activities such as life-stock farming and the production of palm oil, soy and grains (for both food and biofuels) require ever increasing areas of land. In order to make space for these agricultural activities, forests are often destroyed at a large scale, after which the felled slash is burned to be used as fertilizer. This system is known as slash-and-burn. It is practiced both by large-scale agricultural companies and small farmers. This subject is treated in more detail on the sector page on Agriculture;

Conversion of mangrove forests for aquaculture

Mangrove forests in tropical coastal areas are often destroyed to create large-scale fish and seafood nurseries. The subject of sustainable aquaculture is treated on the sector page on Fisheries;

Development of large-scale industrial and infrastructure projects

Forests are also destroyed for the development of industry and infrastructure - such as roads, railways, dams, mines and oil and gas installations and pipelines. Some of these subjects are treated in more detail the sector page on mining, the sector page on oil and gas and the sector page on power generation.

A major risk is unfolding through the efforts of the logging industry to ensure that international climate negotiations (such as the 15^th UN Climate Change Conference in Copenhagen in December 2009) do not protect forests from logging. Forests are being addressed as part of the new UN climate change deal through a mechanism known as ‘reducing emissions from deforestation and forest degradation' (REDD). As the scope of REDD is framed within the context of ‘promoting sustainable forest management', it could actually result in credits being generated from introducing logging into intact forests. This can happen because the definition of forests does not distinguish between a plantation and a natural forest. NGO's believe that mechanisms like REDD will increase logging of intact natural forests and the conversion of forests to palm oil and fibre plantations in developing countries instead of protecting natural intact forests. As plantations store less carbon than bio diverse, carbon rich and resilient natural forests, this mechanism will worsen climate change.

Financial institutions should ensure themselves to benefit from investments in the protection of native forests and vegetation and avoid the financial and reputation risks from investing in deforestation or forest degradation. To ensure that companies in the forestry sector financed by banks manage forests in a way that ensures not only environmental sustainability but also benefits to local communities, banks need to develop a strict policy that sets guidelines for screening forestry companies.