Increasing legality compliance amongst forest sector MSMEs: creating an enabling environment for responsible forest product trade and socio-economic recovery

Pohnan, E., Cammaert, B., Hewitt, D.

Increasing legality compliance amongst forest sector MSMEs: creating an enabling environment for responsible forest product trade and socio-economic recovery

XV World Forestry Congress, 2-6 May 2022

Year of publication 2022

Place of publication Rome, Italy ;

Pages 8p.

Author Pohnan, E., Cammaert, B., Hewitt, D.

Publisher FAO ;

Product type Article

Full item page

Synopsis (short abstract) Micro, small and medium-sized enterprises (MSMEs) play a critical role in meeting the growing demand for forest products worldwide, with potential to contribute to responsible supply chains that combat illegal logging while promoting economic growth. However, MSMEs have been challenged by the emergence of regulated markets requiring verified legal timber, which involve more stringent regulatory compliance and additional up-front costs. Recognizing the need to ensure MSMEs can benefit from – and are not penalized by – the responsible forest trade, the FAO-EU FLEGT Programme supported 100+ projects in 20 countries between 2016 and 2021 that sought to improve MSME capacity to supply legal timber. These projects employed several strategies: • Increasing MSME legal compliance through capacity building, mentoring and technical assistance; • Formalizing MSMEs to achieve legal status and access to benefits such as credit, training programs, and labour protections. • Strengthening associations that represent MSMEs and provide technical and financial assistance; • Reducing the regulatory burden through the simplification of existing legal frameworks; and • Integrating MSMEs into responsible value chains by linking with buyers or manufacturers. The Programme analyzed the impacts of these projects to determine best practices for supporting MSMEs atscale. It was found that the formation of associations was the most impactful intervention for helping MSMEs to formalize and produce legal timber. Capacity-building efforts also must integrate business skill development with training on legality compliance. The paper discusses options for further deployment of these strategies at scale, emphasizing the importance of building an “ecosystem of support” by forming a variety of mutually supporting partnerships. This will be central to assisting MSMEs negatively impacted by COVID-19 imposed lockdowns and economic slowdown. Keywords: Illegal logging, timber trade, small and medium-sized enterprises, forest governance, responsible markets ID:3486686

Language English

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Informal forest sector micro, small and medium-sized enterprises (MSMEs) are often equated with being “illegal” when their mode of production, source of raw materials, or even their legal existence does not conform with their country’s regulatory requirements. This characterization fails to recognize the complex circumstances many MSMEs faces, especially in countries where the requirements for legality compliance and achieving formal status are not clear. This situation raises a question frequently faced by practitioners who work with forest sector MSMEs – should MSMEs be encouraged to formalize to avoid being labeled as ‘illegal’? Acknowledging that MSMEs have valid reasons to either pursue or avoid formalization, this brief does not judge this question but instead argues that it is more important to ensure that MSMEs receive concrete benefits when deciding to become formalized. It is the task of practitioners, governments, and stakeholders to contribute towards the creation of an enabling environment that rewards MSMEs for formalizing. By doing that, practitioners enable MSMEs to reap the expected benefits of formal status, such as securing livelihoods and opportunities for economic growth and decent employment.
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Micro, small and medium-sized enterprises (MSMEs) play a critical role in meeting the growing demand for forest products worldwide, with potential to contribute to responsible supply chains that combat illegal logging while promoting economic growth. However, a growing number of countries are adopting demand-side control measures that require proof of legality of forest products. Forest sector MSMEs will require significant support – and changes to the types of support they receive – to fulfil and even take advantage of these new and emerging market requirements and related opportunities. This paper draws from 110 initiatives in 20 countries supported by the FAO-EU Forest Law Enforcement, Governance and Trade (FLEGT) Programme between 2016 and 2022 and seeks to provide examples of how to support forest sector MSMEs cost-effectively and at scale to integrate them into domestic and international legal timber value chains. The initiatives discussed in this paper offer a wealth of experience and knowledge, which can be capitalized upon to boost forest-dependent livelihoods and promote both social equity and sustainability within timber supply chains. Implementing a portfolio of these strategies in a comprehensive support package generate “transformational changes” that help realize the potential of MSMEs to move past traditional business-as-usual modes of operation towards sustainable growth and more inclusive, resilient economies.
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Agenda: How has supporting MSMES to operate legally and sustainably improved forest governance and livelihoods?
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Micro, small and medium enterprises (MSMEs) play a critical role in meeting the growing demand for timber products worldwide and can support the fight against illegality by providing a source of legal, traceable timber. Equipping MSMEs with the relevant business management skills together with the knowledge and competences necessary to comply with regulations generates transformational changes which extend beyond the duration of projects. These changes not only improve legality in the timber market, but contribute to sustaining livelihoods. The webinar will explore how changes in forest-management practices generated through the support of the FAO-EU Forest Law Enforcement, Governance and Trade (FLEGT) Programme and the European Forest Institute (EFI) have increased market access, enhanced the competitiveness of MSMEs, whilst reducing their vulnerability to shifts on the international and domestic market. It will discuss the experiences of MSMEs who have benefited from FAO and EFI support and provide "food for thought” for future interventions.