The Need to Control Transnational Logging Companies

The former director of the UN FAO wrote in 1987:

"Over the last two decades, massive tracts of virgin tropical forests have come under exploitation, in all three under-developed regions. That exploitation, with a few honourable exceptions, has been reckless, wasteful, even devastating. Nearly all the operations ... have had no profound or durable impact on the social and economic life of the countries where they have taken place ... Local needs are not being met; the employment opportunities are trifling. A significant part of the exports, as logs or as primary processed timber, is exported 'within the firm', and transfer values are fixed to facilitate the accumulation of profits outside the country....The contribution of forestry to improving the lot of the common people has been negligible so far".⁴

Reports such as these led to heightened awareness world-wide of the threats to all forests and the potential consequences of deforestation. But despite the hopes raised and promises made at the 1992 Earth Summit in Rio and a continuous effort at the international level since then to address these threats and consequences, deforestation and forest degradation are accelerating in many parts of the world.⁵ The last remaining areas of large, relatively intact forests—identified as 'frontier forests' by the World Resources Institute (WRI)—are increasingly under threat from unsustainable activities.⁶ WRI and others have identified that principal amongst these threats is large-scale commercial logging of the kind carried out in the vast majority of operations around the world today.⁷ Confirming this is a recent IUCN publication, which rates tree-felling, including both clear- and selective-felling, as the most frequently recorded threat (ahead of agriculture, settlement expansion, grazing and burning) to globally threatened tree species, and timber as the most recorded use of those species.⁸

Not only are most large-scale logging operations unsustainable; many are also illegal within the countries of operation. Indeed, the forestry sector has a history of financial, environmental and social misconduct from which it has escaped with relative impunity. This was highlighted by the Barnett Enquiry into the activities of Japanese, Australian and other transnational logging companies in Papua New Guinea in the 1980s. A number of recent publications have drawn attention to the extent of illegal activity in the forestry sector world-wide (see Table 1). The relative weaknesses in civil society in the countries participating in this illegal trade play a significant part in its perpetuation as well as in many other of the underlying causes of deforestation.

Principal among the threats to forests is large-scale commercial logging of the kind carried out in the vast majority of logging operations around the world today.

Several voluntary, market-based initiatives have recently been put forward in an attempt to address these problems, including a move within the Intergovernmental Forum on Forests (IFF) and calls from the G8 countries for voluntary codes of conduct for the logging industry. A study of forestry-related industries undertaken by a Canadian government department, however, suggests that relying on voluntary compliance is ineffective "in achieving even a marginally acceptable level of compliance or benefit to the environment".⁹ This study supports the findings of an independent survey which found that the main factors influencing organisations to take action on environmental issues were compliance with regulations, board of director liability and employees. The least influential factors were voluntary programmes, interest groups and trade considerations.¹⁰

Forest certification is another initiative aimed at improving forest management through voluntary market-based mechanisms and which offers some hope, provided that the criteria upon which the certification system is based are acceptable to all parties. The current trade in certified forest products, however, is less than 1% of the total. It is also clear that corporations which are currently involved in asset-stripping forests cannot be controlled through such voluntary mechanisms, since by their very nature such companies seek opportunities for short-term extractive investment. Indeed, certification may actually create asset-stripping behaviour in those companies which cannot meet standards and therefore divert trade towards less discriminating markets.¹¹ The voluntary nature of certification and the tiny market share of certified products means that indiscriminate logging continues to have huge unabated impacts on forests and forest-dependent peoples.

The experience of certification and other voluntary measures raises the fundamental question of how far the international community can expect transnational logging companies to become environmentally, socially, and even financially responsible of their own accord. Given the reality of their operations, voluntary measures alone are unlikely to improve the majority of transnational logging company operations to a measurable degree, let alone to curtail the worst excesses of the industry.

This conclusion inevitably raises the need to consider a combination of national options and regional and international co-operation for the development of regulatory standards of practice to be applied to all logging companies and for the strengthening of civil society in order to ensure the sustainability of transnational logging company operations in two key areas:

§ the impacts of operations on forests and forest dependent peoples, including the disruption of successful local economies and the transfer of inappropriate technologies such as bulldozer logging;

§ illegally or unsustainably produced and traded forest products.

Transnational logging companies already have the basis of such a framework within which to operate, namely the appropriate legislation of host countries. This provides the minimum criteria by which logging companies should undertake their activities and by which they should be judged. However, many host countries are institutionally weak and need international assistance to improve planning, management and monitoring capacities. Some national and international efforts are being directed at supporting some host countries to improve their forest policy and relevant legislation where it is inadequate, for instance in Cambodia, Guyana, the Solomon Islands and the Russian Far East, but much greater effort is still needed in a number of countries. Effective government monitoring and enforcement and the strengthening of civil society (via NGOs, trade unions or community groups for instance), are crucial to the successful implementation of regulation at both national and international levels. In addition, given the weak political and civil environments of many host countries within which transnational logging companies operate, the responsibility of the transnational's home base country is a useful mechanism to explore.

Table 1: Recent reports outlining the extent of illegal activities in the timber industry

When visiting Brazil in 1996, the Malaysian Minister of Primary Industries, Datuk Dr Lim Keng Yaik, was reported as saying that "Malaysian investors should obey the laws of the land and seek sustainable practices in order to create a trusting relationship".¹²

Deputy Prime Minister Datuk Seri Anwar Ibrahim has been reported as saying that "Malaysian businessmen who invest in other countries had always been reminded to take into consideration the needs of the people there. He said the businessmen had also been constantly reminded to be sensitive to environmental issues in the countries they invested in to protect Malaysia's image."¹³