Forest risk commodities

Timber

The world’s remaining forests occupy just over 3.8 billion hectares, or 30% of the global land area1. Global demand for wood and wood products creates pressure on tropical countries to produce cheap timber and pulp, and this demand is expected to continue to rise, driven by growing and increasingly affluent populations around the world. While this demand will be met in part through sustainable sources and industrial efficiency, the pressure on natural forests worldwide will continue to rise, particularly in developing countries where costs are lower and climates are suitable for fast-growing trees.

Supply

  • The United States, Russia, and Canada are the leading producers of timber and pulp.
  • Annual exports of primary and secondary wood products from tropical forests have exceeded US$ 20 billion in recent years and further increases are anticipated. In comparison with other regions, logging as a driver of deforestation is most significant in Southeast Asia2.
  • Each year, more than 3.4 billion cubic meters of wood is extracted from forests, approximately half of which is used for wood fuel (firewood or charcoal), and the remainder is used to make timber and paper products3. The world’s managed forests generate approximately US$ 100 billion in wood removals and US$ 18.5 billion in other forest products per annum. This is fuelled by over US$ 64 billion in investments annually4.
  • An estimated 42% of the global wood harvest for industrial uses is used to make paper. Most of that fiber comes from wood specially harvested for this purpose from industrial plantations or within managed semi-natural forest. Existing industrial forestry in North America and Europe is primarily targeted at meeting this demand.
  • At present, no-one knows exactly how much industrial timber consumption worldwide is actually sustainable. However, in the tropics, the proportion of forests that are sustainably managed remains very low, resulting in a number of environmental and social impacts5.

Demand

  • The European Union and the United States lead global timber and pulp consumption. As a single market, the EU is the largest consumer of timber products in the world.
  • Industrialized nations, with less than 20% of the world’s population, consume the vast majority of industrial wood output. Paper is used widely in all industrialized societies, from printing and packaging through to hygiene and food preparation. In almost all parts of the world, the largest increase in demand in forest products has been in pulp and paper6. Historically, North America dominated global production and consumption but due to rapid growth in Europe, Asia and the Pacific, all three markets now account for a similar share7.
  • China has emerged as a global intermediary for wood products, growing its exports to over US$ 23 billion in 2009 – a 700% increase in value from 1997. More than half of China’s timber requirements are met by imports8 and, despite the economic crisis, China has remained the largest single importer of tropical logs, importing over 8 million cubic meters in 20109. As with many other indicators of increasing affluence, it is expected that consumption in nations such as China will increase. The major markets for Chinese wood products are the US, EU and Japan, which capture more than 50% of the export market by value10.
  • The aftermath of disasters, such as the earthquake and tsunami in Japan in 2011, are expected to increase demand for building materials, including tropical wood products, for reconstruction11.

Impacts & their Management

  • There is widespread stakeholder concern around the sustainability challenges of large scale forestry monocultures using non-native species. Extensive plantations for paper in the developing world have raised concerns over the impact on water resources, increases in CO2 emissions, reductions in the levels of plant and animal diversity, and loss of agriculturally productive land.
  • Logging for high-value species in remote areas has a high impact on biodiversity, including threatened species, and deforestation is frequently linked to severe flood events and landslides13. Irresponsible forestry practices, particularly in habitats with high conversation value, can result in habitat fragmentation and degradation and contribute to climate change, loss of ecosystem services and biodiversity loss.
  • According to the World Bank, illegal logging is estimated to cost developing nations close to US$ 15 billion annually in lost assets and revenues. Illegal logging promotes corruption and undermines the rule of law, and a number of reports have connected large scale illegal logging around the world with organized crime syndicates. In 2010, a joint report by Global Witness and the Environmental Investigation Agency (EIA) revealed the illegal rosewood industry in Madagascar, is worth up to $460,000 a day14. Revenues from illegal logging have also been used to fund conflict, most recently in Liberia and the Democratic Republic of Congo and can deprive governments of much needed revenue to grow and develop the legitimate economy. Penalties for using illegally logged products have increased in key import markets and the need for good traceability systems has become increasingly important.
  • Over a billion people depend on forests and the services they provide. Loss of forest resources for forage, fuel, food and other ecosystem services can negatively impact local communities, and ambiguous or unenforced property rights can result in community displacements.
  • Despite the maturity of timber certification schemes, recent NGO campaigns have highlighted that unsustainable sourcing is still a problem. Recent examples include Greenpeace campaigns against well known brands such as Mattel and KFC for using suppliers that provided them with packaging products originating from fiber sourced in Indonesia’s rainforests.

Third Party Certification

  • Industry’s response to sustainability issues has been to develop third party certification systems. Timber certification systems provide third party assurances that forestry operations are sustainable.
  • Two major international frameworks that oversee and promote development of forest certification are the Forest Stewardship Council (FSC) established in 1993, and the Program for the Endorsement of Forest Certification (PEFC) established in 1999.
  • Globally, the world’s certified forest area is approaching 10% and the rate of certification appears to be slowing rather than increasing. Certified coverage is not evenly distributed - almost 92% is located in the northern hemisphere, while less than 2% of tropical forests are certified15.

Government Regulation

  • The US Lacey Act: In 2008, the US became the first country to ban the import, sale or trade of wood and wood products harvested in violation of an underlying law in the country of origin. Importers of wood products must declare the species and country of origin. There are strong penalties for knowingly sourcing, or failing to exercise due care when sourcing, illegal timber.
  • The EU Timber Regulation comes into force from 3rd March 2013. The European Parliament and European Council have approved the legislation, which prohibits the sale of timber logged illegally under the rules of the country of origin. In addition, companies must use a system of due diligence to ascertain that the timber sold in the EU was harvested legally. The new legislation is intended to work alongside the EU FLEGT licensing system, which identifies legal timber and timber products in producer countries and licenses them for import to the EU. This system is being developed through the negotiation of a series of voluntary partnership agreements (VPAs) with cooperating producer countries, and is to be implemented in Europe through the EU FLEGT Regulation (as distinct from the EU Timber Regulation).
  • The Illegal Logging Prohibition Act 2012 received Royal Assent in November 2012 and is now law in Australia. A number of provisions in the Act restrict the importation and sale of illegally logged timber. Regulations to detail the operational aspects of the Act, including due diligence requirements, are now the subject of consultation with industry and stakeholders. Final versions will be available March 2013 and will be enforced from November 2014.

1 FAO & JRC. (2012) Global forest land-use change 1990–2005, by Lindquist EJ, et al. FAO Forestry Paper No. 169. Food and Agriculture Organization of the United Nations and European Commission Joint Research Centre. Rome, FAO.
2 FAO. (2009) Global demand for wood products
3 FAO & JRC. (2012) Global forest land-use change 1990–2005, by Lindquist EJ, et al. FAO Forestry Paper No. 169. Food and Agriculture Organization of the United Nations and European Commission Joint Research Centre. Rome, FAO
4 UNEP. (2011) REDDY set grow
5 FAO. (2009) Global demand for wood products
6 World Resources Institute. (2008) Trees in the greenhouse: Why Climate Change is Transforming the Forest Products Business
7 FAO. (2009) Global demand for wood products
8 EFI. (2011) Baseline study 1, China: Overview of Forest Governance, Markets and Trade
9 UNECE. (2011) Forest products: annual market review 2010-2011
10 EFI. (2011) Baseline study 1, China: Overview of Forest Governance, Markets and Trade
11 UNECE. (2011) Forest products: annual market review 2010-2011
12 UCS. (2012) Logging and the Law: how the US Lacey Act helps reduce illegal logging in the tropics
13 UNEP. (2002) State of the environment and policy retrospective
14 Global Witness. (2009) Investigation into the illegal felling, transport and export of precious wood in sava region Madagascar
15 UNECE. (2012) Forest products: annual market review 2011-2012

Global timber and pulp production

Including all round wood, excluding wood fuel (5 year average by weight 2007-2011)
Source: FAO 2010.

Global timber and pulp production 

Global timber and pulp consumption

Including all round wood, excluding wood fuel (5 year average by weight 2007-2011)
Source: FAO 2010.

Global timber and pulp consumption 

 
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