Private Businesses in Forest Conservation: The Case of Forestwise in Borneo Island

By V Santhakumar

The importance of restoring land, including ecosystems, such as forests, is well recognised.¹ There is a need to bring together multiple stakeholders and actors for this purpose. The possible role of the private sector in restoring land seems attractive in this regard.² The private sector may be involved in the supply of products based on raw materials which are collected from forests sustainably or cultivated without degrading land. However, there are not many accounts of the possibilities and challenges in doing so by private companies. This article discusses the case of one such product company, Forestwise and its activities in West Kalimantan, Indonesia.

The main products of Forestwise are made from the nuts of illipe tree (Shorea stenoptera). These trees are commonly seen in the wet tropical forests of Borneo Island. The butter of these nuts is processed to make a variety of cosmetic products (moisturiser, soaps, massage oil, etc.) There are also other products of the company, such as Kukui nut oil, Arenga sugar, etc., which are made from other materials collected from these forests. Based on their accounts, the impact of Forestwise is significant though modest. It works with about 1000 collectors of such forest products and its intervention could increase their income by 16 percent. Its impact extends to 6 villages and 36000 hectares of forests in the West Kalimantan area.

Rather than analysing the impact of this organisation, this report takes the work of Forestwise as a model and looks at the possibilities and challenges of such interventions in enabling land restoration. The report is based on a field visit to a village where its activities started and have been continuing for the longest duration. We observed the process of collecting nuts and the livelihood of people there. We also had discussions with the beneficiaries of this intervention in the village. In addition, we visited the factory which processes illipe nuts and had detailed discussions with the functionaries of Forestwise, including its cofounder and CEO, Dirk-Jan Oudshoorn.

Intervention by Forestwise

People in this area were using illipe nuts as an ingredient in some of their dishes. However, only a small part of the nuts available in the forest adjacent to their village is used for this. Forestwise could demonstrate that the butter of these nuts can be used for a variety of cosmetic and health products. It could also sell these products to domestic (in places, such as Bali) and international markets. The oil from these nuts can serve as a substitute for cocoa butter and palm oil, which are planted by destroying forests.

Hence, the intervention of Forestwise encourages people in these communities to collect more of these nuts from adjoining forests. The illipe tree can be very tall, and its timber is also valuable. There are many such trees in forests here, and even if people cut grown ones for timber, many fruit/nut-bearing ones would still be available. (Trees which are ten years old may start bearing nuts; the timber value is negligible at this stage.) The collection is done by picking fruits/nuts from the ground. We could see the possibility of collecting these nuts without destroying the undergrowth in forests (though there can be certain cases where the owners of land may cause damage to the undergrowth to facilitate the collection of nuts.)

There is no scarcity of nuts in these forests. In fact, the main problem for the company is that they cannot buy nuts from many collectors. It is, as of now, buying these nuts from only a relatively small number of villages and even from these villages, it may not be able to procure the entire quantity that the locals can collect. The processing capacity of Forestwise (and possibly, the demand for finished products which it makes) is limited. It is trying to get more investors (and is already in the advanced stages of negotiations) so that the processing capacity can be enhanced. It may also require more concentrated efforts to expand markets to ensure an increased number of customers for its products. (If this market expansion is not attempted, an increase in processing capacity may lead to a decline in the prices of products and nuts.)

Though Forestwise is a monopsony, it is giving a higher price for nuts to farmers/collectors by sharing a greater part of the surplus with them. The intentions to protect forests and share a greater part of the income with the locals are visible in the work of Forestwise. The founders of the company do not see this as a profit-maximising enterprise, and forest conservation through sustainable means seems to be the main motivation. Though there were other companies sourcing illipe nuts in the past, before the entry of Forestwise, these could not enter into reliable contracts with local people. There were unexpected fluctuations in the price. It is this problem that Forestwise could address, though it could not source nuts from all people and villages where these are available.³

The collection of these nuts can be a notable source of income for those who could sell these to a company like Forestwise. This is also evident from the interest that local people show in collecting illipe nuts. We could see that most families in the village that we visited make efforts to collect these nuts on a regular basis.

Communities and forests

Parts of forests in these areas are protected not only due to the income from Forestwise. (Other parts are converted into palm oil plantations.⁴) There are different non-timber forest products which are collected and sold by local people. Sustainable harvest of bamboo and rattan can also be a source of livelihood. Timber, if it is harvested sustainably and carefully, can meet their housing requirements and be a major source of income for local people. Small-tower-like structures are constructed near houses to attract birds, and their nests are collected and sold for export to Chinese markets. This is another source of income for people there. A few villages attract tourists and there is a potential for ecotourism. Hence, there are different ways to meet the needs of cash income for these forest-dependent people.

Forests also meet the subsistence needs of people. People can practice slash-and-burn cultivation with adequate fallow period in between. This is the way they cultivate paddy, which is the staple food for these communities. They also cultivate cassava in small plots without destroying forests. There is a variety of fruits (including durian, jackfruit, etc.); water is cleaner (if managed well), and some of these villages also produce hydropower, locally.

The lure of more money is not the sole incentive of these communities. The communities live cohesively and life in these villages with their cultural attributes is meaningful for these communities. It is possible for one member of the community to take actions that may destroy forests, but community pressure is adequate so far to prevent such actions. (This was evident from our discussion with the members of the community.) Hence, the value attached to community life and culture is also enabling the protection of forests.

Possibilities

More and more companies like Forestwise which are concerned about protecting forests and wildlife but at the same time interested in giving a sustainable income to these communities can play a positive role. Forestwise is already involved in the production and marketing of different products, such as Arenga Sugar, Kukui Nut Oil, and Bush Merah Oil in addition to those made from illipe nuts. (However, those based on illipe nuts seem to dominate one in terms of volume and revenue.) The company is attracting other investors and hoping that their investments may help it to buy and process more nuts. This may help more people and villages. There is an interest in `organic rubber’ in European markets, and if this translates into sourcing of a sizeable quantity of rubber from multi-crop/species plantations, it can reduce the mono-cropping of rubber trees in this area.

However, there may be a need for scaling up the actions of these companies and moving away from focusing on one or two products. There is a need to collect and market widely a variety of goods and services which can be provided by wet-tropical forests in a sustainable manner. In that sense, carbon finance can also be useful. However, despite all the global talk about carbon and biodiversity finance, this money is yet to reach communities which protect forests. There can be interventions by private companies in this regard too.

The life of a few villagers in the community also gives the impression that people there can have a decent life even without abandoning forests and cultural practices. Indigenous people do not seem poor here when we compare their situation with that in other developing countries. They have access to basic food, housing, reasonably clean (cleanable) water, toilets, etc. Food is diverse enough with adequate amounts of protein, vegetables, leafy greens and starch. We could see children having a playful social life (with opportunities to swim in natural streams which are not polluted). People interact with each other regularly and have enough community platforms for socialisation. They are not deprived of the benefits of modern education (with schools in villages set up by the Government of Indonesia). Basic healthcare is available, though more advanced medical treatment may require transportation to cities and towns. Though youngsters go to cities for higher education, they continue to have close relationships with their families. The situation in Borneo is closer to that in indigenous territories in Brazil and other Latin American countries. (The situation in Borneo may be insightful in debates on the life of tribal people in India. They were deprived of access to forests, and when a law was made to enhance this access, the concern was whether they would be able to lead a reasonable quality of life by depending on but without destroying forests. The situation in Borneo provides some optimistic signals in this regard.)

Challenges

There are challenges in forest conservation efforts which are carried out by communities and private firms. As part of the normal socio-economic change, youngsters in these communities are getting educated. There are not enough appropriate jobs for such educated people in these villages and, hence, they migrate to cities. They may not participate in and/or lose interest in activities (like the collection of illipe nuts) which can generate income from forests. Their dependence on forests and communities may also reduce. When they are not bound by community norms, they may take action even if these are not sanctioned by communities. It is good if their migration leads to a non-use of forests, but a non-dependence of forests can also lead to their destruction for commercial purposes (say, by transferring the right to use land to outsiders who are not bound by community norms).

Though there are companies like Forestwise (and we have noted such private investments/firms in other countries, like Brazil), these do not make much money. Some of the companies are still in an investment phase hoping for sustainable returns in future. Forestwise is recovering the cost of its operations but may not have an investible surplus on its own to expand operations. Hence, they may not be in a position to scale up their operations. Hence, the operations of most of these firms currently depend on the goodwill of a few individuals who invest their money, time and probably life in this. The availability of finance to reduce carbon dioxide emissions and protect biodiversity at the global scale has not translated into transfer programmes which can benefit these companies which are contributing to forest conservation. Hence, though there is a lot of talk about `businesses protecting forests and land’, the size/scale of their operations is very small compared to the need.

Private businesses can help in certain cases, especially when these are also driven (partly) by environmental goals. However, all the requirements of conservation cannot be met by private companies – Forestwise could not find extant markets for many products from the forests in Borneo, or the additional income through such market expansion that the local people receive may not be that high. The income that can be generated depends on the nature of forests and hence, it may not be enough to protect all kinds of forests. Though forests in Borneo can give a relatively higher revenue, that may not be the case of peatland forests in other parts of the island (such as Central Kalimantan) or Indonesia (as in the case of Riau province).⁵ Forests in Savannahs of Africa, though not dense, enables wildlife viewing. Hence, tourism can be a major source of income in these cases but that may not be the case for peatlands or wet-tropical forests in Indonesia.

All these indicate that we need to have a realistic understanding of the role of communities and private businesses in protecting forests. There are goods and services which may have a direct market which may encourage private firms to be part of forest conservation. There can be innovation in the extraction and use of such products which may enhance this interest or possibility. However, there are other products which may not have wider markets, or which may not give a sizeable income to private actors on a viable basis. Similarly, community norms may help in protecting certain aspects of forests. There is a view that such norms are not adequate to protect wildlife in the forests of Borneo. It had negative implications on the survival of not only visible animals, like Orangutans but also many other not-so-visible fauna. One gets the impression that the wildlife in the forests of Borneo (which are under the control of communities) is sparse. People have a long tradition of hunting wildlife for food, and the avoidance of this practice even if it is banned may require a higher enforcement cost.⁶

Conclusion

The situation in Borneo demonstrates that forest-dependent people can have a reasonable quality of life by using forests on a sustainable basis. This is a concern in countries like India. There is a view that tribal people, if given the right to use forests, may destroy them. There is also a view that access to forests is not enough to get out of poverty and deprivation. Both these views seem incorrect based on the situation in Borneo. Access to a sizeable stretch of forests can improve the life of such communities, and their use of forests need not necessarily lead to forest destruction. However, this note acknowledges the challenges in attaining such a desirable equilibrium.

It is well-known that there are positive externalities in forest conservation. The downstream benefits in terms of hydrology or global benefits through the absorption of carbon dioxide due to the conservation of forests are examples of these positive externalities. It is true that individuals, private or for-profit actors (even when they are driven by their self-interest) can provide these externalities to some extent. The level of such externalities may go up when these private actors are driven by environmental and social goals (as in the case of ESG – Environmental, Social and Governance investments).

Mechanisms, like carbon- and biodiversity-finance, are tools for transferring social benefits of positive externalities to those who protect these directly or who bear the cost of such actions. However, there are practical challenges in the implementation of these transfer mechanisms in many parts of the world, especially in developing countries.

The crucial insight from economics that markets may undersupply those goods and services which have positive externalities continues to be relevant for forest conservation. Hence, the governments have to continue to play an important role. The relevance of this can be seen in Kalimantan too. What if the government allocates more of publicly controlled land for palm oil cultivation? The environmental losses associated with it will be a lot more than the gains from forest conservation by communities on lands controlled by them. Though deforestation through additional palm oil cultivation is slowing down, the enforcement of regulations continues to be important.⁸ The role of communities and private businesses may have to be seen as complementary to (and not as substitutes of) what governments do for this purpose. The government, private businesses and communities may have to be part of forest conservation in an integrated manner with each focussing on what it can do the best.

AUTHOR
V Santhakumar is Professor, Azim Premji University

Featured photo by Mandy Choi on Unsplash