Kayu Lapis Indonesia’s uncompromising mission statement is all about completing the sustainability circle.
The Indonesian plywood, flooring and timber garden products manufacturer sets out its corporate ‘vision’ as ‘excelling in sustainable growth through quality processing of raw material from professionally managed sustainable forest into eco-friendly wood products’.
In today’s increasingly environmentally aware and critical international market, such pronouncements inevitably invite scrutiny. But KLI marketing director Pak Buniadi Makmur insists it’s more than eco sales pitch. It’s this global exporters’ core operating philosophy, governing all aspects of its multifaceted business; from directly managed forestry operations, to manufacturing facilities. The company is clearly confident it can withstand examination too, as it’s also ‘committed to transparency’.
What KLI regards, in turn, as the bedrock for achieving forestry and timber sustainability, is the legality of its operations and wider supply chain. Consequently it has unequivocally backed Indonesia’s SVLK timber legality assurance system, which, it maintains, has significantly helped curb illegal logging.
Leading from this, KLI is also urging full implementation of the country’s EU Forest Law Enforcement, Governance and Trade Voluntary Partnership Agreement (FLEGT VPA). Under the VPA, Indonesia and the EU are implementing a timber legality assurance action plan, utilising the SVLK system as part of the framework, with the aim of ‘FLEGT licensing’ of verified legal timber products.
The subsequent licensed products will then be exempt further due diligence risk assessment in Europe under the anti-illegal wood EU Timber Regulation (EUTR).
KLI is enthusiastically committed to the initiative and agrees with both EU and Indonesian authorities, which say that, after trial shipments exposed some weaknesses in the licensing system, it is now progressing rapidly. At the same time, it also urges the EU trade to re-emphasise its support for the FLEGT programme and to help step up the pace driving it forward.
“Not only do we want our reputation to be a company committed to legality and sustainability – which is underlined by the certification we’ve achieved,” he said. “We want to be part of a wider industry recognised internationally as sharing the same goals and ethos. The future of this industry is all about sustainability.”
All that said, KLI makes it clear it is not just pursuing its green goals regardless. Its approach is also shaped increasingly by bottom line and business development considerations. It is, after all, selling to some of the most eco-sensitive markets there are. These also include the USA, Australia and Japan; countries, which, like the EU, have some form of regulation to bar illegal timber and wood products.
“Imposing high standards in sustainable and legal forest management and following this through to downstream operations can only be good for the business,” said Mr Makmur. “If corporates like KLI group prove we operate this way, it can help overcome persisting negative market perceptions of our industry.”
Moreover, he added, managing the company in a ‘legal, sustainable way has had direct operational benefits’. “For instance, environmental innovations upstream have resulted in more productive forestry. It’s a model we believe that gives the timber business as well as the forest a bright future.”
It’s certainly a model that’s worked for KLI. Starting in the 1970s as a log trader, it is now one of the leading players in the Indonesian industry. It operates two major milling and manufacturing sites (with its plywood CARB certified ultra low formaldehyde). It employs 13,000 people and exports 70% of output to over 80 countries. Its sales to the UK alone are worth US$440,000 per month F.O.B. The company took on its own concessions, now covering 500,000 ha, in the late 1970s.
Subsequently it introduced its first sustainable forest management programme with a triple focus on ‘productivity, ecology and social benefit’. Today, it maintains, a ‘healthy, sustainable forest has been one of the keys to its success’.
KLI says its forest policies comply firstly with Indonesian official standards, plus 60% of its concessions are also FSC-certified. Its product range also means sourcing timber from other suppliers in Indonesia and abroad, with species including meranti, bangkirai, keruing, samama and sengon. As a result it also operates to a number of other certification and legality verification schemes. These include Indonesia’s LEI scheme, plus VLO, VLC, RIL, PHPL and, of course, SVLK. It’s a list KLI would like to see streamlined, but to date that has not been an option.
“Having so many systems to manage is an administrative burden and impacts efficiency,” said Mr Makmur. “But the market decides which certification suits its requirements.”
Clearly KLI also sees the further development of the SVLK system and FLEGT initiative among the routes for simplifying and clarifying this picture, another reason it has got energetically behind both.
“We’ve backed the roll-out of SVLK by the Ministry for Environment and Forestry,” said Mr Makmur. “And we’ve promoted it to the market as a robust system for assuring legal supply chains through effective tracking and monitoring. We’ve also highlighted its consistency and stability, which are vital for running a viable, efficient business.”
KLI was an ‘early adopter’ of the SVLK V-legal labelling programme too, shipping its first container of V-legal product to Europe in 2012.
The company has been equally proactive in the development of Indonesia’s FLEGT VPA. “As part of the process we helped present SVLK and V-legal programmes [as the basis for our FLEGT systems] to importers at multi-stakeholder meetings in Paris, London and Brussels,” he said. “We formed part of a team comprising government representatives, NGOs and smaller producer-exporters, with KLI representing the large-scale sector.” KLI, he added, also presented on the topic at an Asia-Pacific Economic Cooperation meeting.
The company sees FLEGT as making an even clearer statement that Indonesia is ‘serious about putting continuous efforts into combating illegal timber’.
As with SVLK, KLI ’s certification team has undertaken a FLEGT information and education programme company-wide.
Implementation of the initiative has not always been straightforward, but it believes long term will be worth the effort.
“As with other certification processes, you can see them as a challenge or an opportunity,” said Mr Makmur. “We see FLEGT as an opportunity as it will further differentiate us in consumer’s perceptions from suppliers which have not yet taken the same steps against illegal timber.”
The company is convinced too that successful implementation of FLEGT and the start of FLEGT licensing by Indonesia will bring sales benefits. Whether it will result in the 6% increase in timber and wood products exports to the EU some predict remains to be seen, but Mr Makmur maintained that was ‘very possible’. “Sales will definitely increase,” he said.
However, he added, what would also play a key role in dictating the scale of FLEGT’s commercial impact would be the seriousness with which the EU authorities and trade take the initiative and the rigour and uniformity with which the EUTR is enforced. Ineffective implementation and policing of the latter, he said, could disincentivise and impede the FLEGT VPA process.
To get the EU trade behind the initiative also demanded an ongoing education effort. “The European timber sector should know just how serious Indonesia has been about the FLEGT VPA programme as part of its efforts against illegal material,” said Mr Makmur. “They should also understand just what rigorous steps need to be taken before FLEGT licenses are issued.”
KLI would also like to see the FLEGT information drive go further afield in the hope that others follow Australia’s example and accept FLEGT licensing as a risk mitigating factor under their own anti-illegal timber regulations.
“If other countries study our SVLK and FLEGT systems, we’re confident more could follow Australia’s example and accept their value,” said Mr Makmur.
But, without compromising the rigour of the process, the real key to advancing the FLEGT initiative now was getting that first FLEGT licensed timber to market as quickly as possible. And the clear hope is that Indonesia will deliver it.
“It’s a crucial step for FLEGT to be taken seriously for at least one country to be issuing licenses,” said Mr Makmur. “When that happens, and other countries see the benefit, they will automatically step up efforts to follow suit.”
