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  • Linking smallholders to existing wood value chains for sustainable supply

Linking smallholders to existing wood value chains for sustainable supply

An aerial view of a river catchment area in Sondu Basin, Kenya. Photo by P. Sheperd/CIFOR
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Continuing a series of interviews on inclusive landscape finance, Tevis Howard, founding director of Komaza, shares his insights with Bas Louman of Tropenbos International.

Tevis Howard of Komaza. Photo by Komaza

Komaza, founded in 2006, is a vertically integrated forestry company that is involved in forest production from tree nurseries, tree cultivation, harvesting and processing, to selling to domestic and international customers. The company is based in Kifili, Kenya.

Different from other forestry companies in Africa, which produce timber in large plantations, its production is based on thousands of small woodlots in partnership with as many smallholder farmers.

This fits into the production model in Kenya well, where more than 50 percent of the wood supply comes from such farmers.

By aggregating the wood production of these small farmers, Komaza has been able to link them to the traditional wood value chain.

Tevis Howard gives us some insights into the challenges and opportunities he faced in seeking finance during the 13 years since the foundation of the company.

What does ‘inclusiveness’ mean to you?

Inclusiveness seems to be more of an academic issue and can mean many things, at all segments of the value chain, from production to consumption. What counts is that products are useful and accessible to everybody, whether they be financial products, material inputs for tree production or the final products of the wood value chain. Partnerships should be mutually beneficial and include people in transactions or agreements because it is valuable to do so, and not just because it is politically correct.

In our case, partnering with smallholders is a clear business strategy which allows us to reach scale while reducing risks and costs. At the same time, farmers have low risk, significantly increase their assets, and have an expectation of additional future income. Our experience is that partnerships as a whole have created greater benefits for all than could have otherwise been achieved.

Read also: Moving towards a more integrated view on finance and impact

What are the structural barriers to financing smallholders and small- and medium-sized enterprises (SMEs)?

I think you need to address this question at two different levels: first there is Komaza itself, which started up as an SME, although it has now grown to a full-sized company. Secondly, you need to look at the smallholders who grow the trees.

For Komaza there were four big challenges: the first three, to attract the right staff, choose the right farmers to work with and find the buyers, were straightforward challenges that most businesses have. Staff need to be motivated, farmers need to be willing to plant and maintain the plantations, and the customers need to be willing to buy at the offered quality-price relation.

Komaza organizes farmer training programs to ensure quality planting and tree management. Photo by Komaza

Finding the finance to support operations, however, was another matter. The biggest challenge we had was to find investors that were prepared to take the risk to invest in our operations. This went beyond developing the right business models. It required investors to be familiar with the region and interested in investing in early stages of the business. Then we had to convince them that it was worth investing in this asset class, that we were able to manage the risks, and that our model had reduced costs in comparison to traditional tree plantation models.

At the level of the smallholders, the main barriers to becoming involved in tree planting relate to adequate knowledge on tree planting as a business, the costs and availability of inputs for tree plantations, and the requirements for obtaining loans.

How have you addressed these barriers, and what have you learnt from this?

Initially, we aimed at obtaining grant money from social enterprises seeking impact. Using this to build up our model, we were able to obtain convertible loans and equity investments, blending development with commercial money. Financiers invested in Komaza, helping it to grow its assets in trees and a range of different SME processing facilities.

Komaza farmers. Photo by Komaza

After 11 years of building the enterprise, we now have a company with thousands of partners, together worth more than 20 million USD and with expertise across the forest value chain. Much of the work was through personal contacts, establishing trust between Komaza and the potential financiers and between Komaza and partners throughout the forest value chain. In addition, we developed a people-centered company, which helps motivate both farmers and staff to work together in a cost-effective manner while at the same time operating within a corporate structure that is credible to investors.

With respect to the barriers of the farmers, we have been able to come to agreements where they provide land and labor, and we provide technical assistance – the required inputs for tree farming. This helps us to keep costs down (in conventional plantations labor costs may be more than half of total costs) while they invest in the plantation without getting into debt, converting their labor into assets (trees). Once trees have reached the appropriate size, we harvest, transport and sell the trees, sharing the benefits of the sales with the farmers.

Subsistence farmers may find it difficult to obtain documentation that they own their land or other assets, which they would need, for example, to obtain commercial loans. In order to become a partner of our company, we require that their ownership is recognized by neighbors, chiefs and community leaders. This has the added advantage of lowering the risk of land right conflicts.

Finally, we make sure that the area planted with trees is in addition to the area needed for subsistence farming, to ensure that their food provision is not endangered by the wood production. In some cases, farmers also produce food in between the trees during the first years of the plantation.

Read also: Financial products should be adjusted to better meet needs of community forest enterprises

What suggestions do you have to scale up this type of inclusive business model?

We have been able to scale up due to a number of factors: a realistic corporate structure; a human-centered approach, where we discuss with farmers their problems and how our partnership could address some of these; building motivated expertise across the forest value chain; and building relations of trust with farmers, staff, processors, buyers and financiers. This has taken more than 10 years. We have now come to a stage where, with the help of grants, and later blended finance, we have shown the business case and have attracted commercial equity and debt investments in our firm.

Eucalyptus and Melia farms. Photo by Komaza

Only the private sector can invest sufficient amounts in order to reach the scale necessary to create a wood supply from sustainable sources that is able to meet demand. For that reason, we are in the process of creating our Smallholder Forestry Vehicle. Through this vehicle we hope to contribute to filling the gap between financiers that want to invest in sustainable projects but cannot find viable proposals, and the farmers that want to change to more sustainable forms of production but cannot find the finance.

For replication of this type of investment in other areas, we suggest that rather than starting from scratch, it will be important to seek partners that already have the experience, have a network of trustworthy relations, and are motivated to work with trees in the area.

One of the major issues in the forestry sector in Africa is unsustainable production. Scaling up sustainable wood production may not be feasible if at the same time national governments do not take measures to reduce wood from unsustainable sources. One way of doing this would be to raise taxes on wood from unsustainable sources.

By Bas Louman, Tropenbos International.

This interview has also been published on the Tropenbos International website.

This article was produced by Tropenbos International (TBI) and the Center for International Forestry Research (CIFOR) as part of the CGIAR Research Program on Forests, Trees and Agroforestry (FTA). FTA is the world’s largest research for development program to enhance the role of forests, trees and agroforestry in sustainable development and food security and to address climate change. CIFOR leads FTA in partnership with Bioversity International, CATIE, CIRAD, INBAR, ICRAF and TBI. FTA’s work is supported by the CGIAR Trust Fund.

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  • FTA Digital Summit on Inclusive Finance hosted by the GLF

FTA Digital Summit on Inclusive Finance hosted by the GLF

Men process palm oil fruit in Cameroon. Photo by M.Edliadi/CIFOR
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A woman in Fatumnasi, Indonesia holding a harvest of cassava. Photo by A. Sanjaya/CIFOR

Within the framework of the CGIAR Research Program on Forests, Trees and Agroforestry (FTA), Tropenbos International and the Center for International Forestry Research (CIFOR) have initiated a project on inclusive finance. This project includes eight interviews with key stakeholders involved in forest and tree product finance in developing countries and a summary of existing documentation on the topic.

This process, or learning journey, now enters into a consultative, interactive phase. During this phase, we invite you to share your thoughts on finance for inclusive and sustainable landscapes with experts on the topic.

Join us on 9 July 2019, 14:00 Central European Summer Time (CEST), for a Digital Summit on Inclusive Finance organized by FTA and hosted by the Global Landscapes Forum (GLF).

Pauline Nantongo of Ecotrust in Uganda, Juan Carlos Gonzalez Aybar of Althelia Funds and an impact investment manager from Mirova, and Marco Boscolo, forestry officer in the policy, governance and economics group of the Food and Agriculture Organization of the United Nations (FAO) will discuss their experiences and thoughts on the way forward for the upscaling of innovative finance mechanisms that support sustainable landscapes and consider the smallholders within these landscapes.


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  • Top of the tree: FTA in 2018

Top of the tree: FTA in 2018

A variety of mango grows on a farm in Machakos County, Kenya. Photo by ICRAF
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The year 2018 saw the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) chalk up some notable achievements in the worlds of sustainable development, food security and addressing climate change.

A variety of mango grows on a farm in Machakos County, Kenya. Photo by ICRAF

A number of the program’s research findings reverberated throughout the scientific community, impacting discussions at major events and informing work on the ground.

Read on to find out which news articles, research publications, presentations and videos were most-viewed on the FTA website throughout the year.

Gender, agroforestry and combating deforestation were strong points of interest among news articles, topped off by research on orphan crops – underutilized crops that are being brought out of the shadows by plant breeding – which was also covered by The Economist and the Financial Times. The 10 most-viewed news articles on the FTA website in 2018 are as follows.

  1. Orphan crops for improving diets
  2. The power of science to halt deforestation
  3. Climate change atlas presents suitability maps for agroforestry species in Central America
  4. Halting deforestation is ‘everyone’s fight’
  5. FTA’s research domain on livelihood systems receives strong rating
  6. Picks and spades can triple farmers’ yields in Kenyan drylands
  7. Good investments in agriculture and forestry can benefit smallholders and landscapes
  8. Innovation and excellence from chocolate producers
  9. Agroforestry offers pathways to sustainable landscape restoration
  10. Woman on a mission: Pushing for rights and a seat at the decision-making table
Findings have shed new light on the role of forests and trees in the climate debate. Photo by Eko Prianto/CIFOR

Research publications are of course not only viewed via the FTA website but also via the websites of partner institutions or scientific journals.

Of those collated on the FTA website, however, the top 10 most-viewed encompassed ecosystem services, value chains and climate, along with the relationship between trees and water – a popular topic that was the subject of a two-day symposium in 2017 and a follow-up discussion forum in 2018:

  1. Co-investment in ecosystem services: global lessons from payment and incentive schemes
  2. Analysis of gender research on forest, tree and agroforestry value chains in Latin America
  3. Decision support tools for forest landscape restoration: Current status and future outlook
  4. Certifying Environmental Social Responsibility: Special Issue
  5. Suitability of key Central American agroforestry species under future climates: an atlas
  6. Landscape Restoration in Kenya: Addressing gender equality
  7. Forest ecosystem services and the pillars of Bhutan’s Gross National Happiness
  8. Tropical forest-transition landscapes: a portfolio for studying people, tree crops and agro-ecological change in context
  9. Trees, forests and water: Cool insights for a hot world
  10. Bridging molecular genetics and participatory research: how access and benefit-sharing stimulate interdisciplinary research for tropical biology and conservation
Strengthening women’s tenure and rights to forests and trees and their participation in decision making.

As always, FTA scientists presented their work to colleagues and to broader audiences at workshops and events around the world. The top 10 most-viewed presentations of those collected on the FTA website looked at governance, REDD+ and tenure.

  1. Comparing governance reforms to restore the forest commons in Nepal, China and Ethiopia
  2. A personal take on forest landscapes restoration in Africa
  3. Strengthening women’s tenure and rights to forests and trees and their participation in decision making
  4. Are there differences between men and women in REDD+ benefit sharing schemes?
  5. Conflict in collective land and forest formalization: a preliminary analysis
  6. Implications of the ASEAN Economic Community (AEC) for trans-boundary agricultural commodities, forests and smallholder farmers
  7. Reconciling policy and practice in the co-management of forests in indigenous territories
  8. Informing gender-responsive climate policy and action
  9. Assessing REDD+ readiness to maximize climate finance impact
  10. Forest policy reform to enhance smallholder participation in landscape restoration: The Peruvian case
Drone technology for science.

FTA’s partner institutions produced compelling video content in 2018, drawing in viewers interested in drones, nutrition, landscapes and more. The top 10 most-viewed videos posted on the FTA website are as follows.

  1. Agroforestry in landscape restoration for livelihoods, climate and ecosystem services
  2. Drone technology for science
  3. Daniel Murdiyarso talks about the interaction between land and oceans
  4. Expansion of oil palm plantations into forests appears to be changing local diets in Indonesia
  5. Lessons learned from REDD+: progress in 8 countries and the way forward
  6. Restoring landscapes, respecting rights
  7. Creating a movement on sustainable landscapes
  8. Developing and applying an approach for the sustainable management of landscapes
  9. Social inclusion, equity and rights in the context of restoration – lessons from the ground
  10. Integrated landscapes approaches: From theory to practice

Finally, a special mention goes to a well-received infographic from FTA’s gender team: Gender matters in forest landscape restoration.

As the program forges ahead into 2019, it expects to see a continued presence at high-level events and even wider dissemination of its work, in line with its innovative research projects ongoing around the world to further the contributions of forests, trees and agroforestry to sustainable development.

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  • Fit for purpose? A review of guides for gender-equitable value chain development

Fit for purpose? A review of guides for gender-equitable value chain development

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This article presents a review of seven guides for gender-equitable value chain development (VCD). The guides advocate persuasively the integration of gender into VCD programming and raise important issues for designing more inclusive interventions. However, gaps persist in their coverage of gender-based constraints in collective enterprises, the influence of norms on gender relations, and processes to transform inequitable relations through VCD. Guidance for field implementation and links to complementary value chain tools are also limited. The article identifies opportunities for conceptual and methodological innovation to address the varying roles, needs, and aspirations of women and men in VCD.

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  • Baseline for assessing the impact of fairtrade certification on cocoa farmers and cooperatives in Côte d’Ivoire

Baseline for assessing the impact of fairtrade certification on cocoa farmers and cooperatives in Côte d’Ivoire

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In 2014, Fairtrade International, Fairtrade Africa, the World Agroforestry Centre (ICRAF) and Bioversity International initiated a collaboration for the development of a multidimensional baseline on small-scale cocoa farmers and their cooperatives in West Africa. The baseline is expected to provide a fuller understanding of the current situation for Fairtrade cocoa production and marketing as well as provide the foundation for rigorous assessment of outcomes and impacts of Fairtrade certification on cocoa cooperatives and smallholder households in West Africa in the future. Côte d’Ivoire and Ghana, the two largest Fairtrade cocoa producers in West Africa, provide about 68 percent of the cocoa that is sold under Fairtrade terms in global markets.

In 2013, the year this study was commissioned, the volume of Fairtrade cocoa sold from West Africa reached 133 400 tonnes, involving 71 cooperatives and producer associations and 138 800 farmers. Most of this cocoa originated from Côte d’Ivoire and Ghana. The rapid growth in the number of cocoa-producing organizations joining the Fairtrade system in Côte d’Ivoire and Ghana provides a unique opportunity to build a baseline on Fairtrade cocoa producers in West Africa for future monitoring and impact assessment. This report focuses on the Fairtrade cocoa baseline for Côte d’Ivoire (a similar report is available for Ghana). It describes the conceptual framework and methods used in the design of the baseline, followed by an assessment of the context in Côte d’Ivoire. Key features of the baseline data at the cooperative and household levels are covered in detail. The report concludes with some recommendations to Fairtrade for expanding Fairtrade International in Côte d’Ivoire and for follow-up actions for future baseline work.

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  • Blend, bond and blockchain: The financial landscape is changing to fit the planet's needs

Blend, bond and blockchain: The financial landscape is changing to fit the planet’s needs

A large cashew tree grows in Burkina Faso. Photo by O. Girard/CIFOR
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Upfront investment in REDD+ can be a burden for many countries in the short term, but in the long term can instill a sense of ownership, as seen in the case of Brazil. Photo by N. Palmer/CIAT

On a map of global landscapes, the most expansive ecosystem will not appear: finance.

It is the underlying rooted network channeling funds to the right places at the right times, or the superimposed atmosphere raining down fertilization where needed. However you view it, it is a constitutional source of life for its biological brethren, and enormously so.

Yet sustainable finance is also struggling to adapt to the rapidity of global development, forcing global research and dialogue to move quickly in figuring out how to keep it healthy and green. What existing mechanisms can we leverage, and what must we innovate? What financial infrastructure do we prune, replant, grow?

Such was the focus of the third annual Global Landscapes Forum Investment Case Symposium, in which the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) participated, held on May 30, 2018, in Washington, DC, the US. Looking at the state of landscape investment this year, the event pulled certain topics forward as being important of late: blended finance, bonds and blockchains, with discussions on the three synthesized in this article. REDD+ finance was also a key topic at the summit.

Read also: New study finds little private finance in REDD+ efforts, suggests blended finance as way forward


Thirty years ago, China’s Loess Plateau had reached a desperate state of soil erosion and land degradation. After centuries of unsustainable grazing and agricultural practices, an area the size of France that had once fed nearly a quarter of the country’s population had floods and crop failure as its norms, keeping millions in poverty with no way out.

The World Bank stepped in, and with the help of some US$500 million of public investment matched with about the same from the private sector, the landscape transformed. Incomes doubled, agricultural output shot up, and the dusty dry landscape gave way to fertile terraces — all in just 15 years.

“I’ve seen with my own eyes that it’s absolutely, entirely possible to transform a completely degraded landscape in a very poor environment with no capacity to do anything,” said Juergen Voegele, Senior Director of the World Bank Food and Agriculture Global Practice and member of the Loess project team.

He was describing a successful scenario of blended finance, which the Organisation for Economic Co-operation and Development defines as “the strategic use of development finance for the mobilization of additional commercial finance towards the Sustainable Development Goals in developing countries.” In other words, public or philanthropic capital is put up first to attract further investment from the private sector.

It is irrefutable that public money alone cannot fund the work imperative to achieving major restoration projects like the Paris AgreementBonn Challenge and AFR100. But despite growing pressure for the private sector to step up to the plate and chip into such efforts, its role in landscapes is — and should be — limited. Not every climate change effort should be made into a business opportunity, or prioritize financial logic and returns.

“To really start moving the billions, we need to collaborate effectively, and know our role within the ecosystem,” said Jennifer Pryce, President and CEO of non-profit social impact investment firm Calvert Impact Capital. Investing assets, she said, does not solve situations that need legal or diplomatic help.

Logs are seen on a riverbank. Photo by K. Evans/CIFOR

This is reflected in the World Bank’s Maximizing Finance for Development (MFD) concept, which urges development banks and other public funders to pool their capital to help developing countries build policy framework and capacity, cement high standards and reduce as many risks as possible for environmental projects. Once these bones are in place, the private sector can — and will be more apt to — step in and flesh out efforts.

Laura Tuck, the World Bank’s Vice President of Sustainable Development, elaborated on how this manifested in Vietnam’s Mekong Delta, where more than half of the country’s mangroves were cleared for shrimp ponds. After the Bank helped the government mandate 50 percent of shrimp ponds to have mangroves and take out a loan for restoration, the ecosystems were revitalized, and private companies flocked in for the ease with which they could harvest organic, premium-quality shrimp.

The appeal of blended finance is not exclusive to developing countries. Private landowners and businesses has begun investing more in the US forest estate — the world’s fourth largest — following a 10-year government commitment of federal funding for community-driven projects in 23 different landscapes, to combat the country’s growing spread of wildfire and insect disease.

“That’s that model of long-term anchoring of commitment to a landscape with defined outcomes, supported by the community, that enabled others to say that this is worth leveraging the federal dollar to get additional work done,” said US Forest Service Deputy Chief Leslie AC Weldon.

Read also: Making landscape finance more inclusive


With a background in molecular biology and plant breeding, Howard Yana-Shapiro, the Silicon Valley-based Chief Agricultural Officer at Mars, Inc., is a self-proclaimed “gene jockey”. Within the last eight months, he has witnessed big data advance to a point where extraordinarily complex heterozygous genomes can be annotated with ease.

If big data can do it for genes, it can do it for landscape finance, he believes. “I can’t imagine that for the things we’re talking about mixing — bonds, instruments — that you couldn’t write a 3,000-line algorithm that would give you all the answers to all the complexity you’d want to know about which particular finance facility works best in which places.”

Bonds, as he said, are one of the primary mechanisms pushing forward in the landscape arena, serving as a way to refinance and finance projects by channeling capital into an investment that then generates revenue and gets repaid.

Dr. Christine Negra, principal at Versant Vision and advisor to the Climate Bonds Initiative (CBI), the foremost organization focused on advancing the bond market, said the ‘bond universe’ is still in its early days, with different forms popping up left and right. Asia’s first corporate sustainability bond was issued in Indonesia in FebruaryGlobal green bond issuance reached US$155.5 billion in 2017, and climate-aligned bonds — which include green certified bonds and non-certified bonds geared toward the low-carbon economy — currently value US$895 billion.

So far, the Forests Bond launched by the International Finance Corporation (IFC) is at the front of the pack, having received substantial acclaim. A five-year ‘green coupon bond’, it gives investors the choice of taking a 152 million bond in cash or in forestry carbon credits — which can be used to offset emissions or sold on the carbon market — purchased from a 200,000-hectare REDD+ conservancy project in Kenya.

Vikram Widge, IFC’s Global Head of Climate Finance and Policy, said that replicating this bond form in commodity sectors such as coffee, cocoa and oil palm could help build market infrastructure and provide alternative livelihoods to impoverished communities — 90 percent of which rely on forest resources — while we wait for the roughly US$300 billion needed to significantly slow deforestation rates.

A large cashew tree grows in Burkina Faso. Photo by O. Girard/CIFOR

CBI is the main hand behind setting global bond standards and sector-specific criteria, to ensure the ‘green credibility’ of bonds — as well as issue a litmus test for the market. “Putting criteria out there is a way to build it and see if they come, to see the demand for certified bonds,” said Negra.

Yana-Shapiro, on the other hand, warned of having too many tick boxes, and said bond measurement should hone in on five criteria only: productivity, profitability, environmental stewardship, good government and solid management, and social inclusion.

He posed the challenge of how to make the landscape sector worth more than Apple, which is soon to break worth of US$1 trillion. “I would suggest to you that it is not an abstract idea. We are looking at things today that are equally complex in a genome as in a landscape, and we’re able to put that together… to facts and not fiction.”

Read also: Good investments in agriculture and forestry can benefit smallholders and landscapes


Landscape finance would not be properly of the times without a disrupter trying to challenge its ways. Blockchains appear to be filling this role, emerging as a viable alternative to the traditional financial system infrastructure in certain situations.

Since Bitcoin emerged in 2008, not coincidentally alongside the global financial crisis and breakdown of trust in financial institutions, cryptocurrency has grown to account for some 400 billion in capital. This capital is distributed through blockchain networks, which Katherine Foster, Advisor on blockchains to the World Bank, defined as “decentralized, distributed, public (more or less) digital ledgers used to record data transactions across many computers.”

With the safety belt of cryptography, information is shared and stored across a chain of devices in a way “considered immutable and unchangeable.” Chains can be public or contained to a private group of users, and uploaded data can include everything from photos to e-signatures and legal certifications.

Because these are peer-to-peer networks that leave out centralized banks, institutions and other middlemen, blockchains can significantly lower transactional costs, both formal and informal. Vice President for US Business Development at blockchain software company ChromaWay Todd Miller said to think of all the money one can save by keeping one’s own records rather than hiring Goldman Sachs: “It’s not black magic here. It’s a distributed database not controlled by anyone.

And for that reason, “It’s up there with drones for how sexy it is for a lot of organizations,” he said.

Blockchain technology also has two defining features of every disruptor worth entertaining: it opens up new opportunities and makes life easier. In its role as a global contractual database time-stamped, date-stamped and signed, blockchain technology could stretch the horizon of capital acquisition, allowing people to borrow or invest without stepping foot in a bank.

By storing similar information on physical assets like commodity crops, it can also help supply chains be more efficient, transparent and safe. For instance, it could help Ethiopian coffee smallholders certify their beans as fair-trade; track the beans as they move through a supply chain, documenting every value added along the way; and ultimately show consumers the origins of their morning cup.

Already, in the famously iniquitous diamond industry, blockchain technology has proven enormously effective in reducing corruption and conflict.

The biggest challenge blockchains face, however, is quality data to insert into their networks. World Bank Land Administration Specialist Aanchal Anand said she often hears institutions say, “I want to be blockchain ready by 2020.” But this raises the question of whether or not they have data in digital form. If a government’s records are written on paper with coffee stains and tears, blockchains cannot help, she said. To get meta about it, data about data going into blockchains is needed to confirm accuracy.

There also needs to be a level of comfort with the technology, which Anand says comes from on-chain trust (knowing that transactions are validated) and off-chain trust (being able to call or email someone if and when something goes wrong).

Nevertheless, in comparison to Wells Fargo, for example, when consumers were oblivious to the grand misuse of their information, blockchains offer a new alternative with enormous positive potential. “We need to evaluate blockchains not compared to a perfect world,” said Miller, “but to the world we’re in today.”

By Gabrielle Lipton, originally published at CIFOR’s Forests News

This research forms part of the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors.

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  • Deep down in supply chains, zero deforestation commitments look different to what appears on paper

Deep down in supply chains, zero deforestation commitments look different to what appears on paper

Oil palm plantations are a driver of deforestation in Indonesia. Photo by Iddy Farmer/CIFOR
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A paddy field and oil palm plantation area is seen from above in East Kalimantan, Indonesia. Photo by N. Sujana/CIFOR

Oil palm, cattle, timber and soy have all received global attention in recent years for their outsized ‘forest footprints’ – the risks that their demand and cultivation pose for tropical forests around the world.

Thanks to pressure and advocacy from civil society, governments, shareholders and consumers in the Global North, many companies using and selling these commodities have begun to clean up their acts.

They have sought to become – or at least appear – more accountable for the environmental impacts of their supply chain activities. As a result, recent years have seen many make zero deforestation commitments (ZDCs) for the provenance of the commodities on which they rely.

From an environmental perspective, the move is welcome and timely. Tropical deforestation accounted for around 12% of global greenhouse gas emissions between 2000 and 2012. If these ‘big four’ commodities go deforestation-free, it could make a big difference for biodiversity and climate change mitigation worldwide.

However, following through without producing unintended negative side effects is going to be difficult. And this – or failing to follow through at all – could see ZDCs become dubbed with a tokenistic reputation as being just another public-relations and marketing strategy.

A new CGIAR Research Program on Forests, Trees and Agroforestry (FTA)-supported occasional paper by Center for International Forestry Research (CIFOR) scientist George Schoneveld and Particip GmbH consultant Peter Jopke seeks to assess the ZDCs of 50 ‘powerbrokers’ – companies that have the potential to shape rules in major commodities’ global value chains. The work attempts to unravel what these bold-sounding commitments might actually mean for forests, producers and communities on the ground.

Read more: Strengthening social inclusion within oil palm contract farming in the Brazilian Amazon


Unfortunately, the researchers found serious gaps in ZDC implementation practices, which undermine the commitments’ potentials. “On paper the commitments are great, and they use the right terms and are fairly comprehensive in their scope, but by and large companies have yet to fully think through how they’re going to deliver on them,” says Schoneveld.

Company commitments to full transparency in sourcing locations and suppliers, and to independent verification, were found to be particularly weak. This doesn’t necessarily suggest that companies are trying to hide bad practices, say the co-authors, but more that it can be very difficult for them to follow their own supply chains back to their roots. Sourcing practices of the many upstream actors often involved can change without the lead firms being aware.

The study also found that almost 75% of companies did not demand company-wide ZDCs of their suppliers. This suggests that most companies actually tolerate deforestation in their supply chains, as long as their own supply comes from non-deforested areas. So suppliers to these companies might still be instigating deforestation and selling commodities from deforested areas to other, non-ZD–committed customers.

The finding makes sense, given that going zero-deforestation was “purely a business decision,” not a moral or philanthropic one, for most of the companies surveyed, says Schoneveld. As long as their brand is not contaminated, companies have little incentive to pressure their suppliers to stop deforestation entirely.

Oil palm plantations are a driver of deforestation in Indonesia. Photo by Iddy Farmer/CIFOR


Another issue of concern is the fact that in most cases, the powerbrokers did not explicitly account for the externalities resulting from their ZDCs, says Schoneveld. For example, insisting on buying commodities cultivated on non-deforested land increases demand for that land, which can displace former land uses such as food production. As a result, deforestation could occur indirectly as other users of that land are pushed to resume their practices elsewhere.

Committing to ZDCs may also prompt companies in the supply chain to sell off forest land banks that they hold, since they will no longer be able to use them to cultivate commodities. This land could then be deforested by a new owner or by communities vacating their farmland to enable corporate expansion.

Perhaps most concerning of all is that if companies implement more stringent production standards, only some producers will have the capacity to conform, so many smallholders are likely to be excluded, says Schoneveld.

“If you have to monitor everybody and trace all oil palm that comes in, and you have ten thousand suppliers, it becomes extremely costly,” he explains. “So a lot of companies are starting to say, ‘Okay, we have to cut our supply base and focus on those suppliers that we trust and know well.’ ” Oil palm refiners in Indonesia, for example, have begun to concentrate their ‘sustainable’ supply base around larger plantations.

And this is where the tensions become quite stark. One interviewed company, for example, complained that they were forced to remove a “huge chunk” of smallholders from their supply chain to please NGOs campaigning for ZD, because they expected to be criticized for failing to protect forests more than acknowledged for their efforts of including smallholders.

Read more: Corporate commitments to zero deforestation: An evaluation of externality problems and implementation gaps


Certainly, given the influence powerbrokers have on both suppliers and governments, there are opportunities to innovate and exert pressure within value chains themselves. “It’s an important place to start,” Schoneveld acknowledges.

But it seems something of a tall order to expect companies to enact such holistic solutions all on their own. “If you want to have ZDCs that also contribute to agricultural development and food security, and support smallholder integration, I don’t think you can rely solely on companies to deliver on those,” he says. “And that’s where governments need to step in.”

Jurisdictional approaches that integrate landscape planning, deforestation monitoring and improved regulatory enforcement across a defined jurisdiction may provide part of the solution. Most companies are interested in working in places that can guarantee that production is sustainable, because it reduces their own monitoring and traceability costs. And smallholders within those areas can comply with ZD requirements, without needing to sign up to complex and expensive monitoring and evaluation systems. Some jurisdictions, such as Indonesia’s South Sumatra and Central Kalimantan provinces and Malaysia’s Sabah state, are beginning to apply these kinds of approaches, “saying, ‘hey, there could be economic benefits to being sustainable,’ ” explains Schoneveld.

Government involvement is also important because companies making zealous commitments to managing land differently in developing countries can be perceived as challenging their sovereignty. “There needs to be a better conversation between companies, governments, and civil society,” says Schoneveld, “about what role each could play in meeting environmental, economic and developmental objectives, and how to have more complementary initiatives.”

By Monica Evans, originally published at CIFOR’s Forests News

For more information on this topic, please contact George Schoneveld at [email protected].

This research forms part of the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors.

This research was supported by UKAID and International Forestry Knowledge II (KNOWFOR II).

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  • Good governance and sustainability incentives can provide alternatives to land conversion fires

Good governance and sustainability incentives can provide alternatives to land conversion fires

During land burning, haze blankets the landscape in Riau Province, Indonesia. Photo by Aulia Erlangga/CIFOR
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During land burning, haze blankets the landscape in Riau Province, Indonesia. Photo by Aulia Erlangga/CIFOR

In Indonesia, palm oil is a hot industry in more ways than one. In 2015 alone, it contributed USD 20.75 billion to the country’s export revenue. Oil palm plantations cover more than 14 million hectares of the country and, together with Malaysia’s, dominate the global market.

However, fire is still widely used in the development and planting of oil palm, including in carbon-rich peatlands. Resulting smoke and toxic haze have impacted the economy, the health and the environment of Indonesia and other Southeast Asian countries. In 2015, Indonesia’s peatland fires contributed to an economic loss of at least USD 16.1 billion and more than 100,000 premature deaths around the region.

In light of this, a new study led by Center for International Forestry Research (CIFOR) scientist Herry Purnomo, which also forms part of the CGIAR Research Program on Forests, Trees and Agroforestry (FTA), looks at the extent to which good governance principles are applied to Indonesia’s palm oil value chain and analyzes options to help reduce the use of forest and land fires in the industry.

“Palm oil is one of Indonesia’s main commodity exports, surpassing oil and gas,” says Purnomo. “But if we do not manage its sustainability, this sector can fail.

The research focuses on Indonesia’s Riau Province, which experienced massive forest conversion to have the largest area of oil palm plantations in the country. Now, it has the highest domestic frequency of fires too.

“We know that 20% of fire incidences happen in oil palm plantation areas, so we tried to find out what caused the fires and how to reduce them.”

Read more: Towards responsible and inclusive financing of the palm oil sector


In theory, the central government has power to influence the oil palm supply chain through law and policies; district-level governments have the most jurisdiction for law enforcement and information-spreading; and village governments are closest to plantation developers, thus having the responsibility of dealing directly with them.

However, good governance for the industry is not as simple as a top-down approach. From consumers to mills, refineries and developers, players in palm oil influence governance processes in different, sometimes unexpected ways.

“With the governance analysis, we looked at how existing powers contest,” says Purnomo. “Along the value chain, power is not at the landscape level but at the consumer level, or at the mills and refineries. The central government can only function through the district government, but mills can influence local government using incentives and coercion.

“Sometimes the Ministry of Environment and Forestry and the Ministry of Agriculture get the blame for forest and land fire incidences. While potentially, the problem starts from the Investment Coordinating Board (BKPM) welcoming investment for refineries without considering whether there is enough capacity to supply them from legal sources.”

Furthermore, the study found that illegal oil palm developers can hold a lot of influence at local levels and force village governments to support them, often through deceptive use of a Certificate of Land (SKT).

This imbalance between governance and supply chain capacity can drive actors at the landscape level to meet the mill demands in ways detrimental to landscapes.

“Now there are mills everywhere, even in national park areas. People respond by developing plantations everywhere. The fastest and cheapest way is by burning.”

Scientists observe a drone flying over burning peat outside Palangkaraya, Indonesia. Photo by Aulia Erlangga/CIFOR


When demand is high and burning has long been practiced, what reason do farmers and developers have to change their habits to more arduous land-clearing methods?

“We calculated whether existing incentives in the market are enough to change the situation on the ground,” says Purnomo. “The analysis looks at benefits distrubuted from oil palm plantation development using fire, who benefits, and what alternatives can be adopted to compensate.”

The first step is for the market to support certified producers, incentivizing them not to burn as well as to employ value-added farmers. This, however, raises production costs, as well as the cost of fresh fruit bunches (FFB) of oil palm fruits. As this price margin grows, the next step is to make sure that the financial benefits go back into the hands of the farmers, to incentivize their good practices as well.

“Intermediaries have taken the benefit from this margin until now. Farmers should unite to gain more bargaining power, so once they receive a delivery order, they can cut the middleman and go straight to the mill. This will increase their value added. It is important that palm oil businesses are not only certified but also fair.”

Another key step to fire reduction is agrarian reform. While many farmers possess an SKT, the land is still legally part of a state-owned forest area. The unclarity of land status dissuades farmers from investing resrources in land.

“Why should they spend money, when the government can take their land away at any time? The farmers should be guaranteed land legality at least for 25 years, so they can invest safely.”

Read more: The long and winding road to sustainable palm oil


Recently on the international stage, the European Union in January approved draft measures to ban the use of palm oil in motor fuels by 2020. While this sent Southeast Asian governments reeling, Indonesia’s included, Purnomo believes that this boycott will change little. Instead, he says the EU market should give incentives for sustainable production, and Indonesia should create an environment in which that can be done.

“Incentives can change the situation. The government of Indonesia should be more transparent with environmental problems faced by the palm oil industry, show real progress in improving the industry’s sustainability, draw a clear roadmap to meet international standards in three to five years and invite the EU to participate in palm oil in more constructive ways.”

Cleaning up supply chains will come at a cost, but market incentives combined with strengthened national policies and international regulators (namely the Indonesian Sustianable Palm Oil system and Roundtable on Sustainable Palm Oil) can together compensate to make this effort viable – and cool things down.

By Nabiha Shahab, originally published at CIFOR’s Forests News.

For more information on this topic, please contact Herry Purnomo at [email protected].

This research forms part of the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors.

This research was supported by the Department for International Development United Kingdom (DFID UK) and the United States Agency for International Development (USAID).

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  • Study examines bamboo value chains to support industry growth

Study examines bamboo value chains to support industry growth

Men weed a bamboo grove in Indonesia. Photo by Riyandoko/ICRAF
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Men weed a bamboo grove in Indonesia. Photo by Riyandoko/ICRAF

More assistance could help to support the Indonesian bamboo industry, which is currently seen as underdeveloped and missing out on opportunities. 

Despite a significant contribution to the economy, the bamboo industry in Indonesia remains underdeveloped. In terms of policy, bamboo is also often overlooked, with timber receiving much more attention.

Indonesia is home to around 143 bamboo species and 2.1 million hectares of bamboo forest. For centuries, bamboo has been used for construction, housing, household items and handicrafts. It is a no-fuss species that grows rapidly compared to timber, is highly adaptable to various types of soils, and is relatively easy to process. The industry provides livelihoods for hundreds of thousands of people.

Marcellinus Utomo of the Australian National University has explored how the government of Indonesia could foster the bamboo industry, focusing on bamboo value chains in Gunung Kidul, Yogyakarta, as part of the Developing and Promoting Market-based Agroforestry Options and Integrated Landscape Management for Smallholder Forestry in Indonesia project, which is funded by the Australian Centre for International Agricultural Development and also forms part of the CGIAR Research Program on Forests, Trees and Agroforestry (FTA).

“The research findings are very valuable to us,” said project leader Aulia Perdana of the World Agroforestry Centre (ICRAF). “It will help us devise interventions, such as bamboo agroforestry systems, extension programs for silviculture, ways to better process raw material, and improve marketing and business skills. Additionally, we plan to test how to increase the scale of bamboo agroforestry to support the Thousand Bamboo Villages program.”

Read more: Mapping bamboo forest resources in East Africa

In December 2015, the Indonesian government initiated a 10-year program called Seribu Desa Bambu (One thousand bamboo villages) to foster the industry by establishing bamboo forests and factories. Yet, according to the research, the results have been suboptimal.

Utomo examined the value chains of three bamboo products: durable bamboo, kitchen utensils and handicrafts. Data were collected from June to August 2016 through interviews, focus groups, a literature review and direct observations.

He found that durable bamboo had the shortest chain with the least people involved, followed by kitchen utensils. The handicraft chain was the longest, involving the greatest number of people.

A diagram indicates the value chain flow for kitchen utensils. Source: Marcellinus Utomo

Although people in all the value chains were typically well-informed about markets, there was limited sharing of information by buyers to sellers about prices, which could be detrimental for some of those along the chain, such as growers and artisans.

Bamboo is still considered a cheap material. Straight bamboo with a large diameter can sell for between Rp 6,000 and Rp 7,000 (approximately 50 US cents) per pole. Because of the low prices, farmers are not inclined to go to great lengths, neither applying fertilizer nor using silvicultural techniques.

When income from bamboo was compared with national minimum income per capita, Utomo projected that for farmers the economic contribution of bamboo handicrafts was a mere 0.6–1 percent of the minimum income, while kitchen utensils contributed 6.4–8.9 percent and durable bamboo products 7.7–13.5 percent.

These low contributions were caused not only by low prices but also irregular demand. To make ends meet, farmers usually cultivated seasonal crops and rice and grew timber for savings.

Read more: Lack of knowledge may impede economic potential

Artisans who process and add value to bamboo, however, can gain significant income. Durable bamboo contributed 13.2–104 percent, to their incomes, kitchen utensils 152–472 percent, and handicrafts 169 percent up to 3,072 percent. From the numbers in the value chains, profit do not appear to be evenly distributed, with growers left as the most disadvantaged.

Some growers also lack knowledge about bamboo management, whereas artisans lack marketing knowledge and entrepreneurial skills. Weak English-language skills further constrain artisans’ opportunities because many buyers are foreigners.

Utomo also noted a lack of coordination between government bodies and limited coordination between people within value chains, which restricted overall growth of the industry. He suggested the government could establish a taskforce that would operate at both national and local levels to integrate the industry within agricultural and rural development programs, lobby ministries, collaborate with NGOs and research institutions, encourage more extension services, improve promotion of handicrafts, and support better access to microcredit. The formation of producer cooperatives, meanwhile, would help to build capacity and enhance bargaining positions within a chain.

By Enggar Paramita, originally published at ICRAF’s Agroforestry World.

This work is supported by the CGIAR Research Program on Forests, Trees and Agroforestry. We thank all donors who support research in development through their contributions to the CGIAR Fund.

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  • Good investments in agriculture and forestry can benefit smallholders and landscapes

Good investments in agriculture and forestry can benefit smallholders and landscapes

The finance pavilion stands beside the indigenous people's pavilion at the GLF Bonn 2017. Photo by Pilar Valbuena/GLF
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With companies increasingly being seen as key partners in scaling-up efforts to achieve sustainable landscapes, a growing number of private actors are moving from ‘do no harm’ to a ‘do good’ approach.

In light of this, Tropenbos International (TBI) – along with the CGIAR Research Program on Forests, Trees and Agroforestry (FTA), the Netherlands Development Organization (SNV), Finance Alliance for Sustainable Trade (FAST) and the Forests and Farm Facility – organized a well-attended panel discussion titled “Inclusive Finance and Business Models – Actions for Upscaling” at the recent Global Landscapes Forum (GLF) in Bonn, Germany.

Held in the Finance Pavilion, where FTA and TBI also shared a booth showcasing their work and research, around 40 participants came together to hear from five panelists, share ideas about what a do-good approach means in practice, and consider how it can be scaled up.

Watch: Inclusive Finance and Business Models – Actions for Upscaling

In opening the discussion, TBI Director René Boot said: “There’s a growing need for companies and for investors to basically upgrade their corporate social and environmental responsibility policy. We think it is time to move from ‘do no harm’ to ‘do good’.”

Boot pointed out that in order to make that step, it is important to know how to build businesses that are both profitable and can contribute to livelihoods, secure land rights, and make use of the entrepreneurial qualities of smallholders and small and medium enterprises. “Do we have enough information, do we have enough examples, to scale up?” he asked.

Attendees peruse the materials available at the finance pavilion. Photo by Pilar Valbuena/GLF

The first speaker, Herman Savenije of TBI, presented the findings of a working paper titled Improving the positive impacts of investments on smallholder livelihoods and the landscapes they live in, a joint effort from the Dutch Development Bank (FMO), TBI, Dutch organization for development HIVOS and the Royal Tropical Institute (KIT).

The report “developed some key points for the do-good approach for investment and business,” Savenije explained. The points in the report were divided into three categories: recognizing rights; active engagement; and “think landscapes” – which is also an overarching focus of the GLF. An increasing number of business cases show that the approach is feasible, but requires thinking, acting and partnering beyond a business-as-usual approach, he added.

Savenije suggested that mainstream investments and businesses often ignore and underestimate land governance, land rights and livelihoods issues, but failing to properly address the issues could lead to business and reputational risks. “So strengthening the position of smallholders and communities within value chains, within landscapes, makes business sense,” he said.

Carina van der Laan of SNV then discussed access to finance for smallholders in oil palm plantations in Indonesia, while Marcelo Cardozo of the Bolivian forest producer organization MINGA provided perspectives from indigenous producers on accessing finance for integrated territorial management, Francesca Nugnes shared FAST’s experiences in supporting small- and medium-scale enterprises on building workable, sustainable business models, and Paul Hol of Sustainable Forestry Investments (SFI) discussed investments in tree plantations in Ghana and Tanzania.

Aspects of the session echoed a discussion organized by TBI in September, which showed that a growing number of investors want to have a greater positive impact on people’s rights and livelihoods in areas where they do business.

Read more: Getting down to business: Seminar promotes shift toward inclusive investment

The finance pavilion stands beside the indigenous people’s pavilion at the GLF Bonn 2017. Photo by Pilar Valbuena/GLF

Following the panel discussion at GLF, TBI and FTA produced a report outlining its outcomes.

“In the context of agricultural and forestry production, a do-good approach means that commercial investments simultaneously improve the environmental integrity of the landscape and the livelihoods of the people living there, while making a profit,” the report read.

“This requires long-term thinking and investments, including investing in stakeholder engagement and building relationships. Initially, this may result in higher opportunity costs, which makes such investments risky for the private sector. How then can a do-good approach be operationalized on the ground?”

Finding ways to operationalize this approach should be one of the main goals of related research – to advance understanding not only on which business models have greater potential for sustainability and social inclusion, but also on the most effective ways for financial institutions to support scaling-up efforts – which is embraced by FTA’s work on innovative finance, said Pablo Pacheco, a Center for International Forestry Research (CIFOR) scientist leading the work.

Those involved are convinced about the need to team up to reach scale. The success of a do-good approach, thus, is considered to be largely dependent on collaboration and connections. The panel discussion was another step forward in contributing to these efforts.

Read more:

By Hannah Maddison-Harris, FTA Communication and Editorial Coordinator

This work is linked to the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors.

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