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Instruments for Sustainable Private Sector Forestry

Company-Community Forestry Partnerships

A governance tool to meet the challenges of globalisation? Globalisation is often portrayed as reinforcing differences between: ‘the connected’ – globally competitive, benefiting from global markets, capital flows and technology; and the ‘the disconnected’ – affected but increasingly marginalised, with no credit, fragile entitlements, minimal income and education, and little opportunity to tap the economic benefits of globalisation. Between these extremes lies: ‘the confused middle’ – some able to respond to global opportunity albeit in a patchy and unequal way – others getting exploited as the ‘connected’ win at the expense of the rest.

The challenge is to reconcile, trade-off, and attempt a balance between the potential benefits of globalisation and the increasing imperative for local control. Can partnerships between companies and local groups provide a key? Corporate–community partnerships are appealing as a potential means of incorporating ‘the disconnected’ and reducing insecurity in ‘the confused middle’.

The report Company–community forestry partnerships: From raw deals to mutual gains? analysed some 57 examples in 23 countries to identify lessons on the driving forces for partnerships, the nature of the deals involved, their impacts, and the ways in which they might be improved and spread.

Partnerships for whom?

Why Partnerships?

Impacts of Parnerships - an example from South Africa

Lessons learned

Governance

Partnerships for whom?
It is difficult to define precisely what distinguishes a company–community partnership from more conventional company-community relations – except that it is meant to be beneficial to all parties. ‘Partnership’ is often taken to imply that the partners are working together as equals in pursuit of a common goal. This ideal is unlikely to be achieved in most company–community partnerships. ‘Collaboration’ may be a more realistic aspiration, even if it is a less fashionable term.

An implicit feature of a company-community partnership (or collaboration) is that it involves a relationship between one or more companies and the community as a whole. The skills and resources the community can collectively bring to the negotiation might range from organising local initiatives (e.g. growing and managing trees) to refraining from engaging in activities that undermine the interests of companies (e.g. not burning down plantations). The important point is that these interests, skills and resources often go unrecognised in conventional market relations, particularly where globally connected companies are concerned. In turn, the company can provide skills, technologies, resources and access to markets that the community would otherwise be unable to obtain.

Why partnerships?
Under what conditions would business and community protagonists pursue partnerships rather than conventional business deals or exploitative relationships?

Companies may aim for partnerships with communities when there are:

• public pressures to behave well – and increasing intolerance of irresponsible behaviour;
  
  
• discriminating markets – created by certification, fair trade or standards-based stock exchanges (Green Dow-Jones, FTSE For Good), or contractual requirements to service low-income communities;
  
  
• cost advantages that the community can provide – through motivated labour, knowledge of local conditions, efficient informal institutions;
  
  
• local risks that the community can help minimise – the destruction or unauthorised use of company property, violence against company employees, locally supported interference from local politicians; and
  
  
• collective goods that only the community as a whole can provide – access to communal resources, the support of community institutions.

Communities may aim for partnerships with companies when there are:

• decreasing opportunities from the public sector – declining subsidies, privatisation of plantations, fewer centrally planned interventions;
  
  
• desirable technologies or services that only companies can provide – e.g. capital-intensive forestry technology;
  
  
• institutions capable of representing the interests of the community to the company – well developed grassroots organisations, community-orientated non-governmental organisations, or accountable local governments;
  
  
• markets to which the community has limited access – international timber markets; and
  
  
• types of scientific knowledge that the company can provide – e.g. characteristics of alternative tree species.

Of course there are strong reasons why we do not see more partnerships. These include: excessive red tape, weak regulations or conflicting policy signals, inter- or intra-community conflict, a history of bad relationships or mistrust, weak bargaining power, insufficient knowledge and technology, and the reluctance of markets to do deals – all of which encourage companies to consolidate and focus on ‘core competencies’ only. Furthermore, not all partnerships, however defined, are desirable. Nevertheless, it should also be noted that these factors can both change, and be changed.

Impacts of partnerships – an example from South Africa.
In forestry, corporate players are increasingly recognising that they need to contribute to socio-economic aims in order to secure their production base. One of the ways of achieving this is in partnership with communities who also require access to land and who may have the rights and skills to manage that land at a lower cost and at lower risk than the private sector.

In South Africa, outgrower schemes today involve some 12,000 smallholder tree growers on about 27,000 hectares of land. Trees are grown by smallholders with support from companies who later buy the product for pulp. Whilst outgrower timber only provides a small proportion of the companies’ mill throughput, and is the most expensive per tonne, it also provides the fibre that would otherwise be unavailable because of land tenure constraints. This allows a volume of production to be reached which achieves economies of large scale. The access to land under communal tenure is a major benefit to the companies. And crucially, the schemes provide companies with a progressive image at a time of great change and when land use and control in South Africa is called into question.

For communities, outgrower schemes have contributed substantially to household income (they provide about 20 per cent of the income needed for a household to be just over the national ‘abject poverty line’) but have not yet taken households out of poverty. In terms of the asset base for livelihoods:

• Natural capital has been built by households increasingly substituting trees for cattle as a form of savings. Some have also acquired new land under sale agreement of state assets. However potential negative impacts include the spread of alien invasive vegetation and the lowering of water tables.
  
  
• Social capital has been built by securing land rights within the communal tenure system through the schemes. However, growers associations (political capital) capable of negotiating better terms of contract with the companies are still weak.
  
  
• Human capital has been built through silvicultural skills development. But there are a number of ways in which women are exploited in the schemes.
  
  
• Physical and financial capital has been built through access roads, input supply depots and rural credit provision. However, many growers fell their trees early to meet emergencies, are not paid the full market price by the companies, and are excluded from owning shares in processing.

Small growers also face problems with opaque government policy and uncoordinated service provision from agencies of national and local government. Their associations lack the power to engage with the policies and institutions that affect their livelihoods.

Lessons learned.
There appear to be a range of factors underpinning progress towards ‘real’ partnerships – where arrangements have moved beyond mere public relations gimmicks towards equitable deals. These include:

• Reliable information on the partners and the context for the partnership – this should include a realistic assessment of the goals, capacities, and flexibility of both sides, and of conditioning factors such as market trends, competitiveness, and policy conditions.
  
  
• Flexible models – in practice these must be able to that can adapt to suit different and changing conditions, and local circumstances.
  
  
• Negotiated arrangements – deals are strongest where they are co-developed and periodically re-negotiated.
  
  
• Formalised arrangements – strong deals have legal status based on clear contracts spelling out rights and responsibilities, with provisions for nullification and compensation.
  
  
• Secure contributions – key assets, notably community land and business viability, should be secure or made more secure through operation of the deal.

Company–community partnerships do not occur in a vacuum. Without good governance they can easily breed corruption, dependency and new forms of exploitation. Many of the ingredients for success depend upon fair and efficient arbitration, active partnership brokerage, and local community empowerment and representation – which are also vital elements in improving local governance. One challenge is to ensure that the beneficial elements of successful partnerships contribute directly to strengthening local governance. But if local governance is weak and more profits can be secured through deals with local power brokers than from developing a more widely beneficial partnership, then this is what the market pressures will promote, and responsible businesses will lose out to the irresponsible.

Governance
If partnerships are to foster both responsible business and local empowerment, two local governance prerequisites stand out:

• The development of third party brokers or facilitators providing information and analysis, legal advice and arbitration to facilitate negotiation and lobby for vital prerequisites.
  
  
• The strengthening of bargaining power and legitimacy of the community partners. Few partnerships to date can be said to be co-managed by the community partner. Much greater attention needs to be given to revenue-sharing arrangements, share ownership, equity stakes based on the values of land and so on, if partnerships are to have a positive future in contexts of prevailing poverty.

National governance can also be critical. Through arrangements for land tenure and resource rights, as well as rules and incentives for investment, national laws and policies determine the context in which partnerships are set through arrangements for land tenure and resource rights as well as rules and incentives for investment, and they provide the basis for contractual agreements. National laws and policies can either help or hinder the attempts of local communities to organise and make deals to their own advantage. This includes preventing companies from bypassing local rights, ensuring that poor groups have access to the legal means to protect their rights, and penalising companies which pollute or degrade land.

Good global governance is arguably of fundamental importance to the success of local corporate-community partnerships. Some of the companies involved are global players. Often, much of the motivation for developing partnerships with local communities relates to achieving good international reputations and, in some cases, obtaining certification. More generally, the increasing involvement of private companies at the local level has been promoted internationally.

There is still much to be learned. Companies cannot be expected to wipe out poverty single-handedly and local groups are rarely the answer to the managing director’s dreams. But communities cannot afford to ignore the opportunities offered by the private sector, and pressure is increasing on companies who wish to expand their businesses to start addressing local concerns. If there is one basic message – it is to urge prospective partners to enter the deal-making arena with their eyes open.

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