Pablo Pacheco

Conversion of tropical forests to industrial production of agricultural commodities is a main driver of climate change and biodiversity loss. In response, ambitious zero-deforestation pledges have been made by a growing number of global consumer manufacturer companies, international agricultural traders, agro-industrial companies, and governments, to establish deforestation-free supply chains. These commitments are seen as crucial in eliminating tropical deforestation through public and private action, but also in making progress to achieve the Sustainable Development Goals. And what is new is that the private sector is firmly on board and part of the solution, compared to past approaches that were largely publicly supported initiatives. Much has been achieved and in a very short space of time. But more is needed. So how can private and public commitments work better? The 40 contributions in this edition of ETFRN News reflect the strong interest in zero deforestation commitments and show how lively and rapidly evolving the debate is. There are many different experiences and views of what to do from different quarters and not everyone agrees to everything, but the following eight ways to enhance the implementation, effectiveness and impact of pledges have been drawn from lessons learned and views expressed. 1. Agree on clear definitions and standards — what is a forest; what is deforestation, and what are acceptable credible and coherent standards for use across different commodities. 2. National and local governments to become more involved — since failure to address broader governance challenges may reduce the positive impact of private-sector zero-deforestation initiatives. 3. More corporate transparency and accountability — must become the norm for monitoring and reporting progress, and not just regarding zero deforestation commitments.

Community forestry is pursued as rural development strategy in many tropical forest regions worldwide. In Tropical America, rich experiences have been accumulated with community forestry support initiatives and this chapter summarizes published and the author's hands on experiences. The chapter is divided in two parts. The first half focuses on the actual contribution of forests and trees to rural livelihoods, evidence that allows a more precise identification of the actual potential of communal forestry for rural development. The second half of the chapter reviews some of the challenges faced by community forestry development initiatives. The chapter critically reflects on generating profits, inserting communities in forest product value-chains, setting up community forestry enterprises and the challenge to adequately deal with complex regulations. By exploring the experiences of a handful of current community forestry initiatives in Amazonia, and with some reference to Central America, the potentials , limitations and challenges of communal and smallholder forestry are discussed.

• Different types of interactions are emerging involving public and private (non-state) actors across sustainability initiatives in the palm oil sector in Indonesia. • Such initiatives include the development of government standards for sustainable palm oil, legislation related to the setting aside of conservation areas, a 'wave' of provincial and district Green Growth programs, a focus on jurisdictional approaches, and efforts around smallholder registration. These have been accompanied by the emergence of a number of political 'champions' in the form of provincial and district leaders. • Some initiatives can help to implement immediate specific sustainability objectives by filling implementation gaps, by bearing some operational costs and by speeding up regulatory change. • To bring about the transformation and to move beyond a proliferation of pilot schemes, interactions would need to survive political cycles and align with ongoing national processes of reform around natural resource policy. • Those initiatives intended as innovative pilots or to kick start a process in unclear legal contexts may benefit from acting quickly outside of more formal state systems. However, there are clear benefits in integrating initiatives into existing executive systems to help weather and uncertain electoral cycles. • Some actions by non-state actors act to strengthen the capacity of public authority and accountability, whereas others can weaken or undermine these public systems.

• This brief examines two contrasting policy options: the implementation of zero deforestation commitments by the private sector and a complete moratorium on the expansion of large-scale oil palm plantations, and compares them to a situation without policy action. • The zero deforestation commitments and the moratorium on large-scale oil palm plantations expansion could reduce cumulative deforestation by 25% and 28%, respectively, compared to a situation without policy action. They could also cut greenhouse gas emissions from land use and land-use change by 13% and 16%, respectively, over the period 2010–2030. • Even under the zero-deforestation and moratorium scenarios, Indonesia is projected to increase palm oil production between 124%–97% over 2010–2030, which is partly due to higher production originating from smallholders. • Both measures – the zero deforestation commitments and a moratorium of future large-scale oil palm plantations expansion – would be especially beneficial to limit future deforestation in Indonesia in a context in which global demand for palm oil is expected to keep increasing. • Foresight tools can equip stakeholders and policy makers with data and information to allow for evidence-based policy making. This will permit planning for reducing deforestation and greenhouse gas emissions, and finding options acceptable to all stakeholders involved.

• The global palm oil value chain has grown in complexity over time as have the public and private regulations governing the sector. This influences stakeholder decisions along the palm oil supply chain and the territories where it is produced. • Weak alignment between the many regulatory initiatives has given rise to a 'transnational regime complex' that is struggling to resolve effectively many structural performance issues that have long plagued the palm oil sector. • Key performance issues facing the palm oil sector relate to pervasive land conflict and informality, yield differences between companies and smallholders, and a high carbon debt linked to emissions arising from deforestation and peatlands conversion. • Different disconnects, complementarities and antagonisms characterize current governance. Building connections and enhancing complementarities are important ways to gradually reduce antagonisms. • Complementarities have emerged among instruments with global reach, whereas disconnects persist especially within public regulations, between regulations and private standards, and between standards operating across different territorial scales. • Several connections can be built by better linking existing regulations, and public regulations and private standards at different levels. These could arise by embracing approaches that look at both supply chain and territorial management. • The main policy targets to achieve sustainability and inclusivity are: 1) limiting the expansion of palm oil in high-carbon forests and peatlands; 2) adopting mechanisms to enhance transparency and accountabilities; 3) creating conditional incentives to intensify palm oil supply, mainly of smallholder farmers; 4) adopting new approaches to facilitate the upgrade of smallholder production systems; and 5) legalizing tenure claims under different types of rights recognition schemes.

Article 13 of the Paris Agreement calls for enhanced transparency in climate actions. At the same time, non-state actors (NSAs) are increasingly referred to within the text of decisions and initiatives by the United Nations Framework Convention on Climate Change (UNFCCC). However, the continued use of such a broad and undefined term to represent a complex set of stakeholders – ranging from academia to private sector, civil society to indigenous peoples groups – is unhelpful. There cannot be a 'one-size-fits-all' approach to NSAs. • The private sector is a complex and diverse subset of NSAs, with significant variations in capacity, motivations and priorities across companies and value chains. Their response to climate change will be key to setting and achieving the nationally determined contributions (NDCs) made by Parties to the UNFCCC. • A large number of international corporations have made voluntary commitments to reduce their negative environmental and social impacts in the agriculture and forestry sectors, within their own operations as well as those of third-party suppliers. Many of these pledges have now been registered on the UNFCCC non-state actor platform (NAZCA). As yet, however, there is no systematic way to track and verify these pledges and their impacts. • One major risk is that stringent and rapidly implemented corporate commitments related to sustainable and 'deforestation free' supply chains will exclude already marginalized smallholders, who often operate within broader informal economies, resulting in indirect detrimental social and environmental impacts. Aside from the Cancun safeguards, such risks remain unrecognized by the UNFCCC. • Public funds, such as the Green Climate Fund (GCF), could be used to financially support smallholders and small and medium enterprises (SMEs), and upgrade their production systems through the adoption of improved practices and by facilitating their access to sustainable supply chains. • Governments, indigenous peoples groups and civil society organizations, as well as corporations themselves, are monitoring the progress and impact of NSA pledges at different spatial scales. But significant challenges remain regarding the alignment of methods, metrics and data sets, disclosure of information, and the verification and monitoring of indirect impacts. • There is currently no systematic way to track delivery of voluntary commitments through transparent processes that are open to wider society. Additional efforts, including national and international political architectures are needed. • There is justification for the UNFCCC to develop guidance around NSA engagement in climate mitigation and adaptation actions. This can help to distinguish between different groups of NSAs and track the activities undertaken by diverse private sector actors, to better understand how they contribute to achieving NDCs.

• Several sustainability certification schemes have been developed for palm oil; however, the field impacts of these schemes remain highly uncertain. The Sustainable Palm Oil Production (SPOP) project, funded by the French National Research Agency (ANR), was aimed at consolidating and deepening the scientific basis of these schemes. • SPOP field work undertaken in Indonesia and Cameroon highlighted the large variability in practices and impacts of oil palm systems. Our main results related to the uncovering of the multiplicity of growers and their trajectories, and identifying room for improvement and the need for recommendations adapted to the various grower contexts and strategies. • The SPOP project made it explicit that visions of sustainability and global challenges vary greatly among growers and other stakeholders involved in the palm oil sector. These diverging conceptions are most likely to induce bottlenecks in the definition and implementation of good practices and should be accounted for in the refinement of sustainability criteria. • Within the SPOP project, we investigated possible futures for oil palm using participatory prospective analyses and multi-agent-based modeling work. Our research work showed that capacity development and the organizational capacity of smallholders, fair partnerships and combined forms of governance are key drivers in ensuring the uptake of good practices and sustainable development at the landscape scale.

Key points • The Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan, launched in 2003, is the European Union's (EU) response to the global fight against illegal logging. In particular, FLEGT aims at reducing trade in illegal timber between the EU and timber producer partner countries. • FLEGT operates through two major instruments: bilateral trade agreements — known as voluntary partnership agreements (VPAs) — that are signed with willing producer countries, and the European Union Timber Regulation (EUTR), which came into force in March 2013. The EUTR mandates EU importers to exert due diligence in their sourcing of timber from abroad to exclude illegal supplies. • To date, six countries have signed VPAs. Among them, five have committed to apply VPA provisions regarding legality verification not only to timber imported to Europe, but also to timber traded on the domestic market in signatory producer countries. This means that timber harvested and traded on the domestic market will be regulated by national VPA licensing schemes (the so-called Timber Legality Assurance System, [TLAS]). • Cameroon, the Democratic Republic of the Congo (DRC), Ecuador and Indonesia are characterized by a large, vibrant and largely informal domestic timber sector, which supports the livelihoods of hundreds of thousands of local forest users including small-scale farmers, indigenous communities, chainsaw millers, traders and service providers such as transporters. The domestic sector in Gabon is less significant due to the country's small population and the concentration of activities in the capital. In most countries, employment in the informal sector is comparable to or higher than the formal industrial timber sector. The estimated number of informal jobs provided by the sector varies greatly among countries, from about 45,000 in Cameroon to about 1.5 million in Indonesia. • In all countries studied, the domestic timber sector is characterized by the activities of smallholders, chainsaw millers and traders, who rarely own a legal harvesting permit and extract and process small quantities of timber with chain or mobile saws. The resulting low-quality timber is traded in domestic markets or across the borders of neighboring countries, with little formal taxation. Research results indicate, however, that as the product moves along the production chain, 5–15% of the total costs incurred by informal operators are paid in bribes to representatives of ministries, local police, the military and customs officials. • By agreeing to include the domestic sector as an integral part of their TLAS, producer countries are committing to undertake broad governance reforms of the entire forestry sector. Implicitly, such reforms entail formalization of the domestic sector through monitoring, control and verification. • In the countries of the Congo Basin and in Indonesia, such reforms will require the redrafting of current legal frameworks, which are designed around industrial large-scale export-oriented forestry operations, conducted by politically powerful companies with logging concessions. In all countries, existing laws are not structured to sustain a healthy, small-scale, domestic timber market. Research findings indicate a need to improve and simplify access to the resource; to develop and adopt specific fiscal regimes for the domestic timber sector (e.g. royalty rates, processing, transport and marketing levies); to improve access to credit on favorable terms for small-scale operators; to create incentives to comply with the law; and to improve flows of information to small-scale operators. • In countries that have already signed a VPA (Cameroon and Indonesia) or continue to negotiate them (DRC and Gabon), local forest users and traders have been largely absent from in-country VPA negotiations. This reflects their large numbers, distribution over a vast territory and poor organizational capacity, as well as the tensions that often exist between the central governments' stated willingness to formalize them, and the rent-seeking behavior of decentralized officials. Hence, before reforms are initiated, 2 specific channels of communication need to be set up for chainsaw millers and traders to discuss their needs, customary governance systems, and the potential challenges and expectations of formalization. • Similarly, results indicate that the degree of governmental inclusiveness that characterized the initial VPA discussions tends to decrease over time, as political momentum is lost. Government agencies other than forestry and environment ministries may be excluded from the final phases of implementation, when legal reforms will have to be adopted. This could entail enforcement failures, as agencies may be unwilling to enforce rules they did not contribute to creating. The engagement of other ministries, in particular ministries of finance, is necessary for a meaningful national discussion of the financial implications of a functional TLAS for operators, especially small-scale ones. Such discussions have not yet taken place. This could engender implementation failures, if the advantages of the system are not evaluated from inception against the disadvantages (e.g. costs to operators). • Formalization processes come with both benefits and risks, which require ongoing assessment, monitoring and mitigation. Case studies of formalization conducted in other natural resource sectors indicate that even well-intentioned processes can lead to exclusion, criminalization, barriers to entry and elite capture. These could disproportionally and negatively affect smallholders and small-scale operators, and lead to negative environmental impacts. If well conceived and monitored, formalization could increase transparency and clarity of users' rights, reduce conflict and improve working conditions and local economic benefits.

Scope and purpose of the research During the last 40 years, the beef sector has by large been the main driver of deforestation in the Brazilian Amazon. The States of Mato Grosso, Pará and Rondônia constitute the three largest producers of beef in this region. These states comprise 58 million cattle heads (28% of the total national herd) spread over 32.1 million hectares of pasture (53% of the total pastureland in the Amazon Biome). There is an extensive and growing body of work assessing the factors driving the expansion of cattle ranching in this region (Poccard Chapuis, 2004; Veiga and al., 2004; Barreto, Pereira and Arima, 2005; Pacheco and Poccard, 2011). The beef chain has been increasingly acknowledged by NGOs as the major source of deforestation (Friends of the Earth, 2009; Greenpeace, 2009). In the past, public regulations alone were insufficient to halt the expansion of cattle ranching over forests, and the major meatpacking companies did refuse to control their suppliers. Such situation, however, began to reverse. Shifting from a " shaming the corporation name " to a " building new agreements " situation, private and public actors have then engaged in a negotiation process around mechanisms for enhancing the governance of beef supply chain while explicitly embracing some sustainability goals. Scholars stress the role of state actors in this process. All kinds of private regulation must, in some way, relate to existing regulatory frameworks, in particular, national legislation. Thus, the development of a state regulatory framework can pave the way for private regulation or reinforce it (Bartley, 2007; Gulbrandsen, 2005; Rametsteiner, 2002). We analyse the private and public drivers that lead the meatpacking companies' decisions to control their suppliers in the Amazon, the main governance mechanisms emerged, and their limits from observation on current practices. Methodology Our work is based on a historical review of the process and on qualitative interviews with 61 key private and public stakeholders located in the three main beef producing Amazon States (Mato Grosso, Pará, Rondônia) and Sao Paolo and Brasilia, which were conducted between 2011 and 2015. A data display matrix for qualitative analysis was elaborated to organize and analyse patterns of response. The respondents were classified into six types: cattle ranchers, industry sector, retailers, NGO's members, public officials and other informants (e.g. academics, agrochemical sector, technicians, and private and public banks representatives). The responses were analyzed with regards to understanding around three main themes: i) main drivers of change shaping beef supply chain; ii) existing governance systems and mechanisms, iii) the limits and challenges for an effective governance of the beef supply chain in the Amazon.