by

Jessica Galvez & Brandon Tiffith

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TABLE OF CONTENTS

Introduction 3 Objectives 3

Illegal Logging and Associated Trades Cause of the problem

Justice for Forests and Wildlife

Illegal Logging – Practices and Reinforcement 4

The ten ways they illegally Log

Illegal Logging Reinforcements

The Guitar Industry - is sustainability a competitive disadvantage? 9

Gibson Guitars

Taylor Guitars

Bottlenecks in the Black Wood Trade

Economic Analysis of Illegal Logging 12

Supply and Demand for Wood

Restricting the Supply

Strength of the system 16

Using the law to better combat crime

Timber verification systems 19

Integrating Science and Technology 20 Conclusion 28

Works Cited 29

2

YOU CAN’T WAKE A PERSON WHOSE PRETENDING TO SLEEP

WE LIVE ON A PLANET, THERE’S JUST ONE OF THEM

WE HAVE TO WAKE UP TO THE FACT THAT WE DON’T HAVE ANYMORE

THIS IS A FINITE PLANET

WE KNOW THE LIMITS OF THE RESOURCES THAT WE HAVE

WE MAY BE ABLE TO USE THEM DIFFERENTLY

WE MAY HAVE SOME INNOVATIVE NEW NEW IDEAS

BUT IN GENERAL THIS IS WHAT WE GOT

THERE’S NO MORE OF IT

THERE’S ONE CONCEPT THAT WE KNOW

POPULATION X CONSUMPTION = PLANET

AND RIGHT NOW

THEY ARE SIMPLY NOT EQUAL

WE ARE WORKING ON 1.3 PLANETS

SINCE 1990 WE HAVE CROSSED THE LINE

OF BEING INSUSTAINABLE IN RELATIONSHIP TO THE PLANET

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INTRODUCTION

OBJECTIVE

The purpose of this case study is to address the problem of illegal logging and its impacts

on our environment. In addition, our group wanted to increase awareness and knowledge of the

systematic structure of forest management and practices to improve system monitoring tools and

cooperation between countries. Through online research and outside sources, we wanted to

understand the design system processes of forest management to reduce illegal logging including

the general factors that were identified as contributing to illegal logging in forests around the

world. Economic analysis of the supply and demand for wood was conducted. Some of the

solutions presented include market based measures such as; countries acting responsibly, FLEGT,

making a difference and shaping the future.

ILLEGAL LOGGING AND THE ASSOCIATED TRADE

In some countries, up to 90 percent of all the logging taking place is illegal

(EVERGREEN). Every two seconds, across the world, an area of forest the size of a football

field is clear cut by illegal loggers. Why do they do this? Since demand for exotic woods are

greater than the supply, and with such limited resources, illegal logging has become a worldwide

epidemic. Poor communities are hit the hardest. That is 1/3 of the world’s people. These

individuals rely on wood for their livelihood. In countries such as Cambodia, government is

suppose to support the communities and logging is suppose to contribute taxes in order to build

schools and housing and stimulate their economy. When the communities see loggers come into

their land and start demolishing their forests, they feel that “if they cannot profit from the wood,

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then no one should.” This has caused a domino effect. Illegal Loggers cut down the trees, and

the people of the communities burn the timber so then no one profits from it.

Estimates suggest that the criminal activity of illegal logging generates approximately

US$10–15 billion annually in worldwide funds that are unregulated, untaxed, and often remain in

the hands of organized criminal gangs (EVERGREEN).

So far, domestic and international attempts to control forest crimes have focused on

preventative actions, but they have had little or no significant impact. While prevention is a

central part of enforcement efforts to fight illegal logging, it seems to have little influence on

reducing the disappearance of the world’s already scarce trees. Illegal logging obstructs social

development by driving local communities of the benefits of using their resource

(EVERGREEN). Illegally logged timber also undermines well regulated sustainable industries by

undercutting timber products that have legally been harvested (Department of Agriculture). New

ideas and strategies are needed to preserve what is left of forests. The producer countries studied

are generally poor at managing forest related information, although most are developing improved

systems. Producer countries must improve information management if they are to be able to

prevent, detect and suppress illegal logging effectively. Despite the fact that audits of the forest

administration are conducted in all countries, systems for watching profits due and received and

for investigating inconsistencies either does not exist or are poor in most countries (Department of

Agriculture). The data necessary to assess revenues and to see how they may have changed over

time are rarely available.

Political and economic networks often provide forceful drivers for small scale illegal

logging and timber trade (ForestTrends.org). Many of these networks bring together not only

influential players from the private sector but also government officials, including the very

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officials holding the responsibility to enforce logging bans, harvest regulations, and restrictions

on timber trade (EVERGREEN).

CAUSE OF THE PROBLEM

O INSUFFICIENT ENFORCEMENT INFORMATION

O INCONSISTENCIES IN FOREST POLICIES

O IRREGULARITIES IN PRIVATE SECTORS AND GOVERNMENT

JUSTICE FOR FORESTS AND WILDLIFE

Illegal logging has a massive impact on the environment. When forests are destroyed by

illegal loggers it is demolishing the eco system, it is also destroying wildlife and releasing carbon

dioxide into the atmosphere. Many species of Plants are also being destroyed in addition to the

much wildlife that has vanished as a consequence of deforestation. In 2003, the deforestation rate

in some parts of the Amazon was the second highest ever recorded at 26,000 square kilometers

(FuturePolicy.ORG, 2014). The Orangutans was once a species with over 100 thousand, and it

has recently become one of the most endangered species in the world today because of illegal

logging.

Illegal

Logging Deforestation

Endangered Species

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According to Orangutan.org, they have lost well over 80% of their habitat in the last 20 years, and

an estimated one-third of the wild population died during the fires of 1997-98.

Research has released figures to state that over 1.6 billion people are dependent on the

forests for their livelihood (Clancy). Illegal logging is advancing at very alarming rates. If it

continues at current rate of destruction, 96 percent of the remaining forests will be gone by 2022.

The problem of illegal logging stems from weak governing laws over the timber trade and

corruption. In Cambodia and Brazil alone, corruption has had a devastating consequence. Not

only are the countries people being put to labor as slaves, they are doing so on their own property.

In Europe various groups and organizations have been set up to try and investigate and stop

illegal logging. There is a body called the

WWF Illegal Logging Government

Barometer which has been set up by the

WWF to assess the efforts of the European

governments (EVERGREEN). The

organization implements the action plan on

forest Law Enforcement Governance. This

encourages partnerships between countries

to stop illegal logging. The problem must first be addressed by the current administration.

Governments around the world must stop accepting the import of these illegally logged

timbers. Most of the money made on illegal logging is spent on weapons, drugs, gangs and

organized crime. When there is no demand for illegally logged timber then the supply will soon

seize.

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ILLEGAL LOGGING PRACTICES AND ENFORCEMENT

THE 10 WAYS ILLEGAL LOGGING IS CONDUCTED

o LOGGING IN PROTECTED AREAS

o LOGGING WITHOUT PERMITS IN UNPROTECTED AREAS

o ILLEGAL LOGGING IN CONFLICT ZONES

o LOGGING IN EXCESS OF PERMIT OR CONCESSION QUOTAS

o LOGGING WITH FORGED OR RE-USED PERMITS

o OBTAINING PERMITS THROUGH BRIBES

o ESTABLISHING OR EXPANDING PLANTATIONS

o AGRICULTURAL EXPANSION BY SMALL-SCALE FARMERS

o CATTLE RANCHING AND SOY PRODUCTION

o WIDENING ROAD CORRIDORS,

o MINING OR OTHER FELLING

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ILLEGAL LOGGING ENFORCEMENTS

Illegal Logging is defined as logged harvested in breach of laws in place (no matter which

country the timber was harvested) (Department of Agriculture).

The international trade in illegally logged timber is a major problem for the legal timber

producing countries, not only in the developed countries but in the third world

countries. Enforcement of the ban on illegally logged timber supply will be reliant upon the

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willingness of the country of harvest or where the harvesting takes place. Major consumer

countries have or are putting in place measure to prevent trade and illegally logged timber

products. The United States put a prohibition on illegally logged timber imports through the

legacy act amendment in 2008 (FuturePolicy.ORG, 2014). The European union are implementing

their timber regulations which prohibit illegally logged

timber from being placed on the market and require

due diligence to be carried out on timber products.

The EU timber regulations commenced on March 3rd

2012. A number of other countries are also developing

timber legality verification schemes to combat illegal

logging and meet the import requirements of consumer

countries and also to demonstrate the legal origins of

their timber products. Indonesia has introduced a timber legality verification system known as

SVLK(Greenpeace). These approaches together are driving a new policy for combating illegal

logging. Australia is now introducing Legislature to also prohibit the importation of illegally

logged timber through the illegal logging prohibition act. Due diligence will apply to importers

of timber products and processes of logs including the risk of sourcing illegal timber and

putting it onto the market.

THE GUITAR INDUSTRY - IS SUSTAINABILITY A COMPETITIVE ADVANTAGE

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GIBSON GUITARS

In 2010 and 2011, Gibson Guitars premises in Nashville were raided by the fish and

wildlife service (FWS) where agents seized ebony and rosewood that was imported from

Madagascar (Clancy). The FWS found evidence that an employee had told Gibson two years

previously that its Madagascan imports might be illegal, but that the company had nevertheless

ordered further stocks. The ebony was mainly in the form of strips that would be fashioned into

fret boards for guitars, mandolins and banjos (BBC.com). They had accused Gibson of violating

the Lacey Act of 2008 by not asking their supplier where the wood came from and if it was

logged legally .Other purchasers of wood and wood products said without strict enforcement of

the law; their efforts to take a sustainable approach to wood sourcing put them at a competitive

disadvantage (Clancy).

Don Finkell, CEO of the St. Louis-based company stated that his business Anderson

Hardwood Floors took action about five years ago that have helped make it easier to comply by

discontinuing the use of scarce woods from South America, Africa and Asia. It maintains a

relationship with the Forest Stewardship Council (FSC) certification to guide purchases of

anything sensitive. Fickell stated that those efforts could cost him. "So far, there has not been a

verified product with a price point that will support a successful marketing campaign," "This

shows you the extent of illegal logging that still exists. The businesses that comply are going to

have a hard time competing with the ones that profit from breaking the law. It is essential that the

Lacey Act is evenly enforced, "so that the playing field is leveled for honest manufacturers and

their employees.”

TAYLOR GUITARS

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Users of wood tend to slowly become environmentalists (Taylor). If we completely ruin

our environment it almost doesn’t matter if guitars exist or not. Almost every one of Bob

Taylor’s guitars has African ebony on it. His company Taylor Guitars makes 500 guitars each

day. For centuries music makers like Taylor have used ebony, a tropical hardwood for its beauty

sound and durability. Taylor wants the highest quality wood for their guitars but laws for

importing wood like ebony have changed. Us law now requires companies to abide by forest

laws in other countries. Taylor Guitars wants to make sure he has access to legal wood so he

bought into an ebony mill in South Africa. For Taylor the mill is a long term investment.

BOTTLENECKS IN THE BLACK WOOD TRADE

Legal operations require the payment of relatively high taxes on logging operations

and milling operations

(SystemDynamics.org,

2014). Illegal operators,

in addition to cutting trees

illegally, they avoid tax

costs partly by paying

bribes to appropriate

officials. For that reason

illegal timber are currently considerably cheaper than legally produced logs

(SystemDynamics.org, 2014).

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Illegal timber, coming from various companies and limited sources, has to be combined

and channeled by road or river to a limited number of destinations locally or for export, which in

turn creates a bottleneck in the illegal trade. Buyers require the specifics on the species, quality

and source of the timber in order to process it in the most effective way. However, illegal timber

transportation is completely

different from the illegal

drug trade, where all

supplies have to be

smuggled, even locally, for

distribution or processing.

Trucks do not normally need

a permit to carry logs but

once the timber is loaded

onto trucks, the traders are at

no risk to take the illegal timber, often mixed with legal, away from the crime scene to buyers and

processors. To control the bottlenecks by transportation taxes, the amount of taxes applied will be

dependent upon the “rate of deforestation and criminal activity in the region” would raise the cost

of illegal timber to the same cost as legal timber. This would hopefully increase the costs for

those processing illegal wood and could have an impact on how investors in the stock market

view them.

ECONOMIC ANALYSIS OF ILLEGAL LOGGING SOLUTIONS

With enough enforcement, restrictions can reduce illegal logging to levels that the

population considers best, by trimming the supply curve to level S2(P) as the graph shows below,

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these results in higher prices and lower supply (abtassociates, 2006). A key observation here is

that the domestic price for timber P2 exceeds the logging industry cost C2 of supplying W2, and

loggers and traffickers will secure excessive profits equal to the dash marked area in the curve

(which is W2[P2-C2]). The logging industry will favor this result, because essentially the state

has provided monopoly profits (Clancy).

RESTRICTING THE SUPPLY WOOD BY PROHIBITIONS

W2 W1

W=Wood

P2

C2

S2(P)

S1(P)

D(P)

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SUPPLY AND DEMAND FOR WOOD

P1

W2 W1 WM

W=Wood

The picture above shows the supply and demand curve on the same graph. The vertical

axis is the price, and the horizontal axis is the amount of wood conducted. S1(P) is the supply

curve that would exist at a point in time if loggers were unrestrained from logging. D(P) is the

sum of domestic and international demand at the same point in time. W1is the resulting amount of

wood transacted in domestic and international exchange at price P1. The intersection of supply

and demand determines the market price (abtassociates, 2006).

S1(P)+SC

S1(P)

D(P)

P=Price

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RESTRICTING THE SUPPLY WOOD BY TAX EQUIVALENTS

P=PRICE

P2

C2

W2 W1 W=WOOD

The taxes and tax equivalents provide a tool to transfer all or some of the profits from the

loggers to the state (SystemDynamics.org, 2014). In theory, the state could rely exclusively on

taxes. The state charges a unit tax (T) for wood, with the outcome that loggers will freely curb

their supply to W(This assumes that the state puts the tax at a level that covers social costs.)

However, the two policies limit and tax equivalents would probably be used to protect vulnerable

forests and to retrieve excess profits (abtassociates, 2006).

In order to allow for easier monitoring of illegal logging and the response, producer

country governments must collect more reliable data and make all important data public. The

existing indicators are poor at capturing some forms of illegal activity; a more complete and

accurate picture of illegal logging might involve field inspections and analysis of satellite

imagery for sample areas (Clancy). For such independent analysis to be possible, transparency

of information regarding licensed logging must be improved.

T;TAX S1(D)+T

S1(P)

D(P)

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STRENGTH OF THE SYSTEM

The strength of the system would be the combined actions of restraining total flows,

reducing profits from unlawful trade, increasing support to native enforcement, up observance

and reducing the attractiveness of finance in firms concerned in unlawful work and trade of

unlawful origin wood. It’d conjointly make sustainably procured logs enticing, whereas not

raising the value on property logs to make a competitive disadvantage on the domestic and

international market. Global Forest Watch (GFW) is a dynamic online forest observation and alert

system that empowers people all over to visibly manage forests. For the first time, international

Forest Watch unites satellite technology, open data, and crowd sourcing to ensure access to timely

and reliable information regarding forests. GFW gives the public a way to report irregularities

they observe.

USING THE LAW TO BETTER COMBAT CRIME

Illegal Logging is defined as logged harvested in breach of laws in place (no matter which

country the timber was harvested) (ForestTrends.org). Enforcement of the prohibition of illegally

logged timber products will be dependent upon the authority by the country of harvest or where

the harvesting takes place. Illegal logging obstructs social development by driving local

communities of the benefits of using their resource. Illegally logged timber also undermines well

regulated sustainable industries by undercutting timber products that have legally been harvested.

Major consumer countries have or are putting in place measure to prevent trade and illegally

logged timber products (ForestTrends.org). The United States put a prohibition on illegally

logged timber imports through the legacy act amendment in 2008. The European union are

implementing their timber regulations which prohibit illegally logged timber from being placed

17

on the market and require due diligence to be carried out on timber products. The EU timber

regulations commenced on March 3rd

2012. A number of other countries are also developing

timber legality verification schemes to combat illegal logging and meet the import requirements

of consumer countries and also to demonstrate the legal origins of their timber products

Indonesia has introduced a timber legality verification system known as SVLK. These

complementary approaches are driving a new international policy framework for combating

illegal logging and associated trade. Australia is now introducing Legislature to also prohibit the

importation of illegally logged timber through the illegal logging prohibition act. Due diligence

will apply to importers of regulated timber products and domestic processes of raw logs the risk

of sourcing illegal timber and putting it onto the market (FuturePolicy.ORG, 2014). Due

diligence will include four steps

1. Know the Laws In the recent years, nations have passed laws that restrict the exchange of

wrongfully sourced wood. The U.S. altered the Lacey Act in 2008 to include plants and plant

items, for example, timber and paper to the old law that bans trafficking of unlawful timber. The

European Union immediately stuck to this same pattern with its Timber Regulation in 2010,

which went live in March 2013, while Australia passed its Illegal Logging Prohibition Act in

2011. These three countries account for half of the total value of global forest product

imports. Any company operating in and importing forest products into these countries needs to

adopt measures to comply with these laws. IKEA, for example, responded by requiring its

suppliers to annually report origin, volume and species of wood as well as undergo audits through

the supply chain.

2. Know the Species Aside from country specific regulations, companies should also be aware of

timber species listed under the Convention on International Trade in Endangered Species of Wild

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Fauna and Flora (CITES). Depending on which appendix the species in question is listed under,

trade of the species may be completely banned or require a CITES permit (ForestTrends.org).

Additionally, some countries have harvest or export bans on certain types or certain forms of

harvested timber round wood, sawn wood and finished products. However, it is important for

companies to judge which timber type they are using and where they are purchasing from. Taylor

Guitars, for instance, has shifted away from rare species like Brazilian rosewood, African ebony

and Indian rosewood in favor of more abundant species.

3. Know How Countries

Define Legality The three

timber legality regulations

mentioned above prohibit

violation of laws in their

country as well as in wood’s

countries of origin. However,

each country might have their

own definition of legality.

Thus, companies need to understand illegality laws and definitions not just in the countries they

operate in, but in the countries where they are purchasing forest products from. Often, the best

way to do this is by informing suppliers that assurance of legality is now a factor in buyers’

business decisions, just as price and reliability of supply are (FuturePolicy.ORG, 2014).

Ultimately, illegal logging is a sign of weaknesses in governance situations. Thus, some

countries are perceived as either low or high risk when it comes to legality, based on factors such

as local levels of corruption, law enforcement procedures and extent of illegal logging

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(EVERGREEN). While it is still possible to source from “high-risk” countries legally and

responsibly, companies need to do their research, find reliable suppliers and develop procedures

that ensure their supply chains remain legal. Among others, one available tool that helps buyers

with this research is the Risk Information Tool (EVERGREEN), which provides details on

legislation and regulations in source countries, as well as other information.

4. Know Your Available Resources A wide range of tools and systems are now available to help

companies comply with emerging legality requirements. Many companies are turning to forest

certification schemes, such FLEGT or The Forest Law Enforcement, Governance and Trade.

These standards require companies to trace wood to its origin to ensure that it was responsibly

and legally harvested. By ensuring that their supply chains only support legally harvested woods,

companies can both protect themselves and the world’s diverse forest ecosystems.

TIMBER VERIFICATION SYSTEMS

To better combat illegal logging technology must get involved. Today criminals have found

so many sneaky ways to do things that the law must make sure you they are on the cutting edge

when it comes to technology. This involves spending large sums of cash to make sure there are

innovations in the technology used to combat logging. Science plays a big role when it comes to

preventing illegal logging and has given multiple innovations that make a huge difference in the

fight. Here are a few:

1. Hand-held wood identification device and wood Identification database- The major

problem is that custom at the border cannot identify the difference between the illegal and

legal wood. They are unable to verify customs declarations of wood products and wood.

Scientist is currently in the process of developing hand held wood identification devices

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that inspectors can use to determine whether the wood matches the declarations. This

device will put them at the forefront of technical innovation. The devices can identify the

species, genus and geographic origin of the wood. The images will be compared to

images in the database.

2. DNA Testing Innovations- Scientist are mapping the genetic variation of species that will

allow them to tell the geographic origin of logs and wood. They will be able to tell which

exact park a tree came from. This will also be able to help detect counterfeit country of

o

r

i

g

i

n

d

e

clarations on wood products.

3. The US Forest service and donors are making efforts to partner with other countries in an

effort to complete genetic mapping in places around the world. Through constant

scientific innovation they are working on timber tracking, enhancing data management

and field identification manuals. They are also working conducting field training for

employees on forest monitoring.

USING TECHNOLOGY TO FIGHT ILLEGAL LOGGING

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CONCLUSION

The problem of illegal logging and its impacts on our environment has been interesting

but very hard to measure. By countries promoting future transparency it will be easier to derive

data. To reduce the already devastating effects, Forest Management and a tighter supply chain

are key to a successful fight against illegal logging and we as consumers can do our part and

change the way we consume before what we value is gone. From applying simple economics to

the supply and demand for timber, possible solutions can be applied such as taxes and

prohibitions on importing and exporting. Timber can further be monitored and tracked by

implementing technologies such as timber verification schemes and fingerprinting methods. It is

apparent from our research that as a society and as individuals, we are only beginning to tackle

the problem of Illegal Logging; hopefully it’s not too late.

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WORKS CITED

Abtassociates. (2006). Illegal Logging.

Clancy, H. (n.d.). greenbiz.com.

Department of Agriculture, F. a. Austrailias Illegal Logging Prohibition Bill. Department of Agriculture, Fisheries

and Forests.

EVERGREEN. (n.d.). ILLEGAL LOGGING. Retrieved from http://www.environment-

green.com/Illegal_Logging.html

ForestTrends.org. (n.d.). Retrieved 2014, from Timber Regulation: www.ForestTrends.org

FuturePolicy.ORG. (2014, May 25). Retrieved from Forest Sustainability: www.FuturePolicy.ORG

SystemDynamics.org. (2014, June 01). Retrieved from Illegal Logging Timber Trade.