REVIEW

Socio-economic, environmental, and governance impactsof illegal logging

Fernando Reboredo

Published online: 7 May 2013

� Springer Science+Business Media New York 2013

Abstract This article examines the main impacts of the

illegal logging activities with emphasis on the most

important timber production regions. Although the dis-

cussion is focused on the environmental, socio-economic

and governance impacts, it must be stressed that the term

forest governance is the umbrella where the economy, the

environmental values, and welfare of forest-dependent

communities are sheltered. Considering the effects/impacts

of the illegal logging as a whole, we can summarize the

following negative key points: (1) Degradation of the most

valuable forest stands threatening biodiversity, including

rare and endangered species. (2) Increase in soil erosion

and landslides. Increase in CO2 release and climatic

changes. (3) Human rights abuses and disrespect of the

basic needs of local communities and their culture. (4)

Corruption, crime, coercion, and money laundering. (5)

Reduction of royalties, taxes, and other charges paid by

logging companies to the producer States. (6) Depreciation

of legal activities due to the unfair concurrence. Despite

multiple efforts, the results in the combat of illegal logging

are far from satisfactory. Increase the certification area in

parallel with an accurate control, devolve the state land to

the ancient local owners, increase the cooperation between

civil society and forest authorities, and finally strongly

improve forest governance, particularly anti-money laun-

dering laws, are crucial aspects in the combat of illegal

logging. Furthermore, governments and businesses must

implement the triple bottom line concept in order to reach

sustainability.

Keywords Illegal logging � Environmental impacts �Governance impacts � Socio-economic impacts

1 Introduction

Deforestation has long been recognized as a negative

impact in the prosperity of a country, regardless of its

origin, that is, legal or illegal. Nevertheless, the excessive

logging that occurred in some epochs throughout the

world’s history was due to a growing human population

(fuel-wood needs and conversion of forest areas into pas-

tures and cereal fields) and the flourishing of industrial

activities, in the case of Portugal, the metallurgy, sugar

refining, and particularly shipbuilding (Rego 2001; Rebo-

redo and Pais 2012, 2013).

Illegal logging occurs all over the world but mainly in

Africa and Asia where sustainable forest management and

respective forest certification schemes are almost absent.

For example, the certified forest as a percentage of total

forest area is 1.4 and 1.1 %, in Asia and Africa, respec-

tively, while Western European countries have 50.8 % and

North America 32.7 %—(UNECE/FAO 2011). But even in

North America, EU-27 and Europe as a whole, illegal

logging occurs regardless of the observation of sustainable

forestry rules.

The main causes of illegal logging are poverty, weak

governance (Toyne et al. 2002; Bouriaud 2005) and the

absence of sustainable forest management, although these

reasons are not extensive to all the countries where illegal

logging occurs.

Illegal logging causes serious environmental problems

such as global deforestation leading to reductions in carbon

stocks, degradation of biodiversity, lowering water quality

and discouraging sustainable logging practices and forest

F. Reboredo (&)

Departamento de Ciencias da Terra, CICEGe, Faculdade

de Ciencias e Tecnologia, Universidade Nova de Lisboa,

2829-516 Caparica, Portugal

e-mail: fhr@fct.unl.pt

123

Environ Syst Decis (2013) 33:295–304

DOI 10.1007/s10669-013-9444-7

management (Moiseyev et al. 2010) thus undermining the

competitiveness of the legitimate forestry industry. It also

destroys the protective function of the forests—natural

disasters, such as the massive landslides and flooding after

heavy monsoon rain, were observed in the Philippines

(Magallona 2004) or China (UNECE/FAO 2009).

The poorest populations in several countries live in and

around remote forested areas, and most of them depend to

some extent upon forests and non-wood forest products for

food, medicine, fibers. These populations are increasingly

being subjected to changes brought on by globalization,

economic growth, and demographic shifts. Thus, illegal

logging has a negative impact on the resources that forests

provide.

Forests are strongly influenced by governance and

dynamics in other sectors, such as infrastructure, demog-

raphy, or landscape planning and by general macro-eco-

nomic development. Current environmental governance

arrangements are inadequate and have led to continued

degradation of the environment (UNEP http://www.unep.

org/environmentalgovernance/).

In the Asia–Pacific region, the involvement of criminal

groups or the military in illegal resource extraction often

goes hand in hand with violence, threats, or other forms of

coercion that create insecurity at an individual and com-

munity level (Elliott 2007).

A recent report by the World Bank claims that despite

the efforts to curb forest crimes, mainly focused on pre-

ventive actions, it has not halted the rapid disappearance of

the world’s old-growth trees. New ideas and strategies are

needed to preserve what is left of forests (Goncalves et al.

2012). Undoubtedly, proposals for action to combat illegal

logging will be on the agenda of several countries and

institutions in the next decades. The aim of the present

review is to discuss the main impacts of illegal logging and

how these impacts can be mitigated.

2 The main impacts

Generally, the main effects/impacts of the illegal logging

can be summarized as follows:

2.1 Socio-economic impacts

The destruction of forests in several world areas and the

lack of tenure rights to forest communities will put a tre-

mendous pressure on indigenous populations forcing them

to migrate to more densely populated areas. In fact, highly

uncertain land tenure relations intensify conflicts between

wood industry concerns and local communities. In Indo-

nesia, conflict timber incidents resulting in deaths, injuries,

and destruction of property are almost daily events

(Thomson and Kanaan 2003). A survey of reports on

conflict timber published in six regional newspapers

between March 2002 and February 2003 turned up 845

accounts, which is equivalent to more than two incidents

per day. Also the indigenous people of the North, Siberia,

and Far East are no longer guaranteed the free use of lands

and forests, areas where the illegal harvest is a major threat

(Taiga Rescue Network 2005).

In China, the booming of the economy has placed a huge

pressure on wood demand both through massive imports

and increase in total area of plantations. The transfer of

responsibilities to local governance is not a guarantee of

continued funding for the stewardship of the new forests

where local corruption is widespread and under-regulated

corporations have been accused of usurping user rights,

failing to compensate farmers (Wang et al. 2007).

Nevertheless, some authors claim that illegal logging

creates well-paid jobs compared with conventional labor

and opportunities (Casson and Obidzinski 2002) such as

illegal logging in Central Kalimantan, Indonesia, although

in some cases very little of the profit from illegal logging

remains in the local community. According to Kishor and

Damania (2007), only 2.2 % of the total product value was

held locally by those who illegally logged the forests; the

rest went to brokers, buyers, manufacturers, and exporters.

In Southeast Asia, one cubic meter of illegal merbau at

point of import into China is worth $240 while local loggers

receive only $11 per cubic meter (Elliott 2007). Across

Siberia and the Russian Far East, Russian loggers are often

forced to work under extremely poor conditions with very

low salary. Logging brigade members and truck drivers may

earn less than one percent of the amount that the company

gets for each cubic meter logged when sold to China or Japan.

This amounts to 18 Rubles or 0.75 $US per logged cubic

meter (Taiga Rescue Network 2003) indicating the lack of

other job opportunities. Furthermore, the use of illegal paid

labor or illegal labor, the breaching of forest legislation, and

illegal accounting practices are the main problems of unre-

ported wood in Russia (Gerasimov and Karjalainen 2006).

The International Organization for Migration estimates

that there are some 33,000 forced laborers in Peruvian

logging, a reality common to both legal and illegal logging.

Forced labor results from one of two processes. In the first,

middlemen pay a set sum of money to indigenous com-

munities in exchange for mahogany. Later, the community

is informed that the price of mahogany has gone down,

leaving them in debt (Novak and Namihas 2009).

According to the U.S. Department of Labor (2010), timber

is produced with forced labor in Peru and Brazil, particu-

larly valuable hardwoods such as mahogany, and in

Myanmar (Burma) bamboo and the hardwood teak.

296 Environ Syst Decis (2013) 33:295–304

123

According to INTERPOL, between 50 and 90 % of

logging in key tropical countries of the Amazon basin,

Central Africa, and Southeast Asia is being carried out by

organized crime, leading to the increase of murder, vio-

lence, and atrocities against indigenous forest dwellers

(UNEP 2012). Most of the abuses against indigenous

people are driven by the poor governance. In that sense,

some of the social impacts of illegal logging overlap with

the governance impacts.

The World Bank (2006) has estimated that illegal log-

ging causes losses of approximately US$15 billion every

year (the legal forest industry loses more than US$10 bil-

lion while governments lose about US$5 billion in reve-

nues). In a recent report (UNEP/INTERPOL 2012), this

value has increased between twofold and 6.7-fold, that is,

the economic value of global illegal logging, including

processing, is now estimated to be worth between US$30

and 100 billion, or 10–30 % of the global wood trade.

Illegal logging increases timber supply into the markets,

lowering the price of timber thus increasing the competi-

tiveness of national industries (Tacconi et al. 2003), which

agrees with the results of American Forest & Paper

Association (2004)—the global timber product prices

decreased by 7–16 % due to illegal logging activities.

Using a Global Forest Products Model, Li et al. (2008)

predicted how markets would change due to the gradual

elimination of illegal logging from 2007 to 2011. For

example, the annual production of sawn wood and indus-

trial round wood in developing countries will be reduced

from 2007 to 2020, by 2 to 5 % and by 3 to 8 %, respec-

tively, depending on the assumption on illegal logging

rates. In both cases, half of the decrease will be compen-

sated by an increase in the production by developed

countries. As a result of global lower supply, the world

prices of sawn wood and industrial round wood would rise

by 0.5 to 1.3 % and by 1.5 to 3.5 %.

Li et al. (2008) also concluded that in general, produc-

tion in all industries (from logging to pulp and paper)

decreased in developing countries while increasing in

developed countries but not to the same degree, thus

causing higher world prices indicating a full integration of

the markets.

Other timber market models evaluate the import of

illegally harvested timber (IHT) based on the inverse

coefficients (Dieter 2009). This model covers trade via

third party countries and bilateral trade and allows a cal-

culation of the import and domestic use of IHT for each

country and the trade linkages between all countries

although as in any model the quality of the results depends

on the quality of data sources and estimates on the share of

IHT (Dieter, op. cit.). This concern is mainly related to the

discrepancies in official data within different state organ-

isms and the assumption that the degree of illegal logging

is only based on what is reported although we agree that the

extent of any forestry illegality will always be difficult to

quantify.

The Indonesian Government estimates losses of

approximately $3.2 billion by year as a consequence of

illegal logging activities, while the NGO Telepak Indonesia

claims losses of about $5.3 billion per year due to the

overall deforestation from logging, slash-and-burn farming

techniques, and other factors responsible for the environ-

mental degradation (Dow Jones Commodities Service

2006). This agrees with the estimates of Human Rights

Watch (2009) that the Indonesian government lost US$2

billion in 2006 due to illegal logging, corruption, and

mismanagement. This amount included forest taxes and

royalties not collected and losses from tax evasion by

exporters.

The direct annual fiscal loss due to the illegal logging

ranges between $7.9 and 12.4 M for Honduras and $2.2

and 4.0 M for Nicaragua, mainly from fees derived from

stumpage charges on production from national forest,

municipal revenues, and income taxes. These estimates are

conservative and probably underestimate the real costs

(Richards et al. 2003). Honduras loses up to $18 M per

year in lost stumpage fees and other forest-based revenues,

a value which is believed to be an underestimate (Envi-

ronmental Investigation Agency 2005).

According to the State Forest Service (SFS) of Latvia,

losses due to illegal felling between 2000, 2001, 2002,

2003 and 2004 were estimated in 7.6, 8.5, 4.4, 3.2, and 2.4

million Euros, respectively, showing a continuous decrease

in the amount of illegal felling and consequent losses from

2001 onwards, which could be explained by better control

by both owners and SFS (PDF/WWF 2006). Russia loses

annually approximately US$1 billion due to illegal logging

with a corresponding volume of illegal felling around 11 %

of the total volume, according to the official data (Dmitriev

2006).

2.2 Environmental impacts

High levels of deforestation due to illegal logging were

detected, for example, in Central America—Honduras and

Nicaragua (Richards et al. 2003), South America—Brazil

(Lawson and MacFaul 2010), Southeast Asia (Rosander

2008), Africa–Congo Basin (Thomson and Kanaan 2003),

Central and Eastern Europe and former Communist coun-

tries such as Belarus, Ukraine, Moldova, and Russia (WWF

2008; Regional Environmental Center 2010).

If illegal logging practices occur at a large destructive

scale, it can lead to the conversion of forests to grassland

and to the depletion of plant and animal species. If illegal

logging occurs in protected areas, rare plants and animals

may become threatened (Sheikh 2008).

Environ Syst Decis (2013) 33:295–304 297

123

Forests play an essential role in the carbon cycle. Car-

bon from forestry projects accounted for 36 % of the vol-

untary carbon market in 2008 (approximately $254 M),

demonstrating the competitiveness of the sector in gener-

ating carbon credits and promoting, for example, ecosys-

tem restoration such as a degraded riparian forest (ICFPA/

ACPWP 2010).

The industrial roundwood removed from global forests

annually contains approximately 420 million tons of car-

bon (FAO 2007) assuming densities for coniferous and

non-coniferous roundwood of 0.45 and 0.56 tonnes/cubic

meter, respectively, and a carbon content of 50 %. Much of

this carbon is returned to the atmosphere relatively quickly

although a significant fraction in industrial roundwood was

stored in products where it remains for long periods.

The extensive degradation of peatlands in Indonesia by

recurrent fires, deforestation (legal and illegal), and drain-

age causes the release of huge amounts of peat soil carbon

to the atmosphere, the groundwater level being the main

factor controlling the carbon dioxide emissions. Using field

inventory and remote sensing data, Jaenicke et al. (2010)

concluded that the rise of groundwater levels (once dams

have been constructed) within the 590 km2 area of drained

peat swamp forest could result in mitigated emissions of

1.4–1.6 Mt CO2 year, which is equivalent to 6 % of the

carbon dioxide emissions by civil aviation in the European

Union in 2006. Thus, restoring the peatland hydrology is

the only way to prevent peat oxidation and mitigate CO2

emissions.

In the summer of 1998, China suffered massive flooding

along the Yangtze, Songhua, and Pearl rivers. In the floods,

thousands of people died, 14 million were left homeless,

and total losses were estimated at $26 billion. Although the

direct cause was the heavy rainfall, the large deforestation

and consequent reduction of the control of water runoff

was indeed the trigger of such catastrophe (UNECE/FAO

2009). In the Philippines, landslides killed 1,800 people in

Quezon Province in 2004 and Philippine President identi-

fied illegal logging as one of the leading causes of the

disaster and directed police and army forces against illegal

loggers and their financiers (Magallona 2004).

The Convention on International Trade in Endangered

Species (CITES) has a huge list of species in danger.

Among the tree species under the CITES concerns are the

bigleaf mahogany (Swietenia macrophylla) in the Ameri-

cas, afrormosia (Pericopsis elata) in Africa, and ramin

(Gonystylus spp.) in Southeast Asia. For example, in

Honduras, illegal logging is highly selective and the

valuable species mahogany and tropical cedar are at risk.

According to Del Gatto (2003), the annual extraction of

mahogany ranges between 30,000 and 50,000 m3, and it is

believed that this species is near extinction outside of

protected areas.

Tanjung Puting National Park (located in the province of

Central Kalimantan—Indonesia) is recognized as a world

Biosphere Reserve by the United Nations and forms the

largest protected area of swamp forest in Southeast Asia. It

contains a number of commercial tree species including

meranti (Shorea spp.) and ramin (Gonystylus spp) and is

the home of the most famous inhabitant—the orangutan

(Pongo pygmaeus). EIA/Telapak investigators discovered

several illegalities in Tanjung Park which was confirmed

by the authorities who seized ramin loads and detected

ramin factories without license to operate in Central Ka-

limantan (Currey and Ruwindrijarto 1999). Its use in lux-

ury products and increasing scarcity make ramin a valuable

timber on the international market with prices varying from

$600 per m3 for sawn ramin to $1,200 per m3 for molded

ramin. The top export markets for Indonesian ramin are

Taiwan, Japan, Singapore, Hong Kong, USA, Italy, and the

UK. Otherwise, according to the central government, tim-

ber is illegally harvested in 37 of the 41 national parks in

Indonesia (Pye-Smith 2007) despite their protected status.

Other endangered species include the Sumatran rhino

(Dicerorhinus sumatrensis), which have diminished to crit-

ically low numbers in Peninsular Malaysia and the state of

Sabah (less than 40 individuals are estimated to remain)

although there are several recent encouraging population

estimates for Asian elephants and Malayan tigers (Clements

et al. 2010). Long-term studies in order to assess and monitor

the conservation status of both species are urgently needed.

In the Philippines, the Northern Sierra Madre mountain

range contains what has been called the nation’s ‘‘last great

forest’’ with rare plants, majestic tree species, and two of

the most endangered large animals in the world, the Phil-

ippine eagle and the Philippine crocodile, due to the spread

of illegal logging activities (Severino 2009).

The lack of management practices in both legal and

illegal logging activities increases the risk of fire (Sheikh

2008), which can occur due to natural or accidental causes

or with criminal origin. The fires that spread through

Sumatra and Borneo in 1997 and 1998 were largely caused

by timber and plantations companies. Satellite monitoring

showed that four million hectares of land were damaged in

the province of East Kalimantan and allowed the identifi-

cation of 176 firms accused of deliberately setting fires

(Currey and Ruwindrijarto 1999).

2.3 Governance impacts

Forest governance must take into account the fiscal system

of forestry, the role of communities living in forested areas,

and the equitable distribution of their revenues and finally

the crime prevention and/or suppression.

Illegal logging and timber smuggling is well recognized

as a transnational environmental crime in Asia–Pacific

298 Environ Syst Decis (2013) 33:295–304

123

since it is generally committed in more than one state

(Elliott 2007). Furthermore, the Indonesian Ministry of

Forestry has criticized Malaysia and China, for accepting

stolen timber, thus taking unfair advantages to wood

industries in these countries (Jakarta Post quoted by

Obidzinski et al. 2007).

The term ‘‘conflict timber’’ was introduced by the UN in

2001 and is related with the civil wars in Cambodia, which

began in the 1970s and expanded until the early 1990s, and

in the Congo area. Both were responsible for millions of

refugees and millions of deaths. The links between armed

groups and logging companies became evident during the

Khmer Rouge regime—forest cover in Cambodia

decreased from 75 % in the early 1970s to less than 35 %

in the mid-1990s (Thomson and Kanaan 2003) due to the

illegal, but officially sanctioned logging, by the Royal

Cambodian Army Forces and Khmer Rouge.

Other examples of conflict timber are spread to Burma,

Indonesia, Philippines, and Liberia. In Liberia, the former

President Charles Taylor used conflict commodities,

namely timber and diamonds, to finance his military

operations in Liberia and in the destabilization of Guinea,

Sierra Leone, and Ivory Coast.

In the Democratic Republic of Congo, more than 200

forest rangers have been killed over the last decade in the

Virunga National Park due to the charcoal trade which is

estimated at over US$28 M annually (UNEP 2012),

undermining the credibility of the state and seriously

threatening humans and the most emblematic animal in the

park—the gorilla.

Conflict timber incidents almost always occur where

there exists (Thomson and Kanaan 2003):

(a) the complicit involvement of government—military,

security forces, the forest service; (b) little, if any, capacity

for financial oversight; (c) uncertain land/resource tenure;

(d) little hope for just recourse in the application of the

legal system.

In Asia, the routes of illegal timber generally ended in

major regional hubs such as Singapore, South Korea, and

China, where the timber is processed or relabeled as a legal

product (timber laundering) and exported to the USA and

Europe, for example (Elliott 2007), strongly decreasing by

this way the traceability of the wood. Moreover, only a

well-organized network of shipping companies and agents,

brokers and middlemen in target places may support this

type of transnational crime (Elliott op. cit.).

Concerning the financial transactions, their inadequate

control clearly encourages illegal timber activities. Funds

linked to the illegal logging industry in Indonesia move

through Malaysia, Hong Kong, and Singapore (Walters

2010) frustrating the efforts to prosecute illegal logging

offenders, unless Memoranda of understanding between

Indonesia and these countries was established. Also,

important international financial institutions take part in

financing timber extraction in Indonesia such as Credit

Suisse First Boston, ING Bank N.V., and Credit Lyonnais

of Singapore (Setiono and Husein 2005) leading to the

Basel Committee on Banking Supervision in support of the

Financial Action Task Force to recommend prudent

requirements to high-risk sectors such as the forestry sector

and the public sector in developing countries, where cor-

ruption is widespread (Setiono and Husein, op. cit.). The

Basel Committee should request bank supervisors to

monitor implementation of ‘‘Know Your Customer’’ (KYC)

principles, for forestry related transactions that are financed

by major international and local banks.

Corruption and illegal logging are ‘‘twin brothers’’

generally. In Indonesia, one of the world’s most corrupt

countries, as shown by the Transparency International

rank—Table 1 (Transparency International 2012), the

contours of corruption in the forestry sector are increas-

ingly well known thanks to the investigations and reports

of environmental groups such as Indonesian Corruption

Watch, Telepak (an Indonesian environmental group that

conducts undercover timber trade investigations and mon-

itors illegal logging trials) and the Center for International

Forestry Research (Human Rights Watch 2009).

Furthermore, the index of economic freedom underlines

the role of the economy in raising welfare, in this way also

decreasing poverty. Countries are graded and ranked on ten

measures that evaluate the rule of law (property rights and

freedom from corruption), the intrusiveness of government,

regulatory efficiency, and the openness of markets (Miller

et al. 2012). The score of each country lies between 0 and

100; the higher the score, the more liberal the economy.

The analysis of Table 1 shows that the worst values were

for Myanmar (Burma) and some countries of the Congo

Basin (Republic of Congo, Democratic Republic of

Congo), while some of the Baltic States and especially

Singapore exhibited the highest performances. As a whole,

the Asia–Pacific region, South and Central America, and

the Middle East/North Africa presented similar values

ranging from 57.5 to 60.0, while Sub-Saharan Africa had

the lower value with 53.7. Europe and North America score

66.1 and 73.8, respectively.

Although this rank is not directly linked with the forest

sector we agree with Contreras-Hermosilla (2011) who

stated, ‘‘there is no compelling reason to think that the

situation in the forest sector would be radically different

from that of the economy as a whole’’. Nevertheless, some

cautions must be taken into account when the analysis is

mainly focused in some EU countries. For example, the

Baltic States—Estonia and Lithuania, which are ranked 16

and 23, respectively, are not a good example in terms of

forest-related abuses. Also Singapore, the second country

in the rank (87.5), is commonly referred to as the main hub

Environ Syst Decis (2013) 33:295–304 299

123

in Southeast Asia of timber laundering. Furthermore, the

rank of some EU countries deserves attention when com-

pared with the rank of others where forestry regulation is

partially or completely ignored.

It is also claimed that excessive regulation is often

associated with a high degree of corruption and a heavy

underground economy (Miller et al. 2012), but it is worth

remembering that lack of regulation was the main factor

responsible for the beginning of the financial crisis in

2007–2008.

An Environmental Investigation Agency in Honduras

(Environmental Investigation Agency 2005) revealed a web

of corruption and illegalities involving politicians, the State

Forestry Administration, timber companies, sawmills, log-

gers, transporters, mayors, and police. In addition illegal

timber trade is also used to smuggle narcotics and to launder

drug money. Similar conclusions were derived from the

work of Pye-Smith (2007) when analyzing forestry crimes

and court convictions and forest-related abuses in Indonesia,

Ghana and Cameroon. The huge complexity of obscure

interests between the State, government officials and multi-

ple stakeholders (Pye-Smith op. cit.) is the main obstacle to

tackle illegal activities. In the case of Indonesia, the regional

autonomy after the Suharto era, which gave district Gov-

ernments greater control over the management of natural

resources, exacerbated forest loss.

The stronger the forest governance, the higher is the

probability of detecting forest abuses. The Brazilian gov-

ernment carried out 32 enforcement operations in 2003,

and 134 in 2007, the latter involving police, army, and

officers from the Environment Agency IBAMA. As a

consequence, the value of fines issued increased eightfold

over the period (Lawson and MacFaul 2010) although only

2.5 % of the fines were successfully collected.

In 2008, hackers working for illegal logging cartels in

the state of Para (Brazil) had access to transport and log-

ging permits, allowing the theft of an estimated volume of

1.7 Mm3. Also in Brazil in 2009, a federal prosecutor

investigated a scam allegedly involving some 3,000 com-

panies that eco-certified and exported illegal timber (UNEP

2012). These findings indicate that despite the awareness of

the preservation of the Amazon—the federal government

and some state governments in the Amazon region (Para,

Amazonas, Acre, and Amapa) are developing legal

frameworks for forest concessions and the Brazilian Senate

approved in February 2006 a legal framework, increased

enforcement against illegal operations will be necessary

(Barreto et al. 2006).

In 2005, the Environmental Investigation Agency

reported that approximately 300,000 m3 of merbau logs

(Intsia spp.) were being smuggled out of Papua New

Guinea and Indonesia, to China every month. Due to the

rapid action of an enforcement team, by the end of May

2005, over 400,000 m3 of illegal merbau logs had been

seized and 186 suspects named by the police (Environ-

mental Investigation Agency 2008) enhancing the weak

governance and the key role of some Organizations in the

public denounce of illegalities, forcing the authorities to

act.

In the Philippines, the formation in August 2008 of the

Anti-illegal Logging Taskforce to tackle illegal logging in

Table 1 The index of economic freedom (IEF) and the corruption

perceptions index (CPI), in different producer and consumer timber

countries

IEF* CPI**

Europe

Estonia 73.2 64

Lithuania 71.5 54

Latvia 65.2 49

Russia 50.5 28

France 63.2 71

Norway 68.8 85

Portugal 63.0 63

Poland 64.2 58

Asia

Malaysia 66.4 49

China 51.2 39

Thailand 64.9 37

Indonesia 56.4 32

Vietnam 51.3 31

Cambodia 57.6 22

Myanmar 38.7 15

Singapore 87.5 87

North America

Canada 79.9 84

United States 76.3 73

Latin America

Brazil 57.9 43

Guatemala 60.9 33

Honduras 58.8 28

Nicaragua 57.9 29

Peru 68.7 38

Philippines 57.1 34

Africa

Ghana 60.7 45

Liberia 48.6 41

Gabon 56.4 35

Nigeria 56.3 27

Cameroon 51.8 26

Ivory Coast 54.3 29

Congo 43.8 26

Democratic Rep. of Congo 41.1 21

Sources: Miller et al. (2012)*; Transparency International (2012)**

300 Environ Syst Decis (2013) 33:295–304

123

the Northern Sierra Madre Natural Park (NSMNP) confis-

cated in 18 months more than 4,000 m3 of illegal timber,

which included 1,212 m3 in 2008 plus 2,883 m3 in 2009.

Between 2003 and 2007, the volume of confiscated wood

reached only 1,083 m3.

The volume of illegal logging in NSMNP is estimated

between 20,000 and 35,000 m3 per year (representing a

minimum market value of $4.75 M), the maximum volume

being close to the allowable cut of the three logging con-

cessions in Isabela province, where the NSMNP is located,

which is 37,794 m3 (van der Ploeg et al. 2011). These

findings indicate that illegal logging can be controlled and

minimized by enforcement teams if policies are adequate

and implemented and clearly show that the lack of notifi-

cation of forestry crimes does not mean that they did not

occur (Reboredo 2013).

The discussion about the socio-economic, environmental,

and governance impacts clearly showed that sustainability

has not been the goal of governments and businesses. Thus,

the implementation of the so-called triple bottom line (TBL)

would be an important tool toward sustainability (Elkington

1997; UNEP 2009). Elkington argued that companies,

instead of focusing solely on its profits, must also consider

the company’s degree of social responsibility and the com-

pany’s environmental responsibility.

What is needed is to put into practice the TBL concept.

Profits are measured in different currencies but how can we

accurately evaluate the right price for endangered species

or entire indigenous populations or even a thousand hect-

ares of deforested tropical rain forest? According to Slaper

and Hall (2011) ‘‘there is no universal standard method for

calculating the TBL. Neither is there a universally accepted

standard for the measures that comprise each of the three

TBL categories’’, although states, regional and local gov-

ernments, non-profit organizations (e.g., Ford Foundation)

and firms are adopting the TBL and analogous sustain-

ability assessment frameworks.

3 Current and future perspectives

When measuring the average annual deforestation rate

from 1997 to 2000 within a 10 km wide strip of land

located along the inside and outside of a reserve perimeter

in the Brazilian Amazon, Nepstad et al. (2006) concluded

that the average density of fires was 3.7–9.4 times higher

along the outside of the reserve than along the inside, while

on average, deforestation was 1.7 to 20 times higher along

the outside than along the inside.

The impact of forest certification on forest conservation

can be achieved throughout the comparison of the defor-

estation rate and the occurrence of wildfires in certified and

non-certified concessions.

In Guatemala and particularly in the Maya Biosphere

Reserve (MBR) with over two million hectares, the average

annual deforestation rate between 2002 and 2007 was 20

times higher than the deforestation rate for the certified

concessions (Hughell and Butterfield 2008). Also, the

incidence of wildfires differs significantly. The area burnt

on FSC concessions dropped from 6.5 % in 1998 to 0.1 %

in 2007, while in MBR, they range between 7 and 20 %. In

this particular case, the implementation of forest certifica-

tion can minimize deforestation, since the responsibilities

for preservation are transferred to those who take the

concessions and do not foresee a loss to their incomes. A

similar situation occurs in Reserves whose inhabitants try

to maintain their territories free of deforestation fires and

safeguard the intrinsic biodiversity (Adeney et al. 2009).

Moreover, those countries with high forest certification

rates and sustainable forest management (SFM) did not

exhibit illegal logging in general (WWF 2008; Lawson and

Macfaul 2010). Conversely, illegal logging is widespread

in countries without SFM and certification.

In non-certified concessions, greed may be the driver of

deforestation and over-felling was not balanced by an

adequate reforestation. But are the schemes themselves

capable of detecting fraudulent versions of their labels? As

stated by Brack (2010), ‘‘There are already anecdotal sto-

ries of suspiciously high volumes of FSC-certified timber

being exported from China’’ and this tendency is likely to

get worse. Furthermore, the establishment of industrial

plantations is often preceded by abusive deforestation and

land appropriation indicating that certification systems

must be carefully evaluated and controlled to avoid fraud.

Investments in forest sustainability are undermined by

illegal logging. Also the political capital spent on forest

protection is rapidly lost especially when the public

becomes aware that the state itself cannot control what

occurs in protected areas (Elias 2012). After depletion of

timber concessions, illegal loggers expand their activities

into protected areas as occurred in Kalimantan, Indonesia

(Curran et al. 2004). Both cases may discourage the com-

mon citizen who will not accept the weak or null role of the

state in the forest management and the protection of bio-

diversity. The devolution of tenure rights to local hands

such as occurred in Mexico (over 75 % of Mexico’s forests

are controlled by local communities, a remarkable case

study of forest management) will boost the incentive to

manage forests properly, that is, in a sustainable way (The

Economist 2010).

In Russia, three independent public enquiries in 2005

involving more than 2000 people concluded that between

58 and 89 % of respondents think that serious problems

with governance and law enforcement in the forest sector

exist, while between 51 and 86 % stated that the authorities

are inefficient. Moreover, between 50 and 70 % are ready

Environ Syst Decis (2013) 33:295–304 301

123

to assist the authorities in combating crime in the forest

sector (Teplyakov and Grigoriev 2006). These findings

indicate the increasing awareness of public opinion and

highlight the importance of cooperation between civil

society and forest authorities.

Another important step to tackle illegal logging is

related with the finance system. For example, timber-based

industries in Indonesia are financed by both local and

international banks (Setiono and Husein 2005). Large-scale

forest exploitations would not be commercially feasible

without financial support since financial institutions are

required to fulfill anti-money laundering laws, that is, they

should know well their customers, as issued by the Basel

Core Principles, in order to protect institutions from being

used by criminals (Setiono and Husein, op. cit.).

Norway’s Council on Ethics concluded that the Malay-

sian company Samling Global’s forest operations in the

rainforests of Sarawak and Guyana (Malaysia) contributes

to illegal logging and severe environmental damage; thus, a

recommendation to the Ministry of Finance to exclude this

company from the Government Pension Fund Global

investment portfolio was pointed out (Council on Ethics

2010). At the same time, Norway through its Pension Fund

has invested 13.7 billion dollars in more than 70 different

companies from industry sectors such as palm oil, oil and

gas, mining, logging and pulp industry, soy production and

hydroelectric energy, whose activities are responsible for

massive deforestation and forest degradation, while the

amount spent each year on rainforest protection amounts to

500 million dollars (RFN/FEN 2012).

These findings indicate that despite the high level of

political commitment in forest protection, foreign invest-

ments do not foresee ethical attitudes. For example, the

balance of sustainable forestry in the USA points to an

increasing restriction of domestic wood production in the

name of sustainability while going abroad to search the

necessary timber to fulfill national requirements (Shifley

2006). The main consequence is that the impacts of har-

vesting and consumption are transferred elsewhere.

It seems that the Norwegian investment portfolio

referred to above (Council on Ethics 2010; RFN/FEN

2012) was not based on a Multi Criteria Decision Analysis

(MCDA), commonly used in environmental studies (Lin-

kov et al. 2011) and in the sustainable investment sector

(Byrne and Cotter 2012), since neither conflicting objec-

tives were carefully analyzed, nor the opinions of several

stakeholders were taken into account, thus raising doubts

about the nature of the environmental protection efforts.

Moreover, the absence of shareholder views in the decision

making process is a major weakness (Gifford 2004) in

regard to pension funds.

Political commitments between the main consumer

partners, such as EU, USA, Japan, and China, and the main

timber producing regions (Amazon basin, Congo Basin,

Southeast Asia, Russia) would be needed and both the EU

Timber Regulation and the US Lacey Act must be fully

implemented and monitored. In a recent report from

UNEP/INTERPOL (2012) about illegal logging, among the

six key recommendations, two of them must be outlined:

1. Classify geographic regions based on suspected degree

of illegality and restrict flows of timber and wood

products from such areas including shipping.

2. Encourage tax fraud investigations with a particular

focus on plantations and mills.

The latter recommendation is based on the assumption

that huge revenues to the producer states are lost, which

could well be applied in forest management or in the

improvement of local communities conditions. The first

one creates a database that will be used in the near future as

a red flag to those countries where illegal logging is per-

sistent and out of control. Nevertheless, unilateral bans

have the strong opposition of World Trade Organization

plus a time-consuming dispute in international courts and

even the imposition of retaliatory tariffs with economic and

reputational costs.

4 Concluding remarks

Fighting forest crimes has become a goal of the International

community, although the complexity of this issue, with a

transnational network of interests including those of the

world’s most recognized banks, does not favor a rapid res-

olution. If financial institutions were more prudent in the

customer’s financial transactions, perhaps criminal forest

acts will be reduced. Moreover, collaboration with authori-

ties in the follow-up of the huge profits will bring some light

about the nations where money laundering is common.

Whatever the extent of the debate in our opinion, the

discussion about how to tackle illegal logging will be

extended during this century without great achievements.

The legal framework of illegal logging-related problems is

frozen by the incapacity of the main producer and con-

sumer states to reach a consensus toward the action.

To put the TLB concept into practice, we must improve

the welfare of the indigenous people with medical care,

schools, local jobs (social responsibility), while forestry

activities must take into account the deleterious impacts of

businesses in the environment (environmental responsibil-

ity) in order to achieve forestry sustainability.

People, planet, and profit—the three P’s—are not

antagonistic. Instead, they might combine and be the goal

of governments, enterprises, and non-profit Organizations.

Also, a combined action of main timber producing

countries in order to effectively ban illegal logging would

302 Environ Syst Decis (2013) 33:295–304

123

lead to a reduction of the wood supply into the markets thus

increasing prices, particularly for tropical timber products

(in a similar manner, it is worth remembering the role of oil

producer countries in the regulation of the market). Even

the losses due to the global economic crisis would be

counterbalanced by the economic growth of BRIC coun-

tries. The increase in state’s revenues would feed the

above-mentioned welfare, would decrease corruption and

timber-related crimes, and would increase the surveillance

of the local populations against this type of illegality, a

precious help to forestry authorities in each country. These

proposals can be achieved only with a very strong will and

good governance.

Acknowledgments The author is deeply grateful to Dr. Alan Phil-

lips (UK) for the accurate revision of the manuscript and encour-

agement and all the Reviewers for the useful suggestions and remarks.

References

Adeney JM, Christensen NL Jr, Pimm SL (2009) Reserves protect

against deforestation fires in the Amazon. PLoS One 4(4):e5014.

doi:10.1371/journal.pone.0005014

American Forest & Paper Association (2004) ‘‘Illegal’’ logging and

global wood markets: the competitive impacts on the U.S. wood

products industry. Seneca Creek Associates and Wood

Resources International, Poolesville (USA), 190 pp

Barreto P, Sousa Jr C, Nogueron R, Anderson A, Salomao R (2006)

Human pressure on the Brazilian Amazon forests. WRI Report/

Imazon, 84 pp

Bouriaud L (2005) Causes of illegal logging in Central and Eastern

Europe. Small-scale For Econ Manag Policy 4:269–292

Brack D (2010) Controlling illegal logging: consumer-country

measures. Chatham House (The Royal Institute of International

Affairs), Briefing paper, London, 12 pp

Byrne N, Cotter J (2012) Sustainable investment: a tool for decision

makers. ACSBD Working paper no. 6, November, 18 pp

Casson A, Obidzinski K (2002) From new order to regional

autonomy. Shifting dynamics of ‘‘illegal’’ logging in Kaliman-

tan, Indonesia. World Dev 30:2133–2151

Clements R, Rayan DM, Awa Zafir, Venkataraman A, Alfred R,

Payne J, Ambu L, Sharma DSK (2010) Trio under threat: can we

secure the future of rhinos, elephants and tigers in Malaysia?

Biodivers Conserv 19:1115–1136

Contreras-Hermosilla A (2011) People, governance and forests—the

stumbling blocks in forest governance reform in Latin America.

Forests 2:168–199

Council on Ethics (2010) Council on ethics. The government pension

fund global, to the ministry of finance, recommendation of 22

February 2010, 45 pp

Curran LM, Trigg SN, Mcdonald AK, Astiani D, Hardiono YM,

Siregar P, Caniago I, Kasischke E (2004) Lowland forest loss in

protected areas of Indonesian Borneo. Science 303:1000–1003

Currey D, Ruwindrijarto A (1999) The final cut. Illegal logging in

Indonesia’s orangutan parks, August, 19 pp

Del Gatto F (2003) The impacts of unregulated forestry production in

Honduras. Briefing paper. www.talailegalcentroamerica.org

Dieter M (2009) Analysis of trade in illegally harvested timber:

accounting for trade via third party countries. Forest Policy Econ

11:600–607

Dmitriev D (2006) The Russian timber industry: past, present and

future. Russ For Rev 1:8–15

Dow Jones Commodities Service (2006) Illegal wood supplies 67–70 %

of Indonesia industries—NGOs. Illegal logging INFO, September.

Available at: http://www.illegal-logging.info/item_single.php?it_

id=1694&it=news. Accessed Oct 2012

Elias P (2012) Logging and the law. How the U.S. Lacey act helps

reduce illegal logging in the tropics. Union of Concerned

Scientists, UCS Publications, April, 20 pp

Elkington J (1997) Cannibals with forks: the triple bottom line of 21st

century business. Capstone Publishing Ltd., Oxford

Elliott L (2007) Transnational environmental crime in the Asia

Pacific: an un(der)securitized security problem? Pac Rev

20:499–522

Environmental Investigation Agency (2005) The illegal logging crisis

in Honduras. How US and EU imports of illegal Honduran wood

increase poverty, fuel corruption and devastate forest and

communities, 44 pp

Environmental Investigation Agency (2008) Buyer beware. An

investigation into merbau wood flooring sales in the UK, 8 pp

FAO (2007) FAOSTAT database—forestry. Available at:

http://faostat.fao.org/site/626/default.aspx. Accessed July 2011

Gerasimov Y, Karjalainen T (2006) Development of wood procure-

ment in Northwest Russia: round wood balance and unreported

flows. Eur J For Res 125:189–199

Gifford J (2004) Measuring the social, environmental and ethical

performance of pension funds. J Aust Political Econ 53:139–160

Goncalves MP, Panjer M, Greenberg TS, Magrath WB (2012) Justice

for forests. Improving criminal justice efforts to combat illegal

logging. The World Bank, Washington, DC, p 42

Hughell D, Butterfield R (2008) Impact of FSC certification on

deforestation and the incidence of wildfires in the Maya

Biosphere Reserve. Rainforest Alliance, 16 pp

Human Rights Watch (2009) Indonesia. ‘‘Wild Money’’ The human

rights consequences of illegal logging and corruption in Indo-

nesia’s forestry sector, 75 pp

ICFPA/ACPWP (2010) International council of forest and paper

association/advisory committee on paper and wood products

working groups, background paper no. 1 on Sustainable Forest

Industries, 27–28 May, Tokyo, Japan, 93 pp

Jaenicke J, Wosten H, Budiman A, Siegert F (2010) Planning

hydrological restoration of peatlands in Indonesia to mitigate

carbon dioxide emissions. Mitig Adapt Strateg Global Change

15:223–239

Kishor N, Damania R (2007) Crime and justice in the Garden of

Eden: Improving governance and reducing corruption in the

forestry sector. In: Campos JE, Pradhan S (eds) The many faces

of corruption: tracking vulnerabilities at the sector level. The

World Bank, Washington, DC

Lawson S, Macfaul L (2010) Illegal logging and related trade.

Indicators of the global response. Chatham House (The Royal

Institute of International Affairs), London, July, 132 pp

Li R, Buongiorno J, Turner JA, Zhu S, Prestemon J (2008) Long-term

effects of eliminating illegal logging on the world forest

industries, trade, and inventory. Forest Policy Econ 10:480–490

Linkov I, Welle P, Loney D, Tkachuk A, Canis L, Kim JB, Bridges T(2011) Use of multicriteria decision analysis to support weight of

evidence evaluation. Risk Anal 31:1211–1225

Magallona MM (2004) The Philippines, 2004 top news on environ-

ment in Asia. Institute for global environmental strategies.

http://www.iges.or.jp/en/pub/pdf/asia2004/full_text.pdf

Miller T, Holmes KR, Feulner EJ (2012) Highlights of the 2012 index

of economic freedom. Promoting economic opportunity and

prosperity. The Heritage Foundation/The Wall Street Journal,

12 pp

Environ Syst Decis (2013) 33:295–304 303

123

Moiseyev A, Solberg B, Michie B, Kallio AMI (2010) Modelling the

impacts of policy measures to prevent import of illegal wood and

wood products. Forest Policy Econ 12:24–30

Nepstad D, Schwartzman S, Bamberger B, Santilli M, Ray D,

Schlesinger P, Lefebvre P, Alencar A, Prinz E, Fiske G, Rolla A

(2006) Inhibition of Amazon deforestation and fire by parks and

indigenous lands. Conserv Biol 20:65–73

Novak F, Namihas S (2009) La trata de personas con fines de

explotacion laboral: el caso de la mineria aurıfera y la tala ilegal

de madera en Madre de Dios. Organizacion Internacional para

las Migraciones/Instituto de Estudios Internacionales de la

Pontificia Universidad Catolica del Peru, 127 pp

Obidzinski K, Andrianto A, Wijaya C (2007) Cross-border timber

trade in Indonesia: critical or overstated problem? Forest

governance lessons from Kalimantan. Int For Rev 9:526–535

PDF/WWF (2006) Pasaules Dabas fonds & world wide fund. Illegal

logging in Latvia and export of forest products to the UK, 20 pp

Pye-Smith C (2007) Department for international development,

‘‘crime and persuasion: tackling illegal logging, improving

forest governance’’, 52 pp

Reboredo F (2013) The illegal wood in Europe: a review. Int For Rev

(in press)

Reboredo F, Pais J (2012) A construcao naval e a destruicao do

coberto florestal em Portugal. Do seculo XII ao seculo XX.

Ecologia (Revista online da Sociedade Portuguesa de Ecologia)

4:31–42

Reboredo F, Pais J (2013) Evolution of forest cover in Portugal—

from the XII to the end of the XX centuries. A review. J For Res

(in press)

Regional Environmental Center (2010) Illegal logging in SEE and EE

(Governance, Implementation and Enforcement). Illegal logging

activities in Bosnia and Herzegovina. A. Fact-finding study, 27

pp

Rego FC (2001) Florestas Publicas. Direccao Geral das Florestas/

Comissao Nacional Especializada de Fogos Florestais, Lisboa,

105 pp

RFN/FEN (2012) Rainforest foundation norway & friends of the earth

norway, beauty and the beast. Norway’s investments in rainfor-

est protection and rainforest destruction, March, 17 pp

Richards M, Wells A, Del Gatto F, Contreras-Hermosilla A, Pommier

D (2003) Impacts of illegality and barriers to legality: a

diagnostic analysis of illegal logging in Honduras and Nicara-

gua. Int For Rev 5:282–292

Rosander MN (2008) Illegal logging. Current issues and opportunities

for Sida/SENSA engagement in Southeast Asia. Swedish

International Development Cooperation Agency (Sida), Bang-

kok, Thailand, 60 pp

Setiono B, Husein Y (2005) Fighting forest crime and promoting

prudent banking for sustainable forest management. The anti

money laundering approach. CIFOR, Occasional paper no. 44,

Indonesia, 26 pp

Severino HG (2009) Overwhelming force to save the nation’s last

great forest. http://www.gmanetwork.com/news/story/167866/

news/specialreports/overwhelming-force-to-save-the-nation-s-

last-great-forest. Accessed on Sept 2012

Sheikh PA (2008) Illegal logging: background and issues. CRS

Report for Congress, 12 pp

Shifley SR (2006) Sustainable forestry in the balance. J For 104:

187–195

Slaper TF, Hall TJ (2011) The triple bottom line: what is it and how

does it work? http://www.ibrc.indiana.edu/ibr/2011/spring/pdfs/

article2.pdf

Tacconi L, Boscolo M, Brack D (2003) National and international

policies to control illegal forest activities. Report prepared for

the Ministry of Foreign Affairs of the Government of Japan.

CIFOR, Indonesia, 63 pp

Taiga Rescue Network (2003) Illegal logging in the Boreal, Factsheet,

6 pp

Taiga Rescue Network (2005) Our land, our life. Indigenous

peoples’land rights. Factsheet, 5 pp

Teplyakov V, Grigoriev A (2006) Forest governance and illegal logging:

Improving legislation and inter-agency and inter-stakeholder rela-

tions in Russia. A summary project report. Moscow, Russia, IUCN

Global temperate and boreal forest programme, 20 pp

The Economist (2010) A special report on forests. Keeping it in

community. Well-organized locals often make the best forest

managers, but they need help. September

The World Bank (2006) Strengthening forest law enforcement and

governance—addressing a systematic constraint to sustainable

development. The World Bank, Washington, Report no. 36638–

GLB. August, 77 pp

Thomson J, Kanaan R (2003) Final report submitted to the United

States agency for international development. Conflict timber:

Dimensions of the problem in Asia and Africa, vol I: synthesis

report, 33 pp

Toyne P, O’brian C, Nelson R (2002) The timber footprint of the G8

and China. Making the case for green procurement by govern-

ment. Gland, Switzerland, WWF International, 40 pp

Transparency International (2012) Corruption perceptions index

2012, 5 pp. Available at: www.transparency.org/cpi2012/results.

Accessed March 2013

UNECE/FAO (2009) The importance of China’s forest products

markets to the UNECE region. Geneva timber and forest

discussion paper 57, 28 pp

UNECE/FAO (2011) Forest products. Annual market review

2010–2011, Geneva timber and forest study paper 27, 157 pp

UNEP (2009) Towards triple impact. Toolbox for analysing sustain-

able ventures in developing countries. United Nations Environ-

ment Programme, Nairobi, Kenya, 68 pp

UNEP (2012) Organized crime trade worth over US$30 billion

responsible for up to 90 % of tropical deforestation. UNEP Press

Release, 27 September

UNEP, Environmental Governance, Factsheets, 8 pp. Available at:

http://www.unep.org/environmentalgovernance/. Accessed March

2013

UNEP/INTERPOL (2012) Green carbon, black trade: Illegal logging,

tax fraud and laundering in the worlds tropical forests. In:

Nellemann C (ed) A rapid response assessment. United Nations

Environment Programme & INTERPOL Environmental Crime

Programme, GRID-Arendal, 67 pp

US Department of Labor’s (2010) List of goods produced by child

labor or forced labor. Washington, December, 44 pp

Van der Ploeg J, Van Weerd M, Masipiquena AB, Persoon GA (2011)

Illegal logging in the Northern Sierra Madre Natural Park, the

Philippines. Conserv Soc 9:202–215

Walters J (2010) Following the proceeds of illegal logging in

Indonesia. Trends & issues in crime and criminal justice, no.

391, March, 6 pp

Wang G, Innes JL, Lei J, Dai S, Wu SW (2007) China’s forestry

reforms. Science 318:1556–1557

WWF (2008) Illegal wood for the European market—an analysis of

the EU import and export of illegal wood and related products.

WWF, Frankfurt, Germany, July, 43 pp

304 Environ Syst Decis (2013) 33:295–304

123