This guest post was contributed by David Biederman. David is a veteran business journalist and author. He frequently contributes to the Journal of Commerce.
Transformational change occurs when companies fundamentally remake their business models, strategies or practices. IBM, Apple, Nokia, Coca-Cola, Toyota and Harley Davidson are examples of companies that have undergone major transformations and emerged stronger for it.
Transformation is a difficult process that rarely proceeds in linear fashion. By definition it means breaking with an old order, with established ways of doing things. There are invariably delays, setbacks and conflicts, all in the nature of growth and change.
Sustainability is changing the way companies operate in the global marketplace. Consumers are demanding environmentally friendly products. Governments are mandating fewer emissions and less waste. It is now axiomatic among the world’s great companies that sustainability and good business go hand in hand.
For the Indonesian forest products industry, sustainability is a prerequisite for global growth. The market has spoken loud and clear; it wants wood products that are sustainable and legal. Laws in the European Union and the United States prohibit the importation of wood products that cannot be verified as legally and sustainably sourced.
Asia Pulp & Paper has set itself on a path to enhanced sustainability via its Sustainability Roadmap for 2020 and beyond. As a primary custodian of vast swaths of rainforest, the company is under intense scrutiny from customers and environmental groups worldwide and is demonstrating that its commitment to sustainability is real.
APP is winning praise from standards auditors and government officials for adopting SVLK, Indonesia’s new and internationally recognized Wood Legality Verification System, and standards for High Conservation Value Forest (HCVF). The company has suspended all natural forest clearance on its Indonesian pulpwood plantations.
“We are pleased with APP’s commitment and willingness to undergo this level of operational evaluation and scrutiny,” said Loy Jones, lead HCVF assessor. “This represents a critical first step in a long-term journey toward meeting the HCV Management commitment which is not easily undertaken.”
Mr. Jones is spot on when he states that APP’s journey to sustainability is “not easily undertaken.” Indonesia is a fast-developing nation but still faces huge challenges, including poverty, unemployment, and limited infrastructure.
The difficulties Indonesia faces in preserving its natural resources and reducing carbon emissions while simultaneously growing its economy are sometimes oversimplified by well-meaning critics in the NGO and environmental communities. The laudable goals of Greenpeace, World Wildlife Fund and other NGOs – to conserve our natural resources – do not always account for the multiple competing pressures developing nations face in balancing conservation and growth.
Combined the pulp and paper sectors employ 3.76 million people in Indonesia, roughly 4 percent of Indonesia’s working population.
Yet Indonesia’s forestry industry is young, having only in recent decades emerged from a collection of small crafts and lumber businesses to an internationally competitive, plantation-based sector. A sustainable, modernized forestry industry, which is clearly where things are headed, will be a great asset to Indonesia and perhaps a model for the rest of the developing world.
Indonesia is also a fledgling democracy still finding its stride on the global stage. The resignation of President Suharto in May 1998 after 30 years of rule led to a period of widespread transformation in Indonesian society including democratic reform, calls for regional autonomy and economic stabilization. Key government institutions including the legislature, judiciary and executive office underwent significant changes.
Indonesia has made great strides in social and economic progress. Under the first administration of President Susilo Bambang Yudhoyono in 2004-09, major finance, tax and customs reforms were introduced. The government promotes fiscally conservative policies that have led to a debt-to-GDP ratio of less than 25 percent, a fiscal deficit below 2 percent and historically low rates of inflation. In December 2011 Fitch and Moody’s upgraded Indonesia’s credit rating to investment grade, a much-sought designation.
Both the Government of Indonesia and APP understand the imperative of preserving the nation’s rainforests and meeting global demand for sustainable forest products. The transformation to sustainability is well underway; there’s no turning back. Here’s hoping that all stakeholders in the business and NGO communities continue to build on what has already been accomplished.