2015 ANNUAL REPORT

The Borneo Initiative FoundationPublic version

Abbreviations

APHI Asosiasi Pengusaha Hutan Indonesia (Indonesian Forest Concession Holders Association)

CW Controlled Wood

FSC Forest Stewardship Council

GFTN Global Forest & Trade Network

IDH Sustainable Trade Initiative

PT Perseroan Terbatas (Limited Liability Company)

TBI The Borneo Initiative

TFF Tropical Forest Foundation

TFT The Forest Trust

TNC The Nature Conservancy

visit the website www.theborneoinitiative.org April 2016

The Borneo InitiativeWith this public version of the 2015 annual report, The

Borneo Initiative aims to inform a broader public

about its work. This version is fully based on the

annual report as externally audited and approved by

Baker-Tilly-Berk accountants.The Borneo Initiative is

a foundation established in 2008, with offices in The

Netherlands, Indonesia and the USA.

It is The Borneo Initiative’s mission to prevent the loss

of tropical forests due to deforestation and over-

exploitation. The Borneo Initiative’s target is to con-

tribute directly to the increase of FSC certified natural

forest areas in Indonesia, from a base of 1.2 million

hectares in 2009 to 5 million ha by the end of year

2016 i.e. a contribution of 4 million ha extra FSC-

certified. In a subsequent phase, if new funding can

be accessed, The Borneo Initiative aims to expand its

coverage to 6 or 8 million ha as from year 2016.

The Borneo Initiative’s primary focus is the Indonesian

part of Borneo (Kalimantan), but The Borneo Initiative

also keeps open the option to extend its support into

other regions, like Papua, Moluccas and Sulawesi.

With time, the intention is to extend support into Ma-

laysian Borneo too. The Borneo Initiative links up

players at either end of the marketing chain whose

cooperation is required to make certification a suc-

cess: wood suppliers in Indonesia and end users in

FSC markets e.g. Europe or the USA.

The Borneo Initiative offers forest concessions sup-

port via funding, transfer of know-how and market

linkages. The Borneo Initiative provides a 2 to 3 $/ha

subsidy to forest concessions to cover part of the

costs of the certification of forest management.

The Borneo Initiative’s principal advisor and partner

in this initiative is APHI. Partner organisations TFF,

TFT, GFTN, TNC and Wana Aksara offer coaching to

the forest concessions and also dedicate their own

resources into the process.

Looking back and aheadThe Borneo Initiative is still on track in terms of cover-

age, but it proves to be difficult to keep forest conces-

sions to the intended time frame of just two to three

years for achievement of FSC certification. Several

explanations can be given for this: since its start in

2010, The Borneo Initiative has signed support agree-

ments with no less than 49 forest concessions with

a coverage of up to 5.0 million ha, but 9 of these (1.3

million ha) ended their support agreements prema-

turely, mostly due to problems with license renewal

or loss of control over the forest concession. Other

forest concessions still in the programme may be

facing issues with license renewal, staff retention or

forest operations.

While a group of 18 forest concessions achieved their

FSC or CW certificates, another group of 17 forest

concessions continues their preparations for their

main assessments in 2016, reaching an estimated

FSC-certified area of 3.1 million ha by the end of 2016.

CW certification will also be counted as an intermedi-

ary result. The Borneo Initiative aims for a total of 3.5

million ha FSC-certified by the end of 2017, which is

close to our target of 4 million ha.

The Borneo Initiative still sees scope for further expan-

sion of its programme up to 6 million ha. The Borneo

Initiative has a short-list of 12 interested forest conces-

sions with 1.1 million ha under their management.

Their incorporation into the programme is dependent

on the availability of additional donor funding.

Milestone achievements The Borneo Initiative

• 16 full FSC certificates, 2 CW certificates

• an extra 1.6 million ha FSC certified – all natural

forest

• 1 FSC certificate in PNG

• the first ever FSC certificates for mangrove

forests globally

• the first FSC-certification in Papua

• the first FSC-audits ever for merbau concessions

in Papua

• the first corporate group FSC certificate

awarded, to PT Pandu Maha Wana

• safeguarding 28,230 ha of habitat for popula-

tions of Proboscis monkeys, a primate even

more endangered than the Orangutan

• safeguarding another 75,009 ha of Orangutan

range via achievement of FSC certification by

PT Gunung Gajah Abadi.

ID Company name Area (ha)

1 PT Suka Jaya Makmur 171,340

2 PT Belayan River Timber 97,500

3 PT Roda Mas Timber 69,330

4 PT Sarmiento Prakantja Timber 216,580

5 PT Indexim Utama 52,480

6 PT Narkata Rimba 41,540

7 PT Kemakmuran Berkah Timber 82,810

8 PT Dwimajaya Utama 127,300

9 PT Ratah Timber 97,690

10 PT gunu Hutani Lestari 148,450

11 PT Wapoga Mutiara Timber Unit II 169,170

12 PT Rizki Kacida Reana 55,150

13 PT Wukirasari 116,320

14. PT Gorontalo Citra Lestari 46,170

15 PT Sari Bumi Kusuma Delang 60,700

16 PT Gunung Gajah Abadi 74,980

17 PT Inhutani I Meraang 70,700

18. PT Gema Nusantara Jaya 29,750

19 PT Wanasokan Hasilindo 49,000

20 PT Graha Sentosa Permai 44,970

21 PT Kandelia Alam 18,130

22 PT Bina Ovivipari Semesta 10,100

23 PT Sumalindo Lestari Jaya IV 63,550

24. PT Hanurata Unit III 234,470

25 PT Bina Balantak Utama 298,710

26 PT Telaga Bhakti Persada 63,405

27 PT Mitra Pembangunan Global 83,950

28 PT Cloudy Bay 148,900

29 PT Carus Indonesia 72,170

30 PT Wana Bakti P.U. 44,402

31 PT Aditya Kirana M 42,700

32 PT Inhutani II Sei Tubu 99,100

33 PT Inhutani II Semamu 71,375

34 PT Inhutani II Malinau 29,040

35 PT Multi Wahana Wijaya 107,740

36 PT ASCO Prima Nusantara 171,270

37 PT Utama Damai Indah Timber 49,250

38 PT Karya Lestari 49,123

39 PT BUMWI 82,120

40 PT Wijaya Sentosa 130,755

Total 3,692,190

List of forest concessions supported by The Borneo Initiative (Dec 2015)

- Baseline 2010:

full FSC certificates with 0.9 million ha and

1 CW certificate with 0.3 million ha.

- Target 2015:

- 26 companies FSC certified (2.1 million ha).

- an extra 4 million ha of FSC-certified forest

area in Indonesia by year 2015.

- Actual status:

16 companies with 1,497,245 ha FSC certified

and 2 companies with 90,455 ha CW certified.

Support agreements signed: 4,714,647 ha.

Early exits: -790,875 ha.

Portfolio size December 2015: 3,692,190 ha.

Early exits foreseen 2016: -116,320 ha.

Expansion of support agreements 2016: 518,565 ha.

Expected portfolio size Dec. 2016: 4,094,435 ha.

Forest CertificationIn 2015, 4 new FSC certificates could be celebrated,

with a total area of 185,330 ha. In sum, The Borneo

Initiative could elevate to 18 the total of FSC/CW

certificates with a coverage of 1.6 million ha. Of these,

17 in Indonesia and one in PNG (148,900). This against

a target of 26 certifications with 2.1 million ha.

The Borneo Initiative signed limited support agree-

ments, for scoping support only, with three forest

concessions. One is a re-entry into our programme

i.e. PT Hanurata (234,470 ha natural forest in Papua

Province). The other two group 8 participants are

forest plantations on degraded lands in Gorontalo

Province, Sulawesi. The Borneo Initiative has incor-

porated these into its programme in order to gain

experience with certification of forest plantations. PT

Gorontalo Citra and PT Gema Nusantara Jaya cover

46,170 ha and 29,750 ha respectively.

Three support agreements were terminated before

achieving any certification result: PT Mamberamo

Alas Mandiri, PT Sumalindo Lestari Unit V, and PT

Adhimitra Lestari, in total 790,875 ha. Additionally,

The Borneo Initiative anticipates also the termination

of the support agreement with PT Wukirasari (116,320

ha) early in 2016.

The Borneo Initiative Status Map 2015 Legend

Heart of Borneo area (23.4 mil. ha.)

FSC Certified Consessions (1.6 mil. ha.)

FSC In Progress Consessions (694,340 ha.)

Other Logging Consessions (6.1 mil. ha.)

Decertified (60,700 ha.)

Timber Plantations (5.9 mil. ha.)

Conservation Zone (8.9 mil. ha.)

Forest Cover (17 mil. ha. )

Non Forest Cover

Source

1. Natural forest concessions from Ministry of Forestry 2011

2. Timber plantations from Ministry of Forestry 2011

3. Forest cover from WWF Modis 2011

4. Conservation zone from WWF 2011

5. Agricultural Plantations from WWF 2011

Map produced by The Borneo Initiative - Indonesia, date of Production

February 2016.

FSC concessions in Kalimantan

Market linksThere are no specific measurements on the number

of companies reporting increased sales to Europe

or USA, nor on FSC trade flows. Resulting trade

volumes will be surveyed after the Surabaya trade

encounter in 2016. The status of December 2015:

15 Dutch accounts, 20 European accounts and 24

USA accounts.

Since the inception of The Borneo Initiative, the glo-

bal timber trade has changed significantly due to the

bank crises in USA and Europe, and the subsequent

economic recessions. Trade in tropical sawn wood

products and in tropical plywood almost halved

between 2008 and 2014 for Europe, and lost a quarter

in volume in the USA and Canada in the same period.

This, in contrast with Asia where imports of tropical

timber products stabilized, or more than doubled in

the case of China. As a target, The Borneo Initiative

will focus on demonstration of improved links in a nar-

row sense (first target), while the target volume for

USA has been reduced to 50,000 cu.m.

After the US and EU markets contracted in the period

2008-2014, the tide has changed and (moderate)

growth is now registered, albeit under uncertain glo-

bal conditions. Apart from an expected increase

again in overall import volumes, the other opportu-

nity is to increase the relative share for FSC products.

In most markets, FSC is still a niche product.

The commercially most important argument for

choosing a sustainable product is not yet polished

and delivered to the market: its assurance of a perma-

nent and steady business opportunity, giving the cer-

tainty that importers can rely on a product to be on

their portfolio for many years to come. In simple

words, a sustainable product is safer and worthy to

market due its longer life. This situation will demand

extra promotion and a massive campaign from the

certification initiatives, clarifying and instigating mar-

kets to invest in sustainable products. In the end, the

price premium will be worth to pay for. The role of The

Borneo Initiative and its partner organizations is to

push FSC to take a step forward on promotion of FSC

products.

In second semester of 2015, preparations started for

another trade encounter that took place from 25 to 26

January 2016 in Hotel Majapahit, Surabaya under the

motto “Indonesian tropical hardwood products: Sus-

tainable. Quality. Guaranteed.” With the support of

FSC-Netherlands and IWPA (International Wood Pro-

ducts Association), this event brought together 19

overseas timber trading companies from the USA,

Europe and Asia and 28 Indonesian wood processing

industries involved in the production of plywood, ve-

neer, indoor flooring, outdoor decking, truck flooring

and garden furniture.

Adessium Foundation e 950,000 0 e 950,000 2008 - 2011

Adessium Foundation e 950,000 0 e 950,000 2012 - 2015

IDH e € 1,492,265 e € 1,343,039 e € 149,227 2009-2014

IDH e € 1,085,532 e € 976,979 e € 108,553 2010–2016

Postcode Lottery e € 2,300,000 e € 2,070,000 e € 230,000 2010–2015

BAM e € 250,000 e € 225,000 e € 25,000 2009–2013

Bouwfonds e € 250,000 e € 225,000 e € 25,000 2009–2013

Skantrae e € 39,274 e € 35,347 e € 3,927 2012–2013

Aldrik Lifttechniek e € 1,500 e € 1,350 e € 150 2011

Foreign and

Commonwealth Office e € 19,219 e € 0 e € 19,219

25 housing corporations e € 275,000 e € 245,250 e € 27,250 2010-2016

GIZ/Forclime e € 250,000 e € 225,000 e € 25,000 2015-2016

Others e € 500,000 e € 125,000 e € 375,000 2015-2016

TOTAL (core + programme) e € 8,360,290 e € 5,471,964 e € 2,883,326

Financial report

Expenditures 2015

Certification e € 911,700

Market links e € 177,800

Organisation and management e € 259,800

Financial income e € 1,200

Total e € 1,350,500

Programme donors: Total donation Forest Organization Period

(90% forest certification & certification and support

10% organisation & support)

Core donors: Total donation Forest Organization Period

(100% organization & support) certification and support

Donations received

visit the website www.theborneoinitiative.org April 2016

Organisation and ColofonThe Borneo Initiative runs its activities from two offices.

The head office is based in the Netherlands, the other in Indonesia.

The Borneo Initiative

De Corridor 7

3621 ZA Breukelen, the Netherlands

Email: info@theborneoinitiative.org

Mobile phone: +31 610 665564

Pictures: Alain Compost and The Borneo Initiative

Editing: ImpactReporters, Han van de Wiel

Design: Studio 10, Tineke Kooistra

Printer: drukkerij Mart. Spruijt BV, Amsterdam

This annual report is printed on 250gr FSC paper.