Matt Saragih has a passion for merging his business acumen with his desire for social impact. He believes that in the beginning, all companies start off as social enterprises. “Companies exist to try to solve social problems,” says Saragih. “It’s just that over time, they become capitalistic and overly exploited.” While completing his MBA in the United States at the Kellogg School at Northwestern University, he focused on social entrepreneurship and impact investment. During his studies he spent time working on projects which would benefit underserved communities, such as food startup accelerators. When he returned to Indonesia, he started looking for opportunities in areas that are not overcrowded, like the agricultural sector or microfinancing. After discussions with contacts in the non-profit and social enterprise sectors, he settled on something promising: certified forest commodities from small communities.
Today, he is the CEO of the SOBI, short for ‘Sosial Bisnis Indonesia,’ a start-up described as “a market hub which interlinks smallholders to the sustainable-concerned market [through] three strategies: IT-based natural resource management, [an] aggregator for market access and certification, and community empowerment.”
“A lot of wood, such as mahogany and teak, can come from sustainably-managed community forests instead of big concessions or conversions from natural forests,” Saragih comments. While the former option is clearly a better choice from an environmental perspective, sourcing from communities can be a logistical nightmare for companies. “Imagine you’re doing procurement for the company and need to source 1,000 cubic metres of wood, but each village can only provide 100 cubic metres. That means you need to contact 10 villages separately,” he explains. “It is a very expensive process that you’ll have to go to 10 different sites to do research and procure separately.”
Saragih’s aim is to develop a self-sustaining, viable business model. This is where SOBI comes in: they use technology to build a tree inventory database that connects to a smartphone app which allows members of village cooperatives to tag trees that are ready to be harvested, and include detailed information like the trees’ species and diameter. Because the database works in real- time, SOBI can have an up-to-the-minute idea of the amount of wood that the communities are able to provide. This can boost the confidence of those looking to source from smallholders, but who worry about logistics and the stability of the supply.
Sarigih’s company and cooperatives work together based on a profit-sharing partnership, while SOBI serves as group manager for the community forests. That means all the logistics and administrative tasks (including those associated with FSC-certification) are taken care of, while the company is responsible for marketing and business development for reaching more buyers.
In a nutshell, this arrangement allows community farmers to focus on what they do best – doing fieldwork and taking care of their land, forests, and families.
“We’re choosing FSC certification for timber only because there’s a demand there,” affirmed Saragih. “There were other certification schemes, but because there wasn’t any demand, [these] cannot become sustainable models.”
Domestic demand is the game changer
Two hours from Jakarta, Bambang Triwahono, a nursery staff member working at the Koperasi Wana Lestari Menoreh (KWLM) Cooperative in Kulon Progo, Yogyakarta, is hard at work, tagging trees that are ready to be harvested. He and his tree cutting team use a smartphone app that is connected to the SOBI database.
The teak trees he is tagging will be turned into FSC-certified kitchen utensils by a manufacturer called PT. Karya Wahana Sentosa, and the finished products will be available in SuperIndo, a major Indonesian supermarket chain.
D. Yuvlinda Susanta, Head of Corporate Affairs and Sustainability for PT. Lion SuperIndo, is pleased about the demand for FSC.
The supermarket chain is one of the most-established ones in Indonesia, and currently owns 180 outlets with over 8,000 employees. “SuperIndo always strives to provide good quality and affordable private brands that come from sustainable sources, for example with the FSC-certified wood products that comes from responsible sources.” She continues, “Certified products such as FSC-certified ones can help us ensure that products that we provide come from responsible sources, [and] that they are safe for the environment and good for the consumer.”
“Depending on the supply, FSC-certified wood products will be available in all SuperIndo outlets this year.”
Another supplier to SuperIndo is KwaS, a furniture and wooden product manufacturer.
The impressive bamboo architecture of the KwaS factory represents a fresh start from a tragedy– a devastating earthquake and tsunami in Yogyakarta in 2006 wiped out all of KwaS’ production facilities. Desperate, founder and director Robertus Agung Prasetya was able to get some funding to rebuild the premises, which came with three obligations: 1) use bamboo as the main support structure for the factory building; 2) hire locals; and 3) get FSC-certification.
As a legacy, the company has a very good gender balance of employees, which is about 50:50 in terms of male and female ratio. The company’s certification and partnership with SOBI came in handy when they were approached by SuperIndo for a bulk order of FSC-certified kitchen utensils.
“I’m very optimistic about the domestic demand for FSC-certified products,” says Prasetya. “The market is demanding clean wood from clean sources. And with companies like SOBI, we can involve more people in the sustainable wood market, more accurately calculate supply versus capacity, and also streamline internal management processes such as procurement.”
Indonesia has the largest economy in Southeast Asia and is developing quickly. According to a World Bank Report from 2018, one in every five Indonesians now belong to the middle class.
With development comes urban migration, and many villagers, especially young ones, have migrated to bigger cities like Jakarta in recent decades. The villages of Kulon Progo face the same situation. Located in south Java, these villages and their community forests are scattered far from each other, making it harder to achieve economies of scale. For villagers, moving to big cities seemed a sensible choice at the time. But as it turned out, most job opportunities in the city were fleeting or precarious.
Things started to turn around for the villagers when the Koperasi Wana Lestari Menoreh Cooperative (KWLM) was founded in 2007 and FSC-certified in 2011. This is one of the cooperatives working with SOBI, and supplying to KwaS.
“The cooperative was created to unleash the full potential and value of our timber," recalls Bernardus Sad Windratmo, head of KWLM. The cooperative’s profits go to the local credit union and are used for micro-financing to allow the villagers to obtain low-interest loans.
The cooperative operated through a grant up until 2016; after which time they partnered with SOBI and changed to a for-profit, self-sustaining model. This partnership further benefits the cooperative members as they receive better market access and a fairer price.
“On average, the cooperative members get 25-30% more profit than the non-members, because they do not have to pay the middleman fee,” says Windratmo. “After getting FSC certification, we also sell logs in cubic metres rather than [per] log, so the price of the timber is fairer and more precise.”
To join the cooperative, any villager who is a landowner has to pay 5,000 Rupiah (USD0.3) per month and is obliged to adhere to FSC forest management standards. The members get a professional, trained tree cutting team to help them harvest the trees on their land and transport the logs. This is a safer practice, considering the number of horrendous accidents associated with unskilled or inadequately skilled farmers operating chainsaws. Additionally, for every tree that is cut down, three seedlings are given to the villagers for replanting. The membership considers the family a unit, meaning that spouses are also eligible to become members.
According to figures provided by the cooperatives, in 2010 there were about 16,000 hectares of community forests; in 2019 this had increased to 22,000 hectares, mostly a result of replanting as more villagers came to understand the importance and value of forests. Currently, about 832 hectares in the Kulon Progo area are FSC-certified.
“Now there are 1,630 families located in 26 villages in seven sub-districts who are cooperative members,” said Windratmo. “In Kulon Progo, there are about 77 villages, and each has about 1,500 families. There’s huge potential for us to expand through community education, by using word-of-mouth from the members to engage with the village elders and use their influence.”
Heri Susanto agrees completely. He is a farmer and SOBI’s timber piling manager in his village. “Everyone in the village is a farmer and something else. We all have two jobs,” says Susanto. “Although the young generation would still like to move to the cities, they always come back. So there have to be local opportunities for them.”
The economic potentials, as described by the SOBI and the Cooperative partnership, align with Indonesian President Joko “Jokowi’” Widodo’s promise to “build from the peripheries” – moving from a strategy of concentrating opportunities in Jakarta and other large cities to one with more balanced economic development. Increasing infrastructure development in further-flung districts has already provided more job opportunities for local villagers. This, combined with a more structured timber business model which includes support for farming and planting non-timber forest products such as clove and ginger, can provide a decent livelihood comparable to moving to a big city. In fact, according to Windratmo, fewer people have left in the past few years.
SOBI is currently working with two cooperatives. This number hopefully be expanded to five by the end of this year and to ten by the end of 2020. It is inspiring and encouraging to see FSC forest management principles being put in practice and being used as a trusted tool to bridge supply and demand sides to ensure more responsibly-sourced forest products reach consumers. Most important is the prosperity and success that comes to the communities when the true value of forests is realised.