Master-Thesis-CSR Timber Ind. BrazilxGhanaCor

TOTAL NUMBER OF PAGES: 93

CSR in the timber industryThe impact of FLEGT on timber exporters in Ghana and Brazil

Master thesis - Roskilde University

28th of January - 2015

Dpt. of Communication, Business

& Information Technologies

Eustaquio Brant & Comfort Adjaka

Supervisor: Karin Buhmann

Executive summary

Since the 1950ies, Corporate Social Responsibility (CSR) has been under-going an

evolution. Social Responsibility has evolved from the charity-implied activity it used to

be and has today become an intense area of study that covers issues of corporate

citizenship, sustainability and legality. The first part of this thesis explores this

evolution, by giving meaning to the significant occurrences that have influenced and

reshaped the way scholars and businesses think CSR today.

The second section of this thesis focuses on the issues of legality in CSR. We focus on

FLEGT a significant stage of the CSR evolution. To delimit our research however; we

focus on two timber exporting firms in Brazil and Ghana as case studies. A comparison

is made about the two firms and how FLEGT/EUTR/VPA impacts their export process

when trading with Europe.

The findings of this thesis show that, though FLEGT when fully implemented in Ghana

may help the local exporters to fight the issues of illegal logging; by preventing illegal

timber from exiting the country to the European market. There are still loopholes that

the government needs to deal with on the local market and other export destinations.

The consent for businesses is that the FLEGT/VPA license will not bring about any

major changes for firms if they are already working with EUTR.

For Brazilian firms, the current focus is on attaining other certifications like FSC and

other transcontinental certifications, as Brazil has not signed the VPA with the EU.

With that said, all exports from Brazil to the EU will inevitably go through EUTR as

European firms are required by law to perform the due diligence and other import

inquiries through EUTR.

Abbreviations

CSR – Corporate Social Responsibility

EU- European Union

EUTR – European Union Timber Regulation

FLEGT – Forest Law Enforcement, Governance and Trade

FCG – Forestry Commission of Ghana

FSC – Forestry Stewardship Council

HCVF – High Conservation Value Forests

IBAMA – Instituto Brasileiro do Meio Ambiente – Brazilian Institute of Environment and

Renewable Natural Resources

LLL – Logs & Lumber Co. Ltd.

RPPN - Privately Owned Nature Reserve

TIDD – Timber Industry Development Division

UNEP – United Nations Environmental Programme

VPA – Voluntary Partnership Agreement

Table of Contents

1. INTRODUCTION .......................................................................................................................... 1

1.1 Research Field ............................................................................................................................... 3

1.2 Working Definition of CSR .................................................................................................... 4

1.3 Research Question ........................................................................................................................ 5

1.4 Sub-questions ................................................................................................................................ 5

2. LITERATURE REVIEW – The Evolution of CSR ............................................................................ 6

2.1 Implications for this research ...................................................................................................... 18

2.2 RESEARCH DESIGN ...................................................................................................................... 19

3 Research Structure ......................................................................................................................... 20

3.1 Delimitation ................................................................................................................................ 20

4. METHODOLOGY ........................................................................................................................... 22

4.1 Philosophy of Science: Underlying the issue of validity in knowledge production ................... 22

4.2 Ontological Question .............................................................................................................. 24

4.3 Epistemological Question ....................................................................................................... 24

4.4 Methodological Question ........................................................................................................ 24

4.5 Choice of Paradigm ................................................................................................................. 25

4.6 Theoretical Framework ............................................................................................................... 26

4.6.1 Choice of Theory ................................................................................................................. 26

4.6.2 Carroll .................................................................................................................................. 26

4.6.3 Garriga and Melé ................................................................................................................. 28

4.6.4 Kramer and Porter ................................................................................................................ 30

4.7 Empirical Framework ................................................................................................................. 32

4.7.1 Case Study Research ............................................................................................................ 32

4.7.2 Quality of Case Design ........................................................................................................ 33

4.7.3 Credibility ............................................................................................................................ 33

4.7.4 Units of investigation ........................................................................................................... 34

4.7.5 Sources of Data .................................................................................................................... 34

4.7.6 Interviews ............................................................................................................................. 35

4.7.7 Interview guide .................................................................................................................... 36

5 BACKGROUND – Presentation of Cases ......................................................................................... 37

5.1 Forest Stewardship Council - FSC .............................................................................................. 37

5.2 FLEGT Universe ......................................................................................................................... 38

5.3 FLEGT - history ...................................................................................................................... 39

5.4 FLEGT – Action Plan ............................................................................................................. 41

5.5 FLEGT/Voluntary Partnership Agreement ............................................................................. 44

5.6 Chronological implementation of FLEGT Action Plan .......................................................... 48

5.7 GHANA FORESTRY GOVERNANCE; VPA- Implementation status ................................. 49

5.8 FLEGT/VPA- Implementation status ..................................................................................... 50

5.9 Logs & Lumber Co. Ltd. ......................................................................................................... 52

5.10 BRAZIL FORESTRY GOVERNANCE .............................................................................. 52

5.11 Araupel .................................................................................................................................. 53

6 ANALYSIS ................................................................................................................................... 54

6.1 ARAUPEL .................................................................................................................................. 56

6.1.1 Timber and wood in Brazil .................................................................................................. 56

6.1.2 Araupel – General CSR Approach ....................................................................................... 57

6.1.3 ARAUPEL and FLEGT ....................................................................................................... 64

6.2 LOGS & LUMBER CO. LTD .................................................................................................... 68

6.2.1 Timber and wood in Ghana .................................................................................................. 68

6.2.2 Log and Lumber Co. Ltd – General CSR Approach ............................................................ 69

6.2.3 Log and Lumber Co. Ltd – FLEGT/VPA ............................................................................ 72

7 Discussion ...................................................................................................................................... 77

7.1 Brazil x Araupel x FLEGT Impact ......................................................................................... 77

7.2 Ghana x Logs & Lumber x FLEGT impact ............................................................................ 80

8 CONCLUSION .................................................................................................................................. 82

9 Future Perspectives and our Learning Curve ..................................................................................... 86

10 BIBLIOGRAPHY ............................................................................................................................ 90

Master’s Thesis

28 January, 2015

Roskilde Universitet


Department of Communication, Business and Information Technologies

1

1. INTRODUCTION

Comfort Adjaka

Corporate Social Responsibility (CSR) like most social science topics has had its fair share of

on-going development since it first surfaced in the 1950s. Though much progress has been

made concerning the topic, there are still a lot of questions about what CSR really is, what it

ought to be, who decides what it ought to be etc. Regardless of one‟s stance on these issues,

most corporations, governments and consumers today believe that CSR is good corporate

practice and more firms should include CSR as an embed part of their day to day business

operations.

Globalization and the emergence of information flow on the Internet have heightened

concerns for corporations to become more socially responsible. These concerns have

inadvertently called for the interference of some governments and stakeholders to put in place

legal standards to promote CSR.

In Europe the first example of a fully implemented legal scheme in CSR is the European

Union Timber Regulation (EUTR) as part of the bigger picture established with the FLEGT

Action Plan. This was purposely made to require European importers of tropical timber and

wood products from trading in illegal timber on the EU market. The EUTR requires all

members states to put in place national legislation which require firms to go through an

extensive and detailed level of due diligence when trading. It also requires member states to

put in place legislation regarding penalty when firms fall short.

The European Union established in 2003 the Forest Law Enforcement, Governance and

Trade (FLEGT) which has two legs one for importers (the internal leg) EUTR, and a

voluntary partnership agreement (VPA) (the external leg) for countries that export tropical

timber to the EU. The VPA places emphasis on issues of sustainability, illegal logging,

governance and trade. FLEGT/EUTR/VPA is the first model of legality in CSR that not only

place a legal responsibility on suppliers of timber to ensure that the products have been

audited with the respective legality checks before export. This model also places on a

requirement on buyers to ensure that they are putting in the due diligence to ensure that they

are trading with credible and authorized suppliers.

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It is important to note however, that there are other forms of standardized checks that firms

can use to ensure their credibility and accountability of their products like FSC and the Lacey

act of the United States. FLEGT is unique in that, it is the first to extend its legal standards to

suppliers and not on importing firms only. There are of course many questions that surface

when one thinks of CSR in legal terms because the general discourse on this topic in the past

has taken a more soft approach on ethics and morality. Should CSR be an issue of legality? Is

this approach of legality an indication of the attitude that corporations have about CSR?

These are some questions that come to mind as we think of CSR and FLEGT and its VPA

leg. With this background in mind, this paper wishes to explore more by looking at the

following research topic:

The Evolution of CSR and the current state of Legality in CSR: Understanding the

impact of FLEGT/VPA’s (EUTR tangentially) on local firms - A case of study of two

timber exporting firms in Ghana and Brazil.

The methodology used is based on the qualitative approach with organized semi-structured

interviews. A theoretical framework assembles the foundation on which the research is based,

including a presentation of CSR Theories, a presentation of the FLEGT framework which

includes as well as the European Timber Regulation and timber trade ties and trends between

the EU and Brazil and Ghana. The idea behind this is to identify the underlying constituent of

FLEGT/VPAs and how they impact local firms that are exporting to the EU. In line with

different theoretical perspectives various propositions are derived to guide the authors for the

empirical data collection and analysis.

The analysis is done as a result of the reflection between the theoretical basis and empirical

data of this paper. Theoretical proposition helps the authors as a pragmatic tool in identifying

the discrepancy, incongruity and divergence between the empirical data i.e. between Ghana

and Brazil to gain a deeper understanding of Theory and practice.

The discussion centers on the most interesting findings of our analysis, which also enable us

to elaborate on the Theory and empirical evidence, which also include the assessments of the

authors. All the above mentioned findings will be summarized, which will result in a final

conclusion.

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1.1 Research Field

To help us have a better understanding of why we chose to write our thesis on CSR and how

we arrived at our research question, this chapter will address briefly some background

information, our aim for choosing this research field and by the end of the chapter our own

working definition of CSR.

The learning objectives of the Business Studies Department at Roskilde University requires

that, by the time students graduate, they should be prepared to enter firms in the private and

publics sector or become a researcher in the social sciences. Without going in depth about the

learning objectives at a university, one of the main objectives of our study program is that we

ought to have a problem-solving outlook as we enter the job market.

Besides problem solving, students have to be critical, analytical and be able to communicate

in a professional setting. Once students are faced with a problem they should be able to

dissect and find the resources, analytical tools and frameworks that would help them solve

the problem at hand. With these learning objectives in mind, the issues of CSR was chosen

first and foremost because of our interest in the topic and its relevance in modern

corporations. Besides the relevance and our interests, we find that CSR is discussed more and

more as the “right” and sustainable way to do business but at the same time, we find that

there is still a lot of ambiguity regarding the topic. Consequently we chose to write about

CSR because we want to further develop ourselves in the field and also help in our own way

bring some shape to the research that is being done in the field of CSR.

The timber industry was chosen because timbers like most natural resources are scarce and

are not self-sustaining; if forests are not sustained and managed properly, there are many

domino effects that will result. The timber industry is unique in that it covers all elements and

aspects of CSR from the local society to the environment. It is also unique in that it is one of

the few industries where the issue of legality and CSR intertwine.

The initial aim of this thesis was to make an analysis about how legality and CSR became

linked by understanding the evolution of CSR from the 1950‟s until now and reflect how

society through government is increasingly placing more and more responsibility on

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corporations to not only take responsibility in society but also to think sustainability in the

long term.

To make our research more concrete and case specific, we chose to focus on how timber

exporters in Ghana and Brazil are impacted by the FLEGT/VPA and tangentially EUTR.

From a business perspective, it will be interesting to analyze if this new approach of

standardizing procedures with FLEGT scheme can improve actions towards CSR behavior

not only in Europe but also influencing trade partners outside Europe.

To make our research concrete, we have chosen to only look at firms in the private sector.

Ghana and Brazil were chosen because Ghana has signed the FLEGT agreement and Brazil

has not. We want to investigate whether the effects of an agreement like FLEGT will differ

for the countries or whether the differences in products and/or preference will also come in

play. As business students, this thesis take more of an economic CSR approach, hence we are

concerned about what the impact and consequences of an agreement like FLEGT does to the

day to day business operations of firms in the timber industries in Ghana and Brazil.

And finally as to whether the objectives of the agreement and its follow up regulations are

working toward the outline objectives of the EU, but again from the perspective of local firms

in the private sector.

1.2 Working Definition of CSR

Eustaquio Brant

After going through the different perspectives and authors, different understandings along the

time and study fields, this paper will analyze CSR through a more business standpoint. In this

sense, condensing all definitions, we contemplate that CSR refers to how Business are

operated in a way that takes into consideration the social and environmental impact of its

activities, playing along with its principal goal of making profit. These three elements

(economic, social and environmental) will be balanced according to internal and external

factors that affect the Business.

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1.3 Research Question

Comfort Adjaka & Eustaquio Brant

What are the underlying constituents of FLEGT/VPAs and how do they impact local

firms exporting to the EU?

In order to answer the main question the authors decided to investigate certain elements,

which will be helpful in clarifying the subject at stake. Therefore, the following sub-questions

will have to be addressed as well.

1.4 Sub-questions

1. What is the evolution of CSR and the definition of CSR?

The first question aims to comprehend the motives behind the emergence of CSR in the

1950ies. The Oxford Handbook on CSR serves as the stand point from which the thesis

attempts to grasp an understanding of this evolution and definition of CSR. This is inspired

by various researchers that have related views as well as those with conflicting views with on

CSR and its current state of affairs. The authors seek to identify the primary characteristics of

CSR and how it has evolved into what it is now. We already at this point admit that, the

evolution of CSR we discuss in this paper is euro-centric in nature because the Oxford

Handbook and the other authors used in the definition and evolution have done their research

in the Europe and America, hence, it can also be assumed that the corporations or

businessmen they have studied are also in the west. Furthermore, this question seeks to

compare and contrast the several of theoretical views of CSR. Moreover, this question will

help to identify the motives which drive corporations and how this affects the choices they

make with regards to their CSR activities.

2. What are the essential elements of CSR?

This question aims to identify the essential elements that serve as the pillars of CSR by

looking at various perspectives. The theoretical framework, previous research on CSR, and

our empirical data serve as the lens to understand what counts as CSR and how our case

studies are illustrative of the reality of CSR. This is to explore what counts as CSR and what

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does not. The authors will examine other important elements which are qualified as CSR

from three different theoretical views and how that shapes CSR activities in relation to the

timber industry.

3. What is FLEGT/EUTR/VPA?

This question aims to identify what FLEGT/EUTR/VPA is and how it is understood by the

different stakeholders. It presents first and foremost the elements as outlined by the European

Union Commission. What it entails for the partners who have signed the Voluntary

Partnership Agreement, and what it entails for the exporters in countries that have not signed

the agreement. Again with the focus on the influence/consequences of FLEGT on the local

firms that are exporting to the EU.

2. LITERATURE REVIEW – The Evolution of CSR

Eustaquio Brant

The topic CSR (Corporate Social Responsibility) is subject of assumptions and investigation

for multi-disciplinary fields and its boundaries has intersection with different and broader

subjects: business, ethics, governance and accountability.

It is hard to fix a unique definition for CSR, as it is a result of an evolution on common

understanding and public opinion on what should be the relationship between business and

society (E. Post, T. Lawrence, & Weber, 2002, s. xv).

The CSR definition can be variable according to the period of time and space and to which

lens it will be analyzed with, generating ambiguities and different argumentations.

Over the years the concept remained vague, some would distinguish two general schools of

thoughts.

The first group would argue that the business is obligated only to maximize profits within the

boundaries of the law and minimal ethical constraints. Companies must pursue their goal to

make profit and fulfill only the bottom line to live up with the delimitations of legitimacy.

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A second group suggested a broader range of obligation toward the society, reshaping the

spectrum of corporate responsibilities, regardless coercive laws or stakeholder‟s pressures.

(S. Schwartz & B. Carroll, 2003)

For academic purposes and better comprehension of CSR, it is important to follow a timeline

(Crane, Mc Williams, Matten, Moon, & S. Siegel, 2008, s. 20-46) starting with the first

studies on the topic around 1950 and how it was perceived throughout the present days. It

will enforce the complexity to concentrate CSR in only one and fixed definition or study

field.

1950 – 1960: “CHARITY ERA” BFORE 1950 and “AWARENESS” AFTER 1950

The year 1950 is a water divider in CSR studies. Before 1950, CSR was considerate the

“philanthropy” era in which companies donated charities more than promote real actions to

foster ethical behaviors or responsible activities. No other expectation or attitude was

demanded by society toward companies.

Therefore, the acronym was often only SR (social responsibility) rather than CSR, brought up

by R. Bowen‟s ´s publication Social Responsibilities of the Businessman (1953). The author

noticed that hundreds of the largest businesses at that time were vital centers of power and

decision-making. The actions of these firms touched the lives of citizens in many ways and

raised the question of: what responsibilities to society may businessmen reasonably are

expected to assume? (Crane, Mc Williams, Matten, Moon, & S. Siegel, 2008, s. 25)

It was a period of more elusive than pragmatic ideas regarding CSR but at least the subject

became enlightened to business executive‟s minds.

1960 – 1970: “AWARENESS ERA”

This decade is marked as a momentous growth in attempts to formalize or bring a reasonable

meaning for CSR. Companies started to play a more powerful role within the society,

implying a more engaged public posture.

Other authors started to address the topic, as companies became enormous and taking

decision on society development.

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The “C” is incorporate to “SR”. Considering that companies‟ decision should go beyond, or

at least partially beyond, the firm´s direct economic or technical interests. This increased the

idea of including a degree of voluntarism as opposed to coercion. An inner commitment that

companies would pursue better actions, despite any award or imposition (Crane, Mc

Williams, Matten, Moon, & S. Siegel, 2008, s. 27)

A certain voluntarism was criteria for a real CSR as some costs would be involved to reach

sustainable behavior but may not be possible to reach any direct measurable economic

returns. This idea of altruism and unselfishness started to be demanded by academic

publishing and reflecting in the society.

At the end of the 50´s, CSR definition could include philanthropy, employee interests,

customer relations and stockholders. Much more should be focus on discussion on the

following decades.

1970 – 1980: “ISSUE ERA”

As mentioned before CSR was relatively not a new phenomenon by the 70´s but authors

could not agree on a definitive definition, as the more the topic was investigated the more it

could cover.

Theories could not define succinctly delimitations of what would be covered under the CSR

umbrella. The approaches by the 1970´s would take care of the ethical and moral of

“businessman”, the personification behind the corporation. Therefore was difficult to

dissociate with “philanthropy” and not responsibility. Obviously the scope of business

activities is much bigger than the human.

A groundbreaking contribution to the concept of CSR came from the Committee for

Economic Development (CED), in 1971 that published the “Social Responsibilities of

Business Corporations” (Crane, Mc Williams, Matten, Moon, & S. Siegel, 2008, s. 29)

The concept of CSR brought by CED mentioned the Social Contract between business and

society was changing in substantial and important ways. By awareness of society, businesses

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were asked to assume more responsibilities and be attentive to an even broader range of

human values. The CED created the concentric circles notion of social responsibility.

Figure 1: The Three concentric circle explanation (Crane, Mc Williams, Matten, Moon, & S.

Siegel, 2008, s. 29):

Graphically is easy to identify that Business responsibilities were getting broader,

enlightening entrepreneurs and educators to develop the changes on social contract,

demanding more attributions to what was corporations‟ responsibilities and business got

functions and goals other than only profit.

The society, as object of CSR, was also the audience of it and therefore studies started to

research what society understood and what companies incorporated at their structure as

Important issues to CSR in the early 1970´s (Crane, Mc Williams, Matten, Moon, & S.

Siegel, 2008, s. 33). Representative of the period, by order some of the most prominent items:

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minority hiring, ecology, minority training, contributions to education, contribution to arts,

hard-core hiring, hard-core training, urban renewal and civil rights.

In 1979, Archie B. Carroll proposed a four-part definition of corporate social responsibility,

which was embedded in a conceptual model of corporate social performance (CSP). (Crane,

Mc Williams, Matten, Moon, & S. Siegel, 2008, s. 33). For Carroll, entrepreneurs and

companies to be engaged in CSP they needed to have:

“1: Basic definition of CSR that identified the different types of CSR businesses had;

2: an understanding / enumeration of the issues for which a social responsibility

existed (or, in modern terms, stakeholders to whom the firm had a responsibility,

relationship, or dependency);

3: a specification of the philosophy (or strategy) of responsiveness to issues “

This definition embraces different 4 different spheres: economics, legal, ethical and

discretionary/philanthropic responsibilities and later on known as the “Pyramid of CSR”

(figure 2). (Visser, 2005).

Figure 2: Carroll‟s Pyramid of CSR” (Visser, 2005)

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By the beginning of 1980´s, business managers applied the traditional management functions

to dealing with CSR issues. However, they were lacking on having a plan or strategy to

organize their CSR policies to foreseen crisis or better relationship with politics, employees

and customers. Having a very rudimental and reactive attitude for complying with

governance Laws.

FROM 1980 TILL 21ST CENTURY

As in the 1970´s the CSR studies accelerated as study field to different writers and areas of

knowledge, the following decades were focused on refining its different perceptions.

The issue was in expand the understanding of each element of CSR such as corporate social

responsiveness, corporate social performance, public policy business ethics, and stakeholder

Theory / management, just to mention a few of complementary topics necessary to limited

and define CSR.

This refining of CSR brought different approaches, models, schemes and Theories. For this

period, it was important to find a way to apply CSR that was not only as reaction of the

external factors but also as proactive resolution. Without having only a responsive act but

also an active chasing of normative correctness to corporates. (Crane, Mc Williams, Matten,

Moon, & S. Siegel, 2008, s. 36).

During the 1980´s two important Theories were developed: “stakeholder Theory ” by R.

Eduard Freeman and “business ethics” that rose after union Carbide Bhopal explosion in

India in 1984. (Crane, Mc Williams, Matten, Moon, & S. Siegel, 2008, s. 36)

In the 1990´s another important concept was spread the concept of “corporate citizenship”:

social-oriented actions by firms seeking to be seen by their stakeholders as constructive

members of society. (B. Werther & Chandler, 2006, s. 6)

As the concept of CSR is closely related to the reality of the society and express the

yearnings of the human being new factors were taken into consideration, expressing the new

waves of development, such as corporate diversification and globalization.

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Once again the limits and spectrum of CSR needed to be reinvented or redefined. The

corporate activities were not only local but also global. Companies started to outsource their

services / production and reach global stakeholders.

The end of the 1990´s and beginning of 2000´s emphasized on theoretical contributions to the

concept and meaning of CSR and more empirical research on the topic split interests of CSR

apart: stakeholder Theory, business ethics, sustainability and corporate citizenship.

Most of the Theories dialogue among them, on an intensive searching for a formula to

standardize the concept of CSR and its definition, the model to stimulate and determine the

actions Corporations need to follow and achieve the three bottom line of CSR: legal,

economic and social fields.

In 2006, Porter and Kramer released a very illustrative article about CSR applied as

Strategies for Corporations, in which the authors suggest that Corporations could create

“shared value” when connecting the core of their business with society needs. Once again, the

article brought up the difficult situation to manage all stakeholders‟ activities and measure the

best way to extent and apply effectively CSR.

Porter and Kramer were very pragmatic in a sense that Corporations should be aware that a

sustainable action must be incorporated from the very beginning of its operations and

management to settle an effective and valuable CSR agenda.

“A firm that views CSR as a way to placate pressure groups often finds that its

approach devolves into a series of short-term defensive reactions – a never ending

public relations palliative with minimal value to society and no strategic benefit for the

business”. (E. Porter & R. Kramer, 2006)

The model presented at their article suggested to initially map social opportunities that exists

within the interdependency of the company and the society. CSR should not be merely acting

on well-intentioned impulses or reacting to outside pressure, the organization can set an

affirmative CSR agenda that will be beneficial for the social and represents gains for the

business.

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Mapping this social opportunity includes an inventory of problems and opportunities that

need to be investigated, prioritized and correctly addressed. The choices must benefit both

sides: corporation and society. No business can be in charge of all society´s problems or bear

the cost of doing so, and the causes that would be worthy are those that create shared value,

meaningful benefit for society that is also valuable to the business. (E. Porter & R. Kramer,

2006).

The shared value will stand in the intersection of the two main fields:

- Looking Inside out (or also named Inside-out linkages): mapping the social impact of the

value chain. An analysis of all activities a company engages in while doing business in all

hierarchies: Logistics, Operations, Marketing and Sales, After Sales, Procurement,

Technology Development, Human Resources and Firm Infrastructure. In each aspect,

entrepreneurs should be attentive on their negative or positive social impacts.

- Looking outside in (or also named Outside-in linkages): sensing social influences on

competitiveness. Understanding all the forces that contribute to the company‟s ability to

compete. The diamond framework: Related and Supporting Industries, Local Demand

conditions, Context for Firm Strategy and Rivalry, Factor (input) Conditions. Basically,

monitoring external players and partners the company is dealing with, constantly changing in

time and space.

From this ultimate analyzes companies can be positioned in three big and different categories

based on the way they manage their involvement with society. Companies can prioritize:

- Generic Social Issues: issues that may be important for society but are neither significantly

affected by the company´s operation nor influence the company´s long-term competitiveness.

- Value Chain Social Impacts: issues that are significantly affected by the company´s activities

in the ordinary course of business

- Social Dimensions of Competitive Context: factors in the external environment that

significantly affect the underlying drivers of competitiveness in those places where the

company operates.

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From this categorization, we would have a Responsive CSR behavior, acting as a good

corporate citizen, attuned to the evolving social concerns of stakeholders, and mitigating

existing or anticipated adverse effects from business activities. In the other hand, companies

can decide to assume a more Strategic CSR behavior. Obviously if Companies would like to

go beyond Law compliance and stakeholders pressure, they should invest in social aspects of

context that strengthen companies competitiveness, basically what Porter and Kramer wanted

with the Social Dimensions of Competitive Context. A full integration between business and

social needs and it requires more than good intentions and strong leadership, but also

adjustments in organization, reporting relationships and incentives. (E. Porter & R. Kramer,

2006)

For many years, scholars, academics and businessmen used the article of Porter and Kramer

as reference for their organizational strategies. But another group of authors recently

criticized the “novelty” of and coined term “creating shared value” to replace old and settle

streams of Theories on CSR field. (Crane, Palazzo , J. Spence, & Matten, 2013)

In 2014, at the California Management Review, some authors tried to confront the idea of

“creating social value” which they described as a very naive understanding of Corporations.

Crane, Palazzo, Matten and Spence claimed that it is a seductive but puerile thought that

Corporations can adjust their activities to create shared value;

“Reconceiving products and markets by seeking out social problems where serving

consumers and contributing to the common goods might be achieved in parallel.

Second, redefining productivity in the value chain by simultaneously enhancing the

social, environmental and economic capabilities of supply chain members. Third,

enabling local cluster development so that various developmental goals might be

achieved in cooperation with suppliers and local institution” (Crane, Palazzo , J.

Spence, & Matten, 2013, s. 2).

The weights are consistent but the final goal of both documents is to raise awareness of the

necessity of CSR to be included at the Companies DNA. Claiming different nomenclatures is

immaterial respect of CSR and the fact that Companies must shift from a fragmented,

defensive posture to an integrated and affirmative approach. The focus of the CSR discourse

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must move away from an emphasis on image to an emphasis on substance. (E. Porter & R.

Kramer, 2006)

Dialoguing with this intention, Karin Buhmann emphasizes the potential of CSR to society.

CSR is doing more that is required by Law, beyond legal compliance. It is not a matter of

responsive behavior but incorporating responsible and meaningful procedures within the

organization genetics, to reach internal goals but also social improvement, as the company

belongs to the society. Understanding corporations as entities of the society, they should and

must contribute to the Welfare State (Buhmann, 2006).

“Given the potential of CSR to society at large and the role that CSR plays for

corporations, it may be useful to understand more about what drives CSR, what

constitutes the substance of the concept, and the channels that are relevant to

corporations and stakeholders in working with the substance of the concept. An

understanding of the interplay between CSR and law will be of use to corporations and

states in handling processes of change encountered by the welfare state, and

responsibilities of corporations in a process of globalization. “ (Buhmann, 2006)

CSR demands happen from a number of different actors in society. It is not possible to point

exactly to one or a few specific actors that generate CSR norms. Some corporations apply

CSR policies acting voluntary, from a self-regulation (individually or from a collective they

belong to), Codes of Conducts or even following informal norms that society imposes based

on morals, patterns or consuetude. But in fact, these factors are not necessarily binding or

subject to punishment.

A degree of moral plays a very important role in this structure arguing that clarified values of

business and the integration of corporate social responsibility with good corporate citizenship

together provide what could be called a corporate “license to operate”. In another words,

corporations should not be able to operate without ethical values and social responsibility.

Moral and ethical in this case is the triple bottom line of economic, social and environmental

performance. Good corporate citizenship relies on the conception of corporate civic

participation as mutual benefits for the firm, its different partners, stakeholders and other

collaborators (Rendtorff, 2009, s. 17).

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Among all non-legal influences, Karin investigates those that finally become positive Law

and Regulations, mainly because Government is also stakeholders affected by corporation‟s

activities.

Therefore, being part of an organic democratic system, CSR policy, norms, drivers, Laws and

even voluntaries policies are directly related to the society. Sometimes corporation‟s

importance and areas of influences are bigger than the countries instituted governments.

Observing this the society sees an opportunity to revert part of this importance into benefits

for the collectiveness and thus reshapes the idea of Corporation as citizens and sometimes

also part of Government (Crane, Matten, & Moon , Corporations and Citizenship, s. 9,10).

According to Corporations and Citizenship:

“At the present, our view of the corporations tends to be predicated purely on its

economic role as a value creator in society, which in turn has given rise to a legal

status analogous to an artificial citizen. These are clearly outdated and unfit for the

purpose in the context of the political roles of the corporation that we have identified in

this book. Corporations have effects that go beyond the economic (and indeed beyond

even the social), and they occupy political roles that do not always bear much relation

to the legal identity.” (Crane, Matten, & Moon, Corporations and Citizenship , 2008, s.

212,213,214)

As a reflection of legal positivism, Governments try to build structures to foster the minimum

that should be observed when it comes to CSR policies, not only for the Companies that

already have CSR policies, but especially to coerce those that were not voluntarily engaged in

this process and therefore do not have such policies. It is a complex and dynamic scheme

where the Law is not exhaustive but exemplary and didactic (Green , 2009).

Specifically in FLEGT it is clear that the Law brings different players to discuss the content

of the legal document but also to engage companies to do tasks of investigation and checking

compliance, which used to be conducted by the State.

What is the future of CSR? Probably, Steven D. Lyndenberg gave the best response at his

book Corporation and the Public Interest: Guiding the invisible Hand. (Crane, Mc Williams,

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Matten, Moon, & S. Siegel, 2008, s. 42): “A major secular development, driven by a long-

term reevaluation of the role of corporations in society”. (Crane, Matten, & Moon,

Corporations and Citizenship , 2008)

CSR depends and always will depend on cultural and contextual assumptions (B. Werther &

Chandler, 2006, s. 13). It will always be a battle of what is more visible and valuable for the

society, in which moral and ethics have a very important role to divide what is responsibility

and legitimacy.

No matter how we would name it and the fluid nature of its concept (corporate responsibility,

corporate citizenship, corporate community engagement, community relations, corporate

stewardship or social responsibility), the core of CSR is about businesses and organizations

going beyond the legal obligations to manage the impact they have on the environment and

society (B. Werther & Chandler, 2006, s. 6,7,8).

After going through the different perspectives and authors, different understandings along the

time and study fields, this paper will analyze CSR through a more business standpoint. In this

sense, condensing all definitions, we contemplate that CSR refers to how Business are

operated in a way that takes into consideration the social and environmental impact of its

activities, playing along with its principal goal of making profit. These three elements

(economic, social and environmental) will be balanced according to internal and external

factors that affect the Business.

Internal factors being considered: self-regulation such moral/ethical aspects of the

businessmen, voluntary, positive impact the company intend to have facing its stakeholders

and strategies towards the external factor, creating value to its products and services. In the

other hand, we would have the external factors being considered trends in demand,

Legislations/Governance, pressure of stakeholders and competition with similar companies at

the markets.

As mentioned before, each niche of market and company will have to reflect about their own

structure and influence of their activities in the society. The company must maintain a

transparent internal and external dialogue to find out their CSR policies and actions,

respecting Law, customers, and employees, influencing positively suppliers and preserving

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the environment. Any other attitude avoiding this behavior risks their reputation and

competitive position in the market and ultimately its legitimacy.

2.1 Implications for this research

Comfort Adjaka

It is reasonable that CSR is not a fixed concept, as it is directly related to Ethics and Morals

of individual firm or person at hand. As we have different cultures and the human being is

different from each other by nature, it is always hard to get a certain level of homogeneity. As

it happens with all different fundamental issues, we are always negotiating what is right x

wrong, fair x unfair, immutable or variable to set some guidance so that society can move

along towards the same direction aiming for welfare and common progress.

Currently it seems CSR reached a point that it is not a matter of relying only on the good will

and voluntary behaviors of Corporations. Politicians and Governments cannot take for

granted the fact that it is not common sense for all companies to have the same level of

commitment with responsibility and sustainability. All companies do not have the same

moral and ethical standards and therefore a minimum must be required by law, to preserve

our welfare and our environment.

The two big spheres that are reshaping the concept of CSR in our time and age are legality

and also trends in demand, ordinary people demanding more effective actions from

companies.

As the communication landscape has become more globalized, complex and democratic,

ordinary people have gained easier and greater access to information and also more

opportunities to engage in public speeches and undertake collective action. Social network

sites, such as Twitter and Facebook, have become very popular, especially among the

younger generation. Even though the use of social network sites might be quite different

depending on the geographic region or age group, there has been an increased tendency to use

Facebook and Twitter for social awareness (Smith, Wollan, & Zhou, 2011). For many

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companies the Internet has become the best way to customize their message and form of

interaction with the target audience, meeting their expectations. The importance of Internet

has matured to such extent that online actions constitute an essential part of corporate

communication strategy. This development allowed the evolution of consumers into citizens

who are the protagonists of consumption decisions and through their own experiences

determine the value of the brands they consume (Ros Diego & Martinez, 2012)

We could have chosen the trends in demand angle, but this paper will go through the Legality

angle as it entails also citizen´s aspirations. Indeed, the citizen‟s desires and concerns are

sources of the Law that has also the coercive prerogatives.

Following this understanding, FLEGT is the current status of a process that started back in

the 1950ies when society started to discuss about CSR. The maturity of corporate

responsibilities towards the society and environment seen today has been an on-going

development that has led to a standard of minimum participation required by law that

corporations in the timber industry a face with.

Our aim is to understand CSR, in its present stage of the evolution. For this thesis, FLEGT is

a filter on specific market (timber) and product (timber), allowing us to have a magnifying

glass over the complex topic of Corporate Social Responsibility. However, due to limited

time and space, this thesis has decided to focus on the legality angle, namely the example of

FLEGT in the timber industry.

2.2 RESEARCH DESIGN Comfort Adjaka

A research design is a blueprint for conducting a project research. It specifies the processes

necessary for obtaining the information needed to structure and solve the research problem

(Malhotra & Birks, 2007). This research follows a post-positivist paradigm. The main

objective of this research is to identify the impact of FLEGT on exporting firms in Brazil and

Ghana. In order to identify what FLEGT/VPA and in that matter CSR means to our case

studies, a scientific research will be conducted based on the principles of post-positivist

paradigm which will later be addressed in the methodology section.

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3 Research Structure

Part 1 focuses on introduction and background of this research. It will also show the

underlying motivations for researching CSR and how we arrived at FLEGT. Problem-specific

delimitations are also discussed in this section. It is followed by the research design of the

thesis, hereby, addressing the choice of paradigm and methods for this thesis. In addition, the

elements in relation to credibility of this paper will also be discussed.

Part 2 provides a detailed presentation of the theoretical framework of this paper, the choice

of Theories and in our case the different CSR Theories and models that have been chosen for

this thesis. The presentation of the theoretical section serves as a guideline for the empirical

data collection and analysis.

Part 3 will provide the assessment of empirical data. The focus will be on FLEGT/VPAs and

its impact on Logs & Lumber Co. Ltd. and Araupel, our case studies. The previous chapter

will serve as the basis for empirical studies. Using the various propositions from the

theoretical foundation, the dialogue between the presented Theories and the empirical data

will be analyzed to gain a deeper understanding.

Part 4, an analysis and discussion around the chosen topic and some of its most interesting

elements will be made, which will also enable us to elaborate on the Theory and empirical

evidence. The assesments of the authors will be part of the discussion. All the above

mentioned findings will be summarized in a final conclusion.

3.1 Delimitation

Before addressing the philosophy of science, the frameworks and scientific choices of this

thesis, we find it relevant at this stage to address the limitation; issues that are related to CSR

but will not be the focus of this thesis.

As mentioned in the introduction, CSR is still an evolving field of research and no

corporation, researcher, government or multilateral organization has a formula or blueprint

regarding the field. With that in mind, this project has chosen to take an economic approach

to understand the impact of FLEGT/VPAs on private corporations in the local market. To

make our research field more defined, we have also decided to focus on firms that are

exporting only, and to the European market. Furthermore, despite the fact that there are many

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other types of CSR Certifications used in the market such as FSC, we will centralize our

efforts on FLEGT and its underlying regulations.

There are of course a lot of empirical questions that surface with this delimitation; e.g. as to

whether our research will reflect the real world. FLEGT/VPAs are primarily focused on

fighting illegal timber on the EU market hence we ask ourselves about the implications of

illegal timber that are exported to non-EU market. Is it of any relevance to make sure that the

exports to the EU are legally audited while other markets are neglected?

After much consideration, it became obvious to us that, the limited time and pages of this

thesis cannot accommodate all our concerns and all the different approaches and perspectives

regarding CSR and the timber industry and legality as a whole.

Keeping in mind that we are business students, we admit that do not have the legal

knowledge and resources to have an in depth analysis of the legal components that are

mentioned in FLEGT/VPAs. Any references to FLEGT will be superficial and used as

framework or channel to understand the EU Commission‟s vision for the EU market and its

partners. It is important to highlight that FLEGT and its Voluntaries Agreement Partnership is

a recent and ongoing process of dialogue between European Union and regions/countries

interested in signing the respective bilateral agreement. Much still needs to be done to make it

even more known and popular for the parties involved. According to European Union, the

Action Plan will be continuously spread and increased in its capacity (European Comission -

Development and Cooperation, 2014).

Regarding our concerns with other export destinations, as FLEGT/VPA is an evolving field,

we argue that, a strengthening of the regulatory laws in the countries that have signed the

Voluntary Partnership Agreement will in the future affect not only exports to the EU but also

locally and other export markets as well. If the countries that have signed the agreement have

done that because they acknowledge that there are regulatory concerns which need to be

addressed, then this should help them manage the local industries better and other export

partners as well.

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4. METHODOLOGY

4.1 Philosophy of Science: Underlying the issue of validity in knowledge production

This section will address the point of departure that the authors of this paper take regarding

scientific research paradigms; the approaches and contexts which will be applied in

answering the outlined research question and data collection. It is important for us as

researchers to discuss our philosophy of science because, as researchers, our view of the

world and consequently our view on knowledge production will inevitably affect our

procedure (methods of choice) and our findings. According to Guba and Lincoln, it is

important to understand a researcher‟s ontology and epistemology in order to truly

understand the reliability and credibility of their research (Guba & Lincoln, 1989). Ontology

and epistemology is relevant in order to:

Recognize the relations between the key components of the respective research

Distinguishing theoretical and academic work from social phenomena and

Be able to identify other researchers‟ contributions while defending our own positions.

Every scientific researcher articulates from a unique perspective which serves as the

paradigm or “constraint” of their research. A paradigm, according to Guba and Lincoln, is a

set of basic believes that make it explicit the researcher‟s code of construct and principles.

These principles represent the influences that affect the author‟s position on a particular topic

or issues. For this thesis, we believe that making clear our paradigm of choice will enable us

as authors of this thesis to express the degree at which this thesis can be regarded as being

reliable, for instance when it regards objectivity. Different theoretical perspectives exist

concerning paradigms for this thesis however, we discuss four main paradigms outlined by

Guba and Lincoln, each paradigm has its own point of view regarding research construction

and its effects on the possible findings and conclusions on the respective research.

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Figure 3: Source Opfer D. (2008) Perspective on research methodology (Opfer, 2008)

It is important to choose a paradigm, which has the best fit with the authors‟ specific

perception of reality (Heldbjerg, 2003). Darleen Opfer summarizes that there are three main

umbrella paradigms: objectivism, constructivism and subjectivism.

Objectivism believes that knowledge exists whether we are conscious of it or not.

Constructionists believe that we come to know through our interactions

Subjectivism believes that everyone one has a different understanding of what we

know (Opfer, 2008).

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In order to choose which paradigm to follow during the research, three questions will have to

be considered (Opfer, 2008):

The ontological question

The epistemological question

The methodological question

4.2 Ontological Question

The ontological question is concerned with what knowledge is and how it can be defined.

Blaikie describes ontology as:

“claims and assumptions that are made about the nature of social reality, claims about

what exists, what it looks like, which units make it up and how these units interact with

each other. Ontological assumptions are concerned with what we believe constitutes

social reality” (Blaikie, 2000).

The ontological question deals with what the form and nature of reality is and therefore what

is there (knowledge) and what can be known about it.

4.3 Epistemological Question

The epistemological question discusses the authors and whether they are able to maintain

objectivity when researching a specific topic. Blaikie explains epistemology as:

” the possible ways of gaining knowledge of social reality, whatever it is understood

to be. In short, claims about how what is assumed to exist (knowledge) can be known”

(Blaikie, 2000).

Hence the epistemological question identifies what the relationship between the knower or

would-be knower and what can be known. Thus, the nature of knowledge, its fundamentals,

scope, and validity, what is or what should be considered as acceptable knowledge.

4.4 Methodological Question

The methodological question refers to the methods used for the research, for example

whether it uses qualitative/quantitative research methods. Methodology is the strategy, the

plan of action, the design that underlies the choice methods used to obtain the outcomes.

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(Crotty, 1998). Methodology outlines how data is collected for the research and how it affects

the results or co-production of knowledge. It is answered based on the ontological and

epistemological questions. It can be in the form of qualitative, quantitative or a blend of the

two approaches. A wrong methodology may lead to wrong findings as not all methodological

approaches fit the different ontologies and subsequently epistemological questions that exist

(Guba & Lincoln, 1989).

4.5 Choice of Paradigm

Epistemologically this thesis follows the social constructionist paradigm; we believe that

knowledge is constructed through social interactions (Opfer, 2008). The theoretical paradigm

used is post-positivism. The post-positivist paradigm is followed throughout this thesis

because it can be admitted that no matter how authentic this thesis remain to scientific

methodology, absolute truth can never be found concerning the outcome of the research as

reality is subjected to possible critical examination and interaction.

As far as the epistemological question of this thesis is concerned, it follows a social

constructivism paradigm. Constructivism proposes that each individual mentally constructs

the world of experience through cognitive processes while social constructivism has a social

rather than an individual focus (Andrews, 2012) (Young & Collin, 2004). Social

constructionists believe that, knowledge is constructed as opposed to knowledge being

created, consequently, they are less concerned with ontological issues (on the existence of a

reality and what the nature of this reality might be) but rather society is viewed both as an

objective and a subjective reality (Andrews, 2012). A relativist stance is argued for by

(Hammersley M. , 1992) who believes that researchers themselves construct a social world

rather than merely representing some independent reality, which is the source of tension

between realism and relativism (Hammersley & Atkinson, 2007) This point is evident in the

choices that researchers make, not only in the choices of research methodology but also in the

choice of literature, even the choice of research question and problem formulation.

Regardless of whether one leans towards a more realist or relativist side of the discussion, we

cannot deny that the question that what is real is also relative to the researchers and what they

seek.

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4.6 Theoretical Framework

In the study of CSR a lot of different normative and theoretical approaches exist, these

different approaches have a wide range of different methods to dissect, interpret and

understand CSR. In some cases however, the epistemological foundation for these methods

are not transparent but are of crucial importance to the results produced. On the basis of this,

we find it central to the validity of this thesis to establish a transparent epistemological

foundation for the analysis of the ontological field of study; the impact of FLEGT/VPA

(legalized CSR standards) on local exporting corporations.

4.6.1 Choice of Theory


According to Carroll, attempting to organize CSR Theories is as complicated and ambiguous

as attempting to define CSR itself (Crane, Mc Williams, Matten, Moon, & S. Siegel, 2008, p.

47). The Theoretical Framework will be grounded in three different Theories and model of

CSR that complement each other and bring a better pragmatic way to unfold our interviews

and data, leading us to discuss and conclude our project. Our Theoretical Framework:

1. Carroll´s CSR Pyramid; (Carroll, 1991)

2. Corporate Social Responsibility Theories: Mapping the Territory by Garriga and Melé

(Garriga & Melé, 2004)

3. Strategy and Society: The Link between Competitive Advantage and Corporate Social

Responsibility by Porter and Kramer (Porter & Kramer, 2006)

4.6.2 Carroll

Carroll brought awareness to the concept of CSR and its approaches, as we will observe

previously in the section, “Evolution of CSR”. For Carroll, CSR was not considerate only

philanthropy and covers 4 different fields of study: economy, legality, ethics and

philanthropy (Carroll, 1991).

This approached was known as Carroll´s CSR Pyramid and will be used as our pillar to

analyze our data, since we will be able to unfold all four aspects of CSR elements in each

company that collaborated with our investigation.

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This project will have the Business perspective and therefore Carroll´s Pyramid is really

important as it encompass a managerial approach to CSR. Carroll advocates that companies

could forecast and plan CSR, organize CSR, assess social performance and institutionalize

corporate social policy and strategy. Furthermore it will also allow firms to follow and

foresee governmental initiatives in order to be up-to-date with laws dealing with the

environment, product safety, employment discrimination, work safety and other embracing

policies (Crane, Mc Williams, Matten, Moon, & S. Siegel, 2008, s. 34).

Figure 4: Carroll‟s CSR Pyramid

Carroll´s Pyramid has a didactic understanding of CSR and displays easily a way to identify

if companies work with all four elements (economic, legal, ethic and philanthropic), tending

to one or another with more emphasis.

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4.6.3 Garriga and Melé

There seems to be four main Theories that are consistent across the spectrum of CSR

discussions. As expressed in “The Oxford Handbook of Corporate Social Responsibility” and

“Corporate Social Responsibility Theories: Mapping the Territory” by Garriga et Melé these

four main lines of Theories are 1) Instrumental Theories, 2) Political Theories, 3) Social

Integration Theories and 4) Ethical Theories (Garriga & Melé, 2004, p. 51). For the purposes

of this thesis, we will focus mostly on the classification scheme and the definition of each

group rather than specifically on the Theories. Garriga and Melé examine that the current

CSR Theories are focused on those four main aspects and therefore permit us to classify the

most relevant Theories on CSR and related concepts into four groups called: instrumental,

political, social and ethics (Garriga & Melé, 2004).

Garriga and Melé present their mapping of CSR Theories which is complementary to

Carroll´s approach. The authors map Theories they find to be consistent in CSR, given the

diversification and interdisciplinary nature of CSR. They consider each group of Theory

from the perspective of “how the interaction phenomena between business and society are

focused” (Garriga & Melé, 2004, s. 52).

In the Instrumental Theories corporations are seen as instruments for making profit and

consequently its social activities are aimed at producing economic results. This line of

thought coined with the political Theories suggests that, legality in a CSR is necessary

because corporations are egocentric in nature and hence regulations like FLEGT must be in

place to require a certain level of responsibility on firms.

The Political Theories are concerned with the power of corporations, which ought to be

aligned with the responsible use of this power in society; with the power that corporations

gain, they should especially be demanded to do more for society. As corporations gain

economic and social power in society and in the political arena they need to accept social

duties and responsibilities to participate social cooperation.

Social integration Theories focus on society‟s demands and how these demands can be

integrated in the business activities of corporations. These Theories believe that businesses

rely on society for its continuity and growth and therefore corporations need to integrate

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social demands into their business strategies and policies. Trends in society should become

imbedded in business activities.

Ethical Theories are based on moral and ethical responsibilities of corporations in society.

This forth group of Theories sees CSR from an ethical perspective and as a consequence

firms must accept social responsibility as a moral obligation. What is moral or ethical is

determined by the relation between society and firms and this relation is subject to change

over time.

However, they also express that, in many cases the elements of these four Theories are not

easy to separate, as CSR itself is multidimensional. These Theories can be placed and

analyzed in more than one area of Theory (Garriga & Melé, 2004) (Crane, Mc Williams,

Matten, Moon, & S. Siegel, 2008). In reality, corporations cannot dissect the four theoretical

approaches, as they all come together to translate what CSR is for today‟s criteria.

The concept of business and society relationship must include these four aspects or

dimensions and some connection among them must exist” (Crane, Mc Williams,

Matten, Moon, & S. Siegel, 2008, s. 48)

As pointed out by Garriga and Melé as well as Crane et al., the four elements of CSR play

intricately together, but for a Business perspective where companies search for a profitable

execution of its activities, the governments need to foment minimum standards for these

activities.

Following the line of thought suggested by Garriga and Melé, political Theories emphasize

that the economic power that corporations gain should be accompanied with a level of

responsibility in society. Until recently, (2003) the level of responsibility and the choice of

CSR elements which firms chose to focus on were left in the hands of corporations to decide.

Consequently the level of involvement was highly based on the corporations‟ understanding

of CSR. As also quoted by Garriga and Melé,

“Corporate social responsibility means something, but not always the same thing to

everybody. To some it conveys the idea of legal responsibility or liability; to others, it

means socially responsible behavior in the ethical sense; to still others, the meaning

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transmitted is that of „responsible for‟ in a causal mode; many simply equate it with a

charitable contribution; some take it to mean socially conscious; many of those who

embrace it most fervently see it as a mere synonym for legitimacy in the context of

belonging or being proper or valid; a few see a sort of fiduciary duty imposing higher

standards of behavior on businessmen than on citizens at large‟‟ (Votaw, 1972, p. 25).

(Garriga & Melé, 2004).

Today, not only have social demands changed the political arena in some parts of the world

like Scandinavia and Europe are trying to solve the problem identified by Votaw by putting

in place legislation and legal agreements concerning business practices and CSR reporting.

This could be argued as a testimony to how far CSR has come but at the same time how

instrumental corporations are. On one hand, legality shows the dynamics of the modern

society and its impact on not only political decision making but also on corporate practices.

On the other hand, it also makes one question whether corporations truly understand CSR.

Because if they did, there would not be legal standards put in place to ensure compliance.

This to a degree points back to the instrumental theorists‟ argument that firms are mostly

concerned and motivated by economic gain, hence the political arena needs to jump in to

bridge the gap and serve as a moral compass or in the case “a legal compass”.

For the purposes of this thesis, we will focus mostly on the classification scheme and the

definition of each group rather than specifically on the Theories. Garriga and Melé examine

that the current CSR Theories are focused on those four main aspects and therefore permit us

to classify the most relevant Theories on CSR and related concepts into four groups called:

instrumental, political, social and ethics (Garriga & Melé, 2004).

4.6.4 Kramer and Porter

Finally, our third Theory is indeed a Model to connect CSR to a business approach.

According to Porter and Kramer´s article, they propose a new way to study the relationship

between business and society “that does not treat corporate success and social welfare as

zero-sum game”. (Porter & Kramer, 2006)

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Porter and Kramer´s approach is a pragmatic framework to help companies and entrepreneurs

to identify all the effects, both positive and negative the business has on the society. With the

right CSR strategy it could become a tremendous source of social progress as companies will

identify their impact on their surroundings and decide to be only “responsive” as good

corporate citizen and mitigating existing or anticipated adverse effects from their business

activities. Furthermore they adopt a more strategic behavior going beyond “best practices”,

doing things differently from competitors and taking advantage of opportunities to pioneer

innovations to benefit both society and the company‟s own competitiveness.

The authors divided CSR also in 4 categories, and despite the different names, representing

the same ideas of Carroll´s classification. They claim that proponents of CSR have four

arguments to make their CSR decisions: moral obligation, sustainability, license to operate

and reputation. The most innovative of this Model is the classification of companies‟ attitude

towards their impact on the society. Companies can adopt a responsive or strategic behavior

on their way to interact with society.

Porter and Kramer suggest a classification based on the way companies manage their

involvement with society (Porter & Kramer, 2006):

Figure 5: Porter & Kramer, Strategy and Society: The Link Between Competitive Advantage

and Corporate Social Responsibility, 2006).

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All three Theories and Model, as mentioned before, dialogue with each other, agreeing that

Business and Society can contribute in harmony to progress together. Furthermore, they

mention the role of Legality and Business performance, balancing what companies are doing

to comply the Law and what is done replying inner strategies (internal factors) and trends in

demands (external factors).

4.7 Empirical Framework


4.7.1 Case Study Research

“A strategy for doing research which involves an empirical investigation of a

particular contemporary phenomenon within its real life context using multiple sources

of evidence” (Robson, 1993, p. 143).

Robert Yin expresses that the use of a case study is one which must be done as a problem

solving tool to grasp and deal with complex contemporary issues. Complex issues such as

answering intricate “how” and “why” questions. Case studies were chosen as the tool of

research for this paper because case studies allow a lot of detailed data to be collected which

is not always possible with other research methods. Case studies also help to us to conduct

studies on rare cases where there are large samples of which none are similar (Yin, 2009, p.

8). As this report seeks to deal with a “how” question, the case study method is deemed to be

the most suitable and fitting method for answering the research question.

This thesis deals with how FLEGT/VPAs affect two particular corporations in Ghana and

Brazil. There are concerns of the validity as case studies are usually employed when the

researcher is there on the field of research to physically collect data through interviews but

also through observations. To bridge this gap regarding validity of our case studies, we were

particularly critical in the data collection. Organizational goals and other organizational

activities exclusive of FLEGT have all been put in consideration. Company data, national

data and website data have all been utilized to help us as researchers make up for our lack of

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physical observation in the two corporations. „How‟ and „why‟ questions are used in order to

attain a contextual understanding of the problem within the organization. Qualitative data

collection was used to gain a richer and more comprehensive response to the research

question (Yin, 2009, p. 23). The interesting thing about case studies as we quickly discover in

this research is that, within the case study, novel hypothesis surface which not only add new

dynamics to the research but also make interesting hypotheses for future research. Critics of

case studies usually point to the fact that the findings cannot be generalized and hence not

(high in validity) applicable to other cases. However, in our case we find that this should be

considered strength rather than weakness. CSR strategy in corporation should be individual in

nature, which we believe is an underlying interest for why we find the FLEGT agreement

interesting in the first place and why we want to investigate how firms view the agreement

and how they are combining it with their own CSR strategies.

4.7.2 Quality of Case Design

The quality of a case study is strongly related to the quality of the collected data. The quality

of the gathered data is strongly related to the quality of the findings and if they are really

what they appear to be, yielding consistent findings. Therefore when using a case study as a

research method, it is vital to have data of the highest quality in order to validate and qualify

reducing the probability of being wrong.

4.7.3 Credibility

According to Yin, the quality of a study and its credibility can be established by the use of

four common tests; construct validity, internal validity, external validity, and reliability.

During a research process, a researcher should consider the internal and external validity as

well as reliability (Yin, 2009).

4.7.3- External and internal validity

The internal validity of a research study is the extent to which its design or the data it yields

allow the researcher to draw accurate conclusions about the cause-and-effect or other

relationships among the data. In order to ensure the internal validity, the method of

triangulation – multiple sources of data collected – will be used (Yin, 2009).

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The external validity of a research is the extent to which its results are applicable to situations

beyond the study itself (Leedy & Ormrod, 2004). The results of this thesis are highly

contextual hence making it difficult to transfer them to a new setting; we argue however that

this is possible in organizations, which have similar nature as Logs & Lumber Co. Ltd and

Araupel.

2.7.3 Reliability

Reliability is the consistency with which a research‟s procedure yields a certain result when

the entity being measured has not changed (Leedy & Ormrod, 2004). When reliability is high

one can conduct the same research and conclude the same results as in this project. With

topics like CSR however, the evolution continues and there is always room for change, but

the reliability still remains high if scientific considerations, paradigms and theoretical

frameworks remain the same, which is very unlikely in social sciences based on the

epistemological and ontological stance that were previously addressed, all knowledge

production from a post-positivist stance is influenced by the researcher‟s view of the world

and the methods used

As previously discussed in the Philosophy of Science, validity is of high concern in the

production of scientific knowledge; to bridge the gap between subjectivity and reality. We are

constantly seeking validity from different stakeholders that are involved in this thesis process

to ensure that we are all in agreement when it comes to the findings of this thesis.

4.7.4 Units of investigation

The units of the investigation are the Araupel and Logs & Lumber Co. Ltd. Both are business

entities whose number one priority is concerned with running its business operations and

economic gain. This point is embedded in the epistemology and the ontology of both firms

and consequently, it influences their CSR activities and how these activities are interpreted.

This is influential in how we view the information and data that is received from both firms

and how the data is being interpreted.

4.7.5 Sources of Data

The descriptive, background and theoretical parts of this thesis are sourced from secondary

data. This data has been collected from journals, books, reports and internet sources. In

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addition to these secondary sources, primary data has also been collected in the form of

interviews regarding FLEGT and CSR-related issues as the main empirical evidence to

support this thesis. The objective of the case studies is to gather qualitative elements from the

respondent personnel from our case studies. Primary data collected through interviews is

certainly preferable in this thesis since it ensures the exact information needed is received

from the studied phenomenon. Continuous dialogue done through a form of semi-structured

interview with CSR experts is used in gathering relevant information concerning CSR

activities of the organizations. The idea behind semi-structured interviews is to ensure that

there is a flexibility which will allow important follow-up questions that are not originally

part of the structure to appear during the interview process. Also the semi-structured nature of

the interviews allows the researchers to focus on a restricted perimeter so we do not totally

drift from the subject in question.

2.3.7 Choice of respondents

Although, getting majority of the employees at both companies to participate in the

interviews would have been an important element in increasing the reliability of the research,

circumstance beyond the researchers control and the lack of the resources did not permit the

authors to do that. However, the authors of this thesis employed a strategy to ensure that the

critical respondents take part in this research. Even though interviewing other people who

did not work with CSR would have given a true perception of both companies‟ CSR

activities, due to limitations, the author of this thesis made interviews with personnel who

worked with CSR directly.

4.7.6 Interviews

Interviews will be used as a tool of obtaining data. It is a means used to gain knowledge and

information during research either as qualitative or quantitative. In this paper qualitative

interviews will be used since the focus is with the quality of the data i.e. the underlying

understanding of CSR and VPAs rather than the quantification of CSR. It allows us as

researcher to be open to the idea that we do not know it all hence, semi-structured interviews

create room and a degree of freedom for the interviewees to touch on issues that may not

have been foreknown.

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4.7.7 Interview guide

To help structure our data collection method, an interview guide was prepared which will

help direct us regarding issues like the sequence of the interviews, how to pose our questions,

and how to pose follow-ups questions based on a practical approach that we like by Carter

McNamara. In addition, the interview guide provides guidance about what to do or say next,

after your interviewee has answered the last question, leading to structuring our data and

analysis. For this thesis, interviews were chosen as the data collection method. The interviews

combined with relevant data collected (website, reports) about the companies we are working

with serve as our empirical data. This empirical data will help us to deduce our Theories and

frameworks; it serves as a guideline to see how the CSR-Theories based issues we address in

the research question relate to our case studies.

The interview design for this paper is based on a semi-structured interview questions or as

Turner puts it the general interview guide approach and standardized open-ended approach

(Turner, 2010). With this form of interview design, the researcher is in charge of the

questions and to a degree is in charge of what questions to ask. However, being that we are

inexperienced and our interview candidates have worked or are still working with CSR, we

allow them a degree of freedom to not only answer the questions beings asked but also give

their expert opinions even if it means “straying” away slightly (Turner, 2010). In other words,

even though we have an idea of the direction and objectives of our research, we do not

undermine the professional experiences and expertise of our interview candidates. The open-

endedness of our questions also allows room for viewpoints and opinions of our interview

candidates. Also, since the questions are semi-structured and give the illusion of an informal

free-flowing conversation, it helps us to come up with follow up questions that may not have

been considered in the first place. According to McNamara, the strength of this form of

interview allows us as researcher to collect the intended general data plus additional

information that may vary from interview to interview which many cases can make the most

interesting part of the analysis (McNamara, 2009).

When data has been collected, we will proceed to transcribing the data. When transcript data

is ready, the data will be read, labeled and coded (indexed) in different themes, topics, and

differences in opinion or similarities that were mentioned. In this section we are very critical

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about similarities and differences in actions, activities, and concepts. After coding, we will

proceed to grouping the data. When all of this is done, we will then proceed to the analysis.

5 BACKGROUND – Presentation of Cases

Eustaquio Brant

5.1 Forest Stewardship Council - FSC

FSC is a global and multi-stakeholder, non-profit organization dedicated to the promotion of

responsible forest management worldwide. This organization can “enable businesses and

consumers to make informed choices about the forest products they buy, and create a positive

change by engaging the power of market dynamics”. (FSC, 2014)

This organization was established in 1993, it is a voluntary mechanism initiative to promote

responsible forest management independent of governments and supported by other non-

profitable organizations such as Green Peace and LEED (Leadership in Energy and

Environmental Design).

FSC tries to normalize environmental services to local and global communities mitigating the

effects of illegal logging such as deforestation, climate change and keeping an eye on

environmental conservation and poverty alleviation. It is an international association of

members, which provides a scheme to ensure the permanent existence of forest areas through

responsible forest management and conservation.

The FSC logo is used to certificate that the timber and timber product come from responsible

sources that observes among other requirements the 10 Principles and Associated Criteria that

belongs to FSC basis:

Principle 1: Compliance with laws and FSC Principles – to comply with all laws,

regulations, treaties, conventions and agreements, together with all FSC Principles and

Criteria.

Principle 2: Tenure and use rights and responsibilities – to define, document and

legally establish long-term tenure and use rights.

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Principle 3: Indigenous peoples‟ rights – to identify and uphold indigenous peoples‟

rights of ownership and use of land and resources.

Principle 4: Community relations and worker's rights – to maintain or enhance forest

workers' and local communities‟ social and economic well-being.

Principle 5: Benefits from the forest – to maintain or enhance long term economic,

social and environmental benefits from the forest.

Principle 6: Environmental impact – to maintain or restore the ecosystem, its

biodiversity, resources and landscapes.

Principle 7: Management plan – to have a management plan, implemented, monitored

and documented.

Principle 8: Monitoring and assessment – to demonstrate progress towards

management objectives.

Principle 9: Maintenance of high conservation value forests – to maintain or enhance

the attributes, which define such forests.

Principle 10: Plantations – to plan and manage plantations in accordance with FSC

Principles and Criteria. (FSC, 2014)

Different from EUTR and FLEGT this is a private initiative and voluntary. Some

disadvantages can be associated to this type of certification such as time consuming and the

costs to apply for its authorization and to audit. Furthermore, since it is a global scale

organization, the schemes are not customized and most of the time can overrule local

circumstances of each landowners and producers.

5.2 FLEGT Universe

Eustaquio Brant

Before we present FLEGT and its underlying regulations, it is important to address why we

consider FLEGT/EUTR/VPA as CSR. First and foremost FLEGT influences the behavior of

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corporations in the timber industry limiting the trade of illegal timber. It directly shapes the

behavior of corporations by putting in place legal standards of sustainability and

accountability. It places a constraint on firms because they need to pass through the FLEGT

license system or a due diligence system before they are able to trade in timber. Finally we

argue that FLEGT is CSR because, it not only targets illegal logging but also, social elements

such as, Labor Rights, Indigenous Communities, Corruption and Ethical Forestry Governance

which are all elements of CSR. Directly it covers illegal timber but indirectly targets social,

environmental and governance.

In its text, FLEGT does not explicitly mention the term Corporate Social Responsibility but

the intention was clear – to set up minimum standards that European Countries and

Companies should live up to and at the same time could require from their international

suppliers. A clear signal, that the European Union was responding to society demands and

opening the way for a major awareness.

5.3 FLEGT - history

As mentioned previously, CSR´s concept is a continuously evolution on the understanding

what is society´s expectations of businesses as responsible social institutions. This idea of

business having social responsibility is not new, but corporate social responsibility has caught

more attention especially over the last two decades. Partially, it is as a result of corporate

misconducts arising from a misalignment between industry´s judgment regarding its

responsibilities and the concomitant and the constant judgment of society. It is an increased

societal consensus and awareness towards the Industries and its activities impact on the

environment, climate change and social / labor rights.

Another factor explaining this increased attention to CSR is the advent of globalization, a

phenomenon that connected global corporations with local communities across the globe,

with notable social implications. (Pnawar & Hansen, 2008)

Societal expectations of business differ not only by country and culture but also from one

industry to another. The wood product sector operates under more intense public scrutiny

than other extraction-based industries, because wood comes from forests and the public

commonly sees forests as natural places that should be relatively untouched by humans.

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(Pnawar & Hansen, 2008). Therefore the timber market is under a high public surveillance

nowadays. The high flow of information and the increasing public interest in environmental

topics and sustainability has shaped CSR in the Timber Industry into one of the most

elaborated and active.

Combining globalization and the shift of the communication power, citizens and costumers

are able to demand a more sustainable timber extraction, in two different levels: collectively

and individually. Collectively, forcing government and companies to create and apply rules

and measures to ensure legal origin certification of timbers products. Individually, consuming

products with certification and constantly checking transparency and possible flaws within

the production chain.

In the same reasoning, Cashore argues that in the recent years, transnational and domestic

nongovernmental organizations have created NSMD – Non-state market driven systems with

the aim to develop and implement environmentally and socially responsible management

practices. As way to eschew the traditional state authority, these systems and their supporters

have turned to the market´s supply chain to create incentives and force companies to comply.

As a result, an apparent “privatization” of governance according to some political scientists

or the role of market-oriented consumerism in forcing policy changes, according to some

social scientists (Cashore, 2002).

Furthermore the Timber industry is one of the biggest of the world, moving millions and

millions of money, affecting from local indigenous communities to international headquarters

in developed countries. Together with innumerous other causes it is considered to contribute

negatively to the climate changes in our planet, the water damages, the loss off biodiversity

and the shortage of resources for the future. Topics that not surprisingly are some of the

biggest issues of our century according to United Nations reports (European Commission ,

2014) (UNEP, 2014).

We will be focusing the Timber Market within the European Union, reflected in its Action

Plan on Forest Law Enforcement, Governance and Trade as response to illegal logging

trading with EU. According to the EU the scope of this Action Plan back in 2001 was:

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“Take immediate action on domestic forest law enforcement and illegal

international trade in forest products, including in forest biological

resources, with the support of the international community, and provide

human and institutional capacity-building related to the enforcement of

national legislation in those areas.” (Comission To the Council And the

European Parliament , 2001)

5.4 FLEGT – Action Plan

According to the European Commission for EU Forests and Forest related policies illegal

logging is the harvesting of timber in contravention of the laws and regulations of the country

of harvest (European Commission, 2014). Member countries of European Union understood

that the illegal logging is a global problem with significant negative economic, environmental

and social impact and therefore aims to fight illegal logging and its associated trade in an

Action Plan that was outlined in 2003.

“The illegal exploitation of natural resources, including forests, is closely

associated with corruption and organized crime. In some forest-rich countries,

the corruption fuelled by profits from illegal logging has grown to such an extent

that it is undermining the rule of law, principles of democratic governance and

respect for human rights.

In some cases the illegal exploitation of forests is also associated with violent

conflict. Profits from the illegal exploitation of forests (and of other natural

resources) are often used to fund and prolong these conflicts.” (Comission To the

Council And the European Parliament , 2001)

The target of this initial Action Plan was Central Africa, Russia, Tropical South America and

Southeast Asia accounting for nearly 60% of the world´s forests and supplying a large

proportion of internationally traded timber. The FLEGT Action Plan covered both supply and

demand side measures to address illegal logging, and was endorsed by the EU Council of

Ministers in November 2003 (European Commission, 2014).

The European Commission following the first steps in 2001, published FLEGT Action Plan

in 2003 setting out a range of measures available to the EU and its member states to tackle

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illegal logging. As EU is one of the largest consumers of timber products in the world, state

members and buyers have a lot of influence and impact on the suppliers in Africa, Asia and

South America. So if EU buyers trade in legally sourced timber by complying with national

laws, the effects will be towards a European local population and this will help to reduce

illegal logging (EU FLEGT , 2014).

This Action Plan is a big structure, created to reach some different goals at a short and long-

term. At a short-term there are direct and straightforward guidelines: prevent the import of

illegal timber into the EU, improve the supply of legal timber, increase demand for timber

from responsibly managed forest. But on a long-term, there are 7 different areas with more

unfixed agenda but aiming sustainable forest management:

1. Supporting timber-producing countries, including promoting fair solutions to the

illegal logging problem

2. Promoting trade in legal timber, including developing and implementing VPAs

between the EU and timber-producing countries

3. Promoting public procurement policies, including guidance on how to deal with

legality when specifying timber in procurement procedures

4. Supporting private sector initiatives, including encouraging voluntary codes of

conduct for private companies sourcing timber

5. Safeguarding financing and investment, including encouraging financial

institutions investing in the forest sector to develop due care procedures

6. Using existing or new legislation to support the Action Plan, including the EU

Timber Regulation

7. Addressing the problem of conflict timber, including supporting the development

of an international definition of conflict timber

From the beginning, it had a clear intention to constrain buyers and suppliers to legal

consequences to those trading illegal timber and avoid that the Action Plan would be only a

superficial Code of Conduct.

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So from 2001 till 2014, the European Union set the framework to deal legally at least with

environmental aspect of CSR within its territory, expecting to create awareness and an

influence a bigger zone outside the State Members. The chronological steps could be

summarized on:

2001: An Action Plan was discussed through The European Commission intending to support

efforts to tackle the problem of illegal logging.

2003: The European Commission presented its FLEGT Action plan, adopted by the Council

and the European Parliament. The EU developed the FLEGT (Forest Law Enforcement,

Governance and Trade) Action Plan, which provides a number of measures to exclude illegal

timber from markets. Improve the supply of legal timber and increase the demand for wood

products from legal sources.

The two main elements of the action plan are the EU Timber Regulation (EUTR), and

Voluntary Partnership Agreements (VPAs). The EU Timber Regulation (EUTR) and VPA´s

are part of the EU´s FLEGT Action Plan. They work together to combat illegal logging and

improve forest governance. While the EUTR are measures that need to be observed by

importers in EU, VPA´S are treaties that EU makes with timber- producing countries that

export timber to the EU, creating an operational licensing system to assess the legal timber

and comply with the EU Timber Regulation. This means that when purchasing timber under

FLEGT License, EU operators do not need to carry out additional due diligence checks.

Summarizing:

- EUTR: EU Timber Regulation states that in order to buyers place wood in

Europe it has to carry FLEGT License or the buyer need to exercise due

diligence. This meaning, that they must have access to information on the

source of the timber (such as tree species, origin of the wood and compliance

with national laws) and take steps to assess and minimize the risk of placing

illegal timber on the EU markets. Buyers and Operators need to keep records of

whom they bought timber from and to whom they sold the timber. This

Regulation came into force later on, on 3rd

March 2013.

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- VPA: Voluntary Partnership Agreement is a legally binding trade agreement

between the European Union and a timber-producing country outside the EU.

The purpose of a VPA is to ensure that timber and timber products exported to

EU come from legal sources. The agreements also help timber-exporting

countries stop illegal logging by improving regulation and governance of the

forest sector. Currently six countries have signed a VPA with the EU and

currently developing systems needed to control, verify and license legal timber:

FLEGT License (EU FLEGT , 2014).

5.5 FLEGT/Voluntary Partnership Agreement

In its text, FLEGT does not explicitly mention the term Corporate Social Responsibility but

the intention was clear – to set up minimum standards that European Countries and

Companies should live up to and at the same time could require from their international

suppliers. A clear signal, that the European Union was responding to society demands and

opening the way for a major awareness. Furthermore, with the Legality Assurance System the

European Member Countries were trying to lead the voluntary partnership countries

(referring to the target countries) to create more efficient and strong policies against

corruption and foster the social aspects of illegal logging:

This document, the EU Action Plan for Forest Law Enforcement, Governance

and Trade (FLEGT), sets out a process and a package of measures through which

the European Commission proposes to address the growing problem of illegal

logging and related trade. Addressing this issue is one of the European

Commission's priorities in the follow-up to the 2002 World Summit on

Sustainable Development (WSSD).

The Action Plan is the start of a process which places particular emphasis on

governance reforms and capacity building, supported by actions aimed at

developing multilateral co-operation and complementary demand-side measures

designed to reduce the consumption of illegally harvested timber [1] in the EU

(and ultimately major consumer markets elsewhere in the world). FLEGT Action

Plan (Comission To the Council And the European Parliament , 2001)

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The whole process is very innovative and didactic as it is a Law to the Member States of

European Union but open the possibility to be voluntary for the target countries to agree with

VPAs (Voluntary Partnership Agreements), preserving each nation‟s sovereignty.

The VPA is a bilateral treaty between European Union and a timber-producing country,

agreeing to control and license its timber exports as legal. On the other hand, the EU agrees

to recognize this FLEGT licensed on imports from that country. Ensuring timber legality and

LAS (Legality Assurance System) and licensing.

The VPA‟s are really important for those countries who apply for the partnership with EU

Countries as it engages different stakeholders from those countries to the participatory

process of establishing what would be legal or illegal timber logging and how to create a

secure and effective licensing and certification process (mandatory to the agreement

according to FLEGT). Throughout a business perspective, it would enhance the possibilities

to promote greater agility between both sides (supplier and customer), avoiding due

diligences that can generate costs and can be time consuming.

According to Food and Agriculture Organization of the United Nations (Food and

Agriculture Organization of The United Nations, s. 13), graphically the process would be as

the following

Figure 6: The Deployment of a VPA

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Once a VPA is discussed and formalized by the partner country, it will be analyzed and

approved by the EU. Only when all the factors preserved by FLEGT are observed, that the

VPA will be approved and gain validity with the respective traceability, licensing and

certification. The referred factors would include:

1. What is illegal logging for the locals?

2. How to develop and secure employment and competitiveness, to alleviate poverty;

3. Increasing government revenue and improving capacity of government and the private

sector;

4. Strengthening the rule of law and securing the rights of people who are dependent on

forests for their livelihoods (EU FLEGT , 2014)

It is important to mention that FLEGT is not only ruling out and preserving forest from illegal

logging but evoking social and ethical engagement, as each country interested in signing a

VPA and guaranteeing timber export to the EU should define its own Agreements. In the end,

FLEGT promotes not only benefits to the environment but also the facilitation of public

access to information. This involves different stakeholders from the civil society and the

public sector as players in participatory poll. The project also reduces corruption within

government by creating more transparency between the different actors involved.

Furthermore FLEGT is taking into consideration that citizens and local habits can foment a

national consensus and is therefore promoting a realistic approach for the adoption of

domestic regulations (Food and Agriculture Organization of The United Nations, s. 49)

When finally a FLEGT/VPA is signed, this agreement is legally binding for all 28 EU

Member States and the country involved and in case of infringements of this regulation each

Member State determines the penalties applicable.

A decade has passed from the Action Plan implementation till today. During this time eight

countries in West and Central Africa – Cameroon, the Central African Republic, Côte

d‟Ivoire, the Democratic Republic of Congo, Gabon, Ghana, Liberia and the Republic of the

Congo – have undertaken the VPA process and some of these were among the first to

negotiate and sign a VPA. Furthermore, countries in other regions have the intention to

formulate the agreement to facilitate its entry into the European Timber market.

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Figure 7:

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5.6 Chronological implementation of FLEGT Action Plan

Eustaquio Brant

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We sum up the FLEGT section with a timeline of the most important events in the last

decade. As we can see from the timeline above, FLEGT was designed as a set of measures

that work together to in different frontiers. If a country does not have a VPA in place, it can

still export and trade with the EU via a due diligences system covered by EUTR. However,

when a VPA is in place then trade in administered through FLEGT licenses making the

export process easier and faster. To us this is the aptitude and strength of FLEGT Action Plan

because it engages the power of the market and the public sector to force corporations to

perform CRS.

5.7 GHANA FORESTRY GOVERNANCE; VPA- Implementation status

Comfort Adjaka

Figure 8: MAJOR MARKETS OF GHANA‟S TIMBER AND WOOD PRODUCTS

EXPORTS: JAN- SEPT 2013 (TIDD, 2013).

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From January to September 2013, Germany, U.K, Denmark, Italy and France were the

destination with the highest export earnings for processed mouldings, as well as air dried and

Kiln dried lumber and sliced veneers (TIDD, 2013). As seen in the figure above, Europe

emerged as the major destination for Ghana‟s wood and wood products export during Jan-

September 2013 (the second largest in terms of volume but the first in term of value). It

interesting to see that even though the volume of timber and wood products sold to the EU

market is less than the volume sold to the African Market, Ghana earnes more from its trade

with the EU than in Africa. This is also interesting because, Europe buys intermediary

processed timber and not the raw material, an important factor for the FCG which wants the

timber industry in Ghana to make a transition from being an extracting sector to a more

industrial sector (FCG, 2014). This can be argued as a clear motivation for Ghana to

participate in the FLEGT/VPA. It can also be seen as an achievement and its ability to

influence trade and Ghana‟s timber industry.

Ghana is reputable for having strong innovation in timber processing and making timber

producted siutable for the European market, which results in the EU being the destination for

a little over a third of Ghana‟s timber exports (EU FLEGT , 2014).

5.8 FLEGT/VPA- Implementation status

Ghana has about 2.6 million hectares of forest reserves dedicated to timber production, its

forest sector accounts as the fourth largest contributor of Ghana‟s GDP (EU FLEGT , 2014).

Ghana started its VPA negotiations with the EU in 2006, however, the two parties made an

agreement in September 2008 and a Voluntary Partnership Agreement was signed in 2009.

The agreement was ratified in 2010 and Ghana has been working closely with the EU to put

in place a system of control as the country aims to start its first exports under the FLEGT

license in October/November 2014 (EU FLEGT , 2014) (FCG, 2014)

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Figure 9: Ghana’s VPA Implementation Status

(EU FLEGT , 2014)

According to the Forestry commission of Ghana

”Ghana sells timber with a purpose to continue to put only legal timber from

sustainable sources, adhering to the EU and International Tropical Timber

Organization principles. This means that, Ghana is working towards achieving the

EU's FLEGT (Forest Law Enforcement Governance and Trade) licensing and within

the US Lacey Act regimes and with the assurances to specifies that, Ghana will

continue to be at the forefront of international tropical timber market place for a long

time.

Ghana has a strong Forestry Commission (FC) including an overseas branch (FC

London Office), a long history of forest management and capacity for forest research.

The Ghana Government is keen to attract more investment and international design

and technical collaboration. Ghana has a number of small, medium and large

processing facilities manufacturing over 17 different wood products. These processing

mills can be reached depending on product interest elsewhere on this website” (FCG,

2014).

Ghana‟s forestry governing bodies like most developing countries are faced with the issues of

illegal logging in its timber industry. According to Fred Pearce, illegal logging accounts for

the employment of about 100,000 villagers in Ghana, also, illegal timber accounts almost

entirely to the timber sold locally (Pearce, 2012).

Since the EUTR came into force in March 2013, Forestry Commission Ghana (FCG) has

been working closely with EU. On a local plan, FCG has a registration scheme for all firms,

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especially a registration of exporters of timber and/or timber products have been made. An

excel document on the trade division of the FCG shows up-to-date information regarding

companies‟ valid timber holdings and concessions. It also include information about the type

of timber on the holdings, the species of timber on the holdings as well as reference numbers

that can be used in connection with the legality assurance system which is still under

development (FCG, 2014). With this scheme in place, importers, civil society and

government official can independently go on the FCG website to check for information

regarding validity of references. This also allows firms to send information to the government

regarding their holdings and concession and updates respective.

5.9 Logs & Lumber Co. Ltd.

LOGS & LUMBER CO. LTD (LLL) is situated in Kumasi, Ghana. The firm employs about

1500 local and expatriate workers. LLL specializes in the production and export of kiln dried

and air dried lumber, processed mouldings, veneers and other types of wood products as well

as unprocessed timber (TIDD, 2013). As of September 2013, LLL was the second leading

exporter of kiln dried lumber in Ghana, with a total export volume of 1,238.457m3 and a

value of 481,977.21 Euros. For the same period LLL also exported processed L/Moulding at

a volume of 320.752m3 and a value of 172,022.70 Euros, as well as air dried lumber valued

at 258,280.54 Euros and a volume of 874.491m3 (TIDD, 2013). The website of LLL:

http://lllghana.com/

5.10 BRAZIL FORESTRY GOVERNANCE

Eustaquio Brant

The coined term CSR, as repeatedly mentioned before, has not a fixed definition and indeed

it is an evolution of concepts that follows the society‟s understanding of what is ethical and

moral. It is subjective and ambiguous to each company as it is to each individual person.

Brazil is one of the largest countries in the world covered with a dense tropical and rain

forest. According to UN approximately 62% or 519.522.000 ha of Brazil is forested. Between

1990 and 2010 Brazil lost an average of 2.765.850 ha or 0, 48% of forested sold in the world

(Marfret, 2013). Most of the timber market is still for internal consumption, due to the price

and Brazilian controls to exportation.

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Nevertheless, Brazil is willing to reduce illegal deforestation or manage its forest resources in

a better way, counting with internal mechanisms and adopting permanently international

Programs. However, there are still high amounts of illegal timber and suspicious wood based

products that are exported, due to economically problems and corruption at all levels of the

Government Agents (Watts & Vidal, 2014)

Internally, Brazil has its own Environmental Agency responsible for approvals, permissions,

licenses, internal transport authorization and export permits to control timber traders and

harvesting companies. This Agency has the aim of preventing illegal deforestation, illegal

timber trade and make sure that preserved areas and indigenous community are under

protection. (Forest Legality Alliance, 2014). This institution is named IBAMA (Brazilian

Institute of Environment and Renewable Natural Resources). IBAMA‟s main aim is to be the

leader in the construction of a model of development based on environmental sustainability

(Ibama, 2014).

Internationally Brazil is also a close partner with the United Nations, mainly through UNEP

(United Nations Environment Programme), which aims at enhancing activities and projects to

promote dialogue among environment authorities and civil society. This dialogue is to

identify key environmental issues and developing policies and management tools to provide

inputs, sharing information and converting actions into concrete results (UNEP, 2014).

Furthermore, most of the exporters are aware of international requirements to Import timber:

Lacey Act in the USA, FSC for voluntary Certification.

Concerning specifically to FLEGT it is a new field to the Brazilian market and according to

the FLEGT Facilities South America in general has demonstrated a growing interest on the

FLEGT VPA and Brazil has not started any negotiation or bilateral Cooperation yet, even

though it is a main objective of the European Union (European Comission - Development and

Cooperation, 2014).

5.11 Araupel

Araupel is a Brazilian company located at the South of Brazil, with the Head Office at Porto

Alegre and the industrial plant at Quedas do Iguacu. About 336.000 cubic meters of logs/year

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are processed in an industrial complex of 463.000 square feet of constructed area. Araupel‟s

production comprises sawmills, kiln dryers, remanufacture, product storage warehouse and

other facilities (Araupel , 2014). Since 2001 the company is certified for Forest Stewardship

Council (FSC), being able to label its products with FSC Logo assuring buyers and

consumers that these materials are from responsibly managed forests. Araupel has

approximately 1700 employees and was established in 1975. Araupel trades with the most

important markets in USA, Europe and Asia. The Araupel website:

http://www.araupel.com.br.

6 ANALYSIS


Throughout the research and the data collection this paper tried to explore widely the

different aspects CSR applied to the Timber Industry, more specifically the impact of FLEGT

on the company´s businesses throughout three different angles:

- The European perspective: as FLEGT is a Law entered into force for companies that sell

timber products in the European Union. It is important to have a practical understanding how

it would affect European companies as well. We got an interview with a Danish professional

that worked several years with import of timber to Denmark and therefore could share her

expertise about the import procedures, FLEGT and different Certifications. However, the

central focus of this paper is to explore how FLEGT affects local (exporting) firms. Due to

this reason, the European perspective though important, is not central to the analysis of this

thesis. Hence we have chosen to only understand the implications for European importers by

having a brief understanding of how EUTR and FLEGT correspond in the import process. By

request of the interviewee her name and the company she worked for will be kept

anonymous. For practical terms we will refer to this interview as “V1”.

1 A former employee at a Danish timber importing firm, who worked with CSR and

timber, who wishes to be anonymous.

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- The Brazilian perspective: a country that produces and exports a considerable amount of

Timber to European Member States and therefore needs to follow the legal procedures to

place its products on the European market. Yet Brazil is has not signed a VPA with the EU,

the country is not even in negotiations about it. It is interesting however to understand how

FLEGT still affect Brazil as a major exporter. An interview was conducted with Mr. Gian

Carlo Marodin, who is the Sales Manager at Araupel S.A. Araupel is a Brazilian company

that trades internationally with USA, Europe (Denmark, England and Sweden), Australia,

New Zealand, Turkey, China and many other countries. Its products are 100% Brazilian

wood.

- The Ghanaian perspective: Ghana is one of the first African nations to enter into the FLEGT-

Voluntary Partnership Agreement with the EU. Europe is one of the biggest export markets

of Ghana‟s timber and timber products, as mentioned previously, in 2013 Europe accounted

for 48.52% of total timber export earnings. It is therefore implicit that Ghana has interests in

entering into partnership with the EU in order to facilitate this trade. The interesting point for

this thesis and consequently for CSR research is that, FLEGT is not a trade partnership but

rather it is CSR centered. On one hand, Ghana wants to use the agreement to fight illegal

logging and misuse of its forest resources; while the EU to fight the import of illegal timber

and timber products on its markets. This thesis does not focus on the intricacies of how the

Ghanaian government does this or how the EU directly fights import of illegal timber. On the

other hand, the approach is to find out the implications for exporting firms in Ghana because

this is where we believe the practical perspective is; the people who are actually working on

the field, they are aware of the EU importers‟ demands and they are aware of the

sustainability, legal, business and economic risk involved.

-

Various outcomes arose from the interviews we gathered with the different professionals of

the Timber market, corroborating the intrinsic nature of CSR. It helped us to blend our

research question and Theory, contrasting with our assumptions, and finally condensing our

acquired knowledge in our analysis.

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We started from the initial point of presenting our case studies in Brazil and Ghana, but the

Danish input was necessary to make the dialogue between the two sides of the commercial

relationship, from the timber exporter and the timber importer.

FLEGT mission is promoting a dialogue between the European Member States and the

country that wants to sign the VPA (Voluntary Partnership Agreement). In this sense we

would have a lack comprehension in this negotiation field if we have left the side of the

importer out. But our main focus is still the business exporter perspective.

We will compare and analyze the two main points of intersection between Brazil and Ghana

that is the core of this project:

- FLEGT (as a CSR factor) awareness level or the lack of awareness for each of the company

- Its impact on the company´s business.

6.1 ARAUPEL

6.1.1 Timber and wood in Brazil

The forestry and timber industry is a big component of the financial income of Brazil. By

June 2012, Brazil had approximately 8 million hectares of Certified Forest (FSC and

CERFLOR Standards). Besides the Certified timber there is a plenty of uncertified timber

being produced and processed that cannot be estimated and continues to plague the legitimate

timber industries (Enviromental Ministry of Brazil , 2014)

Timber can be harvested either from native forests or planted forests. The native forests in

Brazil are most located in the South of Brazil, where the Araupel is located. The most

predominant timber are pine and eucalyptus, that are produced, processed and traded in

Brazil, but many other species divided in hard and softwood are harvested along the whole

country, including: pulp, raw wood, wood chips, laminated wood, plywood, paper, flooring,

furniture, wood fiber panels, frames and packaging (Brazil - The forestry Industry , 2014).

The three main ways of legally harvesting in Brazil are (Brazil - The forestry Industry ,

2014):

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1. Planted trees

2. Via land clearance that has been authorized due to the forest being cleared for another

purpose (such as agriculture)

3. Via formal forest management, which requires approval from the IBAMA and

Environmental Ministry, through a sustainable management plan.

6.1.2 Araupel – General CSR Approach

CSR entails different study fields and as per the Theories considered to this paper at least four

big spectrums are reflected: instrumental, political, social and ethics. And certainly this is our

first verification of analyzing the data from the Araupel source.

When asked about the concept of CSR for Araupel, Mr. Gian Carlo informed that he does not

know the “CSR” expression but the company he works for has a very strong interpretation on

its responsibility, the prerogatives of its corporate citizenship and the influence of its

activities at the environment and the society. He told that he is not familiar with English

expression or acronym CSR but Araupel adopts FSC Certification and robust sustainable

standards to its products, even though the company obviously seeks financial benefits.

Even before consulting a representative of the company, on the Araupel website it is easy to

identify the preoccupation to distinguish their engaged profile towards Sustainability and

Social Responsibility.

According to Mr. Gian Carlos (and verifiable at Araupel website), the company has a very

precise definition and plan to act both sustainably and also Socially Responsibly.

“We work with two main definitions 1) Social Responsibility is to comply with labor

laws, keep employees happy, and keep good relationship with the local society. 2)

Sustainability is to ensure continuity of resources and prevent environmental

pollution. And therefore when we talk about these two subjects we have different

approaches”

Talking about Social Responsibility, Mr. Gian mentioned compliance to the Labor Law and

afterwards he talks about more voluntary and subjective policies, opening room for a business

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strategy interpretation when he makes use of expressions such as “employee’s happiness”

and “good relationship with local society”. It is difficult to measure these two concepts and

will depend on the balance of the local community demands and the company deliberation. It

is an important example on how the interplay between CSR and law will be of use to

Corporations and States in “handling the processes of change encountered by the welfare

state” (Buhmann, 2006).

For the Brazilian Company, the aspect of Sustainability is something related to legality but

also ways of preserve the future of the company´s activities, backing up with Certification to

prevent problems with inspection or clients, preserving resources for the future of Araupel

business, as they work with a renewable resource as long as it is harvested sustainably.

In practical terms, he explained how these two subjects have different approach:

“-Social Responsibility in Araupel = we hire employees only with a formal

contract; wages policy compatible with industry standard; payment of profit

sharing plan; overtime pay. We provide proper transportation from and to work;

offer meals in the company at a subsidized cost; offer health insurance counting

with medical and dental coverage, physiotherapy, and ambulance. Finally we

support social projects in the region and do not use child labor”.

It is interesting that when he lists the Social Responsibility action plan he most of the time

talks about the compliance of the law (labor laws such as salary wages respect, medical

coverage and no child labor). Then secondly, about deliberative activities of the company that

could explicit “employees happiness and good relationship with locals”, maybe showing the

preoccupation to be, first, legally covered and then, complementary, encompassing actions to

improve their social responsible image and reputation, expanding the obligation by law.

- Sustainability in Araupel = we use only wood from planted forests, in case we

need to buy logs it must have its origin certification. We select wood suppliers that

meet best practices for FSC controlled wood to avoid illegal procedures. It is

important to us that we keep reforestation rates at the same level of cuts. We make

forest management plan that enables the largest increase of the plantations and

keep native forest reserves. We also keep PRNP Corridor Iguaçu.”

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Regarding Sustainability, as part of Araupel understanding of CSR divided in two action

blocks, it is initially very much reliable on guarantying the future of their activities respecting

law, certification and clients demands (business approach) combined with altruism (taking

care of a Private Natural Reserve – Corridor Iguaçu) and ensuring their reputation.

Contrasting Araupel activities with our Theory , Araupel has a clear command of all four

fields that CSR Theories covers (instrumental, political, social and ethics) addressed by

Garriga and Melé:

Instrumental: The Company is interested in covering Social issues and Environmental topics

but as long as it is economically bringing benefits: “We do adopt the FSC that requires

standards to ensure environment protection, socially beneficial and economically viable”.

The Araupel website is didactic and transparent on their considerations on the core of their

activities but with a concern on the repercussion on the society and stakeholders. All

information is provided in Portuguese and English, targeting not only the national clients but

also the international ones, and different stakeholders. The speech is not technical and

exhibits most of the time the conscious work the company does and the objectives with each

project. It is appealing on how devoted the company is to social projects and nature

preservation, very much strategically well presented.

At the Araupel website they unfold more their mission/vision of their activities and market,

attempting to make sense for those that are interested at the company that being sustainable

adds value to their activities, positioning them as one of the best option among their

competitors.

“Mission: To be the best option in the conversion of forests and enthusiastically

generate satisfaction to customers, shareholders and employees, with social and

environmental responsibility”.

Vision: To be the best sustainable alternative in the processing and supply of wood

products for the industry worldwide civil and furniture construction.

Business: Transforming self-sustainable forests in value-added components to the

global construction industry and furniture”

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Political: Araupel understands the role its play in the Brazilian society and more precisely in

the south of Brazil, where the company has its activities. At the interview and the website,

Araupel informs continuously being 100% a Brazilian company and in charge of tutelage of a

Privately Owned Nature Reserve (RPPN), one of the major reserves of the Atlantic Forest

biome in the southern region of Brazil.

Being considered a high conservation value forest, the company took the initiative to commit

itself to the maintenance of one of the last ecosystems of this forest and to develop protection

and maintenance actions of the 12.728 acres. This land shelters a great biodiversity, flora and

fauna threatened or in danger of becoming extinct, data certified on the basis of native

inventory and animal survey. RPPN has brought social environmental benefits to the region

since its conception, as the water resource protection flows into the reservoirs of the power

plants in Salto Osorio and Salto Santiago, preventing the silting and guaranteeing the energy

potential. Furthermore it results on tax exemptions for the whole region, since it is an area of

environmental preservation (Araupel , 2014).

Mr. Gian Carlos understands the weight of Araupel activities and emphasizes the usage of

Origin Certificates, FSC Certification and the fact that the company promotes reforestation at

the same level of the harvest and tutelage of natural reserves. Once again, the company has

very strong understanding the political and social role in the zone and keeps as Principles of

the company both “business commands” and also “CSR commands”. Citing once again

Porter and Kramer, corporations should be aware that a sustainable action must be

incorporated from the very beginning of its operations and management to settle an effective

and valuable CSR agenda.

Araupel Principles (Araupel , 2014)

Business transparency

Respect to people

Ethics in relationships

Innovation

Focus on results

Human valorisation

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Commitment

Honesty

Flexibility

Ability to handle challenges

Team spirit

Araupel wants to avoid potential crisis, due to the core of their activities. The transparency

ensures that the company is truly engaged with its responsibility, not only complying with the

Legal requirements and also showing alignment with the more updated national and

international tendencies on Sustainability and Social Responsibility. CSR in this case is

incorporated at the Company and not only a “short-term defensive reactions – a never ending

public relations palliative with minimal value to society and no strategic benefit for the

business” (Porter & Kramer, 2006).

This attitude also influences the competitors by creating a net of awareness, considering that

Araupel has Social Projects, such as Guardians of Nature as a form to contribute to this

community through educational campaigns about the recovery of the “ciliary” forest,

distribution of native seedlings and selective garbage collection actions developed by project

monitors.

Social: Araupel is attentive to what is expected from the company and especially for the core

of its activities. Besides the instrumental and political CSR approach, Araupel is concerned to

make sure its employees and society “are happy”, according to Mr. Gian´s word, and the

company foster a good relationship with society surrounding it, on a responsive attitude with

strategic CSR traits.

As mentioned at the Political aspect, the company maintains at least three fixed Social

Programs that comprises its employees and also those residents in areas affected by the

activities of the company:

- The Giacomar Foundation: aims at providing structure and options of leisure to its

employees and family members. Becoming part of the Araupel team, the employee uses the

benefits through the Foundation, as its member. The benefits extend to the direct dependents

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(spouse and children). It has a Swiss soccer field, a sand-based soccer field, a bocce court, a

gymnasium – a multisport court, a volleyball court, a park for children and an ecologic trail

- Projeto Gente: The NGO – Projeto Gente, founded in1993, attends to children and

teenagers from Quedas do Iguaçu who live in a social and personal risk situation. Since 2001,

Araupel has been participating in the project, conceding an area in the city center to put into

practice the Community Vegetable Garden, a learning alternative through which it is possible

to experience activities of environment preservation and handling a vegetable garden,

connecting to -topics about citizenship, ethics, organic agriculture, conscious consumption

and respect to nature. Araupel extends its support buying part of the vegetable production to

be used in the Industrial Restaurant.

- The Guardians of Nature: Araupel has been sponsoring the Guardians of Nature since 2009,

the former Child Green Force, in Quedas do Iguaçu, a form to contribute to this community

through educational campaigns about the recovery of the ciliary forest, distribution of native

seedlings and selective garbage collection actions developed by project monitors

Ethics: The ethics aspects of Araupel are reflected throughout Mr. Gian speech and the

company´s mission and principles. The decision to manage the business profitably without

losing the ethical vision is noticeable along the interview.

The company might have external pressure to make decision, on a constant negotiation what

is right or wrong, addressing correctly disputes of moral diversity originated from different

stakeholders. But internally, Araupel is trying to live up to a standard that is not only required

by Law but also with on what they consider correct, adjusting appropriately along the way

(this constant changing on the perception on what is CSR). Strategically it is easier for a

company who has CSR on its agenda. It is kept the profit perspective but following the

client‟s behavior and the market demands.

Araupel and its involvement with society – Porter and Kramer Classification

Having Porter and Kramer´s Model of mapping social opportunities, we can infer that

Araupel´s CSR can be categorized as “Social Dimensions of Competitive Context” (as shown

in figure 5). Araupel is prioritizing social issues that are significantly affected by its activity

in the ordinary course of its business and also going beyond it and touching social issues that

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are not affected by the company business indirectly. As Mr. Gian explained, socially the

company covers labor rights, support social projects correlated to those that work to the

company; keep alive sustainable and environmental policies, attention to customer, healthy

and cultural programs to attend not only employees and the surrounding communities. There

are multiple legs of Araupel´s programs involving philanthropy, ethical statements, combined

to attention to the legality and always enabling profit and more visibility among the

competitive context.

Considering sustainable aspects, Araupel is member of FSC Certification to safeguard the

usage and control of legal planted forest. Avoiding “illegal procedures” and going beyond

compliance Araupel has the tutelage of a Privately Owned Nature Reserve.

The innumerous social programs and projects position the company on “Social Dimension of

Competitive Context”. All programs and projects are object of National and International

acknowledges prizes and Certification, and the result Araupel proudly feed at their website.

Applying to the Model of Porter and Kramer, we infer that “Looking Inside out” the company

is aware of the importance of all departments: Logistics, Operations, and Sales and after

Sales, preoccupied always with its reputation. “Looking Outside out” Araupel is also aware

of the market and its innovations, what can externally influence its productivity and the

context of the other companies involved at the timber industry such as partners and

competitors.

At “News” Section of their website they keep track of these implementations, giving a clear

sign that it matters for their strategy to sell the final product:

- Zero rates in customer complaint (February/ 2012): “Over the past five

years the company has significantly reduced costs of complaints from

customers of the foreign market. The survey shows that in 2012, the amount

spent to meet quality complaints accounted for 0,02% os annual sales”

- Araupel staff training in Europe (April / 2013): “Employees Alessandro

Moreira Soares, Alexandro Natal Sechini, Evandro Vieira and Márcio

Oldoni Pagnocelli spent ten days in Europe during the month of February.

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Involved with training on the use of equipment recently acquired by

Araupel.”

- Biggest and Best Companies in Brazil (August /2013): “Forty years

assessing the performance of Brazil companies, the Biggest and Best of

Exame magazine, in its July 2013 edition, brought on very encouraging

news. According to the evaluation criteria of the magazine, Araupel is rated

as one of the 400 largest agribusiness companies in the country, one of the

50 Brazilian agribusiness companies with the highest growth in sales and

sixth place in the ranking of the Wood and Pulp companies of Brazil”

- Araupel and the MDGS Award 2014 (July /2014): “According to the

coordinator of human resources, Tania Odorcick, “the prize is further

recognition for Araupel that has stood out beyond its borders by promoting

culture, health, and the quality of life of its employees and the citizens of

Quedas do Iguaçu.”

Businesses do not operate in a social or political vacuum (E. Post, T. Lawrence, & Weber,

2002, s. 15). In fact, most companies operate in a swirl of social, economic, technological and

political change that produces both opportunities and threats. Understanding Outside out /

inside out vectors is key to use CSR strategically.

6.1.3 ARAUPEL and FLEGT

This project used Brazil as a parallel angle to Ghana, which is the first country to demonstrate

interest, signed and ratified FLEGT/VPA with European Union to standardize and create

License System timber exportation. Brazil has not shown interest yet and according to the

FLEGT Facilities website in South America only Guyana and Honduras started negotiations

to establish a possible VPA with EU.

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Figure 10: FLEGT/VPA IN LATIN AMERICA (EU FLEGT , 2014)

It does not mean that Brazil cannot export timber and timber products to Europe. Araupel

exports to Europe, especially to Denmark, Sweden and United Kingdom as per Mr. Gian

explanation.

Even though Europe is one of the most important destinations to Araupel products, the Sales

Manager is not aware or knows about FLEGT Regulation even though it‟s exporting under

EUTR commands, valid for the importers. As per our previous analysis Brazil has a very

strict system and organizations to prevent illegal logging, on a very clear attempt to preserve

natural reserves of Rainforest Jungles and Atlantic Forest.

Most of the procedures to be followed are determined by Brazilian authorities, combined with

other requirements to export Brazilian products as Mr. Gian informed; which is very

demanding.

It is clear that the company is aware of the problems that it would find in case they use illegal

Timber. Besides legal requirements, Araupel has internal principles to make sure that all the

measures are followed to provide timber which harvested legally and with ethical and

renewable precepts.

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Mr. Gian informed that Europe has higher standards when it comes to Timber Importation

compared to other countries such as United States. Probably it is result of EUTR procedures

for Europeans, among all the FLEGT Action Plan. And report that the bureaucracy is

increasing even more, compared with the last 10 years. Good will is not always enough for

companies such Araupel, maybe because all due diligence EUTR covers and that Brazil and

Europe have not simplified it with the implementation of a Voluntary Partnership Agreement.

FLEGT in Brazil (and maybe Latin America) may not be on European Commission‟s urgent

focus as just two countries are under negotiations to implement a VPA. Compared to Africa

and Asia, the panorama changes slightly, as more countries are involved:

Figure 11

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But since it needs to be a voluntary Treaty between the exporter country and the European

Union, it is suggestive that Brazil has not shown interest yet.

As Araupel representative´s stated, the company is already following too many requirements

and collecting quite a huge amount of documentation to safeguard the legal origin of its

Timber. It would be beneficial for a solid company such as Araupel to condense its

procedures and promote business advantages to them. A simplification on its export

procedures would mean: reducing time consume with bureaucracy, making easy the exchange

of goods, leveling the requirements for all companies (those that observe CSR and those

which do not follow any CSR policy voluntarily) and strengthening the relationship with a

very important market to Brazil such as Europe.

Mr. Gian was clear about it, exposing his personal experience and understanding of it:

“Governments are more interested in collecting more fines and without being too

engaged, so they concentrate efforts to control only the large companies and trying to

apply fines for exceptions. The Government is not efficient on observing all the

stakeholders and therefore concentrates efforts only with those who already obey the

law and spend more time and money trying to perform legally”.

So even without knowing FLEGT in depth he mentioned the main problem that FLEGT

wants to abolish: “It aims to reduce illegal logging by strengthening sustainable and legal

forest management; improving governance and promoting trade in legally produced

timber.” (EU FLEGT , 2014)

Mr. Gian perception is that FLEGT would be another set of rules that Araupel would need to

follow in order to place orders in Europe, when in reality it would adapt and make easier for

suppliers to export to European Member States. As the FLEGT long term Action Plan is

sustainable forest management. With specific focuses on seven broad areas listed below (EU

FLEGT , 2014):

1. Supporting timber-producing countries, including promoting fair solutions to the

illegal logging problem

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2. Promoting trade in legal timber, including developing and implementing VPAs between

the EU and timber-producing countries

3. Promoting public procurement policies, including guidance on how to deal with

legality when specifying timber in procurement procedures

4. Supporting private sector initiatives, including encouraging voluntary codes of conduct

for private companies sourcing timber

5. Safeguarding financing and investment, including encouraging financial institutions

investing in the forest sector to develop due care procedures

6. Using existing or new legislation to support the Action Plan, including the EU Timber

Regulation

7. Addressing the problem of conflict timber, including supporting the development of an

international definition of conflict timber.

Due to the lack of knowledge, Mr. Gian presumes that FLEGT is a new way to impose non-

tariff barriers to protect the European Market. He lacks the understanding that he is already

working with FLEGT through EUTR and Araupel is directly influenced when it is exporting

to European companies:

“There may be increased the bureaucracy required to export especially for the

developed nations (Europe and USA), which are creating new import control

mechanisms. Some of these are legitimate; others are disguised non-tariff barriers to

protect markets”.

6.2 LOGS & LUMBER CO. LTD

6.2.1 Timber and wood in Ghana

According to Gina Smedley our contact person at Logs & Lumber Co. Ltd., before one tries

to analyze the timber industry in Ghana it is first and foremost important to understand how

the forestry industry works in the country. The timber industry in Ghana is by holdings and

concessions, as lands are family/privately owned in Ghana. This means that you can buy a

piece of land from a private family or a chief with whatever interest one has.

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“In our case, our concession was owned by the founders of LLL when it was started in

1967, since then we have bought and invested in some more lands, which we have

invested in for the future. However, even though the land is privately owned, it must be

registered with the Ministry of Lands and Forestry and depending on the purpose, for

which one intends to use the land, it must also be registered with the respective

Ministry for approval. For example if it is for mining, a school project or a factory,

then one has to inform the authorities and the Ministry or service commission who are

in charge of the specific project one has in mind. In our case, it is used for logging so

we have to register with the Forestry Commission of Ghana as well as the Ministry for

Trade, and Forest Reserves. It is important to also mention that, when all the right

registration is done, the process does not stop there (Smedley, 2014).

According to the FCG, firms are required to have quarterly registration-updates to the FCG

regarding which referenced timber has been logged on which date and what destination these

products are headed (TIDD, 2013). Quarterly reports and annual reports have to also be made

to the FCG and the Ministry of trade.

6.2.2 Log and Lumber Co. Ltd – General CSR Approach

Before we get into the analysis of the impact of FLEGT on companies like LLL, it is

important for this thesis to establish a clear understanding of what LLL means when it talks

about CSR, independent of FLEGT. According to LLL, since its establishment in 1967, the

firm has always had a project called the Reforestation project which focuses on the

importance of proper forestry and logging practices (Logs&Lumber, 2011).

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Figure 12

“For us, the Reforestation project is all about not only securing our concession but also

our future: If we have not had this mind-set and mission from the beginning we would

have been out of business a long time ago, for us it‟s a no brainer that sustainability is

not only for the good of the community but for our own good. Reforestation was

important to us even before the EU or the US showed up and this has always been a

core mission of our business” Gina Smedley.

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Figure 13

The Reforestation project in a nutshell is about sustainability. LLL replants in all its

concessions so that they can be logged in the future, rather than always searching for newer

concessions and buying new holdings. For LLL, sustainability means professionalism from

the field to the factory. According to LLL, they have programs to help train the workforce on

proper logging technique and how to log with minimal risk to the surroundings. They have

experts from Holland who come to train the employees on how to properly use the machinery

that they use both in harvesting and processing the timber to ensure minimum waste. Planting

trees is also another important part of the Reforestation program, LLL mentions that, they are

involved in the Ghanaian governments agenda to promote a greener Ghana (Smedley, 2014)

(Logs&Lumber, 2011)

Apart from the Reforestation project, LLL says that they also give 5 percent of their annual

earning shares to the communities that are directly affected by timber extracts as required by

the Forestry Division of Ghana (Logs&Lumber, 2011). They also support local education

programs to sustain the forest fringe communities by educating them about proper

sanitization and waste management programs to ensure that the natural ecology of the forest

is maintained (Logs&Lumber, 2011). LLL is also involved in the HIGH CONSERVATION

VALUE FORESTS (HCVFs), a program that is concerned with the protection and

conservation of values in Ghana‟s forests reserves.

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Regarding CSR in general, LLL envisages that it obtains the following benefits from its CSR

activities and the benefits it gains from actively being a participant in different CSR

certification programs as well as forest reserve programs both locally and internationally:

- Increases its market share

- Encourages minimization of waste in harvesting and onsite processing

- Provides competitive advantage

- Improves public image of the company

- Ensure compliance with local and international treaties

- Better access to higher value markets

- And above all promotes sustainability of the company through sustainable forest

management (Logs&Lumber, 2011).

6.2.3 Log and Lumber Co. Ltd – FLEGT/VPA

This section of the analysis will address the impact of FLEGT/EUTR/VPA on LLL‟s

business practices. Though the FLEGT/VPA license system is still in the implementation

stage in Ghana, Gina Smedley mentioned that, they are advised by the government and Civil

Society to start adjusting and embedding the FLEGT regulations and requirements in the

companies‟ operations. As in the future, it will be the way forward, especially for exporters in

the timber industry in Ghana.

Ghana is still in the process of putting in the system of control that will enable the legality

assurance system to work. In the meanwhile however, LLL is advised to go on the FCG

website regularly to update the firm‟s concessions and timber holdings and to cross-check

whether the information on the page corresponds with their stock information, a practice that

would become mandatory when the FLEGT system becomes fully functioning.

Currently, the export process for LLL‟s European customers is proactively driven by the

buyers‟ (importers) demand.

To be completely honest, before Ghana signed the FLEGT/VPA LLL aligned itself to the

wishes and demands and what are customers wanted, even though the firm considers CSR to

be an important part of its business (Smedley, 2014). Over the years however, as American

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firms and European firms started sending LLL similar inquiries about certification and proof

of the source of products; asking which agencies can confirm this information, LLL then

became more proactive versus reactive compared to what they were in the past (Smedley,

2014). Since 2008-2009, following the amendment of the Lacey Act of the United States,

coupled with the enforcement of the EUTR in 2013, many of our customers informed LLL

about the changes that had been made both in the EU and the United States. They informed

us regarding the Legal penalty that they risk if the source of their imports were not legal.

Consequently, LLL expressed that, due to this, they had to adapt and accustom themselves to

these changes. The legal department had to actually study and dissects both regulations,

especially the EUTR, because we have a bigger market share in Europe than the U.S.A. For

LLL, the belief was that, as they got accustomed to the EUTR, it helped them gain a

competitive advantage over other exporters in the country (Smedley, 2014). It is evident here

as previously addressed in the theoretical framework that, for corporations, CSR is never

really about the ethics of the matter.

As apparent in Gina Smedley‟s interview as well as, the information on the LLL‟s website,

CSR is accepted in the company because of its benefits, especially for the image boost it

gives to international buyers. The instrumental approach to CSR is prominent, as discussed

by Garriga and Melé, it becomes evident in LLL‟s openness to embrace CSR and

sustainability in general because of the economic and marketing advantages that they bring to

the company.

With FLEGT/VPA, the implementation is still on going, according to the FCG, the first

timber to be exported out of the country under FLEGT licenses was scheduled for October

2014 (FCG, 2014), and no information has been published on the website of FCG about that

yet. LLL expressed that they are looking forward to actually have their first export under the

FLEGT licenses. They expressed that, if one is accustomed to working with EUTR or the

Lacey act, FLEGT/VPA would not be a big deal. “The requirements have always been a part

of our export process to the EU and the United States”, they are not really that new according

to Gina Smedley the only difference is that now the Ghanaian government is involved in the

process and the legal risks are shared between exporter and importer, she added (Smedley,

2014).

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The only new thing perhaps is the Legality assurance tracking system, which would make

tracking of the wood international, compared to how it was in the past. For the authors of this

paper‟s understanding what is currently being done in terms of tracking the source of the

wood is, the references that government officials put on the timber at the holdings and

concessions which are only traceable nationally. This means that when a firm harvests a

number of timbers, they have to go into the referencing system to inform the Ghanaian

government about the reference number and its destination if known. The aim of this was to

keep track of the holdings, to avoid concessions being harvested illegally, but even this was

only applicable to exporters and not firms who sold timber on the local market because no

one really followed up on them (Smedley, 2014). Even though the same problem may

continue with the Legality assurance tracking system, it would be difficult for firm to mix

legally reference timber with the illegal ones because for every timber there is a reference,

hence when it becomes difficult to trace the source of some wood or timber, then the buyer or

the government can go in and investigate further.

As observed, LLL is open to CSR and subsequently FLEGT, it does not foresee any

enormous changes when FLEGT/VPA license becomes fully implemented in Ghana because

the components of FLEGT/EUTR and are also very similar to the Lacey Act. LLL argues

that, if one is acquainted with them, then the VPA would not make a huge difference in their

daily operations as an exporter. LLL also expressed that, compliance to these regulations

helps them gain competitive advantage because it becomes easy for buyers to work with them

or buy from them because they already know the procedure.

European buyers especially are always concerned with the issues of illegal logging because

of the risks attached, i.e. the fine or legal penalty they could face. Due to this, it is of course

easier to work with a supplier who is aware of these legal risks and has already put in place

measures to help mitigate those risks.

Another interesting point of observation is that, unlike other certifications, LLL and other

local exporter of timber are involved in the process of FLEGT/VPA, and have been from the

beginning. This is also important because before, all CSR efforts were company-based and

individually drawn to fit the company and what it considers to be important. Now with

FLEGT, we observe that, the efforts are more collective, it involves, the EU, the Ghanaian

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government, the local exporters and the international buyers and Civil Society. All of these

stakeholders are coming together to have a collective input on CSR in the timber sector.

LLL and its involvement with society – Theories applied

In relating what we know about LLL with the different groups of Theory , it is clear that, the

instrumental approach of thinking about CSR is very dominant. LLL is of course concerned

with ethics as well, this is evident in the voluntary educations they partake to educate the

forest fringe societies and the also their own employee on proper harvesting techniques. They

are concerned with ethics but again we argue that, the instrumental approach of CSR is very

dominant. If there were no economic benefits, LLL would not have been so open to CSR in

general, the Lacey Act and subsequently FLEGT.

The political approach is also evident in LLL‟s CSR scheme because to a certain extent, some

of its actions are not completely voluntary, for example, the 5 percent they give to local

communities is done because the Forestry Division of Ghana requires that all resources

extracting companies, like, mining companies and logging companies must do this. As the

political Theories address, with the power that corporations gain, they also must give back to

the society, especially those that are directly impacted.

The social integration angle of thinking CSR is also evident in the sanitation program and

other activities that LLL involves the forest fringed communities with. As Garriga and Melé

discussed and as we mention in the theoretical framework, the 4 approaches of CSR are

rarely separable, and as we see with LLL, this is the case. The instrumental, political, ethical

and social integration dimensions are all embedded and visible in LLL‟s CSR activities.

Garriga and Melé‟s classification of CSR Theories is supported by Carroll‟s CSR pyramid

which also mentions that CSR is not completely about philanthropy and ethics as many

people would like to believe but rather a combination of four pillars; economy, legality,

ethics and philanthropy. CSR is not only voluntary because it is about economic benefits and

sustainability of the business; it‟s about legality because it's compliance to the laws as well.

In relation to Logs & Lumber Co. Ltd, we also observe that these four pillars are all evident

and as argued by both Carroll and Garriga and Melé they are in almost all cases in separable;

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even though the instrumental and economic motivation is more evident. LLL clearly states on

its website as well in the interview that, their CSR activities help them gain competitive

advantage. It makes it easier for suppliers to work with them because they are aware of

LLL‟s competences and standards pertaining to laws, regulations and the specific export

requirements of the EU. LLL prides itself in knowing FLEGT/VPA and EUTR requirements

because many of their suppliers are working with these legal requirements as well. Legality

in CSR is not always obvious to external parties but in the case of LLL we see it to be very

obvious. Giving 5 percent of earnings to local communities is done by LLL because it is

required by law, the Ghanaian government.

Kramer and Porter also discuss as well as shown in our Theoretical framework, a new way to

study the relationship between business and society: moral obligation, sustainability, license

to operate and reputation. This again emphasizes the political Theories discussed by Garriga

and Melé about the power that corporations gain and how this power should be handled in

relation to society. Kramer and Porter talk about the moral obligation that is accompanied by

this power, what is ethical, what is moral? What is the right thing to do? And this is

individual to each firm. For LLL, what is ethical is helping the local societies, which is why

apart from the 5 percent required by law they also help support educational programs.

Sustainability is evident in the replanting of trees, training of staff and also the education of

the societies that live around their forest holdings. They train them about proper farming and

waste management programs so they do not cause any harm to their stock. The “License to

operate” angle addresses the issues legality that is associated with operating a timber export

business; the license to own a concession; to log and to sell the products whether locally or

internationally. It also covers regulations like EUTR, FLEGT and the Lacey act, all which

deal with forestry and conservation of wildlife. The reputation aspect of Kramer and Porter‟s

model is also instrumental in that is talks about marketing, the image, the brand of the

company and how CSR can affect the way society views the image of the company. LLL is

concerned with gaining certification and is an active member of the forest and wildlife

conservation programs because this boosts their images as a company. As we see through the

different Theories chosen for this thesis, CSR is not just one dimension, it is multifaceted,

and it includes, an economic approach, a sustainability approach, an ethical approach and

finally a legality approach. As argued for by all the 3 Theories for this paper, these four

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approaches to CSR are often inseparable as we also observed her with LLL. The motivation

behind CSR activities at LLL includes all four aspects of CSR.

Finally on Porter and Kramer‟s Corporate Involvement in Society Model (Figure 5), LLL is

categorized in the second category: Value Chain Social impact. LLL is actively involved with

CSR and has a very responsive CSR approach. The firm is responsive to buyer‟s demand and

legality, but still lacks the “extra” mile of covering other fields that are not directly affected

by its activities. LLL is not taking any opportunity to transform social issues into value when

considering its CSR approach.

7 Discussion


7.1 Brazil x Araupel x FLEGT Impact

As we presented in the analysis of this thesis, Brazil has NOT signed the FLEGT/VPA nor is

the country in talks about negotiating a Voluntary Partnership Agreement, even though Brazil

exports timber and wood products to Europe. As the secondary data collected about Brazil as

well as the empirical data from Araupel present, buyers from the EU take the initial

responsibility by putting in the due diligence during the buying process as is required by the

EUTR leg of the FLEGT Action Plan. European buyers are required by law through EUTR to

put in this due diligence in order to mitigate the risks of trading in illegal timber. So this does

not prevent Araupel and other suppliers from exporting to the EU.

From Araupel, we learned that, the export process takes longer as buyers need to do the due

diligence thoroughly because of the lack of FLEGT/VPA and the level of corruption in

Brazil. As pointed out by V2, buying tropical timber and timber products is also looked upon

by many European corporations as risky. Regulations like FLEGT/VPA make it easier for the

buyers to go through the buying process knowing that, the risks are shared and being aware

that suppliers are just as concerned of the penalty involved as they are. Even though

certifications like FSC are helpful and they benefit in the due diligence process, they still lack

the legality pillar which for the European buyer works as a safety net. Also considering the

level of corruption and bureaucracy that exist in countries that produce exotic timber, V,

2 A former employee at a Danish timber importing firm, who worked with CSR and

timber, who wishes to be anonymous.

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mentioned that even when firms do the due diligence it is difficult to fully trust the

authenticity of the certifications that are provided. Timber regulations in Brazil in general

still have a long way to go and Brazil still has a milestone to cover regarding its CSR policies

and regulations. Another interesting observation is that, Brazilian firms like Araupel do not

even know about FLEGT. In the initial stages of the data collection, we thought that the lack

of knowledge about FLEGT was attributed to language barrier. We observe that, his initial

reaction when he found out it was sourced from the European Union Commission, “this was

just another way for the Europeans to control us even more”. Though Araupel exports to

countries in the EU and they go through the due diligence required by EUTR, the firm does

not have an understanding or knowledge of FLEGT and have always taken a responsive

position when it comes to their export processes.

Comparing the Araupel discourse and the one provided by the V, it is easy to find

corroboration on many of the points Mr. Gian´s declarations. It is important to make this

parallel between our interviews just so we have the correct picture on this relationship

“exporter x importer”. CSR is an asset of the company, impacting its reputation and business

strategy and therefore in order to have the most neutral and accurate information we mirror

the information we got from the Brazilian company with the V who has work from the

opposite end of the coin, as a CSR expert in a Danish company.

The aim of FLEGT Voluntary Partnership Agreement is to influence positively Countries to

promote and foment the CSR practices, empowering the suppliers to adjust their activities to

a certain level of CSR attitude; while strengthening trade relations with European Countries.

So even though the aim is the assurance of legality of the exported timber, it will directly

affect the way exporters run their business.

Araupel, the Brazilian company, claims it does not work with FLEGT, yet it is an exporter to

European market, fulfilling CSR policies and offering correct documentation for due

diligences of EUTR (such as FSC Certification and Origin Certificates). The export process

and even the choice of company is highly regulated and influenced by this due diligence that

is required of buyers in Europe through EUTR Regulation. Hence even if Araupel is not

aware, as long as it is exporting to the EU, it will inevitably work with EUTR.

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The Danish representative informed, likewise, from the beginning of the interview that the

VPA leg of FLEGT is very recent and that would be the explanation for the lack on its

implementation in countries that are not negotiation VPA´s yet. V was also not completely

aware that EUTR is FLEGT and the VPA is just another leg under the FLEGT umbrella. V

continuously repeated that it was not possible to import under FLEGT scheme from Brazil3;

however, EUTR is part of the FLEGT scheme. From our empirical understanding of the

FLEGT, we assume that what V meant was that it was not possible to import under the VPA

leg of FLEGT because Brazil has not signed a VPA hence Danish firms apply due diligence

and accept FSC as a complementary certification.

V indicated that the Brazilian Legislations and local laws are also actively fighting illegal

timber and illegal logging and therefore most timber exporting companies are pretty aware of

the necessity of CSR policies, making due diligence pretty efficient even when they do not

know about FLEGT/EUTR:

“For instance, Brazil has done a lot of work over the last 7 years, the governments

through their IBAMA Department. They are doing a lot with a lot of different

measures.”

She added:

So let´s say I am importing IPE from Brazil, which is highly suspicious specie in a very

risk country, then I would require all my suppliers to provide FSC Certification to me.

That could be part of your mitigation process.

Araupel admits also that the Brazilian authorities are working hard to improve standards

when it comes to illegal logging through local forestry regulations like IBAMA. Both V and

Mr. Gian mention that rigidness of the law differs when it comes to big companies and small

companies. It seems the big companies are more susceptible to the penalties of the law and

controlling and maybe that is why the big companies have already such developed CSR

policies. They added that on the Brazilian market you find two groups of companies: on one

side the large companies that are doing their own due diligences and cooperating with

importers, more engaged, proactive with a business approach as they want to avoid problems

3 Refer to Appendix i.

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with Licenses and Government; but in the other side there are small companies, in small set

ups, and they do not care about legality so they process illegal timber. For these small

producers, it is irrelevant if the authorities find out, as they can move from one zone to

another easily, eluding the local area before of being caught.

If Brazil should sign a FLEGT/VPA, it would be covering both situations: government

corruption and leveling the requirements for companies to promote a standard of CSR

mandatory for exporters to European. In other words, the FLEGT scheme would reward and

guarantee profits for those who follow CSR and furthermore repressing informal and illegal

timber traders, by legality and also by pressure of the market (if their products are to be sold

to European buyers). From the Importer perspective, it would be easier to ask only for the

FLEGT License and avoid all divergent procedures that now are emplaced to import timber

to Europe.

Both informants agreeing on the necessity of create a system that can unify procedures

making things easier from the exporter side, which needs to fulfill all customers‟

requirements and the Brazilian government regulations as separate entities which would not

be the case if there were a VPA in place.

7.2 Ghana x Logs & Lumber x FLEGT impact

In comparison to Brazil, Ghana has signed a VPA with the EU and the country has been

working to put in place a legality assurance system that allows Ghana to export under FLEGT

licenses. After analyzing the data collected from Logs and Lumber Co. Ltd, we found that

they had much more understanding about FLEGT, both on EUTR and the VPA. LLL

specifically mentioned on their website and also in the interviews conducted with them that

knowing FLEGT/EUTR/VPA and aligning their CSR policies to match the regulation gives

them a competitive advantage over other exporters.

As mentioned, Ghana is set to start exporting under FLEGT licenses from October/November

2014, but the government and Civil Society and the stakeholders involved in the VPA have

already been advising firms like LLL to start embedding FLEGT policies in their business

operations. Also, since Europe is the second largest export destination, even before Ghana

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signed the VPA, exporters have inevitably had to work with EUTR and consequently

FLEGT.

For LLL the observation is that, FLEGT/EUTR/VPA is a win-win situation for them because

it makes the export process to the EU standardize. They do not have to worry about the due

diligence process or any other form of inquiry which is not already within the confines of

FLEGT and for LLL this time-saving and resources- saving.

We observe in this instance that for LLL and in this case, exporters in Ghana who are already

familiar with FLEGT/EUTR, FLEGT/VPA will not bring about major changes in the export

process. In the business process, the companies will not only have to use FLEGT during the

export process but rather, as an integrated part of their business operations which cannot be

seen as an external regulation but rather an internal one that is aligned with its current CSR

activities.

Mirroring what we know about Ghana with V‟s interview, we observe that for buyers the

VPA is helpful in that risks are now on both companies and not only the importer. Also as

she pointed out, FLEGT will not make any changes for the importer because they are still

required by law EUTR to put in an extensive amount of due diligence to mitigate the risk of

getting a penalty or fine. We also observe especially from the point of the European buyers

that, they are not naïve regarding issues of corruption and falsification of licenses;

consequently, they do not fully trust the effectiveness of local certifications. With the legality

assurance under FLEGT it is not only the government or the corporations that are involved

but also Civil Society, the EU and other stakeholders are involved in the monitoring of the

system so it is not easy to forge or falsify.

Hence a system that works for both sides to make transactions and trade easy while ensuring

that the products that are being traded are from a legal and sustainable source. So again we

observe that the motivation for LLL‟s FLEGT/VPA enthusiasm is highly influenced by the

economic benefits it brings to them. It eases the export procedure because the expectations of

European buyers have become standardize as a legal requirement while they are willing to

integrate as part of their business and CSR activities.

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8 CONCLUSION


The thesis went through a deep investigation and built knowledge about CSR with the final

scope to reply our research question: What are the underlying constituents of

FLEGT/VPAs and how do they impact local firms exporting to the EU?

The research question encompasses different concepts and can bring different approaches and

Theories to play along. But our main filter was legality in CSR applied at the Timber

industry. In this case, while the FLEGT (Forest Law Enforcement, Governance and Trade)

was representative to our study of CSR, Local Firms in Brazil and Ghana exporting to EU

were representative to the impact of CSR on our society.

The Theories used to frame our analysis are the most relevant within the field of Corporate

Social Responsibility and therefore helped us to dissociate the extrinsic aspects of companies‟

speech and filter the most neutral component of the interviews in order to ground our

conclusions.

CSR applied at the timber industry is mostly driven by the economic and legal elements of

CSR, with traits of Ethics and Philanthropy. Companies are concerned on preserving its

sources of activities by maintaining the deforested areas with programs of reforestation

guarantying a long-term running of their business, with a very clear economic intention. At

the same time, branding it as sustainable attitude towards its stakeholders and complying with

the settings required by Law.

The legality within CSR practices are on the latest understanding of CSR definition,

disconnecting to the idea that CSR is a self-regulation code of conduct of companies, seeking

to behave as good corporate citizens. As a certain level of standards is demanded by public

opinion, public sectors and social expectations, Governments feel the pressure to

institutionalize minimums of performances that companies should observe and consequently

object of monitoring, audit and penalties.

FLEGT is archetypal of this moment within CSR, where civil society increased expectations

towards the retributions the Corporate Sector needs to compensate the common welfare,

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guarantying not only possibly damages reparations but also social progress, going beyond

responsive behaviors and claiming strategic results.

The impact of FLEGT / VPAs on local firms at the current stage of its implementation is not

yet completely tangible. FLEGT /VPAs are a result of an evolution of measures and previous

arrangements on the CSR evolution on Timber Market. It is still very recent to measure the

benefits or validity of the VPAs License System. As exposed previously, European Union

address many different CSR element when published it‟s FLEGT Action Plan (including

VPA´s and EUTR) and therefore to align all State Members and outside Partners around the

world will take time to sediment and create an affiliation movement.

According to the Director General European Commission, Stefano Manservisi, “the FLEGT

Action Plan complements the natural resources management agenda and the governance

agenda, two key issues for development for the European Union. The VPAs are excellent

illustration of our vision for development cooperation as it represents a joint commitment

from EU and developing countries to fight against illegal logging and promote good

governance. It also represents a renewed political dialogue on those strategic issues,

respecting the key principles of ownership, as the agreement is of voluntary nature, and

partnership, a set of supporting measures jointly agreed, and, from the EU side, and excellent

collaboration between the Commission and the Member States”.

Companies, in Brazil and Ghana, already adapted their profiles to private Certification

Systems as FSC, local regulation and sustainable management of its resources. With the

implementation of FLEGT at the European market since 2003 with the Action plan and later

on with VPA (2005) and EUTR (2013) both sides of the timber commerce, buyers and

suppliers, needed to adjust directly or indirectly to this new approach of CSR Legality. More

globally and holistically, it addresses environment, different stakeholders, good governance

and corruption, public awareness.

Any regulation (including EUTR) or Certification (such as FSC) schemes were relying on the

companies‟ responsibility, buyers need to exercise due diligence and suppliers fulfill

requirements. FLEGT / VPA´s innovation relies on the inclusion of local Governments,

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outside EU Member States, to get involved and sponsor awareness, control and monitoring

legal timber harvest accordingly with a License System.

The implementation of FLEGT is still on a very initial stage. Few countries are involved in

negotiate VPA (Voluntary Partnership Agreement) to elaborate a formal system of

Certification that enable a direct channel of exportation to Europe. VPAs involve many actors

to elaborate a final and fixed legal document determining: What is illegal timber? How to

control and certificate legal harvest? What are the penalties to those that violate of ordinances

of the law?

Brazil has not signed VPA with European Union yet. It is an organic process evolution and

does not imply that the country has no interest on associating and cooperating with the EU.

Brazil has internally already very strict and demanding Laws and bodies of the government

controlling the market to avoid illegal harvest of timber and most of medium / large size

companies follow those rules. Additionally, most of them are members of private Councils to

have respective Certification (i.e. FSC), endorsed by external audit their activities and

documenting its products accordingly to international buyers that exercise due diligence.

FLEGT/VPA will not bring any peculiar or odd new procedure to release exportation under

its coverage. Quite in opposite, given the lack of information by Brazilian producers it can be

received as new barrier or market protection to European markets.

FLEGT/VPA impact in local medium / large size timber companies would not represent a

major changing on the amount of trade volume (as Brazilians companies already trade with

European companies under EUTR scheme) or applying different procedures. From other

angles, envisioned by FLEGT and its Action Plan, the changes would be more noticeable,

tackling corruption on different levels of the Government and small companies that harvest in

familiar or natural reserves, most of it on informal set-ups.

Concerning Ghana, the panorama is a bit different, as it has signed the VPA with EU in 2009.

Ghana is in the process of developing relevant system to implement the provisions of the

agreement and the protocols for assessing legal compliance. Nevertheless, in practical terms

medium / large Ghanaian companies are also used to respond due diligences from buyers and

local inspections controlling illegal logging. The impact is once again almost imperceptible

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and it seems that other stakeholders would notice the implementation of FLEGT rather than

the timber producers.

Even though the two different countries are in different stages of proceeding FLEGT/VPA,

the impacts are virtually the same. Once fully implemented in Ghana, if implemented in

Brazil, with some years of this experience would be possible to measure more precisely if

companies needed to change major procedures to adjust their activities. By far, local

Governments and companies who were not following any CSR code would be those included

in the biggest improvement proposed and envisioned by FLEGT.

In light of this, FLEGT and its Action Plan does not have at its body of texts explicitly the

expression CSR but it is clear its CSR intentions, covering what most of CSR Theories

comprise: the instrumental, the political, the integration and the ethical aspects of defining

CSR.

As we described along this thesis, CSR has a very fluid definition and adjustable according to

the time and space. FLEGT, especially with its VPAs scheme, encourages a broad dialogue

among multi-stakeholders aiming results at the four aspects of CSR:

- Instrumentalist: VPAs are agreements that promote sustainable forest governance for

increasing the level of economic development, poverty reduction and environment protection

for a long-term commitment and guarantees for the Timber industry and those affected by it.

It guarantees Profit for industries depending on Timber (buyers and sellers) and labor rights

for employees. It allows the Timber industry to seek monetary income but preservation of

biodiversity, emission of greenhouse gases, and impact on conflicts with indigenous and local

population, human right attention and equivalent compensation for the society.

- Political: VPAs empower timber trading companies as social agent of transformation,

increasing standards of CSR and assuring systems to control and independently audit

production. The VPA´s are legally binding agreements between partner countries and

European Union but with direct repercussion on the private initiative, inciting different

sectors of the society to raise awareness of illegal harvest, good governance and transparency

on different CSR policies.

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86

- Integralist: FLEGT uses the power and interest of the European consumer markets to

reinforce reform in timber producing countries. As the European standards are higher, and

given the Globalization enable a global market, measures to regulate importation in Europe

affect locally countries that want to export. VPAs are a natural development of local

implemented laws and international standards (FSC, Us Lacey Act, EUTR), a consequence of

awareness level of the final customer that vote directly to Green Parties and Green initiatives,

as well as ecologic behaviors.

- Ethics: Ethically CSR policies concerns what companies “should” do accordingly to their

“morals” and understanding on what “it is good, right”. In this case FLEGT comes to

incorporate what legally Governments want to avoid for the Corporations to decide by

themselves what is the “right thing to do” when it comes to timber legality. In a multinational

and globalized context we are living in, private interest needs to align with the society

progress, even if it needs to be combined by the weight of Law, guarantying maximizing

individual freedom of choice for companies but preserving the value of building community,

our duty as interdependent social beings to care about and for one another. (Halbert & Ingulli,

2010, s. 2)

9 Future Perspectives and our Learning Curve


Since July, 2014 the European Commission launched an external evaluation of the

implementation of the EU FLEGT Action Plan. This evaluation, covering 11 years of the

implementation of the EU FLEGT Action Plan (2004 – 20014), aims to evaluate all the seven

areas of the Action Plain, and their interrelationships, and also particular attention will be

dedicated to Voluntary Partnership Agreements (VPA). This evaluation will look at relevant

action in the EU, other consumer markets and producer countries, both VPA and non-VPA

countries and in addition it will cover the development of multilateral and global initiatives to

combat illegal logging. A separate and parallel mandatory review of the EU Timber

Regulation (EUTR) will be carried out in 2015, which will focus on enforcement of its

Master’s Thesis

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87

provisions based on reporting by Member States. Both evaluations will be closely

coordinated and Synthesis released from June / September 2015 (EU FLEGT , 2014).

This evaluation, after more than 10 years of the implementation of FLEGT Action Plan,

organized by the European Commission is really evoking for this Thesis, for many logical

reasons.

Our perception of CSR is alive and evolving. What society, governments and companies

understood as Social Corporate Responsibility fifty years ago does not compare to the

expanding universe that CSR covers at the present time. As a social creation, it has an

evolution closely related to the time and space, accepting mistakes and corrections along the

way. We keep learning with wrong attitudes towards prolific postures, developing principles

that always tend to solve more and more issues.

An illustrative example would be the permission to smoke inside airplanes, which perhaps

initially would not relate to timber or CSR but helps us to understand how our perceptions

change following our learning process, regarding what is right and wrong attitudes and how

that can lead to improvements. Not long ago, travellers were allowed to smoke inside planes

and no one would think it was wrong. In 1988 Laws around the world prohibited inflight

smoking as safety measures and healthier standards and, since then, it is inconceivable that

people think it is natural procedure or it was allowed once before.

On the same way, CSR definition is not a static concept and therefore can be analyzed under

different study fields and perceptions. The current Thesis is consequence of an extensive

research, having as “start point”: CSR. It was easy for us to get lost among different authors

attempting to define CSR and all different inputs that the topic entails. But after immersing

on the most relevant Theories and deciding to investigate CSR applied at the Timber Industry

and with FLEGT as our tool we started to find the compass that would help us to navigate on

this abounding ocean of information.

We started with our own assumptions and beliefs, most of them were polished and some

abolished. CSR is a flourishing topic among the private sector, carried by the pressure of

different stakeholders and Governments. Companies have not only the philanthropic attitude

towards society, and indeed the strategic usage of CSR is helping them to address better the

Master’s Thesis

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88

“good attitude” that can generate good reputation and fed the system, ensuring finance profits

and assuring common welfare.

In the other hand, FLEGT showed us how the public sector can induce market and law to

work together to benefit society. With two different fields of pressure, FLEGT persuade

European buyers to pressure their suppliers and timber operators outside Europe. At the same

time VPAs target Governments of countries that want to improve their timber policies to

generate higher standards for their countries and facilitate the entry of their products in

Europe, generating even more internal profit.

FLEGT´s intentions are really effective and embracing, aiming not only illegal logging,

environmental preservation, labor protection but also minimize corruption, encourage

participation of different public and private sectors and raise the level of conscious about

CSR.

It is clear that it is just the beginning, and as we started this section, the European

Commission has not the Manual to make things work and therefore an assessment is so

important to value what is positive and improve what is negative. FLEGT is a collective

undertaking that engages a diversity of stakeholders from government, the private sector and

civil society. All point of views and analysis are important at this point to contribute to this

evaluation just so FLEGT Action Plan remains one of the most comprehensive, and

ambitious, attempt to use the power of timber-consuming countries to, primarily, reduce the

extent of illegal logging. Complementarily, fostering broader issues such as promoting

Treaties with other nations facing the problem as a collective action, installing procedures to

sustainable behavior towards the Nature and Society, promoting Legality on CSR and

leveling awareness just so the civil society can become a driven force to Corporations

become more and more CSR friendly (EU FLEGT , 2014).

The companies we work with let us a very hopeful sight to the future. They are really

organized and conscious on their CSR priority, understanding that the core of their activities

demands total respect to the nature, devotion on solving ecologic matters otherwise they

would face problems to continue their business. We could use Carroll´s Pyramid to see that

the companies are working effectively with the four elements of the CSR, from the bottom to

Master’s Thesis

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89

the top of the pyramid: the economic, the legal, the ethic and the philanthropic. We confess

that initially we were skeptical on the way timber producers were dealing with the

environment, the social aspects and the legal/Certifications. Surprisingly, at the least

companies with medium/large size, those that work on the market are developing an

outstanding work not only applying CSR for society´s own sake but as a new “Branding” tool

to market themselves. No doubt that a lot more can be done, but the basis for a better and

virtuous affiliation future is starting to be built.

This Thesis allowed the authors to discuss in deep CSR. Furthermore, it enriched our

academic and future professional skills as it opened opportunities to debate the structure of

the project, dialogue the posture towards the different stages of the investigation and

negotiation on setting goals. We were exposed to difficulties that strategically were overcome

with a lot of dedication and respect for one to another. We are happy with the chance to work

together and with the knowledge we acquired. We feel that the foundation is solid and will

enable us to follow our professional aspirations. We still believe that Business can only

progress on a sustainable and responsible way and in communion with the society´s interest,

because indeed there is no difference. What guarantees the future of individuals is what

guarantees the future for Corporations.

Master’s Thesis

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90

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