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Legality in the forest sector: New insights into obstacles and incentives for MSME formalisation

Legality in the forest sector: New insights into obstacles and incentives for MSME formalisation

Worldwide, at least 41 million people work in the informal forest sector – more than three times the 12.5 million employed in formal forest sector related businesses. 

In the informal forest sector, micro, small and medium-sized enterprises (MSMEs) are often characterised as “illegal”. This is the case when their modes of production, sources of raw material or legal status do not conform to their country’s regulatory requirements. 

In a new joint report, Promoting legality within the private forest sector: obstacles and incentives to formalization, the FAO-EU FLEGT Programme and the European Forest Institute (EFI) make a case for acknowledging the complex circumstances of forest-sector MSMEs, particularly in countries where requirements for legality compliance and achieving formal status are unclear.

If MSMEs do opt to formalise their business, the authors argue, there should be incentives and support to ensure that they benefit from formal status. This includes business development and credit, access to markets, and increased ability to participate in legal and sustainable supply chains. 

Formalisation will not always be desirable or practical for all forest sector MSMEs, the authors acknowledge. Where the rule of law and / or law enforcement is weak, policy and legal contexts are unlikely to be conducive to these enterprises entering the formal forest sector. 

The report builds on the experiences of the EFI and the FAO-EU FLEGT Programme, whose programmatic work has focused on helping MSMEs to produce and process legal timber for integration into legal and sustainable value chains.