Confederation of Forest Industries (Uk) Ltd

Business Plan

2015

DRAFT

Confederation of Forest Industries (UK) Ltd

59 George Street

Edinburgh EH2 2JG

Tel: 0131 240 1410

Introduction

Athole McKillop

Chairman

1. Confor’s role

Confor: Promoting forestry and wood is a membership organisation that promotes sustainable forestry and low-carbon businesses. Its strength is that it gives a small sector a more powerful voice. Confor represents the whole ‘supply chain’, including nurseries, contractors, growers and professionals, sawmills, panel-board producers and wood and woodfuel supply businesses. Confor focuses on the core strategic issues that are vital to the success and sustainable future of individuals and businesses, but which they cannot tackle alone.

Confor focuses on the following:

• Helping to build the market for wood products and forest services;
• Creating a supportive policy environment for forestry and wood-using businesses;
• Working with partners to tackle ongoing sectoral issues such as research, skills and business support;
• Providing high quality, valued member services.

This business plan assesses the current operating environment, looks forward to identify the strategic challenges and opportunities facing the sector and identifies actions that Confor will seek to deliver in 2015.

The Board of Confor has identified five continuing priorities for Confor in 2015:

• Securing wood supply in the short and longer term;
• Promoting markets for wood products and supporting woodland management;
• Changing attitudes towards the sector amongst politicians, civil servants, environmental NGOs and the public;
• Tackling pests and disease;
• Strengthening member services and growing membership.

2. Analysis of the operating environment

Political/policy

Given the continuing exposure of the industry to government policy and actions, Confor has sought to build awareness and understanding of and support for the industry, with particular focus on the economic basis of forestry. Both understanding and supportive activity is increasing, but still generally unsatisfactory. The May general electionprovides an opportunity to promote the sector, taking advantage of the fact that politicians are in ‘listening mode’, and early engagement with the incoming Government is vital. In Scotland, Wales and Northern Ireland parties will be preparing themselves for elections in May 2016.

No change has been made to the status of the Public Forest Estate in England in the current Parliament. If the Conservatives secure a majority (or are the principal partner in a coalition) then it is expected that they will proceed with establishing an arms-length, more commercial body, still in public ownership, but clearly responsible for balancing its books. However, if Labour is the dominant party at Westminster then there is the real possibility of a very different approach.

Following the ‘No’ vote in the Scottish independence referendum there will be a process of increased devolution that could very well prompt greater devolution to Wales, Northern Ireland and the English regions. These processes will make it even more challenging for the representative sector to operate as each country (and possibly region) will expect more local representation and solutions. Confor has been alive to this trend for a while now and increased resources have been allocated to the countries and within England. That said, the need to tailor messages and activity across the UK further strengthens the argument for the domestic forestry and wood-processing sector to co-operate more closely and effectively.

Effective co-ordination is particularly important in the context of attitudes towards the sector. Confor has recognised for some years that widespread misconceptions and misperceptions of the sector amongst politicians, officials and the public makes lobbying for change and business development much harder. If key audiences had a better understanding of the economic and environmental benefits that the sector provides and what actions are reallyrequired to unlock or strengthen these benefits, then the sector would be more successful. Confor has increased the sector’s visibility, and consequently understanding, but much remains to be done, especially in areas like England where progress is much harder to make. There is also a need for a more self-confident expression of the sector – there is a strong story to tell and out-of-date views should be challenged robustly.

Markets

The sector continues to enjoy a relatively strong operating environment. Sterling has strengthened noticeably, but not yet to the point of eroding the domestic sector’s price advantage. The continuing inability of the Eurozone to deliver growth is a drag on the UK economy and attempts by the European Central Bank to avoid deflation have weakened the Euro. It is not clear what could change this situation in 2015, especially as global growth continues to slow.The UK is set end 2014 with two years’ of robust economic growth under its belt and a forecast of moderate growth for 2015.

The construction industry is forecast to grow 4.8% in 2014 and 5.3% in 2015, primarily due to a recovery in private housing and commercial construction, supported by a return to growth in public sector construction. The Construction Products Association has forecast continued growth from 2016-18, but at a more modest 3.7% average per year.

The CPA forecast private housing starts in Great Britain to rise by 10% in 2015 to 148,000 and, even with slower rates of growth, to reach 171,000 in 2018. However, to achieve thisthe politically popular SME house builders will need to return after being decimated following the financial crisis in 2008.

Some major European mills continue to target exports to middle- and far-East markets as well as to North Africa, and there is continuing optimism that the USA could once again be a key market.

Demand for woodfuel from virgin or sawmill co-product is growing, but more slowly than in the past as the few new, large, electricity-only dedicated biomass power plants look overseas for supply. The Renewable Heat Incentive has driven demand, but there will be a reduction in support and it remains an unpopular measure with the Conservatives and UKIP.

Forest resource and wood supply

With losses of woodland area to disease and conversion to other habitats, the overall woodland area is likely to remain in decline in England, Wales and Northern Ireland, with only Scotland planting significant areas of new woodland. The productive softwood resource continues to decline across all parts of the UK, with Scotland continuing toover-deliver on targets for native woodland while falling well short on commercial softwood.It took intense and repeated lobbying in Scotland beforeConfor overcame apparent institutional resistance to acceptance of there being a problem – a lesson for similar activity in the rest of UK.

There is potential both to secure more wood from existing woodlands and to protect what is there from unnecessary destruction. Under-managed woodland has untapped potential for the economy, environment and society. However, bringing more into management requires investment, advice and a reduction in damaging ‘green-tape’ such as European Protected Species, as well as fundamental change to sustainability assurance mechanisms, like FSC, to make them workable for smaller woodlands. Interpretation of forestry standards in replanting is also important as an unsympathetic approach towards commercial forestry can undermine woodland management and destroy future wood supplies.

Certification, both at the forest level and in the supply chain, is causing increasing concern, with more and more owners threatening to let their status lapse. Owners are becoming increasingly disillusioned at the increasing financial and opportunity cost of certification, while new measures to audit and police the supply chain are introducing similar costs. Increasing cost appears to be driven by FSC’s efforts to tackle unsustainable and illegal activity in parts of Africa and Asia – a one-size-fits-all approach condemns all certificate holders to bear the burden of cost in tackling the least compliant. Confor has secured notable successes in reducing bureaucracy and cost, and is now examining the potential to press for a more fit-for-purpose certification mechanism and alternative means of providing the necessary assurance of legality and sustainability to the market.

Pests and disease

Ash dieback apart, 2014has seen a welcome reduction in the spread of disease, in particular of P ramorum. While this is welcome, it is This threatens to seriously disrupt timber trading locally, as well as drive deforestation and reduce future wood supply. Confor has responded decisively to organise public-private action in Scotland, and pushed for significantly increased activity in Wales where the spread has principally been in the public forest. In Scotland in response to lobbying by Confor, new public funding has been made available to tackle and restock infected areas.

Chalara continues to spread, and other pests and diseases threaten to widen their impact. Confor’s forceful intervention into the control strategy for Oak Processionary Moth has shown what can be done to change the level of Government intervention at an early stage. Governments have committed to putting more resource into plant health. Meanwhile squirrel and deer remain a major threat, with public policy in England, in particular, continuing to ignore the need to act on these pests if current support for native woodland is not to be undermined.

Recruitment and skills

This remains an important issue and one where the principle of organisations playing to their particular strengths indicates that Confor should look to others to take a more active lead – for example, the RFS (and RSFS), ICF and the Forestry Commission.

Confor’s wider role

Confor will continue to act as a focal point for industry action to support wood promotion, health and safety, timber transport, research activity, UKWASand skills.

3. Focusing on five challenges

In order to focus Confor’s resources tightly on the big issues facing the sector, five key challenges are identified. These are a mixture of ongoing activities and arising issues. Other activities will be addressed, but not to the detriment of delivering on these priorities.

In its work it is vital that Confor both feeds back to, and captures the views and expertise of, members.

3.1 Wood supply

This remains a real concern across many parts of the UK. Loss of commercial softwoods continues, with little planting and that only in Scotland. Confor’s specific request for a 50-year forecast of wood availability (no other body had asked for it) has been instrumental in convincing countries that there is a real problem.

An extended lobbying campaign north of the border has brought changes to grant schemes that should bear fruit in the new SRDP, along with commitments to improve the processing of applications. Losses continue meanwhile and discussions are taking place with Woodland Trust to make compensatory planting from wind farm development easier. The future downturn is perhaps even more severe in Wales, and Confor has been tasked by the Welsh Government to lead work with the private sector to identify key actions. In England there is increased understanding amongst politicians and officials, but the only grants for planting are targeted at biodiversity and water management. In response, Confor is producing evidence on how productive forestry can really deliver on these agendas. In Northern Ireland there appears to be real action to improve the next grant scheme.

Grown in Britain remains a key tool to explore Corporate Social Responsibility (CSR) funding for planting and woodland management, including for hardwoods.

Table 1: new planting (annex A for country breakdown – to be updated)

Table - 2: Forecast of availability to be updated

Reducing risk in the face of climate change as well as pests and diseases is prompting debate on what species to plant and on silvicultural systems. There is a clear need to reduce the risk of losing a productive crop, but, equally, productive planting needs to be designed for future markets and cost-effective management and harvesting.

In 2015, Confor will:

Action 3.1.1:continue to resource its lobbying campaign on wood supply and utilise the resources created across the UK.

Action 3.1.2: continue to drive improvements to grant schemes and prioritise protection of the existing resource.

Action 3.1.3:work withGiB to deliver new, CSR and carbon funded planting and management.

Action 3.1.4:explore the potential for a new way of meeting certification requirements for smaller woodlands, starting with the FSC.

Resource implications – these actions will take up a significant proportion of national manager’s time and that of the CEO and Andrew Heald. The continued lobbying campaignwill be resourced primarily from investment income.

3.2Grow markets

Wood for Good (WfG), half-owned by Confor with Swedish industry, remains the primary mechanism to promote timber in construction. In 2015 it will focus on self/custom build and social housing. This is a growing market and a community that is concerned with quality, whole-life cost and carbon – where timber scores highly. It will also continue to provide well-regarded online and seminar-based training for architects and other key audiences. Stuart Goodall and Jon Stevenson of James Jones sit on the board.

GiBis an opportunity to promote market demand and supply, particularly in the hardwood and woodfuel sectors, and especially in the southern half of the UK. It has also provided significant promotion of Confor given its catalytic role in establishing GiB. Volume softwood businesses are doing good business, backed by a weak pound, and there is less immediate interest in the campaign here.

Confor’s cross-sector position on woodfuel, promoting local-scale markets, principally heat and opposing new large-scale, dedicated power only developments has proven successful, influencing Governments and securing strong member support. At this time, there does not appear to be a major threat to the sector from developments in large biomass electricity which see the use of imports.

In 2015, Confor will:

Action 3.2.1:continue to provide finance and administrative services, and direction to WfG through Stuart Goodall and Jon Stevenson’s role on its Board.

Action 3.2.2:support the GiB campaign to promote, principally, hardwood and high-value softwood markets and woodfuel.

Resource implications – the WfG role is relatively small and focused on the chief executive, with funding for the administrative and financial support provided by Roland Stiven.

3.3Changing attitudes towards the sector amongst politicians, civil servants, environmental NGOs and the public

Experience has demonstrated repeatedly that inaccurate perceptions of the industry make achieving sector as well as individual owner and business goals much harder. The terms conifer or commercial are viewed negatively, the existence of woodlands and forests is focused on amenity and recreation or on wildlife, with little interest in employment and products. There is little understanding of the need for income to pay for the provision of benefits, meaning that ‘true’ sustainability is ignored. While harvesting provokes concern about unwelcome land-use change and lorry movements, as does investment in mills.

All industrial sectors are expected to deliver for people and the environment, as well as provide employment and profit. A recent ‘natural capital’ event organised by RSPB provided an interesting insight into what other sectors, and individual businesses in those sectors, do to improve the reputation of their industry or business.

Forestry and wood processing has a stronger story to tell, but is failing to do so and suffers as a consequence. It needs to talk about modern, attractive, sustainable forestry, a world-leading industry, high quality and safe jobs, being leaders in carbon and the wide range benefits to local people and to each country’s economy.

A number of resources and tools are in place, such as research evidence, standards, FISA, Wood for Good, the Confor website, etc and Confor is gaining experience, contacts and interest in the media. A communications strategy for Confor and the industry is needed to provide more impact.

Political influencingcontinues be a vital area of activity, and the wood supply campaigning, pests and diseases, and GiB have provided plenty of opportunities for Confor to promote the interests of the sector – 2014 saw more Confor meetings with ministers than has probably ever been the case in the industry.

Effective influencing requires sustained activity (occasional bursts do not yield lasting impact) and it complements and supports other strands of Confor’s work.

Table 3: Reasons woodlands and forests are important to the public (FC survey 20??)

Percent of respondents who agree or strongly agree
Reason / UK
2009 / 2011 / 2013
They are important places for wildlife / 97 / 97 / 93
They are places where people can relax and de-stress / 95 / 95 / 91
People can have fun and enjoy themselves / 94 / 95 / 91
They are places where people can exercise and keep fit / .. / 94 / 89
They make areas nicer places to live / 96 / 90 / 87
People can learn about the environment / 91 / 90 / 87
People can learn about local culture or history / 69 / 71 / 72
They get people involved in local issues / 63 / 57 / 60
They contribute to the local economy / 59 / 60 / 60
They bring the community together / 50 / 54 / 56
Source: UK Public Opinion of Forestry Surveys.

There is an important role for members to play in this area. For example, members can include the Confor logo on their websites and literature, linking to the new Confor website and its promotion ofthe industry.

In 2015, Confor will:

Action 3.3.1:develop a sectoral communications plan containing key messages and audiences, plans for key resources and a structure for the sector.

Action 3.3.2:work with GiB to promote accurate messages, in particular to the public and schools, about the benefit of productively managed woodland and buying wood products.

Resource implications – developing and delivering a communications package could cost in the region of £20,000.