Lesson 3: Overcoming difficulties in green transformation for the wood industry to accelerate

Lesson 1: Are wood industry businesses affected by the carbon border adjustment mechanism? Lesson 2: Adapt to develop or accept to stop playing?

Mr. Do Xuan Lap - Chairman of the Vietnam Timber and Forest Products Association had an interview with reporters of the Industry and Trade Newspaper about this issue.

2023 is a difficult year for the wood processing and export industry when for the first time no export growth is recorded, can you share about this issue?

According to statistics from the General Department of Customs, in 2023, Vietnam's export turnover of wood and wood products is estimated to reach 13.423 billion USD, down 16.16% compared to 2022.

In the structure of the country's export goods, wood is one of Vietnam's key export industries. Total demand decreased due to the impact of inflation and tight monetary policy in many major wood consuming markets, causing the industry's export turnover in 2023 to close with the result that for the first time in 25 years, the wood industry recorded no growth.

Overcoming difficulties in green transformation for the wood industry to accelerate

Although Vietnam is in the Top 5 largest wood exporting countries in the world, it only exports an average of over 16 billion USD/year. The potential to expand wood and wood products exports in the coming time is huge, because the world's wood and furniture market is up to 200 billion USD.

Currently, Vietnamese wood enterprises are exporting to 150 countries and territories around the world. Although the market has shown some signs of recovery, 2024 still poses some difficulties for the industry. In addition to difficulties in market output, the industry is facing a number of current issues that directly affect the sustainability of the industry.

Firstly, major export markets are increasingly enforcing stricter regulations on product legality and sustainability. Specifically, the EU Deforestation Regulation (EUDR), which will come into effect at the end of June 2023, requires products imported into this market to be legal and not cause deforestation.

Second, there is increasing demand both domestically and in export markets for low carbon emissions across supply chain operations to achieve net zero targets. Products with high carbon content will become more expensive and will lose competitiveness in the market.

Third, each year Vietnam imports about 1.5 - 2 million m3 of round wood and sawn timber from tropical countries, which are legally risky timber, accounting for 30 - 40% of the total imported raw wood of the whole industry. This not only negatively impacts the entire Vietnamese wood industry but also eliminates the opportunity to use low-risk imported wood and especially domestic plantation wood from millions of farming households.

As you just shared, the requirements in export markets for low carbon emissions as well as the trend of green transformation in production are increasingly high and strict. What solutions has the Association deployed in the coming time to adapt to the requirements?

Currently, the green transformation of wood industry enterprises is urgent because the deadline is quite close. In 2027, goods exported to the EU and the United States must meet greenhouse gas emission reduction standards. In the coming time, the two major markets, the EU and the United States, will control the assessment of carbon content in imported products. If the carbon content is higher than the regulations, exporters will be required to pay additional taxes or carbon credits.

Bài 3: Khắc phục khó khăn trong chuyển đổi xanh để ngành gỗ bứt tốc

Mr. Do Xuan Lap - Chairman of Vietnam Timber and Forest Products Association

Wood industry enterprises in Vietnam are forced to go green because it is the requirement of investors, customers and the trend of the times. To do so, enterprises are forced to change the way they manage, use tools and materials that are more environmentally friendly. Vietnam is a wood exporting country, so it certainly benefits from the green transition.

Enterprises that pioneer in green transformation will have more opportunities and earlier access to international capital sources. This will help Vietnamese wood industry enterprises maintain and increase the competitiveness of wood products in the international market.

In addition, when the conversion is successful, businesses have a great opportunity to gradually participate in the carbon market through providing carbon credits, creating additional income for businesses, because the demand for carbon credits in the world is increasing.

In the past, the Timber and Forest Products Association has organized 2 workshops to provide in-depth consulting support on emission reduction for a number of large wood processing enterprises. We have also mobilized international environmental organizations to support part of the funding to support consulting for green transformation enterprises. The Association has sought funding for 5 large enterprises to take the lead in implementing green transformation, with support levels ranging from 200 - 300 million VND/enterprise for green transformation.

To continue supporting and advising businesses on emission reduction production, in the first quarter of 2024, the Vietnam Timber and Forest Products Association will organize conferences and seminars to advise about 6 large enterprises in the industry on emission reduction production such as: circular production; using certified plantation wood sources; linking digital transformation to bring high added value and low emissions... considering this an important standard for exporting wood and wood products to markets.

At the same time, the Vietnam Green Fund of the wood industry will be promoted to ensure that the wood industry does not use and trade in wood of illegal origin. Most notably, the Fund's activities for afforestation, especially in areas at risk of environmental destruction, will be promoted to protect and develop forests.

Promote communication within enterprises about emission reduction production, circular production, and production linked to digital transformation to move the wood industry towards sustainable development, thereby creating high added value while reducing emissions.

What recommendations do you have for relevant ministries and agencies to turn challenges into opportunities in this irreversible trend of green transformation?

In the current period, to resolve market difficulties for wood industry enterprises, it is necessary to organize negotiations to unify regulations on tracing the legal origin of wood in import markets. This is an urgent requirement in the coming time to promote the sustainable development of planted forest wood.

To do this, the Ministry of Agriculture and Rural Development needs to guide businesses and diversify the use of plantation timber certificates according to legally recognized standards, including international certificates and Vietnamese certificates. At the same time, it is recommended that markets importing Vietnamese timber and wood products recognize sustainable forest certificates according to Vietnamese standards.

In addition, to pilot a model of business development towards a green economy, aiming towards a net zero commitment in the wood industry, the Ministry of Agriculture and Rural Development needs to coordinate with ministries and branches to propose or issue a legal framework with specific regulations on the implementation of the net zero commitment. Support consulting experts for businesses in implementing green production activities in wood processing factories to reduce carbon emissions. Thereby, meeting the requirements of export markets.

Thank you!

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