Environmental Sustenance in the Forestry Sector
Bicom limited is an established company in Finland with the desire to improve environmental status by encouraging the locals in a developing country to plant trees. Bicom has been supplying wood products to most of the developed nations. As an appreciation to nature, the management has sought to increase the number of trees for improved environmental welfare. Kenya has been identified as a developing country with the opportunity to grow trees and maintain the habitat. Furthermore, the nation has been experiencing reduced rainfall quantity and change of weather climate because of the global warming. To restore the natural habitat, Kenya will incorporate the assistance of the young and unemployed in planting of trees which is expected to mature in the next twenty years. During this time, Bicom will support the natives financially and protect this project. In return the affected supply chain will have abundant materials to meet the needs of the market for wood products. To meet the enormous expenses, Bicom will incorporate donors from Finland who will offer grants for social and environmental mitigation. Mitigation programs are included as the environment shall have been improved through re-forestation and living standards of the locals shall improve, as the project will increase employment and thus sustenance of the locality. For success to be felt within the project, Bicom will implement inclusive sustainable strategy.
This study reviews procurement strategy in Kenya as a developing nation in the field of forestry. The Company is international based, BCOM Limited, in Finland. The company is established in supplying wood products to other nations. It seeks to procure $1 million in commodities and services to Finland. Situational analysis of the environment and the social elements has been covered. Business has been defined, pricing of the products from the producer to the retailers has also been covered. Basic environmental and social impacts are defined as common production in Kenya. Externalities and mitigation actions have additionally been addressed.
Bicom is an international wood supply company based in Finland. It is interested in improving the status of the environment by engaging in reforestation in Kenya. Since its establishment 20 years ago, the company has never engaged in such project in improving the environment by increasing the main materials. Other than this, the company seeks to improve the living standards of the locals by engaging them in the tree planting business, which will reduce unemployment within the region. The tree planted will restore the amount of rain experienced in the region and reduce the percentage of aridity in the region. To initiate the project, the company will engage the natives by buying seedlings from the nurseries and paying the youths in planting these seedlings in appointed region. This initial step is expected to cost approximately $1 million. The engaged parties will then be paid wages to ensure that the trees are watered and protected. Thereafter, they will be transplanted and irrigated in the appointed place. Protection of the trees to its maturity is expected to take five years. To note, there is a high demand of wood products in offices, homes and in the hotel and tourism industry worldwide. This demand has been increasing while the supply for the raw material, wood has been reducing. Furthermore, according to the UN environmental policies, industries are to ensure they plant trees in place of the cut trees (OECD, 15). These have negatively affected the company as the cost of planting trees has been more than the expected expenditure.
Kenya is one of the developing nations in Africa. It consists of highlands, plains, arid and semi arid areas. The locals rely on the natural resources as a form of livelihood. Mainly the people rely on farming, livestock keeping and fishing as sources of income. The country is found in the eastern part of Africa with rainy seasons experienced two times annually. The country is covered with the central highlands, which experiences high amount of rain, western and the Rift Valley that experiences a good amount of rain for agricultural sustenance. The rains are generally sufficient to sustain agricultural work as coffee among cash crops have been produced for export. However, due to overpopulation, high unemployment rates and poor economy, the locals have been clearing large portions of forests for settlement and survival.
Socially, peaceful and productive natives define the country. Majority of the residents are in the middle and lower economic class due to high unemployment rate. This offers a good ground for the project as there is abundant work force. The government through its arms, ensures there is law and order in all regions. Through the government therefore, the company can request for protection after the project has commenced.
Baseline Condition for the Forestry
Before 1990 Kenya was defined by green habitation in most parts of the country. This was chiefly due to various forests such as Mt. Kenya forest, which was besides a source of clean water that supplied its city, Nairobi. The country was also defined by high rainfall all through the year because of numerous forests. This wealth has declined over the years due to deforestation, which has largely affected the environment and economic stability of the nation. The desired region of reforestation is along the slopes of Mount Kenya.
Business as Usual
There are several participants in this forestry project in Kenya. First, there is the government who has to issue directives on the desired region to plant trees. The policies are implemented by the government agencies through the ministry of lands and environment. To find land for leasing for the five years would cost approximately $5,000 per hectare. Secondly, there are the forestry and environmentalists who have to be incorporated to acquire the best seedlings and perfect timing. One million seedlings are expected to be planted by the participants who are to be chosen. There are the security agencies to offer protection to the employees and the forest.
The buyer may face numerous externalities because of the deforestation in Kenya. The environmental impact as an effect of deforestation may force extra security to be implemented to protect the trees. This may be unsustainable in long term due to increased demand of wood products (Saunders, 64). These trees may be cut prematurely to meet the demands of the market abroad. The region may be hostile to this project as the public may gain entry to the secluded area for reforestation. Secondly, loss of some indigenous tree species because of deforestation may negatively affect this project as the demand for the same may decline while the demand for the present species may be low. Besides, indigenous species offered more environmental support such as protection from soil erosion (OECD 102). This may be difficult to restore within the period. This effect is disastrous to the ecosystem and to the environment in general. Finally, the company may lose the support of the donors for funds. All these elements will result to increase expenditure.
Mitigation strategies for the externalities
The company will have to seek the intervention of United Nations Environmental Policy (UNEP). This will offer licenses and legal protection against threats from the region (Rametsteiner 88). The government as a member of United Nations will have to offer support in form of protection in accordance with the UNEP policies. This support will also be offered in form of tax reduction in the production and selling of the tree products after maturity.
Cost of externalities in product pricing
|Before Externality ($)
|Mitigation Cost ($)
|Total Cost inclusive of externality ($)
|Loss of Support from Donors
This procurement has been designed for the Bicom Limited, an international company based in Finland. The company desires to establish a forest for the production of the wood materials in the next five years, to sustain the environment and improve the living standards of the surrounding residents. There are several externalities to be considered, among them is the loss of donor funds to initiate the project. It is necessary for the company to seek approval from UNEP and acquire minimum amount to start the project before initial commencement (Ochoa 9).
In relation to the externalities discussed, the company should seek for UNEP support and government protection of the forest project before commencement (Oliver, 78). The government ought to offer assurance to the stakeholders on the land and protection of the employees during and after implementation. It is necessary for the government to carry out a feasibility study to determine the actual cost of the procurement. It is necessary to collaborate with a local company to reduce the expenses in terms of employment and government taxes. A feasibility study should be carried to ensure that the seedlings variety planted will have a high market demand to shun losses.
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Rametsteiner, Simula. “Forest Certification – an Instrument to Promote
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Saunders, J. Supply Chain Management and Illegal Timber. Energy, Environment and
Development Programme. Chatham House. London. 2006. Print
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