Corporate Social Responsibility

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Companies in the forestry industry carry out their businesses based on forest resources which are mostly essential elements in maintaining the global ecological balance. Therefore, it is crucial for these forestry companies to consider measures on their corporate social responsibility while pursuing further development in this industry. This report first outlined the corporate social responsibility (“CSR”) issues that may arise from the investment in a privately–owned timber flooring company (the “Company”) in China. Then, it discussed in detail each strategic issue beyond financial concerns that investors should be aware of in this investment.

Since the Company’s businesses mainly involve timber flooring manufacturing in China and timber plantations in China and Guatemala, potential CSR issues will be assessed and discussed from two major perspectives: environmental and social. In terms of environmental perspective, potential CSR issues include excessive deforestation, over-exploitation of forests with significant biodiversity and water pollution resulting from lumbering. From the social perspective, potential CSR issues include the impact of forestry activities on indigenous population, workers’ safety and human rights associated with the workers employed in this industry.

Due to high demand of forest products around the world, companies that have businesses in timber plantations often face issues related to excessive deforestation. According to the 2010 Forest Resources Assessment Report issued by the Food and Agriculture Organization of the United Nations, it is estimated that forests in China cover around 200 million hectares, which is equivalent to just over 20 percent of its total land area1. Thus, it is important for forestry companies to engage in an operating system that can manage its forests so that the size and the quality of the forests will not be significantly affected. For example, China Forestry Holdings Co., Ltd. (“China Forest”)...
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