Forest Certification and the Forest Products Industry by psf35982

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									Forest Certification and
  the Forest Products
       Industry

          B. Bruce Bare
   College of Forest Resources
 University of Washington, Seattle
       November 13, 2000
                OUTLINE

• What is forest certification?
• General approaches?
• Who sets the guidelines?
• Costs and benefits?
• Market place considerations?

                            2
                OUTLINE

• What is forest certification?
• General approaches?
• Who sets the guidelines?
• Costs and benefits?
• Market place considerations?

                            3
            IN GENERAL?


• A 1990’s initiative that encourages
  landowners to practice sustainable
  forestry and to give consumers assurance
  that forest products come from
  sustainable forests. Includes both forest
  certification and chain-of-custody
  components.

                          4
    WHAT IS CERTIFICATION?
• Process by which a forest owner
  voluntarily requests an inspection of a
  forest to determine if pre-defined
  management standards are being met.

• Process for assessing if a forest is
  managed sustainably.
• A way to communicate environmental
  information about forests to consumers.
                            5
      WHAT IS A SUSTAINABLY
        MANAGED FOREST?
• A forest managed to meet all existing
  regulations such that environmental, social
  and economic factors are balanced to
  meet the needs of the present without
  compromising the ability of future
  generations to meet their needs.


                           6
    WHAT IS A SUSTAINABLY
      MANAGED FOREST?
• A land stewardship ethic that integrates
  reforestation, growing, and harvesting
  trees for useful products while
  conserving soil, air, and water quality,
  wildlife and fish habitat and aesthetics,
  and protecting the resource from fire,
  pests, and diseases.
• Protection of lands of special significance.

                           7
   A SUSTAINABLY MANAGED
      FOREST INCLUDES
• Consideration of key values:
  – biodiversity
  – habitat protection and enhancement
  – riparian/wet land protection
  – protection of productive capacity
  – protection of endangered plants and animals
  – protection of cultural, spiritual, and historical
    sites
                               8
  FOREST CERTIFICATION AND
    SUSTAINABLE FORESTRY
• Forest certification isn’t necessary to
  guarantee sustainability and it may not
  be sufficient.

• Certification best viewed as: 1) important
  “policy driver” for improving forest
  management standards and practices 2)
  satisfying buyer groups and consumers
  of forest products.
                           9
                OUTLINE

• What is forest certification?
• General approaches?
• Who sets the guidelines?
• Costs and benefits?
• Market place considerations?

                           10
 TWO GENERAL APPROACHES?

• Performance-based
  – Use criteria, performance measures and
    indicators to monitor performance over
    time (on-the -ground)
• Management system-based (EMS)
  – Generic guidelines and standards (ISO
    14001)
  – Forestry-specific (SFI, CSA)
                          11
TWO GENERAL APPROACHES

• Systems are evolving to be a mixture of
  both approaches




                         12
                OUTLINE

• What is forest certification?
• General approaches?
• Who sets the guidelines?
• Costs and benefits?
• Market place considerations?

                           13
   WHO SETS THE GUIDELINES?
• Government
   – UNCSD (IPF, IFF, Helsinki and Montreal Processes,
     Santiago Declaration). Help establish criteria and
     indicators.
• Private
   – AF & PA (SFI , 1994), PEFC (Europe, 1999)
   – ATFS (1945), Green Tag (NFA, 1998)
• NGO
   – FSC (1993)
   – ISO 14001 (1996), CSA (1995)
                                 14
 WHO DOES THE CERTIFYING?

• First party -- the land owner or firm
• Second party -- an industry or
  association
• Third party -- an independent certifier
  – Rainforest Alliance (SmartWood, FSC)
  – Scientific Certification Systems (FSC)
  – Voluntary Verification (SFI, PEFC)
                             15
IS CERTIFICATION NECESSARY?

• Many believe that sustainable forestry is
  already being practiced in the developed
  countries where about 75% of the
  certified forests are now found.
• Demand being driven by large buyer
  groups who are being pressured to sell
  certified products. Small owners may be
  forced to comply -- non-voluntary.

                          16
IS CERTIFICATION NECESSARY?

• In addition, in states such as
  Washington, tough forest practice
  regulations guide forestry operations on
  state and private forest land.




                         17
      LOOK INTO TWO
  CERTIFICATION SYSTEMS?

• SFI Standard
  – 152 member companies & licensees
  – 84% of paper products
  – 50% of solid wood (in USA)

• FSC Principles and Criteria
  – Presently most favored by buyer groups.

                            18
     SFIS PRINCIPLES (1-5)

• Practice sustainable forestry
• Engage in responsible practices
• Protect forest health and productivity
• Continually improve forest management
  practices
• Protect special sites
                          19
     FSC PRINCIPLES (1-5)

• Compliance with laws and FSC principles
• Tenure and use rights and responsibilities
• Indigenous people’s rights
• Community relations and worker’s rights
• Benefits from the forest

                             20
    FSC PRINCIPLES (6-10)

• Environmental impact
• Management plan
• Monitoring and assessment
• Maintenance of high conservation value
  forests
• Plantations
                         21
    SFIS OBJECTIVES (1-3)

• Employ an array of scientifically,
  environmentally, and economically sound
  practices in use of forests (4 PM)
• Ensure long-term forest productivity (6
  PM)
• Protect water quality by use of riparian
  protection measures (4 PM)

                          22
     SFIS OBJECTIVES (4-7)

• Manage wildlife habitat and conserve
  biodiversity (3 PM)
• Manage visual impact of harvest operations (4
  PM)
• Manage lands of special significance (1 PM)
• Promote efficient use of resources (1 PM)


                             23
    SFIS CORE INDICATORS

• For each performance measure a set of
  core SFI indicators must be satisfied to
  gain certification
• For example, under objective #5 (visual
  impacts), one PM is to use green up
  requirements to schedule clearcuts on
  adjacent harvest units. A core indicator is
  to have a written green up plan or policy.
                          24
    SFIS CORE INDICATORS

• Under objective #2 (long term
  productivity), one PM is to use forest
  chemicals prudently. A core indicator is
  to train all forest workers using chemicals
  and to use trained people as supervisors.




                          25
         FSC PRINCIPLES

• Under principle #5 (benefits from the
  forest), the rate of harvest shall not
  exceed levels which can not be
  permanently sustained.
• Under principle #6 (environmental
  impact), ecological functions and values
  shall be maintained intact, enhanced, or
  restored.
                          26
         FSC PRINCIPLES

• Under principle #6 (environmental
  impact), forest conversion to plantations
  shall not occur except in limited areas
  but not in high conservation value forests
• Under principle #9 (high conservation
  value forests), decisions shall always be
  considered in the context of a
  precautionary approach.
                          27
        FSC DEFINITIONS

• High conservation value forest: 1)possess
  globally, regionally, or nationally
  significant species, or large landscapes
  contained within, or containing, the
  management unit where viable
  populations of most if not all naturally
  occurring species exist in natural patterns
  of distribution and abundance.

                          28
        FSC DEFINITIONS

• High conservation value forest: 2)contain
  rare, threatened or endangered
  ecosystems, 3)provide basic services of
  nature in critical situations (i.e. erosion
  control), or 4)are fundamental to
  meeting basic needs of local
  communities.


                          29
        FSC DEFINITIONS

• Precautionary approach: tool for
  implementing the principle of forest
  stewardship




                          30
         FSC PRINCIPLES

• Under principle #10 (plantations), should
  promote the restoration and conservation
  of natural forests.
• Plantations in areas converted from
  natural forest after November 1994 shall
  not qualify for certification.


                         31
            AREA CERTIFIED
• FSC
  – 19.1 million ha world-wide
  – 2.5 million ha in USA (9.0 ha in Sweden)
  – .021 million ha in Canada
• SFI
  – 27.9 million ha in No. Am. About 68%
    independently verified by third party (2001)
  – SFI licensees 5.7 million ha in No. Am. Both
    public and private. 1.3 million ha in USA.


                                 32
              AREA CERTIFIED
• ATFS
  – 10.1 million ha in USA

• Green Tag
  – 18,000 ha in USA (as of late 1999)

• PEFC
  – 23.5 million ha in Europe (15 million ha in Finland)




                                     33
          AREA CERTIFIED

• ISO 14001
  – 21 million ha in Canada


• CSA
  – 3.0 million ha in Canada



                               34
                OUTLINE

• What is forest certification?
• General approaches?
• Who sets the guidelines?
• Costs and benefits?
• Market place considerations?

                           35
   HOW MUCH DOES IT COST?

• Costs of certification:
  – Direct cost of initial forest assessment plus
    required annual audit and re-assessment.
  – Indirect cost of improved forest management
    practices (i.e., reduced harvest or increased
    expenditures).
  – Cost of chain-of-custody audit

                              36
   HOW MUCH DOES IT COST?

• Economies of scale indicate that some
  small land owners will be hit harder
  (percentage-wise) than large owners.
• Assessment costs vary widely but may
  not be high -- from a minimum of $.50 -
  $1.50/acre for small properties to $.10 -
  .25/acre for larger properties.
                          37
   HOW MUCH DOES IT COST?

• One study shows:
  – Increase in COGS due to FSC certification
    was <10% for 84% of survey respondents.
    For 50%, the increase was < 3%. Average
    was 5-6%.




                           38
    HOW MUCH DOES IT COST?

• Assume that initial assessment costs are
  $0.15/acre for a 2 million acre sustainable
  forest property (i.e., $300,000) on a 50 year
  rotation, and a harvest volume of 35
  MBF/acre is realized annually for five years,
  then the cost/MBF/acre harvested is about
  $.04/MBF. Ignores annual audit cost and
  harvest reduction from surplus inventory.

                           39
        HOW LARGE ARE THE
           BENEFITS?
• The objectives of forest certification are to:
   – gain (keep) access to markets that desire
     environmentally sensitive products
   – promote sustainable forest management

• Producers might gain market share and might
  experience a price premium for certified wood
  products.



                                  40
      HOW LARGE ARE THE
         BENEFITS?

• One study shows:
  – For purchasers of certified wood products
    the average price premium paid was 6-7%
    with 35% paying less than 3% and 55% less
    than 5%.




                          41
       HOW LARGE ARE THE
          BENEFITS?
• World-wide, less than 1% of the annual
  harvest currently comes from certified
  forests. Expected to increase in near-
  term future as more lands are certified.
• In general, price premiums for “green”
  wood products are small or non-existent
  but market share is important in some
  regions such as western Europe.
                          42
      HOW LARGE ARE THE
         BENEFITS?

• However, price premiums probably do
  exist in niche markets.
• Demand is growing; presently is being
  pushed by buyer groups and not end-
  product consumers who are generally
  unaware of the existence of certified
  wood products.
                        43
HOW LARGE ARE THE BENEFITS?


• One way to examine the economics of
  forest certification is to compute the
  breakeven price increase premium to pay
  for the costs of certification.
• See spreadsheet for illustration.



                          44
                OUTLINE

• What is forest certification?
• General approaches?
• Who sets the guidelines?
• Costs and benefits?
• Market place considerations?

                           45
    MUTUAL RECOGNITION
• Agreements to help “clarify” the market.
• SFI and ATFS have agreed.
• In June 2000, representatives from PEFC,
  SFI, FSC, and many other certification
  groups met in Brussels. Next meeting
  later this month.
• Does not mean that all protocols will be
  accepted.              46
  GLOBAL FOREST & TRADE
        NETWORK

• Promoted by the WWF to create demand
  and increase production of certified
  products
• Expected to be over 1,000 members by
  end of 2001.



                       47
GLOBAL FOREST & TRADE
      NETWORK
       Global Forest & Trade Network
REGION         # Members
USA & Canada       239
UK                 102
GERMANY             58
BELGIUM             41
NETHERLANDS         41
BRAZIL              38
NORDIC              32
AUSTRIA             25
SWITZERLAND         20
SPAIN               13
OTHERS              25
TOTAL              634
                       48
  GLOBAL FOREST & TRADE
        NETWORK

• Most of these members promote the FSC
  protocol at this time.
• In the UK the WWF 95+ Group aims to
  have 75% of all wood products certified
  as FSC by 2005.



                         49
  GLOBAL FOREST & TRADE
        NETWORK

• Several home improvement retailers in
  the USA have announced plans to phase
  out wood from “endangered forests.”
  – Home Depot, 84 Lumber, Lowes, Wickes,
    Anderson Corp.




                          50
      CHAIN-OF-CUSTODY

• FSC presently has 735 chain-of-custody
  agreements in 37 countries.
• PEFC has issued one chain-of-custody.
• ISO has issued 232 pulp, paper, and
  paper products certificates and 109 wood
  and wood products certificates for an
  EMS. (NOT CHAIN-OF-CUSTODY)

                        51
            ECO-LABELS

• Presently, FSC and PEFC have developed
  “green” eco-labels for forest products
  tracked through a chain-of-custody
  agreement.
• SFI is working hard to develop a similar
  program.
• ISO does not issue labels.
                          52
 THE END: TOPICS COVERED

• What is forest certification?
• General approaches?
• Who sets the guidelines?
• Costs and benefits?
• Market place considerations?

                           53

								
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