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Forest Certification: Economic Impact of Certified Forest Products

Forest Certification: Economic Impact of Certified Forest Products . Henry Quesada and Tom Hammett Virginia Tech Beyond Our Borders: Building Awareness of International Forestry Roanoke, WV February 18, 2010. Agenda. Forest Sustainability Forest Certification Standards

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Forest Certification: Economic Impact of Certified Forest Products

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  1. Forest Certification: Economic Impact of Certified Forest Products Henry Quesada and Tom Hammett Virginia Tech Beyond Our Borders: Building Awareness of International Forestry Roanoke, WV February 18, 2010

  2. Agenda • Forest Sustainability • Forest Certification Standards • Chain-of-Custody (CoC) scheme • Green Building • CFP Marketing Projects • Market drivers, benefits and limiting factors for CFP • Conclusions

  3. Forest Sustainability • World Forest coverage chance from 1990 to 2005

  4. Forest Sustainability • Suspicious Wood Supply: Huge concern

  5. Forest Certification Standards Two international schemes Forest Stewardship Council (FSC) Programme for the Endorsement of Forest Certification Schemes Council (PEFC) National Governing Bodies are responsible forest types. Relevant to tropical, temperate and boreal forest 34 countries (5,715 Chain of custody and 33,822 logo users) 78 countries (FSC labeled sales value is $US 20 billion) Flexible performance Visibility Comprehensive scheme Support from NGO Endorse national schemes Common trademark Comprehensive approach High level of requirements Lack of NGO support Regional application Low perceived performance Presenter Analysis. Various Sources.

  6. Forest Certification Standards Belka, M. 2008. Forest Products: Annual Market Review. 2007-2008. ONU.

  7. Forest Certification Standards Belka, M. 2008. Forest Products: Annual Market Review. 2007-2008. ONU.

  8. Forest Certification Standards • 39 National standards • United States • ATFS: American Tree Farm System • SFI: Sustainable Forestry Initiative (PEFC endorsed) • Forest Stewardship Council US • Canada • Canadian Standards Association (CSA) Sustainable Forest Management Program (PEFC endorsed) www.forestrycertifications.org

  9. Forest Certification Standards • CSA and SFI cover more certified forests in North America; products can use PEFC label • 76.7 million ha of CSA forests • 60.4 million ha of SFI-certified forests • 205.3 million ha of certified forest area worldwide under PEFC umbrella (as May 2008) Belka, M. 2008. Forest Products: Annual Market Review. 2007-2008. ONU.

  10. Forest Certification Standards Belka, M. 2008. Forest Products: Annual Market Review. 2007-2008. ONU.

  11. Forest Certification Standards • The costs of certification depend on a number of factors • including scale, • location, • certification scheme • and management modifications necessary to achieve compliance. Belka, M. 2008. Forest Products: Annual Market Review. 2007-2008. ONU.

  12. Chain-of-Custody (CoC) scheme • Documents, observation and interviews Procurement Manufacturing Packaging Sales Purchasing Labeling Receiving Production Sales and Shipping CFP customer Storage Receiving

  13. Chain-of-Custody (CoC) scheme From 2006 to 2007, CoC (Chain-of-Custody) certificates increased by 50% - 12,600 certificates globally in 2008 Belka, M. 2008. Forest Products: Annual Market Review. 2007-2008. ONU.

  14. Chain-of-Custody (CoC) scheme Belka, M. 2008. Forest Products: Annual Market Review. 2007-2008. ONU.

  15. Chain-of-Custody (CoC) scheme Belka, M. 2008. Forest Products: Annual Market Review. 2007-2008. ONU.

  16. CFP Marketing Projects VA Guatemala Honduras India Costa Rica Chile

  17. CFP Marketing Projects VA, Wood housing products • One of the harmonized standards (EN) create by the Construction Product Directive (CPD) for the European Union (UE) • CE (Conformite European) assure essential health and safety requirements for all products in the UE except UK, Ireland and Sweden • For A US wood products manufacturer should apply EN 13986 *TRADA. 2007. CE Marking : Implications for Timber Products. May . Sheet 56

  18. CFP Marketing Projects Honduras, doormat *Quesada-Pineda, H., E. Haviarova, and I. Slaven 2009. A Value Stream Mapping Analysis of Selected Wood Products Companies in Central America. Journal of Forest Products Business Research Vol 6, article 4.

  19. CFP Marketing Projects Honduras, doormat *Quesada-Pineda, H., E. Haviarova, and I. Slaven 2009. A Value Stream Mapping Analysis of Selected Wood Products Companies in Central America. Journal of Forest Products Business Research Vol 6, article 4.

  20. CFP Marketing Projects Guatemala, decking *Quesada-Pineda, H., E. Haviarova, and I. Slaven 2009. A Value Stream Mapping Analysis of Selected Wood Products Companies in Central America. Journal of Forest Products Business Research Vol 6, article 4.

  21. CFP Marketing Projects Costa Rica, Pine imports • Only 50% of demand is met with local production • 500 thousand m3 in imports • Huge potential market for US yellow pine producers • GrupoProgreso holds 50% of imports, it requires at least 10k m3 per year of yellow pine *Quesada,H. 2009. Field Trip: Understanding Wood Products Imports In Costa Rica. July 22-29. San Jose, Costa Rica.

  22. CFP Marketing Projects Chile, Wine Barrels and white oak chips • Chile produce 200 million liters a year • World Annual demand is 650,000 wine barrels • 50% is produced by Nadalie • French oak barrel $1,100, American oak sells for $350 • Tracking • More Suttle • FSC system *Quesada, H.2009. Assessing the Wine Wood Products Industry in Chile. Center for Marketing Newsletter. VT

  23. CFP Marketing Projects India, training on US softwoods and hardwoods • $US 983 million imports in 2005 • 20-25 million start up houses are required every year *Ganguly, Eastin. 2007. Overview of the Indian Market for US Wood Products. Cintrafor; and Hammett 2008

  24. CFP Marketing Projects VA: Blue Ridge Forestry Coop (14 members), increase access to Markets Area served

  25. Market Drivers Demographics Information Technologies Market Demand Innovation Process Green building systems Wood energy market Production of CFP Corporate Citizenship Global trade (FTAs) Public Policy CFP customers Certification Schemes Presenter Analysis. Various Sources.

  26. Market Drivers Europe North America Strong political and financial support from Government Business to Business Markets Environment Concerts Lacey Act Government procurement policies NGOs pressure Sustainable sources for private firms Pulp/Paper most certifications Intensive FSC campaigns CFP consumption Presenter Analysis. Various Sources.

  27. Market Drivers Green building: Policies in CFP markets • Standards aim at energy efficiency • Practices and techniques to reduce negative impacts of buildings on the environment and human health • Take advantage of new resources • Environmental impact of building is underestimated • Cost are overestimated (by 300%) Belka, M. 2008. Forest Products: Annual Market Review. 2007-2008. ONU.

  28. Market Drivers • Norway, Finland, Luxemburg not big deal…CFP is self-evident Green building: • Canada, Canadian Green Building Council follows upon LEED • UK, Belgium, Denmark, Netherlands, and Germany and they all have green building systems • Switzerland, Minergie is equivalent to LEED • Leadership in Energy and Environmental Design –(LEED) in US only allow one certification scheme (FSC) • France increase use of wood from 10% to 12.5% by 2010 • US market for green building is growing ($20 billion by 2010) • 66% of US homeowners are aware of green building • In 2007, 40% of remodeling met green building requirements • 51% of homebuilders are willing to pay 11-25% premium for green built homes • Italy through the Green building Council encourage use of CFPs by a minimum of 50% • Japan, Singapore and Australia • 15 countries operate green building systems and standards • Some of these standards require, recommend or approve use of FSC, PEFC CFPs. Presenter Analysis. Various Sources.

  29. Market Drivers • Green Building • The LEED reality: up to 6.5 points out of a possible 136 for using FSC-certified wood: • Exterior wall framing, Exterior wall siding, Flooring, Floor framing, Interior wall framing, Decking, Cabinets, Counters, Doors, Trim, Window framing, Roof framing, Sheathing

  30. Market Benefits of CFP Cost of doing business Contracts with government Brand recognition Value added products Price Premiums Better branding for commodities Market access Competitiveness Presenter Analysis. Various Sources.

  31. Factors limiting CFP VA: Blue Ridge Forestry Coop (14 members), increase access to Markets Survey results: Important factors in decision to buy or specify forest 1=Extremely unimportant, 5=Extremely important

  32. Factors limiting CFP Certified Forest Products Lack of information on CFP for end customer Exclusive promotion of one certification scheme Some Green systems accept only one scheme Forest owners, SME and lover government levels Direct and Indirect cost of certification Predominant certification schemes Limited supply of certified tropical woods

  33. Conclusions • Main driver for CFP is green building initiatives • Many systems similar to LEED are being develop around the world • Only 6.5 points can be earn using FSC out of potential 136 points • There are two major Forest certification Schemes: FSC and PEFC • Public policy is important to encourage the consumption of FSC • Challenge: CoCs not growing as same speed as Forest Certification • How to increase the number of CoC? Presenter Analysis. Various Sources.

  34. Thank you!

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