Forest Certification and 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

Forest Certification and Certified Forest Products 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

Forest Certification and Certified Forest Products Forest Sustainability World Forest coverage chance from 1990 to 2005

Forest Certification and Certified Forest Products Forest Sustainability Suspicious Wood Supply: Huge concern

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

Forest Certification and Certified Forest Products Forest Certification Standards Belka, M Forest Products: Annual Market Review ONU.

Forest Certification and Certified Forest Products Forest Certification Standards Belka, M Forest Products: Annual Market Review ONU.

Forest Certification and Certified Forest Products 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)

Forest Certification and Certified Forest Products 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 – million ha of certified forest area worldwide under PEFC umbrella (as May 2008) Belka, M Forest Products: Annual Market Review ONU.

Forest Certification and Certified Forest Products Forest Certification Standards Belka, M Forest Products: Annual Market Review ONU.

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

Forest Certification and Certified Forest Products Documents, observation and interviews Chain-of-Custody (CoC) scheme ProcurementManufacturingPackaging Purchasing Receiving Production Labeling Storage Sales CFP customer Sales and Shipping

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

Forest Certification and Certified Forest Products Chain-of-Custody (CoC) scheme Belka, M Forest Products: Annual Market Review ONU.

Forest Certification and Certified Forest Products Chain-of-Custody (CoC) scheme Belka, M Forest Products: Annual Market Review ONU.

Forest Certification and Certified Forest Products CFP Marketing Projects Costa Rica Guatemala Honduras VA Chile India

Forest Certification and Certified Forest Products 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 *TRADA CE Marking : Implications for Timber Products. May. Sheet 56

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

Forest Certification and Certified Forest Products Honduras, doormat CFP Marketing Projects Society name*Location# of members Families López y AsociadosSantiaguito1040 Amaya y AsociadosNueva Granada1850 Fúnez y AsociadosSan Marcos2440 Calero y AsociadosPiedras Amarillas16100 Tinoco y AsociadosYaruca12100 Reyes y AsociadosToncontín31140 Peralta y AsociadosRío Viejo2070 Sub total135Total: 540 *Quesada-Pineda, H., E. Haviarova, and I. Slaven A Value Stream Mapping Analysis of Selected Wood Products Companies in Central America. Journal of Forest Products Business Research Vol 6, article 4.

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

Forest Certification and Certified Forest Products CFP Marketing Projects *Quesada,H Field Trip: Understanding Wood Products Imports In Costa Rica. July San Jose, Costa Rica. – Only 50% of demand is met with local production – 500 thousand m 3 in imports – Huge potential market for US yellow pine producers – Grupo Progreso holds 50% of imports, it requires at least 10k m 3 per year of yellow pine Costa Rica, Pine imports

Forest Certification and Certified Forest Products 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 CFP Marketing Projects *Quesada, H Assessing the Wine Wood Products Industry in Chile. Center for Marketing Newsletter. VT

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

Forest Certification and Certified Forest Products Area served CFP Marketing Projects VA: Blue Ridge Forestry Coop (14 members), increase access to Markets

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

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

Forest Certification and Certified Forest Products 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 Forest Products: Annual Market Review ONU.

Forest Certification and Certified Forest Products Market Drivers 15 countries operate green building systems and standards Some of these standards require, recommend or approve use of FSC, PEFC CFPs. Leadership in Energy and Environmental Design –(LEED) in US only allow one certification scheme (FSC) UK, Belgium, Denmark, Netherlands, and Germany and they all have green building systems Japan, Singapore and Australia Canada, Canadian Green Building Council follows upon LEED Norway, Finland, Luxemburg not big deal…CFP is self-evident Switzerland, Minergie is equivalent to LEED France increase use of wood from 10% to 12.5% by 2010 Italy through the Green building Council encourage use of CFPs by a minimum of 50% 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 Presenter Analysis. Various Sources. Green building:

Forest Certification and Certified Forest Products 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

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

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

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

Forest Certification and Certified Forest Products 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.

Forest Certification and Certified Forest Products Thank you!