OBSERVATIONS ON OBSERVATIONS ON FOREST CERTIFICATIONFOREST CERTIFICATION

B. Bruce BareB. Bruce Bare

College of Forest ResourcesCollege of Forest Resources

University of Washington, SeattleUniversity of Washington, Seattle

March 29, 2000March 29, 2000

B. Bruce BareB. Bruce Bare

College of Forest ResourcesCollege of Forest Resources

University of Washington, SeattleUniversity of Washington, Seattle

March 29, 2000March 29, 2000

OUTLINEOUTLINE

• What is it?What is it?

• Purpose and approaches?Purpose and approaches?

• Who sets the guidelines?Who sets the guidelines?

• Costs and benefits?Costs and benefits?

• Relationship to incentives and Relationship to incentives and regulations?regulations?

WHAT IS IT?WHAT IS IT?

• Process by which a forest owner Process by which a forest owner voluntarilyvoluntarily requests an inspection of a forest to requests an inspection of a forest to determine if pre-defined management determine if pre-defined management standards are being met.standards are being met.

• Process for Process for assessingassessing if a forest is managed if a forest is managed sustainably. sustainably.

• A way to A way to communicatecommunicate environmental environmental information about forests to consumers.information about forests to consumers.

WHAT IS SUSTAINABLE WHAT IS SUSTAINABLE FORESTRY?FORESTRY?

• Balancing Balancing environmentalenvironmental, , socialsocial and and

economiceconomic factorsfactors to meet the needs to meet the needs

of the present without compromising of the present without compromising

the ability of future generations to the ability of future generations to

meet their needs.meet their needs.

FOREST CERTIFICATION AND FOREST CERTIFICATION AND SUSTAINABLE FORESTRYSUSTAINABLE FORESTRY

• Forest certification Forest certification isn’tisn’t necessarynecessary to to

guarantee sustainability -- it guarantee sustainability -- it maymay notnot be be

sufficient.sufficient.

• Best viewed as: 1) important Best viewed as: 1) important “policy“policy

driver”driver” for improving forest management for improving forest management

standards and practices 2) satisfying standards and practices 2) satisfying buyerbuyer

groupsgroups and and consumersconsumers of forest products. of forest products.

OUTLINEOUTLINE

• What is it?What is it?

• Purpose and approaches?Purpose and approaches?

• Who sets the guidelines?Who sets the guidelines?

• Costs and benefits?Costs and benefits?

• Relationship to incentives and Relationship to incentives and regulations?regulations?

PURPOSE AND APPROACHES?PURPOSE AND APPROACHES?

• A 1990’s initiative that encourages A 1990’s initiative that encourages landowners to practice landowners to practice sustainablesustainable forestryforestry and to give consumers and to give consumers assurance that assurance that forestforest productsproducts come from sustainable forests. come from sustainable forests. Includes both Includes both forestforest certificationcertification and and chain-of-custodychain-of-custody components. components.

PURPOSE AND APPROACHES?PURPOSE AND APPROACHES?

• Performance-basedPerformance-based

– Use Use criteriacriteria and and indicatorsindicators to monitor to monitor performance over time (on-the -ground)performance over time (on-the -ground)

• Management system-basedManagement system-based

– Generic Generic guidelinesguidelines and and standardsstandards (ISO (ISO 14001)14001)

– Forestry-specific (SFI, CSA)Forestry-specific (SFI, CSA)

OUTLINEOUTLINE

• What is it?What is it?

• Purpose and approaches?Purpose and approaches?

• Who sets the guidelines?Who sets the guidelines?

• Costs and benefits?Costs and benefits?

• Relationship to incentives and Relationship to incentives and regulations?regulations?

WHO SETS THE GUIDELINES?

• GovernmentGovernment– UNCSD (IPF, IFF, Helsinki and Montreal Processes, UNCSD (IPF, IFF, Helsinki and Montreal Processes,

Santiago Declaration)Santiago Declaration)

• PrivatePrivate– AF & PA (SFI , 1994), PEFC (Europe, 1999)AF & PA (SFI , 1994), PEFC (Europe, 1999)

– ATFS (1945), Green Tag (NFA, 1998)ATFS (1945), Green Tag (NFA, 1998)

• NGONGO– FSC (1993)FSC (1993)

– ISO 14001 (1996), CSA (1995)ISO 14001 (1996), CSA (1995)

WHO DOES THE WHO DOES THE CERTIFYING?CERTIFYING?

• First partyFirst party -- the land owner or firm -- the land owner or firm

• Second partySecond party -- the industry or an -- the industry or an associationassociation

• Third partyThird party -- an independent certifier -- an independent certifier– Rainforest Alliance (SmartWood, FSC)Rainforest Alliance (SmartWood, FSC)

– Scientific Certification Systems (FSC)Scientific Certification Systems (FSC)

– SFI, PEFC (Voluntary Verification)SFI, PEFC (Voluntary Verification)

IS CERTIFICATION IS CERTIFICATION NECESSARY?NECESSARY?

• Many believe that sustainable Many believe that sustainable forestry is forestry is alreadyalready being practiced in being practiced in the developed countries.the developed countries.

• Demand being driven by large Demand being driven by large buyerbuyer groupsgroups who wish to sell certified who wish to sell certified products. Small owner may be products. Small owner may be forced to comply -- non-voluntary.forced to comply -- non-voluntary.

AREA CERTIFIEDAREA CERTIFIED

• FSCFSC– 16.9 million ha. world-wide16.9 million ha. world-wide

– 1.6 million ha. in USA1.6 million ha. in USA

– Less than 1500 ha. in WA (?)Less than 1500 ha. in WA (?)

• SFISFI– 23 million ha. In USA - about 33% 23 million ha. In USA - about 33%

independently verified by third partyindependently verified by third party

– SFI licensees - 1.1 million ha in USASFI licensees - 1.1 million ha in USA

AREA CERTIFIEDAREA CERTIFIED

• ATFSATFS – 10.1 million ha. non-industrial in USA10.1 million ha. non-industrial in USA

• Green TagGreen Tag– 18,000 ha. in USA18,000 ha. in USA

• PEFCPEFC – 20 million ha expected by 200120 million ha expected by 2001

OUTLINEOUTLINE

• What is it?What is it?

• Purpose and approaches?Purpose and approaches?

• Who sets the guidelines?Who sets the guidelines?

• Costs and benefits?Costs and benefits?

• Relationship to incentives and Relationship to incentives and regulations?regulations?

HOW MUCH DOES IT COST?HOW MUCH DOES IT COST?

• CostsCosts of certification: of certification:– DirectDirect cost of initial forest assessment cost of initial forest assessment

plus annual audit.plus annual audit.

– IndirectIndirect cost of improved forest cost of improved forest management practices (i.e., reduced management practices (i.e., reduced harvest).harvest).

– Cost of Cost of chain-of-custodychain-of-custody audit audit

HOW MUCH DOES IT COST?HOW MUCH DOES IT COST?

• Economies of scale indicate that Economies of scale indicate that smallsmall land owners will be hit land owners will be hit harderharder than than large firms.large firms.

• DirectDirect costs vary widely but may not costs vary widely but may not be high -- from a minimum of $500 - be high -- from a minimum of $500 - $1000 for small properties to $.25 $1000 for small properties to $.25 -.50/MBF of harvest volume for larger -.50/MBF of harvest volume for larger properties.properties.

HOW MUCH DOES IT COST?HOW MUCH DOES IT COST?

• Another study shows:Another study shows:– Increase in COGS due to FSC Increase in COGS due to FSC

certification was certification was <10%<10% for 84% of for 84% of survey respondents. For 50% the survey respondents. For 50% the increase was increase was < 3%< 3%. Average was . Average was 5-6%.5-6%.

HOW LARGE ARE THE HOW LARGE ARE THE BENEFITS?BENEFITS?

• The The objectivesobjectives of forest certification are of forest certification are to:to:

– gain (keep) gain (keep) accessaccess to markets that desire to markets that desire environmentally sensitive productsenvironmentally sensitive products

– promotepromote sustainable forest management sustainable forest management

• Producers might gain Producers might gain marketmarket shareshare and and might experience a might experience a priceprice premiumpremium for for certified wood products. certified wood products.

HOW LARGE ARE THE HOW LARGE ARE THE BENEFITS?BENEFITS?

• One study shows:One study shows:– For purchasers of certified wood For purchasers of certified wood

products the average price premium products the average price premium paid was paid was 6-7%6-7% with 35% paying less with 35% paying less than than 3%3% and 55% less than and 55% less than 5%5%. .

HOW LARGE ARE THE HOW LARGE ARE THE BENEFITS?BENEFITS?

• World-wideWorld-wide, less than , less than 1%1% of the annual of the annual harvest currently comes from certified harvest currently comes from certified forests. Expected to forests. Expected to increaseincrease in near- in near-term future.term future.

• PricePrice premiumspremiums for for “green”“green” wood wood products are products are smallsmall or or non-existentnon-existent but but market share is important in some market share is important in some regions such as western Europe. regions such as western Europe.

HOW LARGE ARE THE HOW LARGE ARE THE BENEFITS?BENEFITS?

• Demand is Demand is growing;growing; presently is presently is being pushed by buyer groups and being pushed by buyer groups and not end-product consumersnot end-product consumers

OUTLINEOUTLINE

• What is it?What is it?

• Purpose and approaches?Purpose and approaches?

• Who sets the guidelines?Who sets the guidelines?

• Costs and benefits?Costs and benefits?

• Relationship to incentives and Relationship to incentives and regulations?regulations?

RELATIONSHIP TO INCENTIVES RELATIONSHIP TO INCENTIVES AND REGULATIONS?AND REGULATIONS?

• Certification, forest conservation Certification, forest conservation easements, HCPs, cost-sharing, etc. easements, HCPs, cost-sharing, etc. are are voluntaryvoluntary programs. Regulations programs. Regulations are are compulsorycompulsory..

• Easements and HCPs generally involve Easements and HCPs generally involve a a longlong time commitment by landowner time commitment by landowner (50+ years). Certification and cost-(50+ years). Certification and cost-sharing are sharing are shortershorter (5+ years) and (5+ years) and more easily cancelled.more easily cancelled.

RELATIONSHIP TO INCENTIVES RELATIONSHIP TO INCENTIVES AND REGULATIONS?AND REGULATIONS?

• IncreasingIncreasing forest practice regulations forest practice regulations lessenlessen need for certification vis a vis need for certification vis a vis sustainability.sustainability.

• Buyer groups need Buyer groups need assuranceassurance conveyed by certification. conveyed by certification.

• Generally certified price incentives are Generally certified price incentives are notnot present in short-term. Probably present in short-term. Probably won’t be in long-term.won’t be in long-term.

RELATIONSHIP TO INCENTIVES RELATIONSHIP TO INCENTIVES AND REGULATIONS?AND REGULATIONS?

• Can Can combinecombine certification with an certification with an easement, HCP or cost-share easement, HCP or cost-share program.program.

• Must meet Must meet minimumminimum state state regulations to be certified, but regulations to be certified, but landowners not exempt from ESA. landowners not exempt from ESA. Safe harbor agreements help to Safe harbor agreements help to mitigate.mitigate.

RELATIONSHIP TO INCENTIVES RELATIONSHIP TO INCENTIVES AND REGULATIONS?AND REGULATIONS?

• Need to consider certification programs Need to consider certification programs that do not penalize landowners who that do not penalize landowners who practice practice activeactive plantation management. plantation management. This may provide an This may provide an incentiveincentive to keep to keep land in forest production.land in forest production.

• Certification becoming less Certification becoming less voluntaryvoluntary in in order to satisfy buyer groups. Neither order to satisfy buyer groups. Neither the original intent nor an incentive.the original intent nor an incentive.