Wood Science & Engineering - Oregon State University

Forest Certification: An Historical and Forest Certification: An Historical and FutureFuture--Looking PerspectiveLooking Perspective

Eric HansenEric HansenProfessor of Forest Products MarketingProfessor of Forest Products MarketingOregon State UniversityOregon State UniversityCorvallis, OregonCorvallis, Oregon

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OutlineOutline

•• Brief review of historical developmentsBrief review of historical developments•• Recent developmentsRecent developments•• The marketplaceThe marketplace•• The futureThe future

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Certification Certification DPsDPs

•• Chapters since 1998Chapters since 1998–– RametsteinerRametsteiner

•• Six Six DPsDPs–– Covering from 1998Covering from 1998--20032003

•• JuslinJuslin & Forsyth& Forsyth•• U Helsinki studentsU Helsinki students

Why Are Companies Committing?Why Are Companies Committing?

A method for minimizing risk of being targetedAn idealistic philosophy of “doing the right thing”Anticipation of competitive advantageSeen as an effective and credible means of communication

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Certification DriversCertification Drivers

•• Inability to establish self claims as Inability to establish self claims as crediblecredible

•• Some, but not all Environmental GroupsSome, but not all Environmental Groups•• Forest industryForest industry•• Environmental values reflected in Environmental values reflected in

purchase policies/building specificationspurchase policies/building specifications•• ConsumersConsumers

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The Continuing Role of The Continuing Role of Environmental GroupsEnvironmental Groups

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Growth in # of WWF Buyers GroupsGrowth in # of WWF Buyers Groups

02468

101214161820

1998 1999 2000 2001 2002

# of

WW

F B

uyer

s G

roup

s

UNECE DPs

Wood Science & Engineering - Oregon State University

28 Members 28 Members –– consumerconsumer-- and and producerproducer--basedbased

Wood Science & Engineering - Oregon State UniversitySource: RAN

Wood Science & Engineering - Oregon State Universityhttp://www.homedepot.com/HDUS/EN_US/compinfo/community/social_responsibility/1999/wood.html

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Other Purchasing PoliciesOther Purchasing Policies

•• Large homebuildersLarge homebuilders•• Office supply retailersOffice supply retailers•• Financial institutionsFinancial institutions•• Catalog retailersCatalog retailers

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Major Catalog Companies

ForestEthics.org

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Industry ReactionIndustry Reaction•• Embrace the FSC modelEmbrace the FSC modelOROR•• Create a competing systemCreate a competing system

–– Sweden Sweden –– FSC FSC –– Canada Canada –– CSACSA–– Finland Finland –– Finnish Forest Cert. SystemFinnish Forest Cert. System–– U.S. U.S. –– SFISFI

•• Potlatch Potlatch –– breakaway?breakaway?

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Growth in Certified AreaGrowth in Certified Area

0

25

50

75

1998

1999

2000

2001

2002

2003

2004

2005M

illio

n he

ctar

es

FSC PEFC CSA SFI

UNECE 05 Annual Market Review

Wood Science & Engineering - Oregon State University

Share of Certified Area by SystemShare of Certified Area by System

27%

24%27%

22%

CSA PEFC SFI FSC

UNECE 05 Annual Market Review

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Share of Certified Area by SystemShare of Certified Area by System

78%

22%

PEFC FSC

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Geographical Distribution of Geographical Distribution of FSC Certified LandFSC Certified Land (May 2005)(May 2005)

Baltics7%

Brazil6%

Canada9%

Poland12%S Africa

3%Sweden

18%

U.S.14%

Bolivia4%

Croatia4%

Russia7%

UK3%

Other13%

698 Certificates698 Certificates66 Countries66 CountriesNearly 54 million hectaresNearly 54 million hectares

FSC International

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Development in RussiaDevelopment in Russia

•• Development of several systemsDevelopment of several systems–– CashoreCashore -- YaleYale

•• IlimIlim Pulp pursuing FSCPulp pursuing FSC•• ENGOsENGOs actively participatingactively participating•• Retailers actively participatingRetailers actively participating

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Wood Science & Engineering - Oregon State University

Wood Science & Engineering - Oregon State University

The MarketplaceThe Marketplace

The Reality of Marketing Certified The Reality of Marketing Certified ProductsProducts

Low demandLow consumer awarenessLow willingness-to-payPerceptions of lower qualityNiche marketLimited volume availableChain-of CustodyDistributor hesitancy

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DemandDemand• Final consumers are NOT drivers • No good estimates of demand volume

– FSC estimates its market at $5 billion• High level of support for FSC• Global Forest and Trade Network• LEED, etc.

Wood Science & Engineering - Oregon State University

Wood Science & Engineering - Oregon State University

Wood Science & Engineering - Oregon State University

SupplySupply

• No good estimates of supply volume• Area certified not a good predictor of

supply• Certified area is clearly increasing• Potlatch 668,000 acres

– First major U.S. corporate to go with FSC.

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The FutureThe Future•• Mutual recognitionMutual recognition•• Certification of hotspots (Russia, Coastal BC)Certification of hotspots (Russia, Coastal BC)•• ENGO shift in focus to illegal loggingENGO shift in focus to illegal logging•• Review of FSC US regional standardsReview of FSC US regional standards•• Issues to watch:Issues to watch:

–– Tropical forests?Tropical forests?–– LEED Standards?LEED Standards?–– PEFC?PEFC?