western hardwoods association - 2004 1 june 2004catherine m. mater forest certification hits wall...

June 2004

Western Hardwoods Association - 2004

Catherine M. Mater

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Forest Certification Hits Wall Street

Market Strides and Stockholder Results

Catherine M. MaterPres.—Mater Engineering

Senior Fellow – The Pinchot Institute for Conservation Corvallis, Oregon & Washington DCTel: 541-753-7335 Fx: 541-752-2952

Email: [email protected],org

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First, the primer . . .

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In the beginning there was . . .

Then, came . . .

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Let’s first examine market strides.

The big surprise might be on . . . public forestlands

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Food for thought:

Forest certification was considered a “flash-in-the-pan”

No publicly managed forestlands in the US were even considering certification.

In 1997:

Today:

Forest certification is here to stay.

Over 60% of all certified non-industrial forestlands in the US are owned/managed by government agencies.

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In 1998, a radical middle approach was initiated . . . Certification assessment of public forestlands

Unthinkable! Yes

Impossible? Not so fast . . .

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Pennsylvania - 1998

2.1 mm acres (all state forests)

FSC certification

Reasons:

• Major political division on how to manage public forests (deer or no deer).

• Internal debate became major public debate.

Results:

• Certification requirements resolved issue for DOF

• Market demand for PA resource increased overnight (national & international buyer interest)

• Up to 15% premiums gained on timber sales

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Minnesota - 1998

600,000 acres

FSC certification

Results:

• Certification recaptured social license & improved management practices.

• Market demand for lower-grade wood resource (aspen) increased overnight.

• Legislative budgets increased to focus personnel on certified forestry & landowner outreach.

Reasons:

• State & county forestlands questioned by public on management practices.

• Public concerns transferred to legislative budget decreases.

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New York - 1999 700,000 acres (all state forests)

FSC certification

Results: • Certification required more cutting to achieve healthyforests.

• Certification required replenishment of reserve account for proper forest management practices.

Reasons:

• State legislature systematically pulling funding from “dedicated reserve” account to general funding.

• Depleting budget for forestry agency seriously impacting health of forests (not cutting enough).

• No political clout to change dynamics.

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Tennessee - 2001

125,000 acres (all state forests) FSC & SFI assessment FSC certification

Reasons:

• Heavy environmental opposition . Tennessee had the largest number of legislative bills targeted against forestry practices over all other states in the nation.

• Public discontent translated to legislative budget cuts . . .

• . . . at a time when private industry divesting themselves of their forestlands

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Tennessee – 2001 (cont.)

125,000 acres (all state forests) FSC & SFI assessment FSC certification

Results:

• Tennessee achieved the unthinkable - became the first Southern state in the nation to achieve forest certification.

• Achieved tremendous public & environmental support practically overnight.

• Became the only TN state agency to achieve legislative budget increase (at a time of tremendous budget deficit).

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North Carolina - 2001

~100,000 acres

FSC & SFI certification State & university lands

Reasons:

• Heavy environmental opposition (Dogwood Alliance & the chip mill debates

• Intense public discontent

• State & university joined forces to evaluate “radical” options for building path to solutions

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North Carolina – 2001 (cont.)

~100,000 acres

FSC & SFI certification State & university lands

Results:

• Like Tennessee – achieved the unthinkable

• Incorporated lessons learned into academic curriculums at NCSU & Duke University

• Now have environmental attention regarding certification as a solution on both public & private lands

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Maine - 2001

450,000 acres (all state forestland)

FSC & SFI certification

Results:

• Certification became effective tool in re-establishing credibility with environmental organizations & the public.

• Initiative was defeated.

Reasons:

• Highly contentious public debate over management of public & private forestlands.

• Initiative to stop all logging on state forestlands.

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Washington - 2003

1.2 mm acres (Westside forestland)

FSC & SFI (gap only); assessment on-going

Reasons:

• Highly contentious public debate over management of public forestlands.

• Lawsuits filed by environmental organizations (WEC) against the state.

• New “preferred alternative” management policy to be determined for all state forests.

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Washington - 2003

1.2 mm acres (Westside forestland)

FSC & SFI (gap only) assessment

Results:• State recommended for FSC certification with conditions.

• State recommended to proceed with full SFI audit.

• Currently trying to secure funding to complete full SFI audit.

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At the same time, on Indian Nation lands . . .

Congress mandates independent assessment of forest management practices, and . . .

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30 Indian Nations step to the plate:

(FSC & SFI pre-assessments)

16 mm acres of forestlands

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Meanwhile, back to the radical middle . . .

. . . Could federal lands be far behind?

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Take Alaska for example

Of the 17 mm acres comprising the Tongass NF:

• ~ 11mm acres not in roadless or wilderness area.

. . . Ridiculous to think about?

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Let’s just suppose for 2002 . . .

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2 0 0 2 A l a s k a n L o g F l o w : > 4 8 m m b f -

5 K e y C o m p a n i e s


> 4 2 . 2 m m b f

> 5 . 5 m m b f

Based on direct interviews for log flows . . .

. . . About those imports

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And let’s further suppose that over 90% of that export log volume is moved by Sumitomo Forestry & Nissho-Iwai Nichimen Corporation

• Sumitomo: 2002 key restructuring to strengthen company performance included major investment in new LVL production line in New Zealand. That products facility is now one of the world’s largest LVL & MDF producer sites in the world.

• Nissho –Iwai Nichimen: Corporation now has a joint venture with Tackikawo Forest Products Ltd – a sawmill operation in New Zealand.

• As of March 2003, 40% of all New Zealand plantations are FSC certified and Tackikawo Forest Products is FSC chain of custody certified.

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C A N A D A

> 32.6+ m m b f

D i r e c t f r o m A l a s k a t o C a n a d a : > 5 . 2 m m b f

> 5 . 2 m m b f



> 1 1 . 4 m m b f

2 0 0 2 A l a s k a n L u m b e r F l o w : > 4 9 m m b f

15 K ey C om p an ies

Based on direct interviews for lumber flows . . .

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Suppose: for lumber flow into the lower 48 purchased by 15 companies, notable percentage of that volume goes to:

Pella: Who recognizes SFI, CSA, & PEFC equally and has stipulated that all of its lumber suppliers need to be third-party certified by 2008. As of February 2003 – 63% of their wood supply comes from certified sources.

Premdor-Masonite: FSC - certified

Jeld-Wen: also FSC - certified

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Federal lands … not so impossible !!

Already have Dept. of Defense and National Park Service lands certified!

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Let’s next look at unexpected new market pull strides on the retailer/customer end . . .

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Lanoga Corporation (Lumbermans) is FSC-certified and becomes the first retailer in the US to finance certification of public forestlands (WA state). (FSC and SFI)

2003

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1999 sold only $15 million in certified wood product.

2002 sold over $250 million

Looking for more.

Home Depot announces

2003

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2003: Home Depot and Tembec (~$4 billion in sales/yr.; 55 manufacturing operations) announce major partnership:

Agree to offer large amounts of FSC-certified softwood lumber into the US Home Depot markets

All Tembec holdings – 32 mm acres – to be FSC-certified by 2005.

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Domtar: Third largest uncoated freesheet paper producer in NA announces agreement with WWF to certify 22 mm acres of Canadian forests under FSC by 2006

Alberta-Pacific (AlPac): NA’s largest single line kraft pulp mill to undergo FSC certification in 2005 (~15 mm acres)

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With the announcements of Tembec and Domtar, FSC is slated to become the predominate certification system in Canada by 2005, funneling product into the US:

74 mm acres: FSC

70 mm acres CSA

60 mm acres SFI

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2003Time Inc. Paperco

2003: 60% of 600,000 tons of wood fiber per year for newspapers, book companies, and magazines will come from a certified (FSC and SFI) supply.

By 2004 – 70%

By 2005 – 85%.

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Maine - 2003

• Governor announces new initiative to get 10 mm acres of forestlands (public & private) certified within by 2006. (FSC or SFI)

Time Inc. Paperco intervenes and . . .

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Minnesota - 2004


The Governor issues an Executive Order mandating the certification of all state forestlands by 2006. (FSC and SFI assessments)

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Wisconsin - 2004


Governor initiates FSC and SFI assessments on all state and county forestlands. Issues statement to the public stating that market demand “too great to not get certified”.

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Michigan - 2004


Governor announces the mandate to have all state forests certified by 2006. FSC and SFI assessments already initiated.

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Maryland - 2004


Governor announces an Executive Order mandating all state forests to be certified by 2006. Also announces FSC and SFI certification of partial state lands this week.

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Kinko’s first major paper supplier (over 1,000 stores in US) to offer FSC – certified paper.

Quad/Graphics, the world’s largest privately-held printer of catalogs, magazines, and other commercial products ($1.8 billion annual sales) becomes FSC-certified.

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• 600,00 acres

• SFI-certified - US forestlands

• FSC-certified Idaho and Oregon; and …

• Initiates FSC assessments on allother timber holdings in the US

IdahoPotlatch Corporation

First publicly-traded forestry corporation in US to step to FSC plate.

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US Green Building Council: LEED certified

• Currently gives credit FSC-certified wood use;

• Has captured within 5 years:

25% of all government and institutional construction in US

5% of all commercial construction; and

Just approved for residential construction

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And stay tuned for some new announcements in 2004

A ls o V is i t !

M c D o n a ld 's H a p p y M e a l M c D o n a ld 's H a p p y M e a l f e a tu r in g 1 0 e x c lu s iv e M a d a m e A le x a n d e r® d o l ls , a n d 6 g ru e s o m e S t re tc h S c re a m e rs to y s ! m o re >

M c D o n a ld 's M o n o p o ly B e s t C h a n c e G a m e 3 w a y s to w in ! P la y M c D o n a ld 's M o n o p o ly B e s t C h a n c e G a m e a t p a r t ic ip a t in g M c D o n a ld ’s r e s ta u ra n ts n a t io n w id e . m o re >

M c G r id d le s ® B r e a k f a s t S a n d w ic h e s P a r t ic ip a t in g M c D o n a ld ’s r e s ta u ra n ts n a t io n w id e a re o f f e r in g M c G r id d le s ® b re a k f a s t s a n d w ic h e s a s p e rm a n e n t m e n u i te m s . m o re > S e e th e P re s s R e le a s e

M c D o n a ld 's P r e m iu m S a la d s C h o o s e w a rm C r is p y o r G r i l le d c h ic k e n . E a c h P re m iu m S a la d in c lu d e s a s p e c ia l N e w m a n 's O w n ® D re s s in g ! m o re > S e e th e P re s s R e le a s e

G if t C e r t i f ic a t e s O n - l in e ! T w o w a y s to g e t M c D o n a ld 's G i f t C e r t i f ic a te s , a t o u r r e s ta u ra n ts , o r h e re o n w w w .m c d o n a ld s .c o m ! m o re >

In v a l id S a la d C o u p o n : C u s t o m e r N o t ic e T h e P re m iu m S a la d c o u p o n d e p ic te d (a n d th o s e

Clue

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Meanwhile, on the wall street front . . .

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New events unfolding almost daily:

Citigroup – the world’s largest financial institution just announced its new corporate policy providing specific investment funds dedicated to FSC certified products.

Others targeted to “meet or beat” Citigroup: US Bancorp, Wells Fargo, Goldman Sachs, JP Morgan, John Hancock.

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Innovest- internationally-recognized investment research and advisory firm ($1 billion under advisory mandates) – determined that FSC-certified companies achieve superior stock market returns. In 2003 upgraded Domtar from a BBB to A rating when the company committed to FSC-certification of all its woodlands and operations throughout Canada.

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Swiss Reinsurance Company – one of the world’s largest reinsurers in life, health, property, motor, and liability insurance creates investment portfolio (valued at ~ $50 million) committed exclusively to sustainability. Has begun investing in FSC-certified companies.

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Forest Certification:

Growing demand Growing on Wall Street

Here to stay!

If you’re not at the table on this one . . .

. . . you’re not at the table!!

western hardwoods association - 2004 1 june 2004catherine m. mater forest certification hits wall...

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