The environmental and social benefits of Forest Stewardship Council (FSC) certification are proven, as the organisation works to ensure sustainable use of forest products. But a recent WWF study has found that there is also a concrete economic benefit. The bottom line? On average, forestry companies can earn an extra US$1.80 for every cubic metre of FSC-certified timber.
FSC Director General Kim Carstensen explains: “Previous studies have shown that FSC certification has a positive impact on the environment, and the people who live and work in forests, but it’s been harder to show the true financial benefit for the businesses who partner with us. We are an NGO, but we are also an important tool in the marketplace, and we can only be successful in safeguarding the world’s forests if it makes good business sense. That is the premise of certification, and it’s the success of FSC.”
Perhaps most interestingly, the study shows that tropical forest companies and small-to-medium producers benefit the most from FSC certification, as they typically receive the largest premiums, regardless of their region or country.
“Tropical forests are vital to the future of our planet, and the communities who rely on them for their livelihoods need better market access,” Carstensen notes. “FSC certification helps provide that, and the price premiums reflect the high-end and niche markets they tend to supply. Investing in sustainable tropical timber is essential to the future of our forests.”
He explained that the study sought to advance knowledge about the impact of FSC certification on a company’s “bottom line” through primary research on 11 forestry entities operating across four continents. More than 500 original data points were analysed to assess an array of factors such as upfront investments, annual costs, annual benefits, and the overall net present value (NPV) of the decision to pursue FSC certification.
The research can aid forest operators, as well as their financiers and donors, to analyse individual projects, and in doing so, facilitate more efficient allocation of resources to addressing the triple-bottom-line considerations of people, profits and planet.
The participating companies represent a range of sizes, geographies, and sub-sectors. This research should help to establish a baseline, a common methodology, and indicative results from a small yet diverse sample, and also demonstrates the versatility of businesses that can benefit from FSC certification.
The clear outcome of the study is that for the forest operations evaluated, the financial benefits of FSC certification tend to outweigh the costs, albeit with high company-by-company variance.
For forestry companies, this research should help provide valuable data to assist in decision-making and planning. The analysis shows that FSC can generate positive financial results. Positioning for market premiums and optimising operational improvements following FSC guidelines has shown to add the most value to returns.
Carstensen notes that apart from activism by business and consumers, governments can and should support these efforts by clamping down on unsustainable practices, thus providing a level playing field, and by facilitating incentives for credible certification. Buyers of forest products can also benefit from FSC certification, ensuring they source from stable suppliers and through differentiation by communicating to stakeholders and consumers the social investments and other benefits provided by FSC producers.
This study is an early examination and should provide researchers a basis for much-needed further assessment of the economic impacts of FSC. It is not all-encompassing and should be considered as a starting point for future research. FSC itself could facilitate a leap in this field by making anonymous economic indicators part of its annual reporting requirements. FSC and financial institutions can also work together to develop financial products to assist SMEs (small / medium enterprises) in achieving the gains from FSC demonstrated in this work. Most importantly for financial institutions, this research supports the common view of FSC as a proxy for lower risk and higher profitability in the forestry sector. Those bankers which have not already done so, should join the current groundswell of those committing to engage their clients to adopt credible certification in deforestation-risk sectors, and in this way simultaneously achieving financial, environmental, and social benefits.
This research shows the value that FSC can add to forestry assets, but like many other studies, it is clear that this value depends on company context. Advocates of responsible forestry need to support forest managers and investors with tools to assess where investing in certification brings most benefit. WWF has begun work on such tools but a broader alliance of partners is required to ensure these become standard practice.