Costs and Benefits of Forest Certification
Family forest owners around the U.S. are wondering, “What’s driving the growth of forest
certification and what’s in it for me? Can I expect higher timber prices if my forest management
practices are certified? Are there other benefits, and will the benefits outweigh the costs?”
The concept of certification gained a foothold in 1993 and has been building traction since. As of
2011, the area certified under all standards represented 9% of the world’s forests. The area
continues to increase at a rate of about 8% a year1. Forest Stewardship Council (FSC) certified
forestland (Figure 1) is growing even faster at about 11% a year. In mid-2011 FSC totaled
354,100,000 acres worldwide. The United States with 33,811,000 acres of FSC forest places
third behind Canada and Russia (Figure 2).
Figure 1- Growth in Global FSC Certified Area 1995-2010
Direct Benefits of FSC Certification
Initially, advocates thought that forest certification would be spurred by direct price premiums
for certified wood. While some manufacturers are enjoying higher prices for sales, most say
price benefits have been limited. Where they have experienced increased value for end products,
higher prices paid to landowners producing the wood are not common. Although landowners in
some mill woodsheds are reporting premiums in the range of 5% to 20% for certified wood,
1
UNECE, FAO, 2010
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counting on price premiums in current markets is optimistic, as the market is still coming to scale
and gaining full efficiency. There are, however, other tangible direct and indirect benefits related
to FSC certification for both small and large landowners.
Figure 2 – FSC acreage in the top 15 countries. Most of the U.S. FSC supply comes from the Lake States and Northeast
Regions. Highlighting a region of concern in the U.S., red bars show relative acreage of FSC certified land in thirteen
Southeast states compared to other top producers. The South is losing business to other regions in part due to its lack of
FSC supply.
Market access is the key direct financial benefit of certification. It is closely linked to the recent
phenomenon of market globalization.
Not that long ago forest products companies needed locally produced wood, but, even with a
resurgence of Buy Local campaigns that is less true today. Because of globalization and in
particular transportation infrastructure, forest industry functions related to raw material
purchases and manufacturing processes can become geographically separated. Two
consequences are common:
1. While there may be shortages of wood or grades of wood (like FSC-certified wood)
near a mill, there is no shortage of wood on a global scale. Today, a paper mill or
solid wood manufacturer can bring in logs, chips, pulp or lumber from distant sources
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by rail or container ships, often at no greater cost than local sources.2 The net effect is
that wood producers across the U.S. and in Canada, Russia, Uruguay, New Zealand
and other far flung countries have become direct competitors to family forest owners
that used to supply local mills. If mills want FSC-certified wood but can’t buy it
locally, they have the option to turn to other sources as illustrated in Figure 2.
2. Low shipping costs also make it feasible to manufacture products elsewhere. A
company can and will close local plants and shift production to another region or
country. They are motivated by lower labor costs and opportunities to build with
newer technology, access capital or to be closer to alternative raw materials including
better supplies of certified wood. There is also a substantial risk that a manufacturer
could easily lose established customers wanting certified products they cannot supply.
The customer can switch to a new supplier halfway around the world, potentially
causing the original company to close plants due to a drop in business. Lost markets
in either situation can setback local timber growers.
Figure 3 - Highly efficient container shipping is one factor opened the door to globalized trade. Photo:
Jdnx's Photostream, flickr.com
2
For example, in 1956 it cost $5.86/ton to load and unload a cargo ship by hand. Today, using containers, it may
cost 16 cents or less per ton. Railroads can move a ton of freight 423 miles on a single gallon of fuel. (Al Schuler,
USDA Forest Service, 2008)
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Together, factors related to globalization like those described above are causing declines in U.S.
timber harvests and prices that peaked in 1990's but have been falling since.
Companies striving to counter these trends are employing a number of strategies including
building global relationships and aggressively developing branding, product identity and product
value.3 They are adding new services to differentiate their products, and the provision of
certified products is one of the fastest growing changes.4 While they may get higher prices,
their primary focus is on regaining and holding market access through the real and perceived
value forest certification gives their products. The same approach can benefit family forest
owners seeking to sell timber in highly competitive global markets.
While most consumers do not yet seek certified products, at a business-to-business level forest
certification is highly advantageous. Of the various forest certification options available, FSC
demand is the overwhelming leader by a margin of four to one among North American
manufacturers based on chain of custody certifications (Figure 4).
6000
5000
4000
FSC
3000
SFI/PEFC
2000
1000
0
Canada, Mexico & Others
United States
North America Total
Figure 4 - FSC Chain of Custody certificates held by primary and secondary manufacturers outnumber other standards
by over four to one in North America (Aug 2011).
3
4
Peter Ince, et al, USDA Forest Service, 2007
Buehlmann, et al, Forest Products Journal, Vol. 60 No. 6, 2010
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Large landowners including forest products industries, real-estate investment trusts, and public
forests owned by states and counties were first to recognize the value of FSC branding. They
hold the vast majority of certified forestlands. Only 8% of the certified acreage is in smallholder
ownership worldwide5, and the picture is no different in the U.S.
The certification trend is also not unique to the U.S. Take another look at Figure 2 and it is
apparent that global competition in the forest certification arena is keen. Major players in
Canada, Russia, South America and elsewhere have staked strong positions around FSC. Family
forest owners in the U.S. risk a disadvantage relative to large owners worldwide if they do not
become connected with certified markets. Market access is a valuable direct certification benefit
that family forest owners cannot afford to ignore.
Indirect Benefits of FSC Certification
Major indirect economic benefits include avoiding the loss of sales or being force into offering
price discounts due to lack of certification. While markets currently may not be offering many
price premiums, anecdotal evidence tells of sellers giving price concessions ranging from 5% to
25% in buyers’ markets demanding FSC supplies. Another example from Lake States markets in
2008 shows that producers working on non FSC-certified public lands faced the risk of being
phased out of pulpwood supply contracts.6 Although non-certified landowners may be able to
continue selling wood, their bargaining position can be significantly weakened.
From an administrative perspective, FSC participants speak of other valuable indirect economic
improvements stemming from forest certification. There is better communication between
workers and management, less use of costly pesticides, fewer safety-related losses, better followthrough on commitments, better records resulting in tax savings, and more investments in
maintenance and capitol development on certified lands. Some landowners are also receiving
payments for ecosystem services like carbon sequestration that require certification as a
prerequisite.
Family forests having FSC-certified plans also have access to federal cost-sharing incentives
offered through Natural Resources Conservation Service (NRCS) or the federal Farm Service
Agency. Through an agreement7 with the U.S. Department of Agriculture, FSC-certified
programs qualify for federal Forest Stewardship Plan benefits, including access to cost sharing
funds for practices like tree planting and habitat improvement and other financial incentives.
5
Shoana Humphries, FSC-IC, 2011
Wisconsin DNR, 2009
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FSC-USDA agreement is pending final approval by the Secretary of Agriculture as of August 16, 2011.
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The dollar aside, the indirect environmental benefits
of forest certification are what many family forest
owners value most. Foresters writing FSC-certified
management plans are required to provide
landowners with a broader range of environmental
considerations than under more traditional timber
production plans often aimed at maximizing the cut
and minimizing investments. That’s good news to
most family forest owners who say forest health,
wildlife, water, recreation, scenery and the value of
the land as a legacy to leave their children rank far
ahead of timber sales.
Figure 5 - North American River Otter. Photo:
Dmitry Azovtsev, flickr.com
Timber producers are more respectful of operational
regulations and Best Management Practices when
they know an internal reviewer or certification auditor might inspect their work. Logging
companies send their best crews to certified land. They do a better job of avoiding sensitive sites
during adverse weather conditions. They are more careful and damage fewer trees in the harvest
process. Professional loggers bet their reputations on good work and make considerable
investments themselves in training and certification. When it comes time to bid on harvests,
loggers are also known to give preference to FSC-certified forests because they have more
marketing options.
Direct Costs of FSC Certification
There are both direct and indirect expenses (Figure 6) to set up a certification program. Large
landowners may hold an individual FSC certificate and bear the costs themselves, or a group
entity (the most common approach to certify family forests) may address costs on behalf of
group members. In either approach, the land management organization must hire a third-party
auditor and prepare for and participate in audits that occur every year. The audits examine
administrative operations as well as performance on the land. Both group managers and
individual landowners may receive Corrective Action Requests (CARs) that must be addressed
to receive or maintain certification.
Direct audit costs for an individual FSC certificate will typically start at about $10,000 covering
a five-year term for a relatively small owner with 2,500 acres and climb based on acreage and
management intensity. That would not be a practical expense for most family forest owners, and
so group certification has become popular. Direct audit costs for a five-year certification contract
could run an estimated $35,000 for a family forest group with 100 members (with perhaps 5,000
to 50,000 acres total). A “super group” with upwards of 40,000 members and 2 million acres
could expect to pay in the neighborhood of $120,000+ for a five-year audit contract. That would
cover the certification body’s time, travel and earnings for the initial audit and four annual
checkups. Internal audit costs to prepare for reviews, participate in audits and manage Corrective
Action Requests could be in the same expense range.
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Initial Evaluation Audit
Annual Surveillance
Audits
External Audit
Costs
Direct
Certification
Costs
Preparation for Audits
Participating in Audits
Addressing Corrective
Action Requests
Development of Policies for
Environmental,
Social, &
Economic
Performance Criteria
Compliance with Management
System Criteria for:
Forest & Resource Inventory,
Planning, Implementation,
Monitoring,
Records & Reports
Internal Audit
Costs
Total
Certification
Costs
Indirect
Certification
Costs
Figure 6 - Direct and Indirect Certification Costs
The larger the group, the lower the cost per member, direct audit costs falling from about $70 per
member annually for a small 100-member group to less than $1 per member annually for megagroups. The main reason large groups are relatively inexpensive to audit relates to sampling
techniques that require visits to only a small percentage of properties in large groups. Less than
1% of the members of a 40,000 participant group might be visited over five years compared to a
third or more of the members of a small group.
An important advantage many family forest owners experience is that governmental agencies,
environmental foundations or forest industries will often pick up the cost of certification audits
or heavily subsidize them. As a result, a large number of family forest owners pay nothing
toward direct costs. Landowners in other unsubsidized groups may pay modest fees ranging from
$20-$200 annually, depending upon how quickly the group ramps up to scale. Audit costs for
FSC certification are on par with other forest certification systems and are not any more
expensive.8
8
Fred Cubbage, et al, 2011
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Indirect Costs of FSC Certification
There are also indirect costs participating landowners pay if not in cash then perhaps by giving
up an old practice. Indirect costs, sometimes called “compliance costs”, might take the form of:
 Retaining a percentage of trees to function for wildlife habitat rather than cutting
everything that’s salable
 Setting aside buffers along stream channels or wetlands to protect water quality or
reserving some areas to protect endangered wildlife and plants
 Using fewer chemical pesticides and tolerating ingrowth of some natural herbs, shrubs or
trees
 Fixing gullies so they don’t wash out roads
 Communicating with neighbors about property boundaries or anticipated harvests
 Installing safety precautions like gates or signs when appropriate
 Getting a forest management plan and forest inventory
 Keeping records of harvests or a journal of management work
Most landowners who become involved with certification find the required adjustments not only
agreeable but in step with their objectives and well worth the investment.
Figure 7. Certification compliance may require contracting with trained resource
management professionals. Photo: Juan Carlos Reyes / FSC
Group organizations handle many other activities that translate into indirect costs for
certification. Group managers may develop an operating manual, set technical forest
management specifications, monitor harvests, prepare reports, etc. Oftentimes, existing state
forest stewardship programs, consulting forestry businesses and industrial landowner assistance
program have most of the infrastructure already in place. The adjustments needed to comply with
FSC standards are manageable but require a genuine commitment to responsible forestry.
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While there are direct and indirect costs, there are many worthwhile benefits in FSC certification
for family forest owners. Landowners get better and more comprehensive planning guidance.
They receive reassurance from the audit process that they are on the right course. They can be in
a stronger bargaining position when it comes time to sell timber. Their FSC-certified supply
helps keep local wood markets open, manufacturers in business and neighbors employed. FSC is
not just for big landowners. Family forests have a big stake as well.
FOREST STEWARDSHIP COUNCIL-US • www.fscus.org FSC Trademark © 1996
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