Forest Stewardship Council®
FSC update on the FSC Credit System revision
03 September 2014
Contents
1.
2.
3.
4.
4.1.
4.2.
4.3.
4.3.1.
4.3.2.
4.3.3.
5.
Page
Introduction
The current FSC credit system
Why is the credit system being revised?
Proposed changes to the FSC credit system
Credit accounts based on inputs instead of output quantities
New methodology for deducting credits from the account (Options 1 and 2)
Introducing the cross-site credits option for multi-site COC organizations
Independent study on cross-site credits
Consultant’s recommendations
How would the credits be shared between companies?
Stakeholder participation on the public consultation process
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1
2
3
3
4
7
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1. Introduction:
FSC is currently revising the main Chain of Custody (COC) standard FSC-STD-40-004, and
one of key topics of this revision process is the credit system.
In the FSC General Assembly 2011, the FSC membership approved Motion 46, requiring
FSC to clarify the intent of the FSC credit system and revise it as necessary. The same
motion also asked for a clarification of the "product groups", "quality of inputs" and
"conversion factor" definitions in the chain of custody standard in order to improve
consistency of interpretation and application of these terms across certification bodies and
COC certificate holders.
In addition to the Motion 46 process, FSC conducted a number of pilot tests between
September 2011 and September 2012 to test the potential introduction of a cross-site credit
model into the FSC COC system. The results of the pilot tests were submitted to the FSC
Board in June 2013, who decided that the cross-site credits proposal should be incorporated
in the ongoing revision process of FSC-STD-40-004 for broader stakeholder consultation.
The working group responsible for the revision of FSC-STD-40-004 has proposed some
options for changes for the credit system and would like to collect stakeholder feedback on
these different options. The objective of this document is to provide a detailed explanation to
stakeholders on the proposed options for changes to the credit system in order to facilitate
active participation in the public consultation process.
2. The current FSC credit system:
The FSC credit system was first introduced into FSC Chain of Custody in September 2004
as a new system for controlling the production of FSC Mix and FSC Recycled products. The
FSC credit system links the quantity of FSC-certified product available for sale to the quantity
of FSC-certified material entering the production process, but does not require physical
separation of FSC-certified material from controlled wood material in FSC product groups
during processing. Under the current credit system, credits are accumulated in “credit
accounts” based on the quantity of FSC-certified and/or post-consumer recycled inputs into a
FSC International Center GmbH · Charles-de-Gaulle-Straße 5 · 53113 Bonn · Germany ·
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production process, and a corresponding quantity of outputs can be sold with an FSC Mix
Credit or FSC Recycled Credit claim anytime within a 12-month period after credits are first
entered. Non-certified inputs to the production process must be pre-consumer recycled or
Controlled Wood, and non-certified outputs can be sold as ‘FSC Controlled Wood’ under
certain conditions. Additionally, in order to be combined in a single credit account, products
must have similar “quality of inputs” and “conversion factors” (the ration between the quantity
of outputs yielded by a given quantity of inputs).
The current credit system is neither applicable to print processes nor to trading activities
related to finished products and it can only be applied on the level of a single, physical
(storage, distribution, manufacturing, etc.) site.
FSC Mix products produced under the current credit system requirements may physically
contain anywhere between zero and 100% FSC-certified content. This means that an entire
product sold as FSC certified under the credit system may only actually be made up of FSC
Controlled Wood material or recycled material. However, the credit system does provide
linkage to certified forest material or post-consumer recycled inputs at the process level even
though specific products sold as FSC Mix Credit may not physically contain any certified
forest material or post-consumer recycled content, but rather the contents could all be
Controlled Wood.
The introduction of the credit system to FSC CoC was an important change that allowed
many manufacturing companies to process and put FSC certified products on the market
where they were unable to do so before. The credit system model allowed FSC labelled
products to become more readily available in the marketplace and globally recognized.
3. Why is the credit system being revised?
The concepts of the credit system and product groups in the COC standard are closely
related, since the credit system applies at the product group level. Depending on how a
company defines its FSC product groups, the credit system can have widely varying impacts
on the availability of FSC certified product in the market place and the associated demand for
FSC certification of forests and wood products it yields. Also, some stakeholders perceive
some current applications of the credit system as examples of companies taking advantage
of the system beyond its original intended use and that it undermines the integrity of the FSC
brand.
Currently, the users of the FSC COC standard (e.g. Certification Bodies, Certificate Holders)
are interpreting product groups, quality of inputs and conversion factors in different ways. As
a consequence, the FSC membership passed Motion 46, requiring FSC to review and clarify
where necessary these elements of the CoC standard and the intent of the credit system. For
example, in practice, some Certificate Holders have been approved by their Certification
Bodies to combine only the same species, grades, or dimensions in a single product group,
while other Certificate Holders have been approved to combine or substitute species, grades
or dimensions, or to include several product lines in a single product group. Others have
been approved to combine products with different conversion factors in the same product
group, or to systematically transfer credits derived from low quality/value inputs to higher
quality/value outputs.
Variations between how Certificate Holders define product groups and what Certification
Bodies allow means that the playing field for Certificate Holders is not level, and that some
may gain an unfair competitive advantage over others.
Additionally, at the request of several stakeholders, FSC is evaluating the possibility of
introducing a cross-site credit model into the COC system.
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4. Proposed changes to the FSC credit system
In an effort to address some of the concerns identified with the current credit system, the
working group responsible for the revision process of FSC-STD-40-004 proposes some
changes to the FSC COC system, as follows:
4.1. Credit accounts based on inputs instead of output quantities
The current rules for adding credits to the credit account are the following:
a) The company shall add the converted quantity (volume or weight) of FSC and postconsumer inputs as credit to the credit account using the conversion factor specified
for each component of the product group;
b) The company shall add the credit to the account after the organization has gained
legal ownership and before the material enters the production process.
Simply put, the current credit system is based on an account of output products. In order to
enter credits into the credit account, Certificate Holders are required to convert the quantity
of inputs into the resulting output products by multiplying the quantity of inputs by the
applicable conversion factor(s). Also, the credits shall be added to the credit account before
the material enters the production process.
These requirements become problematic when companies include products that have
different types of inputs and different conversion factors in the same product group, since the
current rules do not provide clear guidance on how to combine products.
In order to address this issue, the working group proposes a new credit system based on
input materials only. That means that certificate holders would no longer be required to
convert inputs into outputs before entering the credits into the account; they would maintain
separate credit accounts for each FSC certified input material.
For example, a production process which has FSC-certified MDF as the input material and
tables as the output product would no longer have a credit account for tables, but rather a
credit account for MDF. All products that the company makes that contain MDF could use
credits from the MDF account.
As a consequence, the concept of product groups would no longer be necessary for the
application of the credit system. Since the credit system would apply at input level, certificate
holders would no longer be required to group products for the application of the credit system.
This provides a greater flexibility for the certificate holders, since any product that has the
FSC certified input material in the composition can utilize credits.
According to the new proposed system, the conversion factors would no longer be used
before the credits are entered into the credit account. However, they would still be necessary
for the calculation of the amount of credits that must be deducted from the account when
products are sold with FSC Credit claims.
Multiple species can be combined into a single input credit account as long as the
substitution of one species by another is a common industry practice and the substitution
makes no difference to the customer and product quality.
Why is this change being proposed?
A credit system based on inputs is more similar to the way companies operate in practice
(e.g. companies maintain stocks of different input materials and use them according to the
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demand). This proposal would also provide more flexibility to companies on how to use their
credits in different product lines.
Credit accounting based on inputs only would also address the issue that companies are
potentially combining different products in the credit account because the grouping of
products into credit accounts would no longer exist.
4.2. New methodology for deducting credits from the account (Options 1 and
2)
Currently, certificate holders deduct the amount of the output products they sell as FSC Mix
Credit or Recycled Credit from the credit account.
In the new proposed credit system, certificate holders would deduct the amount of input
materials they use from the credit account.
The new proposed methodology is quite straightforward for products made of a single input
material. However, clear rules need to be defined for the application of the input credit
system for products with multiple inputs (e.g. paper, assembled wood products).
In the case of products with multiple inputs, the working group identified two (2) possible
alternatives for deducting credits from the account and would like to collect stakeholders’
feedback on these options. In order to facilitate the understanding of the two options, the
following examples are provided:
NOTE: In the following examples, all products and volumes presented are hypothetical and have
the sole objective of facilitating the understanding of the two options for the credit system review.
Assembled wood product example: Door made with two different input materials: Plywood
and tropical lumber.
Tropical
lumber
(door rails
and stiles)
Plywood
(panels)
Plywood
25%
Lumber
75%
Paper example: Corrugated paper made with short fiber virgin pulp, long fiber virgin pulp and
post-consumer recycled pulp.
Postconsumer
recl. pulp
Long fiber
25%
pulp
50%
Short fiber
pulp
25%
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OPTION 1: Establishing separate credit accounts per input material. Products with
multiple inputs are only eligible to be sold with FSC credit claims if all input materials
have sufficient credits in their respective credit accounts.
Under this option, in order to produce FSC Mix Credit doors, the certificate holder would
need to source both FSC-certified Plywood and FSC-certified tropical lumber in order to build
credits in each input credit account. And, in order to produce FSC-certified paper under this
option, the certificate holder would need to source FSC-certified long-fiber pulp, FSC-certified
short-fiber pulp and post-consumer recycled pulp in order to build credits in each input
account, and the amount of FSC Mix Credit paper they could make would be proportional to
the amount of credits available in the three accounts, according to the product recipe.
Assembled wood product example:
-30 m3 of Lumber FSC
80 m3
50 m3 FSC
Lumber Credit Account
Lumber Credit Account
-10 m3 of Plywood FSC
3
40 m
30 m3 FSC
Plywood Credit Account
Plywood Credit Account
Conversion factors:
Plywood = 0,5
Lumber = 0,5
3
1 door = 0,1 m
Calculation of the number of doors that can be sold with FSC Mix Credit Claim:
3
3
3
Input volumes x Conversion Factor = (30m x 0,5) + (10 m x 0,5) = 20 m (200 Doors FSC Mix Credit)
Paper example:
CREDIT ACCOUNTS
Post-consumer
reclaimed pulp
CREDIT ACCOUNTS
Post-consumer
reclaimed pulp
-15t of pulp
80 t
-15t of pulp
Short fiber pulp
Short fiber pulp
70 t
55 t
-30t of pulp
Long fiber pulp
65 t
Long fiber pulp
60t
30t
Conversion factors:
Post-consumer reclaimed pulp = 0,5
Long fiber pulp = 0,5
Short fiber pulp = 0,5
1t of pulp = 2 t of paper
Calculation of the amount of paper that can be sold with FSC Mix Credit Claim:
Input volumes x Conversion Factor = (15t x 0,5) + (15t x 0,5) + (30t x 0,5) = 30t of pulp (60t of paper FSC Mix Credit)
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OPTION 2: The credits built from FSC-certified or post-consumer reclaimed1 input
material(s) are used to cover the volumes of non-certified (FSC Controlled Wood)
input materials.
In the assembled wood product example, the plywood is FSC-certified and is the contributing
input used to build credits, while the tropical lumber is FSC Controlled Wood. The quantity of
non-certified inputs (tropical lumber) used in production as well as the quantity of FSC
plywood used are both deducted from a credit account whose credits are built solely by
buying plywood. In the example below, the 30 m3 of non-FSC certified lumber are
compensated by credits built from sourcing additional volumes of FSC-certified plywood.
Therefore, the 40 m3 (30 m3 of non-FSC lumber + 10 m3 of FSC plywood) are deducted from
a credit account whose credits are derived solely from FSC-certified plywood. In other words,
under this option, the certificate holder could produce FSC Mix Credit doors by sourcing
FSC-certified plywood and Controlled Wood lumber (the lumber would never need to be
FSC-certified).
In the paper example, credits are built from the post-consumer reclaimed pulp and the shortfiber and long-fiber virgin pulp are FSC Controlled Wood. The quantities of non-certified
inputs used in production as well as the quantity of post-consumer reclaimed pulp are each
deducted from a credit account whose credits are built solely by buying post-consumer
reclaimed pulp.
Assembled wood product example:
10 m3 of plywood FSC
3
80 m FSC
40 m3 FSC
30 m3 of lumber non-FSC
Plywood Credit Account
Plywood Credit Account
Conversion factors:
Plywood = 0,5
Lumber = 0,5
3
1 door = 0,1 m
Calculation of the number of doors that can be sold with FSC Mix Credit Claim:
3
3
3
Input volumes x Conversion Factor = (30m x 0,5) + (10 m x 0,5) = 20 m (200 Doors FSC Mix Credit)
1
In 2011, the FSC membership mandated the FSC International Center to conduct a chamber-balanced study to evaluate
the risks and benefits of valuing pre-consumer reclaimed paper fibre materials as FSC certified content. The study was
1
drafted by consultants as a discussion paper, based on stakeholder input collected through a FSC membership survey, a
th
stakeholder workshop and phone interviews with paper companies. As result of this process, the FSC Board, in its 66
Meeting (July 2014) decided to classify of pre-consumer reclaimed paper as equivalent to FSC certified and post-consumer
reclaimed, counting towards percentage and credit calculations. The revised draft FSC-STD-40-004 will incorporate this
change in the pre-consumer reclaimed paper classification.
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Paper example:
-15t of post-consumer
reclaimed pulp
FSC CREDIT
ACCOUNT
Post-consumer
reclaimed pulp
FSC CREDIT
ACCOUNT
Post-consumer
reclaimed pulp
-15t of short fiber pulp
(CW)
70 t
-30t of long fiber pulp (CW)
10t
Conversion factors:
Post-consumer reclaimed pulp = 0,5
Long fiber pulp = 0,5
Short fiber pulp = 0,5
1t of pulp = 2 t of paper
Calculation of the amount of paper that can be sold with FSC Mix Credit Claim:
Input volumes x Conversion Factor = (15t x 0,5) + (15t x 0,5) + (30t x 0,5) = 30t of pulp (60t of paper FSC Mix Credit)
4.3. Introducing the cross-site credits option for multi-site COC organizations
In the period between 01 September 2011 and 30 September 2012, 15 companies from
different countries and industry sectors pilot tested the cross-site credits method. The
following pre-conditions for participation in the pilot tests were established by the FSC Board:
-
Controlled Wood verification for the entirety of the sites involved in the pilot;
Minimum of 10% physical FSC input (FSC 100%, FSC Mix, FSC Recycled or postconsumer reclaimed) in each participating site;
All sites participating in the multiple site credit sharing shall be located within the
same ecoregion, country or region (e.g. European Union)
FSC credits shall only be shared within a multi-site certificate.
All inputs to a shared credit account shall be of the same product group, (e.g. same
quality, value, species).
4.3.1. Independent study on cross-site credits
FSC commissioned an independent study to evaluate the results of the cross-site credits
pilot tests. The study results showed that the Cross Site Credit System has potential to
deliver on FSC’s strategic goals and for companies to meet their customers’ demands for
more FSC certified products if the system is properly set up and implemented. Some of the
contributions are:
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The Cross Site Credit system allows large companies to utilise all the credits they
have sourced.
Allocating the credits to the sites closer to the consumer will make it possible for the
producers to meet the market demand which in the longer perspective will enhance
the recognition of the FSC brand and incentives for the certification of forests.
The Cross Site Credit system is expected to incentivize the certification of logistically
disadvantaged forests which means that more and more local stakeholders,
communities and indigenous people will be able to benefit from the responsible forest
management that the certification process result in.
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The Cross Site Credit system will create a better market access for certified material
from areas where FSC Forest Management certification is still very scarce.
4.3.2. Consultant’s recommendations
The consultant recommends that the Cross Site Credit system is approved, if several
safeguards are put in place in order to mitigate the risk of lost confidence and support from
the social and environmental stakeholders.
Summary of the consultant’s recommendation (for detailed information, please click here to
access the complete study):





The definition of input material that can be mixed in the same product group (and
managed in the same credit account) must be strengthened to ensure that;
a) Only material of same (or comparable) species, composition/ specifications and
value are mixed in the same product group.
b) Different input material of a product shall not be mixed in the same credit account.
I.e. if the production of a physical product requires the combination of inputs of
different quality (e.g. softwood and hardwood) then these cannot be mixed in the
same credit account.
Revise the 10% threshold so that it better encourages companies’ sourcing of FSC input
material and does not hinder companies in areas with low FSC share to participate.
Suggestion is to lower the threshold to e.g. 5% and combine it with a requirement that
each site shall show continuous progress in increasing the share of physical input of FSC
certified material.
The requirement that each site must maintain individual credit accounts should be
removed since this is making it difficult for companies and certifiers to monitor the 12
months rule.
The requirement that input material shall be converted before being registered in the
credit account should be amended. Instead more emphasis should be put on ensuring
that the right conversion factor is used when the credits are assigned to a certain
production site.
Clear rules needs to be established for when and how companies shall loose the right to
apply the Cross Site Credit system. Companies that loose the right to transfer credits
should also be forced to write off all their current FSC Credits (credits covered by the
cross site credit system).
Table 1. Potential impacts of introducing the cross-site credits method in the FSC COC.
-
-
-
POSITIVE
Companies will make a more efficient
use of their FSC certified credits, since
the excess of credits at one site will
compensate for the lack of credits at
other sites. That means that less FSC
credits will be lost and more FSC
products will be placed on the market.
Reduction of FSC certified production
costs and CO2 emissions as a
consequence of reduced transportation
costs.
The more efficient use of FSC credits
-
-
-
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NEGATIVE
An increased availability of certified
wood volumes could lead to a reduced
pressure for additional certification of
forests in certain regions.
The cross-site credits could be
apprehended as an additional
uncoupling between the certified origin
and the consumer product (despite of
the fact that the cross-site credits
method requires a minimum of 10% FSC
certified input per site).
The transfer of credits between countries
-
-
-
also represents a potential reduction of
production costs and consequent higher
competitiveness of certified companies.
Industries will have better access to
certified forests outside their normal
supply area. Forest producers will also
have a better access to markets outside
their normal demand area.
Companies that under the current rules
are not able to sell FSC certified
products due to logistic difficulties will
have more flexibility to produce and
distribute FSC certified products.
More incentives for the certification of
small and logistically disadvantaged
forest producers.
Companies will have a better method to
assist with supply interruptions caused
by natural disturbances (e.g. storms,
earthquakes, etc.)
and regions with significant economic
differences even within the same region
(e.g. Europe) could lead to negative
impacts on local forests and markets for
certified products.
Table 2. Potential impacts of NOT introducing the cross-site credits method in the FSC COC.
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POSITIVE
No increased potential risks for the
integrity of the FSC’s brand.
Companies will be required to continue
demanding the certification of their
suppliers located close to their mills.
-
NEGATIVE
A considerable amount of FSC certified
credits will continue to expire or to be
sold as non-FSC.
No creation of incentives for the
certification of small and logistically
disadvantaged forest producers.
The pilot test raised companies’
expectations and its rejection would
cause frustration.
High costs of transportation and CO2
emission.
No alternatives for companies that are
not able to sell FSC certified products
due to logistic limitations.
Lost opportunity to increase the amount
of FSC certified products in the market in
a situation where the demand for FSC
certified supply is higher than the
demand and incompatible with the
growth rate of forests certification.
4.3.3. How would the credits be shared between companies?
If approved, the cross-site credits method would be an option limited to certain certificate
holders. In order to be eligible to use the cross-site credits option, all company sites under
the scope of the cross-site credits account should:
-
be included in the same multi-site certificate ;
be under the same ownership structure;
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-
have a minimum of 5% physical FSC certified input during the specified claim period;
be located within the same ecoregion, country or region (e.g. European Union);
Considering the proposed changes in the credit system, companies would only be allowed to
exchange credits of input materials between different sites. For example, a company site that
has excess of FSC certified raw material (e.g. FSC certified pine logs) could transfer the FSC
credit to a different site, provided that the other site also has on-site the physical volume of
the same raw material (e.g. FSC Controlled Wood pine logs).
5.
Stakeholder participation in the public consultation process
Stakeholders will be invited to contribute to the revision process of FSC-STD-40-004 by
providing their comments on the draft standard that will be sent out for public consultation in
September 2014, after the FSC General Assembly. For more information on the COC review
process, please click here.
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