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FSC-certified wood and products fetch higher prices
Wednesday, 30 May 2012
It’s not just forest owners or governments that benefit from Forest Stewardship Council (FSC) certified forests or products. Processors, traders and corporates do too. Depending on the operation, price premiums for FSC-wood, particularly from the tropics, range from 15 to 25%. For example, FSC-certified timber from Deramakot Forest Reserve in Sabah, Malaysia, fetches 15 to 20% premiums at their timber auctions.
China, in particular, has grown with market demand – 54.8% in the past year – and through partnerships with non-governmental organisations (NGOs) like WWF, government (State Forest Administration, and others) and businesses like IKEA, home improvement retailer Kingfisher, and TetraPak, says Alistair Monument, Asia Pacific director for FSC. This makes good business sense as it targets consumers in Asia’s fast-expanding middle class.
Likewise, companies with FSC certification can grow their business better. FSC-certified sawn hardwood exported to Britain by Malaysia’s Kumpulan Pengurusan Kayu Kayan Terengganu (KPKKT) can fetch 30% more than non-FSC certified products, according to Datuk Zakaria Awang, chief executive officer at Golden Pharos, KPKKT’s holding company. The practice of reduced impact logging (RIL) at site – a form of sustainable forest management advocated by FSC – also saves money for forest owners such as the Sabah Forestry Department, as they do not have to repair damage done to the forest from conventional logging.
Widely recognised as a credible label for responsible forest management, the FSC has certified 148.6 million ha in 80 countries and established national initiatives (or bodies) in 65 countries as of February 2012. Founded in 1993, FSC’s mission is to promote responsible management of the world’s forests.
To balance the interests of different stakeholders, FSC – which sets international standards for sustainable forest management – is governed by three chambers, representing environmental, economic and social interests, with equal vote and power that make decisions cooperatively.
As of February 2012, FSC has 825 members in 85 countries worldwide. The Asia Pacific region has 7.2 million ha of FSC-certified forest and 5,134 Chain of Custody (CoC) certificates issued for the tracking of wood and paper products from the certified forest through processing to the point of sale.
According to Monument, “Growing awareness and demand for FSC-certified forest products are the main factors driving FSC certification. Businesses and the public now recognise FSC as a credible label for responsible forest management and the demand for FSC-labelled products has driven real changes in forest management practices.”
“The Asia Pacific has shown impressive increase in forest management certification in the past few years. China and New Zealand have the most number of hectares certified (2.68 million ha and 1.51 million ha, respectively) as of February 2012. Both have significant areas of managed production forest that are being used in global trade so there are incentives for forest managers to get FSC-certified.”
Certification isn’t just confined to hectarage. There is also CoC certification which ensures credible tracking of FSC materials in the supply chain from manufacturers and processors to traders and retailers. “China (1,914) and Japan (1,126) have the most number of CoC certificates issued, mainly because there are relatively more processors and manufacturers in those countries,” says Monument. A company with CoC safeguards its supply chain from the possibility of illegal products, hence gaining the confidence of their customers.
“The other key growth area in the Asia Pacific is domestic demand in the region. Other emerging markets are now starting to demand FSC and impact the world’s forests. Awareness of the FSC label in Hong Kong doubled in the past year to 29% and is expected to rise further in the region with the introduction of FSC-labelled products onto supermarket shelves. FSC-labelled TetraPak and SIG packaging, as well as Kimberly Clark tissues and paper towel products, are now available in China, Taiwan, Korea, Singapore, Australia and Hong Kong,” he adds.
Even with price premiums, FSC is not without its challenges. Development of national standards is one of the important challenges in the Asia Pacific. Forest Sustainability (Malaysia) Sdn Bhd is working to develop a nationally-adapted FSC certification standard for use by certification bodies in the country. Anthony Sebastian, who chairs Forest Sustainability (Malaysia) and the FSC National Standards Development Group, says Malaysian businesses are interested in the FSC label, not necessarily the FSC national standards.
“There are companies that depend on or have a large interest in the timber industry for their core businesses. Such companies have a bigger stake in ensuring sustainability in the forestry sector in Malaysia, and these companies are those who will support the development of national standards as a means of greening their own businesses. Financial institutions lending to the timber industry are one such business, and the Malaysian FSC national standards are currently supported by HSBC Malaysia,” he says.
In the Asia Pacific, credibility and integrity are other challenges in ensuring that companies and the public can have confidence in the legality and sustainability of FSC products. Monument says: “FSC has focused on these credibility issues in the region and worked closely with Accreditation Services International (ASI), certification bodies, the FSC network, governments and NGOs to increase awareness of FSC requirements, undertake training and organise calibration meetings for all its auditors. So if a company tries to cheat at FSC, they will be found out and may even take a huge business hit.
“FSC is also piloting its new online traceability platform in Asia. This will allow FSC to more quickly and efficiently validate FSC claims, protect the integrity of the FSC system and lower the risk of falsely-labelled products ending up in the hands of consumers. This platform will also allow FSC to trace FSC-certified products more efficiently in line with emerging international legislation.”
Monument says that working with partners such as TetraPak, SIG and Kimberly Clark in the Asia Pacific and huge consumer markets such as India and Indonesia will be important for FSC as it develops over the next decade. Perhaps encouraging home-grown companies in this region to source FSC-certified products for national and regional markets could be the next step in addition to working with multinational corporations.
Deramakot Forest Reserve started as joint Malaysian-German Forestry Research Project in 1989 when the then director of Sabah Forestry Department (SFD), Datuk Miller Munang, conceived the idea of introducing sustainable management of the state’s forests. SFD collaborated with the German Agency for Technical Cooperation (GTZ) at the 55,139 ha Deramakot. According to Datuk Sam Mannan, the current director of SFD, “the objective was to have a model to prove that sustainable forest management can be practised in the tropics and can work in Sabah.”
The Germans put in a lot of technical support and by 1997, Deramakot was FSC-certified. The next step was to multiply, and political support was needed before this could be achieved. So Mannan invited the then Prime Minister Mahathir Mohamad to visit the site. He was impressed with the operations there and instructed that the concept be expanded. Today, the entire state practises a SFM system where concessions are managed under forest management units (FMU).
Assistant district officer Peter Lagan, who provides support to researchers at Deramakot, remembers the rigorous training given by the Germans in the early days that produced the mainly in-house pool of expertise at SFD today.
At Deramakot – which started with only 20% of well-stocked forest – 51,160 ha are set aside for natural forest management while the remainder is designated for the protection of wildlife, watersheds and environmental resources, as well as community forestry. Two other SFD sites, the Ulu Segama-Malua (241,198 ha) and Tangkulap-Pinangah (50,070 ha) forest reserves, were FSC-certified in June 2011. Five out of the seven FSC-certified forests in Malaysia are in Sabah.
“We get an average income of about RM100 per cubic metre from normal logging operations with an ordinary license. If reduced impact logging (RIL) is not practised, there’s tremendous damage which means SFD has to go in and repair the damage. In the end, we don’t make much. Only the logger makes money. By comparison, SFD makes RM200 per cubic metre from FSC-certified Deramakot – which practises RIL. This is after deducting all the costs, including capital and running costs. Meanwhile, we still have very good forests left and need to do very little. There’s hardly any damage and the trees are growing all the time. There is a big difference and the government makes much more money – 100% more,” says Mannan.
“As the first FSC tropical forest in the world to be certified, Deramakot is still the longest and oldest certified tropical forest,” Mannan says.
The local people of Konawe Selatan in south-east Sulawesi, Indonesia, privately-own teak plantations as small holdings. Due to legal restrictions, mainly related to harvesting and transport permits, most districts in the province have only one or two buyers, leading to prices being suppressed. Not being organised into groups meant that individual farmers could only sell their teak at low prices – sometimes at less than 50% of its true value.
With the help of the Tropical Forest Trust (TFT) and local NGO, Jaringan Untuk Hutan (JAUH) or Network for Forests, the farmers formed a co-operative – Koperasi Hutan Jaya Lestari (KHJL). Nearly 200 farmers from 46 villages joined the co-operative, recognising that they could sell wood for a higher price directly to TFT member factories in Java. In May 2005, KHJL became the first co-operative in Indonesia to be awarded FSC certification for the sustainable timber they produce.
Teak sold by KHJL farmers fetches premiums high enough to sustain them economically. Chairman of KHJL Abdul Harris Tamburaka points to the benefits of FSC certification in raising awareness on forest management and annual dividend payments. “The price we get for timber increased because of the co-operative; members can now re-build their houses, and there is better schooling for their children. By 2015, we hope there will be no more poor people in Konawe Selatan,” he says.
In the past, illegal logging had nearly destroyed forests throughout the region. KHJL’s certification empowered the local community to protect and manage their own forests. Teak trees that grow in the fields and plots of Konawe Selatan today not only provide villagers with a substantial improvement in income; they also serve as a model to persuade nearby communities to stop illegal logging.
Since KHJL’s certification, other communities have organised themselves – applying for small grants, formed their own local initiatives and joined KHJL. For the first time these communities – previously some of the poorest in Indonesia – are planning for the future. With a secure and sustainable livelihood come better schooling, improved access to health and a better rural economy – an encouraging beginning for the people of Konawe Selatan.
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