Chain gain

The number of U.S. organizations certified by the Forest Stewardship Council (FSC) for responsible forestry and wood product management grew from around 700 to 1,400 in 2007, and today the number is more than 1,900. Despite this rapid trajectory, growing demand for green building resources has highlighted supply chain challenges in certified wood production.

Wood certification procedures trace a product throughout its “chain-of-custody,” from forest owner to consumer. Timber must be grown, sorted, processed and distributed according to the sustainability standards of the certifying organization. Lumber that originates from a FSC-certified forest will not become FSC-certified wood flooring, for example, if the sawmill that handled raw material processing was not certified by FSC as well. Such interdependencies have created growth barriers in the industry. 
“It’s a chicken-and-egg dynamic,” says Peter Hayes, owner of Hyla Woods, 780 acres of FSC-certified forest in Oregon. If forest owners do not have sufficient access to certified mills, they are less likely to pursue certification. Conversely, without an adequate supply of certified timber, a traditional mill has little incentive to alter its operations.

Managing the supply chain
Forest owners are the starting point for a chain-of-custody, and numerous organizations have begun focusing attention on easing and supporting the certification process, particularly for small landowners. “Small” is defined by FSC as fewer than 2,500 acres, but the majority of owners in the category have fewer than 300 acres.

Collectively, small landowners produce about 60 percent of the wood fiber used in the United States, according to John Pampush of the Metafore organization, a nonprofit that works with businesses to help them select environmentally preferable wood and paper products. Pampush also states that FSC-certified paper has been a bigger driver of FSC-forest certification in some states than lumber. Mechanisms that allow small landowners to join forces can create economies of scale and generate additional certified paper and wood supply sources.

The Northwest Natural Resource Group (NNRG) has developed a Northwest Certified Forestry (NFC) initiative, providing members with benefits such as FSC certification assistance. “Most small landowners are already managing land responsibly,” says Kirk Hanson, NFC’s South Sound regional director. Still, cost and administrative requirements have historically hindered the already sustainable forests from being labeled as such. “The NFC provides them with access to a low-cost certification program,” Hanson says.

The Northwest Certified Forestry initiative advises those pursuing certification. Courtesy NNRG.

“There’s dramatically more demand for certified wood products than even a year ago,” says Ian Hanna, the NFC’s program director and a board member of the Forest Stewardship Council in the United States. The Green Building Alliance estimates that the green building products market will be worth $30 billion to $40 billion annually by 2010.  And while FSC-certified wood accounted for 1 percent of market share in the beginning of 2007, it doubled to 2 percent by the beginning of 2008. “We’re in an evolutionary phase of the market,” Hanna notes.

Potlatch Corp., a Real Estate Investment Trust with over 1.7 million acres of FSC-certified forests, has noted a similar growth pattern. Even with FSC certification, “certified lumber is a very small percentage of our overall sales,” says Matt Van Vleet, the company’s corporate communications director. The trend is accelerating, however, with a 402 percent increase in Potlatch’s certified lumber sales from 2006 to 2007. 

Hanna outlines four entities that can advance forest certification: non-government organizations, a landowner outreach program, a manufacturer or a government body. For example, the state of Wisconsin has made a “massive investment” in infrastructure, leading to certification of state and county forests as land groups, rather than scattered individual certifications.    

The combination of certifications for small landowners and continued certification of large forests can help strengthen supply chains. In May 2008, Washington’s Department of Natural Resources received FSC certification for 145,000 acres of state forest lands. Hanna predicts a “complete shift in the market” as a result. Local mills can now rely on a steady stream of FSC-certified logs, providing incentive to obtain certification. In turn, small landowners will gain access to more FSC-certified mills.

Both Hanson and Hanna of the NNRG compare the current state of the certified wood market to the organic food market 10 to 20 years ago.  “It took time to build organic supply chains,” Hanna says. Now organic food is mainstream, available in the majority of conventional supermarkets.

“We learn lessons from the food industry,” Hayes says of managing his FSC-certified forest. Like the local food movement, the concept of choosing locally grown wood is important to consider in green building projects. He cites an example of a builder’s project that needed to be re-worked because the plans called for species of certified wood that could not be supplied in the specified volumes nor obtained locally. Hayes co-founded a Build Local Alliance in Portland, a group that examines infrastructure issues and seeks to connect local wood buyers with local producers.

Increasing demand for FSC-certified wood products is changing the farming industry. Courtesy NNRG.

Need for education
Forest Products Solutions and the U.S. arm of FSC shared results from a survey of Greenbuild Expo 2005 attendees in a 2006 report “FSC in the Green Building Market.” When asked, “Were you successful with sourcing FSC products?” 46 percent said no. The top two reasons respondents listed for not successfully obtaining FSC-certified wood products were “not available in my market” and “a lack of education amongst my project team members.”

To improve the level of understanding and education among different sectors of the supply chain, Jennifer Allen has initiated a local effort to “foster better relationships” between forest owners and building industry professionals. Allen, associate director of the Center for Sustainable Processes and Practices at Portland State University and a former sustainable business coordinator for the state of Oregon, explains the two groups have many similar goals and concerns.  For example, both will benefit from maintaining healthy, sustainable forests, and both have been affected by the housing market slump and economic downturn. Still, they have at times ended up on opposing sides of policy issues.

Allen began a series of informal meetings held at the Oregon Business Council office, inviting landowners and individuals from the building industry. Her objective was to generate “constructive dialogue” between the attendees. As the two groups become more aware of each other’s positions, they will have the opportunity to align in meeting their mutual goals. “We’ve been successful in creating relationships,” she says.

To be fully informed on certified wood labeling, builders need to recognize the differences among organizations that provide certification. The Forest Stewardship Council is the most widely accepted by environmental groups because of its rigorous criteria throughout the chain-of-custody. “The FSC has higher standards,” says Becky Kelley of the Washington Environmental Council. “Also, they consider three circles of sustainability—ecological, social and economic.” 

The Sustainable Forestry Initiative (SFI) is another major certifying entity in the U.S.  Controversy has arisen over SFI labeling because the American Forest & Paper Association created the program, which has led to questions about conflicts of interest and objectivity. In assessments of green building projects, the U.S. Green Building Council’s (USGBC) Leadership in Energy and Environmental Design (LEED) program awards points for FSC-certified materials, but not for SFI-labeled wood. 

The future of green building
USGBC has increased its membership tenfold since the year 2000. On the commercial building side, green building has “moved from being a competitive advantage to being a competitive imperative,” says Michelle Moore, USGBC’s senior vice president of policy and public affairs.

Owners of small forestlands work together assessing commercial and ecological values. Courtesy NNRG.

Additional trends in the commercial market include an increasing number of policy incentives for green building, a growing number of Requests for Proposals that include green practices and discussions of a green workplace in employee recruitment.

Yet, in the midst of these trends, forest owners have questioned whether the market is willing to absorb a premium cost for certified wood.  Since the market is relatively young and still shifting, pricing varies greatly depending on the supplier and the local area. On average, certified wood costs roughly 15 percent more than uncertified products, but different independent sellers have priced certified lumber from as high as 50 percent more to as low as no increase at all.

To support landowners, the Northwest Certified Forestry program promotes what Hanson refers to as “ecological entrepreneurism,” in which certified wood is just one piece of a much broader focus on helping landowners think of themselves as small business owners and develop income from their forests beyond just selling wood.

The group is exploring methods of combining “responsible forestry with economic and market development.” Nationally, one example is the emergence of carbon credit programs that offer forms of payment to landowners in exchange for the carbon dioxide their forest or grasslands soak up.

The additional income from such programs can help forest owners diversify their revenue streams so they are not solely dependent on wood pricing. Managing a forest in keeping with sustainability standards “can cost 30 or 35 percent more” than less responsible practices, according to Hayes. “Paying too little for an end product leads to lands being degraded.”