FSC certification yields financial benefits for tropical forest businesses, shows new WWF report
A new WWF cost-benefit analysis of Forest Stewardship Council (FSC) certification on a cross-section of forest operators finds that tropical and small or medium producers, regardless of geography, can benefit significantly from attaining FSC certification.
The Profitability and Sustainability in Responsible Forestry: Economic impacts of FSC certification on forest operators report found that on average, the companies examined earned an extra US$1.80 for every cubic metre of FSC-certified roundwood or equivalent, over and above costs associated with certification. The Net Present Value (NPV) of the decision to pursue FSC was, on average, $6.69 per cubic metre of roundwood or equivalent – a strong positive business case overall for the decision to pursue FSC.
These outcomes were achieved through price premiums, increased efficiency and other financial benefits. Results varied significantly by company size and geography. Tropical companies as well as small- and medium-size enterprises – regardless of geography – showed financial gains, while temperate and large producers were found to experience small losses. On average, it took the companies that were studied six years to break even on their investment in FSC.
“The results of WWF’s new report challenge the assumption that the costs of FSC certification, particularly in the tropics, are greater than the benefits,” said Rod Taylor, Director, WWF’s Global Forests Programme. “This study shows that while the investment costs of entering into an FSC certification process can be considerable, for tropical forest operators and small or medium enterprises, the investment can be good for the bottom line. This is an important finding given the crucial role of these groups in safeguarding forests for the future.”
The report is designed to help forest companies plan financially for forest certification, and provides important insight for forest companies and buyers of wood products, as well as governments, financiers and others with a stake in the impact of FSC certification.
“The methodology can be applied by a company on their own operations to do a practical calculation of what they would gain from FSC certification,” Taylor said. “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 make these standard practice.”
There is a noticeable gap in existing literature when it comes to quantitative and detailed analysis of FSC certification. WWF’s Profitability and Sustainability in Responsible Forestry: Economic impacts of FSC certification on forest operators report takes a new approach to analyse a wide range of quantitative and qualitative data that has been acquired in cooperation with forestry consultants Form Valuations B.V.
The WWF study included research on 11 companies in seven countries, and explores whether there is an economic case for forest operators to adopt FSC certification, and for financiers to prefer it. Financial data was collected primarily through in-person interviews with company management, as well as a review of financial reports, audit reports and other supporting documentation.