Sustainable retail markets: Forestry companies must prove their wood is harvested to certain environ

Sustainable retail markets: Forestry companies must prove their wood is
harvested to certain environmental standards

The Gazette, 24 January 2004 -

Home Depot claims to be the world's largest home-improvement retailer.
So it's not surprising that environmental groups targeted the company,
demanding to know if wood in Home Depot's aisles came from responsibly
managed forests. "We were accused at some points of being the largest
destroyer of the world's forests," said Ron Jarvis, vice-president for
lumber merchandising for Atlanta-based Home Depot. The retailer had a
moment of reckoning in the late-1990s, when it realized it didn't know
where its wood was coming from, he said.

Two years after that, Home Depot adopted a purchasing policy aimed at
buying wood from sustainable forests.
With $58.2 billion U.S. in total sales in fiscal 2002, Home Depot
carries a lot of clout.
For forest companies worldwide, the pressure is on to provide proof
their wood is harvested to certain environmental standards.
Certification of those standards through outside audits is becoming an
inescapable cost of doing business in global markets. It is also
becoming an integral part of overall corporate image management.

Bruce McIntyre heads the sustainable solutions practice for Canada of
consulting and auditing firm PriceWaterhouseCoopers.
Aside from advising forestry companies on strategic issues, PWC
performs certification audits, although it doesn't do both for the same
companies.

"The real benefit (of certification) is market access, for example, as
a preferred supplier," McIntyre said. "More and more customers have
purchasing policies."

For publicly owned forestry companies though, making the expensive
investment in certification is a balancing act.
"Shareholder returns are important, so the question for management is
to balance the costs vs. the benefits," McIntyre said.
The choice of standard is equally loaded. Companies must pick a
standard that suits their operations from a technical point of view. But
since they are competing for the public's "environmental vote," as
McIntyre puts it, they must also pick a standard that is recognized and
effectively marketed.
There are several global forestry certification standards, but three
predominate in North America.
The CSA standard was developed by the Canadian Standards Association.
Its defining feature is public involvement in land-use questions. The
vast majority of harvesting in Canada takes place on public land. The
American Forest & Paper Association developed the SFI standard. Some
observers say it is most appropriate in the U.S., where most working
forests are privately owned.

The FSC standard was instituted by the Forest Stewardship Council, a
diverse global group made up of environmentalists, the timber trade,
labour groups, professional foresters and indigenous peoples. The FSC
standard puts a lot of emphasis on environmental and social issues.
There is overlap between the standards - most deal with biodiversity,
forest regeneration, soil and water quality and protection of wildlife.
In January 2002, the Forest Products Association of Canada announced
that its members, 30 of the country's largest producers of pulp, paper
and wood products, would have to adhere to one of the three standards by
the end of 2006. FPAC estimates that its members control about 75 per
cent of the managed forests in Canada.

Jean-Pierre Martel, vice-president for sustainability for FPAC, said
the cost of certification will be about $100 million over five years for
FPAC members. The cost of the initial and continuing audits account for
the smaller portion of the price tag, McIntyre said.

The bigger chunk consists of items like staff time and changing
marketing programs.
Martel agrees certification is being driven by environmental groups and
customers, from construction companies to retailers.

"About 80 per cent of production in Canada is exported, so
certification is a question of access to markets," said Martel.

FPAC plays up its member-companies' move to embrace certification, but
some countries, in particular Sweden, already certify most of their
forest practices, according to the World Wildlife Fund. Steven Price,
director of forests and trade for the Canadian branch of the World
Wildlife Fund, applauds FPAC's commitment to certification. FSC is not
the most widely used of the three standards in Canada in terms of area
(CSA ranks first, SFI second), but it is the fastest growing, according
to Price. And, for the WWF, the gold standard of certification is FSC.
The organization prefers FSC because a broad range of stakeholders sets
its standards, it has performance goals vs. merely process goals and it
emphasizes protecting forests, Price said.

While forestry companies have not been able to count on price premiums
for certified products, contrary to what had been predicted, Price sees
wide-ranging benefits to certification. Market share and avoiding
boycotts are just two. Other benefits include employee motivation. "Your
employees don't want to be seen as bad guys ruining the forest," Price
said.

With the rigorous FSC standard gaining ground and industry consulting
environmentalists, Price sees a turning point in the making. "The
forestry industry has a chance to take a huge step forward if they meet
these standards," he said

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