A Cost Benefit Analysis of Forest Certification at The Forestland Group

Abstract

This project evaluates the costs and benefits of the Forest Stewardship Council’s (FSC) forest certification for a large timber management organization (TIMO). FSC certification is a voluntary, market-based program that promotes sustainable forest management through third-party certification.

The TIMO in this case study manages 3.3 million acres of land certified under FSC, and this project evaluated both the direct and indirect costs and benefits of certification. This project was able to quantify the direct and indirect costs and benefits of forest certification through surveys, financial analyses and regression analyses.

On average, forest certification is a net-positive program for the client, earning an estimated $771,000 of additional annual revenue. Certification premiums paid for finished wood products are significantly higher than certification premiums for certified stumpage. Certified wood products receive an overall price premium of 10.5% while the premium for certified stumpage ranges from 1.6-4.3%. Price premiums for finished wood products are considerably higher for domestic sales than for export sales. The domestic sale of finished wood products generates a statistically significant price premium of 30.0% as compared to the statistically significant but much lower premium for exported wood products of 3.4%.

This project provides evidence that there are financial incentives for forestland owners to maintain forest certification. FSC has marketed both the ecological and financial benefits of maintaining forest certification. Previous studies of forest certification have generally concluded that the ecological benefits of forest certification are clear but that the desired financial benefits have not yet materialized. This project demonstrates that a large timberland owner can receive meaningful financial benefits from its forest certification program.