Keeping Forests Green

CERTIFICATION COMPETITION

By J. Bishop Grewell

As environmental certification in the United States has grown, standards such as "dolphin-safe tuna" and the LEED rating system for "green" buildings have become commonplace.1 Such certification helps consumers select products that experts have deemed "eco-conscious."

Some people consider certification a free-market way of ensuring environmental protection, while others think it smacks of bureaucratic regulation. The experience of the forest products industry-companies engaged in timber management and the production of pulp, paper, and wood products-suggests that competing certification can be both a free-market and an environmental success.

In the early 1990s, the forest products industry came under fire for clearcutting, chemical use, and supposedly inadequate protection of wildlife habitat and water quality. A group of nongovernmental organizations formed the Forest Stewardship Council (FSC) and developed a certification program in 1993. This put pressure on the forest industry, and soon International Paper pushed for industry self-certification. The company's leadership resulted in the Sustainable Forestry Initiative (SFI).

The FSC and the SFI are the two most popular certification programs in the United States. Measured by land covered, the SFI is by far the larger, while the FSC certifies more companies. By 2003, the SFI had certified 200 forest management companies and 116 million acres; the FSC included over 9.6 million acres of forest land and 489 forest management companies.

While both SFI and FSC share the goal of improving forest management, each has different origins, objectives, processes, and standards. "The SFI originated with the realization that the forest industry lacked credibility with the American public," explains Jimmy Bullock, who promotes and coordinates SFI certification for International Paper's southeast U.S. forest lands. "And we realized that unless we regain the public's trust, that ability to gain access to fiber and a fair regulatory playing field could become a problem."2

As the largest member of the American Forest and Paper Association (AF&PA), the industry's major trade group, International Paper was in a unique position to take charge. Using its influence, the company pushed the AF&PA to develop certification of its own-the SFI.

The Sustainable Forest Initiative certification requires research into integrated pest management, limits the size of clearcuts to 120 acres, and has "green-up" requirements-trees replanted on a clearcut must meet a minimum height before a new clearcut can be made on an adjacent site. The SFI standard also encourages riparian (streamside) protection, requiring seeding where soil erosion is likely, quality culverts, and sediment filters such as straw bales or filter fences.

The Forest Stewardship Council (FSC), in contrast, is an international certification program developed by environmental organizations, led by the World Wide Fund for Nature (WWF). It was founded after the 1992 Rio de Janeiro Earth Summit failed to achieve a binding forestry convention. The council, which is funded by private foundations, claims to have the most rigorous international forest management standards.

The riparian standards of the FSC and the SFI are pretty much the same. The FSC, however, limits clearcuts to 40 acres-a size, the council contends, that mimics the range of a natural fire. The FSC requires that forest landowners minimize the use of chemicals, rather than just research their reduction. And the FSC has a number of socio-economic requirements that include consultations with indigenous peoples, standards addressing the general welfare and finances of employees, and assessments of the social impacts of logging operations. The SFI requires none of these, relying on U.S. law to address such issues.

Which system is better? Some environmental groups claim the SFI standard is industry "greenwashing" and contend that the FSC is true "green" certification. The WWF has asked several corporations, including International Paper, to prove their environmental commitment by pursuing FSC accreditation even though they have achieved SFI standards (WWF 2001).

But the forest industry considers the FSC standard impractical, its social objectives unreasonable, and its environmental agenda unscientific. The industry objects to the FSC's bias against plantation forestry (where trees are grown like a crop).3

Much of forest certification discussion deals with whether the FSC or the SFI is a better system and which will win out. But that is like asking whether Coke or Pepsi is empirically better and which should dominate the world market.

Just like rivalry between Coke and Pepsi, healthy competition between the two certification brands has provided benefits: environmental innovation for the SFI and practical restraints on the FSC. In 2000, the SFI program created a Sustainable Forestry Board to manage its program. Two years later, it balanced the board with representatives from industry and the environment. More important, the board became independent from the AF&PA, the industry association that formed it. This has given the program a better reputation and has led to new environmental programs as part of the SFI process. Some impetus for these changes arose from the FSC's "greener" reputation and its more demanding standards.

At the same time, the FSC has had to reconsider some standards. Where it competes with the SFI in the United States, it cannot go overboard with costly requirements. One sign of restraint is that it is considering broadening certification opportunities for plantation forestry.

One-size certification does not fit all. SFI is tailored to the large forest products companies, which often grow trees on plantations and use herbicides and fertilizers. FSC works better for smaller landowners who do not use intensive forest management and who produce wood for niche products such as artwork or "green" buildings.

Anderson-Tully, which owns around 300,000 acres of land along the lower Mississippi River, recently became FSC-certified. It is a small-to-medium-size player in the forest-products industry. The company grows high-quality hardwood sawlogs on a long rotation using natural regeneration. It has a specialty market of customers who pay a premium for "green" products, and thus pursuing the FSC's tougher standards made good business sense.

As long as there are customers who are willing to pay premiums for environmental quality, the FSC will have a niche. As for SFI, major retailers such as Home Depot and Lowe's rely on it. They require their suppliers to meet the SFI standards, mainly to avoid negative publicity from environmental protestors, not because customers are paying more for the certified products. The retailers do not charge a higher price for certified wood.

Yet retailers of paper products do not demand such certification. So what is the motivation of International Paper, which produces mainly pulp and paper? According to IP and other forest products companies, the SFI arose to clean up the acts of bad players whose flawed forest-management practices gave the industry a black eye. (Indeed, initial SFI standards merely reflected practices that IP was following.) This may have been an attempt at forestalling regulation, but it may also have created competitive barriers to smaller companies. Some small companies were kicked out of the AF&PA for failing to get certified.

So, questions about motivation remain. Are businesses getting certified to preempt regulation? To engage in public relations? To form a cartel? Are environmental groups attempting to create momentum for mandatory government certification? No matter what the motives, healthy competition ensures an abundance of options on the regulatory plate.

NOTES
1. "Dolphin-free tuna" is a government-regulated label; LEED is the "Leadership in Energy and Environmental Design" standard developed by the U.S. Green Building Council.
2. Jimmy Bullock, International Paper, telephone interview, May 1, 2003.
3. Richard Boitnott, independent forestry consultant, e-mail correspondence, March 13, 2003.

REFERENCE
World Wide Fund for Nature. 2001. The Forest Industry in the 21st Century. Online: http://www.panda.org/downloads/forests/gftn-pr- 21stcentury.pdf (cited July 29, 2003).


J. Bishop Grewell, a research associate for PERC, is a recent graduate of the Yale School of Forestry and Environmental Studies and author with Clay Landry of Ecological Agrarian (Purdue University Press). This article is based on an unpublished case study that Grewell wrote with Brian Albans and Mike Spagna.

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J. Bishop Grewell, is a former  research associate for PERC. He is a graduate of Stanford University, the Yale School of Forestry and Environmental Studies, and Northwestern Law School. He is currently practicing law in Chicago.
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