Potential of Forest Stewardship Certification (FSC) as a Marketing Tool through Examining the Existence of Price Premiums for FSC Certified Timber

Abstract

The Forest Stewardship Council (FSC) has introduced as international labeling scheme for forest products, which provides a credible guarantee that the product comes from environmentally responsible, socially beneficial and economically viable sustainably managed forest. The demand for certified forest products is on the increase particularly in Europe and UK. However, green labeling or forest certification is a fairly a new concept to Sri Lanka and at present, there are only a handful of companies who are FSC certified.

Most companies wish to join FSC scheme are uncertain about the benefits and opportunities they can derive through such scheme. Therefore it was necessary to conduct a survey on the benefits and opportunities mainly from financial perspective that FSC certification would provide a holder. Under the present survey, the views and ideas of representatives from all the FSC certified Sri Lankan wood based export manufacturers and plantation companies as well as parties who have interests in FSC certification scheme were gathered through questioners and interviews.

According to the findings of the present survey, price premiums seems to be difficult to find and illusive thing for most plantation companies. At present they do not enjoy any significant financial benefit because of having FSC certification, and they find it difficult to justify the cost of certification. But most of them believed that if the market mechanism is properly worked out and benefits spread through the entire supply chain FSC certified woods can fetch a better price in the market. For plantation companies it’s the high end timber that would bring most financial benefits.

Respondents from export manufacturing sector had different views of the role of FSC certification as a marketing tool and the availability of price premiums for certified products. The findings of the survey suggest that some potential for price premiums exists in specific market niches and the financial benefit to the manufacturer depends on the supply chain to the retailer or the end market which the export manufacturer currently joined to. However most companies participated in the survey were disappointed in the present market benefits of certification.

Although most local wood based export manufacturers and planters don’t have any significant financial benefit due to FSC certification, they remain optimistic about the future benefits it would bring and they are expecting the situation to be changed in the future. In addition, some respondents viewed FSC certification as a mechanism that can give a competitive advantage over another within the forest products industry.

For most of the Sri Lankan wood based export manufacturers, the cost of certification is not an extra burden since they are being sponsored by their respective overseas buyers to obtain the FSC certification. Respondents in this study also indicated that changes in forest management and production process they had to make in obtaining FSC certification were not significant, but FSC certification has improved their management and information systems (documentation) considerably.

Most companies suggested that the current standards of FSC scheme should be revised in accordance to the local conditions.