Abstract
Created as a market-based instrument to deter tropical deforestation, the certification program of the Forest Stewardship Council (FSC) has experienced tremendous growth over the past two decades. We argue that using a comprehensive conceptual framework is needed to assess the successes and limitations of FSC certification. We introduce a supply chain strategy framework to address three questions: (a) What are the requisite supply chain conditions for certification programs to be successful? (b) How well does the tropical timber sector meet these conditions? (c) What actions could make FSC certification efforts more effective? We conclude that some conditions necessary for a successful supply chain strategy are not found in the tropical timber industry. As a result, FSC certification faces severe limitations as a governance tool for tropical forest conservation. We suggest that a collaborative approach to creating markets for certified timber will improve FSC certificate program effectiveness.
Keywords
Introduction
Tropical forests 1 cover 10% of Earth’s land surface and play an essential role in sustaining all living things. They preserve biodiversity, regulate local and global climate conditions, support the livelihood of local communities, maintain cultural heritage of forest-dependent indigenous groups, and serve as a revenue source for corporations and governments around the world.
Despite concerns over global tropical deforestation and forest degradation during the past half century and continuing today, large tracts of tropical forests remain threatened and compromised by both global and local forces (Boucher et al., 2011; Geist & Lambin, 2002; Mayaux et al., 2005). Forests have been disappearing at a pace of around 13 million hectares a year, mostly through the clearing of tropical forests (United Nations Economic Commission for Europe [UNECE]/Food and Agriculture Organization [FAO], 2010). The rate of deforestation is highest in South America and Africa, while plantations in Asia are replacing natural forests. The average forest cover in producer countries in the International Tropical Timber Organization (ITTO) decreased from 52% in 1980 to 46% in 2005 (Von Strokirch, 2008).
Prompted by rising public awareness of the linkages between rapid deforestation and climate change, as well as growing frustration at the failure of intergovernmental efforts to slow these trends (Bartley, 2003; Vogt et al., 2000), environmental nongovernmental organizations (NGOs) began seeking ways to use market forces to change timber industry practices. Behind the creation of the Forest Stewardship Council (FSC), forest and wood product certifications emerged in the early 1990s as an alternative strategy to governing forest management practices in the tropics. By allowing consumers to identify and choose sustainably sourced wood products, the FSC aims to provide market incentives for industry players to produce and procure timber in conformance with specific social and environmental standards (Cashore, Auld, & Newsom, 2004; Gulbrandsen, 2010).
The FSC certification—as a nonstate, market-based approach—drew attention as a new form of global governance. There were expectations that the certification regime would fill the void left by ineffectual government regulations, litigations, and advocacy (Cashore, Auld, Bernstein, & McDermott, 2007; Cashore et al., 2004; Gulbrandsen, 2004; Haufler, 2003). Numerous empirical studies have looked at FSC certification, providing valuable insights into the challenges of implementing such an approach to global governance. However, a decade after certification was touted as an innovative strategy for global tropical forest management and preservation, its efficacy remains unclear.
In the face of ongoing tropical forest deterioration and resource constraints, and more than two decades of FSC operation, we consider whether certification is, indeed, the appropriate policy tool. Specifically, we ask three fundamental questions about the FSC certification: (a) Is it implemented according to the program design? (b) Is the program well designed? (c) Do the program requirements for success exist in the contemporary timber industry? To address the first two questions, we pulled from FSC certification literature, with particular attention to findings on FSC’s impact. To answer the third question, we present a supply chain strategy (SCS) framework that sets out the basic logic behind the use of a private standard, such as FSC certification, to bring about change in public policy. Then, we assess how well the tropical timber industry corresponds to the conditions set out by the framework. Last, we use the framework to diagnose the strengths and weaknesses of the FSC certification program and to identify areas where enhancements can be made.
The Emergence of the FSC and the Impact of Forest Certification
The Origins and Objectives of Forest Certification
The forest certification movement emerged in the late 1980s after intergovernmental actions failed to effectively address two interrelated forces: rising public concern over tropical deforestation and growing awareness of “global warming” (as it was called at the time). Although uncontrolled logging and clearing of tropical forests have been serious issues for decades, they entered global public policy consciousness in the 1980s thanks to dramatic images of large-scale clear-cutting and burning of forests. Among the numerous causes of forest deterioration, commercial logging—and, by extension, international trade and globalization—became the main target of critics, largely because of its visible linkage to environmental destruction and social injustice (Boucher et al., 2011; Dauvergne, 2001; Geist & Lambin, 2002; Rudel, 2007).
On the environmental front, NGOs and international advocates of tropical forest conservation were driven by fears about the extinction of species, the disruption of ecological balances, and the potential worsening of climate change (Guruswamy & McNeely, 1998; Reaka-Kudla, Wilson, & Wilson, 1997). It is estimated that illegal logging worth between US$30 billion and US$100 billion, or 10% to 30% of all global wood trade (Nellemann, 2012; Seneca Creek Associates & Wood Resources International, 2004), robs developing countries’ governments of at least US$10 billion in annual revenue (World Bank, 2006).
The first international agreement on the management, conservation, and sustainable development of forests—forest principles—was ratified at the United Nations (UN) Conference on Environment and Development, known as the Earth Summit, in Rio de Janeiro in 1992. Since then, intergovernmental negotiations, led by the UN Commission on Sustainable Development, have produced 270 proposals for action and the creation of a governance institution, the UN Forum on Forests. Despite the symbolic significance of these actions, the high-level international policy debate had little impact. It lacked political and legal support from governments (Gulbrandsen, 2010).
Among the hundreds of forest certification initiatives formulated around the world, we focus our analysis on the FSC for two reasons. First, unlike most certificate programs that are set up to serve the interest of businesses by industry players themselves, FSC was established explicitly as a multistakeholder mechanism to fill the governance void in the tropical forests. This policy-oriented, mission-driven nature of FSC sets it apart from competing global and national standards, such as the Programme for the Endorsement of Forest Certification (see Table 1). Second, while there are other certification programs that are also driven by public policy mission, including Fairtrade International’s timber certification, FSC is widely considered to be the most recognized, credible, and globally adopted standard in scope. For these reasons, many researchers have regarded the FSC as the main, if not the only, global certification scheme that serves as a public policy tool for tropical forest conservation (Cashore et al., 2004; Eden, 2009; Rametsteiner & Simula, 2003). For the purpose of our analysis, we embrace the arguments presented by previous studies and focus our discussion on FSC in the subsequent sections.
Comparison of FSC and PEFC.
Note. FSC = Forest Stewardship Council; PEFC = Programme for the Endorsement of Forest Certification.
An Overview of the FSC
A year after the 1992 Earth Summit failed to establish a binding International Forest Convention, a group of timber buyers, traders, and representatives of environmental and social NGOs from 26 countries established the FSC. Their idea was to develop a global forest certification program to promote sustainable forest management (Eden, 2009). Originally sponsored by the World Wide Fund for Nature (WWF), a leading environmental NGO, and B&Q, one of United Kingdom’s largest home improvement retailors, FSC attained broad-based support from global companies such as IKEA and Home Depot, respected environmental and social NGOs such as Greenpeace and Rainforest Action Network, as well as numerous individuals. These member organizations and individuals participate in one of the three chambers—economic, environmental, and social—of FSC to address issues that are specifically aligned with their interest and expertise.
The FSC, supported by diverse stakeholders, performs two major functions. First, it sets a global standard for “well-managed forests,” with 10 principles and 56 criteria. Each FSC affiliate uses these benchmarks to establish national or regional standards tailored to local ecological, economic, and social conditions. For example, the standards used in Cameroon and Papua New Guinea are shown in Table 2.
Principles and Standards of Forest Stewardship Council for Cameroon and Papua New Guinea (Selected Principles).
Source. FSC-STD-CAM-01-2012 Cameroon Natural and Plantations EN.pdf; FSC-STD-PNG 01-2010 Papua New Guinea Natural and Plantations EN.pdf.
These standards, in turn, are used to certify forest management practices in the affiliates’ countries or regions. Where local standards do not exist, third-party certification bodies may apply FSC’s global standard to determine the quality of forest management, the authenticity of the timber’s origin, or both (Gulbrandsen, 2010).
The second role of the FSC is to provide accreditation for third-party bodies to conduct on-the-ground certification activities through Accreditation Services International (ASI), an independent organization responsible for accrediting and supervising third-party certification bodies. Any organization that wishes to become an FSC-accredited certifier must submit its application to ASI and pass the four steps of the accreditation process: (a) assessment of application document, (b) organizational background check, (c) office visit and interviews, and (d) test audit witnessed by the accreditation body. Once accredited, the certification body is subject to annual surveillance assessments and other supervision. This system is set up to avoid potential conflict of interest between standard-setting and accreditation functions under the same organizational umbrella. As of April 2013, there are 32 FSC-accredited certification bodies around the world, including Rainforest Alliance, SGS Group, and SCS Global Services (ASI, 2013). Rainforest Alliance, which has established the world’s first forest certification program and a founding partner of FSC, is now the largest FSC-accredited certifier and has helped large and small forest operators become FSC certified by providing capacity building along with auditing services. 2
When the FSC certification was developed in 1993, there was optimism about what this new mode of global governance—using nonstate actors and market-based mechanisms—might accomplish (Cashore et al., 2004; Cashore et al., 2007; Haufler, 2003). After two decades of operation, both the land areas certified and the number of certifications have expanded rapidly. FSC now operates in all types of forests—tropical, temperate, and boreal, as well as natural and plantation forests—in more than 80 countries. FSC-certified forests cover more than 160 million hectares, around 2% of the world’s total forestland 3 or more than 10% of the world’s working forests 4 (Conroy, 2007). The UNECE, on the other hand, states it has estimated that the roundwood supply from certified forests amounted to 469 million m3 in 2012, or about 27% of the world’s industrial roundwood production (UNECE/FAO, 2012) and is expected to grow in the short term (CBI [Centre for the Promotion of Imports From Developing Countries], 2011a; UNECE, 2012). Table 3 summarizes the extent of FSC certification.
Forest Stewardship Council Certifications Issued, as of August 2012.
Source. Forest Stewardship Council (2012; rounding error in original figures).
Impact of the FSC Certificate
While some consider the penetration rate of the FSC certificate program to be significant, research has reached varying conclusions about its effectiveness in achieving its original policy goals. The research can be grouped into four areas of emphasis: the change in forest management as a result of the program, the program’s aggregate impact on tropical forest lumbering companies, the scope of the program, and the unintended consequences and spillover effects of FSC certification.
One common direct measure of impact is the change in forest management practices as a result of on-the-ground auditing. Under the FSC scheme, certification bodies produce an end-of-audit report listing the areas where a certification applicant falls short and what improvement is required to meet the FSC standards. These are known as corrective action requests. Studies of the distribution of corrective action requests issued by certification bodies suggest that auditing does influence forest management practices (Bass, Thornber, & Markopoul, 2001; Moore, Cubbage, & Eich, 2012; Newsom, Bahn, & Cashore, 2006; Rametsteiner & Simula, 2003). In developing countries, FSC certification appears to have achieved progress in addressing social issues—training, worker safety, wages and living conditions, and conflict resolution within local communities (Newsom & Hewitt, 2005). Such changes in management practices are widely seen as positive (Gulbrandsen, 2010).
Several scholars addressing the second line of research—the aggregate impact of the FSC program on tropical forest lumbering firms—have found that the net benefits offered by certification are not enough to prompt most producers to seek certification, particularly in developing countries (Cubbage, Moore, Henderson, & Araujo, 2009; Gullison, 2003; Marx & Cuypers, 2010). More than 80% of the certified forests are located in North America and Europe (FSC, 2012). In developing countries, where tropical and subtropical forests account for only 12% of the certified area, critics assert that certification is not likely to reach the critical mass needed to transform the mainstream market and alleviate pressure on natural forests (Gullison, 2003; Vogel, 2005).
The third focus of research sees the scope of the program as a major shortcoming since many of the environmental problems that certification attempts to address cannot be contained within a single forest (Auld, Gulbrandsen, & McDermott, 2008). For example, while it is commonly understood that landscape-level planning is necessary to address biodiversity conservation, FSC certification programs are implemented independently of broader scale landscape planning. There is also a concern that the exclusion of noncertified timber from markets could reduce the economic value of noncertified standing forests, which in turn may intensify unsustainable logging activities and cause forest land to be converted for agricultural production and other commercial use (Leslie, Sarre, Filho, & bin Buang, 2002).
Last, studies examining unintended consequences and spillover effects of FSC certification have paid particular attention to the positive impacts on raising the standards of competing certification schemes (Pattberg, 2005), the implications for public policies (Bell & Hindmoor, 2012; Gulbrandsen, 2004), and the emergence of multisector partnerships and networks, such as the Global Forest and Trade Network led by the WWF (Auld et al., 2008). These authors share the view that FSC significantly contributed to the upgrading of national forest legislation in many countries and encouraged multistakeholder engagement in forest management. They argued that while the full environmental, social, and economic impact of FSC certification have yet been seen, its positive impact on forest governance make it a promising approach.
Taken together, the research on the effectiveness of FSC certification points out its limited impact on sustainable forest management, especially in developing countries. But few studies have answered definitively (or even conditionally) the fundamental questions about FSC’s effectiveness: Is it a good idea? Is it a good approach but poorly implemented? Or is it a good approach but not applicable to the timber industry?
To provide better answers to the fundamental questions, a framework that can put the FSC certificate program in the broader context of supply chains would be useful. In the next two sections, we describe the “supply chain strategy” as such a framework that can be used to assess FSC certification success and apply the framework to analyze tropical timber supply chains. From a public policy perspective, it is of paramount importance and urgency to understand whether FSC certification is, indeed, an effective global governance approach. Numerous case studies have shed light on critical demand-side and supply-side factors that contribute to the success or failure of particular certification programs, 5 but they offer limited guidance for assessing if FSC certification as an effective “nonstate, market-based approach” to addressing tropical forest governance issues.
Forest Certification as an SCS
As mentioned previously, FSC certification was developed as an alternative to conventional regulatory modes of global governance and has been regarded as an innovative nonstate, market-based approach to fill in the global governance gaps (Cashore et al., 2004; Cashore et al., 2007; Haufler, 2003; Gulbrandsen, 2004). The FSC relies explicitly on market mechanisms to exert influence on the management practices of forest owners and wood product supply chain actors. A determination of the efficacy of the FSC certificate is grounded in understanding the logic and interactions of supply chains and markets. The logic underlying the certification approach is well articulated and straightforward: By disclosing the sustainability characteristic of a wood product, consumers are empowered to select those products made from timber that comes from sustainably managed forests (de Boer, 2003; Taylor, 2005). Such consumer demand creates an incentive for retailers to source certified products. Retailers’ demand for more sustainable wood products, in turn, rewards forest owners whose management practice meets social and environmental sustainability standards (Sasser, 2003).
A Supply Chain Strategy
Translating these ideas into an analytic framework that captures the logic of an SCS is one way to assess the impact of FSC certification. For the purpose of our analysis, we call this framework an SCS and use it to capture the operational aspects of nonstate, market-based governance regimes.
Our SCS framework moves the general conception of nonstate, market-based regulation into a more rigorous model predicated on supply chains. Nearly half a century ago, Jay Wright Forrester (1958) articulated what is now known as supply chain management: Management is on the verge of a major breakthrough in understanding how industrial company success depends on the interactions between the flows of information, materials, money, manpower, and capital equipment. The way these five flow systems interlock to amplify one another and to cause change and fluctuation will form the basis for anticipating the effects of decisions, policies, organizational forms, and investment choices. (p. 37)
In an expanding global economy, corporations are compelled to find global suppliers. Mentzer et al. (2001) argues that firms increasingly compete based on the coordination of their supply chains, including increased performance, rapidly changing technology, and economic conditions.
Conceptualization of an SCS framework starts with the interdependencies of a traditional supply chain but draws its inspiration from the related and emerging studies on “global value chain governance.” The origin of the concept is most prominently associated with Michael E. Porter (1985). His later work (Porter, 2008) considered specific location factors, such as local demand patterns and rivalry, and focused more on linkages between companies, thus optimizing “competitive forces that shape strategy” for networks of companies or production systems and even for whole nations (Wiemer, 2008).
A simple definition of the value chain concept is the full range of activities required to bring a product or service from conception, through the intermediary of production, to delivery to final consumers, and onto final disposal after use (Kaplinsky & Morris, 2001). Wiemer (2008) argues that the concept is much more complex, drawing on Altenburg (2007) to identify 19 distinct uses of the concept of a value chain to consider business management and development concepts.
Value chain components include design, production, marketing, distribution, and support to get the product to the final user. Relationships within value chains are shaped by the extent to which dominant firms can set and enforce standards—with the aim of raising entry barriers for competitors—and for the capacities of particular participants to upgrade their activities (Kaplinsky & Morris, 2001).
Our SCS draws on the efforts to model value chain governance (Bitran, Gurumurthi, & Sam, 2006; Gereffi, Humphrey, & Sturgeon, 2003; Wiemer, 2008) but within the context of achieving public policy outcomes. No reference was made to public policy in Wiemer’s list of 19 uses of the concept of global value chain governance. Additional guidance comes from research on agribusiness standards and certification as a mechanism to organize markets for sustainable projects (Aasprong, 2013; Bain, Ransom, & Higgins, 2013; Van der Kamp, 2012).
Finally, a study of the implementation Section 1502 of the Dodd–Frank Wall Street Reform and Consumer Protection Act (2010), and the prospects for success identified by the study authors, offers insights about supply chains in a public policy context. The effort to alter supply chain practices for select minerals originating in Africa in order to achieve specific public policy outcomes (e.g., deny funds to rebels in the eastern Democratic Republic of the Congo) provides additional insight into the ability to change specific global supply chain operations without regulatory requirements (Forrer, Mo, & Yeaw, 2012).
Applying the SCS framework to the certification and global environmental governance literature offers three advantages over existing assessments and evaluations. First, the SCS framework shifts focus to the operational aspect of this emerging form of global governance. It is widely recognized that the rapid growth of international trade and global markets over the past two decades has drastically expanded the scale and scope of corporate supply chain networks, as well as the influence that large multinational corporations extend over their suppliers (Porter & Kramer, 2011). 6 Although such enormous corporate influence has often encountered hostility and suspicion (Busch, 2011; Konefal, Mascarenhas, & Hatanaka, 2005), it has also been increasingly seen as a window of opportunity for advancing social change (Cashore, Auld, & Newsom, 2003; Doh, Newburry, & Teegen, 2003). The SCS framework provides a broader context in which to facilitate discussion on how certification—through its influence over supply chains—can be used to achieve public policy objectives.
Second, the SCS framework helps researchers and practitioners locate the strengths and weaknesses of FSC certification and identify areas where improvements and further research are needed. As previously noted, research has mostly studied certification either as a new phenomenon of governance at the global level or as an environmental program at the firm or community level. The SCS framework directs researchers’ attention toward the difference between what is being done and what is needed for success.
Last, SCS allows for systematic analysis of sector-specific market and supply chain conditions required for certification as well as for supply chain–dependent policy instruments needed to achieve impact. The SCS framework makes it possible to assess success of policy instruments such as Forest Law Enforcement, Governance and Trade Action Plan of the European Union (EU) and the U.S. Lacey Act, which require importers to conduct due diligence on the legality of the sources of their timber imports (UNECE/FAO, 2010). The SCS framework also makes it possible to evaluate certification programs employed in other industries. This is particularly important in the face of widespread adoption of the certification model by a growing number of sectors encompassing a wide range of production processes (Conroy, 2007).
Elements of the SCS Framework
Just as regulations require rational design and proper enforcement mechanisms in order to be effective, an SCS has specific requirements that must be met. The following are the five basic conditions: (a) demonstrable standards, (b) identity tracking, (c) implementation, (d) authentication, and (e) product demand. The first two requirements address the technical feasibility of using SCS as a governance instrument. In order to shift practices in business supply chains, clearly defined characteristics of the product that should or should not be included in the supply chain need to be articulated. At the same time, effective mechanisms must be put into place to ensure that the products’ identities are maintained. The last three elements of the SCS framework are the supply chain actors whose roles are critical: the seller, the buyer, and those who validate the claim about a product’s characteristics.
Demonstrable Standards
An SCS requires a clear standard to distinguish among products. In other words, there should be unambiguous definitions of the “good” and “bad” products. Though obvious, this distinction is not always easy. Concepts like “sustainability” can be difficult to translate into specifics, and local conditions can vary. Specificity also may be sacrificed during multiparty negotiation in order to reach agreement.
This requirement for clear-cut definitions of what should or should not be included in the supply chain stands in contrast with conventional public policy goal setting. Policy objectives, such as the promotion of sustainable forestry or the elimination of conflict minerals, are aspirational but hardly operational. In order for such ambitious goals to be reached through an SCS, one must be able to articulate what “sustainable” means at the operational level.
Identity Tracking
The second requirement for a successful SCS is to physically trace the movement of the product along a supply chain from the time the standard is instituted until the final product is sold in the market—with an eye on the points along the supply chain where the standards are to be met. There are numerous ways to trace the ownership of a product’s different components. Analog recording of buying and selling is the most common tracking method although information technologies, such as the use of IC tags, have become increasingly popular. However, while technological advancements make it easier to trace a product’s provenance, tracking the movement of identical commodities remains challenging. That’s because a responsibly produced product looks like any other. In dealing with a great number of suppliers and an indistinguishable product, origins and ownerships can easily become confused, obscured, or misrepresented—especially in places with weak governance, inadequate infrastructure for sorting and sequestering, and low technical knowledge.
Beyond the characteristics of the products, the configurations of supply chains also affect identity tracking. The supply chains for primary commodities—such as coffee, wood, and minerals—are typically organized as decentralized horizontal networks. These networks are characterized by large downstream retailers and merchandisers in the global North that drive commodity production, while trade takes place in the global South (Gereffi, 1994; Gibbon, 2001). In this buyer-driven structure, the supply chains are coordinated not by vertical integration of multinational corporations but by many types of local and international coordinating agents (Gibbon, 2001). The feasibility of effective tracing mechanisms will depend on the number of producers involved and the ways in which they are linked in a supply chain.
Implementation
Technical feasibility is not the only condition required by a successful SCS. Parties need to be responsible for taking the actions that produce compliance. It is relatively easier for companies to implement policies for compliance when they are operating in industries with an oligopolistic structure and a cluster of powerful players at one or more points along the supply chain. In an industry made up of a large number of smallholders, implementation of an effective mechanism for tracking operations would be more challenging and more costly—leaving players less willing to comply.
Authentication
Once the product’s movement is traced and documented, there must be a responsible entity to represent the validity of the claim about the product’s properties. This condition is critical for two reasons. First, if consumers are expected to make purchasing decisions based on a product’s traits, they need assurance that the claim is credible. Second, the requirement for validation effectively excludes hundreds of voluntary industry standards from SCS since compliance claims linked to these voluntary standards cannot be authenticated.
A third-party audit of products and production processes is most common validation tool. Qualified and authorized auditors inspect the product or process and issue a proof, or a certificate, if the product and process comply with claimed standards (Upton & Bass, 1996).
Product Demand
Although many certification schemes rely explicitly or implicitly on consumer’s purchasing decisions to drive producers’ behavior change, ethical consumers are not the only determinant of whether SCS will be successful. Retailers and business clients also help influence market demand (Espach, 2006). Researchers have identified numerous factors that can theoretically power demand for products with desired traits. Some of the most common drivers of demand include the threat of state regulation (Reinhardt, 1999), corporate reputation and branding (Conroy, 2007), and NGOs’ negative campaigns (Domask, 2003). Regardless of the reasons a firm adopts SCS, the important criterion for SCS success is market participants—particularly the end consumers—who are able and willing to pay for the added costs.
These elements of the SCS framework can be used to guide our research into whether FSC certification successfully meets these requirements. We will present the evidence from the tropical timber industry.
Assessing FSC Certification Through the SCS Framework
Our assessment of how well the FSC certificate meets conditions required for SCS success are summarized in Table 4. 7 Admittedly, the scores require further scrutiny and are also subject to local conditions, including rule of law, the level of good governance, and capacities. However, for the purpose of our analysis, the conditions in Table 4 are an indicator for determining the prospects for improvement within the existing scheme of FSC certification. The remainder of this section elaborates this model with more detailed explanations.
A Supply Chain Strategy Framework for Assessing Forest Stewardship Council Certification.
As discussed earlier, FSC over the past two decades has developed a highly sophisticated model to define, track, and authenticate sustainable timber products (Eden, 2009). These are the three conditions FSC has become accomplished in tracking.
The ecology and management practices of forests differ significantly around the world. Defining the specific practices that constitute sustainable forest management, applicable to global governance, is not easy. To accommodate place-specific realities while ensuring continuity, the FSC has adopted an innovative system that combines universal principles and criteria with localized indicators (FSC, 2012). By allowing national and local partners to fine-tune the standards in accordance with local preferences, but without compromising their socioenvironmental objectives, the FSC has successfully built flexibility and responsiveness into its program. For these reasons, we argue that the FSC has achieved considerable success in establishing clear, credible, and scientifically robust international standards while simultaneously taking into account heterogeneous social and ecological conditions of forest management on the local level.
Another novelty of FSC’s approach lies with its certification procedure. Rather than function as a certification body itself, FSC accredits other organizations to conduct on-the-ground audits through its accreditation arm, the ASI. As an independent agency, ASI is responsible for checking certifiers’ compliance with FSC’s rules and procedures. It does so through a combination of field and office audits, ensuring the transparency and accountability of its process and maintaining the credibility of its certificate. The certification process covers both tracking and authentication conditions.
In terms of tracking the movement of wood products, significant progress has been made in chain of custody (CoC) control. CoC in the supply chain context refers to the movement and ownership of a product from the time the raw materials are extracted from the earth or sea until the final product is sold in the market. The issuance of CoC certifications has steadily increased, reaching more than 23,900 certificates in 107 countries as of August 2012 (FSC, 2012).
Environmental governance networks—created and linked by the FSC—enabled broad-based stakeholder buy-in for the standards (Eden, 2009). The decentralized approach taken by FSC has created an infrastructure that enables a wide range of organizations and individuals to cooperate, collaborate, and compete with each other to promote the adoption of FSC certification (Gandenberger, Garrelts, & Wehlau, 2011; Garrelts & Flitner, 2011). The interactions between FSC stakeholders, in turn, have spurred innovation and continuous improvement of the program.
Such broad-based support from the industry and civil society also is important in facilitating the execution of FSC certification. In particular, support from leading players in the wood products industry—such as Swedish retailer IKEA and British home improvement company B&Q—has allowed FSC to achieve substantial market share in a number of EU markets. In the United Kingdom, for example, B&Q has announced that it has achieved 100% certification on over 16,000 of its wood-based products (WWF, 2001). IKEA has also embarked on the goal to increase its purchase of FSC-certified wood products to10 million m3, or 50% of the total projected volume of wood sourced by IKEA, by 2017 (IKEA, 2011). Although precise market share of FSC-certified timber products is not found, we estimate that FSC accounts for a large share of the certified wood sold in the European markets because it is the leading—and sometimes only—certification scheme in a number of Eastern and Western European countries (UNECE/FAO, 2012).
With regard to authentication, FSC has carefully crafted a third-party verification mechanism with an independent accreditation body that has helped establish credibility for its logo. The separation of standard-setting and certification bodies prevents conflict of interest and ensures a high level of transparency, accountability, and governance within the scheme. The engagement of diverse stakeholders in the verification process is also critically important for the credibility of FSC certification in the eyes of market participants, consumers, and wider audiences (Eden, 2009). Nevertheless, environmental and human rights activists have criticized the on-the-ground practice of the FSC certification (Counsell & Loraas, 2002; Ozinga, 2001). Given the complexity of certification operations and the varying degrees of local institutional capacity, there is much room for improved organizational governance and supervision. However, we support Eden (2009) and others’ view that the broad-based support for FSC indicates a high level of credibility around the FSC’s logo.
Despite this notable progress in certifying sustainably produced timber, the FSC has encountered enormous difficulties in reaching the scale necessary to protect tropical forests from destructive exploitation. Using the SCS framework, we have identified that the main weakness of the FSC certification lies in two elements of the SCS model: implementation and product demand. Trade patterns and supply chain configurations of tropical wood products explain these weaknesses.
The supply chain structure of tropical wood products makes it costly for producers to implement CoC and forest management certification in developing countries. A comprehensive picture of the product supply chain is challenging to compose, but research indicates the demand for wood products is so diffused that the top 50 wood users consume only 10% of the total production (WWF, 2001). Even if we take into account recent trends of industry consolidation, the landscape is still highly fragmented with horizontally integrated supply chain actors linked by long distribution channels (Irland, 2007). Most of the supply chain actors—timber growers and harvesters, processors (lumber mills), secondary processors of wood products (furniture), brokers and distributors, and retailers—are relatively small; only downstream firms tend to be more consolidated (Irland, 2007; Sasser, 2003). In addition, the supply chains of wood products vary considerably by country and product, some of which involve multiple stages of processing and transportation. Changing ownership is a frequent occurrence (Lawrence, 2002).
Wood product supply chains are complex and fragmented, and in developing countries, smallholder and community forestry is a large share of the industry. Therefore, it is costly for the vast majority of the tropical timber producers to adopt FSC certification (Auer, 2012; Carter, Humphries, & Vlosky, 2001). This is the case for small-scale forest owners whose cost is estimated to be more than 10 times greater than that of large-scale operators (Cubbage et al., 2009). As a result, FSC certification is regarded as a scheme more compatible with large retailers and their large suppliers, while preventing smaller players in the industry from participating (Gulbrandsen, 2004; Klingberg, 2003). Faced with high-entry barriers for small forest operators, FSC established the Small and Low Intensity Managed Forests certification program and group certification to streamline procedures and relax criteria for small operators. The Small and Low Intensity Managed Forests certification program allows a group of operators to be collectively certified, thereby reducing the cost for each individual producer. The organization is also planning a Smallholder Fund to help smaller producers finance their certification and gain access to markets.
As mentioned above, anecdotal evidence suggests that the FSC has been successful in garnering support from retailers and developing FSC buyers groups (Cashore et al., 2004; Dickinson, 1999; Klooster, 2005). However, support from business is not uniform across all sectors nor is it of the degree necessary to affect supply and demand up and down the supply chains (Cashore et al., 2004). For example, FSC certification has made remarkable inroads into the do-it-yourself home improvement industry (Harris & Germain, 2002), but has not posted so much success in industries such as furniture (CBI, 2011b; Bass et al., 2001). Do-it-yourself retailers sell products obviously derived from wood (Cashore et al., 2004). Conversely, general retailers, such as IKEA and Wal-Mart, sell highly processed wood products (Cashore et al., 2004). The ability for consumers to associate the final product with the forests from which the raw materials are sourced decreases with processing (Cashore et al., 2004; de Boer, 2003). While many of these retailers have been making serious efforts to trace the origins of their products, the endeavor has proven to be very difficult. Only 22.6% of solid wood procured by IKEA was FSC certified in 2012 (Kelly, 2012).
The most formidable challenge to FSC certification may be the lack of demand for sustainable tropical timber. It has proven difficult to create the linkages between tropical suppliers and ethical consumers. Despite a popular perception that globalization is the main driver of tropical deforestation, the share of tropical timber in global timber production is relatively low. In 2011, the world produced 1,550 million m3 of industrial roundwood, out of which tropical timber accounted for a little more than 10% of the total. Other major wood products—sawed wood and wood-based panels—claim similar shares. 8
At the same time, the volume of trade in tropical timber is surprisingly low. The data indicated that the majority of the wood products from the tropics are consumed domestically. Only 8% of the tropical logs produced were exported, for example, while the shares for sawn wood and wood-based panels were around 25% and 35%, respectively (ITTO, 2011). Such low levels of industrial production and global market integration indicated that an SCS that relies on pressure from foreign buyers, by itself, would not be relevant to a bulk of the forests that are consumed domestically or locally.
International trade also has a geographical concentration. Seven out of the world’s 10 major tropical wood importers are Asian countries, with China alone accounting for more than half of global tropical roundwood import as measured by volume (UNECE/FAO, 2012). The United States, on the other hand, plays a minor role as a tropical timber importer, with only an estimated 30% of hardwood product imports of tropical timber origin (Ekström & Goetzl, 2007). Latin American and African exports are more dependent on EU and U.S. markets (ITTO, 2011), but these countries, too, have found themselves increasingly exporting to Asian markets. Increasingly, much of the tropical logs entering China are processed into wooden furniture and reexported into the U.S. and EU markets. China has been the world’s largest exporter of wooden furniture and parts since 2005, reaching $16.3 billion in 2010 (ITTO, 2011). However, as mentioned above, tracing the sources of wooden furniture is particularly challenging because of the complexity of the supply chain and the high probability of mixing wood from different sources in the production process.
Tropical timber trade patterns reveal that North America and Europe—the places where many environmentally conscious consumers reside—have significantly less leverage in shaping forest management practices than initially anticipated by the founders of the FSC. On the other hand, industrial countries with less environmental awareness, such as Japan, South Korea, and fast-growing developing countries, such as China, are much larger purchasers and, therefore, are in a much stronger position to influence management practices. So far these countries have not demonstrated the knowledge, willingness, or capacity to do so.
In other words, most of the certified wood products do not reach store shelves owing to complex, multilevel supply chains for many wood products. Without market demand, it is extremely difficult to generate an incentive for producers to participate in the certification scheme. This problem has been widely recognized. However, the development of a brand identity around FSC-certified products has been held back by the lack of financial capacity among the industry participants and supporters. Beyond the low level of consumer recognition of the FSC logo, there is an additional challenge: consumers’ unwillingness to pay the price premium or to search for certified products (Irland, 2007).
We argue that the structural configuration of the industry’s supply chain has inhibited FSC certification’s impact on forest management on a global scale. The global trade pattern and the industry structure have left a large number of small forest owners, wood processors, and retailers in developing countries outside the supply chain network of Western retailers. This implies that FSC is likely to face continued difficulty in achieving its objectives.
Moving Forward: Improving FSC Certification
By applying the SCS framework to the FSC certificate program, we have identified two key weaknesses: implementation and market demand. The weakness in implementation speaks to the question of the requirements of an SCS in the global timber industry. The limited size of the U.S. and EU markets for tropical timber will be a serious obstacle if the FSC certificate is to address global rainforest management. The weak market demand for FSC-certified timber can be seen more clearly as a program design flaw. Certification programs rely on market mechanisms to influence the behaviors of supply chain actors. Both FSC critics and proponents agree that market demand for FSC-certified products is of paramount importance to the program’s success.
Despite interest in various types of FSC-certified wood products in Western Europe and North America (CBI, 2011a; FSC, 2012), 9 demand remains the “weak link” in the SCS approach. Weak market demand has been discussed intensely by researchers since the creation of the FSC certification program. The literature highlights the lack of demand to consumers’ low level of awareness about the FSC label and their unwillingness to pay the price premium for certified products (Bjorner, Hansen, & Russell, 2004; Cashore et al., 2004; de Boer, 2003; Dickinson, 1999; Irland, 2007; Sasser, 2003; Sedjo, 2007). Numerous explanations have been offered to account for consumer indifference. They range from unclear messaging about the meanings and benefits of the FSC label (Gallastegui, 2002) to consumers’ weak personal attachment to deforestation problems (Cashore et al., 2004) to low visibility of FSC-certified products (Irland, 2007). Consequently, many recommendations for improving certification have focused on raising the awareness of the FSC label through retailers’ marketing (Cashore et al., 2004) and consumer education campaigns (Teisl, Roe, & Hicks, 2002).
Except for a handful of large retailers, however, few companies can afford to promote the FSC label (Irland, 2007). According to FSC’s 2011 Global Market Survey, 48% of the survey respondents did not do any promotion of FSC-certified products in the previous 12 months, and one third of the respondents had no plan to do so in the coming year (FSC, 2011). Beside the marketing cost, retailers do not invest time and energy to promote FSC certification because the label, on its own, has not been shown to provide sufficient value to the vast majority of consumers. Contrary to the findings of marketing surveys, research on green markets has consistently found a wide discrepancy between consumers’ attitudes and behaviors toward green products (Prakash, 2002). Many self-proclaimed green consumers are not actually willing or able to pay for products that are certified as environmentally friendly (Bjorner et al., 2004; Teisl et al., 2002). These consumers are environmentally conscious, but their value propositions are found in nonenvironmental factors: efficiency and cost-effectiveness, health and safety, performance, symbolism and status, and convenience (Ottman, Stafford, & Hartman, 2006). Advocates for continuous engagement with retailers to promote FSC certification (Cashore et al., 2004; Sasser, 2003) may inform consumers about the meanings and benefits of FSC certification, but there are severe limitations to the remediative effects of such efforts.
However, companies can use certification as a marketing signal to influence consumers’ purchasing behaviors. Iconic, world-scale retailers can play a more effective role—beyond simply advertising the label—in creating demand for FSC-certified products. The key is to integrate certification with the branding of consumer-facing retailers and homebuilders. As a number of researchers have noted, branding is the main motivation for retailers to adopt FSC certification (Carter et al., 2001; Sasser, 2003) and brand identity plays a role in influencing consumer behavior (Irland, 2007). More and more companies have begun to formulate and implement strategies that meet economic, environmental, and social bottom lines (Porter & Kramer, 2011; Porter & Reinhardt, 2007).
Such a strategy will be effective when FSC certification is blended into other values for which consumers are willing to pay a premium price, such as health and safety, quality, symbolism, and status. Iconic brands and their authenticity, based on ongoing relationships between the firm and consumers, have been examined by Beverland (2009). He suggests that consumer trust in the authenticity of a brand can improve sales. An example can be found in the high-end supermarket chain Whole Foods Market (Grobart, 2012). The chain has successfully built its brand around stores that sell foods that are nutritious, fresh, safe, and tasty. It has done so by associating its brand with the natural and organic products that it sources. In response to the company’s skillful branding, Whole Foods shoppers are confident that the products they purchase meet certain safety and quality—and, to some extent, social and environmental—standards, even though they may not be entirely aware of the labels on each product.
The FSC proponents might achieve greater market penetration by engaging iconic brands that are able and willing to represent the social and environmental values embodied in the FSC label. A green furniture retailer, for example, can use FSC certification as a proof of the safety claims of its wood materials because FSC restricts the use of chemicals. Consumers, in turn, can rely on the manufacturer’s reputation to make their purchasing decisions without in-depth knowledge about FSC certification per se. The integration of the FSC logo into a corporate branding strategy offers several advantages. First, it overcomes the hurdle of consumer indifference because it does not necessarily require consumers’ knowledge of FSC certification. Second, it shifts attention from price premiums to value creation for businesses and consumers that embrace FSC certification. This will also lower the high-cost barriers perceived by many smaller distributors (Carter et al., 2001). Last, by using a firm’s reputation to authenticate the sustainability claims, the cause is likely to generate more interest upstream along the supply chain.
Conclusion
The promotion of responsible tropical timber harvesting is one of the oldest environmental issues on the global governance agenda. The FSC certification was developed as one approach to strengthening tropical forest governance, but the problems that the FSC founders hoped to remediate have, in fact, deteriorated. The overall rate of global deforestation appears to have slowed down in recent years (UNECE/FAO, 2010), although the environmental challenges, such as the conservation of biodiversity and global climate change, remain a major global threat (Avissar, de Silva, & Werth, 2006; World Resource Institute, 2005). Forest degradation and more frequent extreme weather exacerbate forest-dependent communities’ vulnerability to flood, landslide, wildfire, and other natural disasters (Sponsel, Headland, & Bailey, 1996). Moreover, forced eviction, displacement, and associated human rights violations caused by industrial logging and plantation projects have worsened in recent years as a result of heightened commercial interests in land acquisition driven by rising global commodity prices (Geary, 2012). Even where local communities’ land titles are formally recognized by governments and respected by forestry companies, the loss of indigenous tradition and cultural heritage remains a concern (Amanor & Moyo, 2008).
Progress has been made in understanding FSC certification’s role in curbing tropical forest deforestation, but more thorough assessments of its efficacy are needed to gauge impactful tropical forest governance. In line with ongoing efforts to better understand FSC certification’s effectiveness, the SCS framework presented in this article provides researchers and policy makers with a practical guide on how to systematically assess the appropriateness and utility of supply chain–dependent governance instruments such as FSC certification.
Through our assessment using the SCS framework, we conclude that FSC certification is not the powerful policy instrument its proponents had hoped. Our analysis shows that the structure of the tropical wood products industry and its associated trade patterns severely constrain the number of timber sellers and buyers a certification regime can affect.
The SCS framework has raised a number of issues for future research in the field of global governance. First, with regard to FSC certification, more research is needed to develop strategies for boosting the demand for FSC-certified products. Second, more attention needs to be placed on the actors in the governance networks—the key agents determining the success of the emerging modes of global governance. Third, as we have illustrated in the case of tropical forest conservation, certification alone may not be enough to solve a specific global governance challenge. Rather, certification needs to be integrated into broader policy measures that promote the same objectives. Few studies have investigated the integration and harmonization of various policies. We believe that there is a great need for interdisciplinary research into this field. In light of the proliferation of certification regimes and other types of SCS in the public policy arena, we need to better understand whether the policy instrument is appropriate for the problem being addressed before designing and implementing the strategies.
Finally, the FSC certificate program is a cautionary tale for those who advocate for nonstate, market-based approaches and for advocates of certificates as a preferred approach. The lack of market demand for certified lumber must be resolved if FSC certificates are to be more effective. However, adopting and implementing a certificate approach without clear evidence of consumer interest in certified lumber could be seen as putting the cart before the horse.
The SCS framework has modeled five specific conditions that must to be in place for success. Given the limited effects of FSC certification, hindsight suggests that it may have been prudent to confirm the presence of these five conditions before adopting an SCS and implementing a certificate program. Such a lesson has important implications in understanding the success of other certificate programs and offers insight to those considering an SCS approach to achieve public policy goals.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.