Summary
• Rising interest in certified wood is driven as much by the timber trade as by government procurement and environmental groups.
• Certified softwood and panels are readily available, but supply of certified hardwood is still restricted.
• The UK has progressed further than other EU countries as a market for certified products.
• The economic downturn is widening the gap between “green operators” and the rest.
New research provides detailed insights into the real scale and nature of demand for verified legal and certified sustainable wood products across the EU. It highlights that interest in these products is increasing in the UK and wider EU market. On the other hand, it also identifies significant gaps in market demand and suggests that adoption of further demand-side measures – such as the EU’s proposed due diligence legislation – is essential to encourage widespread uptake of certification throughout the trade.
The research, entitled “EU market conditions for ‘verified legal’ and ‘verified legal and sustainable’ wood products”, involved interviews with a wide range of timber trading companies, specifiers and other end users in seven western European and was undertaken by Forest Industries Intelligence Ltd for the UK Timber Trade Federation with support from the UK Department for International Development. It indicates that rising interest in certified products is partly a response to green public procurement (GPP) and environmental campaigns.
However, the corporate procurement policies of timber trading companies – which underpin private sector promotion of wood’s green credentials – are now at least as important in driving demand. Another important factor has been a strong ‘push’ from the supply side. FSC– and PEFC-certified products are now readily available from the leading suppliers of softwood and composite panels in northern Europe.
The research highlights that the UK has progressed much further than nearly all other European countries as a market for certified timber products. All the UK’s largest wood agents and importers now have environmental timber procurement policies. These policies have become increasingly sophisticated over the years, combining measures to remove all illegal wood from supply chains through risk assessment procedures, with phased commitments to sourcing larger volumes of fully FSC- or PEFC-certified timber. Companies making commitments to sourcing certified products often see this as part of a wider process of restructuring overall procurement practices in favour of a limited number of key suppliers able to provide the full range of quality services, of which forest certification is only one component.
On the other hand, there is also evidence of gaps in the UK market for verified legal and sustainable wood. The majority of smaller buyers in the joinery and furniture sectors are less interested in certified products. Some importers are still essentially responsive, stocking small volumes of certified wood for marketing purposes only, but not actively developing markets for these products and many public sector buyers, particularly at local authority level, are not following central government procurement policy.
European demand
The market position of certified wood products elsewhere in Europe varies widely, but generally it is significantly weaker than in the UK. Only in the Netherlands does the trade exhibit a comparable level of commitment to securing certified wood products. GPP policies and trade association codes of conduct are beginning to boost demand for certified products in Belgium and France, but there is little reported impact on demand in Germany, Spain or Italy. And demand for certified wood remains low in timber’s major consuming sectors of construction and furniture. Limiting factors in these sectors include the presence of a huge number of SMEs, minimal reputational risk, and the limited scope and poor implementation of GPPs.
Across Europe, the economic downturn is generally widening the gap between the limited number of environmentally proactive operators that are now more eager than ever to exploit the opportunities emerging for timber from increasing interest in sustainable construction, and the large numbers of companies that haven’t yet focused on environmental issues and which continue to sell primarily on price.
The research provides insights into the price premiums being requested and achieved for certified and verified legal products across the EU. For much of the commodity softwood and composite panels sector, high availability of PEFC- or FSC-certified product supply in the EU is met with only limited market requests for labelled product. Hence the opportunities for achieving a premium in this sector are extremely limited.
Only in the rather restricted conditions that prevail in parts of the hardwood sector and to some extent in the specialty softwood sector (such as western red cedar cladding/siding from North America) does the issue of price premiums arise. In these sectors, specific requests for certified products – typically for FSC from public sector buyers – might occasionally be met by limited supply. The highest premiums – in the range of 20-50% on the price of delivery to the importer’s yard – are being asked for FSC-certified tropical sawn hardwood from Africa and Brazil. Price premiums for tropical sawnwood supplied under private-sector legality verification systems (such as TLTV, OLB or VLO) are typically in the range of 3-15%, with most at the lower end of this range.
Generally, there is great reluctance among end users to pay premiums for certified or verified legal wood products, a situation which places significant limits on the ability of suppliers to charge and obtain premiums. As a result, there are signs that some importers and manufacturers implementing green procurement policies have switched their emphasis away from FSC-certified products in favour of less expensive legally-verified products when sourcing from tropical supplying countries.
Supply trends
The research highlights significant trends in the supply of verified legal and sustainable products. It is estimated that, due to relatively high levels of certification within the EU’s domestic forest estate, the proportion of timber consumption ultimately derived from certified forests is likely to exceed 50% in 10 EU member states. However, much of the certified supply comprises softwood and panel products, while levels of certification in the hardwood sector are considerably lower. Supply of certified temperate hardwoods is severely restricted by the high proportion of forests under the control of small landowners.
In the tropics, a major problem is lack of state infrastructure which means that costs to the private sector of meeting social and environmental certification standards may be extremely high. For example, one large European-based company with concessions in Africa notes that its commitment to FSC certification required an investment of US$8m over five years, of which US$2.5m was required to ensure conformance to social standards. It’s no wonder, therefore, that African suppliers are looking for large premiums for FSC-certified products, and that the unwillingness of many buyers to pay more remains a severe constraint to wider uptake of certification in the tropics.
There remains a critical need for more marketing efforts to raise awareness of the role of different certification systems and to ensure appropriate recognition amongst manufacturers, specifiers, retailers and end users. While European demand for certified products is low, a number of other business benefits for certified operators can be identified including: maintenance of market share; protection of corporate reputation; improved business-to-business communication; a foundation for proactive marketing of wood’s positive environmental credentials in relation to non-wood products.
The results of the research imply that adoption of the EU’s due diligence legislation will be essential to encourage widespread uptake of risk management systems and to drive the market towards procurement of only legally-verified and certified products, at least in regions where there is a high risk of illegal logging. In the absence of more effective demand-side policy measures, the existing trade in certified products may well be eroded by increased focus on price during a period of recession.
For a copy of the full report, contact the TTF’s head of sustainability, Rachel Butler on 020 3205 0067.
