Forest certification in marketing: a review

Forest Certification in Marketing:
A Review
Toshiaki Owari
The University of Tokyo, JAPAN

Forest Certification…
 … is a market-based instrument that can be
harnessed to foster a green economy (UNEP 2011)
 An increasing number of studies have examined
forest certification since the mid-1990s
 Related articles published in international
scholarly journals come to more than 200, of
which a considerable number were contributed
by forest products marketing researchers
2013/3/28 MORIOKA 2013 (OwariT)

Previous Literature Reviews
 Forest certification research in social sciences
(Takahashi 2006, in Japanese)
 Certification schemes and impacts on forest and
forestry (Auld et al. 2008)
 Research on forest related environmental
markets including certification (Dargusch et al. 2010)
 Private cost-benefits of certification (Chen et al. 2010)
 Producer-level benefits of sustainability
certification (Blackman & Rivera 2011)

Purpose
 This presentation aims to further synthesize the
accumulated knowledge concerning forest
certification and certified forest products within
the forest products marketing arena
 Key findings from my previous studies (Owari et al.
2006; Owari & Sawanobori 2008) will also be presented
as an example of certification market research

Methods
 To identify relevant journal papers, I conducted
electronic searches with digital databases
 Web of Science, Science Direct, SpringerLink, Google
Scholar, etc.
 I also collected literature by using lists of
references in related articles

Forest Certification Research:
3 Major Academic Disciplines
 Forest products marketing
 A tool for marketing, which adapts the
company to its business environment
(Hansen & Juslin 2011)
 Public policy and governance
 Non-state market-driven private authority
to address environmental deterioration
and social concerns (Cashore et al. 2004)
 Ecology and management
 A tool for biodiversity conservation (Sheil
et al. 2010)

Certification Market Research:
2 Perspectives
Supplier Customer
CFPs

Suppliers‟ Perspectives

Suppliers‟ Perspectives
 … was initially published in late 1990s in North America
(e.g., Merry & Carter 1997; Vlosky & Ozanne 1998; Vidal et al. 2004) and Europe (e.g., Pajari
et al. 1999; Owari et al. 2006).
 … subsequently surveyed in Latin America (e.g., Vlosky et al. 1999;
Nebel et al. 2005), Asia (e.g., Owari & Sawanobori 2007; Ratnasingam et al. 2008; Bowers et al.
2012) and Africa (Attah et al. 2011; Carlsen et al. 2012)
 Suppliers of certified forest products include
landowners, primary and value-added wood
producers, merchants, etc..
 Most studies have examined prevailing experiences and
perceptions of suppliers, including adoption levels and
costs/benefits of forest certification.

Supplier-perceived Benefits
 Market access, public image, price premiums
(Chen et al. 2010)
 Business performance, customer relationship,
environmental communication (Owari & Sawanobori
2008)
 Market-based, signaling & learning mechanisms
(Overdevest & Rickenbach 2006)
 Supply-chain networking (Iwaisako & Sato 2006)

Supplier Benefits: Price Premiums…
 … are negligible
 Certification has few direct economic benefits (Blackman
& Rivera 2011)
 Most frequently, price premiums is not being realized
in the market place (Chen et al. 2010)
 … are receivable
 5 – 51% for the majority of exported certified wood
products in Bolivia (Nebel et al. 2005)
 2 – 56% for certified logs, particularly for high quality
hardwoods in Malaysia (Kollert & Lagan 2007)
 More value-added wood producers received price
premiums in the US from 2002-2008 (Vlosky et al. 2009)

Strategies, Functions and Benefits of Forest
Certification in Marketing (Owari et al., 2006)
 Survey
 Sep. - Dec. 2004 in Finland
 Primary and value-added wood
products companies
 Personal interviews with a
structured questionnaire
 Samples
 50 (response rate: 75%), of
which 25 had been CoC
certified
 Mainly small and medium sized
companies

Importance of Forest Certification

Benefits of Forest Certification

Market Benefits of CoC Certification
(Owari & Sawanobori, 2008)
 A mail survey targeted all
CoC certificate holders in
Aug. 2005 in Japan (n=247)
 Respondents were asked:
 Price premiums (yes/no)
 the perceived level of gained
benefits (measured by a five-
point scale)
 129 usable responses (52%)
were received

Percentage of Respondents with
Price Premiums in 2004

Dimensionality of Market Benefits
Item
Rotated factor loadings
Communality
Factor 1 Factor 2 Factor 3
An increase in sales volume 0.918 0.249 0.186 0.939
Higher profitability 0.828 0.306 0.209 0.824
Keeping existing customers 0.413 0.657 0.192 0.638
More customer satisfaction 0.311 0.871 0.250 0.918
Good public reputation 0.128 0.502 0.679 0.729
Acceptance from environmentally
sensitive customers
0.192 0.458 0.700 0.736
Acceptance from environmental
groups
0.196 0.036 0.818 0.709
Total
Sum of squares 1.89 1.81 1.80 5.49
Percentage of variance 27.0 25.8 25.7 78.5
Coefficient Alpha 0.93 0.84 0.85
Note: Factor analysis (maximum likelihood with varimax rotation), n=120
Business performance
Customer relationship
Environmental communication

The Level of Benefits Gained from
the CoC Certification
No benefit
at all
1 2 3 4 5
Business
performance
Customer
relationship
Environmental
communication
Benefit rating (mean+SD)
a
a
b
p<.01, Friedman test; p<.01, Wilcoxon signed-rank test with Bonferroni correction
Very great
benefit

Customers‟ Perspectives

Customers‟ Perspectives
 … was initially published in late 1990s in North America
(e.g., Ozanne & Vlosky 1996; Spinazze & Kant 1999), Europe (e.g., Pajari et al. 1999) and
New Zealand (Ozanne et al. 1999), and subsequently surveyed in
Asia (e.g., Lee et al. 2007; Mohamed & Ibrahim 2007; Sakamoto et al. 2010)
 Customers of certified forest products can be further
divided into two groups; business customers
(architects, builders, retailers, etc.) and final consumers
 “Willingness-to-pay premiums” for certified forest products
have been a major research topic, and the methods used
are contingent valuation and conjoint analyses

Consumers‟ Willingness-to-Pay Premiums
Citation Product (Price) WTP premium %
Ozanne & Vlosky (1997;
2003), Aguilar & Vlosky
(2007)
stud ($1), chair (100$), dining room set (1000$),
kitchen remodeling job (5000$), new home
(10000$)
4.4-18.7 (1995)
4.4-17.7 (2000)
10 (2005)
Ozanne et al. (1999) shelving (20$), chair (100$), outdoor furniture
(1000$), kitchen remodeling job (3000$), new
home (10000$)
16.5-22.3
Spinazze & Kant (1999) lumber (1.5-3$), flooring (4-6$/sf), paper products
(1-20&), table (100-1000$)
8.84-11.37
Veisten (2002) table (332$ in UK, 275$ in Norway) 1.6 (UK), 1.0 (Norway)
Jensen et al. (2002) oak shelving board (28.80$) 35.3
Jensen et al. (2004) shelf (28.80$), chair (199$), table (799$) 5.6-13.0
Mohamed and Ibrahim
(2007)
wood products 14.4
Cha et al. (2009) wood frame (5$), copier paper (5$), dining table
(500$), flooring (1000$)
6.8-11.6
Shoji et al. (2011) interior finishing (¥100000) 43.8

Consumer Segments with Certification
Preference
 Politically liberal, female, a member of the Democratic
party and environmental organizations, fairly well
educated (Ozanne & Smith 1997; Ozanne & Vlosky 1997; 2003)
 Those who trust environmental organizations, likely the
member, female (Veisten and Solbelg 2004)
 Socioeconomic or demographic variables alone are not
the main determinants (Spinazze & Kant 1999; Bigsby & Ozanne 2002)
 A combination of psychographic and demographic
variables is better suited to segment (Thompson et al. 2010)
 Targeting through exclusive distribution channels (green
building retailers) (Anderson & Hansen 2004; Thompson et al. 2010)

Consumers‟ Purchasing Behavior
Anderson & Hansen (2004) Anderson et al. (2005)
Year Fall 2002 ?
State/Country Oregon, USA Alabama & Oregon, USA
Place 2 Home Depot stores 2 University book stores
Product Plywood Wood pencil
Price $22.59/sheet $0.14 (AU) & $0.20 (OS)/pencil
Certification FSC Rainforest Alliance (FSC)
Results
(amount sold)
Prices equal:
labeled (271) > unlabeled (132)*
2% premium (unlabeled: $22.10):
labeled (103) < unlabeled (176)*
*p<.01, Chi-square test
Prices equal:
AU: labeled (11,296) ~ unlabeled (11,488)
OS: labeled (834) ~ unlabeled (767)
20% premium (labeled: $0.17/0.25):
AU: labeled (3,083) ~ unlabeled (2,902)
OS: labeled (284) ~ unlabeled (275)
100% premium (labeled: $0.40):
OS: labeled (125) < unlabeled (285)*
*p<.01, Chi-square test

Business Customer: Key Findings
 Architects and retailers were not supportive of forest
certification in US (Vlosky & Ozanne 1997; Macias & Knowles 2011),
while there is a high level of interest in NZ (Ozanne et al. 1999)
 73% of the architects working on LEED projects in New
York State, USA, stated that they paid a premium price
for FSC-certified wood (Germain & Penfield 2010)
 For retailers in US and Canada, „improving company
image‟ was the most important reason for buying/selling
certified forest products (Chen et al. 2011; Perera et al. 2008)
 In Japan, construction companies prefer to use recycled/
thinned wood than certified products (Sakamoto & Shiba 2010)

Summary: Forest Certification…
 … has not been frequently studied and published in
countries outside North America & Europe
 … has typically few market benefits to suppliers, although
a price premium has been received in some cases
 … may provide less-tangible benefits such as improving
customer relationships, better public relation, facilitating
learning process, and developing supply-chain networks
 There is a consumer segment who are willing to pay a
price premium to certified forest products
 The majority of consumers may purchase certified forest
products as long as they did not have to pay a premium

Toward A Green Economy…
 Certification studies should further explore the
perspectives of suppliers in developing countries
 How to increase/maximize benefits to suppliers?
 How to decrease/minimize sacrifices of suppliers?
 … consumers‟ willingness-to-pay for forest
products originated from developing countries
 Certification label: indifferent between developed and
developing countries >>Differentiation possible?
 The effect of cause-related marketing?

Thank you!
Office Holders, IUFRO Research Unit 5.10.00
(Forest Products Marketing & Business Management)

Forest certification in marketing: a review

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