/Why_Do_It_Market_Survey_Results_FPI

Market trends for certified forest products

Vincent Chamberland, ing.f.

Graduate student Franรงois Robichaud Research Scientist, Forest Products Marketing

Presentation outline Context: positioning certified products in wood markets Methods Literature review Exploratory survey Focus group with building material dealers

Results Implications for forest managers and mill operators

Context Certification became very popular in Canada with 151 M ha certified in 2011 Many studies measured the impact of certification on the price premium and consumer behaviour.

Few studies on the perception of forest products retailers about forest certification: – Chen et al. (2011) – Perera et al. (2008)

Certification: end users’ perspective Environmental attributes concerning health are the only ones that seem to be important for the end users Certification schemes that warrant energy savings are more likely to get a premium Wood is recognized as the greener and more renewable construction material Homeowners and DIYers have a very low awareness of certification schemes

Certification: retailers’ persprctive National home-centres give more importance to environmental issues National home-centres and dealers are more likely to adopt purchasing policies for certified wood products – Home Depot, RONA, Lowe’s, 84 lumber, etc.

Certification: retailers persperctive Half retailers (Chen et al. 2011) pay a premium for certified wood products – A majority pay 1-5% more – Premium up to 20%

Who pay the premium? – Opposite conclusions (Chen et al. 2011)

– Almost all of those who pay a higher price for certified wood products charge a premium – Retailers receive a much lower premium or no premium at all even if they pay more for certified products

Survey’s objectives To understand the importance of environmental information for building materials dealers To describe the importance of forest certification in retailer’s actual business practice To describe perceptions of retailers about forest certification

Survey respondents Mostly American building material dealers (21)

Some dealers from Quebec (4) Mostly local or regional scale businesses Mostly pro-dealers selling to contractors 44% have a coc requirement

Most respondents don’t have an environmental policy 31% Yes No

69% N = 32

Respondents who don’t have an environmental policy are not likely to develop one in the next 3 years 9% Yes

48%

No

43% N = 21

I don't know

Justification of an environmental policy 60

% of respondents

50

48.1

40

30

20 14.8

14.8 11.1

10

7.4 3.7

0

N = 27

Required by customers

Ethical reasons

We care for the environment

Company image

Increasing sales

Other

Do you require your suppliers to provide you with environmental information about their products?

Type of information demanded %

4% Yes

33% 63% N = 27

No I don't know

Product certification (Ex: Energy Star, EcoLogo, etc.)

88.9

Certified wood products (Ex: FSC, SFI, PEFC)

77.8

Chain of custody

44.4

Continuous improvement (Ex: ISO)

22.2

Environmental Product Declaration (EPD)

22.2

Carbon footprint Life-cycle assessment N=9

22.2 22.2

Do you expect to require more environmental information over the next 3 years?

11% 48% 41%

Yes No I don't know

N= 27 Type of information Certified wood products (Ex: FSC, SFI, PEFC) Product certification (Ex: Energy Star, EcoLogo, etc.)

Continuous improvement (Ex: ISO) Life-cycle assessment Environmental Product Declaration (EPD) Carbon footprint N = 13

% 92.3 46.2 30.8 30.8 23.1 23.1

Sales of certified wood products 33%

Yes

67%

No

N= 27

Rationales for not offering certified wood: – Lack of customer demand – Customers are not willing to pay more – No financial benefits

Importance of certified wood Share of sales 70

% of respondents

60

50

40

30

20

10

0

1-­‐5% N = 18

6-­‐10%

11-­‐15%

16-­‐20%

21-­‐25%

26-­‐50%

51% and more

I don't know

Perception of building materials dealers Selling cerTfied forest products (would) increase(s) overall sales Selling cerTfied wood products

CerTfied forest products are increasingly required by customers

N = 18

Not selling cerTfied wood products N = 8

Selling cerTfied forest products (would) improve(s) the image of my company Strongly 1 disagree

Disagree 2

Neither 3 agree nor Agree 4 disagree

Strongly 5 agree

Majority of dealers who sell certified wood pay a premium 25% Yes No 75% N= 16

Retailers who do not offer certified wood are not willing to pay more 12%

Yes No 88% N= 8

Premium paid for certified products Composite panels

6

Number of respondents

Number of respondents

Lumber 5 4 3 2 1 0 0%

N = 13

1-­‐5%

6-­‐10% 11-­‐15% 16-­‐20% 21-­‐25% 26% and more

6 5 4 3 2 1 0

N = 10

0%

1-­‐5%

6-­‐10%

11-­‐15%

16-­‐20% 21-­‐25% 26% and more

A need for 3rd party verification A majority of respondents believe that green products must be third-party certified to be recognized as such by customers

Yes

48% 52%

No

N= 25

Previous research on eco-labels revealed that end users are more likely to trust green claims when verified by an independent party

Focus group with building material dealers Cincinnati, September 27, 2011 15 building materials dealers from across the U.S. Most with multiple yard locations

Focus group results in line with survey ”It peaked in about 2008, 2009 when people were really talking about it. But then they started seeing the price tag and people moved away from it. We’ve just continued our certification” “Right now it’s not a big thing. It was something we worked up to 3 or 4 years ago when it was more in the conversation. That kind of waned, but we stuck with it“ “We work through LMC, our buying group, to find the certified products we need for that application” “For some government jobs, we need to have COC requirements”

Implications Majority of dealers currently sell certified products Awareness of certification is high among dealers Certified products currently have a small market share Customers requirement is the main incentive to offer certified forest products

Implications Segmentation among retailers – Those who are interested in environmental information • They are more likely to require more environmental information in the future such as forest certification and COC

– Those who are not interested in environmental information • A larger demand by end users would encourage them to offer environmentally friendly products

Implications Improving company image is probably the major effect of certified forest product – Dealers do not yet realize financial benefits or increased sales

Dealers were found to pay a premium for certified products – A word of caution: those who don’t pay a premium are likely to get certified wood within their regular supply

Certification is only one part of the equation: other products and suppliers characteristics are equally important

Implications Awareness among consumers still to come Market opportunities for non-residential construction – Demand for certified products by institutional customers – Growing interest for LEED certification – COC requirements bound to increase in this segment

Certification is becoming a market standard (market entry requirement) likely to facilitate products sales Some export markets are heavy on COC requirements

Vincent Chamberland vincent.chamberland @fpinnovations.ca