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Forest certification in marketing: a review

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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. Several authors have provided literature reviews on the schemes and costs/benefits of forest certification. In this presentation, I aim to further synthesize the accumulated knowledge concerning forest certification and certified forest products within the forest products marketing arena. To identify relevant journal papers I conducted electronic searches with digital databases, including Web of Science, Science Direct, SpringerLink, and Google Scholar. I also collected literature by using lists of references in related articles.

Certification research was initially published in late 1990s in North Amer-ica and Europe, and subsequently surveyed in Latin America, Asia and Africa. In forest products marketing, certification studies can be broadly divided into two categories; suppliers’ perspectives and customers’ per-spectives. Suppliers of certified forest products include landowners, prima-ry 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. Customers of cer-tified forest products can be further divided into two groups; business cus-tomers (architects, builders, retailers, etc.) and final consumers. In North America, ‘improving company image’ was the most important reason for retailers to buy/sell certified forest products. “Willingness-to-pay premi-ums” for certified forest products have been a major research topic from the perspective of final consumers, and the methods used are contingent valuation and conjoint analyses. Actual consumer behavior was measured in the United States through an experimental approach. Some researchers identified a consumer segment with environmental preference.

Source: Owari, T.: Forest certification in marketing: a review. International Symposium MORIOKA 2013: Global Forest Products Marketing and Forest Certification in A Green Economy, Iwate University, Japan, 28 Mar. 2013

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Forest certification in marketing: a review

  1. 1. Forest Certification in Marketing:A ReviewToshiaki OwariThe University of Tokyo, JAPAN
  2. 2. Forest Certification… … is a market-based instrument that can beharnessed to foster a green economy (UNEP 2011) An increasing number of studies have examinedforest certification since the mid-1990s Related articles published in internationalscholarly journals come to more than 200, ofwhich a considerable number were contributedby forest products marketing researchers2013/3/28 MORIOKA 2013 (OwariT)
  3. 3. Previous Literature Reviews Forest certification research in social sciences(Takahashi 2006, in Japanese) Certification schemes and impacts on forest andforestry (Auld et al. 2008) Research on forest related environmentalmarkets including certification (Dargusch et al. 2010) Private cost-benefits of certification (Chen et al. 2010) Producer-level benefits of sustainabilitycertification (Blackman & Rivera 2011)2013/3/28 MORIOKA 2013 (OwariT)
  4. 4. Purpose This presentation aims to further synthesize theaccumulated knowledge concerning forestcertification and certified forest products withinthe forest products marketing arena Key findings from my previous studies (Owari et al.2006; Owari & Sawanobori 2008) will also be presentedas an example of certification market research2013/3/28 MORIOKA 2013 (OwariT)
  5. 5. Methods To identify relevant journal papers, I conductedelectronic searches with digital databases Web of Science, Science Direct, SpringerLink, GoogleScholar, etc. I also collected literature by using lists ofreferences in related articles2013/3/28 MORIOKA 2013 (OwariT)
  6. 6. Forest Certification Research:3 Major Academic Disciplines Forest products marketing A tool for marketing, which adapts thecompany to its business environment(Hansen & Juslin 2011) Public policy and governance Non-state market-driven private authorityto address environmental deteriorationand social concerns (Cashore et al. 2004) Ecology and management A tool for biodiversity conservation (Sheilet al. 2010)2013/3/28 MORIOKA 2013 (OwariT)
  7. 7. Certification Market Research:2 Perspectives2013/3/28 MORIOKA 2013 (OwariT)Supplier CustomerCFPs
  8. 8. Suppliers‟ Perspectives2013/3/28 MORIOKA 2013 (OwariT)
  9. 9. Certification Market Research: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., Pajariet 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 includelandowners, primary and value-added woodproducers, merchants, etc.. Most studies have examined prevailing experiences andperceptions of suppliers, including adoption levels andcosts/benefits of forest certification.2013/3/28 MORIOKA 2013 (OwariT)
  10. 10. Supplier-perceived Benefits Market access, public image, price premiums(Chen et al. 2010) Business performance, customer relationship,environmental communication (Owari & Sawanobori2008) Market-based, signaling & learning mechanisms(Overdevest & Rickenbach 2006) Supply-chain networking (Iwaisako & Sato 2006)2013/3/28 MORIOKA 2013 (OwariT)
  11. 11. Supplier Benefits: Price Premiums… … are negligible Certification has few direct economic benefits (Blackman& Rivera 2011) Most frequently, price premiums is not being realizedin the market place (Chen et al. 2010) … are receivable 5 – 51% for the majority of exported certified woodproducts in Bolivia (Nebel et al. 2005) 2 – 56% for certified logs, particularly for high qualityhardwoods in Malaysia (Kollert & Lagan 2007) More value-added wood producers received pricepremiums in the US from 2002-2008 (Vlosky et al. 2009)2013/3/28 MORIOKA 2013 (OwariT)
  12. 12. 2013/3/28 MORIOKA 2013 (OwariT)Strategies, Functions and Benefits of ForestCertification in Marketing (Owari et al., 2006) Survey Sep. - Dec. 2004 in Finland Primary and value-added woodproducts companies Personal interviews with astructured questionnaire Samples 50 (response rate: 75%), ofwhich 25 had been CoCcertified Mainly small and medium sizedcompanies
  13. 13. Importance of Forest Certification2013/3/28 MORIOKA 2013 (OwariT)
  14. 14. Benefits of Forest Certification2013/3/28 MORIOKA 2013 (OwariT)
  15. 15. 2013/3/28 MORIOKA 2013 (OwariT)Market Benefits of CoC Certification(Owari & Sawanobori, 2008) A mail survey targeted allCoC certificate holders inAug. 2005 in Japan (n=247) Respondents were asked: Price premiums (yes/no) the perceived level of gainedbenefits (measured by a five-point scale) 129 usable responses (52%)were received
  16. 16. 2013/3/28 MORIOKA 2013 (OwariT)Percentage of Respondents withPrice Premiums in 2004
  17. 17. 2013/3/28 MORIOKA 2013 (OwariT)Dimensionality of Market BenefitsItemRotated factor loadingsCommunalityFactor 1 Factor 2 Factor 3An increase in sales volume 0.918 0.249 0.186 0.939Higher profitability 0.828 0.306 0.209 0.824Keeping existing customers 0.413 0.657 0.192 0.638More customer satisfaction 0.311 0.871 0.250 0.918Good public reputation 0.128 0.502 0.679 0.729Acceptance from environmentallysensitive customers0.192 0.458 0.700 0.736Acceptance from environmentalgroups0.196 0.036 0.818 0.709TotalSum of squares 1.89 1.81 1.80 5.49Percentage of variance 27.0 25.8 25.7 78.5Coefficient Alpha 0.93 0.84 0.85Note: Factor analysis (maximum likelihood with varimax rotation), n=120Business performanceCustomer relationshipEnvironmental communication
  18. 18. 2013/3/28 MORIOKA 2013 (OwariT)The Level of Benefits Gained fromthe CoC CertificationNo benefitat all1 2 3 4 5BusinessperformanceCustomerrelationshipEnvironmentalcommunicationBenefit rating (mean+SD)aabp<.01, Friedman test; p<.01, Wilcoxon signed-rank test with Bonferroni correctionVery greatbenefit
  19. 19. Customers‟ Perspectives2013/3/28 MORIOKA 2013 (OwariT)
  20. 20. Certification Market Research: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) andNew Zealand (Ozanne et al. 1999), and subsequently surveyed inAsia (e.g., Lee et al. 2007; Mohamed & Ibrahim 2007; Sakamoto et al. 2010) Customers of certified forest products can be furtherdivided into two groups; business customers(architects, builders, retailers, etc.) and final consumers “Willingness-to-pay premiums” for certified forest productshave been a major research topic, and the methods usedare contingent valuation and conjoint analyses2013/3/28 MORIOKA 2013 (OwariT)
  21. 21. Consumers‟ Willingness-to-Pay PremiumsCitation 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$), newhome (10000$)16.5-22.3Spinazze & Kant (1999) lumber (1.5-3$), flooring (4-6$/sf), paper products(1-20&), table (100-1000$)8.84-11.37Veisten (2002) table (332$ in UK, 275$ in Norway) 1.6 (UK), 1.0 (Norway)Jensen et al. (2002) oak shelving board (28.80$) 35.3Jensen et al. (2004) shelf (28.80$), chair (199$), table (799$) 5.6-13.0Mohamed and Ibrahim(2007)wood products 14.4Cha et al. (2009) wood frame (5$), copier paper (5$), dining table(500$), flooring (1000$)6.8-11.6Shoji et al. (2011) interior finishing (¥100000) 43.82013/3/28 MORIOKA 2013 (OwariT)
  22. 22. Consumer Segments with CertificationPreference Politically liberal, female, a member of the Democraticparty and environmental organizations, fairly welleducated (Ozanne & Smith 1997; Ozanne & Vlosky 1997; 2003) Those who trust environmental organizations, likely themember, female (Veisten and Solbelg 2004) Socioeconomic or demographic variables alone are notthe main determinants (Spinazze & Kant 1999; Bigsby & Ozanne 2002) A combination of psychographic and demographicvariables is better suited to segment (Thompson et al. 2010) Targeting through exclusive distribution channels (greenbuilding retailers) (Anderson & Hansen 2004; Thompson et al. 2010)2013/3/28 MORIOKA 2013 (OwariT)
  23. 23. Consumers‟ Purchasing BehaviorAnderson & Hansen (2004) Anderson et al. (2005)Year Fall 2002 ?State/Country Oregon, USA Alabama & Oregon, USAPlace 2 Home Depot stores 2 University book storesProduct Plywood Wood pencilPrice $22.59/sheet $0.14 (AU) & $0.20 (OS)/pencilCertification 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 testPrices 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 test2013/3/28 MORIOKA 2013 (OwariT)
  24. 24. Business Customer: Key Findings Architects and retailers were not supportive of forestcertification 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 NewYork State, USA, stated that they paid a premium pricefor FSC-certified wood (Germain & Penfield 2010) For retailers in US and Canada, „improving companyimage‟ was the most important reason for buying/sellingcertified 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)2013/3/28 MORIOKA 2013 (OwariT)
  25. 25. Summary: Forest Certification… … has not been frequently studied and published incountries outside North America & Europe … has typically few market benefits to suppliers, althougha price premium has been received in some cases … may provide less-tangible benefits such as improvingcustomer relationships, better public relation, facilitatinglearning process, and developing supply-chain networks There is a consumer segment who are willing to pay aprice premium to certified forest products The majority of consumers may purchase certified forestproducts as long as they did not have to pay a premium2013/3/28 MORIOKA 2013 (OwariT)
  26. 26. Toward A Green Economy… Certification studies should further explore theperspectives of suppliers in developing countries How to increase/maximize benefits to suppliers? How to decrease/minimize sacrifices of suppliers? … consumers‟ willingness-to-pay for forestproducts originated from developing countries Certification label: indifferent between developed anddeveloping countries >>Differentiation possible? The effect of cause-related marketing?2013/3/28 MORIOKA 2013 (OwariT)
  27. 27. Thank you!2013/3/28 MORIOKA 2013 (OwariT)Office Holders, IUFRO Research Unit 5.10.00(Forest Products Marketing & Business Management)

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