FSC Certification Costs

What are the costs of FSC certification?

Financial studies of forest certification concentrate on two main cost groups tied to obtaining and maintaining the FSC certificate.

FSC certification costs fall into two main categories: direct and indirect.

Direct costs cover fixed items such as the application fee, the initial audit, annual surveillance audits, and the FSC royalty. Indirect costs vary substantially depending on the type of firm under review, its size, its timber stock, and the structure of each forest ecosystem. The choice of certification body is another factor that influences cost. Direct fees are paid to the auditor and to the certification body, and may differ from one firm and audit scope to another.

Indirect costs cover the changes the firm has to make internally to meet the scheme's requirements, the management and documentation work needed to support credibility, and the effort needed to build the document flow that sits behind the system. Additional expenses may come from lower production, higher harvesting and silviculture costs, and the uneven distribution of costs and revenue over time.

In Central Europe, forest operations are typically small, and when certification cannot be carried out across a forest area of sufficient size at once, management costs rise sharply. Small forest owners often consider certifying through a forest owners' association to keep fees manageable. Aside from that, the cost of certifying forest operations can be divided into three main groups. The first is the cost of the improvements made at the forest management unit level to meet the scheme's standards. The second is the cost of the initial certification audit plus the follow-on surveillance audits. The third is the cost of defining and auditing the production route (chain-of-custody) for the timber. Some analyses also note that the cost of certification itself should be separated from the cost of bringing the firm up to a level at which certification is feasible. When the firm reaches the social, economic, and ecological performance the scheme requires, its gains in those areas can outweigh the cost of certification itself. Forest certification cost components include:

1. Indirect costs

• Investment costs (silviculture, harvesting, and other operational items)
• Information costs associated with certification
• Forest management: inventory and measurement of resources (timber, biodiversity, soil, water, and so on), economic and social values, forest management coordination, records and reports of the organisations running operations and production volumes, internal audits, and other operating costs
• Production route (chain-of-custody): marking of timber and products, reporting and record-keeping, product tracking across every distribution stage, the cost of setting up stages for inventory, processing, transport, and distribution, internal audits, and other firm-level costs
• Direct costs: certification application fees, initial certification-body audit, annual surveillance audits, and fixed costs

General estimates of certification cost suggest that, for large operations, direct costs range roughly from 0.016 USD to 0.20 USD per hectare. For a forest operation of about 200 ha, direct costs can reach up to 2 USD per hectare. These figures do not cover the preparation effort of the manager, the personnel time needed to assemble the required documentation, or the cost of changes in the organisation's operations needed to maintain the certificate over time. A range of wider estimates exists: for tropical forests, certification cost has been reported at around 0.3 to 1.0 USD per hectare per year, or 1 to 5 percent as a share. The financial burden of certification is usually carried by the forest operator itself, though in some cases buyers that want to preserve an existing sourcing relationship take on part of the cost.

In short, the ability of forest certification to deliver its stated purpose depends on the existence and scale of the market for certified products. Certification is voluntary, and firms adopt it when the expected financial benefits and the incremental costs of applying the required management practices line up in favour of the decision.