Financial viability of forest certification in industrial plantations: a case study from the Solomon Islands

Abstract

Forest certification has been promoted to encourage sustainable use of natural forests. While its use in industrial plantation forests has not always been welcomed (World Rainforest Movement 2002), forest certification offers great opportunities in the tropics. This paper assesses the profitability of forest certification of an industrial hardwood plantation in the Solomon Islands by the Forest Stewardship Council. The results of this study suggest that industrial plantations can achieve significant financial benefits from sustainable forest management confirmed by a recognised certification scheme. This positive outcome will, however, depend on the marginal costs incurred by the plantation company to adapt its practices to meet sustainability requirements stipulated by the certification scheme, and the price premiums obtained by the firm. In the case of the Solomon Islands forestry, the additional costs of sustainable forest management and forest certification, including the transaction cost of forest certification, were far less than the market premium that was obtained from certified logs. The company’s costs would have had to increase by almost two thousand folds before certification could be regarded as financially not profitable. This case study thus demonstrates that it is possible for tropical plantations to have a ‘win win’ outcome from forest certification, achieving net financial benefit as well as ensuring sustainable forest management