Flying Finns
Forestland Certification:
In late 2002 Potlatch Corporation completed thirdparty certification of the company’s 1.5 million acres of forestland in Idaho, Arkansas and Minnesota under both the International Organization for Standardization (ISO) 14001 Environmental Management System (EMS) requirements and the Sustainable Forestry Initiative (SFI SM) 2002-2004 standards. Although we regard third-party certification as a logical extension of Potlatch’s cultural heritage of high stewardship standards it also supports our broadening perspective of the values our forestland represents to our shareholders and society. Third party certification should convey a clear message to society that Potlatch is fully committed to the principles of sustainability, which we believe is also a lynchpin for capturing potential new revenues streams from our valuable timberland asset. Perhaps the best way to illustrate this connection is to outline our recent agreement with the Trust For Public Land (TPL).
 Potlatch has a long tradition of voluntarily recognizing and protecting special places like Walker Park, a stately grove of old western red cedars in north central Idaho. The grove was reserved for the public’s enjoyment several decades ago. SFI’s 2002-2004 certification standards recognize unique areas like Walker. |
In exchange for accepting certain restrictions on the use of our lands included in the easements, Potlatch will receive compensation based on an independent, fair-market appraisal of foregone value. Funding for the purchase of the easements will be raised through public and private sources using TPL’s expertise in this area. Once completed, the easements will be maintained as part the national Forest Legacy Program, a congressionally created partnership with the states designed to protect private forestland from development that is inconsistent with timber production and maintenance of key non-timber values as well as public access and recreation. This federally funded program is administered by the states in cooperation with the U.S. Forest Service.
Without a structured performance certification process and the management practices it sets in place, an agreement of this kind would have been much more difficult, if not impossible, to reach.
Potlatch regards the partnering agreement with TPL as a win-win for society and our shareholders.
Established in 1972, TPL has already helped protect more than 1.4 million acres nationwide by addressing the financial interests of private landowners in preserving parks, greenways, community gardens and urban playgrounds. They have been especially successful in both finding and funding working easements on ranches, farms and timberlands and have completed several such projects in Idaho.
Supporters of TPL’s approach to protecting forests and natural areas from development activity include Idaho’s congressional delegation and its governor, all of whom view it as a way of preserving local economies while assuring protection of forest values, recreation and public access. Private landowners appreciate the fact that TPL’s approach offers compensation for such assurances, a truly market based solution to this social concern. TPL has been instrumental in arranging financing for conservation efforts through grants from private institutions and individuals as well as government programs.
The Forest Legacy Program itself provides significant funding annually to states enrolled in this program. In 2002, for example, Congress appropriated $65 million nationally for these projects. We expect the Forest Legacy Program will be a strong source for funding of the conservation easements on Potlatch’s Idaho lands.
Certification has proven instrumental for the initiation of the Potlatch-TPL project, and we also believe it can open the door to other sources of revenue from our forestland, sources we think offer opportunities to integrate society’s expectations with the interests of our shareholders.
It is in the best interest of Potlatch’s shareholders to promote and maintain public acceptance and trust. Public perceptions are instrumental in the formation of public policy, which directly and indirectly influences our ability to actively manage our lands and thus our company’s profitability. The public now demands that private forestland owners manage their timber resources in an environmentally sound and sustainable way and, increasingly, to address a widening range of non-timber values —everything from protection of threatened or endangered species to preservation of unique landscapes and recreation sites. In recent years, the public’s demands and expectations have been brought to bear on consumer choices as well. Because of their importance from both a market and a public policy perspective, public perceptions and expectations are carefully considered in Potlatch’s business planning.
For most of the 20th century, claims and counterclaims from the forest products industry and its detractors have resulted in a battle of words and pictures aimed at influencing public perceptions and, ultimately, public policy. Sadly, truth is often the first casualty in such a battle, which has produced a public weary of the conflicting claims by both sides and a longing for objective validation that industry practices meet these higher standards of environmental performance, particularly on private industrial forestlands.
 This rare and beautiful wildflower, the “Potlatch” Phlox, was discovered on company land in northern Idaho some years ago. In the 1990s, Potlatch worked with the state of Idaho to assure its protection. |
We believe that the American Forest & Paper Association’s Sustainable Forestry Initiative has established a credible certification program based on accepted forestry practices and good science. As longtime supporters of SFI, Potlatch has been a participant in the program’s evolution.
Clearly, the forest products industry is large and diverse and, as a result, the SFI program is a product of that diversity. This past year the SFI program earned added credibility through a significant upgrade of its performance standard. The standard’s enhanced on-the-ground performance measures include: protecting forests of exceptional conservation value, addressing procurement of all wood and fiber and establishing a united stand on elimination of illegal logging. SFI’s six principles, 11 objectives, 34 performance measures and 118 core indicators assure sustainability and much, much more.
We believe the program now adequately addresses the public’s performance expectations within a structured framework that permits Potlatch and the industry to continue its primary role as a supplier of wood fiber to society.
There is a perception, widely held by many environmental nongovernmental organizations, that the Forest Stewardship Council requirements for certification are more environmentally stringent than SFI’s. That perception, for better or worse, has translated into political and market pressures that have led some large retailers and some customers to openly express a preference for FSC certified materials and, in rare instances , even demonstrate a willingness to pay a premium for such products. Some argue that this may be an a emerging trend on the part of large retailers, although it can be legitimately argued that most rankand-file consumers have not yet demonstrated a willingness to pay a premium for certified wood or paper products.
From the primary producers’ perspective, however, it is becoming increasingly apparent that certification will become the price for access to certain markets. Longerterm it may become a broader standard for entry to all wood and paper markets worldwide. It just makes good business sense for us to view such market trends as opportunities and prepare to take advantage of them using a certification system that is most applicable to capturing that potential.
At Potlatch, since the mid-1970s, we have been developing a conceptual model for managing our forest resources that recognizes the importance of non-timber resources such as soil, water and wildlife habitat. We have employed professionals in hydrology and wildlife biology and were among the first to develop and integrate a Geographic Information System (GIS) into all aspects of land management. In the 1990s, we also incorporated nontimber resource information into the GIS, thus allowing our land managers to evaluate land management decisions from many resource perspectives. Potlatch has recently made an important organizational change by establishing our resource management program as a separate profit center within the company, allowing our resource managers to make independent, long-range management decisions using the most current information about the timber and non-timber resources involved.
This combination of business structure, professional skills and our use of emerging technology provided Potlatch with the tools needed to progress to forest certification, and also set the stage for a new approach to forestland management that encompasses a growing range of new revenue opportunities, including marketing certified wood products.
Though strong supporters of the SFI program, we have nonetheless kept an open mind on the applicability of alternative certification approaches and on making decisions that best meet our business goals. Our Boardman, Oregon hybrid poplar plantation is one example. Potlatch began the Boardman operation in the early 1990s to supplement fiber supply for our Lewiston, Idaho pulp mill. This operation utilizes agricultural practices in an arid, nonforest environment to produce hardwood fiber. When the contraction of Northwest pulp production significantly depressed residual chip prices, we identified a promising new niche market for FSC-certified hardwood logs for use in non-structural hardwood lumber applications such as furniture framing. Because the SFI program is structured around forest management practices and does not incorporate agricultural approaches to fiber production, we considered the FSC’s plantation certification program. It also offered Boardman a viable marketing opportunity. Boardman’s eventual certification by FSC in 2001 was that organization’s first certification of an intensively managed plantation in North America. Although we intend to also certify the operation under the ISO 14001 program, FSC represented a good solution to an immediate business challenge.
One of the primary criticisms of SFI continues to be its apparent lack of independence from industry. Those of us who have worked with that program, however, refute that claim by noting that SFI’s governing board, the Sustainable Forestry Board, is now totally separated from AF&PA and consists of such diverse interests as environmental and conservation groups, public officials, professional and academic group and independent landowners and loggers. The board now “owns” the SFI standard, the application and certification of which requires repeated on-the-ground examinations of field performance.
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Potlatch’s 670,000-acre Idaho forest contains some of |
We are convinced that our standards and field performance will improve as a result of the follow-up, auditing and the doublechecking defined by the ISO 14001 program. In actual practice, this has proven to be the case as our professionals have incorporated EMS-related experience in their resource planning and management activities.
Potlatch chose to certify under the newer SFI 2002-2004 standard, which as was just noted reflects expansion and improvement of various on-the-ground requirements. This combination of an ISO 14001 EMS and the newer SFI standards, we believe, provides one of the strongest certification programs that is available today.
The opportunity to reinforce our belief arose in mid-2002 when the respected Pinchot Institute invited Potlatch to participate, along with various Pacific Northwest state and tribal forest landowners and managers, in a comparison of its Idaho timberland management under the two primary forest certification schemes—SFI and FSC. The invitation appealed to us because no other private industrial forestland management organization in the U.S. has undergone such a comparison and because we have had experience with both SFI and FSC. We do not view the dual assessment as a competition between the certification schemes; both have both real and perceived strengths and weaknesses. But we do expect that the Pinchot Institute study will provide us with a unique opportunity to compare not only the schemes themselves, but also the differences in applicability and application of their audit protocols and processes. Our desire is to participate as an industrial forestland manager and offer perspectives that should help continual improvement of both FSC and SFI. The results of the Pinchot study should be published sometime in late 2003.
Where forestland certification may ultimately lead is impossible to predict. At Potlatch we view it as an opportunity to build on our long-standing commitment to sound forest stewardship by employing new information and technology in the quest for continuous improvement.
In doing so, we believe we can better meet both our shareholder’s and society’s changing expectations for forestland management, thus gaining the public acceptance and trust necessary to continue to operate in an economically viable manner. At the same time, certification provides us yet another tool for exploring new revenue streams for our shareholders by capturing previously unrealized resource values.
human need to use natural resources is fundamental to our continued presence on earth."