By John Caulfield. An estimated two thirds of the wood that's consumed annually in the United States is used for home construction and renovation. Few individuals, it seems, have wielded that fact with greater effect than a recent generation of environmental activists who have been turning up the heat on the nation's largest home builders to stop using wood products made from forests that aren't being managed for sustainability.
Two prominent builders -- Centex Homes and KB Home -- however, have answered that call, garnering at least some praise from environmentalists for their proactive wood-purchasing policies. Whether that praise is merely a pause in activists' pressure tactics is the latest question in a broader debate among home building executives who continue to wrestle with how best to deal with an issue that most contend has landed unfairly on their doorstep.
Indeed, while most builders acknowledge that forest sustainability is in their interests, there are those who have resisted environmentalists' pressure by insisting that they have little, if any, direct control over the forestry practices of their suppliers.
"We support environmental protection and we support sound forest management. But our wood purchasing is from so many different sources, and we've referred these [environmental] groups back to those suppliers," said Marshall Ames, vice president of investor relations for Lennar.
That position, which many builders share, could be a miscalculation if groups like the Rainforest Action Network (RAN) or the Natural Resources Defense Council (NRDC) ratchet up their activities. Both groups have learned that noisy protests in front of home improvement retailer stores, damning letter-writing campaigns, and lawsuits have a way of getting the public's and builders' attention. These non-governmental organizations, often referred to as NGOs, have made life miserable for retailers and suppliers such as The Home Depot, Ikea, Boise Cascade, and Weyerhaeuser, until those and other companies cried uncle and incorporated forest conservation into their purchasing and manufacturing policies.
For the moment, NGOs don't appear to be planning any actions against home builders that aren't playing ball; their practice is usually to pursue diplomatic channels. But activists are relentless about winning their cause, falling back on the implied mandate that nine in 10 Americans say they want forests protected, as the Los Angeles Times reported recently. That's why these groups target businesses that consumers know by name, and why many of these companies end up waving the white flag when they get squeezed. The smart ones, though, have found ways to reach common ground with these groups on terms that are the least disruptive to their operations, their revenues, and their reputations.
Taking a Stand
In recent weeks, the rest of the industry has watched as two builders translated their concerns about sustainable forest management into actions.
Dallas-based Centex Homes on May 14 agreed to stop buying products made from lauan that comes out of Indonesia where illegal harvesting is rampant. Centex Homes, which grossed $5.9 billion from 26,427 closings in the fiscal year ended March 31, also released information about the progress that its purchasing division, CTX Builder Supply, has achieved on tracking where the wood it buys comes from.
In its latest fiscal year, CTX purchased 90 million board feet of dimensional lumber and 38 million square feet of OSB plywood. Centex claims it can trace 82 percent of those purchases to forests where the sustainable management practices are certified under standards established by either the Forest Stewardship Council (FSC), the Sustainable Forestry Initiative (SFI) of the American Forest and Paper Association, or the Canadian Standards Association (CSA). That compares to 28 percent in 2000, the year Centex first struck a deal with NRDC to factor environmental protection into its wood-purchasing policies.
Photo: Bob Guarnier/Compoa
CTX handles 35 percent of Centex's wood purchases. To keep better tabs on where the rest of its wood originates, Centex has assembled a preferred supplier list and has stated its intention to favor those lumberyards, distributors, and manufacturers that can prove their products are made from wood cut from forests managed for sustainability. "We are determining our own fate," said John Mikkelson, CTX's president. "We're ahead of our peers and are steering a middle course between all of the forces that are pulling at us." Neil Devroy, Centex Homes vice president of communications and public affairs, who chairs the Responsible Construction Task Force that Centex set up three years ago to work with suppliers to ensure compliance, added that the preferred vendor list is Centex's "first step to encourage suppliers to follow one of the certification [schemes], rather than wait for the ultimate best solution to emerge."
KB Home isn't waiting either. On May 31, the Los Angeles-based builder held a grand opening for Canyon Oaks, a new community in Pleasanton, Calif. Between one-third and one-half of the wood used to construct the 128 homes planned for that community will be FSC-certified (see "Supply Scramble" in More Information box below). KB also agreed not to purchase, whenever possible, wood products from lumber harvested from the Tongass National Forest in Alaska, the latest battleground being fought over.
Larry Gotlieb, KB Home's vice president of government and public affairs, called NRDC "a great partner" that offered a constructive solution for a market grappling with a severe housing shortage. Still, Gotlieb said the Canyon Oaks project is an experiment. Indeed it is for a company which grossed $5.0 billion from 25,565 homes the past fiscal year, placing it fifth in the nation in new homes closings, just behind Centex Homes, according to BUILDER and BIG BUILDER magazines. Still, Gotlieb said KB would gauge whether FSC's label resonates with buyers. "It's hard to predict what all this will eventually mean for our business," he said. "Right now, the supply [of certified lumber] is small and the costs are high if you buy a lot. We're trying to help create more supply by instigating demand."
Sami Yassa, a senior scientist with NRDC, lauded Centex and KB as innovators on the procurement side. As for the rest of the home building industry, "they are simply lagging behind," said Yassa. But any home builder that wants its purchasing to be more environmentally friendly faces a dilemma: there's not enough certified wood on the market, and consumers' interest in the stuff so far is only slight.
Limited Supply; Questionable Demand
There are 1.06 billion acres of forest land in North America available for commercial harvesting, according to the Web site www.forestinformation.com. All of the suppliers on Centex's preferred list are in Canada or the U.S., and the vast majority of the wood used by North American builders is grown in North America. But less than 15 percent of those forests have been certified: 18.4 million acres under FSC, 96.4 million acres under SFI, and 40 million acres under CSA.
The supply of certified wood has been expanding in recent years as the industry's largest suppliers manage their forests under more rigorous standards. Weyerhaeuser stated in its 2002 annual report that all 7.4 million acres of its forest land in the U.S. would be managed under SFI protocols by the end of 2003 and that all 34.7 million acres it controls in Canada would be managed under CSA standards by the end of 2004. Suppliers outside North America now have one more reason to practice sustainable management after the European Commission -- in an effort to help end corrupt and illegal harvesting in Southeast Asia, South America, Central Africa, and Russia -- stated on May 21 that European Union countries would start refusing to accept lumber from any state unless its forestry practices are deemed legal under a voluntary certification system.
On June 6, a new public-private alliance was formed in the U.S. to promote sustainable forest management. The Sustainable Forest Products Global Alliance is the product of an agreement signed by the World Wildlife Fund, the U.S. Agency of International Development (which provides humanitarian and economic assistance worldwide), and Metafore, which is the name that the Certified Forest Products Council now goes by. The Global Alliance intends to channel $7.6 million into programs that promote responsible forest management that could include more aggressive marketing of certified wood products. The Home Depot has committed $1 million during the next three years to the alliance and published reports stated that Andersen Window would come in as the second corporate sponsor.
Even their loudest detractors concede that environmentalists have elevated the international discourse about the value of sustainable forest management and how certification is made credible by an independent "chain-of-custody" process which tracks the movement of wood from the forest to the sales floor or the jobsite.
"When this issue first arose, companies like Centex had no idea where their wood was coming from. So the result, at the veryleast, has been the development of some centralized method of verification," said Michael Carliner, an economist with the NAHB. Ann Madison, special projects director for The Ryland Group, in Calabasas, Calif., noted that the biggest impact of her company's assessment of its wood purchasing has been "increased communication within our company."
|Forest Policy Players|
However, a general public that demands environmental protection is mostly ignorant about how that goal is being achieved. So "there is no consumer demand for certified wood, which adds no discernible value to the home," observed Centex's Devroy. "All things being equal, [consumers] want the forests protected, but we need to get this done in a way that's price competitive because no one is willing to pay more for it." Because supply is relatively small, products that include certified wood can cost 10 percent to 20 percent more than those that don't, according to various sources. Home builders that, in principle, support certification of forest management are in no rush to seek out certified lumber, nor are they eager to spend hundreds of thousands of dollars to verify that the wood they're buying is from sustainably-managed forests, as Centex did last year when it hired PriceWaterhouseCoopers to conduct a forensic analysis of the homes it built in different parts of the country. Mikkelson said this research found that, in areas such as the Southeast, less than half of the wood that Centex purchased outside of CTX came from non-certified sources.
Supply also explains why builders won't accept FSC as the industry's sole certification scheme as NGOs have been requesting. This has become a chicken or egg argument: Michael Washburn, president of FSC's U.S. operations, says he is convinced that supply problems would ease if builders "primed the pump" and demanded more FSC-certified wood. Devroy countered that his company would be forced to shut down several home building divisions if it gave exclusive preference to FSC wood.
Trade associations like the NAHB and the National Lumber and Building Material Dealers Association favor inclusion of all certification schemes, if for no other reason than they believe competition is healthy. NLBMDA even accepts the Pan-European Forest Certification that the American Tree Farm System, which represents 70,000 private land owners, signed onto a few years ago.
Inclusion finds its intellectual and scientific ballast in the writings and speeches of Patrick Moore, a co-founder of Greenpeace who has emerged as a leading advocate for the use of trees as a renewable resource. Moore sits on Centex's task force, and his opinions have been influencing the way builders and suppliers understand this issue for more than a decade. Moore's market-driven philosophy is simple: wood is renewable, consumption encourages more planting, and certification promotes sustainability.
Moore counsels builders to address this issue head-on and not to get cornered by NGOs, which he said trapped The Home Depot, Lowe's, and other dealers into giving preference to FSC-certified wood. "[The Home] Depot bought into the concept of 'endangered forests,' which is a meaningless term, and the myth which RAN perpetuates that forest companies are responsible for forest degradation."
NGOs and Moore have been hurling brick bats at each other for years. So far, that enmity hasn't spilled into the ongoing discussions between these groups and builders. But push could turn to shove if NGOs see builders as unyielding.
Despite limited resources and manpower, NGOs are relentless in the pursuit of their agenda, as Boise Cascade, RAN's public enemy No. 1, has discovered. Their zeal bubbled up again in May, when RAN castigated The Home Depot and Georgia Pacific -- two companies this group has badgered for nearly a decade -- for continuing to buy Indonesian lauan.
The Home Depot has sought certified wood sources since 1993 and in August 1999, committed to eliminating non-certified cedar, redwood, and mahogany wood products from its stores within four years. RAN waved that decision at The Home Depot's competitors and sparked a chain reaction that led several major retailers -- including Lowe's, Menard, 84 Lumber, and Lanoga -- to commit to similar policies. Those dealers put pressure on forest products suppliers to align their forestry practices with at least one certification scheme.
Are home builders the next domino? Jennifer Krill, who runs RAN's Old Growth Campaign, said that her organization is "very disappointed" with home builders that "haven't stepped to the plate" -- inaction she claimed is tantamount to "support [of] environmental destruction." Even Centex is looking over its shoulder. "At no time have I felt that environmentalists are satisfied with what we're doing," said Devroy. "But they've been willing to talk rather than go out and protest."
Mark Eisen, who was The Home Depot's environmental marketing director through most of the 1990s, recommends that home builders "unilaterally disarm" and cooperate as early as possible with NGOs to develop standards that the industry can live with. "There's no such thing as taking too proactive a stance," said Eisen. He warned, however, that NGOs "smell blood in the water" and pounce when companies backpedal or treat environmental protection as a public relations stunt.
Home builders may take their cue from Centex or KB and refine their purchasing strategies. Their actions may appease environmental groups. But Mikkelson, CTX's president, sees more work ahead for Centex before any of these things happen. "We've come up with a workable solution as best as can be gotten. We have devoted a lot of time and money to this. But we know it isn't over."