Everybody's talking about the Forest Stewardship Council. Whether it concerns controversial forest management regulations (Hessian state forest) or Ikea's promise to be exclusively processing FSC certified wood by 2020. A lesser known fact is that the FSC has developed into a global million-dollar business since its establishment 25 years ago.
Turnover grew tremendously
Receipts and expenditures from 1995 until 2016
At the end of 2017, the FSC published the figures of its parent company FSC A.C. based in Oaxaca, Mexico, based on the International Financial Reporting Standards (IFRS) for the first time. Together with the publicly accessible financial statements of the past years, interesting developments become apparent. It can be assumed that hardly any business in the timber industry achieved a growth rate similar to FSC's figures. Consolidated revenues more than sextupled between 2006 (US-$4.9 million) and 2016 (US-$31.9 million). Expenditures grew to almost the same extent (2006: US-$4.3 million, 2016: US-$29.6 million; without interest, amortization, currency effects). This does not come as a surprise taking into consideration that as a non-profit organization (see info box), the FSC A.C. must not distribute profits. In 2016, principal source of income for the FSC were certificate fees which were classified as "Annual Administration Fee" and only 20% of which came from forests. 80% are paid by Chain of Custody-certified companies like for instance sawmills. In total, this brought US-$25.7 million to the FSC's cash registers. An additional US-$4.3 million came via ASI, the FSC's accreditation subsidiary. A total of US-$1 million of donations were registered. "Yes, there were years with significant surpluses - they are reserves that must be taxed accordingly. Most of the money, however, is returned into the system as investments", as the FSC International comments on the situation. "In 2016 on the other hand, we saw a minor loss of US-$178,000. For 2017, we expect a balanced result."
Two thirds for externals
FSC earnings and expenditures in 2016
About two thirds of FSC's receipts are disbursed to externals. US-$9.3 million were spent on consultants (US-$ 7.7 million) and externals (US-$1.5 million). Upon request, the FSC explains that the externals actually are employees of the respective FSC country organizations that are not directly employed by the FSC. According to the FSC itself, the considerable consultancy costs are associated with technological enhancements (such as forest satellite monitoring). Furthermore, the FSC needs expensive consultants for so-called "Policy for Association" complaints like in the case of Holzindustrie Schweighofer.
The sceond largest item on the statement of expenditure are licenses and service fees with a total of US-$6.5 million. A third of revenues are used by the FSC itself for expenses like staff and recruiting (US-$6.63 million). The salaries for senior management in 2016 amounted to US-$948,000.
OCP could turn into a money pit
FSC structure
What the balance also shows: The transparency project of the FSC (OCS; ocp-info.fsc.org) could develop into a costly white elephant. Originally the idea was to track the trade with certified products. This, however, was met with resistance. This is why auditors commented this item in the annual statement of 2016 with having a "certain uncertainty" as to whether the project will be continued at all. Upon request, also FSC International informs that "we were not able to realize the level of utilization we were hoping for". It would be an expensive ending. In 2015, the OCP was still registered with US-$1.7 million. "The system is being used, this is why it is charged off over the common period", FSC International informs.
US-$15 million of cash for the FSC
The FSC does definitely not suffer from money troubles. US-$19.3 million in assets are counterbalanced by US-$5.6 million in liabilities. In the years prior to the strong growth, a total of US-$15 million of cash reserves were accumulated. Between the end of 2014 and 2016, another US-$2.6 million were added. According to the FSC, half of this sum is working capital.
Seven times the budget of the PEFC
Just how powerful the FSC grew to be financially can also be seen in the comparison to competitor PEFC. In 2016, PEFC International had a budget of US-$5.5 million. This is a sixth of what the FSC has available. The difference is partly due to the federal structure of PEFC with headquarters deliberately kept small. Additionally, the FSC also has local structures that do not appear in the group's balance, like for instance the "Verein für verantwortungsvolle Waldwirtschaft e.V." (Association for responsible forestry), better known as FSC Germany.
