The building of a value based chain : case study of a global, FSC- and Fairtrade certified sawn wood value chain

Abstract: The next frontier of value creation for businesses may lie in finding ways to combine economical, social and environmental sustainability to preserve and protect natural resources. Nowadays, incorporation of sustainability values in core operations is not only seen as a part of sustainable development, but also as a successful strategy for companies. This is especially critical for the forest sector, as it is dealing with one of the Earth’s most crucial natural resources. However, creating new kinds of value chains and business models to achieve systemwide value, have shown to be complicated. Much work remains in an effort to explain how value based forest products chains can be structured and managed in order to successfully connect them to global markets, while at the same time maintain that sustainability values are met. This especially concerns value based, small-scale sawn wood chains, which have gained very little attention in business management literature. The aim of this study is to explain the development of a small-scale, value based sawn wood value chain. This is done by focusing on enabling factors, which can explain the functioning of the value chain. To reach the aim, a case study has been carried out on a Forest Stewardship Council- and Fairtrade certified sawn wood value chain, originating from forest owners in Chile and reaching secondary manufacturers in Sweden. A field study was performed in Chile during fall 2014 and a flexible method has been used. The conceptual framework of the study consists of value chain theory, sustainable supply chain management and sustainable partnership theory. Empirical results show that the value chain structure and business model of the Curacautín value chain are closely related to each other. Relatively few stakeholders are involved in the studied stages of the chain. The chain is of a relational governance type, where trust and personal relations govern complex transactions. The sustainability attributes of the wood products, as well as the stakeholders’ engagement to sustainability values, are perceived as strong enabling factors for the functioning of the chain, by interviewed respondents. However, lack of demand and low production capacity are perceived as constraints. The structure of the value chain differs from previous studied sawn wood value chains, by the relational governance, a more market-oriented focus and a shorter value chain. Considering the intangible nature of the unique attributes of the wood products as well as the chain; the findings show that integration and two-way communication should be critical for the chain. Thus, it is critical that all stakeholders in the chain can “tell the story behind the wood”; to transmit the brand’s sustainability attributes. Also, that the structure of the chain sustains the sustainability attributes all along the chain. In contrast to previous theory, this study suggests that not only marketing but also procurement and certification processes should be seen as key primary activities in the value chain, creating the unique value added attributes. In addition to the elements that are suggested as critical for sustainable partnerships according to previous literature, findings in this study indicate that also mutual sustainability values appear to explain collaborations. The mutual sustainability values appear to imply patience, which should be critical considering numerous challenges. In the short term, the stakeholders might perceive that their engagement brings benefits such as communication of a sustainability engagement and/or risk reduction related to sourcing. In the long term, the stakeholders appear to engage due to a perceived responsibility and an intention to try to have an impact on the political order in society.