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Table of Contents
- EXECUTIVE SUMMARY
- 1.0 Introduction
- 2.0 Program Background and Objectives
- 3.0 Program Profiles
- 4.0 Findings and Conclusions by Evaluation Issue
This report summarizes the findings of an evaluation conducted on the Forest Innovation and Forest Research Institute Initiative of Natural Resources Canada’s (NRCan) Canadian Forest Sector (CFS).1 The evaluation covers approximately $75 million of NRCan funding for the period 2002-03 to 2008-09.
The forest and forest products sector has been a significant contributor to Canada’s economy (2% of Canada’s Gross Domestic Product in 2008). The Canadian forest sector is experiencing severe challenges caused by a large number of factors including improved competitive positions of new and traditional competitors, domestic policy issues2, national and multilateral structural change3, technological and human resource challenges,4 slowdown in the U.S. housing sector, and collapse in the demand for newsprint—among others. As a result, the Canadian forestry sector lost 50,000 jobs over the past two years (2007 – 2009) alone, during which time more than 250 mills closed or suspended operations (and many more reduced production levels).5
In response, the Government of Canada provided a range of short-term supports, mostly financial. To address the long term needs, the Forest Industry Long-Term Competitiveness Strategy (FILTCS), referred to in this document as ‘Forest Innovation’, was developed by government with the input of forest sector leaders. The Forest Innovation initiatives ($127.5 million) were designed to promote sustained investment in technology (new/enhanced products and processes, new applications for wood) and market development (national and international).
This evaluation, which was conducted in the early stages of these initiatives (2009), assessed the progress of the following Forest Innovation components, which are expected to create a new national institutional framework to improve the efficiency, effectiveness, and responsiveness of the forest innovation system, specifically:
- the integration of Canada’s not-for-profit forest research institutes (FERIC, Forintek and Paprican) to form FPInnovations (the world’s largest forest research organization) ($5 million);
- formation of the Canadian Wood Fibre Centre, which forms the ‘fourth pillar’ of FPInnovations ($10 million); and
- the Transformative Technologies Program (TTP), aimed at developing knowledge to support future-oriented forest products ($55 million).
This evaluation also assessed the results of the Forest Research Institute Initiative (approximately $5 million per year). The Forest Research Institute Initiative is provided to the former FERIC and Forintek Institutes (now elements of FPInnovations) to support research that furthers NRCan's overarching goal of sustainable natural resources development by helping to create an economically competitive forest sector.
Evaluation Issues6 and Methodology
The evaluation examined issues related to the programs’ relevance/rationale, results/success and cost-effectiveness. The evaluation methodologies included:
Document Review – This included over 300 documents which encompassed each program’s documentation, plans and performance reports; Canadian federal policy documents; publications of other countries and federal departments and technical publications.
Interviews – This included interviews of a total of 83 stakeholders, 64 for Forest Innovation, a further 19 for Forest Research Institutes Initiative.7
Case Studies – This involved two FERIC Division and two Forintek initiatives of the Forest Research Institute Initiative. Four projects from the Transformative Technologies Program (TTP) were also profiled; however, since the TTP projects are in the early phases they cannot be considered to be case studies. The projects represent a range of research themes, types of collaboration (within FPInnovations and externally) and expected impacts.
Limitations – There were a number of limitations that apply to the evaluation of the Forest Innovation initiative which do not apply to its Forest Research Institute Initiative component:
- Timing: This evaluation, occurring two years after the formation of FPInnovations and three years after the formation of the Canadian Wood Fibre Centre, examined organizations in the early phases of a long-term research program.
- Breadth/Scope of the Forest Innovation Initiative: Due to the very broad nature of this Initiative, the majority of interviewees had vested interests in the assessment of its performance.
The well-documented state of crisis in the Canadian forest products sector, combined with the goals of Forest Innovation investment and outlined in the two Forest Research Institute Initiative contribution agreements, support the finding of continued relevance for the Forest Innovation approach and Forest Research Institute Initiative.
Internationally, actions taken by government tend to reflect Canada’s own actions. Forest research organizations in Scandinavia, China, Chile, New Zealand and elsewhere are funded by both the public and private sector. Public sector funded research and development (R&D) is related to environmental issues, sustainable development, building codes and standards and other issues that affect the sector overall. Private sector companies become members of these research organizations to secure access (on a fee for service basis) to support the implementation of new technologies, and harvesting and processing techniques. Many of the approaches researched by FPInnovations will be relevant across the sector; therefore, it is economically-efficient for the work to be supported jointly by the public and private sectors, and to be implemented within the sector on an as-needed basis.
The literature and document review indicated that the Forest Innovation and Forest Research Institute Initiative measures are consistent with and included in Canada’s Economic Action Plan (Budget 2009), in which the government provided $170 million over two years to secure a more sustainable and competitive forest sector,8 as well as Budget 2008,9 which provided $10 million over two years to NRCan to promote Canada’s forestry sector in international markets as a model of environmental innovation and sustainability. The Forest Innovation and the Forest Research Institute initiatives’ measures support at least two of NRCan’s three strategic objectives.10 Both initiatives also support the general duties of the Minister of the Department of Natural Resources as described in the Department of Natural Resources Act, sections (a) through (i).11
The implementation of the measures is proceeding as planned. FPInnovations has shown success in terms of organizational integration and a new strategic focus on the entire value chain (from fibre through secondary processing) while continuing to support productivity and cost-saving gains for the sector. The steps taken to create the Canadian Wood Fibre Centre have led to some positive impacts in terms of research program delivery and new research linkages.
FPInnovations has also generated short-term results in terms of productivity improvements and cost savings as a result of more applied TTP project activity (e.g., forest optimization). The Program has been an effective vehicle for bringing together research capacity (people, equipment and facilities) from the four divisions, as well as from external research organizations.
The Forest Research Institute Initiative findings are consistent with those of the 2004-05 evaluation reports.12 The funding provided to the Forintek and FERIC divisions of FPInnovations continues to play a vital role in the technology infrastructure that supports innovation in the lumber and solid wood component of the forest sector, and the harvesting sector. Valuable contributions have been made to the public good in terms of the health and safety of buildings (through Forintek’s fire research, seismic studies, durability assessments, etc.), as well as environmental improvements (e.g., FERIC’s harvesting strategies to maximize yields from forest plots, and transportation strategies to minimize the impact of roads and GHG emissions).
Forintek participates in over 15 national and international research, codes and standards and other technical committees. This engagement helps the sector maintain market access and develop new national and international markets for Canadian wood and wood products by ensuring that building codes and standards are consistent with Canadian products and building approaches. The committees address fire codes, restrictions on volatile organic compounds (VOCs) in wood buildings, building designs that account for earthquake concerns, etc. Examples of the codes, standards, protocols and generic technologies developed with the support of Forest Research Institutes Initiative funding were explored in detail in the Forest Research Institutes Initiative case studies.
The quantitative impacts found in this evaluation’s case studies of four Forest Research Institute Initiative areas, combined with the estimated value of Forintek’s participation on six national and twelve international committees (and almost 100 sub-committees of these larger committees) as Canada’s representative, exceed the value of the Government of Canada's investment over the past five years. The magnitude of the estimated benefits from the four projects studied for this project over a one-year period (a conservative estimate) is more than double NRCan’s expenditures for the entire Forest Research Institute Initiative (contribution) program. Using reasonable estimates of attribution, these four Forest Research Institute Initiative projects provided a positive return on the Government of Canada’s investment estimated to be between 3:1 and 8:1.
There are difficulties associated with estimating the outcomes and impacts of TTP projects to-date, as the Program only started within the last two years and a number (but not all) of the projects are long-term. One of the larger TTP investments, the B.C. Coastal Initiative, has shown results in terms of cost savings and productivity improvements. Two industry project participants reported combined benefits of $30 million to-date (this is assumed to be over three years) as a result of improvements in recovery within sawmills – with little investment in capital equipment. The total annual TTP investment in the B.C. Coastal Initiative is $1.5 million (the B.C. government matches these funds for a total public sector investment of $3 million per year). Based on this data, the ratio of annual benefits realized by two companies to-date by the TTP investment is approximately 6:1 (or 3:1 when all public funds are included).
The structure has provided efficient ways to deliver the activities. There are improvements to be made to the existing structures and processes (given that they are only three years old), but all indications are that the structure will work.
Although direct comparisons with other countries are hampered by a range of factors, the international comparison found that the approach used in Canada (i.e., integration of the full range of forest research, a focus on emerging technologies) is consistent with international best practices.
Recommendations and Management Responses and Action Plan Table
|Recommendations||Management Responses and Action Plans||
|1. Encourage FPInnovations to update the long-term research plan for the forest sector in consultation with the appropriate stakeholders.||Agreed. NRCan (CFS and CANMET) together with FPAC, FPInnovations and Canadian Imperial Bank of Commerce initiated the Biopathways Project to develop a long-term plan that would identify the most promising technologies that would transform the industry. The first phase of the Biopathways Project was completed in February 2010. The study has garnered significant interest among the industry, federal and provincial policy-makers as well as investors interested in emerging and non-traditional opportunities in the forest sector. FPInnovations, in partnership with industry leaders and NRCan, has updated the plan and is working to develop an innovation strategy for the forest sector that is informed by the Biopathways analysis.||ADM, CFS (March 2011)|
|2. In any future programming, the Canadian Forest Service (CFS) should encourage FPInnovations to clarify the intent of the Transformative Technology Program with regard to the balance between short-term (immediate needs oriented) and longer-term (transformative) research and development.||Agreed. The renewal of the Transformative Technology Program through Canada’s Economic Action Plan (Budget 2009) provided funds that addressed the ongoing short term productivity challenges facing Canada’s forest industry as well as continued focus on longer term transformative technologies. Subsequent contribution agreements have been focused on distinctive funded streams – one targeting the transfer and adoption of technology focussing on short-term objectives and a second focusing on long term transformative technologies.
|3. Ensure that the transformative aspects of projects supported by the Transformative Technology Program are clearly defined in performance reporting.||Agreed. Measures have been put in place to monitor the impacts of technology developed under the Program. The logic model developed at onset of the Program will be revised with updated performance indicators. Contribution agreements will clearly outline expectations for annual reporting by the recipient.||ADM, CFS (ongoing)|
This evaluation study addresses two areas of Natural Resources Canada’s (NRCan) investment in forest research at FPInnovations:
- Promoting Forestry Innovation and Investment: NRCan’s Forest Industry Long Term Competitiveness Strategy (hereinafter referred to as Forest Innovation) was announced in February 2007 and provided a total of $127.5 million in funding in three program areas. One of the areas was Promoting Forestry Innovation and Investment, which was allocated $70 million (2007-08 to 2008-09). This investment was used to support three initiatives: the consolidation of three existing not for profit forest research institutes, the creation of the Canadian Wood Fibre Centre (CWFC) and the launch of the Transformative Technologies Program (TTP).
- Forest Research Institute Initiative (FRII): NRCan provides funding to FERIC and Forintek (formerly two separate research institutes, now divisions of FPInnovations) for core research program activity. This funding is administered through two contribution agreements and is used to support pre-competitive research and research with public good benefits (e.g., codes and standards; health, safety and environmental issues). Over the past five years, the approximate annual FRII funding provided to FERIC was $1.7 million and to Forintek was $3.1 million.
The main difference between the two programs is the nature of their interventions—Forest Innovation is aimed at transformational, longer term work; FRII funding is focused on more short-term, applied and not necessarily transformational work.
Given the early stage of the Forest Innovation Initiative, the evaluation team examined the degree of progress that has occurred, or is likely to occur, towards achieving the organizational objectives and establishing linkages with a wider range of organizations undertaking forestry product innovation research. Progress in advancing the research agenda and linking with knowledge receptors was also examined.
During the early stages of this study, it was apparent that it would be efficient and logical to expand the scope of the evaluation to assess the Forest Research Institute Initiative funding provided to FERIC and Forintek13 (now divisions of FPInnovations) by NRCan. The stakeholders (industry and other) are the same for both the Forest Innovation and Forest Research Institute initiatives’ activities, and much of what is possible under TTP is based on the long-term Forest Research Institute Initiative investment which provides support for the two organizations’ National Research Programs (i.e., fundamental research in areas such as health and safety, building codes and standards).
The approach to the assessment of the Forest Research Institute Initiative support relied extensively on detailed case studies. Given the length of time that the federal government has been providing support to FERIC and Forintek, and the information that was available as a result, the team felt that it was important to summarize not only the activities, outputs and expected impacts of the projects, but to pursue more extensive interviews with industry, provincial authorities and others to generate an assessment of the intermediate impacts of the research realized to date. This level of detailed assessment of impacts was found to be impossible within the relatively new TTP project portfolio.
A set of evaluation issues – based on the Treasury Board Secretariat evaluation requirements, the input of the evaluation’s Advisory Committee and NRCan’s information requirements – was approved by the Departmental Evaluation Committee. They include:
Relevance/Rationale – To what extent does there continue to exist a need for the measures undertaken to date by the Canadian Forest Service (CFS) and other stakeholders to support promoting forest product sector innovation and investment?
Results/Success – To what extent have the measures undertaken to support promoting forest products sector innovation and investment fulfilled (or are likely to fulfill) their respective objectives, goals and/or targets? Specific questions were added to this section at the request of program management.
In the case of the Forest Research Institute Initiative funding, these questions included the extent to which the requirements of the Contribution Agreements Forest Research Institute Initiative for funding measures were met (e.g., production of strategic and annual work plans, performance measurement).
In the case of Forest Innovation, these questions examined the extent to which the actions taken to date had established the foundation on which future achievements were expected to be based. For example, to what extent are the integration of the research institutes and links to CWFC proceeding as envisioned and what difference has this made or likely to make on forest sector innovation (e.g., is there evidence of new research synergies and if so what have been the results/impacts)?
Cost-Effectiveness/Alternatives – this involved examining the extent to which more appropriate and efficient means to achieve the objectives exist.
The approaches used included a review of background documentation (over 300 documents); interviews: total of 83 stakeholders, 64 for Forest Innovation, a further 19 for Forest Research Institute Initiative funding (see Table 1); case studies (two FERIC and two Forintek initiatives of the Forest Research Institute); and four TTP project examples (the latter originally planned as case studies).14 The projects were selected so as to ensure a representation of the various research themes, extent of collaboration (within FPInnovations and externally), and expected impacts.
A number of limitations affected the evaluation of the Forest Innovation Initiative that do not apply to the Forest Research Institute Initiative component of this evaluation:
- Timing: This evaluation occurred two years after the formation of FPInnovations and three years after the formation of the Canadian Wood Fibre Centre. The planning documents associated with the formation of these organizations note that it will take some time for a complete transition to the new structure. Similarly, the TTP is expected to take several years of new research before significant outcomes are realized. This evaluation therefore examined organizations in transition and early phases of a research program that is acknowledged to be long-term in nature. It is not possible to determine the innovative or transformative nature of the technologies under development at this time.15
- Breadth/Scope of initiative: Due to the broad nature of this Initiative, the majority of stakeholders that were interviewed for this evaluation had a vested interest in the assessment of its performance. Multiple lines of evidence were used to ameliorate this situation.
The evaluation of the Forest Innovation Initiative examined the degree of progress that has occurred, or is likely to occur, in meeting the initiative’s objectives. The evaluation of the Forest Research Institute Initiative examined progress that has occurred.16
The forest sector is a key part of Canada’s economy. Canada has 10% of the world’s forests (second only to Russia which has 22%), and 30% of the world’s boreal forests. Canada is also the world’s largest exporter of forest products ($30.1 B in 2008), which are a significant contributor to Canada’s Gross Domestic Product (2% in 2008). Canada’s exports comprise 16% of the world’s trade in forest products. The major buyers of Canadian products are the U.S. (77%), European Union (8%) and Japan (7%). The forest products sector is a strong user of high technology.
The Canadian forest sector is comprised of three types of industry, which have subdivisions and interdependencies. These industries are forestry and logging services, pulp and paper products industry and the wood products industry. Many of the larger companies have operations in more than one sector (e.g., wood and pulp and paper) and transport material to various locations to enhance production efficiency.17
Canada’s competitive position in the forest products sector is being eroded by competition from other countries (particularly low-cost producers in Asia and South America18), domestic policy issues,19 structural change within the sector domestically and internationally,20 technological and human resource challenges, a need to innovate more rapidly,21 the slowdown in the U.S. housing sector, a collapse in the demand for newsprint (with demand falling by 30% between 2001 and 2008),22 the appreciation of Canadian currency,23 underinvestment by industry in R&D and investments in more efficient equipment,24 and increasing transportation and energy costs.25
These factors, identified as early as 2000, have resulted in a sharp decline in the demand for forest products which has led to layoffs, mill closures, a reduction in both domestic and international sales, and financial losses. The Canadian forestry sector lost 50,000 jobs over the past two years (2007 – 2009) during which time more than 250 mills closed or suspended operations (and many more reduced production levels).26
In response to these pressures, the Government of Canada provided a range of short-term supports, mostly financial. In the early 2000s, a group of Chief Executive Officer level senior members of government and industry determined that a series of measures were urgently required to address the innovation needs of the forest sector. Three related initiatives were proposed: forest research institute consolidation, development of a fibre research centre, and increased investment in forest innovation. These measures amounted to a restructuring of the national forest innovation system, and were designed to make the system less fragmented, more focused and effective.27
These recommendations were addressed in NRCan’s Forest Industry Long-Term Competitiveness Strategy, announced in February 2007, and supported by a total of $127.5 million in funding (originally ending in 2008-09 but later extended to 2009-10). The Strategy was comprised of three elements: Forest Innovation ($70 million); Expanding Market Opportunities ($40 million); and Developing a National Forest Pest Strategy ($12.5 million). The first element, Forest Innovation, is the subject of this evaluation.28
The Forest Innovation Initiative is comprised of several related initiatives, three of which are the focus of this evaluation. The first is the consolidation of the three Canadian not-for-profit forestry research institutes (Forintek, FERIC, and Paprican) into one entity, FPInnovations, as of April 1, 2007. Forintek undertook solid wood product research, FERIC research focused on forest harvesting and transportation, and Paprican undertook research related to the manufacture of pulp and paper. The objectives of the consolidation were to provide greater efficiency, synergies and strength in innovation and R&D, and facilitate speaking with a stronger common voice on forest products sector issues.’29 The total amount of funding for this Initiative provided through the Innovation Treasury Board submission was $5 million.
The second initiative was the creation of the Canadian Wood Fibre Centre (CWFC), which received $10 million in funding, in April 2006. CWFC is a research organization comprised of staff drawn from NRCan facilities across Canada, physically located within CFS facilities, who conduct research focused on increasing the value of Canada's forest fibre. CWFC exists as a component of CFS but delivers work planned by FPInnovations, and works co-operatively with the other three divisions of FPInnovations. The objective of the CWFC is to increase the economic return from Canada's forest resources by conducting research that will yield an increased value of Canada’s forest fibre.
The third initiative was the Transformative Technologies Program (TTP), which provided $55 million to FPInnovations over three years (2007-08 to 2009-10). TTP supports pre-competitive research conducted by FPInnovations as well as academia and other research organizations. The objective of the Program is to harness the capacity of the newly-consolidated institute and others (particularly academia) to meet long-term innovation challenges through the development and adaptation of emerging and break-through technologies such as forest biomass, forest biotechnology and nanotechnology. This is expected “. . . to reduce the industry’s reliance on commodity products and markets that are subject to harsh price and business cycle fluctuations. That means new and better traditional wood products and building system solutions as well as new products that diversify the consumer and market base.”30
This development and adaptation of break-through technologies was identified as essential to the transformation of Canada's forest industry in order to deal with the challenges facing it. An example of one such challenge is the relatively high production costs of harvesting and processing, as compared to larger and newer mills in South America and East Asia, wood supply issues in some areas, and declines in market demand in traditional market segments both domestically and internationally.
New technologies and applications are required to ensure that Canada derives the greatest possible value from its forest resource, and to improve the long-term competitiveness of the forest sector. As these technologies and applications are multi-disciplinary in nature, it was anticipated that new industrial R&D collaborations with a variety of participants outside of the forest industry – including petroleum companies, energy providers and firms within the utilities, chemical and agricultural sectors – would be needed.
Over the long-term, the combined outputs of Forest Innovation initiatives are expected to contribute to (according to the Forest Innovation Terms and Conditions):
- increased competitiveness of the Canadian forest sector (maximized fibre utilization, product and process innovation, maximized economic fibre yield);
- a strong national forest research institute which will result in greater efficiency and strength in forest innovation and R&D and facilitate speaking with a common voice;
- a more comprehensive forest innovation system linking universities, FPInnovations, and industry that will address the complete value chain, from seed to final forest product;
- a comprehensive program of work that will develop new technologies to help transform the sector; and
- opportunities to stimulate new investments by developing revolutionary uses for Canadian forest fibre through technologies such as biotechnology and nanomaterials.
2.2 Forest Research Institute Initiative (FRII) 31
The Forest Research Institute Initiative provides financial support to FERIC and Forintek under five-year contribution agreements.32 The funding supports research that furthers NRCan's overarching goal of sustainable natural resources development by helping to create an economically competitive forest sector through increased productivity, improved market access and value added product development, improved environmental performance, and forest workplace health and safety practices.
Treasury Board provided an annual allocation of up to $8 million from May 30, 2005 to March 31, 2010 to be funded from existing reference levels in Natural Resources Canada Vote 10 (grants and contributions). Actual annual funding provided to the organizations was approximately $1.7 million to FERIC and $3.1 million to Forintek (just under $5 million).
The Forest Research Institute Initiative supports (the former) FERIC’s and Forintek’s National Research Programs and was intended to build on long-standing partnerships between the federal government and the institutes. The investments were expected to:
- increase competitiveness of the Canadian forest sector;
- improve environmental performance from Canadian forest and forest product operations (reduced greenhouse gas emissions (GHGs), energy efficiency gains);
- enhance market access for Canadian forest products in world markets (reduction of non-tariff trade barriers);
- improve national and international perception of Canadian forest practices; and
- improve forest workplace health and safety.
The mechanism used to provide the Forest Research Institute Initiative funding is contribution agreements signed by the Canadian Forest Service of NRCan and each of the two former institutes. The most recent contribution agreement contains objectives and deliverables for a five-year funding period (May 30, 2005 to March 31, 2010). It was not known at the time of this evaluation (2008-09) whether the Forest Research Institute Initiative funding would continue.
This evaluation of the Forest Innovation initiatives occurred two years after the formation of FPInnovations and the launch of the TTP, and three years after the formation of the Canadian Wood Fibre Centre. This evaluation is therefore examining organizations in transition and a program that is acknowledged to be long-term in nature, with significant commercial results expected in five to ten years. In addition, the market demand for, and acceptance of, some of the potential products are uncertain.
The evaluation of the Forest Research Institute Initiative at FERIC and Forintek took place during the fourth year of the five-year agreements. The federal government has had long standing agreements in place with both FERIC and Forintek since the privatization of these organizations over 30 years ago. The profile summarizes the program objectives, research areas, and expenditures.
The consolidation of Canada’s three forest research institutes – FERIC (forest harvesting), Forintek (wood products) and Paprican (pulp and paper) – created the largest public-private forest R&D institution in the world. The objectives for the consolidation of the three research institutes are to provide for greater efficiency, synergies and strength in innovation and R&D, and facilitate speaking with a common voice on forest sector issues.
To enable the consolidation, $5 million was allocated for:
- developing and implementing a new governance model;
- addressing human resources and administrative issues related to the consolidation (excluding capital projects);
- developing an integrated business plan and communication strategy that included new collaborations with provinces, industry and academia; and
- re-aligning the programs of the three organizations within the new FPInnovations.
A new governance system was developed involving the appointment of a new FPInnovations president, a Board of Directors and the consolidation of FPInnovations management and programs, such that these become accountable to stakeholders based on results-oriented performance metrics. Somewhat in parallel to this, an integrated business planning process began (designed to incorporate existing objectives but aligned better with needs of the forest sector).
Two additional supporting factors were key to the realignment. First, human resource administrative capabilities needed to be aligned and integrated so as to provide the required expertise to meet project needs, and to support the administration of human resources (e.g., compensation, hiring policies, and staff development). The second factor was the development of a single financial system to support management decision-making at strategic and tactical levels, as well as provide appropriate and prudent support for operational transactions and basic accounting.
These changes in governance, business planning and human resource and financial management were expected to support an R&D program featuring an alignment of projects with the FPInnovations business plan and the integration of divisional capabilities on projects and enhanced cooperation, coordination, and collaboration among researchers from different divisions. The ultimate outcome of these measures is the establishment of an effective and efficient forest research organization focused on meeting stakeholders’ innovation needs that supports improved competitiveness in the Canadian forest sector.
Program Investment and Expenditure
The $5 million allocation for the consolidation process resulted in the expenditures noted in Table 1 and described below:
- legal and accounting costs for the development of revised by-laws, membership and other legal instruments leading to the dissolution of the existing institutes;
- transfer costs associated with the transfer of assets and liabilities to FPInnovations;
- FPInnovations registration charges and taxes;
- consultancy and external service charges associated with the required studies, reorganizational support, support to the implementation and training in corporate areas such as finance, human resources (HR), information technology, etc.;
- costs associated with the development of strategic plans and meetings to foster synergies in either R&D or in administration;
- communication costs (publications, website, internet, intranets) and the purchase of equipment to foster better communications within the organization; and
- workforce adjustment costs, termination benefit charges and associated employee support costs, recruitment and training costs.
Actual annual expenditures for each area are shown in Table 1.
|Legal and accounting costs||$7,430||$142,404||$0||$149,834|
|FPInnovations registration charges and taxes||$3,000||$22,987||$0||$25,987|
|Consultancy and external service charges||$127,359||$194,175||$1,052,140||$1,373,674|
|Costs associated with the development of strategic plans and meetings||$3,307||$260,546||$315,352||$579,205|
|Communication costs (publications, website, internet, intranets)||$115,714||$85,014||$458,626||$659,354|
|Workforce adjustment costs||$137,891||$421,605||$674,382||$1,233,878|
Source: Annual Transition Funding cost summaries provided by FPInnovations, 2009.
On March 31, 2006, in response to multiple calls from forest sector organizations for long-term reform of forest products sector innovation, CFS announced the creation of the new national CWFC. The CWFC is housed within CFS, takes its functional direction from FPInnovations,33 and collaborates with other FPInnovations divisions. It is comprised of researchers drawn from NRCan facilities across Canada that focus specifically on research that will increase the value of Canada’s forest fibre.
The CWFC is expected to contribute forest-level knowledge, tools, and expertise to the integrated research programs of FPInnovations. Its mission is to create innovative knowledge that will expand economic opportunities for the forest sector to benefit from Canadian wood fibre.34 CWFC activities provide new knowledge to its clients (FPInnovations’ members, academia, governments), which is used to support new policies, processes and products aimed at increasing the value of Canada’s forest fibre and maximizing the value chain of Canada’s forest resources. The research program is directed by the President of FPInnovations with guidance from the Board of Directors. CFS employees at research centres across Canada manage and deliver CWFC’s research program.
The CWFC was allocated $10 million over three years through the Forest Innovation initiative. This funding supports increased collaboration with other research providers (universities, private companies, provinces) and the development of tools and techniques that identify, protect and replicate those attributes of Canadian wood fibre that confer the greatest current and potential economic advantage to the Canadian forest sector.
A significant (unspecified) portion of these funds was anticipated to be allocated through transfer payments to organizations and collaborators whose research objectives contribute to creating more value from Canada’s forest resource. Some funding was also expected to be allocated internally (to NRCan) and through contracts with other research organizations for activities and research aimed at increasing NRCan’s knowledge of opportunities for improved utilization of Canada’s forest fibre.
The CWFC aims to become:
- the national authority on the characterization of Canadian wood fibre;
- an innovator in the development of forest inventory technology and reforestation techniques;
- a knowledge leader in integrating wood fibre into a profitable forest products value chain; and
- a key participant in the research programs of FPInnovations.35
Program Investment and Expenditure
The CWFC’s agreements with FPInnovations differ from those for the other three divisions. CWFC implements contribution agreements for each research project. To-date, every CWFC contribution agreement has been invoiced in full by FPInnovations at the completion of the project.
The objectives of the three CWFC research programs are to:
- maximize the economic value of Canadian wood fibre;
- align regeneration research with economic value; and
- improve forest management planning systems.36
Document review and interviewees described the project selection process and criteria. CWFC research staff submit proposals that are reviewed and approved by the CWFC Technical Advisory Committee comprised of public and private sector representatives.
The projects focus on results with immediate and intermediate impact potential (e.g., related to harvesting and forest management) and place priority on partnerships with other FPInnovations divisions. Examples of CWFC projects illustrate the geographic range (primarily in eastern Canada to date) and focus of their activities:
- The Green River Pre-commercial Thinning Project, Fredericton, NB.: This project involves the other three FPInnovations divisions, with CWFC taking the lead on the project. This project allowed CWFC to study the impacts of pre-commercial thinning (PCT) on fibre quality and product values. The two-year study determined the impact of PCT on specific fibre properties such as fibre length and wall dimensions, as well as density and other attributes that directly affect product quality and performance.
- Research Initiative for Improving the Competitiveness of the Hardwood Industry, Quebec City, QC: This initiative was developed in 2008 by CWFC and FPInnovations to improve the short-term competitiveness of the hardwood industry in eastern Canada. The Initiative spans the value chain and involves CWFC, FERIC and Forintek divisions. The Initiative aims to improve harvest management and performance, strengthen the sectors’ client focus, improve linkages between primary and secondary industries, and facilitate product development (thereby increasing productivity and improving the salvage harvesting of low-quality wood). Funding totals $5 million over three years (CWFC and TTP funding, along with provincial funding from Ontario, Quebec, New Brunswick and Nova Scotia).
- Improving Fibre Quality through Silviculture, Fredericton, NB: This project involves CWFC and Forintek divisions to study the effects of mechanized commercial thinning operations on wood and lumber properties in jack pine stands (one of the widest ranging tree species across Canada).
- Multi-varietal Forestry (MVF), Fredericton, NB: CFS/CWFC has developed MVF, a new strategy for plantation forestry incorporating tree biotechnology that can have an impact on forest productivity (maximizing growth and yield), and improving wood quality, resistance to pests, and uniformity of wood product quality. Benefits may include flexibility to respond to changing climate and forest management priorities and improved management of forest diversity. To date, this project does not involve other FPInnovations divisions.
Project results are summarized regularly in the Canadian Wood Fibre Centre Fibre Facts serieswhich are available for purchase from the NRCan/CWFC bookstore.37 The factsheets provide project overviews, recent results, and sources / contacts for additional information.
3.3 Transformative Technologies Program 38 (TPP)
The objective of the TTP is to harness the capacity of the newly-consolidated institute (FPInnovations) with academia to meet the long-term innovation challenges of the sector.
Traditional technology development usually focuses on reduced costs and continuous product or process improvements within an industry. Transformative technologies, in comparison, are focused on creating more fundamental changes (their transformative nature can be detected by the nature of their impacts once implemented). In the forest sector, transformative technologies promote novel and strategic uses for wood fibre and its many products and derivatives. Transformative technologies can impact traditional products, such as lumber and pulp and paper, by producing, using and packaging these products in new ways. They can also focus on non-traditional products and new markets.39
One example of a transformative technology non-traditional product/new market is a new process development that would allow wood fibre to be combined with plastics – such as polyvinyl chloride (PVC) and polypropylene – to produce new materials with enhanced durability and strength. The North American market for these wood-plastic composites, in decking and railings alone, is growing quickly and could reach $2 billion by 2010.40
The TTP is organized around five research themes. Four of the themes are aimed at developing new value streams that diversify the forest sector’s market opportunities. The fifth theme focuses on maximizing value chain integration (i.e., linking the fibre resource and harvesting with manufacturing process and market needs to facilitate the new value streams). The first four research themes have two-year targets which were developed in 2007-08 (to be realized in 2010).
|Theme||Description and Two-Year Target|
|Next Generation Building Solutions||Applying new technologies, engineering and design, combined with innovative uses of traditional and emerging wood-based materials, for the creation of sustainable building solutions. The two-year target was the implementation of three designs of hybrid construction systems which can be used to update the building code.|
|Next Generation Pulp and Papers||Repositioning commodity pulps and papers by combining the unique attributes of Canadian fibres with new manufacturing technologies and creating value-added pulps and papers. The two-year target was to generate a prototype highly-filled paper based on Canadian mechanical pulp.|
|Energy and Chemicals from Forest Biomass||Developing new approaches to the economic harvesting of biomass and combining this with emerging conversion technologies to produce economically-viable new co-products (e.g. fuels and chemical intermediates). The two-year target was a demonstration of gasification technologies as a base for economic chemical production.|
|Novel Bioproducts||Demonstrating the conversion of wood into new lignocellulose-based materials, including nanomaterials, which can be directed to emerging high-value niche markets. The two-year target was the prototype demonstration of commercial applications of nanocrystalline cellulose (NCC).|
|Value Chain Integration||Applying technologies that link fibre attributes and processes to market demands by harnessing the synergies now available within FPInnovations and the broader research community. Innovative forest-level projects delivered in cooperation with the CWFC are included within this theme. No specific two-year target was set.|
Source: A New Strategic Research and Management Framework for Canadian Forestry: A Component of the Forest Industry Long-Term Competitiveness Strategy and http://forest-foret.nserc-crsng.gc.ca/About-Renseignements/Background-Contexte_eng.asp.
TTP funding is used to support pre-competitive, non-proprietary R&D to address the development and adaptation of emerging and breakthrough technologies such as forest biomass, forest biotechnology and nanotechnologies. As these technologies are multi-disciplinary in nature, there is a need to develop new industrial R&D collaborations with a variety of participants outside of the forest industry, including petroleum companies, energy providers, chemical companies and the agricultural sector.
The total TTP funding provided through the Forest Innovation Initiative was $55 million over three years. Funds were distributed through transfer payments to FPInnovations and academia. Research is guided by FPInnovations’ Board of Directors and based on negotiated annual plans.
The contribution Aareements (2007-08 and 2008-09) listed the outcomes for the entire TTP program of work to the Government of Canada and other stakeholders as follows:
Long-term Outcomes (5-10 years):
- An innovation system that fosters industry competitiveness, efficiency and sustainability and addresses climate change challenges by optimizing forest products value chains and maximizing value of Canada’s fibre attributes.
- An increased range of product opportunities for the Canadian forest sector, with market acceptance and awareness of new and novel products manufactured by the forest industry.
- A revitalized system for Canadian forest sector innovation with a balanced portfolio of technology activities relevant to the changing sector and an emerging bio-economy.
Intermediate Outcomes (1-3 years):
- Collaboration with industry and provinces on transformative research, leveraging support for research work on specific projects in the work plan with industry, governments and academia, both in Canada and abroad.
- Implementation and application of transformative technologies research results in current and emerging industrial environments.
- Networks linking all stakeholders of the research community from universities, industry and governments to identify and address research needs and priorities for all forest product value chains: seed to consumer forest products.
Outcomes are also identified for each of the five research elements and for each project task.
TTP planning and project selection and partner development are expected to lead to basic and applied R&D projects. The results of these projects are the focus of various technology transfer and communications activities (e.g. workshops, publications, and websites).
These activities are expected to lead in the intermediate term to an increased capacity to undertake strategic R&D and to develop transformative technologies that increase the value of the forest resource. In the longer-term the expected outcomes are anticipated to be the development and application of breakthrough technologies and increased economic return from Canadian forest resources.
Program Investment and Expenditure
A summary of activity and investments (both TTP and partner) is presented in Table 3.
1.1 Research Element 1: Next Generation Building Solutions
|Number of Projects||20||20||n/a|
|Total TTP Funding||$4,861,000||$3,773,000||$8,634,000|
|Total External Funding||$1,822,000||$185,000||2,007,000|
1.2 Research Element 2: Next Generation Pulp and Papers
|Number of Projects||11||2 projects
(a merging of 7 projects)
|Total TTP Funding||$4,276,000||$3,031,500||$7,307,500|
|Total External Funding||$2,250,000||$4,500,000||$6,750,000|
1.3 Research Element 3: Energy and Chemicals from Forest Biomass
|Number of Projects||11||7||n/a|
|Total TTP Funding||$3,226,950||$3,813,334||$7,040,284|
|Total External Funding||$749,210||$397,500||$1,146,710|
1.4 Research Element 4: Novel Bioproducts
|Number of Projects||4||4||n/a|
|Total TTP Funding||$2,627,500||$3,257,000||$5,884,500|
|Total External Funding||0||0||0|
1.5 Research Element 5: Integrated Value Maximization
|Number of Projects||11||15||n/a|
|Total TTP Funding||$4,742,000||$6,125,166||$10,867,166|
|Total External Funding||$1,158,850||$2,550,000||$3,708,850|
Source: FPInnovations data provided to CFS in 2009.
Table 4 shows the actual level of TTP investment as per FPInnovations’ certification of costs incurred and paid. TTP is a $55 million program and was extended to 2009-10 mid-way through its delivery, leaving $15 million for fiscal year 2009-10.
|Research Element||2007/08||2008/09||Total||% of Actual TTP Spending|
|Next Generation Building Solutions||$4,804,303||$4,216,070||$9,020,373||22%|
|Next Generation Pulp and Papers||$4,604,329||$3,576,940||$8,181,269||20%|
|Energy and Chemicals from Forest Biomass||$3,336,722||$3,919,259||$7,255,981||17%|
|Integrated Value Maximization||$4,836,880||$6,200,308||$11,037,188||27%|
|Invoiced Actual Program Expenditures||$20,237,824||$20,918,457||$41,156,280||100%|
Source: TTP Contribution Agreements, 2007-08 and 2008-09.
The overall objective of the Forest Research Institute Initiative is to support NRCan’s goal of sustainable natural resources development by harnessing innovation and technology through public / private collaboration to advance the competitiveness of the forest sector.
FERIC’s research and technology transfer is focused on forest operations and management, as well as transportation and roads. It had two labs (in Montreal and Vancouver) and approximately 120 regular and associate members, and participation by nine provinces.41
Forintek supported the wood products component of the Canadian forest industry (e.g., lumber, panels, and other value-added products, and building systems). Forintek had two main research facilities located in Vancouver and Quebec City, and membership was comprised of 280 small, medium and large forest product companies in all provinces.42
As noted previously, the primary objective of Forest Research Institute Initiative funding provided to FERIC and Forintek is to support activities that further achieve NRCan’s goal of sustainable natural resources development by harnessing innovation and technology through public/private collaboration to advance the competitiveness of the forest sector. Specific priorities identified in the contribution agreements for Forest Research Institute Initiative funding include:
- enhancing productivity;
- reducing costs of production;
- maintaining and improving market access;
- growing opportunities for value-added products;
- cutting energy consumption while advancing non-fossil fuel options (e.g. biomass); and
- improving environmental performance through new processes and technologies.
The main result is technical information for government and domestic industry, delivered directly to firms and both federal and provincial governments.
Forintek’s Forest Research Institute Initiative funding was allocated to the following research program areas:
- Building Systems/Markets and Economics: which includes understanding trends in the wood products sector, optimizing the use of wood in buildings and assemblies, ensuring access to world markets by meeting product import and use regulations.
- Manufacturing: which includes developing and transferring technologies to increase process efficiency, reducing manufacturing costs and reducing the environmental impact of the manufacturing process.
- Resource: which includes maximizing returns from the forest and determining the impact of forest management decisions on end-use wood characteristics (less than 5% of program funding).
FERIC’s Forest Research Institute Initiative funding was allocated to the following research program areas:
- Forest Operations Program: which includes improved efficiency of harvesting and silviculture operations, increased awareness of forest operations personnel of best practices, improved recovery and quality of wood fibre, and increased use of environmentally-sustainable practices within Canadian forest operations.
- Operations Management and Control Program: which includes improved planning and management of forest operations with respect to reduced costs and improved environmental compliance, and improved logistics and control of forest operations, equipment fleets and wood flow.
- Transportation and Roads Program: which includes improved efficiency of road and transportation systems, reduced fuel consumption and GHG emissions, and improved safety.
Both Forintek and FERIC have in-house expertise in all core research areas. Both also have strong international reputations and linkages with the international forest and forest products research community.
Previous Evaluation Findings43
Evaluations of the Forintek and the FERIC agreements were conducted in 2004. The evaluations concluded that the NRCan Forest Research Institute Initiative had served the public interest well and that the federal government has a necessary and legitimate role in supporting both Forintek and FERIC. Recommendations included support for continued NRCan funding to the institutes.
To this effect, the Government of Canada spending authority was renewed in April 2005 for continued and enhanced funding to these two forest research institutes until March 31, 2010. The evaluation reports also noted that improved objective setting related to federal government policy, improved performance measures and reporting and increased linkages among the Forest Research Institutes (including Paprican) should be encouraged to ensure more efficient and effective program delivery.
With respect to these earlier findings, this evaluation showed that: (i) the consolidation of FERIC, Forintek and Paprican has increased the linkages between these organizations and led to research synergies and more effective program design and delivery; and (ii) the recommendations with respect to improved performance reporting made in 2004 remain relevant today.
Program Investment and Expenditures
Since 2005, Forintek received $3.1 million per year from the Forest Research Institute Initiative .44 These funds supported research activities primarily in two research areas: building systems (64%) and manufacturing (31%). The balance was allocated to resource assessment and the identification of lumber properties (5%). The funding supported between 40 and 55 projects annually.
Since 2005, FERIC received, on average, $1.7 million per year from the Forest Research Institute Initiative. This funding supported six forest operations projects and three dealing with transportation and roads. For the first three years of the Initiative, approximately two-thirds of the funding supported forest operations research; in year four (2008-09) 80% of the funding went towards forest operations research. No projects were ever funded under ‘Operations Management and Control’ project area. In 2008, FERIC’s entire work program was adopted to reflect a more nation-wide scope (until this point there were some projects under the contribution agreement that addressed members in only the eastern or western parts of Canada).
In 2007-08, the latest year for which data are available, the contribution of various revenue sources to the institutes was as shown in Table 5.
|Federal Core Contribution||9%||10%|
|Provincial Core Contribution||7%||3%|
|Industry Member Assessment||20%||34%||64%|
|Total Revenue (all sources)||$36.4 million||$16.7 million||$41.3 million|
Source: FPInnovations Annual Report, 2007-08.
A review of the annual report financial summaries provided by FERIC and Forintek, combined with interview findings, suggests that these reports do not reflect all of the in-kind and financial support provided by industry partners and others.
Findings and conclusions are presented by evaluation issue or sub-issue. In some cases, evaluation questions have been grouped to facilitate reporting either at the findings or conclusions levels. Where required, the findings and conclusions that are unique to Forest Innovation and Forest Research Institute initiatives have been separated.
Relevance / Rationale – To what extent does there continue to exist a need for the measures undertaken to date by CFS and other stakeholders to support promoting forest product sector innovation and investment?
- Does this approach (i.e., FPInnovations, the CWFC, TTP and Forest Research Institute Initiative) continue to be relevant?
Yes. The well-documented state of crisis in the Canadian forest products sector combined with the goals of Forest Innovation investment and outlined in the two Forest Research Institute Initiative funding contribution agreements lend support to the finding of a continued relevance for the Forest Innovation approach and Forest Research Institute Initiative support.
All key informants who expressed an opinion supported efforts that would continue to foster a comprehensive and integrated innovation approach across the forest value chain, as initiated by the consolidation of the three research institutes and the creation of the CWFC.
Prior to the Forest Innovation Initiative, there were numerous players in the area of Canadian forest-related R&D, including CFS, the three research institutes (FERIC, Forintek and PAPRICAN), provinces, and academia, with little synergies between groups and often competition for funding. Increasing international competition and a growing concern with respect to inefficiencies in Canada’s forest research innovation capacity were highlighted by the Canadian Forest Innovation Council (CFIC)45 and CFS. The consensus of those interviewed for this evaluation, as well as document review findings, show that these factors and industry pressures were exacerbated by a number of industry and economic factors. As a result, the findings show that there continues to be a need for a focus on forest management and forest product innovation in both the short and long term.
Interview and document review findings reveal that this approach (i.e., the integration of forest research across the complete value chain) is consistent with that of leading competitors including the U.S. (U.S. Forest Service), Sweden, other European Union countries (including Finland) and China. The ability to join industry efforts with those of CFS in the area of fibre research was reported as a unique and welcome opportunity by industry interviewees.
The TTP is viewed by industry and provincial stakeholders as an effective vehicle for integrating research capacity across the value chain due to its focus on cross-divisional projects. The literature review and case studies found that the TTP also addresses the needs identified by the CFIC Policy Forum to approach innovation in novel ways, such as by partnering with parties that are not traditional forestry partners (e.g., the plastics industry), and collaborating with these new partners and academia in applying emerging technologies.
The findings of this evaluation, consistent with those of 2004-05,46 suggest that Forest Research Institute Initiative funding continues to be relevant to support national core competencies in key areas within FERIC and Forintek. As the ability of the private sector to support these research organizations has diminished over the last five years, the contribution of the public sector has become increasingly more significant to the operations at FERIC and Forintek. The research in the core program supports development across the industry while meeting several public good needs. All key informants expressed strong support for the Forest Research Institute Initiative funding approach used to date.
Evidence from interviews and case studies suggest that the measures contained in the Forest Innovation Initiative (the amalgamation of institutes, the integration of the Canadian Wood Fibre Centre and the creation of a transformative technologies program) are all of continuing interest and direct relevance.
No interviewee disagreed with the strategies of the Forest Innovation Initiative, and no interviewee (given their knowledge of other options and practices) suggested a different approach than the one taken.
- To what extent do these measures continue to serve the public interest?
- With what results for application to the long-term innovation challenges facing the forest sector?
Summary: Both sets of measures (Forest Innovation and the Forest Research Institute initiatives) continue to serve the public interest. The Forest Innovation measures support both the long and short/intermediate needs of a sector that plays a significant role in Canada’s economic well-being.
The Forest Research Institute Initiative has, and continues to support substantial work that directly addresses the public good, including the development of standards and guidelines in Canada and around the world. It is premature to discuss the results for application from the Forest Innovation Initiative, although some early results have developed and are discussed in the Success section of this report (as are the Forest Research Institute Initiative results).
Two of the strategic directions identified in 2006 by CFIC and CFS were to grow opportunities through R&D that target innovation and to promote forest industry competitiveness. Document review and interview findings show that both objectives are being addressed in that: (a) the focus of the research activities has been refined over the past two years and the current areas of focus have direct application to some of the longer-term innovation challenges facing the sector; as well as (b) some of the shorter-term goals. In the intermediate to longer term, CWFC’s work on value chain integration and economic fibre valuation holds promise. Document review and interviews of CWFC management show that a key strategic objective of CWFC is to continue to encourage collaboration with other FPInnovations’ divisions, thus strengthening Canada’s forest research capacity to meet the sector’s long-term innovation challenges.
The main concern expressed by key informants was the rapid decline of the sector’s economic health during the implementation of the strategy, which raised the question among stakeholders of whether the measures (as defined in 2007 and augmented in Budget 2009) are sufficient, in terms of resources and focus, to effectively meet the long-term innovation challenges of the sector.
One of the main benefits of the competitiveness initiatives undertaken by FPInnovations – expressed strongly and consistently by the industry, FPInnovations, and NRCan interviewees – is the impact that the funding had on promoting a value chain optimization (VCO) approach that involves all four divisions of FPInnovations. This approach recognises the importance of understanding the attributes of Canadian wood fibre, the impact of forest silviculture management and harvesting operations on specific stands, and the impact of the flow of fibre mills to meet specific demands on the economic performance of the sector and the value of products from the forest.
Each of the divisions (and other partners, including academia and industry) has a role to play in the development of VCO strategies (at the forest stand, regional, provincial or national levels). The value of this approach is realized when these roles are integrated into a comprehensive strategy. The value chain focus and integration of researcher capacity across the chain is consistent with international best practices as identified by international interviewees and supported by the document review.
FERIC and Forintek have long-standing relationships with key forest sector players (e.g., industry, national and international research and policy organizations, academia). Over the past 30 years, core funded R&D has contributed to public good components of the innovation system (e.g., databases, protocols, influence on national and international codes and standards) which directly serve the public interest and address innovation challenges.
Interview and case study data found that core funded project results have contributed to: safer, healthier buildings; better managed forests; more efficient transportation; GHG reductions; better building designs due to new fire and seismic codes and standards; and enhanced market access and international competitiveness. These types of activity must be done by organizations at arms-length to industry because this allows stakeholders to have confidence that the research findings are unbiased (‘honest broker role’) and also ensures that the work is properly funded (i.e. no single company could afford to carry out much of the research supported by the Forest Research Institute Initiative).
FERIC and Forintek staff routinely provide advisory services and technical assistance to NRCan/CFS when needed. FERIC and Forintek provide the capacity (expertise, facilities and equipment) no longer available within NRCan/CFS.
- Are there barriers or impediments to the performance of these measures and, if so, how can they be managed/overcome?
Summary: Economic data and interview findings (industry and public sector interviewees) suggest that the key impediment to the performance of these measures (both Forest Innovation and Forest Research Institute initiatives) is the rapid decline of the sector’s capacity to invest in innovation over the short to medium term. Although other impediments have been identified, the major one is the health of the sector.
This substantial barrier is being addressed through the Forest Innovation’s approach to uniting all of the parties involved in the Canadian forest sector with a common focus on identifying and addressing sector needs and challenges. This amounts to a major sector restructuring, and insufficient time has passed to conclude on its success although initial results are positive.
The Canadian forest products sector, already struggling in recent decades, has experienced an unprecedented decline since 2007 (the start-up period for Forest Innovation). This has meant orders of magnitude decreases in FERIC, Forintek and Paprican membership fees (which are based on production volumes) and declines in core membership. It has also meant a decline in capacity to invest in initiatives without significant short-term payback.
Another barrier or challenge is the size and diversity of the Canadian forest sector. The number of companies, geographic range, forest resource composition, the role of the provinces in land ownership, varying policies (transportation, land management) across the country present challenges to an integrated forest research strategy. Competitor countries such as Finland, with four large forest companies and a relatively homogeneous resource do not face these types of challenges thus simplifying their overall forest management and R&D strategies.
Interviews, document reviews and case studies suggest that other barriers/impediments to the performance of Forest Innovation include:
- Integration of Institutes: The need to reconcile corporate cultures and systems for research planning and management across all of the organizations involved is a work in progress. Significant achievements have been made in terms of new financial and HR systems; the next step is to address the divisional boundaries and fully integrate R&D priority-setting and strategic planning.
- Creation of CWFC: The existence of a long-standing and still strong culture of research management which emphasizes scientific discovery achievements, including publications and peer review (note the traditional promotion criteria for the ‘Researcher’ category in the federal public service) as compared to, for example, commercialization, may pose a conflict for CWFC researchers in terms of their research priorities. The management of CWFC has taken steps to address these barriers through various initiatives to integrate planning processes with FPInnovations, and encourage research partnerships with the other FPInnovations divisions.
- TTP: In addition to gaps in sector financial capacity noted generally, barriers appear to exist with regard to the traditional culture and orientation of many forest companies. It is notable that a high proportion of innovation project participation has taken place in companies such as Kruger and Tolko which have demonstrated strong senior-level commitment to specific areas of innovation.
In terms of expanding the markets for wood fibre products by developing transformative technologies and products – e.g., functionalized cellulose fibres: cellulose nanocrystals (largely unexplored, gels, paints, cosmetics, extraction not yet commercial); nanotechnology, energy, biochemicals, etc.47 – FPInnovations will need to involve non-traditional (i.e., non-forest sector) clients.
While some evidence of progress has been made in terms of consulting with these other sectors (as noted in document review findings and by both private and public sector interviewees), the involvement of non-forest sector companies represents a major and challenging change. This significant expansion in research stakeholder focus should be a key consideration as TTP expands into the pilot project stage (with new Budget 2009 funding).
Conclusions – Relevance/Rationale
The Forest Innovation and the Forest Research Institute initiatives are both directly relevant to government priorities, NRCan priorities, public interest and the needs of the stakeholders.
The additional funding provided by the Forest Innovation Initiative comes at a time when the sector is less able to contribute funds to support innovation, technology and market development (yet also when the need for this is greatest)—hence the Initiative is directly relevant to stakeholder needs.
The overall objective of Forest Innovation supports NRCan’s goal of sustainable natural resources development by enhancing the long-term economic opportunities for Canada’s forest sector as a product of increased investment in forest innovation. Its inclusion in the budget underlines its national relevance and role in the public interest.
The Forest Research Institute Initiative objective also supports NRCan’s overarching goal (discussed above) by supporting the work of FPInnovations in furthering achievement of social goals on behalf of the federal government (e.g., work on standards development on an international level).
The consolidation of FERIC, Forintek, Paprican and the CWFC represents a significant milestone in Canadian forest sector research. The theory and approach behind these recent Canadian initiatives is consistent, for the most part, with the actions of a number of international examples relevant to the Canadian situation (e.g., Finland, Sweden, France, Australia, China, and the U.S.). The overall strategic objective behind the Forest Innovation initiatives is to improve the way in which solutions can be developed by taking into consideration the complete value chain.
FPInnovations (its planning and committee structure) has been designed to ensure that: the identification of research priorities and specific needs considers the entire sector value chain; the identification of the best partnership arrangements to undertake the work are considered; and technology transfer (outreach, pilot projects, training, etc.) is a key component of the research activity. The extent to which these needs and activities has been delivered are discussed in the ‘Success’ section.
Most interviewees felt that the creation of FPInnovations has provided a good opportunity to accelerate innovation in the forest sector at a time when positive change is urgently needed. The CWFC and TTP support an enhanced approach to forest research, allowing for complete value chain assessments to focus future research program strategy and projects.
With respect to Forest Research Institute Initiative funding, the R&D and other activities (e.g., participation in codes and standards committees) that are supported by the Initiative continue a 30-year history of serving the public interest. There are ongoing needs to address public good elements of the innovation system (e.g., building codes and standards, harvesting strategies, transportation and processing systems). These types of activities benefit the overall sector (and not just one or two companies) and provide an underpinning for the sector’s overall performance (e.g., domestic sales, exports, new products, health and safety (of buildings and forest operations), sustainable development and maximizing the value of Canada’s forest.
Success / Objectives Achievement – To what extent have the measures undertaken to support promoting forest products sector innovation and investment fulfilled (or are likely to fulfill) their respective objectives, goals and/or targets?
FPI, CWFC, TTP Specific Results / Success Issues
- What evidence exists to demonstrate that these measures are proceeding as envisioned?
Summary: The data gathered by this evaluation indicates that, thus far, all of the measures of the Forest Innovation Initiative, as well as the Forest Research Institute Initiative, are proceeding as envisioned. It should be noted that the success of some measures, such as the development of a FPInnovations culture, will be better evidenced in the future.
Forest Research Institutes Consolidation
Documents show that the consolidation of the three institutes was intended to address the following issues:
- the erosion of investment revenue and the institutes’ continuous need to raise funds;
- the ability to effectively address changing technological needs and challenges of the forest sector along the full length of the forest sector value chain; and
- the need to further research synergies (within the research organizations and with universities) to maintain or enhance benefits to members.
Interview findings and case study findings show that progress has been made on each of these issues. Membership fees have dropped (mostly due to production cut backs and closures) and contract revenue has fallen over the past three years. With the consolidation and launch of the TTP, the newly-formed organization had the funding it needed to continue.
The joining together of the three institutes created one of the world’s largest private forest sector research institutes. This provides enhanced visibility and influence nationally and internationally, and provides a solid platform on which to build a national forest research strategy. As the evaluation team noted above, international interviewee findings show that this approach – the integration of R&D capacity along the value chain – is consistent with the practices followed in countries with strong forest R&D infrastructure, and with best practices as identified by select industry experts interviewed for this study.
The planning documents show that consolidation was expected to increase operational efficiencies. It appears, based on interview findings, that lower administration and overhead costs were one of the key benefits that drove industry’s support for the amalgamation. According to the review of program files and interview data, there is no proof that the anticipated operational cost savings related to the amalgamation have been achieved to date. However, the consolidation tasks (integrated financial and HR systems, new FPInnovations Board) and a new FPInnovations Strategic Plan 2008–2010 were implemented on time and within budget.
Industry interviewees report that consolidation has led to improved cross-pollination of scientific activities and begun to break down the research silos that exist among organizations (FPInnovations divisions, as well as academia and industry). Despite an increase in focus on integrated research projects and other new activities, the industry Divisional Steering Committee (DSC) members interviewed reported that their companies continue to receive the individual support and hands-on assistance as they did prior to the amalgamation (i.e., individual member services / support were not adversely affected by the amalgamation).
One of the benefits of consolidation identified several times by industry interviewees was increased sharing of research results across divisions. For example, Paprican’s use of near infra red scanning technologies was adapted for use by Forintek Division in a Tolko Oriented Strand Board (OSB48) plant. The consolidation has led to increased sharing of expertise and equipment.
Based on document review and interviews, the goals and targets of the transition documentation have been met. In some cases, results were achieved in record time; according to IBM, the financial system (FUSION) schedule was met in half the time that similar systems have been installed in other organizations.
Canadian Wood Fibre Centre (CWFC)
One of the goals outlined in Forest Innovation was to strengthen the engagement of public and private sector researchers within and external to the traditional forest sector R&D community. Interview findings and the document review provided evidence that this is beginning to happen. CWFC researchers report that they are encouraged to draw on the expertise of other CFS researchers for FPInnovations projects, and contribute to CFS (non-CWFC) projects. There is limited evidence of these types of linkages to date, due to the fact that these are new arrangements and researchers are not yet accustomed to working across the CWFC and CFS interface.
The design of a fibre centre within CFS dates back to 2005 when CFIC was examining the roles and structure of the national R&D system. The centre was to address two key issues for Canada’s forest industry: does Canadian fibre offer a competitive advantage? what needs to be done to extract more economic value from Canadian fibre? Interview and document review findings show that this focus on economic value is a departure from the norm for forest-level/fibre research and is a new niche for CFS/FPInnovations.
The CWFC was launched in April 2006, when a portion of CFS capacity was dedicated to this new organization. At the time of writing of this evaluation report (early 2010), the CWFC is comprised of 74 CFS staff across Canada, including 13 researchers, 22 professionals, 24 technical supports and two managers (the remaining staff are students, policy analysts, etc.).
A three-year (2006-2009) development plan was created which outlines the Centre’s objectives, strategies and deliverables. The plan focuses on developing a national forest-level research program, promoting uptake of the CWFC knowledge products by the Canadian forest sector, implementing the CWFC, and integrating it with FPInnovations. Several interviewees noted that the relationship between CWFC and FPInnovations was unique and, as a result, not universally well understood.
CWFC research project proposals include: identification of the lead proponent and key participants; a description of the project’s background, rationale and relevance; project goals and objectives; a description of the project’s significance, benefits and impacts; an outline of how resulting knowledge will be transferred; required funding and leverage; and a work schedule. This fulfils all the information requirements contained in the CWFC Terms and Conditions with the exception of a method for measuring performance.
While several interviewees expressed some degree of concern or scepticism regarding the ability of the CWFC (operating within NRCan) to integrate their research activities with those of the other FPInnovations divisions to the extent desired, the majority were encouraged by the allocation of NRCan funding to fibre characterization and inventory.
These interviewees (industry and FPInnovations) noted the importance of this research to support the emerging value chain optimization approach being used to identify research priorities across the entire sector. As the evaluation team noted above, this approach is consistent with best practices as identified by forest sector expert interviewees.
Communicating research results and technology transfer were identified by FPInnovations and CFS managers, as well as sector experts, as key areas for improvement.
Transformative Technology Program (TTP)
Literature and document review findings showed that the approach taken over the past three years has addressed the research priorities identified in the planning process (as summarized in the Forest Science Policy Forum on Transformative Technologies Report for CFIC). These were: Next Generation Building Solutions, Next Generation Pulps and Papers, Energy and Chemicals from Forest Biomass and Novel Bioproducts.
As the Program was developed, a fifth research theme area emerged: Value Chain Integration or Optimization (VCO). The VCO links raw material attributes, with processing techniques, and market demand attributes allowing fibre supply to be matched with specialized end products. This approach shows promise in terms of increasing research efficiencies by helping strategic planning groups (e.g., DSCs, the Board) identify priority research themes, and research teams identify the best project team members and workplans, all in the context of a customer focus.
The implementation of the TTP gave FPInnovations and the sector the ability to address larger and more complex research, as illustrated by the case studies. According to program managers, the TTP allowed FPInnovations to assume higher risk projects that would not have been supported before (e.g., energy and chemicals, nanotechnology).
In other cases, TTP accelerated the adoption of technology that was available (e.g., biomass and bioenergy). Several FPInnovations and NRCan interviewees noted that the ability of forest companies to participate in projects and adopt new technology had slowed over the last year, and that there were now greater opportunities in other sectors (i.e., more investment capital available in the energy sector).
Industry members and CFS staff both noted that more should be done to communicate TTP project results beyond the project team (i.e., high-level summaries for senior managers, information dissemination to the broader forest research network including academia and industry). Industry interviewees reported that on-site visits were highly valued by FPInnovations members, for example, the presence of FPInnovations researchers in mills who identified opportunities to improve operations.
- In what ways has the approach to supporting forest sector innovation and related activities and outputs addressed the needs/priorities identified in the planning documents (e.g., TB Submission, strategic and work plans)?
Summary: The approach to supporting forest sector innovation, and the related activities and outputs, show strong linkages to select needs and approaches identified in various planning documents, including those produced by CFIC, the Canadian Council of Forest Ministers (CCFM), the Forest Products Industry Competitiveness (FPIC) Task Force, CFS and others. Federal leadership and funding enabled the transition to FPInnovations, the world’s largest public-private forest R&D partnership, and the creation of the CWFC to complement the work done by the other FPInnovations divisions.
In general, interviewee findings revealed a strong consensus that the Forest Innovation initiatives as designed were key to meeting needs as outlined by CFIC, NRCan and understood by industry. Based on document review and interviews, the goals and targets of the transition documentation have been met. In some cases, results were achieved in record time; according to IBM, the financial system (FUSION) schedule was met in half the time that similar systems have been installed in other organizations.
The FPIC document ‘Industry at a Crossroads: Choosing the Path to Renewal’ addressed innovation as well as: public policy issues that affect private sector investment (e.g., R&D tax credits, transportation regulations) and input costs (e.g., wood fibre, energy, transportation and wages). With respect to innovation the Task Force reported that technological innovation in a range of knowledge-based areas (e.g., bioenergy, nanotechnology, biorefining, building products and systems) had potential for significant opportunities and that Canadians should aim at leading development and early deployment in those areas.49
The Task Force also observed that the countries that would derive the greatest benefit from these opportunities would be those with the strongest forest sector innovation systems and the globally competitive firms needed to underpin them. These opportunities were seen by the Task Force as complements to traditional products and business, rather than substitutes for them.50
The Report of the Standing Committee on Natural Resources defined a vision for the industry that encompassed the newly formed FPInnovations and included elements related to: (i) bioenergy, noting that the pulp and paper sector generates 60% of its energy needs from biomass and that with the right incentives could become a net source of renewable, green energy in the future; (ii) biomass and bioproducts, a source of clean energy and an element of the newly launched TTP; and (iii) value added products, which most witnesses agreed was critical.
The last century in the forest industry was described by an interviewee as being founded on commodity products (e.g., pulp and lumber), which many countries could now produce at lower cost than Canada could. Thus, it was argued that the Canadian industry would more wisely turn its focus toward high-value added products (e.g., furniture, doors, pre-fabricated houses, wood-based insulation, etc.).51
The CFIC consultation document (published in June 2004) outlined a number of elements that would contribute to an improved forest sector innovation system which included: the development of an integrated strategic plan; elimination of fragmentation52 (innovation was seen to be happening in a series of silos, with little coordination among government, universities, the forest research institutes, the forest industry and its customers); better integration along the full value chain (i.e., moving away from a focus on up-stream and down-stream innovation); and an increasing market / customer focus.
The Treasury Board Submission (Program Details for Implementing the Forest Industry Long-Term Competitiveness Strategy) outlined the terms and conditions for Promoting Forest Innovation and Investment (Forest Innovation). The resulting measures were consistent with the above planning document priorities and are proceeding as envisioned.
With respect to consolidation, the funding was to provide for a new governance model, help address human resource and administrative issues related to the consolidation, and develop a business plan and communication strategy. The $10 million allocated to CWFC was to be allocated to organizations and collaborators, as well as internally to CFS to increase NRCan’s knowledge of opportunities for improved utilization of Canada’s forest fibre.
The TTP was designed to harness the capacity of FPInnovations, along with academia, to meet the long-term challenges facing the sector. In particular, TTP funding was to support pre-competitive, non-proprietary R&D that would develop and adapt emerging and breakthrough technologies (e.g., forest biomass, forest biotechnology, and nanotechnology). Analysis carried out by this evaluation showed that this was being addressed by the TTP.
- To what extent are the integration of the research institutes and links to CWFC proceeding as envisioned and what difference has this made/likely to make on forest sector innovation (e.g., is there evidence of new research synergies and if so what have been the results/impacts)?
Summary: As the evaluation team noted previously, the integration of the research institutes with the CWFC are proceeding well and as planned. For example, over 50% of CWFC projects involve the participation of one other division, a further 25% involve two divisions and almost 15% involve three divisions (i.e., almost 90% of CWFC projects involve other FPInnovations divisions).
It is too early to determine the impact of the integration on forest innovation, however research synergies have been established and appear to be proceeding as envisioned. It should be noted that restructuring, establishing a common culture/values etc. is a gradual process not normally completed in two years.
The initiatives under review were guided by a number of documents and planning processes which identified objectives and expected impacts. These include the CFIC documents and the CWFC 2006–2009 Development Plan.
One measure of new research synergies is the level of cross-divisional participation in project activities. A total of 27 CWFC projects were funded in 2007-08 and 2008-09, and 28 in 2009-10. Project selection criteria include a focus on partnerships. Document review shows that the CWFC projects to date have focused on short and intermediate transformation of the sector and placed priority on partnerships with other FPInnovations divisions.
The CWFC project selection process has evolved to allow for better integration with other FPInnovations divisions (CWFC was launched one year prior to the transition to FPInnovations). The first round of projects was identified through Letters of Intent; in 2009-10 the project development/selection processes was driven by a defined set of outcomes and an enhanced focus on partnerships. However, while progress has been demonstrated with respect to linkages on projects, FPInnovations and NRCan interviewees noted that CWFC/FPInnovations management need to examine the extent to which CWFC continues to integrate with FPInnovations at a more strategic level (e.g., priority-setting and research program planning).
Research activities in 2009-10 focus on three program areas:
- maximizing the economic value of Canadian wood fibre (value chain integration, economic fibre value);
- aligning regeneration research with economic value (silviculture, selection and production); and
- improving forest management planning systems (forecasting, inventory tools).
The priorities for TTP were identified in a series of white papers and reviewed during two regional workshops. The fifth theme (Value Chain Optimization) emerged after the white papers were completed. It provides an opportunity to approach the value chain as a whole and to involve CWFC (e.g., incorporate the forest- or upstream-end). Overall, the Program has invested approximately $20 million annually, with additional external funding of $13.6 million, for an overall program leverage of 0.68. Four of the five theme areas have outside investment with leverage ranging from 0.16 to 0.92.
FPInnovations’ research managers report ‘good news already on collaboration’ (both within FPInnovations and externally) and that these new partnerships are supporting the implementation of research results in industry, and new techniques and findings (data, new knowledge) within academia and FPInnovations. The involvement of two or more FPInnovations’ divisions on TTP projects helps ensure that research findings and new technologies are more broadly shared within industry (27% of TTP projects involve staff from two or more divisions and each division has a unique set of industry members).
There are examples of technologies being developed within Paprican being adapted for use in wood processing mills (i.e., Forintek clients). Also, there is evidence that some research results are ready for demonstration. These new collaborations and integrated approaches positioned FPInnovations to address the long-term challenges facing the forest and forest products sector.
- What new technologies have been assessed and with what results for application to the long-term innovation challenges facing the forest sector?
Summary: FPInnovations, working with industry and academia, has assessed a number of new technologies that may address long-term innovation challenges of the sector. These include nanocrystalline cellulose, bio-active papers, and forest biorefineries.
Some work of what appears to be a shorter term focus has also been undertaken, which has provided much needed financial returns to the sector. There is some degree of dispute regarding the transformative nature of the work involved; however, the question is moot, given the timeframes involved (transformation is a long term process) and the severe climate in which the TTP and the sector is operating currently.
The following observations are derived from document review, interview findings, and case study analyses.
- Novel Bioproducts – Nanocrystalline Cellulose (NCC): This is a $3.2 million a year program to develop a process to produce NCC in a commercially-viable way, and apply it in other industry sectors (e.g., paints and varnishes, aerospace, and automotive) as an input for advanced, lightweight, high-strength composite materials. NCC is a novel/transformative product (i.e., presents a novel opportunity for fibre and leads to new products for non-traditional sectors). This research area requires the participation of end-user sectors early in the development of NCC technology.
- Bio-Active Papers: TTP provides $250,000 a year to this collaborative research effort that is led by the Sentinel Bioactive Paper Network at McMaster University. The project is to develop paper-based bio-sensors to detect, report and destroy specific pathogens and toxins. The Network is also funded by the Natural Sciences and Engineering Research Council (NSERC) ($12 million over five years) and the Government of Ontario. The TTP investment is significantly smaller than that of NSERC and allows FPInnovations to gain access to the network and its research finding. As with NCC, bioactive papers represent a novel, ‘transformative’ technology. The potential impact of bioactive paper and NCC markets on forest sector companies and fibre demand is, based on select interview findings, uncertain and not expected to be significant even in the longer term (i.e., fibre requirements for these products will not be significant).
- Forest Bio-Refinery: FPInnovations leads this research to develop a field demonstration gasification unit converting wood residues into energy, fuels and chemicals. This research has commercial potential for the production of renewable energy, and next generation fuels and chemicals from biomass. If successful, this technology will help the forest sector diversify its product mix while supporting Canada’s renewable energy and GHG objectives.
Driving forces for the bio-economy include: cost of conventional energy, environmental and climate change concerns, depressed forest and agriculture sectors, and integration of advances in biotechnology with chemistry and material science. For this to succeed, new cross-sector opportunities will have to be identified (i.e., FPInnovations will have to develop collaborations in new sectors). Some corporations are already positioning themselves in this market. For example, Magna is working with researchers at the University of Toronto to develop high-performance, low-cost composites from cellulose fibre in pulp and paper byproducts.
In the forest sector, Tembec has annual sales of $200 million of industrial chemicals. Elements of this research address some of the long-term innovation challenges of the sector and as such can be considered ‘transformative’.
This TTP research theme also looks for ways to apply existing technologies, with a long history of use in Europe, to the Canadian situation.
Several interviewees questioned whether this was a ‘transformative’ technology, or whether Canadian companies should have (given the benefits of the established technology and related equipment) invested in this technology already. Others felt that the technology, being new to Canada, warranted support through TTP as it could ‘transform’ the way in which the sector generated energy and lead to new fuel and chemical production capacity.
The health of the sector has required some of the TTP projects to adopt an approach that may be seen by some as being more short term, but which had much needed financial returns to the sector:
- The research on next generation building solutions builds on the core funded/National Research Program efforts of Forintek-Division to generate new designs for the construction of six- to eight-storey buildings using a combination of wood, concrete and steel. This TTP research initiative helps expand/maintain the market for Canadian wood products and building systems. Interview findings revealed that “TTP allowed us (FPInnovations) to expand our core research program to look at building systems more holistically.”
- The B.C. Coastal Initiative is a collection of projects, some of which focus on short-term, cost-savings or productivity measures. The B.C. Coastal Initiative receives $1.5 million of TTP funding annually; two companies have self-reported savings of $30 million as a result of improvements they made to enhance recovery within sawmills. For example, the sawmill simulation modeling under the ‘Decision Support Tools for Industry Competitiveness’ project helped one Coastal sawmill increase production by 10% with little capital investment.
This Initiative is one of the strongest examples of all FPInnovations’ divisions working together, in collaboration with the University of British Columbia (UBC) and the FORAC (Forest to Customer) group at the Université Laval. The province of B.C. provides matching funds and industry contributes in-kind resources by sharing harvesting data, donating staff time and supporting on-site trials.
According to FPInnovation managers, this Initiative can be considered to be ‘transformative’ to the extent that it represents a change in the way in which the B.C. Coastal resource is valued and managed, and a change in the nature of research partnerships to address the Coastal industries’ current challenges.
In addition, FPInnovations managers estimated that the Initiative would produce expected benefits to the Coastal industry of $90 million over five years. This estimate proved to be optimistic in view of the economic health of the sector and its ability to invest in innovation of any kind (e.g., short-term benefits or longer-term benefits), and illustrates the capacity of the organization to set targets (which can support improved performance measurement and reporting).
- Composites Program: The relatively small TTP investment in this area ($100,000) is being used by Paprican to develop a lignin (wood-based) resin. The traditional, petroleum-based resins can be a highly-variable and significant cost in OSB / composite production. The Forest Research Institute Initiative funding program is complementary to the TTP research project. Applying the research results from both programs at a West Fraser mill led to a 20%25% reduction in overall resin use; the company attributed $3 million of the total $5 million in savings to FPInnovations.
According to the Program’s TB submission, the Transformative Technologies Program funding was intended to provide for “pre-competitive, non-proprietary R&D to address the development and adaptation of emerging and breakthrough technologies such as forest biomass, forest biotechnology, and nanotechnology”. As illustrated by the three preceding examples (Forest Bio-refinery, B.C. Coastal Initiative, Composites), TTP funding is supporting projects with shorter-term benefits to industry that build on the previous and ongoing Forest Research Institute Initiative funding project work. Since transformation is a long-term process, the nature of these projects should be assessed in terms of their impacts over the long term.
Evidence from document review, interviews and case study analyses suggests that a portion of the TTP funding (the evaluation study team estimate approximately 50% based on the above definitions) was invested in incremental changes to existing technologies, processes and products, with shorter-term expected results and impacts for the sector. This focus was to be expected, given the current and pressing needs of the sector and the limited ability of both the public and private sector to supply patient capital in the face of sharp declines in mill production, employment, exports, etc.
Some interviewees questioned the allocation of resources towards transformative technologies as compared to a more focused investment in technologies with near-term application potential and benefits in order to mitigate the current sharp downturn in the sector.
- What are the major issues and success factors involved that need to be addressed in order for these measures to succeed? What has changed as a consequence of these measures?
*internal forces and how they impact performance; and
*external forces and how they impact performance.
Summary: The key internal factors are the working relationships and corporate cultures among the four FPInnovations divisions.
External factors include the performance of the Canadian economy – currency exchange rates, non-tariff barriers (e.g., phytosanitary regulations), higher energy and log costs, etc. – and lower production costs of Canada’s international competition. The market and pricing strategies of international competitors are beyond the influence of the Canadian industry yet will be a key factor in determining the extent to which these measures, to improve Canadian industry efficiencies and diversify the forest sector’s product mix, succeed in increasing industry revenues and profits.
With respect to the Forest Research Institute Initiative and the TTP, the ability of the sector to adopt new technologies, approaches, and overall business strategies (marketing, harvesting, production, sustainable development, etc.) remains a concern.
A number of issues have been, or need to be, addressed in order for the measures to succeed as the Forest Innovation Initiative matures.
Structural and administrative changes were implemented to support more efficient and effective research cooperation and collaboration among the divisions. According to FPInnovations managers, these new HR and financial systems allow divisions to work together more seamlessly than was possible before the launch of a single financial system (FUSION) and a consistent HR strategy and compensation plan. While these administrative tools support integrated strategic planning, priority-setting and project design and delivery, they are necessary – but not sufficient in and of themselves.
Research managers within the four divisions spoke of the need for providing ongoing encouragement to their researchers to look to the other divisions for expertise, equipment, etc. As is to be expected after less than three years of integrated operations, there remain cultural differences among the divisions, most especially between the original three institutes and CWFC. For the objectives related to organizational integration and value chain optimization to be met, on-going efforts on the part of FPInnovations managers to look for opportunities for CWFC to work with the other divisions (where appropriate) need to continue.
A number of external forces affect the overall performance of both the Forest Innovation measures and Forest Research Institute Initiative. Some affect delivery (e.g., the extent to which universities, provincial authorities, industry and others will work with FPInnovations to efficiently complete research projects and implement findings); others affect the extent to which the measures ultimately achieve the intended impacts / results.
This last set of forces include the performance of the Canadian economy – currency exchange rates, non-tariff barriers (e.g., phytosanitary regulations), higher energy and log costs, etc.— and lower production costs of Canada’s international competition. The market and pricing strategies of international competitors are beyond the influence of the Canadian industry yet will be a key factor in determining the extent to which these measures, to improve Canadian industry efficiencies and diversify the forest sector’s product mix, succeed in increasing industry revenues and profits.
With respect to Forest Research Institute Initiative and the TTP, the ability of the sector to adopt new technologies, approaches, and overall business strategies (marketing, harvesting, production, sustainable development, etc.) remains a concern. The recent and sharp decline in the number of mills and level of production means that in the near term, there are limited industry resources available to implement either Forest Research Institute Initiative findings, and especially TTP as many of these projects have longer-term pay-offs.
According to a number of industry and FPInnovations’ interviewees, this barrier illustrates the need for ongoing Forest Research Institute Initiative funding as these projects support the sector by: addressing codes and standards issues that will help to maintain existing markets and expand markets for existing products; and modifying technologies, harvesting strategies and mill processes to reduce production costs and improve competitiveness.
- Have there been any unintended impacts of these measures?
Summary: No specific unintended impacts have occurred. There is a potential concern about the need for careful tracking of performance information due to the significant increase in funding provided in Budget 2009 (to be able to report results achievement according to funding).
A review of the measures in the context of industry conditions today shows that the initiatives may have had several unintended impacts on the sector. For example, improving efficiency through the Forest Research Institute Initiative (and supported in part by select TTP investments) might provide a disincentive to diversification. That is, incremental improvements to existing operations (cost savings, productivity improvements) may continue to be the focus of the sectors’ R&D activities and investments in the immediate to intermediate term.
A second potential concern is the impact of the significant increase in funding through Forest Innovation, and more recently Budget 2009 investments in TTP. Implementation of these initiatives calls for careful performance management approaches for each initiative in order to ensure overall program effectiveness and focus. Review of performance measurement frameworks associated with these new measures was outside of the scope of this evaluation; hence this is a potential concern.
Conclusions – Extent to which measures are proceeding as envisioned
In order to harness the capacity of the newly-consolidated institute with academia, new investments were intended to target the longer-term innovation challenges facing the sector. The growth of the forest sector has always relied on technological progress and breakthroughs. It is a large user of high technology machinery and equipment in Canadian manufacturing.
Difficult market conditions faced by much of the industry in recent years have resulted in research efforts being focussed on incremental process improvements and ways to reduce costs. The more recent downturn over the last year (2008) has led to more mill closures, declining production and loss of jobs. The industry's future relies on creating new opportunities to stimulate investments by developing new uses for Canadian forest fibre.
The TTP, designed to pursue breakthrough technologies with longer-term impacts, has also made significant investments in research with shorter-term payback in response to industry needs, thus focusing partially on the innovative application and integration of developed technologies to produce reasonably near-term impacts (e.g., value optimization).
Interviewees are generally satisfied with the TTP, individual projects, and progress to date. In addition, it appears that the focus on shorter-term impacts will continue with the new pilot project funding allocated to FPInnovations/TTP in Budget 2009. This calls for clarification of the nature of the spectrum of results on which the TTP is focused. The TTP management regime, including project selection criteria, performance planning and measurement, should also be modified to reflect a nearer-to-market focus, where appropriate.
In summary, FPInnovations has shown success in terms of organizational integration, covering the value chain and creating some productivity and cost-saving gains for the sector. For example, the TTP investment, in the BC Coastal project contributed to cost savings, as reported by two companies only, of $30 million versus $1.5 million in TTP funding (or $3 million of federal and provincial support).
Analysis of the results achieved to date and feedback obtained from key stakeholders confirmed that approximately 40% to 50% of the identified activities have been met. For example, the TTP has:
- developed a business plan based on CFIC reports and other strategic planning documents;
- developed linkages and, in some cases, Memoranda of Understanding with research partners; and
- developed reports, prototypes and new knowledge.
The TTP has not yet, in all project areas:
- demonstrated progress in developing/adapting transformative or breakthrough technologies (and may not be able to do so in the intermediate term given the current health of the sector and design of TTP projects);
- developed a research program guided by the value chain rather than the research agendas associated with each of the four divisions; and
- developed an effective communications and outreach strategy.
- To what extent has the Board of Directors of FPInnovations been effective in its dual role of (a) guiding operations of FPInnovations (including the CWFC); and (b) promoting relationships with all of the forest research providers in Canada including provinces, academia and industry?
Summary: The Board and Divisional Steering Committees (DSCs) have been effective in providing guidance to FPInnovations and the individual divisions. The overlap in membership among DSCs helps ensure a more integrated research program.
Promoting relationships among all forest research providers is supported in part by the range of stakeholders represented on the Board and DSCs. Other initiatives, such as ArboraNano Network and the NSERC Forest Sector R&D Program effectively promote relationships with academia and leverage FPInnovations’ research funds. Delayed action on the priorities identified in the 2008-2010 Strategic Plan has limited the ability of the original institutes and CWFC to more fully integrate and adopt an approach to R&D planning that focuses on value chain optimization and key technology areas (vs. the traditional focus of the institutes).
In this section, findings related to both Board of Directors management and the DSCs are discussed.
The Board and DSCs comprise representatives from industry, government and academia and meet, on average, twice a year. Based on interviews with DSC members, the committees are satisfied with their ability to provide input to the planning process. However, there were some concerns that research results were not widely disseminated and that more effective ways to communicate the results were needed (e.g., high-level executive summaries rather than detailed technical reports).
According to interviews with FPInnovations management, CFS managers, and some industry contacts, the ‘crisis management’ conditions of the sector during the time period under review meant that managing funding short-falls (due to declining membership revenues) and short-term operational issues have been the focus of senior management leadership within FPInnovations and the federal government.
As a result, few resources were spent on developing a FPInnovations-wide strategic plan around key research theme areas, integrating research agendas across the value chain, and modifying key management structures (e.g., DSCs to align with priority research themes rather than the institutes). The 2008-2010 FPInnovations Strategic Plan proposed this approach and strategy, which was to be driven by VCO rather than existing divisional structures. This Plan was endorsed by the Board to replace the current ‘stove-pipe’ divisional approach.
New initiatives – such as the linkage with NSERC and the ArboraNano53 network and select international partnerships (e.g., METLA in Finland) – were initiated and show a new approach to promoting relationships with forest research providers including academia and international stakeholders.
Interview findings, primarily with industry representatives, identified concerns regarding the approach to innovation/R&D activity planning and management. The impression of some interviewees was that – despite some early strategic planning efforts – FPInnovations was still missing a ‘map’ of how the key research theme areas and individual projects would lead to the achievement of objectives.
A suggestion was made by one senior level interviewee that it appeared that project selection was based more on pre-existing research interests and ‘spending’ the resources than on competitiveness or economic criteria. Others (including select Board, DSC, and government interviewees) felt that FPInnovations had yet to show strong monitoring in terms of project results.
Consistent with interview findings, the 2004 CFIC report concluded that the return on science and technology (S&T) investment in this sector was not being fully realized, that R&D was not driven or guided by a high-level strategy, and that insufficient linkages among the key players were key to addressing these challenges. The Forest Innovation initiatives, under study here, have gone some way to addressing these gaps. However, the sector still operates without the benefit of an integrated, sector-wide strategy (i.e., one that is driven by systemic, overarching goals).
One sector expert contacted for this study put forward the notion of a national forest research strategy, one that would be developed along the lines of the Technology Roadmap developed by Finland (which is now working on updating its first strategy). The roadmap process helped align public, private and research sector expectations. It also identified new uses for wood, including industrial and commercial, cross-laminated timber and developed demonstration projects to help build / strengthen the country’s wood culture. Consistent with several other interviewees (FPInnovations, industry, and sector experts) this interviewee stated that “Canada should go through a similar exercise to get alignment of expectations and overall approach to R&D strategy and priorities; the process is as important as the end report.”
In 2008, the Board sought to re-balance the research program to incorporate the ‘change agenda.’ The outcome was the 2008-2010 Strategic Plan which identified four key objectives:
- develop technologies that will enhance the forest sector’s value chain;
- build new partnerships (especially with universities);
- put more emphasis on transformative technologies; and
- focus on capturing the full opportunity offered by the emerging bioeconomy.
This Strategy moved FPInnovations away from its division-based structure and toward a matrix management approach. Despite these efforts, management, priority-setting, project management and reporting remain at the division level.
A number of interviewees noted that while there had been a good start, linkages could be improved especially among researchers at CWFC and other divisions and between FPInnovations and science-based initiatives such as Canada’s Model Forest Program.54
Conclusions – Effectiveness of Board (and DSCs)
The Board and DSCs have been effective in providing guidance to FPInnovations and the individual divisions. The overlap in membership among DSCs helps ensure a more integrated research program. However, delayed action on the priorities identified in the 2008- 2010 Strategic Plan has limited the ability of the original institutes and CWFC to more fully integrate and adopt an approach to R&D planning that focuses on value chain optimization and key technology areas (vs. the traditional focus of the institutes). Greater integration will necessitate the replacement of Divisional Steering Committees with research theme-focussed advisory committees.
Promoting relationships among all forest research providers is supported, in part, by the range of stakeholders represented on the Board and DSCs. Other initiatives, such as ArboraNano Network and the NSERC Forest Sector R&D Program,55 effectively promote relationships with academia and leverage FPInnovations’ research funds.
Conclusions – Progress towards objectives
There is a range of evidence that demonstrates progress towards objectives of each of the four measures under review (i.e., the consolidation of the three institutes, the creation of CWFC, TTP and Forest Research Institute Initiative). Some of the measures have already led to the impacts envisioned (e.g., consolidation and Forest Research Institute Initiative), while others appear to be on track to generate benefits to the sector (CWFC and TTP).
Program documents and reports, as well as interview findings, reveal that some project-level research activity may not meet the two- or five-year targets identified at the start of the projects. In some cases it is a result of research findings not bearing out as expected, leading to a change in focus and/or project expectations. In other cases, the fact that industry is focused on short-term cost-savings and productivity improvements caused FPInnovations researchers to modify their work plans to better respond to their members’ priorities/needs. Details are presented below.
- In what ways has the CWFC research program made progress toward adding value to Canada’s forest fibre? How?
Summary: Insufficient time has elapsed to enable conclusions to be drawn regarding the impact of CWFC research on adding value to Canada’s forest fibre.
CWFC’s project planning and priority assignment are focused on adding value to the fibre value chain. The CWFC projects appear to be well-integrated with the rest of FPInnovations and reflect input from industry, provinces and other research organizations.
Further integration with FPInnovations’ strategic plan and VCO approach, as well as improved knowledge communication are needed.
The contribution, structure and operations (including integration with other FPInnovations divisions) of CWFC are a work-in-progress.
The projects supported by CWFC have shown strong linkages with other divisions of FPInnovations. As the evaluation team noted above, almost 90% of CWFC projects have involved at least one other FPInnovations division. CWFC managers and researchers report that consultations between CWFC staff and other CFS researchers are encouraged on both FPInnovations and other NRCan projects.
The document review and interview findings showed that current CWFC priorities had evolved, and were guided by regional consultation meetings with industry, provinces, other research organizations, and feedback from the Divisional Steering Committee. These consultations helped ensure that the program of activity was meeting the needs of the sector and working toward adding value to the fibre value chain.
In 2007, a proposal for a partnership between FERIC division and CWFC for an extension network (for ten officers throughout the country) outlined the need for a national network of technology transfer agents to promote the implementation of R&D findings and new technologies across the sector. The Network involved CWFC and FERIC division due to the synergistic nature of their respective research program and clients. The proposal posited that the technology diffusion and timely transfer of research results are critical to the success of FPInnovations and its research programs. Key performance measures developed for this Initiative include the extent of the Network, and the number and success of conferences, workshops and other technology transfer vehicles, the extent to which the technology is adopted/adapted, and the impact of the technology.
Two aspects of industry information provided by this evaluation’s interviews are of concern:
- Industry interviewees noted that CWFC management was receptive to their comments and modified their research program based on industry priorities; however, these priorities included a greater focus on forest inventory over the initial focus on fibre characteristics.
- While early signs of linkages are promising, some senior level interviewees expressed concern that they did not yet see the connection of CWFC work to forest industry competitiveness objectives.
Conclusions – CWFC’s progress toward adding value
CWFC has been in operation for three years and is showing progress towards its key objectives. Assessing progress against the program theory, confirmed with key stakeholders, showed that approximately 50% to 60% of the identified steps/activities have been delivered. The CWFC has:
- developed an internal governance system;
- worked on an accountability structure; and
- started to collaborate with other FPInnovations’ divisions and generate new knowledge relevant to client needs.
However, more work is required to make progress towards:
- joint governance of CWFC with FPInnovations;
- alignment of CWFC’s research priorities and strategies with those of the other divisions (or along key research theme areas once the institutes have been disbanded) to generate a national, integrated R&D program; and
- improve information dissemination and technology transfer to industry and public sector clients.
Document review and interview findings revealed that additional efforts to support a more consolidated approach – to (i) aligning efforts with FPInnovations Strategic Plan and Value Chain Optimization; and (ii) improving knowledge exchange and communications within FPInnovations and externally – were needed when examining CWFC’s participation in this new organization.
Information sharing within NRCan has begun, and there are opportunities to leverage the expertise of other CFS researchers and share project results with the CWFC further. As in other areas of forest innovation, technology/knowledge transfer remains a challenge and requires new approaches and tools to meet the needs of the research and industry communities.
- In what ways has the FPInnovations strategy taken steps to maximize the value of forest products and increase the competitiveness of the sector?
Summary: A number of key steps have been taken that are intended to lead to maximizing the value of forest products and increasing sector competitiveness. These include integration of the three not-for-profit forest research institutes, creation of an up-stream research institute, adopting the Value Chain Optimization approach to strategic planning, project selection and delivery, completion of the Biopathways study, formation of new partnerships and alliances, and contributions of Forest Research Initiative Institute funding and TTP projects.
The FPInnovations approach and strategy have made a number of advances towards maximizing the value of forest products and increasing the competitiveness of the sector. Some of the key ones, as discussed earlier, include:
- The integration of the three institutes to address the research ‘silos’ that had been previously observed.
- The creation of an up-stream research institute (CWFC) to address the lack of research into fibre characterization, quality and inventory.
- Steps to adopt a Value Chain Optimization approach to strategic planning, project selection and delivery (made possible due to the first two points). FPInnovations managers and sector experts interviewed report that VCO principles have been successfully adopted by forest product companies in New Zealand, South America and Europe. This approach focuses first on value-added markets (not commodity markets) and works back through the supply chain to influence manufacturing, and forest management and operations. A number of TTP projects support the VCO approach (e.g., the B.C. Coastal Initiative), as does the Green River thinning trials and FERIC-Division’s precision forestry work. A roadmap for R&D in VCO was in preparation at the time of this study;
- Participation in the Biopathways study (managed by FPAC and NRCan) that is examining emerging bio-products/technologies, quantifying key economic, social and environmental metrics, assessing the market potential of emerging bio-products, and exploring new approaches to managing the value chain (supply chain management, alliances/partnerships). Prior to the creation of FPInnovations, research into bio-products would not have fallen to a single forest research institute; with the amalgamation, there is improved coordination and a greater ability to meet the needs of these emerging markets and technologies.
- Formation of new partnerships and participation in new alliances (e.g., NSERC Forest Sector R&D Initiative designed to be delivered in collaboration with FPInnovations with a focus on biomaterials and chemicals, innovative wood products and building systems, innovative green papers and value chain modelling).
- TTP projects, often building on Forest Research Institute Initiative/National Research Program findings and capacity, have the potential to diversify the wood product mix, expand the application of structural lumber (e.g., into taller buildings), ensure that value of fibre is maximized by refining silviculture and harvesting techniques, and increase the economic and environmental performance of forest operations through enhanced transportation and milling strategies.
FPInnovations has been in place for only two years and the sector is facing unprecedented economic challenges; therefore, the extent to which the above noted projects have led to, or could be expected to lead to impacts on the sector is limited.
Several interviewees mentioned the proposal to move away from the current FPInnovations structure (i.e., around four divisions) and organize around research themes, to facilitate the new integrated approach to strategic planning and VCO (as outlined in the 2008-2010 FPInnovations Strategic Plan). This approach has been supported by the various DSCs and Board and is seen as a critical step for complete organizational integration and effective research planning.
Despite recent and ongoing efforts to innovate across the forest products value chain, a review of Canada’s forest sector exports shows that the market development end of the value chain continuum – especially as related to value-added, secondary products – may require a greater focus and new approach. It is clear that a number of sector actors are choosing an alternative route to a domestic forest products value chain. A significant volume of Canadian raw or semi-processed wood is shipped offshore (much of it to Asia) where it is processed and eventually returned as higher value-added products to North American (including Canadian) consumers.
FPInnovations has taken a number of positive steps to improve the value of Canadian forest products and the competitiveness of the sector. Unfortunately, current international market conditions appear to provide a powerful incentive for forest products companies operating in Canada to export logs or semi-processed wood to be processed offshore. This, combined with decreased demand for Canadian fibre in international markets, led to shut downs in mill operations in Canada.
It is therefore not surprising that FPInnovations’ private sector membership levels and fees have been declining drastically in the past few years (to under $10 million annually from over $40 million in 2004-05). Furthermore, a number of FPInnovations’ significant recent projects have been conducted with privately-held, medium-sized companies which may have more ‘patient capital’ than that of larger, publicly-held organizations. Taken together, these behaviours and market trends suggest that the sector may not be ready to take the path to competitiveness identified in FPInnovations’ plans.
In conclusion, FPInnovations has made progress in terms of integrating innovation activities on the supply side of the spectrum (e.g., the introduction of the VCO approach). Barriers remain, however, in terms of addressing international market development elements (e.g., product mix, pricing, and delivery logistics) and conditions, a number of which are policy-related56 and some of which fall under provincial jurisdiction and thus are beyond the direct scope or influence of the Forest Innovation Initiative.
However, as one goal of FPInnovations is to ‘facilitate speaking with a common voice’ on forestry matters, the Board, CFS, FPInnovations managers, and DSCs should look to support the organization in addressing these issues which appear to be significant barriers to the future success of FPInnovations, TTP initiatives and contributions to the competitiveness of the sector.
- How well (effectively, efficiently) do the organizations involved work together to achieve the common objective of supporting the long-term competitiveness of the forest industry (e.g., in terms of policy, communications, coordination, decision-making)?
- To what extent have the operations of the four divisions involved in FPInnovations been integrated (e.g., in terms of policy, communications, coordination and decision-making as well as financial, human resources management and administration systems)?
Summary: The processes are ongoing but key steps have been completed such as integration of the three forest research institutes in the financial, administration and human resource areas.
Integrated projects are underway: about 30% of TTP projects involve two or more FPInnovations divisions, and over 85% of CWFC projects involve at least one other division. There are signs that the integration is beginning to address ‘gaps’ or needs in the forest innovation spectrum, and also provides a greater focus on the sectors’ needs and appropriately integrated approaches to address forest innovation.
Work remains to be done on creating a single corporate culture.
The operations of the three forest research institutes were integrated over a period of two years. A single financial reporting system (FUSION) was launched on April 1, 2009 which represents a milestone in the overall consolidation process. Other administrative and human resource systems and policies have been put in place to facilitate cooperation across the divisions. Research managers report that it is now simpler to work on projects with research team members from other divisions.
Each Division has its own steering committee. In the case of FERIC and CWFC, there is an overlap in Steering Committee membership which has helped to identify and implement joint project priorities. These DSCs have some benefits for industry stakeholders, providing a dedicated focus to the relevant industry sub-sectors. On the downside, the DSC structure does not facilitate the move to VCO planning nor facilitate “speaking with a common voice”.
NRCan managers believed initially that the consolidation of the three not-for-profit forest research institutes would lead to a lessening (or loss) of use of the three separate research groups’ names (e.g., that the entire organization would operate under the FPInnovations title); this has not happened and the three groups operate as divisions of FPI, with no loss in use of names – note that the FPInnovations Strategic Plan 2008 –2010 outlined a strategy for change for the organization that removed references to the four divisions and instead organized around four Flagship Innovation Programs: Value Chain Optimization, Building and Living Solutions, Next Generation Pulps and Papers, and Bioenergy, Chemicals, and Advanced Bioproducts.
File reviews and interviews confirm that, while some aspects have been delayed, there are signs that the new FPInnovations consolidation has made progress despite some serious barriers.
A number of new, more collaborative projects involving cross-divisional resources have been started, particularly in the area of value chain optimization: almost 30% of TTP projects involve two or more FPInnovations divisions, and over 85% of CWFC projects involve at least one other division. There are signs that the integration is beginning to address ‘gaps’ or needs in the forest innovation spectrum, and also provides a greater focus on the sector’s needs and appropriately integrated approaches to address innovation in the forest.
- To what extent are mechanisms and processes in place to support ongoing integration?
Summary: To a substantial extent, mechanisms and processes are now in place to support ongoing integration, including financial systems, human resource systems and plans, and funding allowing CFS researchers to participate in FPInnovations projects.
Integration is not yet complete, but major accomplishments have been achieved.
Ongoing integration is supported by a number of mechanisms and processes, including:
- an integrated financial system (FUSION);
- an integrated HR system and plan;
- dedicated funding to CWFC that allows CFS researchers to participate in FPInnovations projects; and
- an effective Divisional Steering Committees and Board.
In summary, there is a consensus among the stakeholders interviewed that integration has led to a larger, more effective organization able to address the range of issues facing the sector, although ongoing improvements are necessary.
- Is there evidence to date of improved efficiencies or cost savings associated with the integration of the research institutes?
Summary: This evaluation did not identify any cost savings associated with the integration, nor was a specific target identified (this was more of a general expectation on the part of industry). However, the majority of interviewees that spoke to this issue had seen greater research efficiencies (planning, better project definition, more efficient delivery) and expected to see more in the future.
The evaluation study did not identify any cost savings associated with the integration, nor was a specific target identified (this was more of a general expectation on the part of industry). However, interviews showed evidence of improved project design and delivery which implied greater efficiencies and cost savings were likely to be realized (for example, sharing of research results, increased engagement of CFS research staff, dissemination of research findings through R&D bulletins and fact sheets, new R&D partnerships).
A number of FPInnovations managers interviewed do not expect to see significant cost savings in terms of operations (i.e., lower overhead and administration costs). However, the majority of interviewees that spoke to this issue have seen greater research efficiencies (planning, better project definition, more efficient delivery)57 and expect to see more in the future.
Conclusions – Efficiency and effectiveness of operations
In conclusion, the organizations involved are working together to achieve the common objective of supporting the long-term competitiveness of the forest industry.
Assessing progress against the program theory and confirmed with key stakeholders shows that approximately 50% of the identified steps/activities have been met taking into account the TTP and the formation of FPInnovations. There are financial and administrative systems in place to support the ongoing integration of policy, communications, co-ordination, decision-making across the organization. FPInnovations has developed a new, interim governance system and accountability structure, developed an integrated business plan that identifies key strategies and new objectives, and promoted research linkages across the four divisions.
However, there are some key areas critical to the success of the new organization where progress has been slow (due in part to the financial health of the sector and therefore the organization). These include:
- aligning strategies and programs with the needs of the forest sector and government priorities;
- addressing the research ‘silos’ by disbanding the divisional structure and organizing research priorities by theme areas along the value chain; and
- further promoting research collaborations with traditional forest sector companies, academia, and non-traditional partners whose input (technical, financial and market) is required to support the development of novel, ‘transformative’ technology.
- To what extent have relationships with all the forest research providers in Canada – including provinces, academia, and industry – been established to support innovation in the forest sector? In what other ways has progress been made toward this end among the stakeholders?
Summary: The consolidation of the three forest research institutes, and the creation of CWFC, facilitated greater interaction among FERIC, Forintek, Paprican and CFS researchers (as measured by the number of joint projects).
External linkages of forest researchers have been supported by a number of new programs including the NSERC Forest Sector R&D Initiative, ArboraNano Network, and the new funding for TTP.
Linkages with private sector organizations outside the traditional forest sector have been established. Some interviewees expressed concern that FPInnovations would need to pursue user industry linkages more aggressively (such as those in the chemical, biochemical, energy, automotive or manufacturing sectors).
FPInnovations continues to benefit from the linkages among the individual institutes and other research organizations that were in place prior to consolidation. In general, the linkages with industry (especially the larger players but also some of the small and medium size firms) are strong. The level of membership (although in decline to the ability to pay the annual fees) is still vibrant, and regular participation of industry members in the Board of Directors and the four Divisional Steering Committees are measures of the degree of involvement and consultation.
More recently, a new mechanism to facilitate research linkages with universities was developed. The NSERC Forest Sector R&D Initiative is designed to enhance linkages between FPInnovations and the Canadian academic research community. This Initiative will allow universities to more readily participate in FPInnovations research (prior to this program, university funding was more limited).
In February 2009, ArboraNano – the Canadian Forest NanoProducts Network – was selected as one of four new Business-led Networks funded by the Government of Canada.58 ArboraNano will receive $8.9 million over four years. The R&D network will bring together nanotechnology and forest sector expertise to research innovative, highly-engineered, carbon-neutral products containing nanomaterials. The Network will research ways to convert wood and wood fibre from Canada’s forests into high-value nanomaterials and intermediates to be used to produce a variety of unique advanced products. These nanomaterials and the products developed from them will have applications in industrial sectors, including aerospace, automotive, medical devices, chemicals, composites, cosmetics, pharmaceuticals, coatings and forest products.
There have been some linkages formed with private sector organizations outside the traditional forest sector. Some interviewees expressed concern that FPInnovations would need to more aggressively pursue user industry linkages such as those in the chemical, biochemical, energy, automotive or manufacturing sectors.
Conclusions – Relationships among forest research
The consolidation of the three forest research institutes, and the creation of CWFC, has facilitated greater interaction among FERIC, Forintek, Paprican and CFS researchers (as measured by the number of joint projects).
With respect to external linkages, a number of new programs have helped support relationships among forest research providers, including the NSERC Forest Sector R&D Initiative, ArboraNano Network, and the new funding for TTP.
FPInnovations has well-established research relationships with the forest sector. The forest sector’s ability to maintain these research relationships and participate in forest R&D is being tested by current economic and industry conditions.
Forest Research Institute Initiative Specific Results/Success Issues
- To what extent were the requirements of the Contribution Agreements for Forest Research Institute Initiative measures met (e.g., production of strategic and annual work plans, performance measurement)?
Summary: The requirements of the FERIC and Forintek Contribution Agreements for Forest Research Institute Initiative funding were met entirely. Strategic plans, work plans and annual reports were produced.
The Contribution Agreements for Forest Research Institute Initiative funding required FERIC and Forintek to prepare a strategic plan, annual work plan and annual report.
- The strategic plan was to be brief, outlining the general research direction for the work to be conducted, describing the expected economic impact on the industry, setting performance targets, identifying linkages to federal priorities and providing guidance for annual work planning processes.
- The annual work plan was to provide details of the research projects to be conducted for the upcoming year, specifying the relationship to long-term goals/strategies, key objectives, deliverables, milestones, measurable outcomes and expected impact.
- The annual report was to summarize the progress and results of research undertaken linking inputs and activities to the strategic plan.
Schedule C of the Contribution Agreements provided a performance measurement strategy for the Agreements and required the recipients to set targets in the strategic plan and collect and analyze performance information annually by specified strategic project areas. This was to be done through the recipient’s project monitoring system.
- To what extent was performance data collected and used for decision-making?
- Were strategic plans and annual work plans developed as described in the contribution agreement and if so, what results did they have?
Summary: The requirements of the contribution agreements for the provision of strategic plans, work plans and project technical progress reports have been met. The requirements to monitor and report on performance against results targets as set in the strategic plan have been met.
Higher-level performance data such as satisfaction levels, costs savings, reductions in fuel consumption and greenhouse gas emissions avoidance was reported in the five year summary reports (but not analyzed/substantiated) by both Forintek and FERIC.
The level of performance data collected and reported appeared to be mainly useful for the operation and day-to-day management of individual projects, complying with the technical progress reporting requirements of the contribution agreements, and informing the ongoing technical review of projects.
Project outcomes/impacts are not often presented in project proposals and do not appear to be consistently collected and reported as the projects proceed. Without such information, it is not possible to gauge the relative success of Forest Research Institute Initiative funding in terms of impacts and to objectively support decisions regarding the continued relevance and priority of a project.
FERIC and Forintek provided brief strategic plans for the period 2005–2010 which complied with the requirements of their Contribution Agreements.
FERIC identified several outcome performance indicators in its strategic plan and set performance targets for them. These indicators encompassed items such as uptake for research results (50% of FERIC members); level of membership satisfaction (80%); industry cost savings ($50M), reductions in fuel consumption (200 million litres per year); and GHG emissions (500,000 tonnes per year); and workplace accidents and injuries (three injury reduction practices implemented). These targets applied to all FERIC activities and were not divided by strategic project areas.
Forintek also specified indicators and targets for outcomes in its strategic plan such as reductions in manufacturing costs (five technologies resulting in 5% production cost reductions, and 10% reductions in energy consumption); maintenance or expansion of markets for wood products (two cases where Forintek intervention led to regulatory revisions that protected or expanded markets), uptake for research results (50% of Forintek members), and level of membership satisfaction (80%).
FERIC’s annual work plans provide a performance framework for each strategic project areas – Forest Operations, Transportation and Roads, and Operations Management and Control with end outcomes that link to federal priorities for the forest sector. Within each of these three areas, a number of individual research projects are described including key objectives, activities, deliverables, milestones, outcomes and expected impacts. Project clients and partners are also identified. Some specific targets involving cost savings, operational efficiencies and value increased are given for the outcomes and expected impacts of individual projects, usually in percentage terms. Budgets for each project are also specified.
Forintek’s annual plans are also organized around three strategic project areas: Building Systems/Markets & Economics, Manufacturing, and Resource. For each of these strategic areas, a compendium of Planned Project Statements is provided. Each project statement includes a description of long-term goals/strategies, key objectives, key actions and deliverables and milestones. Also included is information on the status of the project’s deliverables from the last year, the partners and collaborators and the project’s rationale and potential impact. The focus of the plan is on the technical subject matter of the research. Potential impacts are presented in general terms such as the opportunity to expand the wood market but few, if any, targets or estimates are established for these impacts. Labour costs and non-salary expenditures are given by program area.
FERIC’s annual reports continue to group projects under the strategic project areas used for its annual work plan. Details on each project undertaken include resources used (billable expenses, additional revenue, full-time equivalent usage and capital expenditures), the partner/intermediary support received, project deliverables and the milestones achieved. A summary of performance information on some outputs, activities and immediate outcomes for the entire division are provided including such items as the number of face-to-face contacts, events organized with participation levels, number of reports produced and their distribution levels, downloads of presentations and software and website hits and registrations.
Forintek’s annual reports also build on its annual plans using the same strategic project area structure and project compendium. The Project Statements from the annual plan serve as the basis for the Simple Progress Reports in the annual reports. The description of long-term goals/strategies, key objectives, key actions and deliverables, status, partners and collaborators, and the project’s rationale and potential impact remain the same. A description of the work completed during the fiscal year and the publications or patents produced are reported annually. As in the work plan, the focus of the annual report is on the technical subject matter of the research. Aside from the descriptions of activities and outputs in individual project reports, no other performance information is provided in Forintek’s annual reports.
Five-year performance reports were developed as required by the contribution agreements by both Forintek and FERIC. These reports provide summary data of achievements without substantiation of the results reported; however, those projects contained in the two summary reports that pertained to the case studies carried out for this evaluation, for the most part, were consistent with case study data. Because of the timing of provision of the reports to the evaluation team (February 2010), appropriate follow-up in the evaluation interviews with Forintek and FERIC representatives was not possible — hence the evaluation can conclude only on the data related to the case studies.
Conclusions – Compliance with Forest Research Institute Initiative Contribution Agreements requirements
The requirements of the contribution agreements for the provision of strategic plans, work plans and project technical progress reports have been met.
The requirements to monitor and report on performance against results targets as set in the strategic plan have been met. There is some evidence of systematic monitoring and reporting of outputs and immediate outcomes by FERIC, largely at the level of reports distributed, clients reached and product uptake. There was no such evidence available for Forintek.
As for higher-level performance information – such as satisfaction levels, costs savings, reductions in fuel consumption and GHG – data on these areas was reported in the five-year summary reports (but not analyzed/substantiated) by both Forintek and FERIC.
The level of performance data that was collected and reported appeared to be mainly useful for the operation and day-to-day management of individual projects and for complying with the technical progress reporting requirements of the contribution agreements. It might also be useful for informing the ongoing technical review of projects. Prospective project outcomes and impacts were not often presented in project proposals and did not appear to be consistently collected and reported as the projects proceed. Without such information, it was not possible to gauge the relative success of the Forest Research Institute Initiative in terms of impacts and to objectively support decisions regarding the continued relevance and priority of a project.
The program files examined as part of this study included assessments and report cards produced by FERIC for individual industry partners, which report on benefits of FERIC’s work. Forintek does not appear to follow this reporting practice. The benefits in these report cards are largely expressed in terms of operating cost savings and then compared to the costs of the services funded by individual industry partners to yield benefit/cost ratios. In addition, the Forest Research Institute Initiative case studies show that information on the outcomes and impacts of some projects can be produced with relatively modest additional data collection and analysis effort on the part of FERIC and Forintek staff.
Case studies performed for this evaluation demonstrated that reporting on economic, environmental and other non-technical outcomes and impacts is possible.
- To what extent were the objectives of the Forest Research Institute Initiative achieved?
Summary: The objectives of the Forest Research Institute Initiative Contribution Agreements, four each for FERIC and Forintek, have been met and remain important as ongoing objectives for the Canadian forest sector.
The quantitative impacts found in case studies of four Forest Research Institute Initiative funded areas – combined with the estimated value of Forintek’s participation on six national and 12 international committees as Canada’s representative – exceeds the value of the Government of Canada's investment (via the Forest Research Institute Initiative) over the past five years. Using conservative, reasonable estimates of attribution, the Forest Research Institute Initiative funding provides a significant positive return (3:1) on the Government of Canada’s investment.
Based on the annual reports provided by FERIC and Forintek, in compliance with the contribution agreements, it appears that the majority of Forest Research Institute Initiative projects are on schedule and on budget. The annual reports do not include a variance column or explicitly highlight issues or problems with project delivery. This information would help support periodic reviews and evaluation studies.
- * reduce manufacturing costs of wood products;
- * maintain and expand markets for wood products and systems;
- * improve and/or diversify products; and
- * improve value from the forest.
A preliminary analysis59 recently completed by Forintek’s Markets and Economics Group (2009) showed that without continued wood research and activities to monitor domestic and international market access and building codes and standards committees to ensure fair access to wood products, competing materials and technologies could substantially erode the wood share of the building material market.
The analysis estimated potential annual market losses to wood products of between $5.0 million and $8.3 million (US) in the U.S. market due to substitution from other materials. The range reflects a low/high wood substitution scenario, representing a potential loss of between 30% to 50% of the total $17.1 million (US) wood market to other materials and systems. Average annual Canadian lumber and panel exports to the U.S. market are estimated at $11.1 million (US) and a potential loss of 30% to 50% of this market would be devastating to the industry.
Based on document review and interview findings, Forintek staff routinely provide advisory services and technical assistance to CFS when needed. When the expertise is not available in-house, the Forest Research Institute Initiative --or National Research Program (NRP) – supports new research projects to generate the required research results. These NRP projects are undertaken according to the direction and priorities of the appropriate FPInnovations-Forintek division technical committees. Public good concerns that have been addressed include air quality and human health in homes that use wood products, volatile organic compound emissions from composite wood produces, and mould from wood products.
Forintek staff participate in 18 national and international committees, and over 70 technical sub-committees. These groups are focused on research, codes and standards related to structural, fire, durability and composites’ performance (data based on current membership lists provided by Forintek research managers). This participation is supported in part by the Forest Research Institute Initiative funding provided by NRCan. The committees include the: Canadian Standards Association; Canadian Wood Council; National Building Code of Canada; International Organization for Standardization (ISO); American Lumber Standards Committee; American Society for Testing and Materials; and National Lumber Grades Authority. Participation on these committees has helped to address existing and emerging non-tariff barriers that threaten the ability of the Canadian forest sector to sell their products nationally and internationally.60
Following is a summary of seismic and fire research case study with both private sector and public sector benefits that illustrate the extent to which the Forest Research Institute Initiative objectives were achieved.
Forintek researchers are actively involved with more than 70 national and international committees and sub-committees concerned with building codes and standards. The research conducted by Forintek staff allows them to provide technical information to national and international codes and standards committees in an impartial fashion that address seismic and fire related properties and performance of Canadian wood, wood components and building systems and provide an opportunity to influence the codes and standards that are developed to ensure fair access for Canadian wood products and systems to domestic and international markets.
The seismic case study showed that Forintek’s intervention to overturn a U.S. regulatory proposal to double the seismic design loads for wood frame structures in the U.S. protected the Canadian market from a potential market loss of between $164 million and $294 million (U.S.), or an estimated $4.6 million to $7.6 million (U.S.) contribution to the Canadian wood industry’s bottom line.
The seismic case study also illustrated a number of other impacts from Forintek’s interventions with regulatory authorities. These included working with the Canadian Wood Council to open the way for building five and six storey wood frame residential buildings in Canada, expected to yield new domestic and U.S. markets for wood.
Forintek has also worked cooperatively with authorities in Japan on construction and earthquake testing of full-size six-storey residential test buildings. This work has the potential to open new markets in Japan. Finally, the efforts of Forintek personnel on various codes and standards committees to update the National Building Code of Canada (NBCC) is aimed at rationalized design provisions for the small, well-built wood frame buildings in areas of high wind and earthquake prevalence.
This change to the NBCC will mean Canadians will continue to have safe, solid homes at costs that do not reflect over-engineered and wasteful construction. For the industry, this means competitive pricing in an area where other building materials may currently provide less expensive NBCC-approved solutions. While the potential economic impact of these opportunities appears substantial, there was insufficient data available to accurately assess the benefits of these opportunities.
The adoption of objective-based codes for fire safety in Canada and performance-based codes in other countries has created new opportunities for wood structures, at home and abroad, provided these wood structures can be shown to deliver an acceptable level of fire safety. Forintek is working with Carleton University’s Chair in Fire Safety Engineering and other stakeholders to develop computer models that predict the response of wood frame assemblies when exposed to fire and the fire performance of four-storey wood-frame commercial buildings.
Armed with the results of Forintek’s modelling, the wood products industry can demonstrate that wood-based non-residential buildings and assemblies perform as well in fires as non-wood systems. This will put the industry in a better position to compete for non-residential market share in a performance-based environment while ensuring the continued and improved safety and well-being of Canadians.
Currently, only 10% of the floor area of one-to-four storey non-residential buildings in North America is built with wood. The potential market for the remaining 90% would have an estimated annual market value of $ 1.6 billion U.S. With a conservative Canadian market share factor of 33%, this would amount to a potential market of up to $430 million U.S. for Canadian wood products, or a potential bottom line contribution of $12.5 million U.S. per year to the industry that could be realized in the longer term.61
In Canada, Forintek has been testing the fire performance of unprotected ground-level floors in single-family dwellings with eight different floor assemblies. The results have demonstrated that single-family houses, constructed with wood-based structural elements, provide acceptable performance whereas some non wood-based systems may not. These test results have protected the existing wood products market while casting doubt on some non-wood alternatives.
Forintek has also been participating in initiatives directed towards Asian markets in conjunction with the Canada Wood Group.62 Exports of Canadian lumber to Asian markets amounted to $1.3 billion in 2006 with the majority going to Japan. Building on its work in Japan, in 2001, in developing designs of wood-frame assemblies that meet the stringent fire requirements in urban centres, Forintek extended its activities into Korea and China to demonstrate that wood frame assemblies could be designed to meet the fire and acoustical codes of those nations. These efforts also included teaching local architects, engineers and developers how to construct wood-frame buildings. Forintek’s initiatives are beginning to pay dividends to the point that it is anticipated that exports of Canadian wood products to China will soon surpass those to Japan.
Industry representatives estimate that, for 2009, exports for spruce, pine and fir lumber to China for housing will approach 120,000 to 150,000 million board feet63 (MBF) valued at approximately $40 million (U.S.) and representing an annual bottom line contribution of $1 million (U.S.) to the industry. Projections to 2018 estimate that 500,000 MBF will be exported from Canada valued at $136 million (U.S.) at current prices. The industry representatives interviewed for this study considered that all of this increased demand can be attributed to Canadian efforts to open the market and that Forintek played a key role in this achievement.
- *improve competitiveness of Canadian forest operations and products through cost reduction, enhanced product quality;
- *improve national and international perception of Canadian forest practices resulting in continued social license to practice and increased market access;
- *reduction of greenhouse gas emissions from Canadian forest transport operations toward meeting Canada’s commitment to the Kyoto Protocol; and ;
- *improve sustainable forest practices.
FERIC-Division provided measures of select outputs in their 2007-08 and 2008-09 annual reports. These are shown in Table 7.
|Face to face contacts||2,450||Over 2,000|
|Reports||Distribution list of 840
Over 190 reports downloaded or requested (web counters not always working)
|Distribution list of 793
Over 100 reports downloaded or requested (web counters not always working)
|Events||42 regional events, over 1,630 participants
2 international conferences, over 300 participants
|97 regional events, over 2,000 participants|
|Solutions newsletter||2,700 on distribution list||2,634 on distribution list|
|Solutions/Presentations||822 downloads||288 downloads|
|Software||172 activations||212 activations|
|Website traffic||39,000 hits
1,357 registered members with access to restricted information
|Website hit counters not functional
1,220 registered members with access to restricted information; total of 17,000 downloads
Source: FERIC Annual Reports to CFS/NRCan.
A summary of seismic and fire research case study findings, with both private sector and public sector benefits, illustrate the extent to which the Forest Research Institute Initiative’s objectives noted above were achieved.
FERIC’s transportation and harvesting operations research are yielding significant results and generating cost savings and efficiencies, reducing fuel consumption and greenhouse gas emissions, improving sustainable forest practices and protecting the industry’s social license to practice, and improving the health and safety in the workplace.
The transportation of raw fibre from forest harvesting operations to the various types of conversion mills is a significant cost component of the overall fibre supply costs and can be as much as 50%. As such, improving the efficiency of this segment of the supply chain is a major program activity at FERIC. The Transportation Research case study, which examined four transportation projects undertaken by FERIC, showed that these projects have significantly improved the load-carrying capacity of forestry trucks and trailers without adversely affecting the stability and safety of those vehicles.
FERIC demonstrated this to regulatory authorities and helped get those vehicles approved for use on public roadways. Annual savings of $8.6 million and 6,544 tons of GHG reductions have resulted from three of the projects and a fourth, recently completed, is expected to yield estimated annual savings of $6.0 million and 2,200 tons of GHG reductions.
A fifth transportation project to produce guidelines for load weight and speed on off-highway trucks helped operators descend steep forest roads more safely and access and operate in some areas of steep terrain without the need for expensive road construction. While there are no systematic data available on off-road forestry accidents, and injuries and deaths involving steep inclines, informed individuals reported that the incidence of accidents or injuries attributable to steep grade log transport have been significantly reduced.
A sixth transportation project involved the use Tire Pressure Control Systems (TPCS) to improve the productivity of forestry trucks and reduce infrastructure damage. FERIC has 20 years of experience in adapting TPCS technology to the forest sector and has been able to prove the road-friendliness of variable tire pressure systems to regulatory authorities. This has allowed transport operators with TPCS-equipped trucks to be exempt from Seasonal Load Restrictions (SLR) on approved routes. They are able to haul full loads over an extended operating season with significant operational cost savings. The case study shows that B.C. operators have annually saved an estimated $5 million in operating costs (fuel, regular maintenance, etc.) and $3 million per year in truck repair costs for B.C. and Alberta operators.
The Ministry of Transportation of Ontario is expected to approve a TPCS SLR program in the near future. Anticipated savings to Ontario operators are conservatively estimated at $6 million annually, with tertiary road64 maintenance cost reductions of $750,000 per year.
The harvesting operations case study includes a partial cutting technology project and a precision forestry project.
FERIC has developed an innovative, operationally-viable technique called the 1-2-3 shelterwood harvesting method for implementing partial cutting treatments in all major forest stand types and extensively tested this on several member company operations. This harvesting method involves regenerating the forest by selectively removing a proportion of the larger trees in stands approaching maturity 10 -15 years prior to harvesting so that an understory of young trees can be well established by the time the mature forest is harvested.
To date, nearly 4,000 hectares (ha) have been harvested using the techniques developed by FERIC, representing around 200,000 cubic metres (m³) of socially and silviculturally acceptable raw material to the mills at a viable cost. While this still represents a small portion of the total timber harvest in Quebec, this number is expected to grow significantly as companies prepare their new general management plans for 2013. The work that FERIC has done in this area has helped forest companies, especially in eastern Canada, maintain their social license to operate (i.e., provide nearby residents and the Canadian public more broadly with assurances that harvesting practices are responsible and sustainable), thus providing wood to their mills and supporting increased competitiveness in an increasing challenging environment.
Better supply chain management is critical for the forest sector to enable value chain maximization and the transformation from a product/technology “push” mode to a “pull” mode. FERIC’s Precision Forestry Program develops innovative solutions and improvements to operational planning, field data acquisition and operations monitoring.
One of the major success stories from this program has been the introduction of a series of hardware and software systems which include MultiDATS, FPDats, FPComs, FPInterface and FPTrak. There are currently over 3,000 MultiDATs in operation in Canada. They incorporate a motion sensor and GPS capability and are used on various harvesting machines.
The MultiDATs are generating operating efficiencies of 5%-10% representing net savings to the industry estimated at $61.4 million per year.65
An integrated suite of these systems called FPSuite is currently being developed by FERIC. FERIC estimates that optimized decisions facilitated by FPSuite tools could increase supply chain efficiencies in the order of 15%. Savings to the industry from the future implementation of FPSuite are estimated at $190 million per year assuming a 25% market penetration rate of FPSuite with large operators.66
Conclusions – Extent to which Forest Research Institute Initiative impacts were achieved
The case studies of Forintek’s seismic and fire research projects and FERIC’s transportation and harvesting operations research projects have shown that these four research projects have resulted in substantive economic benefits in terms of cost savings to the industry, access to new markets, and energy efficiencies as well as associated reductions in GHG emissions. The total magnitude of the estimated benefits from these four projects alone, even if taken conservatively as one-year benefits, is well over double NRCan expenditures for the entire Forest Research Institute Initiative contribution program. Table 8 provides an overview of the main current and future benefits and the respective costs for FERIC and Forintek.
Using data presented in Table 8, and based on cost savings to date (and assuming total Forest Research Institute Initiative funding of $5 million annually) the net benefit:cost ratio is approximately 3:1 (e.g., $78 million to $25 million) – this does not take into account the factors identified in the note that follows Table 8.
|Research Area||Benefits||Current||Future||Average Annual Costs|
|Transportation||cost savings||$16.60 M||$13.65 M|
|Transportation||reduction in annual GHG||6,544 tons||2,200 tons|
|Harvesting||cost savings||$61.35 M||$190 M|
|Total Cost Savings||$77.95 M||$203 M|
|Total GHG Reductions||6,544 tons||2,200 tons|
|Seismic||market opened or protected||$164 M to $292 M $US||$57.4M $US|
|Fire||market opened or protected||$40 M $US||$626 M $US|
|Total Markets Opened or Protected||$204M to $332 M $US||$683 M $US|
Source: Evaluation Case Study Data. Note: The results are not summed here since factors including the time value of money, return on sales and precise attribution calculations are not considered. With conservative assumptions, however, these four cases show benefits which greatly exceed costs.
The annual plans and reports provide detail at the project level for Forest Research Institute Initiative expenditures at FERIC and Forintek. Missing is an overall summary of progress toward the expected results, an identification of areas of concern, and a thorough estimate of their research partners’ contributions (financial and in-kind) to the projects. This information, provided on an annual basis, would help with both the year-to-year management of the project portfolio, adhoc reporting to senior management, and program evaluation reporting.
In addition to the research activity supported by the Forest Research Institute Initiative, the organizations participate in and represent Canada at numerous international events, and on 18 national and international committees. The technical expertise that they are able to bring to the table is not available elsewhere in Canada and is critical to the discussions of national and often international codes and standards. For example, through these memberships, Forintek managers contribute to the development of new regulations or building codes that are, where possible, consistent with Canadian best practices and that help to maintain or expand markets for Canadian products. The consistency in staffing at Forintek, the independence of the organization (from industry and the government), its corporate memory and technical expertise are critical to their success in this area.
In summary, the quantitative impacts found in case studies of four core funded areas, combined with the estimated value of Forintek’s participation on six national and 12 international committees as Canada’s representative exceeds the value of the Government of Canada's investment (via the Forest Research Institute Initiative over the past five years). Using conservative, reasonable estimates of attribution, the Forest Research Institute Initiative funding provides a significant positive return on the Government of Canada’s investment.
Cost–Effectiveness/Alternatives – Are there more appropriate and efficient means to achieve the objectives and are there other, more cost-effective ways of achieving Forest Innovation objectives?
- Are there currently more efficient ways to deliver these measures?
Summary: No. The structure has provided efficient ways to deliver the activities. There are improvements to be made to the existing structures and processes (given that they are only three years old), but all indications are that the structure will work. The role of CWFC (as discussed earlier) is the one issue that may affect the future efficiency of the organization due to the difficulties inherent with integrating a public sector, distributed research group with FPInnovations.
Although direct comparisons with other countries are hampered by a range of factors, the international comparison found that the approach used in Canada (i.e., integration of the full range of forest research, a focus on emerging technologies) is consistent with international best practices.
Based on interview findings with senior FPInnovations staff and NRCan staff, the creation of FPInnovations and launch of CWFC has created efficiencies in terms of research program design and delivery. This is further backed up by case study findings and interviews with industry members. One industry sector interviewee felt that R&D synergies among FPInnovations divisions have the potential to reduce the number of research staff needed by up to 20% through research program rationalization and re-focus.
Complementary funding programs have the potential to create additional efficiencies and leverage program funds. For example, the recent launch of the NSERC Forest Sector R&D Initiative and the ArboraNano Network, which provide grants to university researchers to investigate forest sector research priorities, provides an opportunity for FPInnovations to leverage its R&D program funds and obtain a seat at the table and access to the network’s research findings. During the interviews, a number of sector experts and FPInnovations researchers expressed the opinion that universities/academia were currently under-used within Canadian forest research.
International Findings Summary
A review of international competitors’ approaches to forest research was investigated during this evaluation. Interview and document review findings show that Finland, Sweden, the U.S., Australia and New Zealand are the major comparison countries based on the similar economic, government, and research environments. The nature of forest research innovation in other countries, forest ownership, and land access and management policies can make comparisons difficult as noted in earlier studies by NRCan and others.67 Comparisons of research priorities are hampered by the variation in infrastructure and the nature of the wood fibre itself, and require a more detailed technical review that was beyond the scope of this evaluation.
In general the approach used in Canada (i.e., integration of the full range of forest research, a focus on emerging technologies) was found to be consistent with international best practices. Interview findings also showed that the approach used in Canada is widely respected, due in large part to the reputations of FERIC, Forintek and Paprican internationally.
According to CFS managers and a number of documents reviewed, the strategic push for FPInnovations is to look for research partnering opportunities with international research organizations (especially those in the U.S.) has been strengthened recently.
FPInnovations collaborates with Finnish research organizations. For example, the FERIC Division (with the support of TTP) organized a Nordic Bioenergy Tour in Sweden and Finland in the summer of 2008 to explore potential technologies and methods for application in Canada, and develop research collaborations with a number of Nordic forest research institutes. In July 2009, METLA (the Finnish Forest Research Institute) signed a Memorandum of Understanding with FERIC-Division to undertake cooperative R&D, share information and technology transfer through cooperative demonstration projects and short courses, and encourage research personnel exchanges.
One element of the Finnish approach to forest research management is the recent effort to develop (and then update) a technology roadmap. This integrated strategy involved all stakeholders and helped to develop a common understanding of research priorities and the roles of various R&D players. The benefits of this type of activity for Canada were raised by several sector experts and industry interviewees during this evaluation.
- To what extent do the measures overlap with, or complement programs administered by the provinces?
Summary: No overlap was found to exist. The structure, strategy and tactics of FPInnovations and its constituent divisions mitigate against overlap and duplication by including provinces and industry as co-funding members.
With the exception of one individual, all interviewees felt that there was no overlap with programs administered by the provinces or others. The representation on the Board and on the Divisional Steering Committees of provincial representatives should continue to mitigate against any overlaps with the provinces. A number of interviewees noted that there were few programs administered by the provinces that complemented the work done by FPI.
As the evaluation team noted above, the integration of the three research institutes helped to identify efficiencies in terms of meeting the sector’s research needs.
- What would likely have happened had either or both of the Forest Innovation and Forest Research Institute initiatives not been undertaken?
Summary: Circumstantial evidence of industry ‘un-investment’ in research (especially pre-competitive research) and innovation over the past two decades, capped by a precipitous drop in private sector support of constituent institutes over the past few years, suggests that without the federal government’s initiative, FPInnovations and its individual divisions might well not exist. In the present circumstances there can be no doubt that federal funding has made a significant difference – not to just the existence of FPInnovations, but to the state of forest innovation in Canada.
There is emerging evidence that the full value chain perspective for Canadian research in this area would not have been meaningfully started without the Forest Innovation approach.
Several senior interviewees expressed the opinion that this Canadian model was the envy of the world. On the other hand, some interviewees pointed out that Canada did not put as much public investment into its forest sector as some other countries had. A number of interviewees expressed the view that this approach has had a significant impact by engaging a number of formally disparate parties which could not have happened without financial and other support provided by NRCan.
In terms of Forest Research Institute Initiative, evidence from case studies suggests that a number of initiatives have affected technology infrastructure such as standards and protocols, as well as ‘public good’ outcomes. Given the lack of industry capacity it is unlikely that these kinds of achievements would have been realized without the Forest Research Institute Initiative. In addition, TTP cases such as the B.C. Coastal Optimization Initiative and the six eight-story building system efforts have built on knowledge and techniques gained over decades of investment, much of it supported by the Forest Research Institute Initiative.
1 Based on Sub-sub Activity 1.1.4 of the Department’s 2008-09 Program Activity Architecture.
2 Forest Product Association of Canada (FPAC ), Forest Sector Innovation Response September 2002, pages 10-11 and FPIC “Industry At A Crossroads: Choosing The Path to Renewal”, May 2007, p. 14.
3 Forest Products Industry Competitiveness (FPIC), “Industry At A Crossroads: Choosing The Path to Renewal”, May 2007, p. 14.
4 FPAC Competition and Consolidation in Canada’s Forest Products Industry 2005, p. 6.
6 It should be noted that this study was planned and data collected prior to issuance of the revised Treasury Board Directive on the Evaluation Function, dated April 2009, which now refers to the issues of relevance and performance (effectiveness, efficiency and economy) on page 19. Source: http://ncc.evaluationcanada.ca/downloads/TBS_DirectiveEvalFunction_En.pdf
7 NRCan management interviewees = 9; FPInnovations manager interviewees = 12; FPInnovations Board member interviewees = 5; Divisional Steering Committee member interviewees = 15; FPInnovations researcher interviewees = 17; other interviewees (FPAC, international, academia) = 6; Forest Research Institute Initiative Case Study interviewees (industry and industry associations) = 19. Total = 83.
8 Canada’s Economic Action Plan 2009, April 1, 2009, pages 28, 101, 169. Source: http://www.budget.gc.ca/2009/pdf/budget-planbugetaire-eng.pdf.
9 Canada’s Economic Action Plan 2008, page 16. Source: http://www.taxnetprofr.com/budget2008/Chapter1.pdf.
10 Natural Resources Canada 2008-09 Estimates: Report on Plans and Priorities page 5: S.O. #1: Natural resource sectors are internationally competitive, economically productive, and contribute to the well-being of all Canadians; S.O. #2: Canada is a world leader on environmental responsibility in the development and use of natural resources. Source: http://www.tbs-sct.gc.ca/rpp/2008-2009/inst/rsn/rsn02-eng.asp.
12 Forest Engineering Research Institute of Canada (FERIC) Agreement Evaluation (E05003), August 2005 and Forintek Agreement Evaluation (E05004), August 2005. Source/Available from: /evaluation/reports/2005/926.
13 Forintek was established in 1979 as the successor body to the CFS Forest Products Laboratories, and FERIC is also a spin-off of CFS research and was established in 1975.
14 Interviewees by category: NRCan management (9); FPInnovations managers (12); FPInnovations board members (5); Divisional Steering Committee members, primarily industry representatives (15); FPInnovations researchers (17); other, such as FPAC, international, academia (6); Forest Research Institute Initiative case studies (19); total (83).
15 David Cohen and Robert Kozak “Research and technology: Market-driven innovation in the twenty-first century” (The Forestry Chronicle, January/February 2001), page 110.
16 More information on the study approach and methodology is included in the methodology report developed for this evaluation.
19 FPAC Forest Sector Innovation Response September 2002, pages 10-11 and FPIC “Industry At A Crossroads: Choosing The Path to Renewal”, May 2007, p. 14.
20 FPIC “Industry At A Crossroads: Choosing The Path to Renewal”, May 2007, p. 14.
21 FPAC Competition and Consolidation in Canada’s Forest Products Industry, 2005, p. 6.
23 Conference Board of Canada “Mission Possible: Canadian Resources Strategy 2007”, p. 14.
27 The Way Forward; A Framework For Change, A CFS Strategy, A CFS Management Forum, February 14-15, 2006, p.4.
28 NRCan, program resource proposal, Program Details for Implementing the Forest Industry Long-Term Competitiveness Strategy, pages 5-15.
29 NRCan, program resource proposal, Program Details for Implementing the Forest Industry Long-Term Competitiveness Strategy, page 7, paragraph 9.
30 FPInnovations, Transformative Technologies Annual Report on Key Research Successes 2007-08, September 2008, page 2.
31 The information in this section was obtained from several documents as well as interview data. The documents included (a) Department of Natural Resources, Forest Research Institutes, Forest Engineering Research Institute of Canada (FERIC), Contribution Agreement # 2005/01, August 30 and amendments 1 and 2 (as well as subsequent years) and (b) Department of Natural Resources, Forest Research Institutes, Forintek Canada Corp. (Forintek) Contribution Agreement # 2005/01 (and subsequent years).
32 Until the 1970s, forest harvesting research and wood product research was undertaken by the Government of Canada. Following federal restructuring, FERIC and Forintek were established as a private, non-profit organization in 1975 and 1979 respectively. Since the privatization of these institutes, the Government of Canada has provided funding on an annual basis.
33 As described in the Development Plan (page 8), “The orientation of the research program of the CWFC will be directed by the President and Chief Executive Officer of FPInnovations, with guidance from the Board of Directors. However, CFS employees at research centres across Canada will manage and deliver CWFC’s research program”.
34 Canadian Wood Fibre Centre, Development Plan 2006-2009, ISBN 978-0-662-46381-8, Cat. no.: Fo149-1/2006E-PDF, 2007, page 8.
35 Canadian Wood Fibre Centre, Development Plan 2006-2009, ISBN 978-0-662-46381-8, Cat. no.: Fo149-1/2006E-PDF, 2007, page 8.
36 Canadian Wood Fibre Centre, Development Plan 2006-2009, ISBN 978-0-662-46381-8, Cat. no.: Fo149-1/2006E-PDF, 2007, pages 20-21.
41 The number of institute members (for FERIC and Forintek) may have declined in late 2009 due to the economic challenges faced by the sector. Based on interview findings, some of the companies that have withdrawn membership continue to participate in FPInnovations projects and committees.
42 Paprican does not receive Forest Research Initiative Institute funding. Its membership numbers are smaller than for FERIC and Forintek (approximately 40 industry members); however, its annual budget is larger than those of the other divisions (see Table in this section). After initial federal government research in pulp and paper, Paprican was established in 1925 by the pulp and paper industry. Since then, it has worked to enhance the pulp and paper industry’s technical competitiveness through research and educational activities. Although not having a continuous annual funding arrangement in place, the Government of Canada, through various programs, has provided financial support to Paprican over the years, particularly in the area of environmental technology. Private sector companies fund the bulk of the research program at Paprican.
44 Data as supplied by NRCan/CFS.
45 A small group of senior decision-makers in the Canadian forest sector who formally represent the three major constituencies that fund forest sector innovation: the Government of Canada, the provinces, and industry. Representation was at the CEO, Deputy Minister, and Assistant Deputy Minister level. Source: http://wcm.paprican.ca/newsevt/WCMPublicNews.nsf/Lookup
47 Canadian Forest Innovation Council. Forest Science Policy Forum on Transformative Technologies Summary Report (May 31, 2006), page 28.
48 OSB is a panel product made of aspen or poplar (as well as southern yellow pine in the U.S.) strands or wafers bonded together under heat and pressure using a waterproof phenolic resin adhesive or equivalent waterproof binder. Oriented strandboard was developed in the late seventies. Source: http://www.cwc.ca/Products/OSB/.
49 Forest Products Industry Competitiveness Task Force. Industry at a Crossroads: Choosing the Path to Renewal (May 2007), page 21.
51 David Coles, Communications, Energy and Paper-workers Union of Canada, Committee Evidence, February 28, 2008 as quoted in Canada’s Forest Industry: Recognizing the Challenges and Opportunities. Report of the Standing Committee on Natural Resources. Len Benoit, MP, Chair. June 2008, 39th Parliament, second session. Page 28.
52 Another interpretation of fragmentation relates to the overall structure of the industry. Up until the early part of 2007, no Canadian-based forest products company ranked among the 20 largest is the world. The forest products industry is of the view that Canada’s conventional forest industry must restructure / consolidate in order to modernize, take advantage of economies of scale, better manage risks, etc. (as per the Report of the Standing Committee of Natural Resources, 2007). While the industry structure (and policy / economic issues) are not direct considerations within this study they are an important to the context within which the innovation approach and research directions are considered.
53 ArboraNano is a new Canadian Forest NanoProducts Network supported by the Government of Canada’s Business-led Networks of Centres of Excellence Program, FPInnovations and NanoQuébec. ArboraNano is intended to create new business opportunities for the Canadian economy by using Canada’s renewable forest resources to manufacture new value-added products with superior performance attributes. Source: http://www.arboranano.ca/.
54 Canada’s Model Forest Program was developed and initiated by Natural Resources Canada’s Canadian Forest Service in 1991, and has encouraged the establishment of a network of collaborative partnerships representing a diversity of forest values. The term ‘model’ forest refers to the idea that the sites established under this program provide an example of sustainable forest management that others can look to for ideas and illustrations of how to achieve sustainable forest management in their own area. Source: http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/publications-opinion-files/1142.pdf.
55 This initiative responds to federal Budget 2008, in which NSERC was allocated new funds for collaborative research that directly contributes to the knowledge and innovation needs of Canada’s forest industry. Canadian academic researchers, in collaboration with FPInnovations, industry and government scientists and engineers, may receive grant funds to investigate specific research that support the forest sector priorities. Source: http://www.nserc-crsng.gc.ca/Professors-Professeurs/RPP-PP/SNGSuppForestry-SRSSuppforestier_eng.asp.
56 According to the Forest Producers Association of Canada (FPAC), the policy-related barriers include competition and economic development policies, duplication and overlap between federal and provincial legislation, effective rates of taxation on capital investment (federal and provincial), fibre access policies, energy deregulation, and transportation policy. Sources: FPAC Forest Sector Innovation Response, September 2002, pp. 10-13.
57 Such as (but not limited to) e.g., sharing of expertise and equipment.
58 Announced in Budget 2007, the goal of the Business-led Networks of Centres of Excellence Program is to fund large-scale, collaborative networks led by the private sector and focused on specific business research needs.
59 Economic Assessment of Building Systems Impact on U.S. Consumption of Wood - Preliminary Analysis, 2009.
60 Earlier evaluations – e.g., a market access program supported by the Canada Wood Export Program (CWEP) and BC-Forest Innovation Investment (BC-FII) and a Japan market development program supported by BC-FII – highlighted the impact that Forintek researchers play in securing favourable changes to building codes and product requirements in off-shore markets (primarily Japan, China and South Korea).
61 Forintek, Markets and Economics Group analysis, based on data drawn from McGraw-Hill industry subscription database, detailed calculations shown in Annex D, Fire Research Case Study, page 186.
62 Canada Wood Group (CWG) is a coalition of Canadian industry trade associations which represents Canada’s forest sector market development, market access and technical interests in offshore markets including Japan, China, South Korea, Taiwan, Vietnam, the United Kingdom, Belgium (Europe) and other countries. Source: http://www.canadawood.org/au_region.php.
63 ‘Board feet’ is a measure of lumber volume. A board foot is equal to 144 cubic inches of wood. Source: http://woodzone.com/Merchant2/tips/board_feet/board_feet.htm.
64 In Ontario, tertiary roads connect those regions in northern Ontario not served by secondary highways and were mostly resource access roads. These roads were constructed in small numbers, and with one exception (Highway 802), do not end at a settlement. All are gravel roads, except for highways 802 and 805, which both have some paved sections. Most have speed limits of 80 km/h (50 mph). Source: http://en.wikipedia.org/wiki/Provincial_highways_in_Ontario.
65 FERIC estimates.
66 FERIC estimates.
67 For example: ‘Forest Products Research and Development Organizations: Organization, Governance and Measures of Performance in a Worldwide Setting”, P.V, Ellefeson, M.A. Kilgore, K.E. Skog, C.D. Risbrudt. October 2007; and, ‘International Comparison of Forest S&T Funding and Management in Canada, the United States, Sweden and Brazil’, Prepared for the Canadian Forest Service, July 1999.
- Date Modified: