PORTICO, SA

As it moves to expand its product line to include oak doors, Portico, S.A., is weighing whether to continue using environmental certificatio n of its forestry operations as an integral part of its corporate stra tegy. When its high-end, residential exterior-we doors were made from tropical mahogany, it was important to have environmental certificatio n in order to avoid controversies about deforestation and to gain entr y into important U.S. distribution channels. Now, however, Portico is questioning whether that strategy proved sufficiently beneficial to th em to warrant pursuing the same certification for their new line of oa k doors. Oak, after all, is not as controversial as tropical mahogany. Portico, S.A., located in Heredia, Costa Rica, manufactures high-end, residential exterior-use mahogany doors for export to the United Stat es. Some of its mahogany is supplied by its subsidiary, Tecnoforest de l Norte, established to oversee its natural mahogany forest acquired t hrough a ''debt-for-nature'' swap in 1987. This operation had earned e nvironmental certification from Scientific Certification Systems. By 1 994, Portico's sales had grown to 60,000 units per year. The mahogany needed to satisfy the demand had been obtained by increasing the frequ ency of cutting in the managed forest and by introducing engineered wo od technology (i.e., veneers and butcher-bloch interior pieces), which enabled Portico to continue making solid mahogany doors while wing th e raw material in the most efficient manner. In 1994, Portico's manage ment believed that there were significant business risks associated wi th increasing the company's investment in mahogany forests. Concurrent ly, the market for high-end exterior doors, both within and outside th e United Stales, was growing. In order to expand its sales, the compan y would need to we an additional premium wood material, American Red O ak. This world also enable Portico to offer its customers doors made o f both mahogany and oak, considered to be the best materials for premi um exterior-use doors. Because Portico did not own forests of American Red Oak, it planned La purchase the oak in the United States, ship it to Costa Rica where the doors would be produced, and then reexport th e finished doors to the United States and other markets. However, this oak did not carry an environmental certification. Portico's managemen t felt that the environmental certification had been essential in help ing them avoid controversies about tropical deforestation and gaining distribution through U.S. retail chains such as The Home Depot, but th ey wandered whether the same certification would be as important in th e case of American Red Oak, an abundant species over which there had b een little or no environmental controversy. This case includes strateg ic management issues about growth strategies and the inclusion of proa ctive environmental policies in corporate strategies and information o n environmental issues and on the high-end residential exterior-use do or market in the United States. Environmental information in the case includes descriptions of debt-for-nature swaps, tropical hardwood defo restation, sustainable logging, the history and status of logging in C osta Rica, natural forest management, and environmental certification under Scientific Certification Systems. (C) 1997 Elsevier Science Inc.