For this achievement you need to smelt a block of wood using charcoal to make more charcoal.

It doesn't matter which type of wood you use. Firstly you have to smelt wood using either coal or a wooden plank and that will give you charcoal. Then let that burn out and in the Fuel box place the charcoal you just got and a block of wood in the Ingredient box.
As soon as the wood has finished burning and you take the charcoal out of the furnace the achievement should pop.

If you need any help just PM me.