Sustainable paper supply: The real world

The global paper value chain puts pressure on the environment in different ways. APP adopts a new way to manage it, writes Danielle Jerschefske

World paper and board demand is expected to increase three percent in 2013, up from the one percent achieved in 2012, says Rod Young, chief economic advisor of RISI, an independent source for economic information on the international forest products industry. Packaging is considered a key driver of this growth with an anticipated four percent increase in consumption of containerboard and specialty papers through the end of this year.

Where there’s demand, there will be supply – and competition. The trick in the modern paper and packaging industries is meeting the requirements for global business sustainably. Established chain of custody certification schemes like FSC and PEFC are being increasingly adopted, offering better ways of managing forests and plantations with a reliable value chain of custody (COC). However, the premium on CoC-certified material has deterred widespread adoption in the label world, thereby slowing the cost reductions which come with scale.

There’s a real need to produce more pulp, better, at a fair price and in a sustainable manner. For this reason Asia Pulp and Paper (APP) has adopted a basic forest management system using High Conservation Value (HCV) assessments which originate with the FSC. The following details the complex dilemma of the paper industry and describes how HCV works. How will this system affect the labels and packaging industry?

Eco and Economics

In June of 2012 Indonesia-based APP, the third largest paper producer in the world after Finnish firms UPM Kymmene and Stora Enso, announced its Sustainability Roadmap for 2020, putting the environment at the heart of its business strategy moving forward. APP has been in ongoing battles with environmental NGOs that have accused the company of destroying high value forests and priceless biodiversity. The Roadmap is the company’s attempt at harmonizing the social impact and economic reality of paper production.

Both APP and the Indonesian government realize the value of the nation’s natural resources. Indonesian companies are beginning to realize that any association with deforestation, biodiversity loss and harmful emissions can be detrimental to reputation and international business.

The government recognizes that the forest needs to be protected, and that there’s value in the beauty of the country. It has also realized that its movements are in the eye of the world, and that it can’t make the mistakes other widely forested nations have made. The country’s leadership has agreed that it must collaborate with Finland to eliminate illegal logging of valuable lands and ecosystems.

With a population of nearly 250 million people – the fourth most populous nation in the world – 14 percent of the population of Indonesia lives below international poverty levels. The poor are most reliant on the nation’s natural resources and the forest lands contribute significantly to the country’s GDP.

APP directly employs 70,000 people in Indonesia. Hundreds of thousands are touched throughout the supply chain and the Indonesian government has decided to be more a part of this process. The root cause of deforestation is poverty. In regions where trees and pulp have strong economic value, impoverished citizens clear land to plant crops to feed their families, selling harvested wood into the black market to maintain a healthy standard of living.

Ian Lifshitz, APP Americas sustainability director, says, ‘Social responsibility and job creation are supremely important to our company. One of the biggest challenges, however, is education in the marketplace, both at a local and international level.

‘An enterprise like APP must look at the holistic approach by training locals to effectively work on plantations, endorsing community farming and education programs, giving away seedlings for people to plant and grow trees, so that we can buy them back and re-plant again.’

As part of APP’s Forest Conservation Policy, APP and its suppliers have suspended all natural forest conversion while HCVF and HCS assessments are undertaken by The Forest Trust. As such, APP is 100 percent plantation-reliant as of February 1, 2013.

FSC to HCV

HCV (High Conservation Value) areas are defined as natural habitats that have the presence of rare and or endemic species (confined to a specific geographic area), sacred sites such as burial grounds or resources that local residents rely on for their livelihood that are considered to be of critical importance. FSC’s ninth principle of 10 rules listed for Responsible Forest Management clearly states: ‘Maintenance of high conservation value forests – to maintain or enhance the attributes which define such forests.’

There are six types of HCV areas including those that ‘contain globally, regionally or nationally significant biodiversity values’ such as endangered species, and areas that provide basic ecosystem services in critical situations like erosion control’. Not all forests that contain rare species will be considered HCVs, but should also be managed properly.

All of APP’s nine Indonesian mills are SVLK certified. SVLK is the Indonesian Wood Legality Verification System started in 2009 by the government as a chain of custody to enforce legal and sustainable harvesting.

SVLK has an important role to play in helping Indonesian companies meet the new European Union Timber Regulation (EUTR). In April 2011, Indonesia and the European Union (EU) agreed on a Voluntary Partnership Agreement (VPA) under the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan. Under this agreement, the design of SVLK is recognized as a credible system to guarantee the legality of timber supplies from Indonesia. This VPA between the EU and Indonesia is expected to become operational this year.

Because APP has been exclusively plantation-reliant as of February 1, 2013, APP’s Forest Conservation Policy has accelerated the objectives of the Roadmap by two years.

'The ideal example in forestry is for a third-party environmental certification organization to work with pulp and paper companies and environmental NGOs together to identify practical, sustainable techniques for harvesting trees that balances environmental responsibilities with regional, social and economic realities.

 ‘In contrast to the ideal scenario, environmental NGOs have created a certification scheme, the Forest Stewardship Council (FSC), with which they have defined to their own standards and removed input from the paper companies and governments’ policies. Without these insights, FSC doesn’t properly acknowledge the economic realities of pulp and paper manufacturing, and focuses solely on ‘environmental’ priorities, despite how unsustainable it is.’

Some analysts have found FSC certification can add as much as 32 USD per hectare to operations in emerging markets. In the label market, FSC certified stock has been priced by as much as 20 percent more than virgin fiber material. The majority of label converters that offer FSC material will tell you that they have it, but they don’t sell it.

Lifshitz continues: ‘HCV is a viable option that looks at materials and land, and also checks with international standards. The customer response to the adoption has been positive. They’re excited to see that APP is taking steps beyond national compliance and driving business forward.’

This article was published in Labels & Labeling issue 1, 2013