Pulp & Paper Study



Purpose and Scope of Study
Executive Summary
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Purpose and Scope of Study


This study assesses the carbon performance of 25 global pulp & paper companies using the Sustainable Value approach. The Sustainable Value approach extends the concept of opportunity costs that is well established on financial markets to include environmental and social aspects. This allows for the fact that companies not only require economic capital for their business activities, but also environmental and social resources. To create positive Sustainable Value, a company must use its economic, environmental and social resources more efficiently than its market peers. In this study, we concentrate on the creation of Sustainable Value with corporate emissions of carbon dioxide (Sustainable ValueCO2) and therefore align corporate contributions to climate change with the valuation methodology applied to investment and financial market decisions.

The Purpose of this study is twofold: First, the results create transparency by demonstrating how efficiently 25 different pulp & paper companies use carbon emissions compared to their industry peers in the years 2005 to 2009. Secondly, the study reveals the potential that still exists for a more efficient use of carbon dioxide within the pulp & paper industry by comparing industry laggards to industry leaders. The Sustainable Value approach can be extended to other resources and it could cover the entire life-cycle of pulp & paper products. However, for this study, we decided to focus on the climate change impact of activities within the production process of the respective companies. There are two main reasons for this. Firstly, this pays tribute to the importance of climate change for this sector and society. Secondly, it allows us to cover more companies as the inclusion of additional indicators drives down the number of companies that can be considered. By concentrating on the production process we follow the example of the financial markets that concentrate their performance assessment on the use of economic capital by the company rather than by the entire life-cycle. The results of this study thus show how effectively a company balances profit-seeking with its climate related environmental responsibility in production activities.

Funding from MISTRA

The Swedish Foundation for Strategic Environmental Research (MISTRA) funded this study via the research project “Sustainable Investment Research Platform” (SIRP), subproject “Value-based environmental sustainability analysis of Nordic companies”. At the same time it must be stressed that the researchers at the University of Leeds, Euromed Management Marseille, and the Institute for Futures Studies and Technology Assessment take full and sole responsibility for this study and its conclusions.

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Executive Summary


This study reports the findings of a research project that analysed the carbon performance of 25 global pulp & paper companies using the Sustainable Value approach. The research was conducted by researchers working at the University of Leeds, Euromed Management Marseille, and IZT – Institute for Futures Studies and Technology Assessment. The Sustainable Value approach is the first method that allows assessing corporate sustainability performance based on the value created with the resources used. By extending a traditional valuation method applied in financial analysis, it assesses not just the use of economic capital but also environmental and social resources. In this study we calculate Sustainable ValueCO2 as a special case of Sustainable Value, which assesses a company’s carbon performance in a value-based way.

A pulp & paper company thus creates positive (or negative) Sustainable ValueCO2 when it earns a higher (or lower) return than its peers with the carbon emissions emitted. An analysis based on the Sustainable ValueCO2 approach establishes whether a company is successfully using its carbon emissions to create value in comparison to its industry peers. In doing so, the Sustainable ValueCO2 approach measures corporate climate change performance in monetary terms. It establishes a link between corporate contributions to climate change and the value-based approach that is traditionally used in management practice and financial analysis.

This study assesses the carbon performance of 25 pulp & paper companies over a five-year period from 2005 to 2009. Two assessments were carried out in the process of this research: The first assessment focuses on the creation of absolute Sustainable ValueCO2. The second assessment takes into account company size and is a measure of the relative carbon performance of companies. To compare the carbon performance of companies of different sizes, this study looks at the Sustainable ValueCO2 of a company in relation to its sales. In both of these assessments, two different return figures for the calculation of Sustainable ValueCO2 are applied to illustrate the explanatory power of the assessment for different stakeholders. The return figures used are Earnings before Interest and Tax (EBIT) and Net Value Added (NVA) to determine the Sustainable ValueCO2 of the companies under analysis.

The results of the calculation of absolute Sustainable ValueCO2 creation show considerable differences in sustainability performance between the companies assessed. In the EBIT-based scenario, the majority of the companies assessed show both positive and negative Sustainable ValueCO2 results. Four companies (Metsäliitto, Myllykoski, Nippon and Norske Skog) were identified as consistently generating negative, and five companies (DS Smith, International Paper, Kimberly-Clark, Södra and Sveaskog) as creating positive Sustainable ValueCO2 over the entire period assessed. Kimberly-Clark by far generates the highest Sustainable ValueCO2 for all years assessed, with its best result in 2009, creating about € 1.5 billion more EBIT than the industry peers had generated with the company’s CO2 emissions and overall following a positive trend. At the other end of the spectrum, Domtar (2005 and 2006), Nippon (2007) and Weyerhaeuser (2008 and 2009), lag far behind their peers in terms of Sustainable ValueCO2 creation. While in its best year (2005), Weyerhaeuser ranked second and created nearly € 1.2 billion Sustainable ValueCO2, in its worst year (2008) the company destroyed a devastating € 1.9 billion of Sustainable ValueCO2. The results look different when company size is taken into account; here, Sveaskog emerges as best performer in three of the five years assessed (2006, 2007, 2009), creating the highest Sustainable ValueCO2 in relation to its sales. In 2007 Sveaskog yielded a SVM of 17.12%, that is, the company created € 17.12 Sustainable ValueCO2 per € 100 of sales. Striking are also the differences Grupo ENCE shows: While being in the midfield in terms of absolute Sustainable ValueCO2 with rather unremarkable results, the company now ranks first in 2005 and last in 2009. Similar differences can be observed with Domtar and Metsäliitto. When results are adjusted to sales, the SVMCO2 curves of both companies show much higher amplitude, i.e. the results display rather extreme positions, putting them closer to the worst performance shown by Weyerhaeuser in 2008.

Due to the limited data availability, the NVA-based scenario considered 17 companies only. Since the benchmark composition changed accordingly, a meaningful comparison with the EBIT scenario is limited. Particularly some of the companies showing rather extreme EBIT-based results (e.g. Domtar, Kimberly-Clark and Weyerhaeuser) could not be included. Nevertheless, the analysis reveals interesting results. Clear frontrunner now is SCA, creating between € 0.98 billion (2005) and € 1.55 billion (2009) more Net Value Added than the benchmark had created with SCA’s CO2 emissions. In the EBIT scenario the company in contrast even destroyed Sustainable ValueCO2 in the years 2005 and 2007. SCA is closely followed by Smurfit Kappa for the years data were available (2007 to 2009).

Despite the fact that the company follows a clear negative trend, in its worst year it still creates considerably more NVA with its CO2 emissions than the industry peers had generated (2007: SVCO2 € 1 billion; 2009: SVCO2 € 0.67 billion). Metsäliitto started off as second best performer, but – following a negative trend - ends up in the red in 2008 and 2009. Ahlstrom, Billerud, Corticeira, DS Smith, Grupo ENCE, Holmen, PaperlinX, Södra and UPM form the midfield of the assessment. Lagging behind comparably far, the bottom of the ranking is shared by Mondi, Myllykoski, Norske Skog and Stora. The latter, however, manages to improve significantly over the period reviewed. In 2005, Stora still shows the worst performance among the NVA-based Sustainable ValueCO2 results, generating € 1.25 billion less NVA than if its CO2 was emitted by the average pulp and paper company assessed in this study. Although still destroying Sustainable ValueCO2 in 2009 (-€ 0.07 billion), the company then managed to climb up to rank 11 of 17.

Again, the picture changes when results are corrected for company size. Now Corticeira clearly shows the most value creating use of CO2 emissions with a SVMCO2 between 20.82% (2008) and 23.89% (2005). Second best performer is Sveaskog, only showing a drop in 2008. Myllykoski, in contrast, destroys devastating € 73.5 Sustainable ValueCO2 per € 100 of sales (SVMCO2 -73.5%) and ploughs a lonely furrow now at the bottom of the ranking. That is, Mondi, Norske Skog and Stora could gain some ground compared to Myllykoski, when company size is accounted for. They still, however, destroy Sustainable ValueCO2 with each sale they make and form the lower quarter of the ranking.

The differences in carbon performance between the companies identified in this study can be partially attributed to differences in their product portfolios or the energy mix in the countries the companies operate in, as well as to financial and structural effects. However, the individual results also reflect the effects of good carbon management practices.

It should be noted that the Sustainable Value approach does not attempt to express a company’s entire commitment to sustainability in a single ratio. Along these lines, the Sustainable ValueCO2 applied in this study does not attempt to press a company’s entire commitment to carbon management in a single ratio. For example, the study does not take into account biogenic carbon dioxide emissions. Furthermore, the Sustainable Value approach only takes into account impacts that can be quantified in a meaningful way. Qualitative sustainability aspects should be managed with qualitative instruments.

The Sustainable Value approach provides a link between sustainability and the value-oriented approach that is common in management practice. Taken as a whole, the results of this study provide a transparent and meaningful overview of carbon performance trends among the pulp & paper companies assessed. More generally speaking, this study illustrates the extra value that has been created by the most carbon-efficient companies within the pulp & paper sector; and, in turn, the value that has been destroyed by the most carbon-inefficient pulp & paper companies when compared to their peers. The study also shows that Sustainable Value is a practical tool for producing an in-depth assessment of corporate carbon performance.

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Press Release (English language)
Press Release (Swedish language)


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