Agriculture and Environment: Wood Pulp

Introduction

There is increasing interest on the part of both investors and buyers in the overall environmental impacts of pulp plantations as well as what management is doing to reduce them. This is resulting in both investment screens and certification programs that are designed to reduce investment risks, improve product image, and increase the confidence of investors and buyers in the final product.

Investment screens are a mechanism to pressure pulp producers to improve environmental and social practices. Investors in the pulp and paper sector have been targeted on two fronts to adopt this approach; the risk bad investments pose to their corporate reputation and the financial loss from unsustainable business practices.

Given the tiny profit margins of many pulp operations, banks that fund them are beginning to understand that the adoption of better practices is one way to insure that a pulp company will be more viable than its neighbour, all other things being equal. Increasingly, policies that explicitly consider environmental practices and social concerns help to guide finance decisions.

Considering environmental and social issues can protect the corporate reputation and increase financial opportunities. Experiences from two companies in Brazil, Aracruz Cellulose S.A. and Riocell S.A., show that actively integrating social and environmental concerns into business strategies can create opportunities to increase efficiency and develop competitive advantages (WRI et al. 1998).

Banks such as ABN Amro in the Netherlands have also developed specific pulp plantation investment strategies that require potential investments to be screened according to environmental and social criteria. Increasingly, such screens are seen as an integral part of the bottom-line analysis for a proposed investment and not just peripheral criteria evaluated afterward.

Forest Stewardship Council (FSC) certification of plantation forests offers another tool to promote better management practices. A number of pulp and paper companies have certified their forests and now can market their products as FSC-certified. The certification program now allows products with waste, recycled, or reused wood to be certified (FAO 2001b).

Consumers, and in turn industrial buyers, are increasingly aware of environmental sustainability and social responsibility issues when making purchasing decisions. Some industrial buyers, particularly those purchasing pulp for well-known brands, will not buy any pulp from Indonesian acacia plantations because of their environmental problems.

Some buyers have indicated that the situation might change if Indonesian acacia plantations obtain FSC certification. Such certification would indicate a major shift from current practices (Roberts 2002). This is a clear indication of the role some pulp buyers are willing to play to make the pulp industry more sustainable.

It is hard for companies to reduce their damaging environmental impacts, however, if they do not know what they are. Some countries require companies to report at regular intervals on soil erosion, suspended solids, and other water quality issues. In many cases, however, companies are measuring such environmental criteria themselves.

This is seen as a scorecard, a way to know where they stand and monitor the impact of their performance. It is also important baseline data that can be used to show improved performance and quite possibly to reduce input costs. For example, some companies now recycle more than 90% of the chemicals used in the digestion phases of pulp processing.

Companies have also been able to reduce the BOD levels of their effluent by as much as 90% and the levels of some of the toxic compounds even more (WRI et al. 1998). Countless studies have been conducted on plantation management showing a number of practices that can increase productivity and at the same time increase the sustainability of plantations.