Pulp, Paper & Forestry Products

Pulp & Paper Products

The Pulp & Paper Products industry consists of companies that manufacture a range of wood pulp and paper products, including pulp fiber, paper packaging and sanitary paper, office paper, newsprint, and paper for industrial applications. Companies in the industry typically function as business-to-business entities and may have operations in multiple countries, such as the U.S., Canada, and Brazil . While some integrated companies own or manage timber tracts and are engaged in forest management, sustainability issues arising from these activities are addressed in SASB’s Forestry Management (RR-FM) industry standard.

Forestry Management

The Forestry Management industry consists of companies that own and/or manage natural and planted forestry lands and timber tracts or operate non-retail tree nurseries and rubber plantations . The industry conducts its operations on lands that can be company-owned or leased from public or private landowners. Companies typically sell timber to wood products manufacturers, pulp and paper producers, energy producers, and a variety of other customers. The industry’s largest companies operate primarily in and are domiciled in the U.S. and Canada. Some have international operations including in Brazil and New Zealand. While some integrated companies may also operate sawmills, wood products facilities, or pulp and paper facilities, sustainability issues arising from these activities are addressed in SASB’s Building Products & Furnishings (CG-BP) and Pulp & Paper Products (RR-PP) industry standards.

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Source: SASB

Sustainable forest management plays a crucial role in carbon capture and climate change. Despite increasing demand for paper and forest products driven by digital and analytics, the industry is undergoing a sustainability-led transformation. Challenges facing the industry include wood supply and profitability, fires, and infestations. Pulp producers are focusing on reducing carbon emissions and energy costs by cogenerating energy from pulp residues. The industry is also prioritizing reducing water consumption and pollution in paper production and ensuring health and safety in automated processes. Precision forestry technology is helping with harvesting to enable lower delivery costs for wood and higher wood yields from a given area of forest.

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Industry Characteristics

• There is a significant sustainability revolution underway in the paper and forest products sector, with the rapid emergence of new regulations and global consumer concerns. This phenomenon is creating growth opportunities for the industry to serve as a substitute for other substrates such as plastics. Source: McKinsey
• The 2020-2030 decade is a era of transformational change that will be characterized by the next wave of industry disruption—digital and analytics—coupled with increasing efforts in sustainability. Unlike other industries, such as energy, demand for current paper and forest products is structurally increasing (for instance, as a substitute for packaging and construction materials)—hence the next level of disruption will involve an increase in productivity and output combined with a sustainability-led transformation. Source: McKinsey
• Sustainable forest management is a key factor for many of the companies rated in this sector. Source: S&P Global

Sustainability Impact

• Forest companies are exposed to  environmental factors that could affect wood supply and profitability. In tropical climates, for example, harvesting rates are higher. Forest companies are also exposed to event risks such as fires or pest infestations. Reducing carbon emissions is less of a concern, as forests act as "carbon sinks" meaning they don't generate but instead absorb carbon dioxide emissions. Pulp producers typically lower carbon emissions and energy costs by cogenerating energy from pulp residues. Source: S&P Global

Sustainability Investments to watch

• Reducing water pollution in paper production is a main consideration. Source: S&P Global
• Many companies are working to limit health and safety risks in their automated processes. Source: S&P Global
• Precision Forestry increase digital usage in harvesting to enable lower delivered costs for wood. It also makes possible higher wood yields from a given area of forest. By increasing productivity these technologies relieves pressure on natural forests, as well as improved efficiency and less waste during harvest and wood production. It can monitor fires and control water management. Source: McKinsey
• Bioenergy: Bioethanol, black liquor and wood residue gasification are predominant forms of biomass energies available in pulp mills. Gasification-based pulp mill biorefinery technologies, once fully commercialized, offer the potential for attractive investment returns and significant energy and environmental benefits. Besides better energy performance, the integration between the biorefinery and the pulp mill effectively limits the specific capital investment associated with liquid fuels production to a surprisingly modest $60,000–150,000 per barrel of diesel equivalent per day—specific capital costs compared to those for much larger coal-to-liquids facilities. Source: ScienceDirect paper: Consonni et al., 2009

• Afforestation
• Conservation forestry
• Forest management
• Rehabilitation and restoration of forests, including reforestation and natural forest regeneration after an extreme event
• Landfill gas capture and utilisation