taiga-news newsletter on boreal forests Issue 37 Winter 2001 Clearcut for Whom? In Ontario, a new forestry rule has just been approved that encourages enormous clearcuts. Some critics have assumed the new rule is the result of a conspiracy with the forestry industry. But it is more subtle than that. Chris Henschel, of the Wildlands League, explains. T he Ontario government recently tried to use the modest tree retention requirements of its new forestry rule as the basis for claiming an end to clearcutting as we know it. The reality is that the biggest change brought about by the new rule is the legal entrenchment of clearcuts with no upper limit on size. The new rule (at www.mnr.gov.on.ca/ mnr/forests/forestdoc/ebr/guide/disturbance.html) is a misguided attempt to ‘emulate’ fire through forestry operations. Emulating natural disturbance is a legal requirement under the province’s forestry legislation. However, research shows clearly what we already know intuitively – clearcuts are not ecologically comparable to burns (see TN36). Ontario’s Ministry of Natural Resources (MNR) has seized upon an interpretation of fire emulation that, in a twist of logic, makes enormous clearcuts into a laudable ecological objective. Why? The apparent lack of common sense and ecological rigour of the approach leads many to suspect a smokescreen with greedy forestry companies must be behind it. But it’s not quite that simple. At public meetings MNR biologists have pleaded with opponents of the guideline to support the MNR’s approach, ‘for the sake of the caribou’. In Canada, woodland caribou is a wild species that requires old coniferous forest far from roads to survive. As forestry spreads across Ontario’s north, the range of the species steadily retracts. Some forest industry staff are genuinely troubled by the market implications of being forced to comply with this contentious guideline. Tembec, one of Canada’s biggest forestry companies, signed on to a joint statement with Wildlands League opposing the big-clearcut approach, and supporting an alternative that maintains the forest’s critical characteristics. The story is more complicated than a corporate love of big clearcuts. There seem to be three drivers behind MNR’s approach to this guideline. Big clearcuts to save wildlife is what you get when you mix genuine ecological objectives, binding legal requirements and a government culture of sustaining timber supply. Struck by the unnatural image of a landscape carved into 200-ha blocks, and by the extirpation of area-sensitive caribou from the industrial forest, staff biologists want to curb these trends. The obvious recourse would be a guideline that mandates the retention of a judicious amount of old, intact forest. But this solution is immediately at odds with MNR’s prime directive, maintaining and increasing the timber supply to mills. That many forest areas are already being logged at or above their long-term sustained fibre supply makes MNR even less likely to consider an approach that might ‘take’ any of that wood away. This conflict leaves MNR in a dilemma that has to be solved to the satisfaction of two legal requirements – to develop a clearcutting guideline, and to emulate natural disturbances. Voila! A guideline for big clearcuts that emulate the size of natural fires. MNR is satisfied that the legal requirements are met, fibre supplies are intact, and staff biologists hold on to the hope that large contiguous cuts may one day make nice contiguous homes for caribou when the forest grows back. There is of course a better way. Our alternative approach to forestry offers a solution to maintaining the forest’s integrity as well as a sustainable industry. It focuses on retaining the critical characteristics of the boreal forest that are threatened by logging. It is described in Making Forestry Better, available at www.wildlandsleague.org/proactive2.pdf Contact: [email protected] Inside: The boreal pulp and paper industry profiles and trends news Global Contents pulp&paper Convention Credibility 49 transnationalisation 4 jaakko pöyry corporate profiles 5 67 finance 8 nordic footprint 9 certification 10 illegal logging 11 Editorial T his issue of Taiga News explores the pulp and paper industry of the boreal region. The pulp industry is a major player in the boreal forests, yet it undergoes much less scrutiny than other sectors such as the timber trade. In this issue we have spotlighted a number of important trends and forces in the pulp industry, however we are sure that we are only scratching the surface of a critical issue for the boreal forests, and the research presented here raises as many questions as it answers. One thing is clear from the data presented on pages 6–7. Many of the companies in the pulp industry are huge, particularly the transnationals operating on both sides of the Atlantic, and, as Ola Larsson points out on page 4, they are generally getting bigger, and more globalised. Chris Lang on page 9 demonstrates the complexity of the overseas operations of many of these companies, and Elisa Peter on page 5 explores how consultancy companies oil their wheels. It is notable that the Russian players are, for the time being, much smaller than their European and North American counterparts. But given the attention being paid by international financial institutions to the Russian sector (see page 8), the Russian government’s liberal economic policies, and the huge scale of Russia’s fibre resources, we can probably expect rapid growth in the Russian pulp and paper industry. What impact this will have on the Taiga should be a major concern for us all. Continued on page 6 2 TAIGA NEWS ISSUE 37 Winter 2001 The Convention on Biodiversity (CBD) appears to be ready to address the real causes of forest loss in a credible and participatory manner. The Subsidiary Body on Scientific, Technical and Technological Advice (SBSTTA) of the CBD, which met from 12 to 16 November in Montreal, took on board the recommendations of the global process on the underlying causes of forest degradation and deforestation. There seemed to be a general consensus amongst the SBSTTA delegates that it was time for action and the final outcome was a large number of action-orientated recommendations on a broad range of issues. The meeting was described by non-governmental (NGO) participants as ‘historic’ and bodes well for the 6th Conference of the Parties (COP) of the CBD in April 2002. Contact: Simone Lovera, Global Forest Coalition [email protected] Increased NGO Participation NGOs have been invited to participate in the first meeting of the expert group on climate change and biodiversity of the CBD to be held in late January in Finland, and in an expert meeting on co-operation between the CBD and the United Nations Forum on Forests (UNFF) in Ghana, 28–30 January 2002. A multistakeholder dialogue will be held at UNFF2, Costa Rica, 4–15 March. But Govt Participation Declines Certified Forest Product Council in the USA. North American product information is already available and in the future the database will also include information on Europe. Contact: www.certifiedwood.org Survival Guide Contact: [email protected] [email protected] Taiga Rescue Network has produced a new publication on forest certification: Developing Forest Stewardship Standards – A Survival Guide. The guide is a practical handbook intended for all stakeholders involved in the development of FSC standards worldwide. It includes common problems and tips and covers all the steps in the standard development process, drawing on the past experience of various FSC working groups in 13 different countries. Oh No, Not That Again Contact: [email protected], www.taigarescue.org From 5 to 8 November, in Yokohama, Japan, an expert group meeting was held on monitoring, assessment and reporting on implementation of the UNFF action plan. However, only 11 voluntary country reports have been submitted to the UNFF Secretariat, and most countries have even failed to identify their focal point. The Canadian Forestry Advisers Network has posted a new presentation on its website with their view that ‘An International Forest Convention Is Needed Now’, despite the fact that 10 years of UN debate has clearly shown that no-one else in the world agrees with them. Indigenous Declaration FSC Database Representatives of indigenous peoples attending the 7th COP of the United Nations Framework Convention on Climate Change (UNFCCC), held in Morocco in November this year, issued a declaration demanding recognition of their rights and warning of the dangers of the agreement on including ‘carbon sinks’ in the Kyoto Protocol. Forest Stewardship Council (FSC) certificates are now listed on the internet via a new database developed by the Contact: www.wrm.org.uy/actores/CCC/ IPMarrakesh.html Contact: www.rcfa-cfan.org/english/issues.14.html news Europe Public Procurement In October the Climate Alliance Conference passed a resolution calling on the European Parliament to allow the use of public money in environmenally sensitive ways, and to favour eco-labels on all levels of public procurement. Source: www.klimabuendnis.org/kbhome/start.htm Forest Footprint WWF have recently published the UK’s Forest Footprint. The UK is the world’s second biggest importer of forest products, importing 85% of its needs. The Minister for the Environment has pledged to reform government procurement of forest products, to source more FSC certified products and to promote responsible forestry on the estimated 6.4 million ha of overseas forests needed to supply the UK market. Contact: www.wwf-uk.org Finns Break Moratorium Recent evidence shows that the Karelia moratorium on logging in old growth forest in Murmansk is being broken by the Russian company Polaria, managed by Michael Nazarov, and that the moratorium timber is being purchased by the Finnish company Fromlog Ky. Contact: [email protected] Russia Hot Air At the climate change COP7 in Morocco in November, Russia negotiated an increase from 17 to 30 million tonnes in the official level of carbon that their forests are able to absorb (see TN35). This hugely increases their quota of ‘hot air’, or spare greenhouse gas absorption capacity, which they can trade with nations with surplus emissions, such as Canada, Japan and the USA. Unfortunately, the USA, by far the most polluting nation and thus potentially Russia’s biggest customer, has withdrawn from the Kyoto Protocol, so Russia may have difficulty finding buyers for all that hot air. Source: Russian Environmental Digest, ECO news Hijau and Indigenous People At a conference in Malaysia in November, indigenous peoples’ representatives from Russia and other Asian countries compared notes on how Rimbunan Hijau’s activities are impacting on their lives. In 1997 the Malaysian mega-company bought a massive logging concession in the Russian Far East. Now their logging activities in Khabarovsky Krai have overrun indigenous hunting and fishing territory. Rimbunan Hijau had been fined several times for infraction of forestry laws but there are concerns that the regional administration is becoming less vigilant in recording infractions, after massive payments to the adminstration by the company. Contact: Forest Networking, forests.org Land Reform President Putin has signed the longawaited legislation allowing the sale of land across the country. The Land Code permits the sale, to both Russians and foreigners, of about 2% of the country’s 1.7 billion ha of land, including commercial land, land in cities and about 40 million dacha (summerhouse and garden) plots. Sales of the 25% of Russia that is agricultural land are to be covered in forthcoming legislation. Will the 60% of the land that is forest be next? Source: RED files. Samarga Moratorium The Russian forestry enterprise Terneiles recently announced a 2-year moratorium on logging of the Samarga River basin forests in the Ussuri taiga, Russian Far East (see TN36 Action Alert). Terneiles has also indicated it is willing to go for certification of its production and some of its forest holdings according to FSC standards. With about 1500 employees it is one of the largest harvesting and timberprocessing companies of the Primorsky region. Source: Russian Forest Update www.forests.org/recent/2001/ruforupd.htm Russias Forest Exports Russia’s forestry service estimates that exports of forest and paper products could total US$4.5 billion for 2001. This will include more than 40 million m 3 of roundwood timber worth more than US$1 billion. Russia’s total logging in 2001 is 140 million m3 of commercial timber, 6% more than in 2000. Official figures are that Russia has over 75 billion m3 of timber, and could harvest up to 541 million m 3 of commercial timber annually, though envirionmentalists estimate much lower figures. Logging peaked in 1991 at 380 million m3. Source: Interfax News Agency North America Sun Peaks Crisis The Secwepemc people of Skwelkwekwelt, British Columbia, are appealing for help as they are driven from their homelands to make way for a controversial ski resort. The Sun Peaks resort is planning a massive expansion on the Secwepemc traditional territory. Protesters have been evicted and face criminal charges for trespass. They claim that roads to traditional gathering grounds have been blocked, and that the Ministry of Highways has destroyed the home of a Secwepemc family. Contact: Skwelkwekwelt Protection Center [email protected] Endangered Species Law The effort to get protection for Canada’s 387 endangered species into law has reached a critical phase, with Canada’s federal Standing Committee on the Environment finishing a 6-month review of the proposed Species at Risk Act (SARA) on 27 November. Conservation groups from across North America are calling on Canada’s prime minister to take the committee’s recommendations on board and strengthen the bill before it is returned to the House of Commons for a third and final reading. Contact: wildcanada.net Alberta Forest Policy Problems A new report demonstrates that Alberta’s forest policies must change if Alberta’s forest industry is to remain competitive. The report, Structural Impediments to FSC Certification in Alberta: Overcoming Barriers to Well-Managed Forests, documents that a lack of protected forests and unmanaged petroleum industry activity severely hampers the Alberta forest industry’s ability to become FSC certified. In some places, oil and gas activity in Alberta clears almost as much forest as the forest industry. However, oil and gas companies have no cutting limits, no reforestation requirements and do not have to plan their activities jointly with the wood harvesting companies to manage forest use. Contact: www.fanweb.ca/download/awacmyk.pdf ISSUE 37 Winter 2001 TAIGA NEWS 3 pulp&paper Growing Global Ola Larsson, Taiga Rescue Network The past few years have seen a tremendous increase in large corporate mergers in all sectors, and the forest industry is no exception. All large forest companies have been subject to mergers and acquisitions and nothing indicates that this development is coming to an end in the near future. This article describes the transnationalisation process currently taking place across the worlds forest sector using the example of the Swedish forest group,Svenska Cellulosa Aktiebolaget(SCA). B Transnationalisation of SCA 100 % ack in 1996 SCA Chief Executive Officer (CEO) Sverker Martin-Löf stated ‘We have done nothing else but peel off businesses these past years…We have now reached a stable basis with the three business areas hygiene, packaging and graphic papers’. SCA is the second largest private forest owner in the world, with forest holdings amounting to 1.8 million ha of productive forest. Although not the fastest grower in the sector, SCA demonstrates the main aspects of current forest sector developments – specialisation and transnationalisation. % foreign sales 50 % foreign employment 0 80 85 90 95 96 97 98 Specialisation Year In the 1980s the buzzword of the Nordic forest sector was vertical integration. Companies stated proudly that they were vertically integrated, with activities ranging from energy production and forest management to producing and selling a wide range of wood products such as magazine paper, copy paper, newsprint, hygiene papers and sawn products. Today corporate ambition is not vertical integration, but rather specialisation in a few key product areas where the company sees a profitable market in the future. SCA has chosen to focus its activities on the two key areas of hygiene products and packaging, and all sell-offs and acquisitions are directly or indirectly aimed at increasing the company’s market share in these product groups. SCA has already sold its power plants and fine paper utilities and analysts foresee SCA selling their core activity: the forest and its management. During the period 1998–2000 SCA carried out strategic investments amounting to US$2 billion and acquired 30 companies. ‘Strategic US acquisitions create conditions for global expansion within selected product segments’, says Martin-Löf. In the year 2000 alone, strategic moves included the sale of the group’s fine paper operations, the acquisitions of the US company Johnson & Johnson’s incontinence operations (hygiene products) and Finnish MetsäSerla’s corrugated board operations (packaging), and the formation of a new sawmill and forest company, Scaninge. Transnationalisation If a forest company has chosen to focus its activities on one or two product groups it will want to increase its production of these products as larger production levels and market shares are believed to increase profitability. This growth in production can either be achieved ‘organically’ (through building new or improving old plants) or through mergers and acquisitions. As the world’s paper market at the end of the 1990s was characterised by an over capacity of production, it has in general been cheaper to increase market share through mergers with and acquisition of existing production units than to build new capacity. With forest companies growing larger and more specialised, more and more of their production, sales and ownership is located outside of their home country. Figure 1 shows the past 20 years of growth of foreign production (and therefore employment) and 4 TAIGA NEWS ISSUE 37 Winter 2001 Transnational isation index Figure showing SCAs growth in foreign activity. The transnationalisation index is the average of corporate foreign sales and employment. sales for the SCA group. To talk about SCA as a ‘Swedish’ company and their sales ‘abroad’ may no longer be appropriate when a company has reached SCA’s degree of transnationalisation, with most of its production and sales outside Sweden. Foreign ownership is growing, but remains a minority (21% at the end of 2000). Future Developments and Possible Consequences Business analysts claim that the forest industry in Finland and Sweden was leading the global forest industry’s restructuring at the end of the 1990s. Most analysts also agree that the forest sector is still rather unconsolidated, compared with similar sectors, and therefore will see further mergers and acquisitions. The transnationalisation of the forest industry has not yet attracted a lot of attention from the forest movement. Views and opinions on the developments differ, but some concerns that have been raised include double ecological and social standards within the same forest company and the potential absence of a sense of responsibility when the forest operations in one country are owned by an international corporation with its headquarters in another continent. Stora Enso is one such transnational forest company that has received criticism for having different environmental ambitions for its forestry operations in different countries. For example, the company has FSC certified forest operations in Sweden while it has lacked FSC ambitions in neighbouring Finland. Another reason for criticism has been that the company refuses to buy Russian old-growth wood but still uses controversial Finnish old-growth wood in its processing industry. Even though the dominant view on transnationalisation amongst the environmental movement is scepticism, some activists have made the point that transnationalisation may be a good development as fewer and bigger companies can be better targets and negotiating partners than a larger number of smaller companies. Whether bigger is better remains to be seen. Contact: [email protected] pulp&paper On Jaakkos Tracks Elisa Peter, Taiga Rescue Network Although not as well known by forest activists as the big forest companies, Jaakko Pöyry is the worlds largest forestry and engineering consultancy firm, which has been promoting the rapid expansion of industrial forestry, plantation forestry and the pulp and paper sector around the world over the last 40 years. This short profile gives a flavour of its activities. T he Jaakko Pöyry group was established in 1958 in Finland and has since then been involved in projects in more than 100 countries. It expanded internationally in the 1970s and 1980s to promote the Scandinavian forestry model abroad and to play an increasingly active role in the globalisation of the pulp and paper industry by opening offices in more than 30 countries. As of today, it has designed 350 major pulp and paper mills in boreal, temperate and tropical countries alike, including Russia, Scandinavia and Canada (see the list of the most recent pulp and paper projects below). The group’s net sales have grown from about EUR 50 million in 1985 to some EUR 475 million today. Jaakko Pöyry works by providing advice and ‘special expertise’ to the forest products industry and forest officials on a wide range of issues such as: planning, building and maintenance of pulp and paper mills, buying and selling (mostly) Scandinavian forestry machinery and pulp and paper technology, establishing tree plantations (including carbon plantations in the south, e.g. Indonesia, Laos, Vietnam, Thailand and Brazil), logging, carbon trading, trade flows, investments and banking. Underlying Jaakko Pöyry’s ‘special expertise’ is the assumption of ever increasing paper consumption, an estimated volume of growth of 10 million tonnes a year (t/a), and the growing consolidation of the industry, which the firm is facilitating through its projects. Jaakko Pöyry is there to help the industry to respond to this projected increased demand for paper by planning for higher production capacity through the improvement of the efficiency of existing mills and the construction of new mills. Jaakko Pöyry is also promoting mergers, acquisitions and new business alliances within the industry by offering special financing and strategic consulting services. Often, these projects are financed by multilateral aid agencies (such as TACIS), governments or international financial institutions (World Bank, etc.). In the last few years, Jaakko Pöyry has been trying to green its image. Its annual reports stress that ‘environmental protection is a guiding principle in all activities undertaken’ and the group claims to be a pioneer in ‘developing forest plantations, carbon sinks, re-use of wood wastes, and closed-loop technology for pulp and paper mills’. Indeed Jaakko Pöyry is one of the main actors involved in creating the conditions for establishing largescale industrial pulp, paper and carbon sinks plantations in the South, most of which have been strongly opposed by local communities and environmental groups. In the boreal region, Russia provides a good example of Jaakko Pöyry’s work. The firm conducted an assessment and planning of the entire forestry sector for the Russian government in 1992, which led to the recommendation that Russia double its annual cut from 100 million m3 to 200 million m3, a figure they estimated would still be far below the potential optimum harvest level. Later, in 1998–2000, the company conducted a TACIS-funded assessment of the Baikalsk and Selenginsk pulp mills. The Baikalsk mill is located on the east shore of Lake Baikal in eastern Siberia and within the territory of a World Heritage Site (see page 8). In 1998 the average distance for timber transport to the mill was 1400 km and Jaakko Pöyry advocated switching to timber supplies in Buryatia and along the Trans-Siberian railway between the cities of Krasnoyarsk and Irkutsk (a 600 km radius from the mill). This is all old-growth forest. The firm even advocated using thinning and sanitary logging in the water protection zone on the shores of the lake to provide the mill with raw material. Although it was critical of the logging methods used at present and said that they would lead to the gradual degradation of the forest in the lake basin the final recommendation of its study was to expand and modernise the mill. Jaakko Pöyry has no policy of transparancy and many of its reports are hugely expensive. But given its huge influence on the industry we need to keep a careful eye on its work, and insist that governments and donors who fund its activities fully disclose the details of the arrangements and results. Sources: Jaakko Pöyry. Annual Reports 1998, 1999, 2000 and www.poyry.com Lang C., Hildyard N., Geary K., Grainger M. (2000) Dams Incorporated: The Records of Twelve European Dam Building Companies. SSNC Report. Sutton, J. (2001) Baikal Environmental Wave, personnal communication WRM (1998) Jaakko Pöyry: More Than Mere Consultants. World Rainforest Movement. Bulletin 15 Contact: [email protected] Some major pulp and paper projects conducted by Jaakko Pöyry in the last 2 years. • Main engineering consultant for new paper mill in Canada (Stora Port Hawkesbury, 350 000 t/a, 1998). • Main engineering consultant for expansion of chemical pulp mill in Finland (Metsä-Botnia, 565 000 t/a, 1998). • Process engineering for rebuild of fine paper machine in Sweden (MoDo Paper, 250 000 t/a, 1998). • Process engineering for new fine paper machine in China (APRIL, 300 000 t/a, 1998). • Detail engineering for expansion of chemical pulp mill in Brazil (Aracruz Cellulose SA, 700 000 t/a expansion, 2000). • Main engineering consultant for de-inking plant and paper machine in USA (Madison Paper Company, 2000). • Main engineering consultant for the Baikalsk and Selenginsk pulp mills in Russia (funding from TACIS, 19982000). ISSUE 37 Winter 2001 TAIGA NEWS 5 pulp&paper In North America... Editorial Weyerhaeuser Continued from page 2 It is hard to know what impact any of the pulp giants is having on the boreal forests. What proportion of current fibre originates from old-growth forest, from secondary forest, or from plantations? What proportion is recycled? What are the trends in these sectors? We need more information gathering in this sector and transparent dissemination. The trade in fibre is global and it is extremely difficult to track the origins of most products in this sector, particularly as so many are low-profile disposable commodities such as toilet rolls, nappies, pizza cartons and newspapers. How do we get consumers to care whether their cereal box came from a sustainably managed forest? If we want a packaging industry that is responsible with regard to forests, we need to understand better the markets they are working for, and use that understanding to raise consumer awareness of their impacts. Whilst traceability is difficult, it is not insurmountable using approaches such as those developed by Springer-Verlag and UPM-Kymmene (www.upmkymmene.com/tracingimports). Some countries, such as the UK, have begun to take seriously their global ‘forest footprint’, an idea pioneered by non-governmental organisations (NGOs). But we also need to see big businesses such as the pulp and paper industries named here, researching and making public their ecological footprints. A final key question is, who is financing the sector? The research by Profundo shows how much power financial institutions have in the industry. These institutions always put conditions on their contracts with clients and these should be used to encourage responsible forestry. They should insist that their investments are not used to contribute to the destruction of old-growth forests. They should underscore their commitment by providing financial incentives for the development of transparent and robust fibre tracking systems and encourage sourcing of fibre from Forest Stewardship Council (FSC) certified forest management. A code of responsible investment in forestry would be a useful starting point. Mandy Haggith and Bill Ritchie 6 TAIGA NEWS ISSUE 37 Winter 2001 Washington State, USA. Produces pulp, packaging and newsprint. Convicted of violations of air and water quality and waste management standards. Website: www.weyerhaeuser.com Abitibi Consolidated Montreal, Quebec, Canada. Produces newsprint, recycled products and timber. Causes controversy by logging in primary boreal forests. Recently sued in Quebec by the Grand Council of the Cree, regarding practices in the area under the James Bay and Northern Quebec Agreement (Cree treaty). Website: www.abicon.com Domtar Montreal, Quebec, Canada. Produces packaging, free sheet, publishing, speciality and technical paper and timber. Controversially logging in primary boreal forests. Also recently sued by the Grand Council of the Cree. Whos the borea Website: www.domtar.com In Scandinavia... Norske Skogindustrier ASA (aka Norske Skog) Lysaker, Norway. Produces newsprint, improved newsprint, directory paper and gloss newsprint. Buys wood from old growth and key habitats. Supports Pan-European Forest Certification (PEFC). Has operations in Asia but little information is available about them. Website: www.norskeskog.com Stora Enso Helsinki, Finland. Owns land in Finland, Sweden, USA, Canada and Portugal Produces magazine paper, newsprint, fine paper, packaging and board. Stora Enso is one of the major buyers of old-growth wood in Finland but the company refuses to purchase old-growth wood in Sweden and Russia. The company’s Swedish operations are FSC certified, while it has not shown the same ambitions for its Finnish forest lands. Website: www.storaenso.com Profiles of some of th companies involved in the SCA Stockholm, Sweden. Produces hygiene products, packaging and publication papers. SCA is FSC certified and delivered the first FSC certified magazine paper to BBC Wildlife in 2000. However, SCA is the only major Swedish promotor of exotic lodgepole pine plantations in Sweden and is lobbying the Swedish FSC Council to approve this practice. For more on its transnationalisation see page 4. Website: www.sca.com UPM-Kymmene Helsinki, Finland. Produces printing paper, sawn timber and plywood. UPM-Kymmene is one of the two biggest pulp&paper In Russia... Ilim Pulp Enterprise Saint Petersburg. Produces board, pulp, paper and plywood. Logs old-growth forest. Website: www.russianpapermills.com Titan/Arkhbum/Arkhangelsk PPM Arkhangelsk. Produces pulp, board and paper Logs old-growth forest. Has poor contacts with NGOs. Syktyvkar Forest Enterprise Syktyvkar, Komi. Produces paper, board and plywood. Logs old-growth forest. Has poor contacts with NGOs. pulping al forests? he major boreal forest pulp and paper industry. Name Number of Employees A rea of forest (million ha) A rea FSC certified (million ha) Weyerhaeuser 16,000 47,000 1 5 .6 0 Stora Enso 11,645 45,000 3 1 .6 UPM-Kymmene 9034 33,000 ? ? SCA 6244 40,000 1 .6 1 .6 A bitibi Consolidated 3612 18,000 ? 0 2980 10,500 ? ? Domtar 2289 12,500 ? 2 sites Södra 1119 3000 2 0 510 28,000 2 .2 0 Syktyvkar Forest Enterprise 243 10,000 7 0 Titan/A rkhbum/ A rkhangelsk PPM 214 15,000 ? 0 Norske Skog buyers of Finnish old-growth forest timber and this is at odds with their support for the old-growth logging moratorium in north-west Russia. Sales (2000) (US$ million) Website: www.upm-kymmene.com Södra Växjö, Sweden. Produces pulp and sawn timber. The company is owned by 34,000 forest farmers in Southern Sweden. Its target for the end of 2002 is to certify 1.2 million ha (more than 60% of its land) to PEFC standards. Despite large environmental ambitions on the processing side the group has decided not to promote FSC certification amongst its members. Website: www.sodra.com Ilim Pulp Enterprise ISSUE 37 Winter 2001 TAIGA NEWS 7 Foreign investment in Russia Jan Willem van Gelder, Profundo The Russian pulp and paper industry is experiencing a period of strong growth with muc foreign investments. This article examines four examples of foreign investments in R A t the moment, there are about 160 pulp and paper mills in Russia. Ten major pulp and paper mills cover more than two-thirds of the total output, and all are increasing production. Russias pulp output reached 5.8 million tonnes in 2000 (14% more than in 1999) and paper and board output reached 5.2 million tonnes (+15%). This output growth is mainly focused on foreign markets and 28% of the pulp production and 45% of the paper and board production is exported. Foreign investment is behind much of this growth, so it is worth looking in some detail at some of the financial players behind the growth of four big mills. Svetogorsk The Svetogorsk Pulp and Paper Mill is an integrated pulp and paper mill, located 200 km north-west of St Petersburg, close to the Finnish border. It was acquired in January 1995 by the Swedish company Tetra Laval, which invested US$127 million in the plant in the 3 years it owned it but never realised a profit. In January 1999 the pulp and paper mill was sold to the largest pulp and paper company in the world, International Paper (United States). The Overseas Private Investment Corporation (United States) provided political risk insurance of US$150 million. The Multilateral Investment Guarantee Agency (MIGA, part of the World Bank group) guaranteed the equity investment of US$30 million. International Paper has invested around US$100 million in the pulp and paper mill in the past 3 years. Paper production has increased to 325,000 tonnes per year, and Svetogorsk is now Russia’s leading supplier of office paper, with 40% of the market. Turnover reached US$185 million in 2000. The adjacent tissue plant (which belonged to Svetogorsk Pulp and Paper Mill as well) was sold separately by Tetra Laval to the Swedish company Svenska Cellulosa Aktiebolaget (SCA) for US$26 million in June 1998. Svetogorsk Tissue operates Russia’s most modern tissue machine, built in 1989. Annual production amounts to about 20,000 tonnes, corresponding to 20% of the needs of the Russian market. Current capacity is 30,000 tonnes, but SCA is planning to increase it to 40,000 tonnes in four years by an investment of US$12 million. 8 TAIGA NEWS ISSUE 37 Winter 2001 Major Russian pulp and paper mills 1. Svetogorsk 2. Ilim Pulp Enterprise 3. Kommunar 4. Kondopoga 5. Arkhangelsk PPM 6. Kotlas 7. Syktyvkar 8. Solikamskbumprom 9. Ust-Ilimsk 10. Bratsk 11. Baikalsk Syktyvkar Syktyvkar Forest Enterprise is a paper mill in the Komi Republic. The Austrian paper company Frantschach owns 19.4% of the shares of Syktyvkar. Frantschach itself is 70% owned by Mondi Paper from South Africa, which is part of the large Anglo American mining conglomerate. Other foreign shareholders are Burlington Investment Ltd (9.0%), New Europe Investment Fund (7.8%) and Conwey Holdings Ltd (6.2%). The investment programme of Syktyvkar, which aims at a considerable growth in volume together with product upgrading, is partly financed by the ExIm Bank of the United States. Syktyvkar also has obtained a loan from the Bank of America (United States), of which US$34.8 million was outstanding at the end of 1999. Baikalsk The Baikalsk Pulp and Paper Mill was built on the shores of the Lake Baikal in Siberia in the 1960s as a military factory. The plant has been criticised heavily because its waste water is polluting Lake Baikal. Despite the mill’s treatment facility, environmentalists estimate that it dumps 135 kg of dioxin a year into the lake. This is threatening all 1500 species of animals and plants in the lake, including the unique nerpa (freshwater seals). The mill is nearing the end of its life span, but its managers and the 3000 workers are eager to keep the mill open. Paid by the US Agency for International Development, a plan has been drawn up to switch to a non-chlorine manufacturing process, eliminating dioxin, waste water and the burning of coal. This project would cost US$ 600 million (see also page 5). In December 2000, the governor of the Irkutsk region discussed, with representatives of the Japanese trading firm Marubeni, Japanese investments in the Baikalsk Pulp and Paper Mill. Arkhangelsk Arkhangelsk Pulp and Paper Mill (Arkhbum) is located in Novodvinsk on the shore of the White Sea. The company has annual sales exceeding US$300 million. Its annual production of 700,000 tonnes of pulp accounts for 12% of Russian production. Its share in the Russian production of container board is over 36%. Arkhbum also produces wood fibre boards, paper and fair-paper products. A large part of production is exported to Germany, the UK, France, the Netherlands, as pulp and paper industry h of this expansion financed by Russias pulp and paper mills. Spain, Italy, Poland and South Korea. In 1996 the company was on the verge of bankruptcy. It was taken over by the Titan Group from Russia, the paper trading firms Wilfried Heinzel from Austria (which now holds 13% of the shares) and Conrad Jacobson from Germany, and another foreign investor. The management was replaced, and large investments were made in modernisation of production. In 1999, Arkhbum realised a profit of US$40 million, and it is planning to increase output of all its products. In July 2000, Arkhbum obtained a US$9 million 1-year loan from International Moscow Bank (Russia) and Bank Austria Creditanstalt, a subsidiary of Bayerische Hypo und Vereinsbank (Germany). The proceeds of the loan were used to finance the import of corrugated cardboard packaging equipment. In August 2000, Arkhbum obtained a further US$4 million loan from Erste Bank (Austria) to reconstruct an unbleached pulp fibre line. The machinery is supplied by the Austrian company Lenzing Technik. Contact: [email protected] Nordic Footprint Chris Lang It is not just the boreal forests that are impacted by the pulp and paper industry based in the boreal region. Many northern companies supply machinery and expertise in developing countries in the south, and thus have much bigger footprints than we might expect. The example of Scandinavian operations in Thailand gives us a flavour of what is involved. I n the last two decades, the pulp and paper industry in Thailand has expanded hugely to an industry producing almost 4 million tonnes a year (t/a) of paper and board, dependent on eucalyptus plantations to supply the raw material. The impact on Thailand’s communities and forests has been severe. When forests and woodlands are converted to eucalyptus plantations, villagers’ livelihoods are endangered as they lose a source of food, medicine and firewood. Water sources dry up, rice crops near the plantations fail and villagers lose grazing land. Despite these impacts, funding from aid agencies in Canada, USA, Japan, Australia, Scandinavia as well as the World Bank and the Asian Development Bank has helped the expansion of the pulp and paper industry in Thailand. During the 1990s, several new pulp and paper mills started operations in Thailand: Siam Cellulose (1992), Phoenix II (1994) and Advance Agro (1996). All three new mills are designed to use eucalyptus as raw material and all three use technology and machinery from Northern countries. Phoenix’s first production line started up in 1982. The consulting engineer for the 70,000 t/a mill was the German–Austrian company, Klockner-Voest, and the pulping technology was supplied by the Swedish company, Kamyr. Phoenix’s second mill opened in 1994, at a cost of US$240 million. The financing included an US$80 million loan from several Scandinavian banks, led by Leonia Bank of Finland and guaranteed by Finnvera, the Finnish Export Credit Agency. The Finnish government pays all the loan interest due to Leonia Bank: it is the largest concessionary loan ever granted by the Finnish government. Advance Agro is the largest fully integrated pulp and paper manufacturer in Thailand and exports 70% of its production. Two years ago, Stora Enso bought up 19.9% of Advance Agro. Under the deal Stora Enso is assured of a market for at least 12,000 tonnes of long-fibre pulp from its mills in Europe and gets exclusive international marketing rights of Advance Agro’s products outside Japan. A series of Scandinavian companies has won lucrative contracts to deliver machinery, equipment or technical services on pulp and paper projects in Thailand, including Ahlstrom, Sunds Defibrator, Nopon Oy, Valmet, Kvaerner and Jaakko Poyry. In addition to funding specific pulp and paper mills, Scandinavian aid has helped promote industrial forestry and the pulp industry in general. The Thai Forest Sector Master Plan (TFSMP), completed in 1994, was funded by the Finnish government and carried out by Jaakko Pöyry. The TFSMP had an overwhelming bias towards industrial forestry and the pulp and paper industry and aimed to formulate the relevant policies and to develop institutions to implement the plan. Pöyry’s recommendations included handing over 4 million ha of farmers’ land to private companies for tree plantations to feed the pulp and paper industry. The plan was opposed by Thai NGOs and was never implemented by the Thai government. In 1995, the Finnish International Development Agency commissioned the World Conservation Union (IUCN) to carry out a review of the TFSMP. The review pointed out ‘serious flaws’ in the plan, and stated ‘if implemented either partially or in full, the plan would have many widespread, permanent social, economic and environmental impacts’. IUCN’s review team also pointed out that ‘the project was established with serious flaws in its design and methodology’, with 80% of consultancies going to international consultants who were ‘almost exclusively Finnish or Swedish and none spoke Thai’. Yet the flow of cash from the north continues to this damaging industry. Phoenix is currently planning to expand its pulp and paper mill, and the company is again looking to gain export credit from the Finnish and Swedish governments. Contact: [email protected] ISSUE 37 Winter 2001 TAIGA NEWS 9 certification Sustainable for Whom? Chanda Meek, Boreal Footprint Project A new study, Sustainable for Whom? documents small-scale forest management, looking at both FSC certification and benefits to local populations, in order to analyse how policy can support socially beneficial forest management. T he Boreal Footprint Project and the Taiga Rescue Network have recently released a paper called Sustainable for Whom? discussing communities, the Forest Stewardship Council (FSC) and social benefits in Canada and Sweden. The purpose of the study was to examine regional policy and legal conditions for market-based certification to reward both green and equitable forestry, that is forestry which is good for the environment while providing meaningful work and economic livelihoods for local people. The study focuses on four communities: Tåssåsen Sámi community (Sweden), Drevdagen (Sweden), the Algonquins of Barriere Lake (Canada) and Pictou Landing First Nation (Canada). Each community illustrates a different aspect of community survival and forest management in the boreal region. Market-based certification of forest management is the latest effort by civil society to internalise the environmental and social costs of wood production by endorsing a green label for products that have been produced in a manner reflecting broad environmental and social standards. The FSC in particular has received enthusiastic support from environmental NGOs. In Sweden, FSC has been vigorously pursued by both NGOs and indigenous peoples, with approximately 43% of productive forest land certified. In Canada, only 0.015% of the country’s forested land base is certified. Findings from Four Communities The Sámi community of Tåssåsen has been in conflict with small forest owners who refuse reindeer grazing on their lands. Unimpeded access to grazing grounds is the main benefit the Sámi receive from FSC certification. However, these benefits are not sufficient to ensure Sámi livelihoods, as they can only access a fraction of their grazing grounds. This voluntary agreement must be broadened to include non-compliant forest owners or the Swedish government should pass a clear, binding recognition of Sámi rights. Drevdagen is a small Swedish community that has a longstanding land title dispute with the Swedish State. Despite the FSC certification of Sveaskog, the local forest manager, the people of Drevdagen have not received any substantive benefits from ‘improved forest management’. The lack of benefits stems from Drevdagen’s lack of economic infrastructure and absence of decision-making power. The Algonquins of Barriere Lake are an indigenous community based in Quebec, Canada. The Algonquins negotiated the far-reaching social benefits and comanagement Trilateral Agreement, in which the largest forestry operator (Domtar), the Province and the Canadian government eventually agreed to share governance and benefits from forestry within the Algonquins’ traditional lands. At present, the Algonquins are not receiving any social benefits from Domtar operations. Central to their future is the implementation of the Agreement, which has recently made headlines because of Canada’s reluctance to pay its promised share of the implementation provisions. Pictou Landing First Nation is an indigenous community in Nova Scotia, Canada which has been FSC-certified for over a year, and has ambitious plans for capturing full social and 10 TAIGA NEWS ISSUE 37 Winter 2001 environmental benefits from their culturally-based forest management plan. Pictou Landing, though depending on a modest sized forest, is on its way to turning a profit and opening doors to its community. Crucial to its success has been developmental support through the First Nations Forestry Association in Nova Scotia, community support for culturally-based ecoforestry, and the land rights (title and reserve land) to pursue its own agenda. Conclusions Forestry that is most likely to be responsive to multiple uses within a community and based upon shared values is likely to be based upon community ownership and/or control of the resource base. Sustainable development relies on community empowerment, whether or not communities have the flexibility to pursue their own agendas for resource development. When we discuss socially beneficial forestry we need to address two basic questions: who owns and controls the forest, and who benefits from its current use? Policy frameworks that support community sustainability include the following: binding tenure, customary use or indigenous rights recognised by the state; legislated social development agreements with specific targets, goals and timelines; and forest management policy that includes meaningful, targeted reform of the underlying causes of forest degradation such as unsustainable tenure agreements. While the FSC cannot take the place of a rural development programme, it has some potential to provide community leverage or to reinforce existing tenure agreements. If NGOs and the public want to ‘green’ and socially improve large corporate tenureholders, a credible development programme for affected local communities must compliment certification. FSC is a voluntary labeling scheme, and as such does not have the power to create jobs, help communities organise, or redistribute wealth in communities. In fact, very few large corporate tenure agreements on public or disputed lands provide social benefits in keeping with a moderate interpretation of FSC Principle 4. Making the jump from good intentions to the implementation of something like the Algonquins’ social benefits assessment within the Trilateral Agreement will require substantial NGO support, state and regional movement, as well as corporate compliance with the FSC principles and criteria. Recommendations • • • Specific, quantifiable socio-economic targets (such as jobs per volume wood extracted) should be on checklists for certifying operations that affect forest-dependent communities. Criteria for community consultations should be strengthened (ie. who is invited, what constitutes appropriate consultation?), especially regarding indigenous communities. Support for certification needs to be balanced (with time and resources) by campaigns calling for innovative, communitydriven approaches to sustainability. Contact: [email protected] www.taigarescue.org/publications/reports.shtml illegal logging Illegal logging in Estonia Rein Ahas, Estonian Green Movement. The Estonian Green Movement has begun a project researching illegal forestry. Their latest results show that it is a major problem with up to 50% of all exported timber being illegal. What is Illegal Forestry? M ost international organisations define illegal forestry as activity not following local or international laws, contracts or regulations, including violation of environmental, forestry, logging and tax rules; theft of forest products (forest theft); and document fabrication. Timber that is produced using these methods is illegal. Environmental NGOs see it as a big problem because illegal structures and operations generate new problems and new markets for this timber; illegal actors do not follow rules and are difficult to control. Approximately 50% of the timber exported from Estonia is illegal. It is a serious problem for Estonian forestry and for the many Scandinavian companies permanently using Estonian timber. The scale of illegal (or shadow) forestry in Estonia is demonstrated by the following figures for various categories of deception, from estimates by the Estonian Green Movement (EGM) in % of the total volume of felled timber. • Forest theft – 5%. • Violation of felling regulations – 20%. • Not using or fabricating documentation – 20%. • Not paying employer ’s taxes and income tax – 50%. • VAT frauds; using intermediates, offshore firms and secret identities; tampering – 15%. There is overlap between categories because if one stage of business is illegal it often generates new violations. Where is the TimberGoing? Estonia is the second largest exporter of wood products to Finland after Russia, and the third biggest exporter of wood products to Sweden after Latvia and Russia. Big companies that buy Estonian timber use local supplier companies and several intermediate or offshore firms for legalisation of illegal timber. Harvesting, sorting and local transport of illegal timber is often done by small companies with unclear ownership. The origin of timber is hard to discover because of ‘very soft’ laws and the lack of legal demands for management plans. The timber changes owner several times and its tracks are lost. As a final guarantee, unscrupulous exporters and local producers surround themselves by chains of friendly intermediates under their control. NGO Action Plan Environmental NGOs have created an action plan to fight these problems. EGM has started a governmental roundtable on illegal forestry, prepared materials for discussion and interviewed Estonian stakeholders and organisations from consumer countries. Together with the Estonian Fund for Nature (ELF), we have started to revise the Forest Code and other regulations. ELF has devised various alternative schemes for avoiding illegal forestry and has run a media campaign to demonstrate the problem. During 2001 four roundtables were held with no success because the State and industries are not very interested in solving this problem. The State is not Interested The Environmental Ministry and its forestry department do not want to solve this problem for several reasons. • Politics: the Minister is from the • • • Reform party, which represents business and industry, and they have a very liberal economic policy. Stagnation: it is very complicated to change laws and the ministry does not take the initiative. Other sectors: many aspects of the problem, such as taxation, police and funding, have to be resolved by other ministries at the governmental level. Industry lobbying: Estonian and Scandinavian industries have an intensive lobby to keep getting cheap timber easily. Industry is not Interested Companies want to keep their costs down, avoid competition, and minimise paperwork. Estonian branches of international companies have low environmental awareness and they do not want to deal with state responsibilities. Some companies have had signals from Scandinavian headquarters to control the legality of timber but the Estonian response has been to solve the problem by coveringup the corruption even more. Time for action The time has now come for us to track and prove that companies buy and use illegal logs from Estonia. The time has come to change Estonian legislation and environmental performance. EGM, ELF and other Estonian NGOs are waiting for your ideas and responses on how to link our work into bigger campaigns. There has been some recent progress with the illegal forestry project. The former head of the Forestry Department was replaced by a new and active director on 1 November 2001 and an illegal forestry working group was created in the Estonian Forest Development Program. The issue was also raised within the European parliament at a meeting on 26 November 2001. We hope the Estonian Timber Industries Association will now engage with us in constructive discussions. Contact: [email protected] ISSUE 37 Winter 2001 TAIGA NEWS 11 Taiga Rescue Network and Boreal Forest Network 6th Biennial Conference Current and Future Boreal Forest Values Conservation Goals and Market Trends 2022 September 2002 Winnipeg, Canada Highlights include a line-up of high profile speakers and a visionary presentation on shifting the paradigm from competing to co-existing values for the future, plus panel discussions on climate change, traditional values, and defining and protecting the boreal forest. The conference will be followed by NGO strategy sessions, held in the nearby boreal forest at the Wilderness Edge Retreat Centre on the Winnipeg River. Feedback from the public sessions will be collected and presented here to inform our strategic debates. We’re working very hard to keep the costs down so as many participants as possible can come. Watch out for further announcements soon on our websites at www.borealnet.org and www.taigarescue.org. We look forward to seeing you all next September. Contact: Michelle Forrest and Susanne McCrea, conference organisers [email protected] IS IT TIME TO RENEW YOUR SUBSCRIPTION? If your address label states Paid to 2001 it is time to renew your subscription to Taiga News. If the label states Paid to 2002, or something else, you are up to date. We hope that you will continue to subscribe and benefit from the unique coverage of our newsletter. See payment details below. Please Renew Your Subscription Before March 31st! Subscribe to Taiga News Taiga News is the only newsletter available focusing solely on the boreal forest and its people and issues related to them. We hope that you are able to support it by subscribing. Please pay the subscription fee and fill out the form below. 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Note: If you pay by post, bank transfer or cheque, please add an additional US$10 to cover the bank fees. Be aware that your bank will probably also take a fee. Next issue Publisher Taiga Rescue Network, Box 116, Ajtte, S-962 23, Jokkmokk, Sweden. Tel: +46 971 17039 Fax: +46 971 12057 Email: [email protected] Web site: www.taigarescue.org Editors Mandy Haggith & Bill Ritchie 95 Achmelvich, Lochinver, IV27 4JB, Scotland, UK. Tel: +44 1571 844020 Email: [email protected] Illustrator Gun Hofgaard, [email protected] Tel: +46 971 380 63 Printer Posthouse Printing, Findhorn, Scotland Tel: +44 1309 691640 Paper Repeat paper, Inveresk Graphic Papers made from 100% post-consumer waste, accredited by NAPM, Eugropa and ISO. Authors are responsible for their own articles. Permission is granted to reproduce text providing full credit is given. © Taiga Rescue Network, 2001. ISSN:1401-2405 The next issue of Taiga News will focus on the convention on biological diversity. 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