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FOREST PRODUCTS ASSOCIATION OF CANADA
Sustainability Report 2007
This report is printed on Canadian offset paper containing 30% post-consumer fibres.
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CONTENTS ABOUT THIS REPORT ......................................................... 2 MESSAGE FROM THE PRESIDENT & THE CHAIR................ 3 FPAC CEO SUSTAINABILITY COMMITMENTS ..................... 5 FPAC SUSTAINABILITY INITIATIVE .................................... 6 ENVIRONMENTAL RESPONSIBILITY .................................. 8 SOCIAL DESIRABILITY ..................................................... 17 ECONOMIC VIABILITY ....................................................... 21 CONCLUSION ................................................................... 24
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ABOUT THIS REPORT The Canadian forest products industry contributes to society’s well-being through its products and services— from forest to market. The industry is committed to working in a manner that is environmentally responsible, socially desirable, and economically viable. Members of the Forest Products Association of Canada (FPAC) are committed to a sustainable development path built on a profitable and competitive industry. This first Sustainability Report measures FPAC members’ progress against a range of environmental, economic, and social indicators that will evolve over time. By reporting biennially on these indicators, FPAC members hope to demonstrate steady and substantive progress toward their stated commitments and broader sustainability goals. FPAC members are proud of their progress to date and are determined to build upon it through continual improvement in both their collective and their individual performance. The FPAC Sustainability Report 2007 is a first step. As we strengthen our reporting tools and gain more experience, we will further develop and refine the Sustainability Initiative upon which this report is based to better address the needs of FPAC members and their communities of interest across Canada. This report includes data and information for FPAC members’ Canadian operations for the 2005 and 2006 calendar years. Additional details on a specific member’s operations are available on its website or within its corporate publications.
MESSAGE FROM THE PRESIDENT & THE CHAIR Sustainability is more than a slogan or a mantra and more than the sum of all the charts and graphs in this first biennial report on the FPAC Sustainability Initiative. For FPAC members, sustainability is first and foremost a collective mindset to be a strong, competitive, and profitable industry that can perpetuate itself while earning recognition as a good steward of the environment, a good employer, a good neighbour, and a reliable supplier and trading partner. It means taking concrete actions, addressing issues in a collaborative fashion, advancing common interests with local forestry communities and Aboriginal peoples, and building strong partnerships for conservation with organizations such as the Canadian Boreal Initiative, Canadian Wildlife Federation, Ducks Unlimited Canada, and the World Wildlife Fund. It means taking principled leadership positions on global issues and exerting leadership on key sustainability files: · Climate change: We’re committed to reducing greenhouse gas emissions beyond the 44% reduction achieved since 1990. We’re adding more green power generation capacity at our mills, mainly from biomass cogeneration. Already the industry generates enough power to supply all of Greater Vancouver, a city of two million people. · Sustainable forestry: Our pledge to certify all FPAC member-managed forest areas to a major sustainable forest management standard by 2006 has been fulfilled. · Paper recovery: We believe that no good paper should go to landfill. We have committed to work with partners to increase Canada’s paper recovery rate to 55% by 2010, making Canada a world leader in paper recovery. · Illegal logging: We worked with the International Council of Forest and Paper Associations (ICFPA) to gain international commitments to oppose illegal logging, and we adopted an FPAC statement on illegal logging as well as a traceability commitment. Sustainability is dynamic, an evolutionary journey with no final destination. As much as we know, there is so much more to learn. The more we leverage new knowledge, techniques, and technologies, the more efficient and competitive our operations become. That’s good for all stakeholders, including our shareholders.
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FPAC CEO SUSTAINABILITY COMMITMENTS There will always be new challenges. The Canada–U.S. softwood lumber dispute is behind us, but the devastating mountain pine beetle infestation is causing major environmental damage with economic implications in British Columbia, and is spreading east. At the same time, our need to improve our international competitiveness has resulted in closures and curtailments in many of the communities in which we operate. The FPAC Sustainability Initiative is a work in progress and provides a forum for addressing these and other challenges. Future versions of this Sustainability Report will include more benchmarks. We invite you to follow our progress, to provide us with feedback to help us improve our reporting, and to continue to expect more. We expect nothing less from ourselves.
Avrim Lazar President & CEO Forest Products Association of Canada
FPAC is committed to sustainable development in the forest products industry in Canada. The FPAC Board of Directors, comprising its member companies, adopted the FPAC Sustainability Initiative and accompanying principles in February 2005 to guide their efforts as individual companies and collectively through FPAC. CEOs of member companies have endorsed the following formal commitment statement to demonstrate their support for and participation in the FPAC Sustainability Initiative: “It is hereby confirmed that we are participants in the Forest Products Association of Canada’s Sustainability Initiative and endorse its vision and principles. As participants in the initiative we will integrate these principles into our business practices and contribute to sustainable development through continual improvement. We will provide information on our performance to the Forest Products Association of Canada for the development of a biennial, public Sustainability Report.” The corporate logos for those companies endorsing the initiative are presented below:
James (Jim) A. Shepherd President & CEO Canfor Corporation Chairman of the Board Forest Products Association of Canada
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5
6
F PA C V I S I O N
7
· Product recycling: Promote and continuously improve product recovery and reuse.
· Resource use: Continuously improve the efficient use of natural resources, material, and energy.
· Community and stakeholder relations: Engage our stakeholders in a proactive and transparent manner and be respectful of their interests.
· Sustainable forest management: Practice sustainable forest management in all our operations in accordance with recognized standards and ensure that wood supply is from legal sources.
· Economic contribution: Contribute to the economic and social well-being in communities where we operate, as well as regionally and nationally.
· Relations with Aboriginal peoples: Be respectful of the economic and cultural interests of Aboriginal peoples and encourage their participation in the forest products industry.
· Our employees and workplace safety: Provide economic opportunities and a safe and productive work environment for our employees and contractors.
To conduct our business with integrity and reflect evolving societal values in our performance
SOCIAL DESIRABILITY
· Environmental performance: Comply with all applicable regulatory requirements and continuously improve the environmental performance of our operations.
To ensure that our activities are conducted in a sustainable manner that protects the environment
E N V I R O N M E N TA L R E S P O N S I B I L I T Y
· Customer focus: Develop and deliver quality products and services to meet present customer and future market needs.
· Competitiveness: Continuously improve the competitiveness of our industry within the global marketplace.
· Financial viability: Ensure the profitability of our industry and its long-term economic viability.
To maintain the profitability of our industry as the basis for sustainable development
ECONOMIC VIABILITY
S T E WA R D S H I P O F T H E C A N A D I A N F O R E S T P R O D U C T S I N D U S T R Y
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We will operate in a manner that is: Environmentally responsible, Socially desirable, Economically viable
The Canadian forest products industry contributes to society’s well-being through its products and activities—from forest to market. FPAC members are committed to a sustainable development path built on a profitable and competitive industry.
F PA C S U S TA I N A B I L I T Y S TAT E M E N T
F PA C S U S TA I N A B I L I T Y I N I T I AT I V E
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FPAC MEMBERS (96.2 million hectares)
TOTAL SFM CERTIFICATION IN CANADA Source: Canadian Sustainable Forestry Certification Coalition, December 2006.
140
123.7
100 80 60 40 20 2006
2005
2004
2003
2002
0 2001
Millions of hectares
120
ENVIRONMENTAL RESPONSIBILITY
Concern for the state of the world’s natural resources and the environment in general has never been more focused. People want to know that forests are being regenerated, that wildlife habitats are being protected, and that forest biodiversity is respected and maintained. Buyers of forest products want to show their customers and the public that they are making responsible purchasing decisions. Over the past five years, FPAC and its members have demonstrated world-class leadership in responding to these concerns. In January 2002, FPAC members committed to achieving third-party SFM certification on all lands under their management by the end of 2006 to one of three internationally recognized standards: Canadian Standards Association (CSA), Forest Stewardship Council (FSC), or
Approximately one million hectares of Canadian forest are harvested annually by the forest products industry. This amounts to less than one-half of one percent of Canada’s forestlands. 8
Source: Canadian Sustainable Forestry Certification Coalition, December 2006.
140
123.7
120 100 80 60
41.7 1.9
4.3
4.4
4.9
6.3
7.8
9.9
Brazil
Malaysia
Australia
Germany
Russia
20
France
40
Chile
17.4
22.1
ENVIRONMENTAL RESPONSIBILITY INDICATORS Sustainable Forest Management · Total SFM certification in Canada · Canadian certification in a global context · Annual allowable cut from certified forests — FPAC members Environmental Performance · Total reduced sulphur — FPAC members · Total particulate matter — FPAC members Resource Use · Energy intensity — FPAC members · Percentage of energy from biomass — FPAC members · Greenhouse gas emissions intensity — FPAC members · Water use — FPAC members Product Recycling · Canada’s paper recovery rate 9
Canada
USA
Finland
0
Sweden
Sustainable Forest Management
CANADIAN CERTIFICATION IN A GLOBAL CONTEXT
Millions of hectares
Our commitment to environmental responsibility means more than compliance with all applicable regulations. In adopting a focus on continual improvement in our environmental performance, we strive to reduce the environmental footprint of our operations by using raw materials and energy efficiently, managing our environmental releases, and promoting even more recovery, reuse, and recycling. FPAC members’ practice of sustainable forest management (SFM) along with SFM certification assures customers that the products they buy are made from legally and sustainably sourced wood and that forestry operations are managed in accordance with internationally recognized SFM standards.
FPAC MEMBERS (96.2 million hectares)
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100 75 50
2006
2005
2004
0
2003
25
FPAC MEMBERS TOTAL PULP & PAPER INDUSTRY
TOTAL REDUCED SULPHUR (as HYDROGEN SULPHIDE)—FPAC MEMBERS (PULP & PAPER FACILITIES) Source: FPAC Member Survey.
0.8 0.6 0.4 0.2
2005
0.0 2003
To support this commitment, FPAC members have further committed to trace their fibre back to the forest area of origin by the end of 2008, to assure customers that the wood fibre they are using comes from legal sources.3 FPAC will track its members’ progress against this commitment and give an account in future reports.
125
2001
While considerable progress has been made in sustainable forest management, challenges still remain, and FPAC is tackling these issues head-on. During 2006, FPAC and its members adopted a statement on illegal logging, recognizing that illegal logging not only contributes to deforestation but also undermines the viability of legally harvested and traded forest products and is a serious detriment to forest sustainability. Within this statement, FPAC and its members have committed to purchasing and using wood only from legal sources and to firmly condemning corruption and criminal activities related to illegal logging.
Source: Canadian Sustainable Forestry Certification Coalition, December 2006.
1999
The FPAC commitment has also pushed Canada into the world leadership position for certified forestlands. Of the 1/10th of the world’s production forests that are certified, Canada accounts for more than half of the certifications recognized by the global Programme for the Endorsement of Forest Certification schemes (PEFC) and almost one-quarter of FSC certifications.
ANNUAL ALLOWABLE CUT (CERTIFIED FORESTS)— FPAC MEMBERS
2002
Sustainable Forestry Initiative® (SFI).1 As of December 2006, FPAC members had essentially achieved their goal.2 Certification imposes rigour and goals and intensifies the focus on continual improvement. FPAC members now account for almost 80% of the 123 million hectares certified in Canada. According to The State of Canada’s Forests 2005–2006 report, less than half of the 310 million hectares (143 million hectares) of forestland in Canada is made available for the forest sector to use and subject to forest management. Eighty-six percent of Canada’s managed forests have been certified.
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* Total reduced sulphur (TRS) for 2005 has been calculated as kg per unbleached tonne of kraft pulp production to harmonize calculation methods with the U.S. forest sector. Before 2005, TRS was calculated as kg per tonne of pulp production.
Environmental Performance The forest products industry has a strong record of investment and success in addressing environmental issues. Since 1990, FPAC members have dedicated over $8 billion to successfully address a range of issues associated with mill effluent and air emissions. Looking to the future, our membership is equally committed to making genuine and significant progress with efforts to improve ambient air quality and protect our water.
FPAC MEMBERS TOTAL PULP & PAPER INDUSTRY
TOTAL PARTICULATE MATTER— FPAC MEMBERS (PULP & PAPER FACILITIES) Source: FPAC Member Survey.
3.5 3.0 2.5 2.0
10
0.5 0.0
11
2005
Given tenure arrangements in Canada, it is often the fibre supplier that holds the legal right to harvest, whether through tenure or ownership. Therefore, in the Canadian context, knowing the fibre supplier is often equivalent to knowing the forest area of origin. The source is considered legal if it is certified or recycled or originates from a forest where the supplier is the owner and/or has evidence of the legal right to harvest.
1.0
2003
3
1.5
2001
One FPAC member’s division underwent a third-party certification audit and is awaiting its FSC certificate in early 2007. The land base represents approximately 1% of FPAC’s committed lands.
1999
2
1992
New members and new mergers have five years to achieve this certification.
kg / tonne
1
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ENERGY AND CLIMATE CHANGE LEADERS Air Quality
FPAC members are at the forefront in addressing the issue of global climate change. Since 1990, we have:
Since 1999, FPAC members’ paper mills have cut particulate emissions per tonne of output by 40% while simultaneously reducing odour-associated releases of total reduced sulphur by 50%.
· Improved the energy intensity of our operations by more than 18%. · Cut our fossil fuel consumption by 45%. · Increased the share of biomass energy so that we now meet almost 60% of our total energy needs with low-impact renewable sources.
Further improvements have been necessary, however, to protect human health and the environment. FPAC launched a multi-stakeholder Pulp and Paper Air Quality Forum tasked with developing a long-term strategy capable of addressing air quality issues in the sector in a coordinated and comprehensive manner that also recognizes the business environment in which the sector operates.
· Reduced our total greenhouse gas emissions from our pulp and paper operations by 44% (a 54% reduction per tonne of output).
FPAC also contributed to the Forum by aggressively characterizing the nature of emissions arising from the operation of our wood products facilities. We will use the knowledge gained to give an account on releases from these facilities in future reports.
Resource Use Climate Change and Energy
During the past decade, the forest products industry has become Canada’s leader in renewable energy use. Since 1990, FPAC members have cut their fossil fuel consumption by 45%. Today, almost 60% of the energy needs of FPAC member companies are met by renewable resources. These sources are mostly wood residue and other biomass from our SFM-certified forests, as well as through cogeneration, which means that some of our mills have the potential to be net energy producers.
(REDUCED INTENSITY TO 18% BELOW 1990 LEVELS) Source: FPAC Energy Monitoring Report 1990–2005.
30 25 20 15 10 5 2005
2004
BIOMASS
NET ELECTRICITY PURCHASES
OTHER (NET) PURCHASES
Source: FPAC Energy Monitoring Report 1990–2005.
Pulp & Paper Energy Sources, 1990
Pulp & Paper Energy Sources, 2005
49%
56%
0% 22%
16%
30%
2%
Source: CIBC World Markets, March 2005.
12
FOSSIL FUELS
PERCENTAGE OF ENERGY FROM BIOMASS— FPAC MEMBERS (PULP & PAPER FACILITIES)
This strategy of substituting biomass for fossil fuels and using less emissions-intensive natural gas in place of oil and coal has seen our pulp and paper mills reduce their aggregate
4
2003
2002
2001
2000
0
1990
As a result of these investments, the energy intensity of our members’ pulp and paper operations improved by 18% from 1990 to 2005. This improvement reflects the members’ 1% annual improvement commitment made under the Canadian Industry Program for Energy Conservation (CIPEC).
ENERGY INTENSITY—FPAC MEMBERS (PULP & PAPER FACILITIES)
GJ / tonne
Availability of competitive energy resources has traditionally been a key advantage for the Canadian forest products industry. In recent years, however, energy costs have increased substantially and now account for a significant portion of our cost base. For example, energy costs represent nearly one-quarter of all operating costs associated with newsprint manufacturing in Eastern Canada.4 To maintain their competitiveness, FPAC members have made major investments to modernize and improve the energy efficiency of their pulp and paper mills.
13
25%
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(PERCENTAGE IMPROVEMENT FROM 1990 LEVELS) Source: FPAC Energy Monitoring Report 1990–2005.
2005
75 60 45 30 15
2005
2003
2001
0
CANADA’S PAPER RECOVERY RATE
An FPAC member from Quebec won a 2005 CIPEC Industrial Energy Innovator Award for achieving immediate energy savings of 3.6% through an employee energy-awareness week, an energyefficiency ideas contest, and a series of workshops. 15
2006
49% *
50 40 30 20 10 0 1990
Percent
Source: Pulp and Paper Products Council.
* Estimate
14
2004
90
Consumers use paper to meet many different needs and each distinct use requires different properties, such as strength, brightness, and absorbency. Blends of both fresh and recycled fibres, in varying proportions, are being used to deliver the required properties to the consumer. While it is technically impossible to sustain society’s long-term paper needs without fresh fibre, FPAC member companies believe that no good paper should go to landfill. What was once considered waste has become an increasingly important source of fibre for the paper industry. Forty-nine percent of all the paper and paper-based packaging consumed in Canada in 2006 was recycled, up from 28% in 1990.
TOTAL PULP & PAPER INDUSTRY
2000
Product Recycling
FPAC MEMBERS
Source: FPAC Member Survey.
1992
At the same time, water consumption at our mills is down by 10 cubic metres per unit of production (15%) since 1999. Ongoing capital improvements combined with new and upgraded technologies will contribute to further efficiencies in the use of water resources.
WATER USE—FPAC MEMBERS (PULP & PAPER FACILITIES)
m3 / tonne
Dioxins and furans have been removed from effluents, and AOX levels (total amount of organic chlorine and other compounds) have been reduced by 90%. Another class of toxic substances, containing nonylphenol and its ethoxylates (NPEs), has been virtually eliminated by Canadian pulp and paper mills, and we have achieved a 70% drop in total suspended solids in our mill effluents.
2003
In little more than a decade, Canadian mills have made dramatic strides towards significantly reducing or eliminating several classes of toxic effluents that affect the quality of nearby water.
2002
60% 50% 40% 30% 20% 10% 0% 2001
Water Use
GREENHOUSE GAS EMISSIONS INTENSITY— FPAC MEMBERS (PULP & PAPER FACILITIES)
1999
greenhouse gas emissions by 44% since 1990 (or 54% reduction per tonne of output, because we make 20% more pulp and paper than we did in 1990). But we’re still not satisfied. The industry is targeting further emissions reductions. Pulp and paper mills are committed to additional reductions to fossil fuel emissions per tonne of output by 2012. FPAC has put this pledge in writing as part of the first memorandum of understanding on greenhouse gas emissions reductions between industry and the Canadian government.
2000
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HOW MANY TRACTOR-TRAILERS? One of FPAC’s members is the largest recycler of newspapers and magazines in North America and annually diverts approximately 1.9 million tonnes of waste paper from landfills—the equivalent of 95,000 tractor-trailers of recyclable paper! This member’s innovative community-based paper recovery program not only keeps valuable recyclable paper out of landfills, but also contributes to community development, because involved community organizations—schools, churches, and non-government organizations (NGOs)—are paid for their paper-recycling efforts.
SOCIAL DESIRABILITY We know more can be done. FPAC members support a commitment to increase Canada’s paper recovery rate to 55% by 2010. The industry is investing to enable recycled paper to have a longer life and greater durability. Our member companies are also investing in programs and activities with our customers, businesses, and local governments to increase the amount of paper collected and to ensure that it is clean and free of contaminants.
Social desirability is about being good neighbours and employers. It is about providing economic opportunities and productive and safe work environments for employees and contractors and encouraging the participation of Aboriginal people in the industry in a manner consistent with their economic and cultural interests. By engaging our communities in a proactive and transparent manner and striving to contribute to their economic and social well-being, this industry can be a source of strength and stability—locally, regionally, and nationally.
Employee and Workplace Safety With a combined activity in 2005 of more than 110 million person hours worked by 55,000 employees, occupational health and safety is of utmost priority to our members. Within each facility, the health and safety performance of our workforce is closely monitored, measured, and managed. Over the last decade, FPAC members have achieved continual improvement in their performance and have reduced the recordable incident rate (RIR) by 30% in the past five years alone. More importantly, FPAC members have taken significant steps to improve the safety of their sawmill operations, with the goal of ensuring that these workplaces are no less safe than the balance of their operations.
Aboriginal Relations Aboriginal communities play an important role in the Canadian forest products industry. FPAC companies engage with Aboriginal communities on an ongoing basis, typically maintaining relationships with dozens of different communities at an operational level. These relationships include seeking Aboriginal people’s input into planning and decision making, identifying traditional forest uses, and sponsoring cultural events, business partnerships, and opportunities. Aboriginal people’s cultural perspectives and needs play an important role in many of our decisions 16
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SOCIAL DESIRABILITY INDICATORS that affect land and resources. Virtually all of our member companies have relationships with Aboriginal businesses— as contractors, partners in joint ventures, or suppliers.
Employee and Workplace Safety · Employee recordable incident rate — FPAC members Aboriginal Relations · Qualitative discussion
The forest products industry creates economic opportunity for many Aboriginal communities and individuals. The industry is the largest industrial employer of Aboriginal people in Canada. Aboriginal businesses provide an ever-growing share of goods and services to the industry, and our member companies are pleased with the many business relationships that have been established with Aboriginal organizations.
Community and Stakeholder Relations · Qualitative discussion Investment in the Community · Qualitative discussion
FPAC and our member companies are committed to working with Aboriginal communities to strengthen their capacity in this important sector and to further their opportunities for participation in the Canadian forest products industry. We will be developing meaningful indicators to more accurately benchmark our progress on our commitments to Aboriginal communities in future reports.
FOCUS ON COMMUNITY INVOLVEMENT An FPAC member has created Community Advisory Forums in each community in which it operates to ensure open communication. These Forums hold regular meetings to discuss matters related to the company’s operations, to serve as a place where community concerns are shared, and to offer ideas for the company’s consideration. Community Forum participants include home and business owners, environmental groups, employees, Aboriginal people, health care personnel, and local government.
Community and Stakeholder Relations FPAC members recognize the importance of sound and constructive relations with the local communities in which they operate. They have a record of working with Aboriginal people and stakeholders such as environmental groups, local communities, and labour groups to find common ground and mutually agreeable solutions. Engagement and partnerships are important ways to strengthen FPAC member relations with communities and other stakeholders. Our commitment to sustainable forest management, which includes open and transparent public participation as a fundamental requirement, ensures that we engage our stakeholders, including those who are directly affected or interested in forest management, on an ongoing and meaningful basis. This interaction is vital for identifying the unique cultural, social, environmental, and economic values that guide our operations in each community and region in which we operate. Future sustainability reports will include meaningful indicators for community and stakeholder relations.
FORESTRY
PANELBOARD MILLS
SAWMILLS
PULP MILLS
TOTAL FORESTRY PRODUCTS
EMPLOYEE RECORDABLE INCIDENT RATE—FPAC MEMBERS
Investment in the Community
FPAC members keenly understand that their success is closely linked to the health of the communities in which they operate. For this reason they see that their support to these communities is vital, and they give back to the communities in ways that are locally significant.
18
Source: FPAC Member Survey.
18 Recordable incidents / 200,000 hours worked
Few industries affect Canada as profoundly as the forest products industry, which represents 3% of Canada’s gross domestic product and exports over $40 billion annually. The industry is one of Canada’s largest industrial employers, operating in hundreds of Canadian communities and providing nearly 900,000 direct and indirect jobs across the country, primarily in rural communities.
15 12 9 6 3 0 2001
2002
2003
19
2004
2005
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ECONOMIC VIABILITY INDICATORS The community investment approach of FPAC members is focused on providing value-added support that meets local needs—giving where it is important to the community and where the company can make a lasting contribution. This can range from investments in health, education, scholarships, and youth programs to donations for local infrastructure, in-kind support, and employee volunteering.
Financial Viability · Return on capital employed · Forest products industry’s investment as a percentage of depreciation Competitiveness · Forest products industry’s labour productivity Customer Focus · Qualitative discussion
FOCUS ON YOUTH An FPAC member has implemented a program that helps provide first-time employment for students through grants to non-profit organizations. Over the last three years, this program has provided $750,000 in grants to nearly 400 non-profit organizations across Canada to hire hundreds of young people for their first summer jobs. The program not only provides young people with invaluable work experience and eye-opening opportunities, but also bolsters the resources of non-profit organizations.
FOCUS ON RECREATION FPAC members can play an important role in providing forest-based recreational opportunities. One FPAC member operates and maintains 24 recreation sites that are in or adjacent to its Forest Management Area. The company strongly believes that providing the public with opportunities for recreation in a safe, secure, and enjoyable environment is part of its mandate as a forest steward of the land.
FOCUS ON CAPACITY-BUILDING Many FPAC members provide donations to help build local infrastructure and 20 facilities such as women’s shelters, hospitals, and community arts and sports facilities. Some FPAC members also participate in Habitat for Humanity projects.
Global market pressures have brought about a significant effort by the industry to restructure. The industry recognizes that efforts to strengthen its competitive position in global markets have had a significant impact on the communities in which it operates. The industry is also working aggressively to strengthen its overall competitiveness to minimize the need for future mill closures. This includes working with governments to create a more competitive fiscal environment for our operations as well as making investments to improve the competitiveness of our own operations. Future sustainability reports will see meaningful indicators to more precisely measure progress with respect to community investment.
20
ECONOMIC VIABILITY Maintaining an economically strong and competitive industry will ensure that we can meet the expectations of major stakeholders, including communities, customers, lenders, and investors, by providing a platform for continual improvement in environmental performance, and that we can sustain and enhance the broader socio-economic benefits the industry provides to Canadian society. The most important facets of economic viability are being competitive on a global scale and retaining a strong customer focus—delivering quality products and services to meet present customer and future market needs.
Financial Viability Return on capital employed (ROCE) is a financial measure of the returns a company is realizing from the capital it invests. At a six-year average of 7.9%, the forest products industry’s ROCE is above the average of all Canadian industries, which was 7.1% over this period. Estimates of the cost of capital in the forest products industry are typically in the 9%–12% range, which can make it difficult to attract investment. The industry competes for capital globally, and competitors such as Latin America have a higher return on capital at 9%. The Canadian forest products industry’s return on capital has been particularly low in the last few years as its input costs have risen while demand for some products has been stagnant or declining. Limited return on capital can make it difficult for the industry to invest. Investment has been lower than depreciation for eight years, but even in this challenging climate it is estimated that the industry invested over $4 billion in 2005. Many investments have been made in biomass and cogeneration technologies, as these are important sources of renewable energy that also improve the long-term competitiveness of the mills.
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ALL INDUSTRIES
10 8 6 2
22
Pharmaceuticals
Motor Vehicle Parts
Forest Products
150 125 100 75
25 2005
2004
2003
2002
2001
2000
1999
1998
1997
0 1995
Percent
50
· Develop strategic and integrated responses to ensure that customers’ needs and concerns are fully addressed.
WOOD PULP AND PAPER MANUFACTURING
FOREST PRODUCTS INDUSTRY’S LABOUR PRODUCTIVITY Source: Statistics Canada.
65 60 55 50 45 40 35
23
2005
2004
2003
2002
2001
30 2000
Labour productivity: output/hour worked, expressed in 1997 constant dollars
FPAC will be developing meaningful indicators to more accurately benchmark our progress on our commitments to customers in future reports.
Finance and Insurance
Source: Statistics Canada.
· Track how perceptions and understanding of the Canadian industry’s sustainability efforts are changing in response to the proactive actions of the industry.
A recent survey of FPAC members’ customers reveals that confidence in Canadian products is as high as or higher than in the past and that, while not perfect, Canada is seen as leading if not “superior” in the area of sustainability. While price, quality, and reliability continue to be important considerations for buyers, environmental criteria are playing an increasing role in purchase decisions. Our customers tell us that green considerations are increasingly integrated into their new requests for proposals from suppliers and that these green procurement policies are being introduced across the board. Finally, customers are telling us that their relationships with their FPAC member suppliers are inarguably better than those with any other supplier.
Air, Rail, Ship Transportation Equipment
0
FOREST PRODUCTS INDUSTRY’S INVESTMENT AS A PERCENTAGE OF DEPRECIATION
· Better understand the role and impact of sustainability issues in major customers’ decision-making processes.
· Identify emerging issues and concerns within the major customer sectors.
4
1999
FPAC regularly surveys the industry’s major customers in Canada, the United States, and around the world. Through these surveys, FPAC works to:
12
1996
Customer Focus
14
1998
The forest products industry’s absolute productivity levels are higher than those of all of the Canadian manufacturing sector, and have exceeded those of the Canadian economy as a whole for the last 20 years. However, the most relevant measure of productivity is the industry’s growth rate. The wood products sector has had impressive growth in labour productivity—an average of 4.4% annually over the last nine years; in fact, it is double that of the U.S. industry. On the other hand, the pulp and paper sector has had an average of 1.6% growth annually over the same period. Both sectors continue to find ways to improve productivity to ensure that they remain significant players in the global market.
Source: Statistics Canada, CANSIM Table 180–0003.
Mining
It is important that the industry continues to invest in itself despite the challenging economic circumstances outlined in the previous section. To compete in an increasingly challenging environment, the Canadian forest products industry must demonstrate clear advantages. One way of assessing the industry’s work to remain competitive is to measure its productivity growth.
RETURN ON CAPITAL EMPLOYED, 1999–2004 AVERAGE
1997
Competitiveness
Percent
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CONCLUSION The Forest Products Association of Canada and its member companies are proud of the performance record presented in our first Sustainability Report. This report demonstrates that we are making continual improvement in all key areas and realizing significant progress toward our public commitments. Moving forward, we are determined to build on our record of continual improvement and to further strengthen and expand our measurement and reporting systems. We will communicate our progress publicly in our next biennial Sustainability Report, in 2009. Report Feedback The Forest Products Association of Canada values your comments on this report. Please go to www.fpac.ca/en/sustreport_survey/ and fill in the online survey or send your comments to ottawa@fpac.ca. .
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ABOUT FPAC The Forest Products Association of Canada (FPAC) is the voice of Canada’s wood products, pulp, and paper producers nationally and internationally in government, trade, and environmental affairs. FPAC’s 19 member companies represent the largest Canadian producers of forest products and are responsible for approximately 75% of the working forests in Canada. FPAC’s vision is to be the leader in advancing the global competitiveness and sustainable stewardship of the Canadian forest products industry. Under the leadership of its members, FPAC designs programs to promote Canada’s performance in trade and economic matters, sustainable forest management, and environmental stewardship. Third-party sustainable forest management certification of member companies’ forest practices is a condition of membership in the association—a world first.
Call us, contact us, invite us to brief you: Canada · Forest Products Association of Canada, 99 Bank Street Suite 410, Ottawa, Ontario, Canada K1P 6B9 · fpac.ca · ottawa@fpac.ca T 613-563-1441 · F 613-563-4720 Europe · Forest Products of Canada, 12A, Place Stéphanie, 1050 Brussels, Belgium T 32-2-512 50 51 · F 32-2-502 54 02
The Forest Products Association of Canada is a proud partner of the Canada Wood program.
Design by McMillan. ©2007, Forest Products Association of Canada. Publié également en français.