Climate-smart raw material

We only use wood from forests that are responsibly managed for the benefit of future generations. All the timber can be traced back to the harvesting site.

Our opportunities and challenges

Although Setra does not own any forest itself, it is in the forest that our business begins. We must be able to guarantee that the timber we use comes from sustainably managed forests, i.e. forests where financial, economic and social values have developed in a balanced manner. That is why we only work with certified suppliers and value our long-term relationships with them.

We have identified a future need to govern the length, dimensions and quality during harvesting to an even greater extent, depending on the products demanded. This will be possible through the application of new technology and close working relationships involving us exchanging data with timber suppliers.

We are also facing new challenges in the context of dealing with damaged timber, given that storms, forest fires and attacks from insect pests are expected to rise in step with the effects of climate change.

In a future in which wood plays an increasingly important role, it is vital to continue safeguarding the Swedish forestry model, where we maintain biological diversity while simultaneously working to generate high returns.

Governance

All the raw material that Setra purchases is either certified or controlled by a certified supplier. Certification is performed according to the FSC® and PEFC™ standards – the largest forestry certification systems in the world. Setra’s raw material policy is in line with the FSC policy for Controlled Wood and PEFC Controlled Sources. This ensures that we are also in compliance with the requirements set out in the EU Timber Regulation.

Setra’s sawmills and processing units are certified in accordance with FSC and PEFC standards for Chain of Custody and the FSC standard for Controlled Wood.

How we work

Responsible forestry and climate benefits from wood

More than 99 percent of Setra’s raw material comes from Sweden, with the remainder being imported from Norway. In Sweden, the Swedish Forestry Act stipulates how we are to utilise and manage our forests. A key concept with regard to sustainable forestry is the “reforestation obligation”, which requires the forest owner to start planting, sowing or using seed tree stands within three years of harvesting. At least two new trees must be planted for each one harvested.

Growth is currently higher than harvesting and has been so throughout the twentieth century. As a result, there is twice as much forest in Sweden today as there was a hundred years ago. According to the Swedish National Forest Inventory, the annual growth in productive forest land has been calculated at around 116 million cubic metres of forest, of which approximately 75–95 million cubic metres are harvested annually.

One key aspect in this context is the capacity of the growing trees to absorb carbon dioxide. There is huge climate benefit linked to managing the forests because young, growing trees capture more carbon dioxide than older trees. While it is true that harvesting does release carbon dioxide from land and remaining branches into the atmosphere, the reforestation obligation ensures a circuit in which the new, growing trees bind carbon dioxide.

When we use the timber to manufacture wood products, we contribute to continuing to lock in the carbon dioxide – stored as carbon – in homes, for example. Buildings store carbon throughout their lifetimes and if they are subsequently demolished, the material can be reused or sent for incineration to generate electricity and heat. On incineration, the stored carbon is converted into carbon dioxide.

Raw material purchasing

Setra purchase pine and spruce from around 15 suppliers.

52%

Pine

48%

Spruce

3.46

million m3

How much timber Setra processed in 2020. All timber comes from sustainable and responsibly managed forests.

Wood purchasing

Setra has no forests of its own and therefore buys all its raw timber material. Setra works with around 15 suppliers including our owners – Sveaskog and Mellanskog – which supply a large proportion of the raw timber.

In 2020, Setra purchased 3.46 million cubic metres of wood, of which 52 percent was pine and 48 percent spruce. The timber often comes from local or regional sources. Our catchment area is normally within a radius of approximately 100 kilometres from the sawmill.

Setra’s timber purchasing includes harvesting and delivery to our mills. The majority of timber deliveries involve road transport. Some of our plants have their own railway tracks and in 2020, Setra received slightly more than 4 (4) percent of its timber deliveries by train. We hope to be able to expand the proportion of train-based deliveries in future.

Optimal flow to our saws

For the past two years, our Supply Chain department has been responsible for planning and managing operations in the value chain from raw material to delivery of the finished wood products. Supply Chain ensures that each sawmill receives the correct volume of timber of the correct quality to manufacture its product mix.

The correct timber for the different purposes is selected out in the forests, where cutting is adapted to match customers’ wishes and requirements. In 2020, Setra and Sveaskog participated in the DiVisi project concerning digitalised value chains in the forestry industry. The project works with the huge volume of data stored in harvesters and timber trucks and at the sawmills. The objective is to enhance competitiveness by sharing the data through the value chain. For Setra, this may involve gaining early access to data regarding the lengths and diameters of the incoming logs, which should translate into more efficient production and increased profitability.

Close working relationships with suppliers

Quality and reliable raw material deliveries are crucial to our business. The fact that Setra’s leading suppliers – Sveaskog and Mellanskog – are also our owners provides a firm basis for a secure supply of raw material.

Sveaskog is the largest forest owner in Sweden. The company is owned by the Swedish state and shall function as a role model in the area of climate and the environment. Sveaskog has certified its entire holding of managed forest in line with FSC® and PEFC™ standards, and has set aside 20 percent of its productive forest land for nature conservation. As a state-owned company, Sveaskog is expected to work to realise the national climate and environment goals with regard to thriving forests and rich populations of flora and fauna. Sveaskog’s new strategic direction represents a positional realignment so as to enhance forest growth and boost ecological values, taking into account the high social values the forest generates.

Mellanskog is an association belonging to 26,000 private forest owners. The association is environmentally certified by PEFC and traceability certified by

100 km

Our raw material comes from forests within a radius of around 100 km from the sawmill.

Certified raw material

PEFC – Programme for the Endorsement of

Forest Certification™ – is an independent umbrella organisation working to promote sustainable private forestry through independent third party certification. In Sweden, approximately 15.8 million hectares of forest land are PEFC-certified.

FSC – Forest Stewardship

Council® – is a non-profit, independent, international members’ organisation that provides a system for the voluntary certification of responsible forest management. Around half the productive forest land in Sweden is FSC-certified. In 2020, the FSC adopted a new forest standard under which an additional five percent of the land is to be protected so as to preserve and develop natural or social assets, in addition to the five percent set aside for nature conservation purposes. FSC. Mellanskog purchases its members’ wood and sells it to customers including Setra. Approximately onethird of the members and 40 percent of their forest area are PEFC-certified. When selling, the association checks that timber that is not certified still fulfils the requirements in its raw material policy.

Stringent demands on the raw material

Many people today want to know the origin of the wood products they buy. It is becoming increasingly common to demand sustainable forestry and certified raw material. All Setra’s raw material suppliers are certified in line with FSC and/or PEFC standards. This means that the forest owner has made a voluntary commitment to responsible and sustainable forestry, thus agreeing to inspections by third-party auditors.

As a minimum, wood delivered to Setra must be fully traceable and live up to five fundamental criteria. Certified suppliers check that the wood meets the requirements. Setra does not accept: • Illegally harvested wood. • Wood from forests in areas with serious social conflicts. • Wood from forests worthy of conservation. • Wood from harvesting that threatens forests of high conservation value. • Wood from forests containing genetically modified trees.

Setra pays a premium to receive certified raw material. The proportion of certified timber purchased is defined by customer demands. In 2020, fully 50 percent of the wood products sold by Setra were FSC- or PEFC-certified, representing an increase of seven percentage points on 2019. At the same time, 23 (30) percent of the cellulose chip and 15 (16) percent of the biofuel was sold as certified. Demand for certified wood is also high in the construction industry, and in December 2020 Setra’s CLT factory was certified, so the company can now sell CLT elements as certified.

Traceability

Setra requires transparency and traceability from all suppliers. It must

Sales of sawn wood products

Certified and controlled, proportion of sales

100% 100% 100% 100% 100%

19%

17% 19%

18% 20%

20% 23%

20% 28%

22%

2016 2017 2018 2019

■ Controlled ■ Proportion PEFC ■ Proportion FSC

2020

All the wood that Setra purchases is certified or controlled, and we work exclusively with certified suppliers. Wood from forests that are not certified must fulfil Setra’s raw material policy, which is controlled by the supplier.

be possible to trace the wood back to the harvesting site if we are to be able to check that no wood from areas of forest worthy of conservation is delivered as raw timber to Setra’s sawmills.

In Sweden, all harvesting areas larger than half a hectare must be registered with the Swedish Forest Agency for approval. Coordinates from the harvesting site make it possible to check with the Swedish Forestry Agency to make sure that the wood does not come from a conservation area. In this way, the wood can be traced all the way from harvesting to log sorting at a Setra unit.

Damaged wood

We at Setra are committed to ensuring that as much benefit as possible is drawn from forest assets – taking into account both respect for nature and the interests of the forest owners. That is why we accept timber felled in storms and damaged by insect attacks and forest fires. These are all natural incidents, but their frequency may increase and the associated damage may become more far-reaching due to the increasing effects of climate change.

Major incidents affect harvesting in the forests and, as a result, the reliability of our deliveries, which is why we see a need for greater preparedness. Setra is preparing licence applications in order to be able to water the timber at two more of our units during the summer months. By watering the timber, we can take care of larger volumes if necessary, protecting them from insect attacks during the storage period.

However, watering cannot help save timber from trees that have already been attacked by the European spruce bark beetle, as the protective bark is damaged. Figures from the Swedish Forest Agency indicate that almost 8 million cubic metres of spruce forest were attacked by the European spruce bark beetle during the past year, which is the highest level of damage ever recorded in Sweden. In spring 2020, Setra conducted a test sawing of wood damaged by the European spruce bark beetle in Hasselfors. The results demonstrated that it is essential to work with the wood quickly, while it is still fresh and suitable for sawing. Continuing the experiment, we will be test planing and checking the bending strength of wood from trees damaged by the European spruce bark beetle so as to identify potential applications.

Timber quality ensured for the future

The capacity to deal with and store timber quickly has already become a key issue and with the increasing effects of climate change, the need may become even greater. The consequences of a warmer climate include more severe storms, as well as insect attacks which may make it necessary to harvest areas of forest ahead of schedule. Setra is now making preparations to be able to water the timber at all our sawmills if necessary.

Why water the timber?

Watering lowers the surface temperature when evaporation occurs, helping to eliminate fungal growth. It also protects the wood against insects, which need heat to gain a foothold, even though the majority of attacks take place in the forests. If, during the summer months, we need to accept large volumes – in the aftermath of a storm, for example – watering is essential in assuring the quality of the timber. We view it as a “safety valve”.

How can you water in a sustainable manner?

We use huge sprinklers that we set up in the timber yard to spread the water evenly and efficiently across a given area. In order to optimise the flow and manage our water resources, we use a control system which sprays out the volume of water calculated to evaporate from the wood on the basis of the prevailing conditions. This makes it possible to reduce environmental impact and to minimise the flow of water leeching out from the yard. The water that does not evaporate is led away from the timber yard via a culvert to a sedimentation tank where bark and other coarse particles are captured.

How often is the timber watered, and why?

This is principally defined by the stock turnover. At our Malå unit, we haven’t watered for 15 years. The summer is short there, and we maintain a good flow of timber. In Skinnskatteberg, on the other hand, we water every year. The reason for this is that we have numerous saw classes there, which means we need larger stocks – and this naturally increases the risk of blue staining. We are currently preparing to be able to water stocks at all our units if we suddenly receive large deliveries of timber, following a storm for example.

How is the need likely to change?

The effects of climate change are becoming increasingly noticeable, resulting in an increased risk of storm felling during mild winters. This also leads to more insect attacks, as well as a greater risk of drought and fires, which means areas of forest have to be harvested ahead of schedule so as to preserve the value of the wood. All in all, this means we envisage an increased need for watering in the future.

Anders Nordmark, EVP Supply Chain and Technology