The needs of the many: Why Fibria's corporate plan has transformed to a 'shared value' approach
With the UK announcing a new £62 investment to combat deforestation across key areas of Brazil, one of the largest pulp companies from the country, Fibria, outlines its new corporate strategy that seeks to give back to society.
As the Greek proverb goes: “If you steal something small you are a petty thief, but if you steal millions you are a gentleman of society”.
Claudio Olimpio, a farmer from Brazil, is a self-proclaimed thief. “I would steal wood to produce charcoal. I did it because it was a means of survival, but it was an illegal means of survival,” Olimpio states in a recently published case study. Olimpio and many other farmers were embroiled in conflict with eucalyptus pulp producers Aracruz Celulose and Votorantim Celulose e Papel; the two companies that would merge in 2009 to form Fibria.
Communities would burn and steal wood, block roads and occupy land, all of which negatively impacted the businesses’ bottom lines. In 2009, wood theft cost Fibria almost £20m and created tension with surrounding communities.
These local groups were stealing from Fibra because of a lack of economic opportunities. Fibria acquired land for eucalyptus farming which aggravated smallholder farmers. But after the merger was completed, a window of opportunity opened to change the dynamics.
The reaction of these communities now has an implication in the UK. This week, the UK Government announced two new projects worth £62m will help tackle deforestation across Latin America by promoting sustainable new business models and sourcing practices.
It was fitting then, that Fibria travelled to a stakeholder meeting in London last week to highlight its new approach to sustainable sourcing and forest protection. The aforementioned case study was released alongside a keynote speech from the company’s chief executive Marcelo Castelli. The speech outlined how a new approach wasn’t just about planting trees, but “growing together with our clients”.
At the event, Fibria’s director of sustainability and corporate relationships Maria Luiza de Oliveira Pinto e Paiva explained that demand for pulp isn’t likely to decrease, but that any economic opportunities would now capture new benefits for the societies the company surrounds itself with.
“We want to spread the news that it is possible to be profitable at the same time that you are working on social and environmental changes,” Maria says. “We used to have admired profit. We started with the mindset of getting the recognition of society that we’re doing the right thing and getting our profits in the right way.
“But now we’re moving towards shared value, because the profits are about ourselves and the shared value is about us as a whole. We’re evolving our culture towards a more collective approach.”
It sounds beneficial on paper, but the business model wasn’t always this way. Before, Fibria’s corporate responsibility strategy was jarringly named “admired profits” – a reflection from the company that its way of doing business was admirable because it had reduced environmental impacts while driving economic growth. But the firm soon found that societal implications were the missing piece of a holistic puzzle.
Pillars of success
The dynamics truly started to shift after the launch of Fibria’s Rural Land Development Programme (PDRT) in 2016, which encouraged local farmers – many of them the so-called thieves that had been stealing from Fibria – to work with the company to foster new agricultural practices.
As of 2016, the PDRT has been implemented in more than 50 communities, with wood theft declining by 90% as a result. While the benefits were clear for Fibria, this new way of working uncovered a step change within the company, one which placed society at the heart of their corporate strategy.
Fibria decided that a new strategy should be formed that integrated the considerations of the local communities, alongside the well-versed environmental practices. The Board of Directors established a Sustainability Committee to steer the company through complex and often intra-related societal and environmental considerations.
Eventually, the company settled on a “shared value approach” to sustainability. The Harvard Business Review defines this approach as a means to “enhance the competitiveness of a company”, but in a manner that advances the “social conditions” of the communities it operates in.
The company has since expanded its admired profits strategy so that it can be admired by local communities. The shared value approach consists of the PDRT alongside three other key pillars; the Forest Savings Programme, a Local Supplier Development, and Sustainable Forestry.
The Forests Savings Programme supports almost 2,000 farmers, and participants – known as “fomentados” - are trained to maximise yields and implement sustainable best practice farming methods. Fibria even supplies the seeds for the farmers, and a wood purchase guarantee ensures that once these seeds have grown into eucalyptus the profits are there for the farmers.
By encompassing local communities into its supply chain, Fibria has been able to negate some of the impacts caused by climate change. In 2016, droughts spread across Brazil, and the Aracruz mill was forced to source extra eucalyptus supplies. This could’ve have proved costly, but the fomentados accounted for part of the shortfall with their own supply.
The PDRT, on the other hand, covers 56 communities and 5,000 farmers, 80% of which were involved with accounts of wood theft from Fibria. The average family enrolled in the programme has seen monthly income increase by r$3,750 – r$4,700, equivalent to 4-5 times the minimum wage.
“We have a 5.3 million tonne capacity in Brazil,” Maria says. “Society is still growing, they’ll need our products and we need to find the ways of growing without using more land. There’s price changes and bad practices, and we want to grow, but grow out of productivity rather than land use.
“There are some very unproductive and old-fashioned methods here, but we developed a strategy that will teach [communities]. We gave them technical assistance to help them. These are five-year projects and we help them to access markets and they get better prices.”
Fibria wants the farmers that are “highly engaged” with the programme to become technical ambassadors that share the techniques with those not enrolled in the programme. Fibria will also attempt to reach out to indigenous communities to place them into the programme.
A local supplier development focuses more on the maintenance aspect of the mills. In 1990, 80% of Aracruz Celulose’s supply chain procurement came from outside its home state of Espirito Santo. If there was a fault in the mill, it could be closed for two weeks as a result.
Today, 70% of suppliers to Fibria’s Aracruz unit are locally based, largely through a supplier base set up by the firm and Brazil’s National Confederation of Industry’s Instituto de Euvaldo Lodi in 1997. By utilising a local supplier base, Fibria has reduced its freight costs by 3%, equating to $4m in savings a year. In 2016, Fibria saved around $30m by integrating local farmers into its supply chain instead of outsourcing contracts.
The new strategy will help accelerate existing sustainability targets. Fibria has a goal in place to help communities generate 70% of income from projects supported by local companies. The firm is also targeting the restoration of 40,000 hectares of by 2025 and to reduce water consumption by 17% per tonne of pulp produced.
Despite Fibria’s best efforts, illegal logging, land conversion for cattle ranching and urban development are all substantial drivers for continued environmental degradation.
The company owns approximately one million hectares of forest, including 633,000 hectares of planted forests. A further 364,000 hectares has been set aside for preservation and conservation. Maria and her team are teaching farmers unique conservation techniques that enables them to conserve nature and comply with national policies.
The Brazilian Forest code ensures that fomentados must use no more than 40% of their land to plant eucalyptus. Fibria’s Sustainable Forestry pillar teaches farmers to plant “mosaics” that intersperse eucalyptus with other native forests. Native forests are planted on hills and along waterways to prevent erosion and protect surface water, while soil preparation is also championed.
Fibria’s work in this area is above the national mandate to have at least 20% of land conserved for native forests, and the company works with FSC and PEFC to certify its supply chain. In 2016, more than 97% of Fibria’s sales were to customers demanding sustainability certification.
These practices are having a positive impact on Fibria’s own emissions. Carbon sequestration is driven by silviculture, conservation and recovery that, when taking emissions from prior land use into account, create a net carbon increment of more than 90 million tonnes.
The company is under no illusions that the shared value approach is very much a work in progress, but that isn’t stopping a desire to build new cross-sectoral partnerships to create more powerful, society-driven corporate strategies across Brazil.
“A challenge for us today, is to show what we do and engage with other stakeholders,” Maria adds. “It’s not the only challenge we face, but we don’t believe we’ll solve this by ourselves. This is our call to action, we are setting up our social presence.
“Once we found out the benefits of this model, we felt it was our responsibility to share it among society. We are one a journey of sharing it with other companies, to show that it is possible and that it won’t hurt your results, it will add to it.”