Playing Catch Up - implementing a sustainability strategy in an emerging economy
Sustainability is a core element of any modern business. Companies in the developed world have been investing heavily in the implementation of CSR and sustainability strategies in recent years and the expectation to communicate sustainability has never been greater, says Liz Wilks. In the UK for example, HM Treasury now requires sustainability reports to be published in Annual Reports and Accounts.
For businesses in emerging economies, many of whom are located in resource rich countries, the business case for sustainable development is clear - renewable resources must be managed in a sustainable fashion to ensure that the business can continue. However, there are added expectations for those countries to demonstrate and prove their sustainable development on a global stage.
Perhaps the most recent example of this was the agreement from Member States at the Rio+20 United Nations Conference on Sustainable Development to launch a process to establish universal sustainable development goals (SDGs). This decision represents a global shift towards sustainable development and will be developed to address some of the challenges of the UN's Millennium Development Goals (MDGs)
Spotlight on the Pulp & Paper Industry
For the pulp and paper industry, the 1990s was the decade when the issue of sustainability first came to the fore. Pressure from stakeholders began to mount on companies to publicly demonstrate their environmental credentials. For those based in North America and Europe, sustainability had been on their agenda for some time but the pressure to prove it against an auditable set of criteria was minimal. Many were implementing Sustainable Forest Management (SFM) schemes at a national level but there was a lack of understanding about the environmental benefits of these initiatives.
The 1990s was also the decade which saw significant growth of global pulp and paper companies in emerging markets. Asia Pulp & Paper (APP) was one of these new players trying to develop a successful and competitive business model in a fraction of the time that the long established companies of the West have had to evolve. Naturally, these nascent companies have found themselves playing catch up in fields such as technology, infrastructure, logistics and sustainability.
From a sustainability perspective, the challenges facing companies in the industry have been highlighted by sophisticated campaigns from well-known NGOs. NGOs are an important and influential stakeholder group for the industry. They have undoubtedly been a major influence in helping to shape the sustainability practices of numerous companies.
Within the pulp and paper industry more specifically this has led to a rise in sustainable forest management, which has brought forth certification schemes such as the Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification (PEFC).
A Complex Landscape
The sustainability and certification landscape in pulp, paper and forestry is a complex one. The industry has no single global forestry certification standard by which all companies can be audited and measured, which can make for a confusing situation for consumers. The most recognised schemes are FSC and PEFC but it is important to note that these (and other certification schemes) cover just 10% of the world's forests, leaving the remaining 90% uncertified.
FSC was launched in 1993 as an NGO-Business partnership and PEFC followed in 1999. PEFC was created in response to the specific requirements of small and family forest owners as an international umbrella organisation providing independent assessment, endorsement and recognition of national forest certification systems.
The introduction of PEFC enabled the independent development of standards tailored to the political, economic, social, environmental and cultural realities of the respective countries, while at the same time ensuring compliance with internationally-accepted requirements and global recognition. Meanwhile, emerging economies are generally unable to gain FSC accreditation because of current rules preventing the certification of industrial plantations converted later than 1994.
In response to this and demands for legality supply-chain assurance globally, Indonesia developed its new wood legality & verification system, SVLK and its local certification scheme, LEI, which falls under the PEFC umbrella
Launching a New Sustainability Policy
It is against this broader industry backdrop that APP recently implemented its 2020 Sustainability Roadmap, an instrument to help the company lay down measureable, reportable and verifiable goals to achieve its objective of leading the way globally for international standards.
However, from our experience the implementation of a sustainability strategy is not simply a job of external communications, there is the task of ensuring that employees, from senior management right down to operators on the mill floors and the harvesters in our pulpwood suppliers' plantation forest, understand the sustainability principles being implemented. This is no mean feat for a company with 70,000 employees in Indonesia alone and that is before you account for all those indirectly involved, such as local communities and independent suppliers.
So what are the guiding principles of sustainability which could apply to a company embarking on the implementation of a new sustainability strategy?
Ensure legal compliance in the country in which you operate; Review and adopt voluntary national and international standards; Maintain an active and transparent dialogue with internal and external stakeholders.
When developing a sustainability strategy, it is crucial that the feedback and the views of stakeholders are accounted for, whether they are government, employees, customers, NGOs or other groups and individuals.
A holistic view of sustainability is also crucial. APP's philosophy is to commit to a sustainability strategy in its entirety, not only covering sustainable forest management but also committing to alleviating poverty and conserving biodiversity.
Companies in emerging markets face different challenges to those in the developed world, where sustainability and CSR programmes are often focused around efficiency of production or the financial support of CSR projects. However, the landscape can be very different in an emerging economy. For example, in Indonesia forestry and related industries are directly responsible for $18bn of Indonesia's GDP (3.3%) and employ 600,000 people.
In a country where nearly 33m individuals live below the poverty line and 60% of the population live in rural areas where forestry and agriculture are the main source of economic livelihood, the importance of the forestry sector cannot be underestimated. This landscape adds to the complexities of deploying a meaningful sustainability programme; however it also provides the opportunity for companies, such as APP, to make a meaningful impact.
Dr Liz Wilks, European Stakeholder and Sustainability Manager at Asia Pulp & Paper