Not just talk: the role of business in combatting global warming

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Published 12 November 2018
Stora Enso combats global warming in many ways and has reduced its greenhouse gas emissions for over a decade. It all starts with commitment. We spoke with our Chief Financial Officer Seppo Parvi to discuss what that means.

Why is it important to integrate climate-related risks, opportunities, and agendas into a company’s strategy?

It’s important to make sure that climate efforts are not talk only, but that they become a part of the company’s daily work. At Stora Enso, this means integrating them in our strategy, just like with other vital aspects of our business. Climate-related risks and opportunities are a part of our annual risk assessments. But we have to make sure that addressing these risks and opportunities is not only a tick in a box, that we are truly doing something to combat global warming. And that, of course, is prevalent in our renewable products.

 

How do Stora Enso’s climate-related business risks and opportunities change the way it does business?

Our products are the opportunity. Our packaging and consumer boards, wooden building materials, biomaterials, and paper products all store carbon throughout their lifetime, even through recycling. They also replace fossil-based alternatives, and can eventually be used to make renewable energy. And we are constantly developing new and improved solutions.

At the same time, global warming poses a risk to our operational environment in some locations: wet winters and heightened risk for forest fires in the summer impact our wood supply in Europe, while extreme weather conditions such as hurricanes can damage our tree plantations elsewhere in the world.

To mitigate risks, we have had to look in our own backyard. We have made investments and set ambitious targets to reduce greenhouse gas emissions from our operations and value chain. We have reduced coal as an energy source, invested in renewable energy, and developed sustainable forestry management methods.

Why do businesses need to report on their climate-related work?

Things do not get done unless they are measured. Setting targets and reporting on them are proof of our progress. Making targets public also creates pressure to reach those targets, to stay on track – or to publicly explain why they were not reached. And when targets have been set well and reached as planned, they can ultimately lead to less costly loan arrangements: Stora Enso, for example, has signed a Revolving Credit Facility (RCF) loan where part of the pricing is based on our performance in reducing greenhouse gas emissions.

There is also a growing demand for climate reporting that can inform investment and regulative decisions. Information is the foundation of efficient markets but current standards don’t reflect the need to assess the social and environmental performance of companies. That’s why we need a standardised way of reporting. The Task Force on Climate-Related Financial Disclosures (TCFD) attempts to do just this by encouraging the development of a market practice – the same standards for all companies. It’s no easy task since industry needs can be very different. But it’s an important opening.

How has Stora Enso tackled climate reporting and is there room for improvement?

As the first in our industry, we set ambitious science-based targets in 2018 to further reduce greenhouse gas emissions in our operations and along our value chain. We report on our progress not only in our annual report but also in our interim reports, which is rare. And in addition to the RCF loan that is partly connected to our science-based targets, we have published a green bond framework. To drive change, we have also began asking our suppliers about their performance in global warming mitigation in all our tenders.

Going forward, we should see if there are other ways we could measure the progress of our climate work. But it’s important to stay focused on the big picture and not get lost in a jungle of indicators. At the same time, we can look at what more we could do to measure and reduce greenhouse gases in our supply chain. Ultimately, it’s our products that matter the most because they are a renewable option to fossil-based alternatives.

 

What impacts will climate reporting have on business?

Initiatives like the TCFD are getting the ball rolling: companies are beginning to report on their progress. The next step is to create and implement the standards needed to make it easier to compare companies and industries to each other. This should lead to more effective measuring of progress, improved company resilience, more informed decisions by investors, and better risk assessments by lenders, insurers, and other stakeholders. Stora Enso of course wants to remain a frontrunner in climate reporting also in the future.