FOREST PRODUCTS ASSOCIATION OF CANADA
Sustainability Report
2007
This report is printed on Canadian offsetpaper containing 30% post-consumer fibres.
FPA-9000_V4_Sustain_Cvr_EN 1/23/07 9:41 AM Page 1
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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3
MESSAGE FROM THE PRESIDENT& THE CHAIR
Sustainability is more than a slogan or a mantra and morethan the sum of all the charts and graphs in this firstbiennial report on the FPAC Sustainability Initiative.
For FPAC members, sustainability is first and foremost acollective mindset to be a strong, competitive, and profitableindustry that can perpetuate itself while earning recognitionas a good steward of the environment, a good employer, agood neighbour, and a reliable supplier and trading partner.It means taking concrete actions, addressing issues in acollaborative fashion, advancing common interests with localforestry communities and Aboriginal peoples, and buildingstrong partnerships for conservation with organizations suchas the Canadian Boreal Initiative, Canadian Wildlife Federation,Ducks Unlimited Canada, and the World Wildlife Fund. Itmeans taking principled leadership positions on globalissues and exerting leadership on key sustainability files:
· Climate change: We’re committed to reducinggreenhouse gas emissions beyond the 44% reductionachieved since 1990. We’re adding more green powergeneration capacity at our mills, mainly from biomasscogeneration. Already the industry generates enoughpower to supply all of Greater Vancouver, a city of twomillion people.
· Sustainable forestry: Our pledge to certify all FPACmember-managed forest areas to a major sustainableforest 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 partnersto increase Canada’s paper recovery rate to 55% by 2010,making Canada a world leader in paper recovery.
· Illegal logging: We worked with the InternationalCouncil of Forest and Paper Associations (ICFPA) to gain international commitments to oppose illegallogging, and we adopted an FPAC statement on illegal logging as well as a traceability commitment.
Sustainability is dynamic, an evolutionary journey with nofinal destination. As much as we know, there is so muchmore to learn. The more we leverage new knowledge,techniques, and technologies, the more efficient andcompetitive our operations become. That’s good for allstakeholders, including our shareholders.
ABOUT THIS REPORT
The Canadian forest products industry contributes tosociety’s well-being through its products and services—from forest to market. The industry is committed to workingin a manner that is environmentally responsible, sociallydesirable, and economically viable. Members of the ForestProducts Association of Canada (FPAC) are committed to a sustainable development path built on a profitable andcompetitive industry.
This first Sustainability Report measures FPAC members’progress against a range of environmental, economic, and social indicators that will evolve over time. Byreporting biennially on these indicators, FPAC membershope to demonstrate steady and substantive progresstoward their stated commitments and broadersustainability goals. FPAC members are proud of theirprogress to date and are determined to build upon itthrough continual improvement in both their collective and their individual performance.
The FPAC Sustainability Report 2007 is a first step. As westrengthen our reporting tools and gain more experience, wewill further develop and refine the Sustainability Initiative uponwhich this report is based to better address the needs of FPACmembers and their communities of interest across Canada.
This report includes data and information for FPACmembers’ Canadian operations for the 2005 and 2006calendar years. Additional details on a specific member’soperations are available on its website or within itscorporate publications.
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FPAC CEO SUSTAINABILITYCOMMITMENTS
FPAC is committed to sustainable development in the forestproducts industry in Canada. The FPAC Board of Directors,comprising its member companies, adopted the FPACSustainability Initiative and accompanying principles inFebruary 2005 to guide their efforts as individual companiesand collectively through FPAC.
CEOs of member companies have endorsed the followingformal commitment statement to demonstrate their supportfor and participation in the FPAC Sustainability Initiative:
“It is hereby confirmed that we are participants in theForest Products Association of Canada’s SustainabilityInitiative and endorse its vision and principles.
As participants in the initiative we will integratethese principles into our business practices andcontribute to sustainable development throughcontinual improvement. We will provide informationon our performance to the Forest Products Associationof Canada for the development of a biennial, publicSustainability Report.”
The corporate logos for those companies endorsing theinitiative are presented below:
There will always be new challenges. The Canada–U.S.softwood lumber dispute is behind us, but the devastatingmountain pine beetle infestation is causing majorenvironmental damage with economic implications inBritish 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 thecommunities in which we operate. The FPAC SustainabilityInitiative is a work in progress and provides a forum foraddressing these and other challenges.
Future versions of this Sustainability Report will includemore benchmarks. We invite you to follow our progress, toprovide us with feedback to help us improve our reporting,and to continue to expect more. We expect nothing lessfrom ourselves.
Avrim LazarPresident & CEOForest Products Association of Canada
James (Jim) A. ShepherdPresident & CEOCanfor Corporation Chairman of the BoardForest Products Association of Canada
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EN
VIR
ON
ME
NT
AL
RE
SP
ON
SIB
ILIT
Y
To e
nsur
e th
at o
ur a
ctiv
itie
s ar
e co
nduc
ted
in a
sust
aina
ble
man
ner
that
pro
tect
s th
e en
viro
nmen
t
·En
viro
nmen
tal p
erfo
rman
ce:C
ompl
y w
ith
all a
pplic
able
reg
ulat
ory
requ
irem
ents
and
cont
inuo
usly
impr
ove
the
envi
ronm
enta
lpe
rfor
man
ce o
f our
ope
ratio
ns.
·Su
stai
nabl
e fo
rest
man
agem
ent:
Pra
ctic
esu
stai
nabl
e fo
rest
man
agem
ent i
n al
l our
oper
atio
ns in
acc
orda
nce
with
rec
ogni
zed
stan
dard
s an
d en
sure
that
woo
d su
pply
is
from
lega
l sou
rces
.
·R
esou
rce
use:
Con
tinuo
usly
impr
ove
the
effic
ient
use
of n
atur
al r
esou
rces
, mat
eria
l, an
d en
ergy
.
·P
rodu
ct r
ecyc
ling:
Pro
mot
e an
d co
ntin
uous
lyim
prov
e pr
oduc
t rec
over
y an
d re
use.
SO
CIA
L D
ES
IRA
BIL
ITY
To c
ondu
ct o
ur b
usin
ess
wit
h in
tegr
ity
and
refl
ect
evol
ving
soc
ieta
l val
ues
in o
ur p
erfo
rman
ce
·O
ur e
mpl
oyee
s an
d w
orkp
lace
saf
ety:
Pro
vide
eco
nom
ic o
ppor
tuni
ties
and
a sa
fe a
ndpr
oduc
tive
wor
k en
viro
nmen
t for
our
em
ploy
ees
and
cont
ract
ors.
·C
omm
unit
y an
d st
akeh
olde
r re
lati
ons:
Enga
geou
r st
akeh
olde
rs in
a p
roac
tive
and
tran
spar
ent
man
ner
and
be r
espe
ctfu
l of t
heir
inte
rest
s.
·R
elat
ions
with
Abo
rigi
nal p
eopl
es:
Be
resp
ectf
ul o
f the
eco
nom
ic a
nd c
ultu
ral
inte
rest
s of
Abo
rigi
nal p
eopl
es a
nd e
ncou
rage
thei
r pa
rtic
ipat
ion
in th
e fo
rest
pro
duct
s in
dust
ry.
·Ec
onom
ic c
ontr
ibut
ion:
Con
trib
ute
to th
eec
onom
ic a
nd s
ocia
l wel
l-be
ing
in c
omm
uniti
esw
here
we
oper
ate,
as
wel
l as
regi
onal
ly a
ndna
tiona
lly.
EC
ON
OM
IC V
IAB
ILIT
Y
To m
aint
ain
the
prof
itabi
lity
of o
ur in
dust
ry a
s th
eba
sis
for
sust
aina
ble
deve
lopm
ent
·Fi
nanc
ial v
iabi
lity:
Ensu
re th
e pr
ofita
bilit
y of
our
indu
stry
and
its
long
-ter
m e
cono
mic
via
bilit
y.
·C
ompe
titi
vene
ss:C
ontin
uous
ly im
prov
e th
eco
mpe
titiv
enes
s of
our
indu
stry
with
in th
e gl
obal
mar
ketp
lace
.
·C
usto
mer
focu
s:D
evel
op a
nd d
eliv
er q
ualit
ypr
oduc
ts a
nd s
ervi
ces
to m
eet p
rese
nt c
usto
mer
and
futu
re m
arke
t nee
ds.
FP
AC
SU
ST
AI
NA
BI
LI
TY
IN
IT
IA
TI
VE
FP
AC
VIS
ION
A L
EA
DE
R I
N A
DV
AN
CIN
G T
HE
GL
OB
AL
CO
MP
ET
ITIV
EN
ES
S A
ND
SU
ST
AIN
AB
LE
ST
EW
AR
DS
HIP
OF
TH
E C
AN
AD
IAN
FO
RE
ST
PR
OD
UC
TS
IN
DU
ST
RY
FP
AC
SU
ST
AIN
AB
ILIT
Y S
TA
TE
ME
NT
The
Can
adia
n fo
rest
pro
duct
s in
dust
ry c
ontr
ibut
es to
soc
iety
’s w
ell-
bein
g th
roug
h its
pro
duct
s an
dac
tiviti
es—
from
fore
st to
mar
ket.
FPAC
mem
bers
are
com
mitt
ed to
a s
usta
inab
le d
evel
opm
ent
path
bui
lt o
n a
prof
itabl
e an
d co
mpe
titiv
e in
dust
ry.
We
will
ope
rate
in a
man
ner
that
is: E
nvir
onm
enta
lly r
espo
nsib
le, S
ocia
lly d
esir
able
, Eco
nom
ical
ly v
iabl
e
76
FPA-9000-V5_Sustain_EN 1/23/07 9:42 AM Page 6
140
120
100
80
60
40
20
0
2001
2002
2003
2004
2005
200
6
TOTAL SFM CERTIFICATION IN CANADA
Mill
ions
of h
ecta
res
Source: Canadian Sustainable Forestry Certification Coalition, December 2006.
FPAC MEMBERS
123.7
(96.2 million hectares)
140
120
100
80
60
40
20
0
41.7
123.7
Chi
le
Fran
ce
Bra
zil
Mal
aysi
a
Aus
tral
ia
Ger
man
y
Rus
sia
Swed
en
Finl
and
USA
Can
ada
CANADIAN CERTIFICATION IN A GLOBAL CONTEXT
Mill
ions
of h
ecta
res
1.9 4.3 4.4 4.9 6.3 7.8 9.917.4 22.1
Source: Canadian Sustainable Forestry Certification Coalition, December 2006.
FPAC MEMBERS(96.2 million hectares)
ENVIRONMENTAL RESPONSIBILITY
Our commitment to environmental responsibility means morethan compliance with all applicable regulations. In adopting a focus on continual improvement in our environmentalperformance, we strive to reduce the environmental footprintof our operations by using raw materials and energyefficiently, managing our environmental releases, andpromoting even more recovery, reuse, and recycling. FPACmembers’ practice of sustainable forest management (SFM)along with SFM certification assures customers that theproducts they buy are made from legally and sustainablysourced wood and that forestry operations are managed inaccordance with internationally recognized SFM standards.
Sustainable Forest ManagementConcern for the state of the world’s natural resources andthe 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 forestbiodiversity is respected and maintained. Buyers of forestproducts want to show their customers and the public thatthey are making responsible purchasing decisions.
Over the past five years, FPAC and its members havedemonstrated world-class leadership in responding to theseconcerns. In January 2002, FPAC members committed toachieving third-party SFM certification on all lands undertheir management by the end of 2006 to one of threeinternationally recognized standards: Canadian StandardsAssociation (CSA), Forest Stewardship Council (FSC), or
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
Approximately one million hectares of Canadian forestare harvested annually by the forest productsindustry. This amounts to less than one-half of onepercent of Canada’s forestlands.
8 9
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10
Sustainable Forestry Initiative® (SFI).1 As of December 2006,FPAC members had essentially achieved their goal.2
Certification imposes rigour and goals and intensifies thefocus on continual improvement. FPAC members nowaccount for almost 80% of the 123 million hectares certifiedin Canada. According to The State of Canada’s Forests2005–2006 report, less than half of the 310 million hectares(143 million hectares) of forestland in Canada is madeavailable for the forest sector to use and subject to forestmanagement. Eighty-six percent of Canada’s managedforests have been certified.
The FPAC commitment has also pushed Canada into theworld leadership position for certified forestlands. Of the1/10th of the world’s production forests that are certified, Canada accounts for more than half of the certificationsrecognized by the global Programme for the Endorsement ofForest Certification schemes (PEFC) and almost one-quarterof FSC certifications.
While considerable progress has been made in sustainableforest management, challenges still remain, and FPAC istackling these issues head-on. During 2006, FPAC and itsmembers adopted a statement on illegal logging, recognizingthat illegal logging not only contributes to deforestation but also undermines the viability of legally harvested andtraded forest products and is a serious detriment to forestsustainability. Within this statement, FPAC and its membershave committed to purchasing and using wood only fromlegal sources and to firmly condemning corruption andcriminal activities related to illegal logging.
To support this commitment, FPAC members have furthercommitted to trace their fibre back to the forest area of originby the end of 2008, to assure customers that the wood fibrethey are using comes from legal sources.3 FPAC will track itsmembers’ progress against this commitment and give anaccount in future reports.
Environmental PerformanceThe forest products industry has a strong record of investmentand success in addressing environmental issues. Since 1990,FPAC members have dedicated over $8 billion to successfullyaddress a range of issues associated with mill effluent and airemissions. Looking to the future, our membership is equallycommitted to making genuine and significant progress withefforts to improve ambient air quality and protect our water. 3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1992
1999
2001
2003
2005
TOTAL PARTICULATE MATTER—FPAC MEMBERS (PULP & PAPER FACILITIES)
kg /
tonn
e
Source: FPAC Member Survey.
FPAC MEMBERS
TOTAL PULP & PAPER INDUSTRY
Source: FPAC Member Survey.
* 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.
0.8
0.6
0.4
0.2
0.0
TOTAL REDUCED SULPHUR (as HYDROGEN SULPHIDE)—FPAC MEMBERS (PULP & PAPER FACILITIES)
kg /
tonn
e
FPAC MEMBERS
TOTAL PULP & PAPER INDUSTRY
1992
1999
2001
2003
2005
11
125
100
75
50
25
0
2002
2003
2004
2005
2006
ANNUAL ALLOWABLE CUT (CERTIFIED FORESTS)—FPAC MEMBERS
Mill
ion
m3
Source: Canadian Sustainable Forestry Certification Coalition, December 2006.
1 New members and new mergers have five years to achieve this certification.
2 One FPAC member’s division underwent a third-party certification audit and isawaiting its FSC certificate in early 2007. The land base representsapproximately 1% of FPAC’s committed lands.
3 Given tenure arrangements in Canada, it is often the fibre supplier that holdsthe legal right to harvest, whether through tenure or ownership. Therefore, inthe Canadian context, knowing the fibre supplier is often equivalent to knowingthe forest area of origin. The source is considered legal if it is certified orrecycled or originates from a forest where the supplier is the owner and/or has evidence of the legal right to harvest.
FPA-9000-V5_Sustain_EN 1/23/07 9:42 AM Page 10
Air Quality
Since 1999, FPAC members’ paper mills have cut particulateemissions per tonne of output by 40% while simultaneouslyreducing odour-associated releases of total reduced sulphurby 50%.
Further improvements have been necessary, however, toprotect human health and the environment. FPAC launcheda multi-stakeholder Pulp and Paper Air Quality Forum tasked with developing a long-term strategy capable ofaddressing air quality issues in the sector in a coordinatedand comprehensive manner that also recognizes thebusiness environment in which the sector operates.
FPAC also contributed to the Forum by aggressivelycharacterizing the nature of emissions arising from theoperation of our wood products facilities. We will use theknowledge gained to give an account on releases fromthese facilities in future reports.
Resource Use
Climate Change and Energy
Availability of competitive energy resources has traditionallybeen a key advantage for the Canadian forest productsindustry. In recent years, however, energy costs haveincreased substantially and now account for a significantportion of our cost base. For example, energy costs representnearly one-quarter of all operating costs associated withnewsprint manufacturing in Eastern Canada.4 To maintaintheir competitiveness, FPAC members have made majorinvestments to modernize and improve the energy efficiencyof their pulp and paper mills.
As a result of these investments, the energy intensity of ourmembers’ pulp and paper operations improved by 18% from1990 to 2005. This improvement reflects the members’ 1%annual improvement commitment made under the CanadianIndustry Program for Energy Conservation (CIPEC).
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 fuelconsumption by 45%. Today, almost 60% of the energyneeds of FPAC member companies are met by renewableresources. These sources are mostly wood residue andother 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.
This strategy of substituting biomass for fossil fuels and usingless emissions-intensive natural gas in place of oil and coalhas seen our pulp and paper mills reduce their aggregate
1312
Source: FPAC Energy Monitoring Report 1990–2005.
30
25
20
15
10
5
0
1990
2000
2001
2002
2003
2004
2005
ENERGY INTENSITY—FPAC MEMBERS (PULP & PAPER FACILITIES) (REDUCED INTENSITY TO 18% BELOW 1990 LEVELS)
GJ
/ to
nn
e
PERCENTAGE OF ENERGY FROM BIOMASS— FPAC MEMBERS (PULP & PAPER FACILITIES)
Pulp & Paper Energy Sources, 1990
0%
22%30%
49%
2%
16%
56%
25%
Pulp & Paper Energy Sources, 2005
FOSSIL FUELS
NET ELECTRICITYPURCHASES
BIOMASS
OTHER (NET)PURCHASES
Source: FPAC Energy Monitoring Report 1990–2005.
ENERGY AND CLIMATE CHANGE LEADERS
FPAC members are at the forefront in addressing theissue of global climate change. Since 1990, we have:
· Improved the energy intensity of ouroperations by more than 18%.
· Cut our fossil fuel consumption by 45%.
· Increased the share of biomass energy so thatwe now meet almost 60% of our total energyneeds with low-impact renewable sources.
· Reduced our total greenhouse gas emissionsfrom our pulp and paper operations by 44% (a 54% reduction per tonne of output).
4 Source: CIBC World Markets, March 2005.
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15
greenhouse gas emissions by 44% since 1990 (or 54%reduction per tonne of output, because we make 20% morepulp and paper than we did in 1990). But we’re still notsatisfied. The industry is targeting further emissionsreductions. Pulp and paper mills are committed to additionalreductions to fossil fuel emissions per tonne of output by 2012. FPAC has put this pledge in writing as part of the firstmemorandum of understanding on greenhouse gas emissionsreductions between industry and the Canadian government.
Water Use
In little more than a decade, Canadian mills have madedramatic strides towards significantly reducing oreliminating several classes of toxic effluents that affect the quality of nearby water.
Dioxins and furans have been removed from effluents, andAOX levels (total amount of organic chlorine and othercompounds) have been reduced by 90%. Another class oftoxic substances, containing nonylphenol and its ethoxylates(NPEs), has been virtually eliminated by Canadian pulp andpaper mills, and we have achieved a 70% drop in totalsuspended solids in our mill effluents.
At the same time, water consumption at our mills is downby 10 cubic metres per unit of production (15%) since 1999.Ongoing capital improvements combined with new andupgraded technologies will contribute to further efficienciesin the use of water resources.
Product RecyclingConsumers use paper to meet many different needs andeach distinct use requires different properties, such asstrength, brightness, and absorbency. Blends of both freshand recycled fibres, in varying proportions, are being usedto deliver the required properties to the consumer.
While it is technically impossible to sustain society’s long-termpaper needs without fresh fibre, FPAC member companiesbelieve that no good paper should go to landfill. What wasonce considered waste has become an increasingly importantsource of fibre for the paper industry. Forty-nine percent of all the paper and paper-based packaging consumed inCanada in 2006 was recycled, up from 28% in 1990.
An FPAC member from Quebec won a 2005 CIPECIndustrial Energy Innovator Award for achievingimmediate energy savings of 3.6% through anemployee energy-awareness week, an energy-efficiency ideas contest, and a series of workshops.
Source: FPAC Member Survey.
90
75
60
45
30
15
019
92
1999
200
1
2003
2005
WATER USE—FPAC MEMBERS (PULP & PAPER FACILITIES)
m
3 / to
nne
FPAC MEMBERS
TOTAL PULP & PAPER INDUSTRY
Source: Pulp and Paper Products Council.
CANADA’S PAPER RECOVERY RATE
Per
cent
* Estimate
50403020100
1990
2000
2006
49% *
Source: FPAC Energy Monitoring Report 1990–2005.
GREENHOUSE GAS EMISSIONS INTENSITY—FPAC MEMBERS (PULP & PAPER FACILITIES) (PERCENTAGE IMPROVEMENT FROM 1990 LEVELS)
kg C
0 2e /
tonn
e
60%50%40%30%20%10%
0%
1990
2000
2001
2002
2003
2004
2005
14
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16
SOCIAL DESIRABILITY
Social desirability is about being good neighbours andemployers. It is about providing economic opportunitiesand productive and safe work environments for employeesand contractors and encouraging the participation ofAboriginal people in the industry in a manner consistentwith their economic and cultural interests. By engaging our communities in a proactive and transparent mannerand striving to contribute to their economic and socialwell-being, this industry can be a source of strength andstability—locally, regionally, and nationally.
Employee and Workplace SafetyWith a combined activity in 2005 of more than 110 millionperson hours worked by 55,000 employees, occupationalhealth and safety is of utmost priority to our members.Within each facility, the health and safety performance ofour workforce is closely monitored, measured, and managed.Over the last decade, FPAC members have achieved continualimprovement in their performance and have reduced therecordable incident rate (RIR) by 30% in the past five yearsalone. More importantly, FPAC members have takensignificant steps to improve the safety of their sawmilloperations, with the goal of ensuring that these workplacesare no less safe than the balance of their operations.
Aboriginal RelationsAboriginal communities play an important role in theCanadian forest products industry.
FPAC companies engage with Aboriginal communities on anongoing basis, typically maintaining relationships with dozensof different communities at an operational level. Theserelationships include seeking Aboriginal people’s input intoplanning and decision making, identifying traditional forestuses, and sponsoring cultural events, business partnerships,and opportunities. Aboriginal people’s cultural perspectivesand needs play an important role in many of our decisions
We know more can be done. FPAC members support acommitment to increase Canada’s paper recovery rate to55% by 2010. The industry is investing to enable recycledpaper to have a longer life and greater durability. Ourmember companies are also investing in programs and activities with our customers, businesses, and localgovernments to increase the amount of paper collected and to ensure that it is clean and free of contaminants.
HOW MANY TRACTOR-TRAILERS?
One of FPAC’s members is the largest recycler ofnewspapers and magazines in North Americaand annually diverts approximately 1.9 milliontonnes of waste paper from landfills—theequivalent of 95,000 tractor-trailers of recyclablepaper! This member’s innovative community-basedpaper recovery program not only keeps valuablerecyclable paper out of landfills, but alsocontributes to community development, becauseinvolved community organizations—schools,churches, and non-government organizations(NGOs)—are paid for their paper-recycling efforts.
17
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that affect land and resources. Virtually all of our membercompanies have relationships with Aboriginal businesses—as contractors, partners in joint ventures, or suppliers.
The forest products industry creates economic opportunity formany Aboriginal communities and individuals. The industry isthe largest industrial employer of Aboriginal people in Canada.Aboriginal businesses provide an ever-growing share of goodsand services to the industry, and our member companies arepleased with the many business relationships that have beenestablished with Aboriginal organizations.
FPAC and our member companies are committed to workingwith Aboriginal communities to strengthen their capacity inthis important sector and to further their opportunities forparticipation in the Canadian forest products industry. Wewill be developing meaningful indicators to more accuratelybenchmark our progress on our commitments to Aboriginalcommunities in future reports.
Community and Stakeholder RelationsFPAC members recognize the importance of sound andconstructive relations with the local communities in whichthey operate. They have a record of working with Aboriginalpeople and stakeholders such as environmental groups,local communities, and labour groups to find commonground and mutually agreeable solutions. Engagement and partnerships are important ways to strengthen FPACmember 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 affectedor interested in forest management, on an ongoing andmeaningful basis. This interaction is vital for identifying the unique cultural, social, environmental, and economicvalues that guide our operations in each community andregion in which we operate. Future sustainability reportswill include meaningful indicators for community andstakeholder relations.
Investment in the CommunityFew industries affect Canada as profoundly as the forestproducts industry, which represents 3% of Canada’s grossdomestic product and exports over $40 billion annually. The industry is one of Canada’s largest industrialemployers, operating in hundreds of Canadian communitiesand providing nearly 900,000 direct and indirect jobs acrossthe country, primarily in rural communities.
FPAC members keenly understand that their success isclosely linked to the health of the communities in whichthey operate. For this reason they see that their support to these communities is vital, and they give back to thecommunities in ways that are locally significant.
1918
FOCUS ON COMMUNITY INVOLVEMENT
An FPAC member has created Community AdvisoryForums in each community in which it operates toensure open communication. These Forums holdregular meetings to discuss matters related to thecompany’s operations, to serve as a place wherecommunity concerns are shared, and to offer ideasfor the company’s consideration. Community Forumparticipants include home and business owners,environmental groups, employees, Aboriginal people,health care personnel, and local government.
SOCIAL DESIRABILITY INDICATORS
Employee and Workplace Safety· Employee recordable incident rate —
FPAC members
Aboriginal Relations· Qualitative discussion
Community and Stakeholder Relations· Qualitative discussion
Investment in the Community· Qualitative discussion
18
15
12
9
6
3
02001 2002 2003 2004 2005
FORESTRY
SAWMILLS
PANELBOARD MILLS
PULP MILLS
TOTAL FORESTRY PRODUCTS
Source: FPAC Member Survey.
EMPLOYEE RECORDABLE INCIDENT RATE—FPAC MEMBERS
Rec
orda
ble
inci
dent
s /
200,
000
hour
s w
orke
d
FPA-9000-V5_Sustain_EN 1/23/07 9:42 AM Page 18
The community investment approach of FPAC members isfocused on providing value-added support that meets localneeds—giving where it is important to the community andwhere the company can make a lasting contribution. This can range from investments in health, education,scholarships, and youth programs to donations for localinfrastructure, in-kind support, and employee volunteering.
Global market pressures have brought about a significanteffort by the industry to restructure. The industry recognizesthat efforts to strengthen its competitive position in globalmarkets have had a significant impact on the communities in which it operates.
The industry is also working aggressively to strengthen itsoverall competitiveness to minimize the need for future millclosures. This includes working with governments to createa more competitive fiscal environment for our operations aswell as making investments to improve the competitivenessof our own operations. Future sustainability reports will seemeaningful indicators to more precisely measure progresswith respect to community investment.
20
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ECONOMIC VIABILITY
Maintaining an economically strong and competitiveindustry will ensure that we can meet the expectations of major stakeholders, including communities, customers,lenders, and investors, by providing a platform forcontinual improvement in environmental performance, andthat we can sustain and enhance the broader socio-economicbenefits the industry provides to Canadian society.
The most important facets of economic viability are beingcompetitive on a global scale and retaining a strongcustomer focus—delivering quality products and servicesto meet present customer and future market needs.
Financial ViabilityReturn on capital employed (ROCE) is a financial measure ofthe returns a company is realizing from the capital it invests.At a six-year average of 7.9%, the forest products industry’sROCE is above the average of all Canadian industries, whichwas 7.1% over this period.
Estimates of the cost of capital in the forest products industryare typically in the 9%–12% range, which can make it difficultto attract investment. The industry competes for capitalglobally, and competitors such as Latin America have ahigher return on capital at 9%. The Canadian forest productsindustry’s return on capital has been particularly low in thelast few years as its input costs have risen while demand forsome products has been stagnant or declining.
Limited return on capital can make it difficult for theindustry to invest. Investment has been lower thandepreciation for eight years, but even in this challengingclimate it is estimated that the industry invested over $4 billion in 2005. Many investments have been made inbiomass and cogeneration technologies, as these areimportant sources of renewable energy that also improvethe long-term competitiveness of the mills.
ECONOMIC VIABILITY INDICATORS
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 thathelps provide first-time employment for studentsthrough grants to non-profit organizations. Over thelast three years, this program has provided $750,000in grants to nearly 400 non-profit organizationsacross Canada to hire hundreds of young peoplefor their first summer jobs. The program not onlyprovides young people with invaluable workexperience and eye-opening opportunities, but alsobolsters the resources of non-profit organizations.
FOCUS ON RECREATION FPAC members can play an important role inproviding forest-based recreational opportunities.One FPAC member operates and maintains 24 recreation sites that are in or adjacent to its ForestManagement Area. The company strongly believesthat providing the public with opportunities for recreation in a safe, secure, and enjoyableenvironment is part of its mandate as a foreststeward of the land.
FOCUS ON CAPACITY-BUILDINGMany FPAC members provide donations to help buildlocal infrastructure and facilities such as women’sshelters, hospitals, and community arts and sportsfacilities. Some FPAC members also participate inHabitat for Humanity projects.
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CompetitivenessIt is important that the industry continues to invest in itselfdespite the challenging economic circumstances outlined in the previous section. To compete in an increasinglychallenging environment, the Canadian forest productsindustry must demonstrate clear advantages. One way ofassessing the industry’s work to remain competitive is tomeasure its productivity growth.
The forest products industry’s absolute productivity levelsare higher than those of all of the Canadian manufacturingsector, and have exceeded those of the Canadian economyas a whole for the last 20 years. However, the most relevantmeasure of productivity is the industry’s growth rate. Thewood products sector has had impressive growth in labourproductivity—an average of 4.4% annually over the last nineyears; in fact, it is double that of the U.S. industry. On theother hand, the pulp and paper sector has had an average of 1.6% growth annually over the same period. Both sectorscontinue to find ways to improve productivity to ensure thatthey remain significant players in the global market.
Customer FocusFPAC regularly surveys the industry’s major customers inCanada, the United States, and around the world. Throughthese surveys, FPAC works to:
· Better understand the role and impact of sustainabilityissues in major customers’ decision-making processes.
· Track how perceptions and understanding of the Canadianindustry’s sustainability efforts are changing in responseto the proactive actions of the industry.
· Identify emerging issues and concerns within the majorcustomer sectors.
· Develop strategic and integrated responses to ensurethat customers’ needs and concerns are fully addressed.
A recent survey of FPAC members’ customers reveals thatconfidence 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 importantconsiderations for buyers, environmental criteria are playingan increasing role in purchase decisions. Our customers tell us that green considerations are increasingly integratedinto 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 theirrelationships with their FPAC member suppliers areinarguably better than those with any other supplier.
FPAC will be developing meaningful indicators to moreaccurately benchmark our progress on our commitments to customers in future reports.
22 23
Source: Statistics Canada, CANSIM Table 180–0003.
14
12
10
8
6
4
2
0
Min
ing
Fina
nce
and
Insu
ranc
e
Fore
st P
rodu
cts
Air
, Rai
l, Sh
ipTr
ansp
orta
tion
Equ
ipm
ent
Mot
or V
ehic
le P
arts
Pha
rmac
euti
cals
RETURN ON CAPITAL EMPLOYED, 1999–2004 AVERAGE
Per
cent
ALL INDUSTRIES
Source: Statistics Canada.
150
125
100
75
50
25
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
FOREST PRODUCTS INDUSTRY’S INVESTMENT AS A PERCENTAGE OF DEPRECIATION
Per
cent
Source: Statistics Canada.
6560555045403530
1997
1998
1999
2000
2001
2002
2003
2004
2005
FOREST PRODUCTS INDUSTRY’S LABOUR PRODUCTIVITY
Labo
ur p
rodu
ctiv
ity: o
utpu
t/ho
ur w
orke
d,ex
pres
sed
in 1
997
cons
tant
dol
lars
WOODPULP AND PAPERMANUFACTURING
FPA-9000-V5_Sustain_EN 1/23/07 9:42 AM Page 22
24
CONCLUSION
The Forest Products Association of Canada and itsmember companies are proud of the performance recordpresented in our first Sustainability Report. This reportdemonstrates that we are making continual improvementin all key areas and realizing significant progress towardour public commitments.
Moving forward, we are determined to build on our recordof continual improvement and to further strengthen andexpand our measurement and reporting systems. We willcommunicate our progress publicly in our next biennialSustainability Report, in 2009.
Report Feedback
The Forest Products Association of Canada values your comments on this report. Please go towww.fpac.ca/en/sustreport_survey/ and fill in the onlinesurvey or send your comments to [email protected].
.
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ABOUT FPAC
The Forest Products Association of Canada (FPAC) is the voice of Canada’s wood products, pulp, and paper producersnationally and internationally in government, trade, andenvironmental affairs. FPAC’s 19 member companiesrepresent 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 globalcompetitiveness and sustainable stewardship of the Canadian forest products industry. Under the leadership of its members, FPAC designs programs to promote Canada’sperformance in trade and economic matters, sustainableforest management, and environmental stewardship. Third-party sustainable forest management certification of member companies’ forest practices is a condition ofmembership 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 · [email protected]
T 613-563-1441 · F 613-563-4720
Europe · Forest Products of Canada, 12A, Place Stéphanie, 1050Brussels, Belgium
T 32-2-512 50 51 · F 32-2-502 54 02
Design by McMillan. ©2007, Forest Products Association of Canada. Publié également en français.
The Forest Products Association ofCanada is a proud partner of the CanadaWood program.
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