Trouble at mills plagues paper users – Print21 magazine feature

Despite all the good work done by the industry to spread positive environmental messages, recent media reports and campaigns by green groups have once again highlighted the supply chains of certain paper manufacturers. Whatever the ins and outs of these disputes, says Tony Duncan (pictured), the fact is they often serve to reinforce the perception that print and paper is a problem.

So it’s come to this.

We have the largest three manufacturers and suppliers of copy papers in the region all under review from an NGO (FSC), which to all intents and purposes is restricting their ability to supply the Australian market. And it is debatable if any of their distributors fully understand whether the campaign is based on fact or a media beat-up. (I think the real issue is more about palm oil plantations than it is about paper, but paper is an easier target than half the goods on a supermarket shelf…)

However, I’m not surprised distributor suppliers are acting the way they are—they have long-term reputations to protect and, in some cases, have struggled for years to get clear answers to questions they have asked with regard to manufacturing practices (including fibre supply, employee working conditions etc).

As a sceptical Australian stakeholder commented a few months ago, he has been invited more than once to visit one of the Indonesian mills, with promises of transparency and openness—but when he asks if he can be accompanied by a local union official, the answer is always no.

It would be fair to say there have been some concerns regarding the practices of the Indonesian mills for many years both here and overseas. The Europeans managed to keep them out for a number of years, often based on environ­mental concerns. Whether this was real or simply a reaction to a potentially damaging low-cost competitor, it is difficult to say. And while the market still raises questions, the reality is that the defences have been breached and market positions are being developed.

When markets are on a downward slide and margins under continual threat, the barriers to new, lower cost entrants often vaporise. And while some of the commentary has certainly been a culmination of years of concerns, there is no doubt that environmental performance has improved considerably. But not far enough apparently.

Locals in the spotlight

The situation in Australia for manufacture of fine paper is now a little more complex, with the local manufacturer coming under further threat from exactly the same organisation which has disrupted the flow of Indonesian product. I’m not going to judge the merits of this except to say that the manufacturer—Australian Paper—doesn’t actually own any of the trees in dispute; it purchases fibre from suppliers, one in particular which is under pressure from the NGO. (Nippon Paper Industries, Australian Paper’s parent, does own forestry assets in Australia, but these are separate businesses.)

The issue at play in Australia is a real one regarding the use of native or high conservation forests, and you can make your own judgement on whether the use of this timber is sustainable or not. It is an ongoing concern to many people, however and I guess most in the paper industry can see a time in the not-so-distant future when the use of these forests as a commercial resource will be terminated.

However, this is an industry with long investment and asset timeframes, and shutting off supply overnight is in no one’s interest. (The oft quoted throwaway line by some that Australian Paper could source wood from plantations further west in Victoria may be theoretically possible, but the economic and environmental costs are commercially difficult —tens of millions of dollars per year and hauling logs hundreds of kilometres.)

It is a cause of admiration/frustration that while the motor vehicle industry has successfully managed to distance itself from emissions, the paper industry is joined at the hip with its environmental performance, no matter what control or influence it may have over them.

This underlying inability of the industry to present its case is a real concern. In an environment where a relatively poorly-resourced organisation can get up a campaign which parts of the media are sympathetic to, is potentially dangerous for profits and jobs.

There is no doubt that FSC have been criticised by industry (printers as well) for regulations, processes and an attitude which at times seems out of touch with commercial reality. While they may say that commercial reality is in the eye of the beholder, and their priorities are elsewhere, the reality is that anyone who purports to take a position (and money) from companies and organisations has a responsibility to these stakeholders.

Whether this can be managed simply by a supported outpost of a stronger overseas organisation, and can be professionally managed in Australia by a limited resource, with the correspondingly lower understanding of local complexities, remains to be seen.

It is difficult to see how this latest spat is actually going to end. Certainly, the Indonesian mills have major distribution networks across Asia and other parts of the world and the tonnages sold down here will be able to be absorbed in other markets without too much trouble—although a company such as Fuji Xerox Australia pulling back as a distributor will have implications in other parts of Asia.

The local situation is a little more confusing at this stage. The Reflex product range has been the focus of a range of protesters for more than ten years—and up to now has survived and grown. In general, over this time, distributors and customers have understood the value that having a local manufacturer means to the economy, and likewise the investment and effort by the company to work with accredited environ­mental standards has meant manufacturing standards have remained high.

However, a very unhelpful outcome from all of this is the further reinforcement that this is a problem industry. And right now, with a review of the paper industry having been underway for the past 18 months, this ‘uproar’ further supports the view by a number of politicians that it is not an industry worth supporting.

Whether it is the Federal Government’s fault or not, the current government is overseeing probably the greatest reduction in the forestry and forest products manufacturing industry—ever.

Opportunities missed
Prof Goran Roos refers to successful economies having three “bio-anchors”:

• Food
• Pharmaceutical
• Pulp and paper

There is a strong logic that these sectors provide a production base of raw materials, a strong, large-scale manufacturing sector, and a high value-adding industry based on commercially focused R&D.

It’s a compelling statement, particularly as Australia currently has only one of these sectors of a globally competitive size (and perhaps one significant global pharma company). From the political level, building value-added industries, based on upsteam natural advantages, is not new, but perhaps a little difficult for some.

And if you need convincing, this is from a recent Biofuels Digest article discussing the “sugar gold rush”:

For now, the road to Jerusalem passes through Guarulhos International Airport in Sao Paulo. There, you can see the passing parade…
Who is there? The small but high-tech armies led by the Kings of Amyris, Solazyme, LS9, and Codexis. New forces now gathering under the ducal flags of KL Energy, Cobalt Technologies, Vercipia, Braskem, or BioVerde. And lesser-known Barons spread across the lounge chairs of the Sao Paulo Admirals Club, with briefcases filled with their slide decks, NDAs, MOUs and IP, gathering forces, capital, and allies—and perspective.

Exhorting them on—the bishops and patriarchs of Dow, Dupont, BASF, Petrobras, Total, BP, and Shell—cautiously investing in their success—but counting on nothing, and still wedded to their oil & gas or palm kernel lifelines—hinting of massive off-take agreements that would flow from success.

We’re not seeing much of this excitement or investment down here, and even less in cellulose-based technologies compared with Europe, North America and China. Opportu­nities are being missed, although I’m sure in the future we will happily buy in these technologies under license—as we do in the print and most industries.

Without new products and industries, the local paper manufacturers will continue to be placed under pressure from politicians, NGOs and other people who simply view the sun, low down on the horizon, as a sunset, not a sunrise.