How do ESG principles change timber industry in Russia?

18 november 2021
Best available techniques can become a compromise between ecology and economics in industry. What profit is brought by ecological transformation and why does the company need special department for ESG? About an expert: Vladimir Krupchak, Chief Investment Officer of Pulp Mill Holding, Member of the Board of Directors, Arkhangelsk PPM, JSC and Sawmill 25, CJSC. Chairman of the Board of Directors, Group of companies "Titan". Doctor of Economics.

Best available techniques can become a compromise between ecology and economics in industry. What profit is brought by ecological transformation and why does the company need special department for ESG?

About an expert: Vladimir Krupchak, Chief Investment Officer of Pulp Mill Holding, Member of the Board of Directors, Arkhangelsk PPM, JSC and Sawmill 25, CJSC. Chairman of the Board of Directors, Group of companies "Titan". Doctor of Economics.

The best technologies and concessionary funds

Agenda on ESG in timber industry is connected with the specific contradictions. On the one hand, the industry is based on environment-intensive technologies. On the other hand - forest is the single resource, key element of ecosystem.

In this case, the industry cannot fail to perform sustainable development. ESG indices influence on credit ratings of the company. All the projects in forest industry are capital intensive.

Green economy

Best available techniques (BAT) become a compromise between ecology and economics. They allow implementing ESG principles, simultaneously improving economical factors and finding new points of growth.

ESG principles include three main directions:
E (environment) is responsible attitude to the environment and reduction of impact of the planet.

S (social) is social responsibility, care about the staff, clients, partners, consumers and inhabitants of footprint regions.

G (governance) is the quality of corporate governance, including transparency of accounts, relationships with stockholders and government, anti-corruption measures.

By the end of 2022, many major Russian enterprises of the industry shall make an application for obtaining complex ecological permits (CEP) and approve the correspondence to BAT requirements. As of today, three such permits were got in the industry, including APPM.

In our opinion, enterprises can use CEP as a tool not only for ecological control but for modernization as well. It is obvious that more environment-friendly technologies save resources, raw materials, time and thus, they are more cost-efficient.

CEP is also the means for involvement grants and concessionary financing for the growth of ecological efficiency. APPM plans to invest 18.2 bln. rub. for the corresponding program. Its implementation will lead to ecological transformation of the mill.

Investments to the production and the best practices

We assured 20 years ago that the measures for ecological transformation give good economic effect. At the beginning of 2000, APPM commenced investing intentionally to ecological modernization of its production departments.

The idea was to reduce discharges and emissions due to fuller and more effective employment of resources (raw materials, chemicals, fuel and energy). And thus, not to expend efforts and money on cleaning and disposing. And these are BAT, essentially.

In 1997-1998 we raised a loan from World Bank and rebuilt Board production department in order to reduce fuel consumption. The experience met with success - such investments give double or triple effect. Since then we consider and evaluate any new project both from economical and from ecological point of view.

As a result, Arkhangelsk PPM was included into top-18 leading worldwide pulp and paper companies with climatic rating "A". Our ecological program was also noted in the UN by its inclusion into the list of the best practices for achievement of goals of sustainable development.

The UN paid attention to some steps of APPM, using which it became possible to reduce greenhouse gas emissions and reduce energy consumption for the production. For example, the start-up of new plant with high-performance gas treatment equipment and high pressure boiler, which uses biomass as a fuel.

These technologies can be used practically in all industries. Moreover, as it was mentioned in the UN, today in Russia there are favorable terms for transition to BAT and international standards for emissions control.

Innovation economics

Strategy-2030 and ESG-department

Basing on its experience concerning the reduction of greenhouse gas emissions, APPM developed and adopted a strategy of low-carbon development by 2030. The company took a voluntary obligation to reduce total direct and energetic indirect emissions by 55% in comparison with the level of 1990 - to 1.4 mln. tons of CO2-equivalent. Simultaneously other indirect emissions shall be reduced by 20% to the level of 2015 up to 370 thousand tons of CO2-equivalent.

We plan to decrease the emissions in several directions - reduce energy consumption of the production, increase efficiency of fuel utilization, build up the rate of biomass in fuel balance, change to less carbon-intensive fossil energy sources. Engineering and organizational decisions are developed for each direction.

Besides, now APPM is in the process of development of its first policy relating to ESG and sustainable development. For further improvement of the work in this sphere the company organized its own department, which will supervise the achievement of sustainable development goals.

Combination of activity within one structure will allow solving issues in the sphere of ESG more efficiently. It is important not only for investors and banks but for all key stockholders: government authorities, clients, staff, civil societies and inhabitants of territories.

 

Info
ESG principles include three main directions:
E (environment) is responsible attitude to the environment and reduction of impact of the planet.

S (social) is social responsibility, care about the staff, clients, partners, consumers and inhabitants of footprint regions.

G (governance) is the quality of corporate governance, including transparency of accounts, relationships with stockholders and government, anti-corruption measures.