Fighting with fiber: Forestry and pulp companies halt Russian operations as Ukraine war escalates

09 Mar 2022 --- Major paper packaging groups and forestry standards authorities are freezing their operations in Russia and Belarus in a show of protest against the invasion of Ukraine. The divestments are expected to deliver a heavy blow to the Russian economy, further threaten global price rises and degrade environmental sustainability efforts.

While Western governments have not yet targeted the Russian forestry trade for international sanctions, some of industry’s most prominent fiber-packaging corporations – like Stora Enso and UPM – have announced they would be shuttering all trade with Russia due to the “unacceptable” war in Ukraine.

NGOs promoting environmentally sustainable forestry practices have also voluntarily joined the economic assault on the Russian wood trade. The PEFC (The Programme for the Endorsement of Forest Certification) has retracted its certification for any product using timber sourced in Russia or Belarus.

Speaking to PackagingInsights, Thorsten Arndt, head of communications at PEFC International, says the organization’s decision is both humanitarian and environmental. “Nature is the unacknowledged victim of any war, and the negative environmental impact will be tremendous.”

“The military invasion is in direct opposition to our core values. This aggression causes unspeakable and unacceptable pain and death to innocent people, including women and children. It also has an immediate and long-term destructive impact on the environment, on forests, and on the many people that depend on forests for their livelihoods,” reads a PEFC statement.

Conflict timber
The PEFC says it decided to retract its certification after determining all timber exports from Russia and Belarus now fit the organization’s definition of “conflict timber,” defined as “timber that has been traded at some point in the chain of custody by armed groups, be they rebel factions or regular soldiers, or by a civilian administration involved in armed conflict or its representatives, either to perpetuate conflict or take advantage of conflict situations for personal gain.”

Timber is reportedly the fifth largest export sector for Russia.The move follows calls from over 120 Ukrainian, Belarussian and European environmental and human rights NGOs and activists for industry and governments to sanction the Russian wood industry. Led by the Ukrainian Nature Conservation Group, signatories of a joint statement said that in 2021, the export value of timber and wood products from the Russian Federation was US$13.9 billion. Western countries are the major markets for this wood.

“The financial resources the Russian and Belarussian governments gain from wood exports help to equip the Russian invaders, fuel their tanks and produce their bombs. Therefore, consuming Russian and Belorussian wood and timber products means supporting death and destruction in Ukraine,” reads the group’s statement.

Timber is also the fifth largest export sector for Russia and comprises 3% of the country’s total export value. “More importantly, it is about 8.5% of the total non-fossil fuel export value,” says Arndt.

As of December 2021, around 41 million hectares of forest in Russia and Belarus are PEFC-certified. This number corresponds to about 13% of the total global PEFC-certified area.

Despite the organization’s decision, Arndt adds: “We value the efforts by PEFC Russia and PEFC Belarus in promoting sustainable forest management through forest certification, and we encourage them to continue administering their national system operations.”

Joining the fray
Rival sustainable forestry non-profit Forest Stewardship Council (FSC) has also announced it will halt all trade on FSC-certified materials and wood from Russia and Belarus.

To continue to protect forests in Russia, FSC says it will allow forest management certificate holders in Russia the option of maintaining their FSC certificates but not permit them to trade or sell FSC-certified timber.Divestment and sanctions against the Russian wood trade could have a severe economic and environmental impact.

FSC director general Kim Carstensen proclaimed: ‘We must act against aggression; at the same time, we must fulfill our mission of protecting forests. We believe that stopping all trade in FSC-certified and controlled materials, and at the same time maintaining the option of managing forests according to FSC standards, fulfills both these needs.”

Meanwhile, the Sustainable Biomass Programme, which also provides certifications for environmentally sustainable biomass products, says it is “currently assessing its position” despite “condemning the invasion of Ukraine.”

Paper packaging punch
The assault on Russia’s billion-dollar wood market comes as packaging players increasingly look to fiber-based materials as an alternative to plastics, which are being restricted by legislation and shunned by consumers globally.

Major packaging producers like Stora Enso and UPM have announced they will no longer be doing business in Russia, citing humanitarian concerns.

“The war in Ukraine is unacceptable, and we are fully behind all sanctions. We will now focus all our attention on supporting our customers and the well-being of our employees,” says Annica Bresky, president and CEO of Stora Enso.

The company has three corrugated packaging plants and two wood products sawmills in Russia, employing around 1,100 people. It will also stop all export and import to and from Russia, and a mitigation plan has been activated to secure the availability of input materials from other sources.Major packaging companies are abandoning trade and operations with Russia due to the invasion of Ukraine.

UPM, which is already embroiled in a long-running dispute with its workers, who are on an extended strike (accusing the company of attempting to break up their union) has also announced a suspension of all deliveries to Russia while the conflict in Ukraine continues.

While less than 10% of UPM’s wood sourcing to Finland comes from Russia, and its sales to the Russian Federation account for approximately 2% of its revenue, the decision may add further turmoil to the company’s production problems, which are already decimating essential labeling production for packaging throughout Europe.

Mondi under scrutiny
Despite actions by forestry organizations and packaging producers, leading paper-based packager Mondi has yet to decide on its operations in Russia, which are comparatively large against UPM and Stora Enso.

The company has come under fire for failing to suspend production at its Syktyvkar facility near Moscow. The site accounted for 12% of Mondi’s total revenue in 2021, roughly €925 million (US$1,015 million) and 20% of the group’s underlying €1.5 billion (US$1.65 billion) EBITDA, according to its 2021 financial report.

However, a smaller site in Western Ukraine, which produces paper bags for Mondi, has been closed due to the conflict.

The company emphasizes that its Syktyvkar facility primarily serves the Russian domestic market, but calls for a boycott on Mondi products have already begun. Justin Hobson, marketing manager at UK-based Fenner Paper, says only major companies like Mondi can make a difference and should be taking more decisive action.

Mondi’s share price plummeted to the lowest point in a year last week, and the company says it is “actively monitoring this rapidly evolving situation, the international response and the implications for the group.”

By Louis Gore-Langton

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