Monday, August 20, 2007

Will The Iliam Group Be the Same-Old Forest Industry?

One of the world’s largest paper products companies, International Paper, is teaming up with the owner of Russia’s largest paper mills, Iliam Holdings S.A., to log the Russian Boreal, or Taiga, for paper.

International Paper Chairman and Chief Executive Officer John Faraci said. "Ilim has continued to strengthen its operations and substantially improve its profitability, and we're investing at a good multiple and expect attractive returns. As we continue to transform International Paper, focusing on our global uncoated paper and packaging businesses, the joint venture with Ilim positions us very well within low- cost, high-growth markets in Russia and Asia."

The $650 million deal between International Paper and Ilim Holdings S.A. to form Ilim Group was just announced, and the companies’ emphasis was on upgrading facilities, increasing production, developing new products, in order to increase returns to investors.

As the Daily Green notes, no mention in the press release about environmental responsibility or commitments to include clean technologies as a part of the "upgrades." But in order to compete in the new global marketplace with some of the best growth in environmentally improved paper products, they will inevitably need to reckon with such issues. The question is, will it be greenwashing or will it be real?

International Paper has recently indicated positive movement, announcing it would pursue Forest Stewardship Council certification for some of its operations, but the company still carries one of the world's most dubious environmental reputations among paper companies so this announcement is being greeted with trepidation by conservationists. And boardroom level decisions such as this spells disaster for small, local, forest dependent communities in the Russian Taiga. Perhaps, however, at a juncture such as this, there is an opportunity for International Paper to design sustainability into the fabric of its business plan. With tools available such as Google Earth, a sympatheic, educated consumer market, and a strong international conservation movement to instantly notify the world, there are significant business risks associated with poor corporate responsibility such as a failure to embrace clean energy technologies, cleaner bleaching technologies and credible forestry certification.

So perhaps there is an opportunity here. So IP, what's it gonna be?

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