THE FUTURE FOREST PRODUCTS INDUSTRY: LEANER, GREENER AND MORE INNOVATIVE

A dramatic storyline draws the eye. And the recent narrative about the worst recession of a generation and a recovery stumbling forward has certainly riveted our attention. But feeble markets haven’t been telling the real underlying business story. The plot hinges not on what markets are doing but on how business adapts to what markets are doing. The heroes at the end of this story will be those who adapt the quickest and smartest to structural market changes, not those who get lucky in good markets and beaten down in bad.

From this perspective Canada’s forest sector appears poised to emerge from the troubled economic times in a heroic fashion. Rather than simply gritting its teeth and waiting for better times, the industry has instead been retooling itself into a leaner, greener and more innovative sector, one that is poised to become an increasingly dynamic player in the global marketplace of the 21^st century.

The industry transformation has followed different paths in different companies but it has basically embraced four approaches.

The first is obvious ―the necessary step of improving productivity and cost efficiencies. Companies have worked as teams finding creative solutions and streamlining their operations.  Our sector consistently outperforms the overall economy in productivity growth and our sawmills outperform their U.S. counterparts.

Second is the push to diversify markets.  Instead of waiting for the U.S. market to return, companies have been boldly expanding their reach to the world, especially in Asia.   The forest products industry is now Canada’s number one exporter to both China and India.    

Third, forest companies have been translating their superior environmental performance into reputational capital. Canada’s pulp and paper mills have reduced their greenhouse gas emissions by 60 % since 1990.  Canada has more third-party certified forest land than any other country in the world.  And one year ago, 21 forest companies belonging to the Forest Products Association of Canada (FPAC) joined leading environmental groups to sign the landmark Canadian Boreal Forest Agreement. Far from resting on its laurels the industry is committed to keep raising the environmental performance bar and to seek market advantage over competitors who are slower to act.

The final game changer comes from innovation and the ability to extract more value from every tree in the form of bio-fuels, bio-materials, and bio-chemicals that can be used in everything from airplane parts to plastic resins to pharmaceuticals.  These add-on products would supplement the existing lumber, pulp and paper operations.  A recent study published by FPAC identified a vast global market opportunity for such products of $200 billion by 2015.  

There will be no lack of drama in tomorrow’s forest industry. The business world is never easy and global competition is always fierce. But new efficiencies, expanding markets, green credentials and innovative new products will position Canada well. The forest industry story will no longer be about the struggle to survive but instead about its ability to thrive in the years ahead. The new narrative is about an industry primed to create new wealth for the economy, help us reach our environmental goals, create solid jobs and shore up rural communities.