Pulp and paper

World paper consumption exceeds 400 million tonnes per year. Making this volume of material requires huge production of pulp and fibre. Although recycled fibre use is slowly increasing, the pulp industry's primary source of fibre is still forests and tree plantations. It consumes around 40% of the world's industrially logged timber.

The pulp industry is associated with a range of problems:

In some countries, including Indonesia and Russia, pulp companies are actively involved in destruction and degradation of natural forests, and abuses of land rights of local communities and indigenous peoples.
In many countries, including Indonesia, Brazil, Uruguay and Mozambique, there are on-going social conflicts caused by pulpwood plantations that have been established through land grabs from local communities or peasant farmers.
Plantations of monoculture non-native tree species can damage natural ecosystems and cause detrimental impacts on water sources.
Too often pulp mills do not use the highest possible standards of clean production, thus causing air and water pollution.
Greenhouse gases are emitted throughout the paper lifecycle, from forest extraction, through pulp and paper production, use and disposal, and some paper sources are particular hotspots, such as the pulp plantations on deep peat soils in Indonesia.
Finally, in some countries, including Indonesia and Russia, the pulp industry is associated with problems of forest governance and corruption and legal irregularities including tax evasion, fraud and money laundering.

The fastest-growing markets for pulp and paper are in Asia, particularly China, which is now the world's biggest consumer and producer of paper, and the largest importer of pulp. Cost pressures and a shrinking market have led to the closure of some pulp mills in Europe and North America, but in China, Indonesia, countries in the Greater Mekong region, Brazil, Russia and Mozambique, there are ambitious plans for expansion or construction of new pulp mills. This will inevitably increase pressure on forests and their communities and/or require expansion of pulpwood plantations, and will risk social conflict, pollution and climate change.

The role of banks

Banks and other investors have an important role to play in reducing the risks of the pulp and paper industry.

Firstly, it is essential that banks with a large exposure to the sector develop appropriate investment policies that help them conduct proper due diligence when assessing the social, environmental and human rights impacts of investments in the sector. Such policies should also guide bank investment decisions, with the option open of disinvestment or refusal of new loans where these impacts are likely to be negative. To guide banks in the right direction, the Environmental Paper Network (EPN) and BankTrack published Green Paper, Red Lines, a document that sets out the minimum requirements for financiers of the pulp and paper industry.
Secondly, where pulp and paper companies show leadership and make commitments to improve their practices, for example, to use fibre only from sustainable sources or to avoid the use of land where local communities have not given free and prior informed consent, banks should make finance conditional upon full implementation of these commitments and monitor compliance with them.
Thirdly, banks need to be alert to the legal and reputational risks of associating with pulp companies with known histories of involvement in corruption, fraud and illegal logging, and help to leverage reforms in governance by withholding finance from such companies.

EPN and BankTrack are working in partnership to ensure that banks and other investors in the pulp and paper industry have improved access to information about these risks and opportunities and strengthen their policies and practices in financing the industry. In addition, we research the role of banks that continue to finance pulp and paper projects with a large negative impact, and assist communities affected by such projects in dealing with banks. Find here an assessment of banks' policies regarding the pulp & paper industry.

Our Global Paper Vision

The Environmental Paper Network is a network of more than 100 civil society organizations which all share a vision for a world where paper is produced and consumed sustainably. The Global Paper Vision, which is also endorsed by BankTrack, identifies seven priorities for achieving this, and seeks a wide range of stakeholders, including investors in the pulp and paper industry, to help to: