Europe’s biggest private forest owner defends harvesting strategy

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Europe’s largest non-state forest owner is facing a challenge to its core business of harvesting and replanting trees on land valued at $9bn, as the EU’s climate change strategy focuses on preserving woodland.

The listed Svenska Cellulosa AB (SCA) is the owner of 2.6m hectares of Swedish forest, almost equivalent to the area of Belgium, which it uses to produce wood products, pulp and packaging paper.

Ulf Larsson, chief executive of SCA, argues that policymakers would fail to protect woodland by viewing forests primarily as carbon stores, and that they should be actively managed.

“We cannot really look at the forest only as a carbon sink, as that would be a very big mistake,” he told the Financial Times.

“When we harvest the tree, we replant with two or three new ones . . . We get access to raw materials and we can substitute plastics with paper, fossil fuel with biofuels, and concrete and steel with wood.”

SCA revalued its forests to SKr76.6bn ($9bn) as of June 2021, up from around SKr75bn. Shares in the group rose to a recent new high on strong quarterly revenues on pulp and packaging demand through the pandemic.

Industry analysts are now also focused on what effect the emerging EU policies will have on the company’s revenue and growth.

Forest management, as an eligible activity under EU categorisation, could potentially lead to SCA being paid to plant more trees, or to be paid for carbon dioxide captured by its forests.

In 2020, the company harvested 4.8m cubic metres of timber, while its remaining forests absorbed about 4.4m tonnes of CO2 or about 9 per cent of Sweden’s total annual carbon emissions. SCA also operates wind turbines on its land.

Larsson told analysts at the latest results briefing that while he was broadly positive about the EU efforts, the outcome would be “negative if we have any big restrictions on how to manage the forest and how to provide the market with renewable materials from the Scandinavian forestry, then it’s not good for the climate”.

However, environmental groups say actively managed forests, where trees are cut down and new ones planted, will absorb less carbon than they would if they were not harvested at all.

The EU commission this month released its forestry strategy that aims to increase the volume of carbon absorbed by woodland as part of sweeping measures to cut the bloc’s emissions by 55 per cent by 2030.

The volume of the greenhouse gas absorbed by a tree depends on a complex array of factors including its age and species.

The commission has said that wood of “high ecological value” should not be harvested and that the material’s use should be optimised based on its environmental value.

This prioritises the use of wood in long-lived products, such as furniture, or in place of carbon-intensive alternatives, such as switching plastic for wood.

Member states should be careful that the benefits of using wood for such purposes were not outweighed by a reduction in the carbon being stored as a result of increased harvesting, it said. The commission also plans to include the planting of 3bn extra trees by 2030 in its policies.

Wood-based industries, such as papermakers and biomass companies that make pellets burnt for energy, support 3.6m jobs across the EU and have insisted that “sustainable” forestry should be encouraged.

Tension between EU policymakers, the wood industry, scientists and green groups was brewing for months in the lead up to the EU’s climate package.

Forests and other woodland cover about 44 per cent of EU land but the commission’s strategy is politically sensitive because member states, which would have to report data to Brussels under the plans, say forestry policy is a matter of national competence.

After objections from 11 EU nations, the commission’s new strategy made concessions through greater recognition of member states’ authority over their forests.

Larsson told analysts that SCA was going to “put a lot of effort” into the debate shaping the rules in coming quarters, as the details of the policy were critical. The group this month reported the strongest second-quarter earnings since it demerged from tissue and nappy maker Essity in 2017.