Future of European pulp and paper in bioeconomy – where does the transformation come from?
By Anne Toppinen
“No strategic renewal will take place if the industry continues on its path of incremental investment and short-termism, with a strategic focus on improving cost efficiency”.
This quote came from one of our Delphi panelists in a recent study on the future of pulp and paper in Europe. The European pulp and paper industry (PPI) has indeed been seeking renewal under the emerging concept of bioeconomy, as witnessed by rebranding of some companies, consolidation and changing business portfolios. In the study we explored the current situation in European pulp and paper sector from the viewpoint of value creation by using a qualitative Delphi approach. High level experts from seven countries participated in three rounds of data collection in 2014. Study was a joint collaboration with strategy scholars from Lappeenranta University of Technology and published in journal Futures. Based on our results, three points deserve further attention.
First, the industrial renewal must be driven by industrial sustainability, otherwise the bioeconomy will not be successful. The other main drivers of competitiveness in 2030 included – no surprise there – new innovations in wood fiber based products and processes. These innovations also typically include some element to improve environmental performance product or process, be it in the form of material or energy efficiency or finding new uses of wood fiber to substitute fossil based materials.
Second, if the management of pulp and paper business wishes to operate more profitably in 2030 than today, changes are needed not only in the products and services, but also in the industry dominant business logic. This is not at all an easy task in such a traditional sector. Developing more diversified and competitive businesses in pulp and paper industry also includes inevitably switching costs. It requires also time and patience, and to some degree a sound economic situation with increasing market pull. This is not yet happening though some positive signs have appeared in Europe. Struggle with the fears of consequences of UK Brexit or rise of protectionism hurting free international trade seem to however overshadow these.
Third, there appears to be scope for further prioritizing actions and developing comprehensive research agendas that go beyond technological innovations and take into account markets, consumers, and the whole institutional context. A key word here is also change: changes in consumer values towards environmental awareness, changes in customer orientation and knowledge of end-user needs.
“Consumers are becoming more and more environmentally aware, so consumer behavior will have a greater influence on the PPI environmental performance than we see today.” (a Delphi panelist)
Interestingly, in our study there was high level of diversity between the groups on the perceived industry capacity to realize the new products and services in their 2030 turnover. On average as high as 40 % turnover was believed to originate from new products in 2030 as compared to 2014. Is this unrealistic? Perhaps, but to get on track is even more important than reaching the precise level. Starting commercial-scale businesses will require a fundamentally better understanding of the future markets and customers, and of skills to managing change. Sufficient R&D input is required for developing improved products and services, but raising the standard for sustainability is required to achieve the level of social acceptance that allows transitioning these products into practice. When thinking about how we create value, we should simultaneously think about how value is being shared in the chain. From the researchers’ point of view, an interesting future avenue would be to combine futures research with studies on sustainable business models, as recognized among transition theorists. This will be one of the core tasks in our recently started project ORBIT, funded by Academy of Finland and conducted by University of Helsinki and Lappeenranta University of Technology.
Need for addressing sustainability challenges call for solid leadership and management capabilities in the industry. A more proactive stance on actions and in dialogue with stakeholders is needed, and as said - patience. But does financing community as a key stakeholder group have this patience? Despite many positive signs, time is still needed for the new forest bioeconomy products to appear on consumer markets at a larger scale.
Anne Toppinen works as a Professor and project leader in research group Forest bioeconomy, business and sustainability at the University of Helsinki. This commentary article was built upon recent article:
Toppinen, A., Pätäri, S., Tuppura, A. and Jantunen, A. 2017. The European pulp and paper industry in transition to a bio-economy: A Delphi study. Futures 88, 1-14.