Sustainability is a key element of Stora Enso’s corporate governance, promoted by the Board of Directors, the CEO and the Group Leadership Team (GLT). The CEO carries the ultimate responsibility for the successful implementation of the sustainability strategy. Work on sustainability is led by the Executive Vice President, Sustainability, who reports directly to the CEO. The Board of Directors’ Sustainability and Ethics Committee oversees the implementation of Stora Enso’s Sustainability Strategy and Ethics and Compliance Strategy. The Committee met four times in 2017.
More information on Stora Enso’s approach to sustainability and consolidated results on sustainability indicators are published in the separate Sustainability Report 2017.
Stora Enso’s human rights commitment extends from employees and on-site contractors, through external suppliers of materials and services and business partners, to communities living near the Group’s operations. In addition to Stora Enso’s commitment to the UN Guiding Principles on Business and Human Rights, the Group’s Sustainability Agenda is aligned with the ten principles of the UN Global Compact, including its principles on human rights. Stora Enso also respects and follows the reporting requirements of the UK Modern Slavery Act.
Human rights risks are required to be taken into account throughout our operations, including investment decisions related to mergers, acquisitions, and divestments. The Group’s investment guidelines stipulate that environmental and social risks and impacts, including those related to human rights, must be duly identified, assessed, and addressed prior to any investments in projects with business critical risks.
Stora Enso is currently developing a human rights strategy and it will be further refined during 2018. The strategy will define a set of prioritised human rights that are the most relevant for Stora Enso over the long-term.
In 2017, our focus was on finalising the implementation of the Human Rights Action Plan that resulted from our group-wide Human Rights Assessment conducted in 2014 and a related report published in 2015. During the year, an internal assurance process was carried out to ensure that actions were adequately concluded and evidence documented.
By the end of 2017, 88% of the preventive and remediation actions were completed and 100% of the actions were brought to an appropriate conclusion. The actions are based on the UN Guiding Principles on Business and Human Rights and criteria created in collaboration with Danish Institute for Human Rights. 9% of the actions were closed and 3% were identified as actions requiring continuous review. As all actions were progressed to an appropriate conclusion by the end of 2017, the reporting on the Human Rights Action Plan progress will stop.
Stora Enso’s key performance indicator on responsible sourcing measures the proportion of total supplier spend covered by the Group’s Supplier Code of Conduct (SCoC). By the end of 2017, 95% of Stora Enso’s total spend on materials, goods, and services was duly covered (92% at the end of 2016), meeting our target for the year.
In 2017, a total of 61 reports received through Stora Enso’s various grievance channels were identified as potential non-compliance cases (58 in 2016). Proven misconduct leading to disciplinary and/or legal actions, and/or improvements in the processes and procedures was identified in 14 (18) of the completed investigations, while 22 (5) further complaints were found to be valid without involving misconduct. None of the proven misconduct cases were related to child labour, forced labour, or discrimination.
The company’s Code of Conduct index monitors and evaluates employees’ perceptions of Stora Enso’s work on topics covered by the Code of Conduct and it is based on the annual employee survey results. In 2017, this index improved to 83 (81 in 2016). Our goal is to maintain this positive trend.
Forests, plantations, and land use
Progress on responsible forestry is followed with a key performance indicator (KPI) that measures the percentage of the lands owned and managed by Stora Enso covered by certification systems. The target was to reach 96% coverage by the end of 2017. In 2017, coverage amounted to 92% (90%). The KPI will be redefined during 2018, and reflecting this, a new target will be set. At year-end Stora Enso owned or managed lands with a total area of 972 600 hectares.
In 2017, the total amount of wood (including roundwood, wood chips, and sawdust) delivered to our mills was 37.5 million m3 (solid under bark) (37.6 million m3 in 2016). The share of third-party certified wood in the Group’s total wood supply was 85% (83%).
Managing land contracts in Guangxi, China
Stora Enso leases a total of 82 591 hectares of land in four regions of Guangxi, of which 29 581 hectares (30 500 hectares in 2016), corresponding to 36% (37%) of the total area, is social land leased from village collectives, individual households, and local forest farms. In many cases, these social lands had already been sub-leased, sometimes repeatedly, resulting in chains of sub-leases. Often the original owners did not benefit from increased land rental prices because of these chains.
Stora Enso has been reviewing and correcting land lease contracts in Guangxi since 2009, when irregularities in the contract chains were first discovered. By the end of 2017, 66% of the contracts were found to be free from contractual defects (66% by the end of 2016) corresponding to 16 267 hectares (16 480) of social land. In irreconcilable cases, we terminate leases in a responsible manner, considering all potential impacts. When contracts have no defects, this means that the ownership of land is clear or resolved, and that contracting procedures have proven to be legal, authentic and valid.
As announced on 19 January 2017, Stora Enso is reconsidering its plans to build a chemical pulp mill in Beihai, and decrease the area of its leased forestland in the Guangxi region. As part of this process, Stora Enso aims to have only land leased that is free of contractual defects. Stora Enso has moved from contract correction to normal contract management and therefore we will stop the reporting on contract correction progress.
Land occupations by the Social Landless Movements in Bahia, Brazil
In Bahia, Brazil, work continued on a Sustainable Settlement Initiative launched in 2012 to provide farming land and educational support for local families in the landless people’s social movements.
At the end of 2017, additional areas of Veracel’s productive land totalling 3 043 hectares (3 499 hectares at the end of 2016) were occupied by landless groups not involved in the Sustainable Settlement Initiative. During the year, Veracel continued to seek repossession of these areas through legal processes, and the company resumed forest management activities in total on 456 hectares compared to the situation at the end of 2016. At the end of 2017, the total land area owned by Veracel was 213 500 hectares, of which 75 000 hectares are planted with eucalyptus for pulp production.
Since 2007, Stora Enso’s target has been to reduce our fossil CO2 emissions per saleable tonne of board, pulp, and paper by 35% from 2006 levels by the end of 2025. Stora Enso is ahead of the 2025 target. In 2017, our fossil CO2 emissions per saleable tonne of board, pulp, and paper were 40% lower than the 2006 benchmark level (40% lower in 2016). This means Stora Enso has already reached the target, although the Group’s CO2 intensity has been adversely affected by the coal-based energy consumption at our Beihai Mill in China. Stora Enso has begun to investigate long-term options to gradually move away from coal to biomass and other non-fossil fuels.
In December 2017, Stora Enso’s Science Based Targets to combat global warming were approved by the Science Based Target Initiative. With the new targets, Stora Enso commits to reduce greenhouse gas (GHG) emissions from operations 31% per tonne of pulp, paper and board produced by 2030 from a 2010 base-year. To reduce Scope 3 emissions, Stora Enso commits to have 70% of non-fibre suppliers and downstream transportation suppliers in terms of spend set their own GHG reduction targets by 2025, towards the aim that these suppliers adopt science-based GHG reduction targets by 2030. In addition, the company will educate 100% of customer-facing staff on the advantages of setting science-based targets by 2020. Stora Enso plans to report progress on the Science Based Targets in Q1/2018, and at the same time retire the old target listed above.
Environmental investments and liabilities
In 2017 Stora Enso’s environmental investments amounted to EUR 65 (41) million. These investments were mainly to improve the quality of air and water, to enhance resource efficiency and energy self-sufficiency, and to minimise the risk of accidental spills.
Stora Enso’s environmental costs in 2017 excluding interest and including depreciation totalled EUR 170 (172) million. These costs include taxes, fees, refunds, permit-related costs, and repair and maintenance costs, as well as waste water treatment chemicals and certain other materials.
Provisions for environmental remediation amounted to EUR 108 (100) million at 31 December 2017, details of which are in Note 22, Other Provisions, of the Consolidated financial statements. There are currently no active or pending legal claims concerning environmental issues that could have a material adverse effect on Stora Enso’s financial position. Cost related to environmental remediation measures amounted to EUR 11 (9) million.