The Global Drive to Decarbonize Pulp and Paper

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The global push towards decarbonization is reshaping industries, with the pulp and paper sector facing increasing pressure to reduce its carbon footprint. This pressure stems from a combination of regulatory demands, market expectations, and the evolving priorities of end customers. As a significant emitter of greenhouse gases, the pulp and paper industry must navigate these dynamics to remain competitive, sustainable, and profitable. Pulp and paper companies must understand the interconnected challenges of decarbonizing their own operations and the impacts of direct and indirect suppliers, all in the global context of evolving drivers related to carbon emissions and urgent climate action.

Global Pressure for Regulatory Compliance in Pulp and Paper

Regulatory pressure is one of the primary drivers of decarbonization in the pulp and paper industry. Governments worldwide are implementing stricter environmental regulations to combat climate change. For example, the European Union’s Green Deal aims to make Europe the first climate-neutral continent by 2050. This ambitious goal includes stringent emission reduction targets and implementing carbon pricing mechanisms like the EU Emissions Trading System (ETS). Pulp and paper companies operating in the EU must comply with these regulations, necessitating investments in cleaner technologies and processes.

In North America, regulations are also tightening. Canada’s federal carbon tax and provincial initiatives require industries, including pulp and paper, to reduce carbon emissions. Similarly, while federal regulations have fluctuated in the United States, states like California have implemented robust climate policies, including cap-and-trade programs that incentivize emissions reductions.

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Bigger Market Expectations, Smaller Carbon Footprint

Market dynamics are another significant factor driving the decarbonization of the pulp and paper industry. Investors and stakeholders are increasingly prioritizing decarbonization when making decisions. Companies that fail to address their carbon emissions and environmental impact could risk losing investor confidence and facing higher capital costs. Sustainability is no longer a niche concern but a mainstream expectation that affects a company’s bottom line.

The growing trend of sustainable investing means that companies are under pressure to demonstrate their commitment to reducing carbon emissions. Pulp and paper companies are responding by setting ambitious decarbonization targets (e.g., SBTi, RE100) and publicly reporting their progress (e.g., CDP disclosure). This transparency helps attract investment and enhances the company’s reputation and competitiveness in a market that increasingly values sustainability.

End Customer Demand for Client Action

End customer demand for sustainable products also accelerates the push for decarbonization in the pulp and paper industry. Consumers are becoming more environmentally conscious and are demanding products that are produced sustainably. This shift is particularly evident in the consumer packaged goods (CPG) sector, where companies are under pressure to offer eco-friendly packaging solutions.

Companies are setting ambitious sustainability targets, which include reducing the environmental impact of their packaging. These companies expect their suppliers, including pulp and paper producers, to align with their sustainability goals. Consequently, pulp and paper companies must innovate to offer products that meet these expectations, such as recyclable, biodegradable, or carbon-neutral packaging materials.

The rise of e-commerce has further intensified the demand for sustainable packaging. With the surge in online shopping, the volume of packaging waste has increased, prompting consumers and businesses to seek more sustainable solutions. Pulp and paper companies that can provide sustainable packaging options stand to gain a competitive edge in this evolving market.

Reducing Scope 1, Scope 2 and Scope 3 Emissions in Pulp and Paper

To effectively decarbonize, the pulp and paper industry must address emissions across its entire value chain, categorized as Scope 1, Scope 2, and Scope 3 emissions. Scope 1 emissions are direct emissions from owned or controlled sources. Companies can reduce these by investing in energy-efficient technologies, transitioning to renewable energy sources, and optimizing production processes to minimize waste and emissions.

Scope 2 emissions are indirect emissions from the generation of purchased electricity. Pulp and paper companies can lower these emissions by purchasing green power, both bundled (PPAs) or unbundled (EACs). This not only reduces their carbon footprint but also often results in cost savings over time. Scope 3 emissions, which are all other indirect emissions occurring in the company’s value chain, present a more complex challenge. These include emissions from the production of raw materials, transportation, and product disposal. To address Scope 3 emissions, pulp and paper companies must work closely with their suppliers to ensure sustainable sourcing practices, enhance the efficiency of transportation and logistics, and promote the use of recycled materials in their products.

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At STX Group, we urge companies globally to establish science-based GHG emissions reduction targets in line with the Paris Agreement goals. Additionally, a thorough evaluation of opportunities, as per the Science Based Targets initiative or ISO 14068, should be conducted to reduce direct and value chain emissions in a scientifically aligned manner.

With STRIVE by STX’s expertise in decarbonization and extensive network of global partners, we are uniquely positioned to support your corporate net zero pathway. Whether your company is seeking to reduce emissions, access new revenue streams through carbon markets, or enhance your sustainability credentials, STRIVE by STX is here to guide you every step of the way.

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