Times are tough if you’re an import-competing paper manufacturer. But according to Australian Paper, the buck doesn’t stop on price in an environment where triple bottom line reporting is creating a whole new currency.
From the perspective of the stereotypical Australian male, Paul Allen has had a dream run as a sales and marketing executive. His employment history reads as follows: Lion Nathan, Four’N Twenty and Tabcorp. Clearly, it’s unfair to suggest he would be looking for a challenge after selling beer, pies and gambling to Australians. But four years ago he moved to a marketing role at Australian Paper, a major player within a local industry officially in crisis: pulp and paper manufacturing.
“When I came here, the brief was to establish a new value proposition,” says Allen, who has since become General Manager of the Packaging Division at Australian Paper. “A couple of things quickly became obvious to me: firstly, you’re too price exposed if you try to trade just as a commodity
in this industry; and secondly, there was a lack of pride in the pulp and paper sector – people weren’t holding their heads high.”
Certainly, it’s an industry that polarises public opinion. But within two years of Allen’s arrival at Australian Paper, the company was at a crossroads. Its parent company, PaperlinX, decided to withdraw from manufacturing, leaving Australian Paper’s future very much up in the air.
Salvation came in the form of a takeover by Japanese giant Nippon Paper, looking to improve on its place as the eighth- largest paper manufacturer in the world. But despite the deal, two of the company’s four mills were still shut down. Within months, the Minister for Innovation, Industry, Science and Research, Senator Kim Carr, was moved to commission a strategic review of the ailing local industry.
“The review recognised the steady decline of the industry here in Australia,” Allen says. “This isn’t so much about the higher exchange rate, but rather the sheer growth in capacity in paper and pulp manufacturing around the world. If the dollar dropped to 80 cents it would help our local business, but you’ve got people in Indonesia and China with such huge capacity that they’ve got the economies of scale and lower cost base to go after your market share.”
As the only manufacturer of fine paper in the country, Australian Paper was inevitably involved in the Industry Strategy Group established to conduct the review, with CEO Jim Henneberry the deputy co-chair. Issued in March 2010, the final report made a series of recommendations across the themes of innovation, investment, sustainability and productivity.
The response to those recommendations is still very much a work in progress, but one frustration in particular has clearly left its mark on Australian Paper as it struggles to stay afloat amid a flood of cheap imports.
“There’s very little preferential specification of Australian made product in terms of government procurement policy here,” Allen says. “If the Federal Government, for example, was to specify even 25% of its paper to be Australian made, it would be of enormous benefit to our sector and our business, but we really struggle to get traction on the issue.”
As frustrating as the lack of specification was and continues to be for the company, it brought Allen back to his original brief. How could he develop a value proposition for Australian Paper that would, in itself, create an imperative for customer organisations to specify the company’s product?
A clue came in the form of a program Allen had initiated shortly after joining the company, when he had been given responsibility for driving sustainable development. “Sustainability and marketing have been entwined in my time here, and I could see from the start that sustainability presented a real opportunity for us to differentiate ourselves from imported grades of paper, many of which are sold with little to no credentials in that regard,” he says.
The initial result was the development of carbon neutral paper, certified against the Government’s National Carbon Offset Standard (NCOS). To complement this, the company measured the greenhouse gas emissions per tonne of its standard pulp and paper at 1.07 tonnes of CO2 – a figure it has subsequently reduced through efficiency measures to 0.71.
“Some of our major corporate customers really responded to the fact that we put a metric on the product, demonstrating a saving of 0.71 tonnes of carbon with each tonne of carbon neutral paper they bought,” Allen says. “They liked the assurance behind its certification,
and from that we saw a greater opportunity: to provide a complete footprint representation of what a tonne of locally made paper stands for.”
Environmental metrics, however, would only be the start. Through his own research, conducted as part of his MBA, Allen discovered that 60% of ASX 100 companies were already adopting a range of triple bottom line measures in their reporting.
“Contrary to popular belief, sustainability does not solely equate to environmental performance – it’s also about a social and economic footprint, and increasing numbers of companies are reporting to stakeholders to demonstrate how they’re looking after these key aspects of their business,” Allen says. “That means there’s a business opportunity for Australian manufacturers to support that type of reporting with data on the local product.”
What followed was an 18-month journey towards a set of key sustainability indicators that would really mean something to Australian Paper’s stakeholders. Again, the process was anchored in recognised standards – this time the Global Reporting Initiative’s (GRI’s) world- leading sustainability reporting framework. And the process would necessarily respond to the hunger customers had demonstrated for genuine metrics, quantifying the triple bottom line value of the paper being purchased.
The result was the Creating a Tonne of Value program: a set of 12 metrics tailored for application in each customer’s own GRI and sustainability reporting. And further, the environmental, social and economic metrics were specifically designed to reflect the factors that a far-reaching research effort had indicated were of the greatest concern to local customers.
“People don’t want 500 metrics, as they inevitably become devoid of any meaning,” Allen explains. “So when you buy our local product, we’re providing one page that says here’s
the contribution you’re making to Australia’s economy, to jobs, to communities and to people in the regions where you operate. We give companies every reason to specify Australian made, because they get to see the benefits it delivers where it counts to them – that’s the value proposition beyond the functionality of the commodity itself.”
For example, the purchase of a tonne of Australian paper (approximately 400 reams) equates to a contribution of $518 to national GDP. It’s a nice figure, but it would mean little without some form of independent assurance as to the data’s validity and credibility. As such, Ernst & Young were engaged to apply a rigorous and robust approach to the collection and analysis of the data.
“Greenwash is a term that gets bandied about,” says Allen. “But the flipside of that is ‘greensquash’, whereby companies looking at innovation in this space become too scared to make a claim for fear of minority groups taking pot shots at them. The answer to that is to provide complete transparency – whether it is the carbon we emit or the water we save; the jobs we provide or the injuries those employees suffer, people need to have confidence that our metrics are solid and assured.”
According to Mathew Nelson, the Ernst & Young reviewer who crunched the numbers, Australian Paper has taken a novel approach in targeting its sustainability reporting at the end consumer.
“Most companies generally respond to their stakeholders with standard metrics assessing their economic or greenhouse impact, but rarely in a customer-focused way,” he says. “The key differential here is that most businesses conduct their reporting to address perceived risk – Australian Paper’s overwhelming drive is responding to an opportunity, with an unabashed determination to sell more paper.”
The commercial imperative behind the program is hardly something that Paul Allen is going to apologise for in the current environment – and as he points out, the means goes a long way towards justifying the ends.
“Pricing and cost control might be a big part of your ongoing strategy when you’re dealing in commodities, but at the core of our positioning is the goal of making the most sustainable paper in Australia,” he says.
“We’re also hoping to generate growth in the understanding of sustainability across all three of its pillars, so that people start to balance their assessment of the providers of goods and services. It would be a tragedy if environmental groups hijack the sustainability debate at the expense of the wider responsibilities that should establish a company’s credentials.”
In this sense, the Tonne of Value program has offered what Allen calls a “softer metric” for Australian Paper’s future: the heads of the company’s 1400 employees have clearly been raised.
“People are proud of these metrics, and they want to improve on them,” he says. “There will always be those who think any business that requires trees as an input can’t be a good thing, but I believe the full extent of our footprint on this country provides the basis for a very strong reputation.
“Just as we’ve been driven to provide tangible evidence that ‘Australian made’ really does matter, it’s fair to say that our program was born from a real desire to convey the positive contribution our sector is making to this country.”
“There will always be those who think any business that requires trees as an input can’t be a Good thing, but I believe the full extent of our footprint on this country provides the basis for a very strong reputation.”
