Two recent news releases from (IP), the largest pulp and paper company in the world, have caused me to pause and revisit some of the fundamental strategic underpinnings of my work at Dogwood Alliance. And as I will explain, I have resurfaced with a renewed confidence in our market strategy to drive the greening and transformation of the forest products industry to protect forests here at home in the US South and around the world.
First, we cannot forget that in good times or bad, large-scale exploitation of our natural resources in the scale and manner by the forest products industry and the very well managed is a very profitable business.
This July, in the midst of a recession, announced the company had nearly doubled year over year earnings on 8% revenue growth with quarterly net sales of $6.6 billion with 2nd quarter operating profits of $483 million. That my friends is not chump change! And because you are following me on a Dogwood Alliance blog, you know those revenues are all derived from cutting down trees and that the financial bottom line in no way reflects the costs of IP’s business on forests, water, air or our climate. So the first take home for me is that our current economic model still fails to incorporate and value the natural world. This leaves so many of the negative impacts of their business operations on the natural world as well as society at large – and not the company.
Second, IP also recently released their 2010 Sustainability Report, and in many ways it delivers positive news. Yet, upon deeper review and reflection it truly reveals how far we have come in greening the forest products industry and just how much further we have to go. The good “Today’s paper, pulp and packaging customers demand more of their suppliers than high-quality, innovative products. They want a supply chain partner who can help them achieve their sustainability objectives…” Hard to argue with that, a complete validation from the largest pulp and paper company in the world of the market strategy that Dogwood developed and continues to work. IN FACT, I think I may have written those exact words myself on more than one occasion.
So what are WE telling IP’s largest customers? To the office supply and paper packaging customers we say that Southern forests are worthy of protection and companies can reduce their impacts on these special forests by using paper efficiently, increasing their use of recycled fiber and insisting on paper certified to the Forest Stewardship Council standard which ensures no fiber from endangered forests or natural forests converted to pine plantations.
But all is not peachy keen. IP’s website also notes that only 1.5% of all the fiber used in U.S. operations is certified to the high standard of the Forest Stewardship Council (FSC). So that leaves 98.5% of their wood supply coming from sources that are not certain to be responsibly managed or from forests with special high conservation values. Instead, wetland forests like the Green Swamp in southeastern North Carolina are being ditched and drained to cut down and make chicken buckets for KFC, amongst other customers.
So after stewing on these recent pieces of news I can conclude that though clearly we are making great progress greening one of the most resource intensive industries on earth, we still have a long way to go. And real change must come to , the wizard behind the curtain of forest destruction.
Their top executives are making outlandish profits, IP was recently identified as one of 25 companies that paid more to their CEOs in compensation then they did to the nation in taxes.
CEO compensation: $12.3 million
U.S. federal income taxes: $249 million REFUND !!!!!!! (thanks in large part to exploitation of black liquor loophole)
CEO John Faraci received a 75 percent pay hike in 2010 pocketing $12.3 million.
Your post on ‘s profits provides no context by which to judge the numbers. I’ll attempt to provide that, though I’m not an economist. I also do not own stock in IP.
I chose to compare IPs financial performance against the 30 companies in the Dow Jones Industrial Average. I picked this average because it is the most well-known, and has a fairly small number where I could crunch numbers for perspective.
I used “Net Income” as the measure of profitability. There are several, but this is a widely used measure. IP’s Net Income for the 2nd quarter of 2011 was 3.37% of Revenue. How does this compare to companies in the DJIA?
Only 3 companies had lower Net Incomes than IP. These were WalMart (3.48%), Travelers Companies (-5.70%), and Bank of America (-68.96%). The remaining 27 companies in the DJIA had Net Incomes above IPs, and 18 were in the double digits.
This tells me that IP, while profitable, is not making outlandish profits. The numbers simply do not support this contention.
great update Andrew !
Keep up the good work, Scot. Glad your reflection left you renewed and ready to hit the track again.