IAS 41, IFRS 13 disclosures biological assets, risks, change in policy to carry forest land at valuation, forestry

Stora Enso Oyj – Annual report – 31 December 2020

Industry: agriculture

Changes in accounting principles

Valuation of Nordic forest assets

Stora Enso changed the valuation method for its forest assets and the accounting principle for forest land in the Nordics at the end of 2020. Forest assets are defined as biological assets (standing growing trees) and the related forest land. As a result of the valuation method change, the forest assets in Sweden are valued using a market approach. Due to the change in accounting principle, the forest land in Sweden and Finland are accounted for under the revaluation method instead of cost method.

Forest assets in Sweden are valued by using a market approach method based on the forest market transactions in those areas where Stora Enso’s forests are located. In Sweden reliable market transaction data is available and provides a more transparent and observable valuation basis. The total forest assets net cash flows consist of cash flows related to standing trees (biological assets) and separate cash flows regarding forest land. The standing trees valuation is computed based on a discounted cash flow (DCF) method and using a discount rate implied by the market transactions in accordance with the IAS 41 Agriculture standard. The discount rate is determined as the rate at which the market transaction prices match the total forest assets cash flows. For forest land, previously accounted at cost, the revaluation method is applied as defined in the IAS 16 Property, plant and equipment standard. Forest land is revalued using a DCF method based on future net cash flow streams related to trees to-be-planted in the future as well as other land related income, such as hunting rights, wind power leases and soil material sales. The discount rate is the same for biological assets and forest land.

For the other Nordic forest assets, owned mainly in Finland through the Group’s 41% shareholding in the equity accounted investment Tornator, the market approach is not considered to be an accurate valuation method as the reliable market data is not available with enough details. The discounted cash flow method will continue to be used for valuation of biological assets, where the discount rate applied is determined using the weighted average cost of capital method. The forest land, previously accounted at cost, is revalued by using a DCF method based on its future net cash flow streams related to trees to-be-planted in the future as well as other related income.

For the plantation forests, there is no changes in accounting principles or in the valuation method as there is no reliable market transaction data available. Therefore in plantations, biological assets are continued to be valued using DCF method and related forest land is continued to be accounted at cost. Plantation forest assets are classified as a separate asset class as compared to Nordic forest land to reflect the different nature, usage and characteristics. The main difference is the short-term growing cycle of 6–12 years in plantations versus the long-term growing cycle of 60–100 years in Nordic forests. There are also differences in regeneration methods, forest management and use of the assets for other purposes.

Changes in accounting principles to Swedish forest assets increased the carrying amount of forest land from EUR 324 million to EUR 1 829 million, resulting in EUR 1 504 million increase in forest land, EUR 1 195 increase in Other Comprehensive Income (OCI, revaluation reserve) and EUR 310 million increase in the deferred tax liability. Accounting principle change related to other Nordic forest assets, owned mainly in Finland, is not considered to be material. The increase in forest land assets is recognised in OCI net of deferred taxes and accumulated in revaluation reserve in equity and does not have impact on the income statement. The fair value changes in biological assets continue to be recognised in the income statement. The comparative periods have not been restated and in the comparative periods forest land is measured at cost. See Note 12 Forest assets for more details.

The Group has also changed its forest land presentation principles. Previously, forest land assets were included in the statement of financial position on the line Property, plant and equipment, and as part of the Land and water asset class, as specified in Note 11. In accordance with new presentation principles, forest land assets and corresponding comparative figures are presented on a separate line in the statement of financial position.

Note 2 Critical accounting estimates and judgements

Biological assets

The Group has biological assets in subsidiaries, joint operations and associated companies. Biological assets, in the form of standing trees, are accounted for under the IAS 41 Agriculture standard, which requires that the assets are measured at fair value less the costs to sell. Fair value is determined using discounted cash flows from continuous operations based on sustainable forest management plans taking into account the growth potential of one cycle. These discounted cash flows require estimates of growth, harvest, sales price, costs and discount rate. In determining the value of biological assets the management of subsidiaries, joint operations and associated companies need to make appropriate estimates of future price levels and trends for sales and costs, and to undertake regular surveys of the forest to establish the volumes of wood available for cutting and their current growth rates.

See next chapter for estimates and judgement applied in valuation of Swedish forest assets and Note 12 Forest assets for more detailed information about Nordic and plantation forest assets.

Swedish forest assets

The Group has changed the accounting principles and valuation method for Nordic forests at the end of 2020. In accordance with the new valuation method, the fair value of forest assets in Sweden is determined using a market approach method, which is based on the forest market transactions in the areas where Stora Enso’s forests are located. Market prices between areas vary significantly and judgement is applied to define relevant areas for market transactions used in valuation. The valuation of the forest assets is based on detailed transaction data and price statistics as provided by different market data suppliers. Market transaction data is adjusted to consider characteristics and nature of Stora Enso’s forest assets and to exclude certain non-forest assets and transactions considered as outliers compared to other transactions. The valuation takes into account where the forest land is located, price levels and volume of standing stock. The value of the forest assets will be affected by changes in transaction prices and by how the volume of standing stock develops. Stora Enso is applying weighted three-year average market transaction prices considered to include a sufficient amount of transactions and estimated to represent market conditions at reporting date.

The value of the forest assets is allocated to biological assets (standing trees) and forest land. Allocation of the combined fair value of forest assets is based on the income approach where separate present values of expected net cash flows are calculated for both biological assets and forest land. The discount rate is determined as the rate at which the valuation based on market transaction prices matches the total forest assets combined cash flows for standing trees and forest land. The total net cash flows for each of the components include estimates in respect of future harvesting volumes, sales price levels, and cost development. See Note 12 Forest assets for more information.

Note 12 Forest assets

Accounting principles

The forest assets of Stora Enso are defined as standing growing trees, classified as biological assets, and related forest land. The biological assets of Stora Enso consist of standing trees to be used as raw material in pulp and mechanical wood production and as biofuels.

Forest asset valuation is based on continuous operations and sustainable forest management, also taking into consideration environmental restrictions and other reservations. Biological assets are recognised and valued in accordance with the IAS 41 Agriculture standard at fair value and forest land assets are recognised in accordance with the IAS 16 Property, plant and equipment standard. Leased forest land assets are presented as part of right-of-use assets in Note 11 Intangible assets, property, plant and equipment, and right-of-use assets.

The Group changed its accounting policy related to Nordic forest asset valuation at the end of 2020 as explained in Note 1 Accounting principles. The Group has also changed its forest land presentation principles. Previously, forest land assets were included in the statement of financial position line Property, plant and equipment, and as part of the Land and water asset class, as specified in Note 11.

Related to presentation principle changes, corresponding comparative figures are presented on a separate line in the statement of financial position and as part of forest assets.

Nordic and plantation forest assets are classified as different classes of assets due to different nature, usage and characteristics of the assets. The main difference is the short-term growing cycle of 6–12 years in plantations versus the long-term growing cycle of 60–100 years in Nordic forests. There are also differences in regeneration methods, forest management, and the use of the assets for other purposes.

Nordic forest assets include holdings in Sweden and Finland (also including minor forest asset holdings in Estonia and Romania) and plantation forest assets include holdings in China, Brazil, Uruguay and Laos. Accounting policies for the different class of forest assets are presented separately below. The Group has forest assets in its own subsidiaries in Sweden, China, and Laos, as well as in joint operations in Brazil and Uruguay, and in equity accounted investments in Finland and Brazil. Stora Enso also ensures that the Group’s share of the valuation of forest holdings in equity accounted investments and joint operations are consistent with Group accounting policies. At harvesting, biological assets are transferred to the inventory.

Nordic forest assets

Forest assets in Sweden are recognised at fair value and valued by using a market approach method on the basis of the forest market transactions in the areas where Stora Enso’s forests are located.

Stora Enso intends to use forest assets to balance the wood supply for its industrial operations and to seek opportunities for further optimisation of its forest asset holdings. The total forest assets value is calculated with verified inventory data and regional standing stock prices, considering among others:

  • regional market transaction data based on the forest assets’ geographical locations,
  • standing stock prices by forest cubic meter (m3 fo) combined from traded forest estates and
  • regional standing stock inventory.

Information relating to forest asset transactions are available from several market sources. The market transaction information can be viewed as market-corroborated inputs. Certain adjustments are made to refine the market-corroborated inputs using unobservable inputs, therefore inputs are categorised to fair value hierarchy measurement level 3. The judgements are further explained in Note 2 Critical accounting estimates and judgements.

The total value of the forest assets in Sweden is allocated across standing trees, which are recognised as biological assets and forest land. Allocation of the combined value fair value of forest assets is based on the income approach where separate present values of expected net cash flows are calculated for both biological assets and forest land. The discount rate is determined as the rate at which the valuation based on market transaction prices matches the total forest assets combined cash flows for standing trees and forest land. The discount rate is estimated to be the same for biological assets and forest land as the nature and timing of the cash flows are similar.

Biological assets are measured at fair value in accordance IAS 41. The fair value is based on the income approach and the discounted cash flow method whereby the fair value of the biological assets is calculated using cash flows from continuous operations, taking into account the growth potential of one cycle. Forest land is measured at fair value using the revaluation method as defined in the IAS 16 standard. Fair value of forest land is measured based on income approach, including net cash flows related to trees to-be-planted in the future as well as other land related income, such as hunting rights, wind power leases and soil material sales.

Other Nordic forest assets, owned mainly in Finland through Group’s 41% shareholding in the equity accounted investment Tornator, are recognised at fair value using the income approach. The valuation of biological assets is based on the discounted cash flow method calculated using cash flows from continuous operations, taking into account the growth potential of one cycle. The forest land is measured at fair value using the revaluation method as defined in IAS 16. The forest land fair value measurement is based on the income approach and the discounted cash flow method, including cash flows from trees to-be-planted in the future as well as other related income. The discount rate applied for both biological assets and forest land is determined using the weighted average cost of capital method.

Changes in the fair value of biological assets are recognised in the income statement. Changes in the fair value of forest land, net of deferred taxes, are recognised in other comprehensive income (OCI) and accumulated in a revaluation reserve in equity. Revaluation reserve is not recycled to the income statement upon disposal. If the fair value of forest land were to be less than cost, the difference would be recognised in the income statement as an impairment loss.

Plantation forest assets

In plantation forest areas, biological assets are recognised at fair value in accordance with the IAS 41 standard and based on the income approach in those areas where the Group has forest land. Fair value measurement is based on fair value hierarchy measurement level 3. Forest land is measured initially and subsequently at cost, using the cost model as defined in IAS 16.

The valuation of biological assets is based on the discounted cash flow method calculated using cash flows from continuous operations and based on sustainable forest management, taking into account growth potential of one cycle. The fair value of the biological assets is based on the productive forestland. The yearly harvest from the forecasted tree growth is multiplied by wood prices and the cost of silviculture and harvesting is then deducted. The fair value of the biological assets is measured as the present value of the harvest from one growth cycle, taking into consideration environmental restrictions and other reservations. The discount rate applied is determined using the weighted average cost of capital method.

Young standing timber less than two years old (less than three years in Montes del Plata) is considered to be an immature asset and is accounted at cost. Fair value is deemed to approximate the cost when little biological transformation has taken place or the impact of the transformation on the price is not expected to be significant, which varies according to the location and species of the assets.

Changes in the fair value of biological assets are recognised in the income statement. The forest land is measured at cost and not depreciated.

The value of forest assets disclosed in the Consolidated statement of financial position from subsidiary companies and joint operations amounts to EUR 6 256 (4 136) million as shown below. The Group’s indirect share of forest assets held by associated companies amounts to EUR 837 (798) million. The total forest asset value amounts to EUR 7 093 (4 934) million.

Forest assets

1 Items are recorded in the profit and loss lines for biological assets. For forest land, changes in fair value are recognised directly in equity.

2 The impact in 2020 is mainly due to valuation and accounting principles changes for Swedish forests. See Note 1 for more details.

3 Additions in 2019 mainly including assets acquired through Bergvik Skog AB restructuring.

4 Previously presented as part of Land and water in Note 11 Intangible assets and property, plant and equipment and right-of-use assets. Not including leased forest land.

Valuation and standing stock of forest assets in main subsidiaries, joint operations and associate company

1 Forest cubic meters

2 Solid under bark (sub) cubic meters

3 Total figures exclude minor forest ownerships in Laos and associate company Arauco Florestal Arapoti S.A. in Brazil

1 Forest cubic meters

2 Solid under bark (sub) cubic meters

3 Swedish Forests harvesting volume is annualised based on June-December outcome. Estimated growth is a full year estimate.

4 Total figures exclude minor forest ownerships in Laos and equity accounted investment Arauco Florestal Arapoti S.A. in Brazil

5 Swedish forest total area (ha), productive area (ha) and biological assets per productive ha recalculated based on information received after 2019 reporting.

Subsidiaries and joint operations

At 31 December 2020 forest assets (excl. leases) were located by value, in Sweden 90% (83%), China 3% (4%), Brazil 1% (3%) and Uruguay 6% (9%). The land area comes to 1 726 (1 722) thousand hectares of which 7% (7%) is leased and under 1% (1%) is restricted. From Stora Enso’s total forest holdings 1 361 (1 349) thousand hectares is productive forest land. The harvested wood amounted to 7 (7) million m3 sub. The Montes del Plata and Veracel amounts take into account the ownership share.

Swedish forests

At the end of 2020, the value of the biological assets in Swedish forests amounted to EUR 3 774 (3 133) million and related forest land amounted to EUR 1 829 (309) million. The increase of EUR 1 504 million in forest land value in 2020 is related to the accounting principle change to measure Nordic forest land at fair value using the revaluation method. The increase of EUR 641 million in biological asset value in 2020 is mainly due to the change to a transaction based valuation method and, as a consequence, in a lower discount rate applied in the valuation of biological assets and due to foreign exchange impact. Biological asset value was negatively impacted by changes in parameters applied in discounted cash flow model. Deferred taxes liabilities related to forest assets amounted to EUR 1 153 (709) million. The discount rate of 3.6% (4.2%) is applied in the valuation. In 2020 the discount rate is determined as the rate at which the valuation based on market transaction prices matches the total forest assets combined cash flows for biological assets and forest land. In 2019 discount rate was determined using the weighted average cost of capital method.

The productive land in Swedish forests amounted to 1 145 (1 145) thousand hectares with a standing stock of 118.7 (120.3) million m3 sub and 143.0 (143.2) million forest m3 (fo.). The weighted three-year average market transaction price applied in the valuation for Swedish forests assets in 2020 is EUR 39 per forest m3. The forest asset value corresponds to an average of EUR 4 900 per ha of productive forest land. The annual harvesting is on average 3.8 (3.4) million m3 sub.

The valuation of the forest assets is based on detailed transaction data and price statistics as provided by different market data suppliers. Market transaction data is adjusted to consider the characteristics and nature of Stora Enso’s forest assets and to exclude certain non-forest assets and outliers. The valuation takes into account where the forest land is located, price levels and volume of standing stock. Market prices between areas varies significantly. Future changes in value of Swedish forest assets are impacted by changes in market transaction prices and changes in volume of standing stock, considering growth and other changes. See Note 1 for details related to changes in accounting principles and Note 2 for information related estimates and judgment applied in the valuation.

Forest asset location and volume in 2020

Guangxi

At the end of 2020, the value of the biological assets in Guangxi, China, amounted to EUR 176 (181) million. All the forest land in China is leased. The biological assets included young standing timber with a value of EUR 33 (34) million. The movement is driven by higher sales prices and costs and decreases volumes. The discount rate of 8.4% (8.9%) used in the discounted cash flows (DCF) is determined using the weighted average cost of capital method decreased slightly. The productive land in Guangxi totals to 75 (76) thousand hectares with a standing stock of 3.4 (3.1) million m3 sub. The annual harvesting is on average 1.0 (1.0) million m3 sub.

Veracel

Veracel Celulose S.A. (Veracel), a 50% joint operation company in Brazil, had biological assets fair valued at EUR 132 (172) million, of which Stora Enso’s share was EUR 66 (86) million. Decrease is driven by foreign exchange impact and slightly lower volumes. Sales prices increased slightly. The biological assets included young standing timber with a value of EUR 22 (33) million. The discount rate of 8.8% (9.0%) used in the DCF is determined using the weighted average cost of capital method decreased slightly. The related forest land is measured at cost. Stora Enso’s share (50%) of the land area is 112 (112) thousand hectares. Stora Enso’s share of the productive land in Veracel, Brazil totals 47 (50) thousand hectares with a share of standing stock of 3.7 (3.1) million m3 sub. The ownership share of annual harvesting is on average 0.8 (0.9) million m3 sub.

Montes del Plata

Montes del Plata (MdP), a 50% joint operation company in Uruguay, had biological assets with a fair value of EUR 460 (445) million, of which Stora Enso’s share was EUR 230 (222) million. The biological assets included young standing timber with a value of EUR 46 (55) million. The discount rate of 6.5% (8.0%) used in the DCF is determined using the weighted average cost of capital method decreased in 2020. The related forest land is measured at cost. Stora Enso’s share (50%) of the land area is 135 (131) thousand hectares. Stora Enso’s share of the productive land in Montes del Plata, Uruguay totals 94 (86) thousand hectares with a share of standing stock of 10.7 (8.2) million m3 sub. The ownership share of annual harvesting is on average 1.0 (1.4) million m3 sub.

Associated companies

The Group has two associated companies holding forest assets.

Tornator

Tornator Oyj (Tornator), a 41% owned Finnish associated company, had biological assets with a value of EUR 1 877 (1 805) million, of which Stora Enso’s share was EUR 769 (740) million. Forest land had a value of EUR 136 (94) million of which Stora Enso’s share was EUR 56 (38) million. The increase in the fair value of biological assets is mainly due to purchases and other minor changes. The increase in the value of forest land is due to purchases and accounting principle change to measure forest land at fair value. Stora Enso’s 41% share of the productive forest land in Tornator totals to 269 (262) thousand hectares with a share of standing stock of 25.8 (25.1) million m3 sub. The ownership share of annual harvesting is on average 1.2 (1.0) million m3 sub.

Arauco Florestal Arapoti

Arauco Florestal Arapoti S.A., the 20% owned Brazilian associated company, had biological assets with a fair value of EUR 42 (67) million, of which Stora Enso’s share was EUR 8 (14) million. The related forest land is measured at cost.

Biological asset valuation sensitivities of significant assumptions of a +/- 10% movement

Swedish forest asset valuation is sensitive for changes in market transaction prices and volume of standing stock. A change in the average market price of forest assets of EUR 1 per forest m3 would impact the value of forest assets by EUR 143 million. A change in the volume of standing stock of 1 million forest m3 would impact the value of forest assets by EUR 39 million.

Risks and risk management (extracts)

Strategic risks (extract)

Global warming – physical impacts

Physical risks related to climate change are assessed based on stress scenario on long-term (25-30 years) basis. Changes in precipitation patterns, periods of drought, typhoons and severe frost periods in the subtropics could cause damage to operations and tree plantations. Increases in average temperatures could lead to changes in the tree species composition of forests. Drought periods together with high temperatures increase the risk of forest fires and insect outbreaks, potentially affecting forests and regional wood prices. Milder winters will impact harvesting and transport of wood in northern regions and the related costs. Water stress to our production units is not seen as a material risk given geographical location. The increase in risk level vs 2019 is driven by the lack of political decisions and multilateral coordination to mitigate the climate change, increasing the probability of physical impacts. See also “Competition and market demand”, “Regulatory changes” and “Sourcing”.

Policy principles and mitigation measures

Physical risks are to great extent subject to risk transfer and thereby within the cover of our property and business interruption insurance programs. With regards to forest and plantation assets, making roughly 35% of the Group’s balance sheet, Stora Enso benefits from strong strategic resilience through geographical diversification within the asset portfolio. Moreover, risks related to insect damages such as bark beetle infestation in Nordic forest assets is limited by better inherent endurance of Nordic forest compared for instance to Central-European forests. Diligent plantation planning is ensured to avoid frost sensitive areas and non-controversial tree breeding and R&D programmes are applied to increase tolerance of extreme temperatures. Stora Enso maintains a diversity of forest types and structures and enforces diversification in wood sourcing. Wood harvesting in soft soils involves the implementation of best practices guidelines.

Related opportunities

Nordic forests in Finland and Sweden benefit from increased heat summation and longer growing seasons, leading to acceleration in forest growth with direct positive impact on the value of own forest asset and indirect impact related to market wood availability and cost.

Operational risks (extract)

Forest and land use

Wood is our most important raw material. Failure to meet stakeholder expectations or to ensure the chain of custody and economically, socially and environmentally sustainable forest and land management practices throughout our wood procurement and plantation operations could also result in significant reputational and financial loss to Stora Enso. Unpredicted changes in forest certification schemes could limit the availability of certified raw materials. Furthermore, global challenges such as population growth, global warming, increasing demand for agricultural land and bioenergy, and the widening gap between the supply and demand for wood, all require us to use natural resources even more efficiently. See also “Global warming – physical impacts”, “Regulatory changes”, and “Communities and human rights”.

Policy principles and mitigation measures

Our Policy for Wood and Fiber Sourcing, and Land Management, robust traceability systems and our active promotion of forest certification all help to ensure that no wood or fiber from unacceptable sources enters our supply chain. In addition, when sourcing logging residues and other forest biomass for energy use, we follow the specific guidelines developed for the harvesting of forest energy, which include strict environmental considerations.

Related opportunities

As trees absorb carbon dioxide (CO2) from the atmosphere and – together with wood-based products – act as carbon sinks, wood from sustainably managed forests represents a carbon neutral, renewable alternative to many non-renewable materials. If forests and plantations are managed sustainably, new generations of trees will replace those that are logged, sequestering more CO2 from the atmosphere. Well-managed forests can make entire ecosystems more resilient to negative impacts, and benefit from positive ones.

Compliance risks (extract)

Regulatory changes

The Group’s businesses may be affected by political or regulatory developments in any of the countries and jurisdictions in which the Group operates, including changes to fiscal, tax, environmental or other regulatory regimes. Potential impacts include higher costs and capital expenditure to meet new environmental requirements, expropriation of assets, imposition of royalties or other taxes targeted at our industry, and requirements for local ownership or beneficiation.

The EU Green Deal and its climate targets for 2030 and 2050 have resulted in proliferation of future legislation which will impact Stora Enso. The policy initiatives from European commission will include policies and legislation on areas such as EU Forest Strategy, EU ETS, Carbon Border Adjustment mechanism, Sustainable products initiative, Packaging and Packaging waste revision as well as EU taxonomy.

In particular, the EU energy and carbon policies may impact the availability and price of wood fiber. Concerning the EU Emissions Trading Scheme (ETS) 4th trading period, carbon leakage will remain, but the allocation of free allowances is expected to decline. A stress scenario over the next ten years and with a carbon allowance price at 50 EUR/t, assuming the current proposal for the 4th ETS trading period, implies an annual financial impact below Group materiality threshold, even when factoring in increased costs from purchased electricity.

Increased demand for carbon neutral primary and secondary biomass fuels may increase energy costs. General opinion and political consensus to limit wood harvesting, arising from the view to further increase forests’ function as carbon sinks while ignoring the net-positive climate impact of forest products, could limit the availability of wood, increase costs and reduce investment opportunities. Additionally, political instability may result in civil unrest, nullification of existing agreements, harvesting permits or land leases.

Regulation as part of the EU’s Action Plan on sustainable finance brings new climate related obligations on both investors and corporates, in particular through the EU Taxonomy on sustainable activities and integration of ESG risks in investment processes. There is uncertainty as to how Stora Enso’s share will be classified as an investment object in light of this emerging regulation, but good management of financial climate and other sustainability related risks and opportunities, as well as disclosure thereof, will improve the likelihood of a favourable perception by the capital markets and thus the cost of capital.

Stora Enso has been granted various investment subsidies and has given certain investment commitments in different countries e.g. Finland, China and Sweden. If committed planning conditions are not met, local officials may pursue administrative measures to reclaim some of the formerly granted investment subsidies or to impose penalties on Stora Enso, and the outcome of such a process could result in a negative financial impact on Stora Enso.

The risks related to regulatory changes have increased during 2020 driven by more protectionist policies amongst key economies and due to potential downside impacts related to key transition risks, such as the EU Green Deal programme.

Policy principles and mitigation measures

  • Active monitoring of regulatory and political developments in the countries where the Group operates
  • Participation in policy development mainly through industry associations and other partnership programmes

Related opportunities

  • Regulatory changes involve market growth potential for sustainable products. Resource efficiency, the low-carbon circular economy and renewability are increasingly important sources of competitive advantage.

Compliance risks (extract)

Communities and human rights

Social risks may harm existing operations and the execution of investments, especially in growth markets. Failure to successfully manage relationships with local communities and nongovernmental organisations (NGOs) could disrupt our operations and adversely affect the Group’s reputation. The Group operates in certain countries, where land and resource ownership rights remain unclear and where related disputes may arise.

In order to transform to a renewable materials company, business restructuring may be required which in some cases can lead to site closures and hence have a significant impact on local communities.

Potential impacts include reputational impacts and negative media coverage, harm to communities and rights holders, disruption of operations, and loss of the licence to operate.

Policy principles and mitigation measures

Stora Enso strives to identify and minimise risks related to social issues in good time, in order to guide decision-making in its investment processes, restructuring planning as well as in its ongoing operations. Tools such as sustainability risk assessment, human rights due diligence and Environmental and Social Impact Assessments (ESIA) help ensure that no unsustainable projects are initiated, and all related risks and opportunities are fully understood in all operations. These tools also enable project plans and operating practices to be adapted to suit local circumstances. Furthermore, dialogue with NGOs is a part of the Group’s stakeholder engagement. More information on community engagement is presented in Stora Enso’s Sustainability Report.

Related opportunities

  • Ensuring that the communities around our operations thrive economically, socially, and environmentally is crucial for the success and sustainability of Stora Enso.
  • Clear business benefits to Stora Enso through a strong focus on social responsibility, as customers, business partners, investors and potential employees become more and more attracted to socially responsible companies.