International Paper is $22.4B pulp and paper manufacturer based in Memphis, TN that operates across the paper production value chain . The paper-making process begins with the production of pulp from harvested trees or recycled paper. Pulp is mixed with water, cleaned, and treated in preparation for the web formation step, where the wet pulp is stretched onto a screen in a web-like sheet. This pulp-based sheet is dried and stretched as it travels down a heated production line, after which it is coiled into rolls that can weigh over 20 tonnes. These paper rolls can also undergo finishing, or ‘converting,’ steps, such as trimming or applying coatings .
Exhibit 1: Papermaking Production Process 
International Paper produces both pulp that it uses as an input and a range of finished paper products, such as containerboard for corrugated boxes, printing paper for books and envelopes, and consumer packaging for food items and pharmaceuticals. Although International Paper is a brand that many consumers may not recognize, its products are sold under names like Hammermill and Postmark that have higher brand awareness. It has enormous scale, managing over 300,000 acres of forestland in Brazil and operating 24 pulp and paper mills, 169 packaging plants, and 16 recycling plants .
The paper industry is facing environmental pressure on multiple dimensions, especially in light of global concerns over climate change, and International Paper is no exception. The paper production process requires a large amount of energy, with paper and pulp ranked fifth among industries in terms of its energy consumption . This process generates a high level of carbon dioxide emissions, with paper and pulp contributing 9% of all manufacturing CO2 emissions . It also can lead to runoff pollution of water sources, filling of landfills, and deforestation.
The increasing regulations enacted in response to climate change have presented challenges for International Paper and other players in the paper industry. These can be seen most explicitly in efforts to reduce GHG emissions. The 2015 COP21, a successor to the 1997 Kyoto Protocol, established non-binding emission reduction targets for many countries, including the US. Under COP21, the US made a non-binding commitment to reduce GHG emissions by 26-28% by 2025 compared to 2005 emissions . The EU founded an Emissions Trading System, which impacts two of International Paper’s sites in Poland and France. Within the United States, the EPA enacted the Clean Power Plan to require the development of plans in the next three years to reduce pollutants from Electrical-Generating Units (EGUs) by 32% by 2022-2033 compared to 2005 levels . Beyond regulations on GHG emissions, rising awareness of climate change has also brought on increasing public attention to contributions to landfills and deforestation, as both tend to exacerbate rising GHG levels, as well as water usage and pollution.
International Paper is currently taking steps to comply with new regulations, which it publishes in an annual sustainability report. As of 2014, it had reduced GHG emissions by 8.3% compared to 2010, which is ~40% of its goal of 20% reduction by 2020 . It had reduced manufacturing waste sent to landfills by 17% compared to 2010 levels, which is over halfway to its goal of a 30% reduction . International Paper is also currently undergoing activities to increase recycling and assess how to improve water usage.
The progress made to date by International Paper is promising, although its 2020 goals do not map precisely to the COP21 commitments and are primarily reactionary in the face of current and anticipated regulations. Based on its current achievements, International Paper should use learnings from some of its successful improvements, such as the 30% reduction in its Louisiana plant’s natural gas usage achieved by upgrading equipment, and apply them more broadly across production sites . It could also experiment with innovative approaches, such as the biochemical process designed by the Confederation of European Paper Industries in 2013 with the potential to reduce energy usage by 40% via updates to the papermaking process’s web formation stage . From a forestry perspective, it could increase its share of recycled wood pulp and ensure that its sources comply with sustainable forest management. Technology upgrades can be challenging to justify in an industry with decreasing demand and large, long-lasting fixed assets, but upgrades have the potential to improve International Paper’s energy usage and positioning with customers as a sustainable supplier.
Whether or not International Paper will take the opportunity to become a more sustainable paper provider remains to be seen – but the potential to do so exists.
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