1. Finnish Paper Industry and Recycling TU-E1120 - Strategic Management of Technology and Innovation Group 8: Aleksi Jokela, Emmi Peltonen, Saara Sulonen, Maria Sundin

2. Our assignment Paper industry has been under major restructuring in Finland during the recent years. Many paper machines have been decommissioned and workers in paper industry have been laid off. One of the reasons for these developments has been the global increase in paper recycling. Make an analysis of how the global increase in paper recycling has effected the paper industry in the recent years and try to envision future developments in this industry! Based on your analysis, give advice to the top management of Finnish paper industry companies on how the paper industry companies should change their strategies!

3. Introduction to our Topic: Paper Industry

4. Paper industry has a significant impact on Finnish economy 49 pulp and paper mills in Finland. The forest industry directly employs about 42,000 people in Finland. Approximately 20,000 people work in the paper industry. Forest industry counts for 20% of Finland’s exports The share of forest sector in the total regional GDP by forestry centre, 2008.

5. Paper industry produces various products requiring heavy investments Forest industry includes lumber, pulp, paper and cardboard production Paper industry covers the production of paper and packaging materials Nowadays also other wood fiber based products Paper and packaging material products: Mass produced Require specialized and expensive equipment - → Industry slow to adapt - → Production choices crucial strategic decisions!

6. Paper Production Supply Chains Wood De-barking and chipping Mechanical and chemical pulping De- inking Cleaning Paper making Finishing 1 2 3 2 1 3 Pulping 4 5 6 Recycled paper

7. Recycling changes beginning of the production chain Recycled material is an alternative source of fibre in pulp The time from gathering recycled material to utilising it for pulp can be measured in weeks (years for hardwood and decades for softwood) → Pulp can be made cheaper Explains much of the production demand for recycled paper Recycling shortens the fibres available for use → Properties of the final product change

8. There’s also a social pressure for recycling Consumers and governments are increasingly environmentally aware Growth in demand for recycled materials (positive image for companies) Pressure from regulation and official targets E.g. European Union has set recycling targets both in terms of recycling rate and waste

9. Paper consumption trends have changed, which has affected production, too Office paper production decreasing: Digitization Global competition: High production costs in Finland (wages, expensive transporting paper for recycling) Low demand on quality Packaging material production growing: Globalisation & E-commerce Higher property requirements (e.g. strength) Paper production in Finland

10. Paper Production Paper Collection Paper Consumption Paper Recycling Export Import Burnt paper, Waste Export R C Only 50% of paper produced goes back to production as recycled material Recycling Rate = R/C Paper recycling process

11. Strategic Implications for Finnish Paper Companies

12. Paper is generating only a small portion paper companies’ of profits

13. Companies in the paper industry should take full advantage of the opportunities recycling offers Many industry companies have broad assets in the industry Wide possibilities for innovation : Why some new products are more successful New products that use the same supply chain can be launched at lower cost Opportunities in radical innovation such as 3D printing Wood and paper based 3d prints have already been made Leveraging opportunties in collaboration and crowdsourcing

14. Recommendation: Big picture The industry is established and the companies are big  This allows pursuing multiple business areas simultaneously  Develop a balanced strategy using e.g. Strategic buckets Invest more Invest & Rethink Reduce but keep synergies Important but not critical High margin products - Paperboard - Packaging - Tissue paper Novel products 3D printing Medical nanofiber Basic Research New applications Co-operative research Low margin products paper

15. Recommendation: Ensure short term profitabitiliy Focus on paperboard instead of paper Shifting to a higher profit margin market reduces business risk Reduce production costs with recycled materials Develop recycling chain and leverage qualities of northern lumber R&D co-operation between companies Businesses can synergize to develop better products Setting up a co-operative environment with competitors can be hard Leverage co-assets and find synergies in the current infrastructure Many different products, e.g. sheets of textile pulp, use parts of the same production chain

16. Recommendation: Develop new capabilities for long term profitability Focus on new industry innovations E.g. medical applications of pulp, 3D printing paper/wood Cooperation with startups, universities and companies from other industries Emphasis on product development Expand recycled paper’s life from current 3-4 cycles and find more uses for shorter fibers Invest in basic research: hire and support research groups Focus on high-margin high-quality products that require long fibre Long fibre comes from softwood that grows in Finnish forests E.g. high-end packaging materials (strength, printing)

17. Questions?

18. References Cooper, R., & Edgett, S. (2010). Developing a product innovation and technology strategy for your business, Research Technology Management, vol. 53, pp. 33-40 Ervasti, I., Miranda, R., Kauranen, I. (2016), Paper recycling framwork, “the Wheel of Fiber”, Journal of Environmental Management, vol. 174, pp. 35-44 Finnish Forest Industries (2015), The Finnish Forest Industry In Figures, available at http://www.forestindustries.fi/statistics/The-Finnish-forest-industry-in-figures-1274.html, accessed 25.4.2016 http://www.forestindustries.fi/statistics/The-Finnish-forest-industry-in-figures-1274.html Henard, D. and Szymanski, D. (2001), Why Some Products Are More Succesful Than Others, Journal of Marketing Research, vol. 38, no. 3, pp. 362-375 i.materialise blog (2015), 3D Printing Wood is Possible, available at https://i.materialise.com/blog/3d-printed-wood-is-coming-to-i-materialise/, accessed 25.4.2016 https://i.materialise.com/blog/3d-printed-wood-is-coming-to-i-materialise/ Keränen, J., Ervasti, I (2014), Amounts of non-fibrous components in recovered paper, Resources, Conservation and Recycling, vol. 92, pp. 151-157 Luonnonvarakeskus (n.d.), State of Finland's Forests 2012: Finnish Forests in European context demonstrated with selected indicators, available at http://www.metla.fi/metinfo/sustainability/finnish-contribution-of-forest.htm, accessed 25.4.2016 http://www.metla.fi/metinfo/sustainability/finnish-contribution-of-forest.htm

19. References Metsä Group (2015), AnnualBrochure 2015, available at, http://www.metsagroup.com/en/Documents/Publications/Metsa-Group-Annual-Brochure- 2015.pdf, accessed 25.4.2016 http://www.metsagroup.com/en/Documents/Publications/Metsa-Group-Annual-Brochure- 2015.pdf Metsä Group (2015), Financial Statements Bulletin 2015, available at, http://www.metsagroup.com/en/Documents/Financial-reporting/Metsa-Group-Financial- Statements-Bulletin-2015.pdf, accessed 25.4.2016 http://www.metsagroup.com/en/Documents/Financial-reporting/Metsa-Group-Financial- Statements-Bulletin-2015.pdf Paper Online (n.d.), Papermaking, available at http://www.paperonline.org/paper- making/paper-production/papermaking, accessed 25.4.2016http://www.paperonline.org/paper- making/paper-production/papermaking Salo, R. (2016), Paper and paperboard production in Finland, Finnish Forest Industries, available at https://www.forestindustries.fi/statistics/industry/15- Pulp%20and%20Paper%20Industry/, accessed 25.4.2016https://www.forestindustries.fi/statistics/industry/15- Pulp%20and%20Paper%20Industry/ Stora Enso (2015), Financial Report 2015, available at http://assets.storaenso.com/se/com/DownloadCenterDocuments/Financial_Report_2015.p df, accessed 25.4.2016 http://assets.storaenso.com/se/com/DownloadCenterDocuments/Financial_Report_2015.p df UPM Kymmene (2015), Annual Report 2015, available at, http://assets.upm.com/Investors/Documents/UPM_Annual_Report_2015.pdf, accessed 25.4.2016 http://assets.upm.com/Investors/Documents/UPM_Annual_Report_2015.pdf

20. Appendices