Introduction to the Company
The Navigator Company is a Portuguese pulp and paper company selling to 130 countries over five continents, with special focus on Europe and USA. As part of its strategy for expansion, the company is investing in the tissue business, implementing a forestry project in Mozambique and in starting a new pellets factory in the US. It is one of the leading European manufacturers of uncoated printing and writing paper, and bleached eucalyptus pulp. The company employed over 3,000 people in 2016 and had a turnover of 1.58 billion euros. Its industrial output was 1.4 million metric tons of air dry pulp and 1.6 million metric tons of paper.
Introduction to the Project
Since the 1950s, the Navigator Company has established three industrial plants and acquired a fourth one. Located in four different regions in Portugal, the plants have contributed to national and local economic development by promoting the settlement of younger populations in areas with an increasing population outflow rate.
In 2015, the Navigator Company undertook this study to gain a more complete understanding of its contribution to the economy of the four regions where its plants are located, as well as to the broader Portuguese economy. The work contributed to improving its enabling environment through communication on the company and on the forest sector’s positive contributions to the economy. The assessment also served to gain government support and to attract investments to industrial clusters within these and other regions.
The Navigator Company identified 3 target audiences:
- Regional authorities, who are priority stakeholders because the environmental impacts of the pulp and paper industry tend to accrue locally and therefore it is important to demonstrate the positive impacts that also accrue locally.
- The Portuguese government, as the Navigator Company wanted to demonstrate the value that the forestry sector creates at the national level to help generate support for the sector from policy-makers.
- The European Union Commission because, like the Portuguese government, it also develops policies that will impact the forest sector; so it is important to communicate and engage them with information about the industry’s value creation potential.
The company chose quantitative rather than qualitative indicators because the regional and national governments were key recipients of the information. Its chosen scope was the direct, indirect and induced impacts of four of the Navigator Company’s processing plants in Portugal.
The Navigator Company chose the regional level as its geographic scope since the regional governments were key stakeholders. The project took six months to complete. While running only a national-level analysis would have reduced the project’s complexity, it would not have achieved the key objective of being able to engage with regional governments.
This is a baseline analysis as it quantifies the impact that the company had under business-as-usual (BAU) activities in 2015. The analysis will not be repeated every year because the key messages will not change as long as the economy remains stable.
The two indicators chosen for the assessment were employment and GDP. The primary aim was to understand how much added value and how many jobs were created in which industry sectors for external communication and engagement. In the future, the Navigator Company would consider looking at their dependencies on skills and availability of workers in particular regions for their internal company use.
The Navigator Company decided to hire external consultants (KPMG) to quantify the impacts using regional and national input-output (IO) models. The IO method is an established and reputable technique that has been used before both inside and outside Portugal and is based on national statistics; these factors contribute to the credibility of the results.
Direct impacts were measured using primary data from the Navigator Company. The impacts of the suppliers to the four plants (the indirect impacts) were assessed using purchasing ledger data from the Navigator Company and regional IO models that are available publicly from the Portuguese statistics authority (INE). The impacts of the spending of wages by the Navigator Company employees and employees in the supply chain (the induced impacts) were also calculated using the IO method and household wage spending pattern data from the INE.
The project results are presented in aggregate so it is not possible to see spending with individual suppliers as this is sensitive information for the Navigator Company and for suppliers.
Data collection was a major challenge. External data from the INE were readily accessible but a significant limitation was the lack of data for 2015. This (and other assumptions) have been clearly communicated alongside the results of the study. If the analysis were to be repeated in other countries that the Navigator Company operates in (particularly in developing countries), the availability of recent data from the national statistics organization may be a real barrier for the assessment.
The GDP indicator is a valued impact; it is a proxy of the value of the company’s economic impact on society. GDP is not a complete representation of the whole economic impact on society (for instance, there are well-being benefits from receiving wages that are not captured by GDP); however, it is an accessible and comparable indicator to use. This case study provides and estimated GDP value using the IO method; however, other methods to do this also exist, such as computable general equilibrium (CGE) modelling.
In the future, the Navigator Company might consider looking at the value (rather than just the number) of jobs created. One example of such valuation would be to include a weighting factor to account for the level of unemployment in the regions of interest. An example of monetary valuation would be to estimate the amount of welfare payouts by the local government that have been avoided due to job creation by the company.
The Navigator Company presented the results of the analysis at its Sustainability Forum 2016. The audience at the forum comprised national policy-makers, academics, NGOs, local government representatives and companies from the sector and value chain. The aim of the presentation was to raise national policy-makers’ awareness of the value created by the sector and to demonstrate the Navigator Company’s leadership in assessing and monitoring their value creation impact.
There were some challenges in deciding how to define and communicate the assessment’s key messages. As the study generates information for many external and internal stakeholders, including the Navigator Company employees, it was important that the main messages be understood by all these different stakeholders and not taken out of context.
The main value of this analysis for the Navigator Company has been the communication opportunities the work has provided. The Navigator Company would not use this methodology in its current form as a decision tool (for example, to decide where to invest in setting up a new operation) as there are too many other considerations that this analysis does not capture. Instead, the assessment can be used for locations where the Navigator Company has already decided that it would like to operate to demonstrate the benefits of the forest sector to local government. This would help to gain local and national government support for the proposed operations. This is particularly important for the forest sector because the industry relies heavily on measures that create a positive environment for forestation activities, and on local infrastructure (such as the building and maintenance of high-quality roads and harbor facilities) and this infrastructure is often funded by local governments.