IFRS reports Converstion issues unique to the forest, paper, and packaging industry

Posted January 19, 2016 in Pulp and Paper Industry by Elizabeth Tischer

International Financial Reporting Standards reported conservation issues unique to the forest, paper, and packaging industry 

The digital world with its worldwide internet, email, e-Books etc. is threatening the existing demand for paper and paper-based products now and in the approaching future. 

But as the International Financial Reporting Standard observes, as some doors begin to close, other windows elsewhere are beginning to open, bringing a new range of opportunities for demand in terms of paper, packaging, fiber and wood. 

Engineered wood is becoming increasingly popular in house construction, and as technology improves, with things like bio-products and bio-fuels (especially if their price continues to lower), the demand for fiber is going to increase. 

As well as affecting demand, technology has the potential to improve the supply situation too in terms of forest yields and productivity. However, this change will be gradual, whereas the change in demand is likely to be more explosive, particularly with regard to fiber. 

The increasing demand for fiber 

As competition hots-up for the supply of fiber, it will have two effects. Initially as demand shifts to more sustainable products, forests themselves will become more valuable. 

But at the same time, and as referenced in the International Financial Reporting Standards, striking the right balance between the need for production as against the need for better conservation, is going to become an ever increasingly complex equation, as the use of forests as a tool for contributing towards the ecology of the planet becomes ever more important. 

We are all aware that trees are a superb renewable source, but there is only a certain amount of forest that can be comprehensively managed, and there is a limit to the amount of land that can be used for planting trees. It is in limited supply and its potential has to be shared with other growing needs such as those of agriculture and homes, as the world’s population continues to increase. 

New players entering the supply chain 

According to International Financial Reporting Standards, as technology evolves we will see new players coming into the equation. 

Companies operating in industries such as chemicals and energy will all want to gain access to wood fiber for their own needs. This will occasion a change to the very nature of the competition for fiber, and will affect the structure of the forestry industry itself. 

In order to maximize conservation, it will be important to work across the various industrial boundaries. 

The need for cross industry collaboration 

The International Financial Reporting Standards forecasts cross-industry collaborations as FPP (Forest Peoples Program) organizations strike up new partnerships with the new entrants in the marketplace. 

It could be for example that a new entrant with a distribution network already in place for bio-fuels, may well make the setting-up of a bio-refinery operation more cost effective. 

Other examples whereby conservation could be improved would be packaging companies working more closely with fiber suppliers to co-operate on evolving more sustainable packaging innovations, and paper manufacturers collaborating with electronics firms and logistics companies to design the next step in state-of-the-art labels. 

The need for more regulation to increase conservation 

The other thing that the International Financial Reporting Standards forecasts in terms of conservation of the world’s forests is an increasing amount of regulation. New regulation has already had a significant impact on the FPP industry, but we can expect to see more of this. 

Natural forests will be more valuable for their carbon, climate regulation and ecosystem benefits than for any other uses of the land. The International Financial Reporting Standards forum envisages a situation whereby direct public-sector subsidies could be required to support regulation in order to protect forests across an increasingly wider range of benefits than exist today. 

But we mustn’t lose sight of the fact that increasing regulation can also distort the picture. As an example, supporting the use of fiber for one product at the expense of another without taking into account the full economic and environmental implications can have unforeseen results. 

The International Financial Reporting Standards views the needs of production and conservation together 

The International Financial Reporting Standards makes the point regarding the use of wood for energy in Europe. This means that the goal for regulation must ensure it brings about the highest sustainable and value added use of fiber and fiber products, together with an all-round understanding of the important role played by the world’s forests, not only from a production point of view but from a conservation point of view as well.

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