A Paper Company Takes Bold Steps to Make Sustainability a Source of Profits

Like many companies, PaperCo* had come to understand that a broad sustainability program was essential for doing business in our era of global commitments. Investors wanted to see measurable sustainability improvements reflected on P&L statements year after year. And PaperCo’s leaders knew that environmentally-friendly practices could help retain loyal customers who are increasingly willing to pay premiums for green products and are also a new angle to identify and unlock emerging market opportunities.

Our four-week diagnostic study of PaperCo involved both an “outside-in” and “inside-out” analysis. We investigated which facets of sustainability mattered most to its customers, investors, regulators, and other stakeholders, and we examined the factors influencing the company’s top-line growth and performance. This two-fold approach demonstrated that a sustainability program could be a source of real profit.

• 10 pts EBITDA increase from value creation activities like emissions costs reduction, energy spend savings, and revenue growth
• 10 wks Time our team needed to deliver detailed plans to grow revenue, optimize costs, and develop plans for more sustainable business practices.
• 2-3 pts EBITDA increase from risk mitigation (i.e., rising energy prices, regulatory threats, and related potential impacts).

Our materiality analysis revealed the most important environmental, social, and governance (ESG) topics in the paper industry. The critical issues for PaperCo to address first included greenhouse gas emissions, water consumption, waste, and sustainable sourcing. Through benchmark comparisons with competitors, we demonstrated where PaperCo exceled, pulled even, or lagged on each topic. For this portion of the engagement, we collaborated with EcoVadis, our strategic partner on environmental, social, and governance assessments. Our study covered everything from product life cycles to employee health and safety, offering the company’s leaders a new perspective on several missed opportunities.

Through a series of collaborative client workshops, we helped PaperCo define its ambitions in each priority area. We presented leaders with a range of technology initiatives that would improve the company’s ESG performance, each example accompanied by scrupulously measured levels of EBITDA impact. We generated specific target numbers, and identified the key performance indicators that will help the company track its progress.

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Within 10 weeks, we provided PaperCo with a detailed road map that specified both how to grow revenue through product development and optimize costs through improved performance. We helped develop a vision for more efficient plants, carbon-neutral products, and a smaller emissions footprint. Once implemented, the plan puts the company on track to realize approximately 10 points of EBITDA increase from value creation activities (emissions costs reduction, energy spend savings, revenue growth, and other opportunities) and another 2–3 points from risk mitigation (rising energy prices, regulatory threats, and related potential impacts).

Today, PaperCo is implementing many of these initiatives and planning to launch others once the global pandemic has subsided. The company is transforming the way it trains its people on risk scenarios and general market sensitivity. Significant stakeholder value is being created, and PaperCo is in a far better position to respond to stricter regulatory requirements, rising energy prices, higher carbon taxes, and shifting consumer demand.