Human Capital: The New Metric to Measure

GRAEME RODDEN

Just before the coronavirus devastated meeting plans globally, the Pulp and Paper Technical Association of Canada (PAPTAC) was able to hold its 106th annual meeting—PaperWeek Canada—February 3-6 in Montreal. As has been the custom, the Biofor International conference was held at the same time.

The usual strong technical program opened with a keynote talk by Pierre Fitzgibbon, a cabinet minister with the government of Quebec, who also worked with Domtar in the late 1990s. He noted that the pulp and paper industry and Quebec have long been “intertwined.”

The government, he said, has earmarked CAD$80 million (US$56 million) for investments in “bio” projects: biofuels, nanocellulose, and cellulosic derivatives. These will help advance the “circular economy.”

He added that with a shift to a greener economy, the pulp and paper industry poses a unique challenge for the government, saying that environmental projects will feed the Quebec economy over the next few years.

Following Fitzgibbon, the first panel of the conference looked at the growing importance of human capital. Ably chaired by Anne-Marie Hubert, Ernst & Young, the theme was: talent as a critical enabler of long-term value creation.

It was discussed in light of EPIC (the Embankment Project for Inclusive Capitalism), in which Hubert took part. One of the issues is how to convince investors to see the validity of the long-term value and related metrics in measuring human capital.

Since the financial crisis of 2008, trust in business has rapidly declined. There is a growing disconnect between society and business. The issues have become how industry can reconnect and how it can see beyond financial results.

In the future, it will be important to drive value for stakeholders (investors, talent, and society), not just shareholders. Hubert said that the SEC is studying the possible mandatory disclosure of talent-related metrics (human capital), not only financial metrics.

PACKAGING PANEL

Is fiber-based packaging an effective way to reduce plastic waste? That was the question posed to the packaging panel, which featured Julien Bras, Nestlé. He is head of a new division of the company, the Nestlé Research Institute of Packaging Science. He noted that Nestlé makes 10,000 different products and sells about a billion products every day. It now regards packaging as part of the product.

Anne-Marie Hubert, Ernst & Young, hosting the panel on ‘Talent as a critical enabler of long-term value creation.’ (Photo courtesy of Paper Advance.)

The company’s objectives are to: reduce use of virgin plastic materials by one-third by 2025; have 100 percent of packaging recyclable by 2025; and achieve zero net GHG emissions by 2050.

Nestlé will focus on fiber-based solutions and is looking to use all-paper packaging. In response to a question, Bras said that the product development process is accelerating. Projects should not last longer than two years and prototypes are needed in 10 months.

SPOTLIGHT ON LIGNIN

On the Biofor side, one of its research and innovation advancement sessions dealt with lignin. It was said that potential availability is 141,000 tons, of which 78,000 will come from kraft pulping operations, 60,000 from biofineries, and 3,000 from lignosulphonates. Forecasts say the global market for lignin could hit US$1 billion by 2025.

Ludo Diels, research leader at Vito (Belgium), said that for too long the industry did not know how to handle lignin; it was always considered a waste product. There have been several trials with lignin applications in the recent past, but he said that they met with limited success.

But, climate change is driving industry to bio-based products, so commercial lignin production has seen many recent developments in applications. To increase lignin as an active component and not just as a filler, the industry needs to increase lignin’s solubility, increase its reactivity, and decrease its dispersability.

Vito is currently working on a depolymerization plant with Sappi in Belgium.

In the same session, Eddie Peace, West Fraser, discussed the company’s involvement with lignin. It set up a bioproducts division in 2010.

For it to be successful, West Fraser knew it had to have synergies with the company’s operational abilities and needs. In 2014, it announced a partnership with Noram and FPInnovations to construct the first commercial-scale lignin recovery process in Canada at its Hinton, AB, pulp mill. Peace said the company’s strategy was to integrate the product into its plywood business (Paper360° March/April 2018, p. 50). The lignin is now marketed as Amallin LPH or Amallin HPH.

Originally, Peace added that West Fraser saw the lignin product as a drop-in for its resin in the plywood mill. “It was not as easy as we thought. We are still looking at this along with other applications.”

OPEN INNOVATION/
FOLLOWING THE MONEY

A presentation by Virginie Chambost, EnVertis, looked at a different way to solve the challenges of entering a market: open innovation. This is not a new concept, but how it is applied to the bioeconomy is evolving. For example, closed innovation is comparable to internal R&D, which is used as a barrier to competition. This is the traditional product development path. For various factors, this concept has fallen out of favor.

Industry had to rethink the innovation process to ensure value creation to capture long-term competitiveness. She cited the case of Xerox, which had many innovations that were not of value to its core business but could be of value to others. Therefore, spin-offs were created.

Specific to the forest products industry, she named companies such as Suzano, IP, WestRock, Cascades, and Stora Enso as practicing open innovation. Each company has developed its own unique approach to help it exploit the principles of open innovation. Stora Enso, in particular, has been using open innovation to form partnerships to shape business models.

Steve Passmore, Passmore Group, gave delegates a hard dose of reality when it comes to finances. Although many have touted the benefits of the bioeconomy, financial success has thus far been hard to achieve.

As he said, technical scale-up needs a constant injection of capital. He sees it as a six-stage process to commercialization. If a company wants to succeed, the product must be financially competitive with any alternative. “You must convince investors/lenders that all risks can be managed: the greater the perceived investment risk, the greater the cost of debt.”

To alleviate the risk, Passmore suggested co-developing, co-locating and co-producing. He added that Canada has many advantages that could encourage bioeconomical investments such as its high volume of biomass. He also offered an old axiom: Follow the money. The investment community is increasingly viewing fossil fuels’ future as untenable.

WORKFORCE ASPIRATIONS

One of the final luncheon panels looked at a popular topic of the day: experienced workforce and younger generations—are their aspirations that different? Chaired by McGill University professor and local radio host Karl Moore, the panel looked at how the hopes of the different generations in today’s workforce could be accommodated.

One panelist noted that, perhaps for the first time, four distinct “generations” were represented in the workforce: baby boomers, millennials, Gen X, and Gen Z. (Then again, maybe no one ever labeled various generations as we do today.) Each has its own hopes for their future and how they want to lead their lives, the oft-cited work/life balance. However, the way an organization treats these differences will decide the fate of that organization. Today’s worker wants to be judged on output, not input—that is, on results, not hours worked.

Moore also brought up the interesting concept of reverse mentoring: Let youth lead. 

Graeme Rodden is senior editor, North and South America, for Paper360°. Contact him at [email protected]