Organisation and management

Our business concept is to own and add value to the forest. Holmen’s forest holdings are the foundation of our business – an ecocycle where the raw material grows and is refined into everything from wood for climate-smart buildings to renewable packaging, magazines and books. The climate is therefore a very closely integrated part of our operations. Our production of wood products, paperboard and paper meet growing demand for renewable and recyclable products, and our production of green electricity from water and wind plays an important role in the transition to a fossil-free energy supply.

Significant risks are reported to Group management by the head of the business area and the business area management team at quarterly Business Review meetings.

In 2021, the CEO and Group management updated Holmen’s investment process to include environmental and climate impact and there by evaluate and mitigate climate risks and opportunities linked to investments. The investment process is owned by the CFO. To increase the value and benefit of the forest, intense work is in progress to develop existing products while identifying future opportunities for renewable wood fibre. Holmen’s work on research and development is mainly focused on three areas: 1. increased forest growth, 2. more efficient production and 3. developing new and existing products based on forest raw material. Incorporating climate risks in the investment process is a natural development in ensuring that Holmen is climate-adapted into the future.

Holmen’s sensitivity analysis shows how Holmen will be impacted financially if access to wood and electricity is affected, and if sales of our products increase or decrease. 

Climate risks analyses in the supply chain is conducted by Holmen's Group-wide purchasing function.

Read more about climate risks in the supply chain here.

Climate risk analyses

Holmen is a decentralised organisation and every business unit has its own processes for identifying, assessing and reacting to climate-related risks and opportunities. Each business unit has an ISO-certified management system used to identify and tackle risks, for example in energy consumption and greenhouse gas emissions.

The risk of impact on Holmen’s sites from climate change is being managed through continuity planning in the respective industry.

Our mills are in relatively stable locations in terms of landslides, flooding, storms, etc. and are therefore considered to be low risk. In 2015, Holmen conducted a risk analysis of the consequences we would face in one of our mills, were sea levels in the Baltic Sea to rise by 2 metres. The result showed that production equipment and water treatment would survive without being submerged. An embankment and a pump would probably need to be installed in one location, which is fully feasible.

In 2021 a wide-ranging climate risk analysis was carried out at Linghem Sawmill in line with the methodology of the Task Force on Climate-Related Financial Disclosures (TCFD) and the EU Taxonomy, based on the Swedish Meteorological and Hydrological Institute’s scenario analyses RCP 8.5 and RCP 4.5. The result showed low physical risks and easily manageable transitional risks. This work serves as a model for planned climate risk analyses of other industries and energy production plants. 

Holmen has a decentralised organisation in which each business unit is responsible for drawing up a climate adaptation plan to assess how its operations and its products and/or services may be affected by climate change. In 2022 climate adaptation plans were produced for our operations in forestry, hydro and wind power, our sawmill in Linghem and for electricity production from biofuel.

The climate adaptation plans are based on an assessment of changes in climate parameters that pose a risk to operations. The climate parameters take into account primary physical events such as air and water temperature, secondary physical events such as surface water or groundwater supply, and transitional events such as new customer demands and regulatory and legislative changes.

The climate adaptation plans identify critical business processes and the climate-related events considered to pose a risk to these processes. An annual financial impact is calculated to assess the impact of climate-related events on operations, and the result of this risk assessment becomes a financial consequence in the respective critical process.

Ongoing and potential activities capable of reducing the consequences of these various climate risks are identified, while at the same time the direct and indirect impacts of the planned measures are evaluated. This may involve everything from developing digital tools to investigating our opportunities to plan and regulate water supply in reservoirs. All in all, the climate adaptation plans represent proactive work that equips us to develop our operations and adapt to a changing climate.

Risks and opportunities

Marketing opportunities

One of society’s biggest challenges is meeting the needs of a growing population while at the same time curbing climate change. If we are to successfully transition to a fossil-free society, we must break our dependence on fossil resources and make more use of renewable materials from nature.

Population growth and urbanisation, coupled with surging ambitions for sustainable construction, are driving the wood products market. Demand for paperboard and paper is being fuelled largely by economic and population growth, as well as changes in consumer behaviour and increased digitalisation. The desire to reduce climate impacts and avoid plastic packaging is a strong driving force promoting greater use of wood fibre-based products.

Regulatory opportunities

Everything and everyone needs to carry their climate cost, which creates business opportunities for Holmen’s renewable products and renewable electricity production.

The European energy market is undergoing a major transition. Roughly half of electricity production in Europe is fossil-free, but electricity only accounts for a quarter of total energy consumption and almost all other energy consumption is fossil-based. To meet the climate targets, much of fossil-based energy production will need to be switched to fossil-free sources. As fossil energy is phased out, renewable electricity production will take on even greater significance in the future. According to a report by the Confederation of Swedish Enterprise in 2020 (Kraftsamling elförsörjning – Långsiktig scenarioanalys (Focusing energies on electricity supply – long-term scenario analysis)), demand for electricity in Sweden alone is set to rise by at least 60 per cent by 2045. However, it will not be enough simply to increase the production of renewable energy – all transport and industrial processes will need to be electrified and made more energy-efficient, as will the construction and heating of buildings. Achieving this transition will require major investment and all products will have to carry the true cost of their climate impact.

Buildings account for considerable emissions of greenhouse gases from material and energy use, both during construction and over their life cycle. Within the EU, the construction and real estate sector is responsible for 35 per cent of fossil carbon dioxide emissions, and in Sweden buildings account for 40 per cent of energy use. Active measures in the areas of heating, material choices and transport offer major opportunities to reduce the real estate sector’s climate footprint.

As the focus on climate issues intensifies, it is becoming increasingly clear that the forest and its products have a vital role to play in a fossil-free future. This is true not least of wood products, which store carbon dioxide while they are in use, while at the same time reducing demand for products with a high carbon footprint, such as concrete and steel.

Holmen is a company that is helping to improve the climate. The amount of greenhouse gas in the atmosphere is lower thanks to the work we do. Our growing forests capture and store carbon dioxide, our products replace fossil alternatives and our production of hydro power and wind power contributes to the transition towards a renewable energy system in Europe.

Emerging regulatory and legal requirements

Holmen is active in a global market and sells products to many countries around the world. Because of this geographical spread, Holmen is exposed to political risks, conflicts, natural disasters, climate change, etc. Changes in the law and regulations may affect the conditions in which Holmen operates. Holmen has therefore been active through dialogue, consultation responses, preparedness and advocacy work, on its own behalf and together with industry organisations, to promote the growth of bio-based and fossil-free activities.

One example is the ability to obtain a permit to build wind farms in Sweden. This process can be very long and take large amounts of time and money. Holmen has transformed our industries to run on fossil-free electricity and bioenergy. This has enabled us to cut our fossil emissions from Scope 1 by 90 per cent since 2005. However, we have become more dependent on a reliable supply of fossil-free electricity from the grid, which is why we are expanding wind power. We have just completed a wind farm in Sweden and have submitted a permit application for another.

The EU’s Green Deal sees the European Commission developing new strategies for biodiversity and forests and the EU Taxonomy for sustainable business activities. The purpose of these frameworks is good, but creating one document that is appropriate throughout the EU is a challenging task. We have many different kinds of forest in the EU, all of which require different management strategies due to their different circumstances.

Transitional risks

Examples of transitional risks are Holmen’s reputation as a reliable company that delivers sustainable products that contribute to a better climate. Combating climate change is a business opportunity for Holmen. We are careful to treat our brand with great care, because it is considered to stand for reliability, quality and sustainability by many customers. 

Physical risks

The Swedish Meteorological and Hydrological Institute’s forecasts show that average temperature, precipitation and soil moisture will increase in Sweden. A warmer climate could increase the growth of our northerly forests with a longer growth period, more precipitation and higher levels of carbon dioxide in the air, aiding photosynthesis. It could also affect the ecosystems by altering biodiversity, while increasing the risk of storm and snow damage, fungal attack, insect damage and forest fires. Furthermore, climate change could impact the ability to carry out harvesting, for example because of the increased risk of damage to the land.

Examples of physical risks are the impact on Holmen’s operations of water shortages and higher water levels in the Baltic Sea. Such physical risks of the impact of climate change on Holmen’s operations are managed via Holmen’s operational continuity planning. The continuity planning process is owned by Holmen’s risk manager, who reports to the CFO. Each mill is responsible for updating its continuity planning every two years.

Another example of a physical risk is access to wood. About 45 percent of the wood Holmen uses in our own industries comes from our own forests, where we ourselves have sown the seedlings we plant. Holmen Forest conducts ongoing climate risk analyses to create healthy, resilient forests able to cope with a changing climate. Read more below.

A warmer climate brings with it risks and opportunities for our silviculture. For Holmen, which grows forest on the boundary with the tundra, growth may increase significantly. Here we will need to manage our forests so that we can take advantage of longer vegetation periods, somewhat increased precipitation and increasing amounts of carbon dioxide in the atmosphere, which promotes photosynthesis.

One example of this type of risk is that we need to ensure the continued high quality of the regrowth, so that we create dense and vigorous young forests able to rapidly convert carbon dioxide into oxygen. Young, growing trees capture more carbon dioxide than old trees.

The changing climate is an important factor that can affect elements in a forest. It brings a higher risk of wind and snow damage, fungal attack, insect damage and forest fires and species preservation difficulties.

Higher soil moisture due to more rain and warmer temperatures, plus shorter periods of frozen soil, will make harvesting and transport in the forest, and transporting the wood to industry, more difficult. Harvesting when the ground is not frozen increases vehicle damage to the soil.

Climate change is having a negative impact on biodiversity, creating difficulties regarding wildlife conservation.

By applying Holmen’s guidelines for sustainable forestry (based on information from the Heureka climate scenario risk analysis system) and our certifications, such as PEFC and FSC® (FSC-ID), we ensure that we systematically manage the forest to better cope with climate change and reduce the impact of the climate on our operations. Our current wood refinement program is adapted to a changing climate. The plant production systems have excellent root structures, producing trees that can withstand storms. We adapt planting to the location as well as clearing and thinning the area relatively early, which helps reduce the risk of storm damage. This will produce forests that are storm-tolerant in the future.

Read more about how we use the Heureka climate scenario risk analysis system below.

Climate risk analysis in our forestry using the Heureka system

Holmen Forest conducts ongoing climate risk analyses to create healthy, resilient forests able to cope with a changing climate.

Holmen has conducted these wide-ranging climate risk analyses using the Heureka system. This system was developed at the Swedish University of Agricultural Sciences and is used to carry out climate risk analyses of all our forests. It projects the impact climate change is expected to have in the medium and long term on wood, environmental conservation, recreation, the economy and carbon sequestration. The result is a number of climate parameters and scenarios based on Sweden’s forests being used and managed in different ways.

For example, the impacts climate change may have on growth. The climate scenarios available in Heureka have been calculated using an external model known as BIOMASS, using climate scenarios developed by the Swedish Meteorological and Hydrological Institute (SMHI) as input. The climate scenarios have been run for the whole of Sweden, divided into areas 50 x 50 km square. They describe temperature changes over a five-year period in each cell of this grid and provide function parameters for each tree species and soil moisture class. These function parameters are used in a model in Heureka that calculates changes in growth as a consequence of climate change. It features three climate scenarios: ECHAM5 A1B, MPI 4.5 and MPI 8.5.

At Holmen we use the results to predict forest growth in 100 years, divided into five-year periods. We adapt our forestry and plan our harvests based on the results to constantly ensure that Holmen’s forests grow more than the amount we harvest every year. The survival rate for forest seedlings and the need for supplementary planting is monitored one and five years after planting of a harvested site is complete. Internal and external environmental audits of our forest management are also carried out each year. In addition, a risk assessment of wood supply is conducted in line with our PEFC Chain of Custody, FSC® Chain of Custody (FSC-ID) and Controlled Wood certifications. Holmen has applied clear guidelines for purchases of wood since 1998.

Climate change is expected to partly lead to increased growth due to higher temperatures but also to lower growth due to the greater impact of storms, fires, flooding, etc. We are working very actively to adapt our forests to make them resilient to the anticipated negative impacts of climate change. We are also adapting our forestry and planning our harvests based on the results to constantly ensure that Holmen’s forests grow more than the amount we harvest each year. As such, the growth in the forest is down to our active and sustainable forest management, which begins with the seed – we raise our own seedlings and reforest all the areas that are harvested. Because the annual growth is greater than the harvest, the amount of wood in our forests is also increasing year on year, which means that we will gradually be able to harvest more in the future. In 2022, Holmen’s total volume of standing timber amounted to 125 million m3 growing stock, solid over bark, which is 5 per cent higher than ten years ago.

The forest is managed sustainably to produce a good annual yield and stable value growth, as well as healthy, vigorous forests with well-maintained ecosystems and biodiversity. Growth and harvests will increase over time. In 2020, a new harvesting plan was drawn up for the period 2021–2030, during which annual harvests are expected to increase by 0.1 million m3 compared with 2016–2020 while the amount of thinning remains unchanged.

Holmen’s climate analyses also include our wood suppliers. The wood we use in our industries comes from Swedish forest owners and only 3 per cent is imported, mainly from the Baltic countries. As a large forest owner in Sweden, Holmen plays an important role in developing a sustainable forestry culture in Sweden. Holmen spends large amounts of money and puts large amounts of resources into research, development and education in nationwide forest management projects, aimed at creating healthy, resilient forests in Sweden capable of withstanding a changed climate.

50 per cent of Sweden’s forests are owned by private individuals, who play a very important role in Holmen’s supply chain (upstream). The wood market in Sweden is optimally organised in that forest companies (including Holmen) first buy wood from the landowner on an open market and then, once the deal is agreed, all the Swedish forest industry players swap their purchases around, so that the wood is always driven to the nearest sawmill, irrespective of who bought the wood or who owns the sawmill. This avoids transporting wood over long distances, improving transport efficiency, finances and environmental impact for all forest companies. It also means that it is in the interest of the entire forest industry that all forests in Sweden, including forests owned by private landowners, are healthy and resilient and that the trees are adapted to live and grow in a changed climate over their long lifetime. It is therefore common practice amongst forest owners to manage their forests in line with the recommendations of the Swedish University of Agricultural Sciences, based on the results of the Heureka system.

Holmen actively applies the Heureka system and we train our wood suppliers in the knowledge we gain from our own climate risk analyses. Our private wood suppliers also often purchase the service from us where we replant trees we have harvested, and one of the most important activities a forest owner can do to create healthy, resilient forests is to plant resilient seedlings and the right tree species in the right place so that the tree has the right conditions over its lifetime, even in the face of future climate change.

The skills of contractors are another important factor in avoiding errors and we therefore also train contractors in silviculture.