Part of the bioeconomy, Stora Enso is a leading global provider of renewable solutions in packaging, biomaterials, wooden construction and paper. The company develops and produces solutions based on wood and biomass for a range of industries and applications worldwide.

The company has a long track-record of direct communications with investors and analysts on sustainability issues comprising presentations, meetings and webinars.  These are underpinned by annual reporting that aims to align with a forward view of what best practice in sustainability reporting will be.

Stora Enso's articulation of its purpose and values

Identifying that forward view, however, is not always easy.  Ulla Paajanen, Stora Enso's Head of Investor Relations, shares her experience and ideas.

Q1: How does Stora Enso manage your communications on sustainability with investors?

Our most effective way of communicating with investors and wider financial markets is through personal engagements in the form of meetings and presentations virtually and physically.

Of course, with our website and annual reporting we reach wider audience, but the effectiveness is not as good as with personal dialogue.

In general, we do not find ESG ratings reports make an effective contribution to investor communications on sustainability.  They tend to lack quality and comparability of the data.  Also they provide little  transparency on their methodology and don't make it easy for us to get feedback on the answers that we provide.

Ulla Paajanen, Stora Enso's Head of Investor Relations

Q2: Why do you engage with the development of accounting and reporting standards on sustainability? How do they help you in your communications?

To some degree standards are inevitable.  The growth of passive investment and quants-based investment strategies, (involving new technologies) , means that there have to be standards if we are to maximize the benefits and avoid unintended consequences.

Companies also need to be involved in the standards development process to ensure that that the standards that are developed align with industries, markets and best sustainability practice.

At Stora Enso, we have a particular interest in being involved in the process as interest in our sustainability performance is growing strongly amongst mainstream investors and we have a positive story to tell  as we are one of the few companies in the market with a positive carbon footprint.

Q3: What problems remain with the standards?

The problems at the moment are that they are still under development and will be still for some period of time. Financial accounting standards have been under development since middle ages and are still evolving with time and as the world around us changes.

So, I predict that we see the same development with sustainability standards.  However, it should not take 500 years to have them ready thanks to the modern-day technology and science.

That said, even when global sustainability or ESG standards frameworks are ready, it is only reasonable to expect that they will continue to evolve with time as our understanding of ESG factors and how to measure them improves.

Q4: Which standards are highest priority for you and why?

SASB

We see SASB as important for a number of reasons:

• First, because some of our largest institutional investors are strong supporters of it
• Secondly, because we receive a plethora of requests from investors and from ESG ratings agencies and we think that SASB represents the best opportunity to align these into one coherent framework.

So, we have developed our own SASB online index for sustainability reporting which is published on our website.

TCFD (Task Force on Climate Related Financial Disclosures)

Again, some of our largest investors are active supporters of the TCFD - so we prioritise this.

Of course, climate-related disclosure is important for Stora Enso since our activities mitigate climate change. We are one of the largest private forest owners in the world.  So, we manage the carbon sinks that these forests offer and the carbon remainsstored in the products that we produce through their lifecycle.

Therefore, it is important that we measure this impact in correct manner.  Poor measurement and poor reporting in this regard will lead to a distortion in the world's climate management efforts.

EU Taxonomy (for sustainable activities)

The EU Taxonomy is clearly a massive classification system including environmentally sustainable economic activities, which is in the development phase especially in our industry sector.

However, Rome wasn't built in a day and the delegated act with taxonomy criteria for forestry has been delayed until April.

Stora Enso continues to make representations to explain and inform member states and the EU Commission on the Forestry sector's contribution to tackling climate change. Over 46, 000 responses from a wide variety of stakeholders have been sent to the EU Commission which is now finalising the review and analysis of this feedback, including with regard to the comments received by Member States. 

IFRS

We have participated in the consultation from IFRS on accounting standards for sustainability.  While these initially focused on carbon, we are encouraging IFRS to broaden their scope to include wider relevant ESG parameters.  We are also encouraging them to build on existing standards rather than to reinvent the wheel.

Q5: Practically, how do you keep up to date and engage with standards development?

There are a variety of different ways of staying engaged - depending on the standard.

We participate in consultations and working groups.  We also undertake our own analysis on how the standards being developed will affect the way that we report on our own business activities.

For example, the latest participation was to give feedback to SASB’s Human Capital standard development.

This helps us to comment on standards as they are being developed and then implement them promptly if / when they are agreed.

For SASB, in particular, I have been a member of SASB’s Standards Advisory Group (SAG) since 2019.

Q6: How do you think the emergence of global frameworks will affect the sustainable investment research process?

I sincerely hope that unified standards around sustainability data will enable the ESG ratings agencies to become more like 'sell-side' sustainability analysts whereby they:

• Do not require us to complete questionnaires or correct their own data-gathering - can you imagine Morgan Stanley allowing us to fill in the reports that they write on us?
• Take full responsibility for the data within reports and the analysis conducted around it

Ultimately, I hope that this will enable ESG ratings firms to add value through their analysis of data rather than simply from the collection of data.

Support

Sustainable-IR thanks Ulla Paajanen of Stora Enso for her support in writing this case study.