Stora Enso Oyj (STERV) Earnings Call Transcript & Summary

Welcome to Stora Enso's Biodiversity Teach-in. I am Anna-Lena Åström, Senior Vice President, Investor Relations. Thank you for joining us today. It's great to see such strong interest for this very important topic. Sustainability is no longer just about CO2 emissions. Biodiversity represents a significant part of our agenda and for good reasons. We have today gathered Stora Enso's experts to give you our view on how biodiversity fits into our sustainability strategy and how we can both manage biodiversity in our forest assets and at the same time, grow our business. We are stepping up our agenda with ambitious sustainability targets. And we hope to see others follow our lead. This is also true for biodiversity which you will hear more about in a minute. But let us first look at the agenda for today. The teach-in is planned for 1.5 hours with the presentation taking approximately 50 minutes. We are then looking forward to Q&A session, where we will look forward to your questions, which you can [indiscernible] start posting now on the question mark icon on your screens. We will start the presentation with Annette Stube, our Executive Vice President, Sustainability, who present our sustainability priorities and their value add to business. Stube will be followed by Jari Suominen, Executive Vice President, Forest Division, who will detail the Forest division's sustainability strategy. The last part of the presentation will start with Annika Nordin, Vice President, Sustainable Forest Management. She will give us general perspective on biodiversity in the Nordic forests. The presentation will be concluded by Johan Lindman, Senior Vice President, Global First and Sustainability, who will go into more detail on our approach on biodiversity. I will now hand over to Annette Stube to start the presentation.

Thank you, Anna-Lena, and good afternoon, everyone. I'm Annette Stube. I'm Head of Sustainability here at Stora Enso. And I will just briefly give you a framing of where we are in sustainability and the new strategy that we have made, the new targets that we have set, which really provides a frame for what you're going to listen to for the rest of the call. So starting at helicopter view, if you take the first slide here, we are really seeing an acceleration of the sustainability agenda or the ESG agenda, as you know, over the last 1 to 2 years. I've been in this field for 25 years, and I've never seen anything like the development that we've had in recent times. And different things are happening here. Most importantly, we are seeing that targets are based on science led by the climate development, obviously. But this is going on to other topics on the sustainability agenda as well, including biodiversity and rightly so. Also, leaders are taking a systemic approach. So going beyond their own industries and businesses, and really looking at the broader ecosystems that they are part of when they are setting targets, taking ambitions for their companies. And not least, we are seeing this from our stakeholders, our customers, our employees, the communities where we are part of are asking the same questions of us as well. So in a way, this is all coming together now, and it has really been time for a step-up change for Stora Enso. Even though I would say the company has been doing very well on sustainability for the last many years. We are now moving into a new era, and we are reflecting this in how we go about it. So let's move to the next slide. It's really all about becoming regenerative. That is what nature needs. That is what science is telling us needs to be done. And so we've set a target for 2050 which is all about delivering products that are 100% regenerative. So for us, that means that they are fully circular that they enhance biodiversity that they're biodiversity net positive. We will talk more about what that is. And that there are CO2 net positive, meaning that we are taking more CO2 out of the atmosphere than we are bringing in. And eventually, this is helping our customers become regenerative. And of course, we are lucky to be based on having renewable products as our base, and we are bringing this on to our customers as well. So going to the next slide, diving into a little more concrete target, which is our 2030 targets on these 3 areas that are the most important areas for us as we see it. CO2, we've upgraded our science-based target. We were the first company in the forest industry to make a science-based target. We now have 1 that is aligned with a 1.5-degrees scenario. And we are setting ourselves the ambition to reduce our CO2 emissions by 2030 with 50% in absolute terms with the 2019 baseline, which is very ambitious. So building on what we've already done. And we are seeing the same from our supply chain. So again, by 2030, having a 50% reduction in absolute emissions with the 2019 baseline. So that means working a lot more diligently, closely with our suppliers to deliver on this target. Secondly, we have secularity, which we already have a lot of experience on. But we've set ourselves a target that by '25, our circular design guidelines will be fully implemented across all our innovations. And innovation is really key here because we have to invent new things in order to be able to deliver on these targets. And so by 2030, we want to be able to deliver 100% recyclable products by factory gate. And finally, biodiversity, which is the topic of today of course. We have a detailed action plan going towards 2030. And several indicators that is telling us and everybody else because we will be very transparent about our approach here, how we are progressing. So of course, a lot more on this in the hour to come. So if we just move to the final slide for me, I just want to say that we believe that in using our products and our innovation to deliver on these targets, we believe that it's much easier to link to the commercial growth agenda, which is, of course, key to Stora Enso as well. And it is responding to our customers' needs and stakeholders' expectations in general, and as I said, helping our customers become regenerative. We also believe that by taking a systems approach by taking a long-term view on our direction will be better able to set direction for our innovation as well as having a long-term perspective of capital allocation. And obviously, that's a clear advantage for us as well. And because we are -- as we are progressing here, we will step-by-step demonstrate that we are able to become regenerative eventually. And this will gain us more acceptance as for our current offering, which will give us more time in terms of delivering on this transition because it is a time of transition, not just on biodiversity on climate and on a number of other issues, as you know. And so we believe that we'll gain a license to be a system shaper, have a solid seat around the table, which is super important, obviously, when things are being shaped and developed, and we want to be part of shaping that. And so being closely liaised into these circles will also give us an opportunity to look around the corner as it were. And that's obviously a big opportunity for any company. So we believe we are in a very good place. This is very timely development for us. And now we're just looking forward to diving into the issue of biodiversity. So I'll hand over to Jari.

Thank you, Annette, and happy to meet all of you. And my name is Jari Suominen, and I am -- i have long experience in Stora Enso. I have been working here more than 25 years and I have been working so far in Paper business, Wood Products business. And now 2 years ago, I moved here where everything in Stora Enso starts in Forest. I will start with short recap, what is Stora Enso forest? And then I will move more towards our strategy, sustainability strategy and finally, ending up to topic itself, which is biodiversity. Of course, you, dear investors, you are interested about our values. And if you are looking at our forest value today, it's EUR 7.4 billion. So this is representing some half of our balance sheet. And in right side, you can see that Forest is global. Our Forest is global. We are one of the largest forest owners. And top of -- on top of forest ownerships, we in Forest division, we are running the wood procurement around Baltics area. And if you are combining this altogether, this gives us unique position. We are global. We are one of the largest forest owners. We are one of the largest wood suppliers. And this gives us strong competence base to learn and develop our business. Let's then see a bit more our figures in detail. So we are sourcing up to 40 million cubes of wood annually and globally. Our own forest is representing important role there, but still now and in the future, private forest owner will be the 1 single largest source of wood. Then looking right side of the picture, you can see our financial performance, and I'm happy to say that so far, we have been fulfilling our target to exceed return on capital employed of 3.5%. So let's move then to our strategy. We have categorized Forest division strategy in 4 different areas. In the mid-size wood supply, I will not use so much time today because that's area we have been running already decades. Left side, the own forest that is where we started 2 years ago as we became large forest owner. But that's not all. This is, of course, elevated also the importance of Forest sustainability. And this has been playing also vital role in our strategy work. And there the special focus has been then the topic for today, which is biodiversity. And due to well-known reasons, public affairs is playing vital role for us and forest sustainability and public affairs are strongly connected. One additional topic I would like to share, especially with you is the stakeholder views. So we want to understand and we want to consider in future better external stakeholder views. And I'm so much waiting for the discussions today and going forward to get your feedback and your contribution in this field. So let's go to the next slide. And this is my last slide for strategy and looking at big future. We see great potential in our own forest growth going forward. Of course, time lines are long as forest growth is slow, especially in Nordic forest, but also the potential is enormous. We will develop this based on our innovation, digitalization and continuously developing sustainable forest management. And what I would like to highlight also is pretty interesting area that we have identified additional value streams also on top of traditional wood sales. Let's move to next slide. And now getting into sustainability part. First of all, Forest division sustainability focus areas, those are based on Stora Enso's sustainability approach, which is, of course, natural. We have selected 4 focus areas. These are Biodiversity, Carbon, Land use and Communities. And due to well-known reasons Biodiversity and Carbon have had a special attention during coming -- during the past years and it will also during coming years as well. Then I would like to share with you a couple of important piece of information. And my humble wish is that you would carry this with you. If you go to next slide. And left side, first piece of information is the fact that only growing forest is absorbing carbon. You can see the red line there. This is showing how single tree or forest side or whatever how the wood is annually growing? How -- what is the growth rate? Or what is the absorbing of carbon, which is more or less the same? You can see that in 10 first years, the Seedlings is growing slowly. But after that, the annual growth will increase rapidly until the tree gets 30 years old. But after that, the annual growth will reduce until when the tree has age of 80 to 100 years, and then the growth has close to stopped. And this is the message that only growing forest is absorbing carbon. And in order to allow forest to grow, it need to be also used, but used naturally with sustainable way. Then right side I would like to highlight the importance of tree breeding. We have competence today in our operations to make tree breeding and our target is to make forest growing better. And what do I mean with better? Of course, I mean that it needs to grow faster, but not only that, it need to become more resilient towards diseases more resilient against storms. And 1 example in Central Europe is the very difficult situation in bark beetles and this bark beetles are coming towards North and those are visible already in Sweden. So this area is utmost important for our development, and it's a significant part of our sustainability agenda as well. So let's move further. And now coming to our biodiversity ambition. We have set high ambition 2050 like Annette was already referring. Our aim is to become net positive 2050. And we will use our unique position here, so we will use our own forest as experimental lab and our experience is we will share with private forest owners as a service. But we will not only limit to own forest or forest itself, we will participate to development of overall biodiversity in society. So let's look at my last slide, which is then a bit concretizing this. So we have also set targets for 2030. This in order to prove that we are continuously progressing in our agenda to become net positive 2050. We have set even more than 40 actions and actions areas where we have started the work already. We will measure our progress overall in biodiversity but also in our actions with more than 15 indicators. We will use and develop innovation and digitalization to take further steps there and we will be prudently open with our knowledge, and we will establish online reporting already during the next year. And at last -- my last part, utmost important message is also that part of this complicated matter, we are working with that. We are progressing with that, but it will be also continuous improvement and then continuous learning and continuous adoption for our sustainable forest management practices. So let us continue now the deep dive around biodiversity and I give it further to Annika, please.

Thank you, Jari. Hello, everyone. So before coming to Stora Enso in February this year, I spent 25 years as a forest scientist. So I have both perspectives from theory and practice on this topic of biodiversity. And in my talk here today, I will first provide a brief line on the subject of biodiversity, putting it a bit in a global context. And then I will take you from there to the Nordic forest. Next slide, please. So biodiversity, it's all about the variability of different biological life forms here on earth. And normally, we talk about biodiversity on 3 different levels: on genetic level, on species level and an ecosystem level. And biodiversity has been regulated internationally since 1992 in the UN Convention of Biological Diversity. And the goals of this convention is really to promote biodiversity conservation. It is to ensure sustainable use of this important resource and it's also about fair sharing of the benefits that may arise out of the use of genetic resources. Next slide. So biodiversity is a rather complex topic, I would say. But when we talk about it, daily like we do in media nowadays nearly. Then I think it's mainly 2 arguments that are important to make biodiversity relevant for the public. And the first 1 is about functionality. It's about biodiversities needed to maintain proper ecosystem function. And then the other sort of argument that is often raised, it's about the moral dimension, but we need to conserve biodiversity to respect all different life forms on earth. Next slide. But why do we talk so much about biodiversity at this point in time, I think 1 important process. I think there's many answers to that question, but I would like to mention 1 process, and that is the IPBES process. IPBES is for biodiversity what IPCC is for climate change, I would say. It's about gathering scientists from all over the world to sit down and assess the scientific evidence and come with prescriptions or suggestions for pathways forward to policymakers and to other decision makers. Next slide. But going now from the global to the Nordic forest. I would like to mention first about the red list. The red list is an important tool for the practical biodiversity work that we do. And red list, they are issued country-wise. It's really about the risk of species to become extinct within the specific country. And I will use Sweden as an example. And in Sweden, the latest version of the red list was issued in 2020. And the red lists are also, I should mention, they are according to a system set by the International Union for the consolidation of Nature. So the basis for the red list is the same everywhere. And it's about assessing the risk of species to become extinct in the short term or in the long term. And it's not really based on accounts of specific species. It's really based on assessments of how much habitat and structures that are available for the specific species. In Sweden, we assess or the red list assess that there are about 30,000 species in the forest, and 8% of those are today red listed. That is about 2,500 species. And out of those, about 1,300 are impacted by forestry and particularly then by the final harvest operations. On the right-hand side, you see one of the red listed species in the Swedish forest. It's Usnea longissima, it's a lichen that grow on the branches of trees. It's an epiphytic lichen and it's called. And this species is red listed in Sweden, but it's much more common in Norway, for example, because it likes really moist forest. And it's common along the coast way -- the coast in Norway and also in the Pacific Northwest, you can find it much more abundantly than you can find it here in Sweden. It's a very nice lichen, I would say. Next slide. But when you hear about the red list, you often only hear about the negative parts of it, you hear about the negative trends. And here, I would like to show that -- there are also improvements going on, and this is a red list index. It's calculated in a rather complicated way, I would say, but it's about categories of species. The species within the group that are red listed. And if this group reached 1 on this Y-axis, then it would disappear from the red list because the species in that group would no longer be threatened. But here, you see the trends of 2 groups, categories that has done quite well over time for the last 20 years and it's frogs and reptiles, and then it's mammals and this is for Sweden. But for most other groups, I would say that the trend over these last 20 years, it's more or less unchanged, except for mosses and for birds where we can see a decline for the last 5 years, I think it is. Another good news I would like to tell you about is that species that go extinct, they sometimes reoccur. And I think it was 19 species out of 92 that have reoccurred in the latest version of the Swedish red list compared to the previous version. And here you see 2 such examples. It's 2 insect that you can find in the southern part of Sweden. And here, it's on the sort of border of its distribution. So these species are much more common for the Southern Europe. But here in Sweden, they -- they are on the outskirts of where it can live. And if the way it goes bad for a few years, it disappears and that what was happened in the 2010 or something. And now they have both reoccurred these 2 species. So that's the good news. Next slide, please, or at least examples of good news. But going out in the forest, how should the forest look like them to be a good place for biodiversity. It's really about structural variation. And -- if you have a forest with lots of variation, you will also have lots of potential habitats for different species. And in the forest, it's a lot about the trees. The trees, they should be of different ages of different sizes of different species and the trees should be living. But perhaps mainly the trees need to be dead because it's deadwood that is really a substrate that is -- we are short of that in the Nordic forest. And I will come back to why we are short of that. But deadwood must be also of different kinds, different stages of the composition. So it's not just like creating deadwood would solve the problem like this. It's about having the wood slowly decomposing to make all these different structures and habitats that are important for different species. Another feature, very important in the Nordic Forest is the water and water, naturally flowing water in these landscapes, they create moisture gradients and fertility gradients that also contributes to this variation that we need to enhance biodiversity. Next slide. But it's not only natural processes that creates biodiversity, we can also help nature to create biodiversity. And here, I show 2 examples. One is about fire because we are nowadays very good at preventing fires to occur in the forest. We have not so many and not so large fires. And that is a problem for species that are totally dependent on fires. And we have different vascular plants that need fires for the seeds to grow. And we also have insects that are dependent on deadwood from fire to be able to complete their life cycles. So what we do in forest today is controlled burnings, to enhance the sort of structures and habitats that these species require. Another thing that was perhaps -- or it was very common like 120 years ago or 100 years ago in the Nordic landscape. That was cattle grazing in the forest, and cattle create small-scale disturbance that supports different species like particularly vascular plants like orchids, they need this kind of small-scale disturbance to be able to thrive in the forest. Next slide. Before leaving the part to Johan, I would like to mention something about the legacy of previous forest management, that is impacting the biodiversity we have today. And if we look back now in the Nordic Forest, as Jari said, it's growing very slowly, the trees. And that means that biodiversity is also developing only very slowly and it takes time then. And if we go 100 years back in time, we did selective harvests in the Nordic countries. We harvested the big trees and left the small ones behind and -- there was also a lot of deadwood then. And the forests became quite low productive. And then those forests were replaced with a large-scale forest tree operations that started in the 1950s, 1960s. And thanks to those operations we have today, very well growing forest in the Nordics but also, this was not good for biodiversities because we created large and also homogeneous forests. Since the 1990s, the forestry operations have changed a lot. And today, we have much more small-scale operations. And we do considerations to the natural features of the landscape. On this picture, then the color picture, you see a small stream and you see buffer zones along the streams with different tree species, mixed tree specious buffer zone and also in the harvested area, you see groups of retained trees. And for the future, these trees will contribute to the structural variation that the forest that is coming will be part of, so to say. But now I will leave the floor to Johan to talk more about the management practices to [ answer ] that's for biodiversity. Thank you.

Thank you, Annika, and good afternoon to all of you. My name is Johan Lindman. I am by education a Forester, and I have spent most of my career in forest management and daily forest operations in Stora Enso in different parts of the world. And I would like to share a little with you today how we now will work with continue to develop our biodiversity activities in the forest. So if I -- get the next slide, please. So as Annika said, biodiversity is very much about variation and variation in different scales. So when we want to work with biodiversity, we need to work in scales in the landscape in habitats and on species level and do that also throughout the life cycle of the forest. And then as you know, the life cycle of the Nordic forest is somewhere between 70 and 100 years. In the '90s, also as Annika mentioned, there was a radical change in how we do sustainable forest management and this we now see solid track records on the development of biodiversity as a consequence of that. But we also want now to increase our activities to be more active and also developed by the biodiversity management, not just to restore it. We foster this with collaboration with universities, NGOs and other stakeholders in society and, of course, driven by all our people out in the forest skilled, skilled people would love to be in the forest and have a big heart for nature and biodiversity as such. And I will give you a couple of examples on how we approach this. So if we take next slide. If we start with the life cycle of the forest, as Annette mentioned, we breed trees for good growth and for resilience in the future. But out in the forest, it's also about adapting the trees to the right places, time trees on the dryer place parts of the plantation areas and Spruce and Bergamot in the moist and fertile areas. And we also use native trees all the time. In the -- during the life cycle once the forest becomes 30 to 40 years old, it's time for thinning of the forest, and that's the second time when you can influence the biodiversity by selecting trees, keeping deadwood that has occurred and also adjust species composition and promote more to citrus trees into foresting that is a bit limited from beginning. And when you come to the final felling somewhere when the force is 70, 80, 90, 100 years old, it's time to do the planning for the harvesting to maintain or promote the variation in the forest and by that promote biodiversity keep certain pieces of the forest untouched and have special activities to develop more deadwood or retention trees in the hoisting sites. Let's look at the next slide. So monitoring and managing the forest is, of course, -- if we look at the left hand of the slide, it's, of course, dependent on the actual state of biodiversity in the forest. And what we many times have talked about on what has been a focus in setting aside areas, protect areas that they should not be managed at all. And this is, of course, a powerful tool, but it's not the only tool and we now want to widen the activities and combined this with much more active management of biodiversity. And that is, of course, then can be done in satisfied areas, but it mainly also occurs in the forest where we produce wood for commercial reasons and keep track on our operations so that the quality of operations do not harm biodiversity is one key area and especially then adding biodiversity management activities that promote, enhance the different features that we want to have on landscape level, on habitat level and for the species to live in this. So let's go to next slide. And Annika talked about forest fires, that is, of course, 1 element and that is a large scale element and it's a bit risky. It's at least I am a bit worried when I start a fire because it has to be ended in a good way. But promoting the variation in the harvesting sites is key. Decaying wood, different types of deadwood and to promote that, we can create high stands. We cut the trees of 3, 4-meter high and leave a stand that can gradually die and be a good place for insects and birds later on. Retention trees is another area where you keep valuable trees or you keep a group of trees to get shadow into the forest and for example, mosses that Annika talked about need to have more moister conditions in the forest. That's good for them. Some areas should not be touched at all even if they are small areas, they are not reserves, but they are smaller that we keep untouched to promote that type of habitat. And then soil and water, very important to protect the waters from damages and to clean streams, sometimes the faces can move better and more undisturbed and the same. So not destroying the soil as such which tracks and often machines and towards the water steam fields have barriers, buffers also different type of kinds. So these are our examples on how we do the increase the variation and add opportunities for biodiversity to develop further. Next slide. We have measured some elements of biodiversity historically, but we want to increase our activity in measuring biodiversity monitoring biodiversity with 2 purposes, of course, to understand what is the status, but also to learn and to develop our management activities even further and by that be adaptive in our way of working. And since this is a variation it is very, very important to describe and monitoring biodiversity in different scale. We're talking about landscape scale, we're talking about habitat scale, and we're talking about species in itself. And the landscape scale in itself is especially important because species move. They can move from one place in the forest to another place in the forest. And if there is sufficient variation in a landscape is also gives room for different type of species to move around in the face landscape. And that means that we have indicators for describing the variation on the landscape level. Habitat is a little what Annika showed on the picture with deadwood and water. It is the structure of the forest where the species can live and some species have some structure they prefer, other have other structures that they prefer, and we want a mix of different structures in the forest. And then when it comes to species and red listed species, et cetera, we want to monitor them as well. But even here, it's not necessarily only the red-listed species that are interest sometimes it's more valuable to follow quite common species, but as has been the effect that they are responding to change, so they can show that things are moving in the right direction. And that is also the species that we will follow going forward. Next. And this is -- I will not go into details in this, but this is the set of indicators and as said they are then selected carefully based on science on so what can be followed, a reasonable to follow-on landscape level, what can be followed on habitat level and what can -- the species will be selected and what is the quality of our work and all this, thus, together will give us a picture on the state. So biodiversity over time, the quality of our work and the active management that we can gradually develop, and we will follow this then over time towards 2050. Next slide, please. Going forward, there is, of course, opportunities for improving our way of working and improving our output, our efficiency. The first one is what we call precision forest or precision biodiversity. It is the possibilities with digitalization, remote sensing, laser scanning, data processing to be more data-driven and by that being more accurate, more granular in the data we have to work into forest and by that also be able to improve our management activities more efficient and more straight to the point. Future-fit forest that is about developing the tree breeding so that the trees that we grow will be growing well, but also be resilient, as Jari told earlier, to the change in the environment that we know will take place. And as science move forward, we will follow and be part of science development collaboration with universities and institutes to be able to improve gradually as we learn more. Finally, if we go to the next slide. So if we sum this up, come back to what Jari also mentioned, we have our ambition to 2050 to be biodiversity net positive. On the road to 2050, we have set up the long list of actions that we will work on and be able to deliver results out of that. And the focus is moving from the conservation preservation to active management and adaptive management based on the learnings that we get. We will use a set of indicators to follow and monitor the development, and that will also guide us in learning, and we will gradually be able to be more granular, more data-driven and more focused on how we can an efficient way promote biodiversity and manage biodiversity. And these learnings will, of course, be part of our service offering to private forest owners and promote their journey to become more biodiversity positive as well and sharing our knowledge transparently with all stakeholders is part of that journey. So with that, I will end my presentation here and hand over to Anna-Lena for the question-and-answer session. Thank you.

Thank you, everyone, for very interesting presentations. We will now start the Q&A session. The first question goes to Annika. Does Stora Enso have a preference for a biodiversity reporting framework? If so, which one and why?

A good question, but it's not that easy to answer. I wouldn't say that we have a preference for a specific reporting framework. I think that, yes, there isn't a generally agreed framework. At the EU level, we, for example, have the ALIGN project that is supposed to move into that direction and it has not really come up with anything concrete yet. We try to follow the development of different reporting frameworks and to be able to be part, I would say -- at the moment, I think we try to develop our own framework in a way with the 17 indicators Johan just showed and also comes there keeping track of species and how you do that in a good way. And I think, I mean, then field inventories are important, but then we also have new methods and new method developments to keep track of. I think this sort of field with how to measure biodiversity and how to report it, will develop tremendously in the upcoming 10 years, I would say. Thank you for a good question.

Okay. So we have the next question -- goes to Annette. What will your base line of biodiversity net positive be? Will it be a set of metrics from a particular year? Or how will it work?

Yes. Another good question. So the net biodiversity target is for 2050, so quite many years ahead, and that's some of the work that's ongoing now, that we will start measuring on. And I think what Annika alluded to as well was that this is not as well defined as CO2, for instance. So we need to understand together with others who are working with this field as we are, what the right metrics are and how do we measure -- how do we measure that eventually? What we know at this point is that it needs to be done, and that's why we've set this target. So a lot of the development ahead.

The next question goes to Jari. How do you want to reconcile increase biodiversity with the aim of increasing forest growth? Will you carve out more forest reserves? Or will you try to be more biodiverse on your entire forest surface?

Very good question. First of all, our firm belief is that with good innovation and research work supported with our digitalization work and sustainable forest management, so -- we can manage both parallel. In start up phase, of course, this will include certain investments that we need to do to enhance biodiversity. But then on the other hand, then biodiversity longer term is giving us even business opportunity as we have this unique opportunity that we are one of the -- we are global forest owner, one of the largest forest owners and wood suppliers. And these are then the services we can provide externally. So we believe we can parallel manage both. However, including some investment, but this investment will give us longer-term opportunities as well.

Thank you. The next question goes to Johan. Do you have any evidence as to the impact on the techniques you mentioned earlier? Have an aggregate forest growth? Can better biodiversity actually be good for yield?

Yes, it can, in some cases. I think it is -- building on what Jari just said, I think what we're aiming for is actually opportunity to increase the output of our activities. And that output can be that we get more forest growth out of the areas where we focus on forest growth, because we get more biodiversity on the areas where we focus on biodiversity mainly. But there are also areas where it's actually so that you can get improved biodiversity by active management and at the same time, get some forest growth out of that. One example would be that you have a certain area that has been set aside because you want to reserve the birch for it that has come after a fire. And after a while, the spruce starts growing and changes the environment. And then you can go there and take out the spruce and get some volume out and at the same time, promote additional biodiversity. So there are possibilities to combine these. And that is 1 of the examples of active management that we are gradually learning how to do better and more effective.

Thank you. We have another 1 for you, Johan. What is the proportion of natural regeneration in your forests? The cultivation and planting of young trees alone causes a certain CO2 footprint. Are these emissions taken into account in your calculations?

They are. First, they are taken in, if you look at the forest cycle, you look at the forest growth for the whole life cycle as such. And the proportion for us is -- that's where the vast majority of our regeneration is done by seedlings. That increases the growth and it increases the survival rate. However, during the life cycle of the forest, natural seeds also come in and add in to the seedlings. And in some spaces, for example, air -- dry areas or pine forest, there could be good opportunities for natural regeneration of pine trees under -- using seed trees of pine, but that is normally not our common way of doing it.

The next question is for Annika. How do you concretely monitor species level? Constant monitoring through camera, count or once-a-year sample examination?

I think it depends on the species you'd like to monitor, but many of the species that you sort of monitor like insects or lichens or mosses that are not that abundant, you need to do field inventories. But it's enough if you do it once a year because these species, the insects and so forth, and they're mainly out in the summer. So you need to go there and count them at that point. While mosses and lichens, you can sort of monitor also other times of the year because they're out there all the time, so to say. But there's different techniques depending on which species you'd like to monitor. And then you can also monitor some abundant species with the help of remote sensing, for example. We are getting towards monitoring of the field layer, the vaccinium bushes, the bilberries and lingonberries bushes with remote sensing. So then you could -- you could monitor it on a rather large scale, if you like, but it really depends on the species. And as Johan mentioned in his talk, we will try to monitor species, but we can't monitor all species. As I said, there's 30,000 species in the forest. So we need to choose which species to monitor, and we try to show what we call umbrella species: species, that if you find them, they are also connected to other species you may find because you have that specific species. So lots of different techniques will be used and are used already.

Okay, thank you for that. I suggest we continue on the same theme with another question for Johan on a similar subject. How are you planning to achieve accurate reporting on the indicators you outlined? Would it be spot checks or some drone using spatial technology? Especially also interested in how this will work in the young forest, where compliance is lower?

Techniques, similar answer as Annika had that depending on which indicator there is, we will use different techniques to monitor them. If you, for example, look at the age structure of the forest, you use the stand inventory that you have where you have different age structures for different pieces of the forest. When you look at the species composition, you can do that on site inventories or you can do it on remote sensing. And we use a mix of both of these. When you come to different habitat structures, they are at this point in time, not really possible to do by remote sensing all of them. Most of them will need field inventories and we are developing those ones as part of our monitoring of the wood properties in the forest. So even here, we will need to use a mix of tools: You need 1 tool if you're on landscape level, you have another tool if you are on a very granular level up in the forest. But all in all, of course, the technology is developing. So we will have opportunities in the future that do not exist today. And we put a lot of focus on developing new remote and technologies to be applied, as well as data processing of the data that we will have.

Thank you. We have a question for Jari. So pulp and paper mills use a variety of chemicals. How do you prevent water and pollution having a negative impact on biodiversity at Stora Enso?

Thank you for this question. And this is an area where our industry has been working very -- in a very deep level during past decades and our water treatment systems in our mills are well developed, and there is no pollution out from our mills. This is -- these are investments which we have done during the decades ago, and we are continuously further developing our progress. So this is -- I think this is pretty well under control at the moment.

Okay. Let's continue with another 1 for you, Jari. What proportion of your current forest do you think are already in a good position from a biodiversity perspective?

I don't have any exact figures. Maybe Johan better to answer there. So basically, when looking overall, we have considered biodiversity in our work already since '19 -- since '90s, like Annika was referring. So our existing situation is we are very satisfied with that. And we have local professionals working around biodiversity. And what we are now talking is to make even further steps there. I don't know if Johan wants to add anything on this.

I can build a little on exactly what you said, Jari and we can, for example, see on habitat level that we have the increase of deadwood that is measured by the natural inventories that is ongoing. We can see a clear increase there. We can see a clear increase in deciduous trees over the last 30 years. We can see a clear increase in bigger deciduous trees that are very important for some species. And we can see an increase on old forest. So a lot of these large-scale [ parameters, ] we have clear proof points on gradual development. And when we look at the red list, it's a quite stable situation on the different species group, as Annika mentioned earlier, with some positive development for some groups.

So if I continue from here, so a lot of work has been done. Still, we want to make significant step change there during the coming years and coming even decades. So we are not net positive yet, but we will be.

Thank you. I have a question for Annika. There's been a lot of talk about the beetles. Are they a threat to spruce only? And would growing more pine be part of the solution?

The bark beetles are a problem that we have been seeing. It has increased over the last decade or last 7 to 5 years anyhow. Much more in Europe than in Sweden, I would say, but dry summer weather is a problem that enhance the bark beetles. They like that kind of weather. And the bark beetles, we call them a natural enemy to the spruce trees and pine trees, the other main species we have in the Nordic forest. That, of course, has other natural enemies. All 3 species have different kinds of enemies, insects and pathogens that like to live from them. But what I would say is that the 3 species' composition in Southern Sweden may need to be adjusted, and we may need to have less spruce there in the future as we have been seeing very many years now with quite dry summer conditions down there. And pine, yes, that's part of the solution, but maybe we also need to look at other species, broad-leaved species and perhaps even what we call exotic species like Douglas Fir and so forth. But Stora Enso is really not operating in these exact areas. I wouldn't prescribe solutions for Southern Sweden, really. But I think this is what we deal with at the moment. We have a climate change and we have this interaction between the host species and the natural enemies. And we need to handle it. We need to deal with it, and we can deal with it with forest management. Thank you.

Thank you. We have another 1 for you, Annika, while we are at it. How do you ensure the tree species you innovate are nature positive as well as growing fast and being more resilient? Is there a risk of introducing alien species with unintended consequences?

Today, we're not using exotic tree species in Stora Enso or even in Sweden to a large extent. We use our native species. What we do is tree breeding. It's like we do also in agriculture or horticulture -- you breed blackcurrant, for example, is a good example. The blackcurrants you put in your garden today have been changed by breeding to make them resistant to the different [ dews ] that otherwise would attack and destroy the berries, the blackcurrant berries. So it's really breeding that we use to make the trees more adapted to the future climate. And trees, they really rely on day length and the seasonal period for their stack in the spring and how they become ready for winter in the autumn, and we can sort of also use this feature, this natural feature of the tree, and move the trees slightly northwards as the climate is changing to make the trees more resilient or future proof for the climate change. So there's tools we can use. But then to do this, we, of course, need to be able to do tree breeding. That's 1 thing, but we also need to do planting because we -- yes, the seedlings from the tree breeding programs are normally more adapted to the climate than perhaps the natural regeneration always is because the natural regeneration on the site is really as dependent on the trees you have at the specific site, so to say. So we have tools, but we don't really use exotic species. That's an important thing to remember. We use the native species for the breeding programs. Thank you.

Another question for you, Annika, on the same subject. Can you provide more details around your progress on the tree breeding such as how sizable is the benefit we can get from this in terms of growth rates and resiliency?

That is a difficult question and perhaps Johan want to fill in. But normally, we say that the breeding programs we've had so far in Sweden, they have improved the trees, so they now grow like 20% better or something, 20% or 30% better than previously. But -- it's also an interaction with the environment. You can always say that a tree would grow 20% or 30% better in an optimal environment, but the environment is never optimal. There's always a dry period in the summer or you have a cold spring or whatever. And then you can't really be sure how much better growth you have because of the tree breeding program than compared to the natural progeny from the site. But I think tree breeding is a very important tool to make the future or the forest future proof in a way, and we need to continue to develop tree breeding for this purpose. Johan, please. correct me if I'm not totally wrong.

No, you're absolutely right. But we can add that tree breeding is a repeated action. You do a breeding and mother and father and you get the children, so to speak. And then you select among that generation and then you do a new breeding and then you get a new set childrens. And at present in Scandinavia, we are on the third generation and planning for the fourth generation of breeding. What limits the breeding is that the trees need to flower to be able to set seeds and that is taking 50 to 20 years for a spruce or pine to do that. And for each of these generations, you gain some 8% to 10% increased growth, if that is what you were to measure -- or a better improved resistance to drought, for example. And if we are now in the third generation, we come back to that we are on 30% increased growth with the third generation seeds that we are able to use.

Okay. And another question on the same subject, your tree breeding and seeds developing. This is for Johan, sorry. Are you working on genetic engineering technologies such as the CRISPR?

If we separate between R&D and operations, when we do tree breeding, that is just pure tree breeding, then we are in the stage of introducing how to use genetic selection, similar to fingerprint selections that you can do in humans, to improve the speed of selecting the trees. You can -- we can look at the mother and further, see the genes, and then you can look at the next generation and see that the ones that have the same fingerprints as the first growing, they will most likely grow well in next generation -- by that, speeding up the breeding cycle. And that we -- and that is not genetic engineering. It's about utilizing the gene as markers for understanding the trees. Then when it comes to our R&D, we are working with a company called [ SweGen Genomics, ] where we see if we can transfer genes we have done that to eucalyptus. And we're also trying to learn this CRISPR process, as that was the question, which is not transferring genes but as cutting out genes or making genes not active. And this is not used in commercial, and we have said that we, at this stage, do not use this commercially. We do it on the research level, and we have some field trials in Brazil, where we have started to see how this can work. But this is a long journey. I think it -- we will not have anything that is commercial possible to use on, for example, in eucalyptus, at least in -- not until 5 to 10 years perspective.

Thank you. A question for Annika. It's about tape and the measure points within biodiversity. The data in this area is very scarce. What are, in your opinion, the best data points available at the global scale, for example, for red list index protected areas and naturally regenerating forest, et cetera?

Thank you. I'm not really sure if I totally understand the question, but I will try to develop a bit on this. I mean, data points on biodiversity. I think we have some data. I think it was Johan who mentioned about that we have been measuring deadwood for a long time. We have been measuring the field layer, vegetation, how it looks like and how it's connected to the tree layer and how it develops over time. And also, we have species measurements in Sweden -- in Sweden, in general, but also on Stora Enso land specifically. So there's lots of data to sort of build on when we move further. And now we want to step up on collecting more data and trying to find new ways of using the data. And I think that is where we are at the moment.

Another question for you Johan. Has Stora Enso considered an agroforestry strategy beyond cattle grazing?

Yes, we have. We have other examples of the agriculture in combination with honey production and with other agricultural crops in the forest. The most developed approach we have had was in a plantation in Laos, where we developed a combination of eucalyptus trees and rice growing combined where we grow rice between the eucalyptus trees in the beginning, the 2 first years of the rotation age. However, this plantation, we have now divested since it didn't have a strategic fit to our company anymore, but there are examples, but they really have to be locally adapted and fitting into the context and finding the right combination.

Thank you. A question for Annika. How do you balance the increase of deadwood and the risk of uncontrolled wildfires?

That's a very good question. And I think that's a problem that we need to be able to deal with. I think 1 reason why we don't have a deadwood in the forest so much today or why we haven't had it all the time is that the old foresters, they really like to removal deadwood to decrease the forest fire risk. So it is a risk to have more deadwood in forest for having larger fires and fires that are also more difficult to handle if they start. But since we know we need the deadwood, this is also something we have to deal with. And I think what we can work with here is really how to distribute deadwood in a forest landscape. And perhaps we want -- we don't want very deadwood rich forests close to communities or houses and things and also we may put deadwood in forests where the forest is a bit more moist. But of course, we also need deadwood in dry forest for the biodiversity and that is where we perhaps create risk for fires in a way. But we will learn as we go along, I would say.

Thank you. Question for you, Johan. When a tree is felled, the roots die, which has a large impact on the soils. So how do you balance the economic value of the tree against the soil impact from any forestry?

I'm not sure if I really grasped the core of the question. But I mean the wood we take out is the commercial wood that we use. And the roots, they will gradually decay and again, become nutrients in the soil. So it is -- and we do have practice to take up the stands in the soil in the Nordic forest.

Another one for you, Johan. Will reducing pesticides use be part of the biodiversity improvements?

At this stage, we do not use pesticides at all in the Nordic forest.

So another 1 for you on the beetles. What is the long-term implication for this for forest management?

The bark beetles?

Yes.

Annika mentioned the bark beetles as the natural enemies to the trees and that is absolutely correct. And dry summers has accelerated it. I think there is also in many cases, and especially in Central Europe, there is a forest management angle to the bark beetle attacks as well. And that is, if you remember the curve that Jari showed in the beginning of the presentation, that young forest are the ones that capture carbon. It also -- it's also an example that when the forest becomes older, it grows less, and it's also less resilient to attacks. And a lot of forests in Central Europe that has been damaged by the bark beetle has been too old from a forest management perspective -- overage forest, big trees with lower vitality. And I think that 1 element we will see going forward is that we will be more keen on and in the forest management, not to let the forest become too old because then the risks for -- or their resilience to different type of stress, could be drought, could the insects, could be fungus, is lower. And that reduces the growth and it also makes a lot of carbon when these trees are dying.

Another one for you, Johan. What is Stora Enso's approach regarding biosafety when potentially introducing new trees for future fit forests?

I think it goes firstly, as I said, we are working with native trees, and we are now working with trees that are adapted to the boreal forest. So I don't see, in that respect, the difficulty. And it's very key to see that the effect of the tree growing is a combination of its adaptation to the site. And if that is -- doesn't fit, the trees will not grow well and that will not be trees that we want to use. So I think it -- here, the production and the biosafety safety goes well, hand in hand.

Thank you. I have a question for Jari. How does Stora Enso determine its financial annual budget to invest in improvement of biodiversity? Do you compare that investment with any targeted return?

Yes, yes. So we are in a situation that we have not dedicated any budget for biodiversity investment. And as 1 example is that where we are investing at the moment is so-called precision forestry, where Johan was several times referring. So to improve the data and connect that to digitalization, analytics and even building [ distant win ] from forest. This will support our forest management but this will also support fire diversity management. So there are a lot of investments which will benefit both biodiversity and sustainable forest management. Then, of course, these 40 actions are including matters which will include investments. And we are now going forward, evaluating those. And like I promised earlier, we will be -- we will be open and report on our activity there.

Another question for you, Jari. Do the rates of other ecosystem service provisions also accelerate during the years '10 to '30?

I think that when looking until 2030, so ecosystem services, we can see already development there. Of course, again, I need to say that we are talking about forest, which is growing slowly. But when we are looking especially at different kind of services -- and services also to private forest owners. So we can see some tangible results already until 2030 for surely. Any quantification, I cannot give you yet.

And I have a question for Annette. The COP26 meeting in Glasgow is a hot topic. And do we have any comments about the outcomes regarding forest? There has been a lot of talks about 120 countries, representing more than 85 of the world's forest, committed to hold and reverse forest loss and land degradation by 2030.

Well, we can say very clearly that we support any action against degradation of forest. And we are increasingly having an active voice externally about this. This is, of course, when we have a target which is about enhancing biodiversity, we can't encroach on it, obviously. So this is of key importance that countries are coming together to make this kind of important target.

Thank you. A question to Johan. Can you please talk a little bit about your work on biodiversity outside the Nordics: in Latin America and China, and any potential challenges and opportunities in these regions?

Yes. Thanks for a good question. I'm happy to do that. Firstly, the ecosystems where we operate in Brazil and Uruguay and China, which are the ones where we have plantation operations at the moment, are very different from each other. And they are as different between each other as the difference towards the Nordics. So the approach is it has to be localized to the context. And in Uruguay and Brazil, in both cases, we had more work with a mosaic where you have fast-growing plantations in one part of the forest and areas where you focus on biodiversity development in another part of the forest -- different from the Nordics where these 2 effects are kind of combined in the same place in the forest. So where we -- in Brazil, we work very much, which is an area, where in the 1920s to 1940s, the Atlantic rain forest was logged down, and the landscape has been used since then for cattle grazing mainly. And what we do there is that we -- between the eucalyptus plantations, which is roughly half of the area, we restore and develop the nature reinforce coming back gradually, and also do that jointly with some agriculture and agroforestry practices. In Uruguay, there the historical land use is not -- rainforest is Pampas. Pampas is a savanna-type of landscape where it has been more of grasslands. And that means that in the areas, that roughly 65%, 70% of the area is eucalyptus and the remaining part is grassland areas. And there, we promote the utilization of the grassland, and we also have, as someone earlier had in a question, opportunities to have cattle both on the grassland but also inside our plantation, which is favorable for the cattle. But also very favorable for us because it reduces the fire risks in the eucalyptus plantations. When we come to China, there, the feature of the operations in China is 2-folded that are very different from Brazil and Uruguay. Firstly, that it's a very hilly area. And secondly, that the population density is very, very high. And that means that the combination there is a very intensive land use in that respect. And the land becomes flat enough for agriculture, there is agriculture in the area where it could be ducks or hens or other type of cattle. And then in the more hilly areas where we have our eucalyptus plantation there, we combine that with a similar type of border zone and variations that I showed for the Nordic forest that you leave deadwood that you have buffer [ so ] towards water and that you try to promote in that scale biodiversity. But due to the dense population, it's not possible to have big areas where you promote just biodiversity because it will be used by the local people for other purposes.

Thank you. I have another 1 for you, Johan. Does deadwood release CO2 to the atmosphere while degenerating? If so, how much?

Yes, everything that decays is leaving CO2 out to the atmosphere. That's a part of nature. How much depends on how much deadwood and how fast it decays. So I cannot give a figure on that. But at the same time, the forest where the deadwood is laying is absorbing carbon at the same time as it grows. It's part of the integrated cycle.

And back to Jari, a question for you. Sustainable wood is seen as a good alternative for concrete as a building material, but is there enough wood in the world?

Thank you for these questions. So in my previous role when I was heading Wood Products and also Building Solutions, so I got this question each time I need to say, when there were any interview. Forest is growing more than we are using today, especially if we are looking at it from a European perspective and also how we use wood is improving continuously. If you're looking at the fact that -- if you're looking at high-rise buildings, so there has been high-rise buildings since Roman times. So maybe 2000 or 3000 years -- but high-rise wooden building there has been only 20 or 30 years. And this is 1 area where we are putting a lot of efforts to improve the efficiency and material efficiency of those solutions. So those are efficient already today, those are highly sustainable, but we have still a possibility to make those even more efficient. So I -- my firm belief is that, yes, there will be enough wood available for wooden construction.

And another 1 for you, Jari. Will you create a biodiversity label or product information offer to enhance sales in environmentally-driven markets you are developing such as massive timber wood construction, as we were just talking about?

Thank you for a great business idea and the -- to be serious, so -- and especially when you look at the wood and construction side. So we have had already, since years, development regarding carbon footprint. If you're looking at different municipalities who are [ piloting ] like schools from our wood, so we have been offering making offers not just what is the euro price, but also what is the carbon footprint of coming building. And I expect that something similar will be developed going forward regarding biodiversity. And then, of course, if and when we are successful in our work, this will give a great advantage in marketplace. And of course, we have already deep collaboration and cooperation with many of our customers around the field of biodiversity.

Thank you. And we are running out of time. So the last question goes to Johan. Can you remind us of the major critique points of the EU regarding Nordic forestry management, what is the EU getting wrong? Where does it have points?

That is a very good question. And since we are running out of time, I will try to be very, very short. But I think the difficulty with the European Union proposals here is that -- the aim -- they have a good aim. They want to promote biodiversity. They want to mitigate climate change in connection to that. But when they come to finding the solutions, they do not acknowledge that the forest in Portugal is very different from the forest in Romania, which is very different from the forest in northern Finland. That means that the solutions to promote biodiversity has to be adapted to the local conditions and this is where European Union, one way try to find a one-size-fit-all solution that most likely will not fit anyone except maybe the area between Lübeck and Berlin.

Thank you. Thank you to all the presenters. You've done a really good job, and thank you all people who have participated in this event. They really appreciate all your good comments. I know that there are a few that we still haven't been able to answer due to lack of time, but please send us the question and we'll make sure we answer every single one of them. And this is a starting point for our engagement with you on this subject. And we really encourage and welcome an open dialogue with you. So please, you can find the contact details to Investor Relations on our website, storaenso.com. Thank you very much again, and I really hope it added a lot of value to all of you. Thank you.