Globalisation and the Finnish forest sector: On the internationalisation of forest-industrial operations
ARI AUKUSTI LEHTINEN
Lehtinen, Ari Aukusti (2002). Globalisation and the Finnish forest sector: on the internationalisation of forest-industrial operations. Fennia 180: 1– 2, pp. 237–250. Helsinki. ISSN 0015-0010.
This article focuses on the most recent internationalisation of Finnish for- est companies. The profiles of the major companies are analysed. A ‘world map’ is drawn to illustrate the gradual formation of forest-industrial spac- es in three scales: the articulation of Finnish (national) forest interest is related to the strategic openings of the Finnish forest companies within European (continental) and global (transcontinental) contexts. The suggest- ed world map covers both the active exporting of the ‘Finnish model’ and the subsequent new location of Finland in the international networks. Both material and symbolic dimensions of the process are highlighted. The slow dynamics of the paper production is set against the current fluidity of so- cietal demands that are fed by intensifying competition between the lead- ing companies, profit maximation among the shareholders, and keen steer- ing by globally aware environmentalists and consumers. Finally, the eco-so- cial consequences of the contested globalisation process are addressed by ex- amining the most controversial signs and signals. These include size ranking of the companies, profit hunting, image and identity politics, and product cer- tifications. The theoretical framework is based on the political-ecology litera- ture inspired by actor- and context-specific approaches. Hence, the aim is a simultaneous analysis of both material and symbolic changes in forest-indus- trial practices.
Ari Aukusti Lehtinen, Department of Geography, University of Joensuu, P. O. Box 111, FIN-80101 Joensuu, Finland. E-mail: [email protected]
Material and symbolic forests The specific goal is to analyse the eco-social interdependencies and consequences of the glo- balisation of the forest industry and trade. On the The intensive internationalisation of the forest in- one hand, these are related to the growing de- dustry is currently rearranging the interrelations mands of profit maximation and, on the other between the leading companies and their suppli- hand, to widening sustainability demands and ers and customers. The governance of the com- concerns of justice. Theoretically at stake is the panies is also under redefinition: shareholder in- contested rearticulation of local–global interfac- terest increasingly conditions the managers’ de- es and nature–society relations. Both are informed cision-making. The entire societal setting of the by a conceptual refocus on the interrelations be- forest industry has therefore changed, both at the tween the material and symbolic spheres of our level of material production and in terms of finan- socio-spatial existence (e.g., Peet & Watts 1996; cial performance and image profilation. Accord- McAfee 1999; Murdoch et al. 2000; Zimmerer ingly, this article outlines the basic forest-indus- 2000). The empirical material is limited to the trial restructuring in connection to the rise of sym- Finnish forest-industrial companies that are cur- bolic and speculative values in paper production rently re-working their historical embeddednes in (see, e.g., Collins 1998; Sandberg & Sörlin 1998; Finnishness and Finnish forest resources. The anal- Saether 1998; Kortelainen 1999a). ysis focuses on the years 1990–2000. 238Ari Aukusti Lehtinen FENNIA 180: 1–2 (2002)
The article’s starting point underlines the seri- The ‘qualitative turn’ within the forest trade is ousness of the current eco-social problems. The taking place in the negotiations concerning the challenges of globalisation are real and acute, and central criteria of credibility and indicators of sus- demand collective and effective reforms in soci- tainability. Concretely, the macro-level merger etal practices. These challenges can no longer be logic follows size and credibility rankings of the overlooked and labelled as ‘trendy’ constructions key actors. The stock markets are sensitive to the of eco-alarmism. This does not, however, change behaviour of the companies, and the markets the fact that ecological and social imperatives are ‘read’ the credibility labels of the suppliers. New human derivations and therefore loaded with a and contested measures of forest certification myriad of motives. There is no way back to the have been introduced and publishers and media modern(ist) worldview based on solid divisions houses are now willing to confirm the sound between ‘us’ and ‘them’, the ‘internal’ and the background of the paper they use (Fürstner 1996). ‘external’, or the human and non-human realms Finally, the disputed guarantees confuse the con- (Conley 1995; Whatmore & Thorne 1998; Lehti- sumers. The third frame view of the article thus nen 2000, 2001a). argues that the main forest-industrial actors are Environmental problems, violations of human increasingly conditioned by the (more or less pub- rights, and other dark sides of modernisation can lic) negotiations of credibility. These negotiations, no longer be excluded from global and local prac- while surfacing as economically significant, turn tices (see Brown & Flavin 1999). This is the first into forums of hegemonic competition. This com- and the most fundamental frame view of this arti- petition is about the formulation of the primary cle: it is here, in between and across the domi- form and content of the negotiations, including nating ways of knowing, that new openings and the subsequent optional distribution of loads and radical inclusions are needed. But difficult prac- benefits defined in the reached agreements. In tical challenges follow immediately: How to make known examples, the initial eco-social worries the inclusions deemed necessary? On what basis have turned into a ‘game’ of relational positions should the necessities be ranked? How to cope and benefits and have resulted in an illusion of with the consequences of these inclusions? How strengthening eco-social viability (see, e.g., Mc- to evaluate the relevance of the myriad of already Afee 1999; Tirkkonen 2000). Again, difficult ques- existing critical eco-social signals? tions emerge: How to learn to identify the con- The task seems paradoxical. The critical voices tinuously changing conditions and rules of this emerge from experiences of alarming material ‘game’? On what basis should the concerns with shortcomings, but they turn into qualitative at- ‘good’ and ‘bad’ motives be distinguished? How tributes when integrated into trade routines as ex- to avoid processes where the judges judge their penses or guiding rules. Sustainability, green cer- own cases? How to make an ethical argument tificates, organic farming, just forestry, etc., are economically convincing? ideal models that aim at changes in human be- The operations and negotiations are document- haviour. But they are also signals in the market ed in this study with the help of geographical scal- because they seek to measure the viability of the ing. The ‘Finnish model’ of forest-industrial mod- production process and the value of the end prod- ernisation is briefly described as a historical con- uct. This leads to the second frame view of the text whereupon Europeanisation (since the mid- article: the forest-industrial actors (as economic 1980s) and globalisation (since the mid-1990s) actors in general) are now more frequently forced have developed as new phases of activity for Finn- to integrate qualitative aspects into their produc- ish companies. All these phases, however, are in- tion and trading profiles. The direction of this tegrally characterised by strong interdependencies change is currently under heated contestation. The across these dominating spatio-temporal scalings (research) questions hence are: How to secure the and marked by rapidly evolving discursive con- validity of information concerning the basic criti- tents. This is the fourth and final frame view of cal material conditions in our local–global world? the article: the forest-industrial actors and activi- Especially, how to secure the validity of the tran- ties seem to become evaluated in connection to sition from material to qualitative criteria? How to the spatio-temporal scales they are primarily iden- identify and evaluate the signals of the actors and tified with. European companies differ from glo- target groups? How to confirm that even the most bal companies and this makes a difference, e.g., marginal(ised) but concerned voices will be heard? in merger negotiations. This tends to confirm and FENNIA 180: 1–2 (2002)Globalisation and the Finnish forest sector 239 legitimate the hegemonic historico-spatial prac- 29.4 percent in 1999. The Finnish export profile tices and, moreover, the direction of reach: glo- nevertheless still continues to be exceptionally balisation becomes the primary goal and even the forest-dominated. In other boreal countries with guiding ideological discourse. The scaling appears parallel forest-industrial histories the level of ‘for- as a construction of reference fields (for the com- est dependency’ has stayed below 20 percent of peting actors) and it proceeds through merit and the exports. The respective numbers were 14.9 status assessments. ‘Europe’ (or ‘Finland’), for ex- percent in Sweden and 16.7 percent in Canada ample, varies according to each discursive field: in 1996 (Avain... 1998). ‘Cultural Europe’ differs from ‘Fort Europe’ that Most of the world’s forest-industrial production refers to political boundaries, and Nokialand can is limited to domestic markets, but Finland has hardly shadow its Finno-Ugric roots (although this oriented towards export trade. The focus is on the may be easier for individual companies). A con- core countries of the European Union: France, tinuous ideological competition rages between, Germany, and Great Britain. In 1999, circa 90 and within, the dominant spatio-temporal scal- percent of the paper produced in Finland was ex- ings. ported. Only Sweden achieved almost the same The ‘Finnish model’ illustrates the role of this export level (84%). In Canada, the export share inter-scaling in forest-industrial practices. The suc- reached 75 percent, while in other paper-produc- cessful export of this model during the early years ing countries it stayed much lower: slightly be- of current globalisation seemed to essentially low 50 percent in France and Germany and be- change the model itself. Finland the Forest State low 10 percent in the USA and Japan. South Ko- turned into an integral part of the Greenbelt of rea reached the export level of 32 percent in 1999 Northern Europe (Lehtinen & Rytteri 1998). Simi- (Forest industry… 2001a). larly, the European Union looked significantly dif- The Finnish emphasis on export is increasingly ferent in the new context – more bureaucratic and a matter of scaling. In the framework of the Euro- regulative – from inside than from outside, as pean Union, export and import activities between Casimir Ehrnrooth (1995), the then leading the EU countries are part of the internal trade. The spokesman for Finnish forest industries, strongly broader spatial view brings up new issues of trade, argued. In addition, the global reach of the forest modifying the coding of forest statistics. It also industry suddenly turned into concerns about lo- makes comparisons with federal Canada easier. cal sensitivity. The companies grew big with their Consequently, the EU scaling brings along sever- transcontinental operations, but were confused by al important changes in forest strategy formula- regional cultural variations and local specificities tions. For example in 1995, when Sweden, Aus- (Hornborg 1998; Ovaskainen et al. 1999; Miet- tria, and Finland entered the EU, the Union be- tinen & Selin 1999). came a net exporter of forest products and the sta- In the following, Finnish forest-industrial firms tus of forest-industrial policy rose within the Un- are analysed within the described framework. The ion. Moreover, Finnish forest experts have devel- phases of internationalisation (export phase, Eu- oped Pan-European Forest Certification (PEFC) cri- ropeanisation, globalisation) are mapped and teria for forest management. This has also evaluated as challenges to both Finland and the strengthened the ‘continental scaling’ of forest- companies, as well as to the new actors and are- based trade (Hazley 2000). nas of the evolving ‘game’ scene. During the past few decades, the Finnish forest industry has been internationalised by expanding its production and ownership abroad, especially Exporting Finland in Western Europe, but also transcontinentally. In 2000, 43 percent of the paper and board produc- During the twentieth century, Finland became in- tion capacity of the Finnish companies was still tegrated in the globalising economy as an export- located in Finland, whereas 44 percent was based er of forest-industrial products. The process inten- elsewhere in Europe and 9 percent in the USA sified between the World Wars and was not chal- (Forest industry… 2001a). In comparison, the pro- lenged until the rapid rise of information technol- duction capacity abroad was circa 10 percent in ogy industries in the end of the century. The share 1980 (Lammi 2000: 33). The rapid internationali- of forest products in total exports fell from 37.6 sation is due to an industrial restructuring which percent in 1990 to 28.9 percent in 1997 and to has ranked three Finnish forest industry compa- 240Ari Aukusti Lehtinen FENNIA 180: 1–2 (2002) nies to the top-twelve list of largest forest indus- has been a repeated problem. Periods of overca- try companies in the world (Stora Enso, UPM- pacity become reflected as fluctuations in price Kymmene, and Metsäliitto/M-real) (Fig. 1). levels and profitability that worry the investors. The rapid expansion and top ranking of the This is contrary to the earlier Finnish national con- major Finnish companies owes a lot to the nation- text characterised by less critically supported ex- al subsidies prior to the EU membership. The suc- pansive investment strategies (Moen & Lilja 2001). cess was made possible by a combination of nu- The current competitive internationalisation is merous collaborative linkages and risk-sharing in a state of discordance. The large companies are mechanisms within the national context that searching for firm (long-term) market positions strengthened the competitiveness of the compa- and even leadership in selected product groups nies. The companies themselves simultaneously through mergers and by investing in the renewal created a successful outward-looking path by of capacity. The investors evaluate every move as broadening their scope from pulp and newsprint a possible signs of eroding (short-term) profitabil- towards coated papers, liquid packaging board, ity. Hence, the companies need to address both and speciality papers. This unique state–compa- the material and symbolic dimensions of paper- ny combination – the ‘Finnish model’ – was the making. They need to take risks in order to main- background recipe for the global launch during tain or enhance their status in the markets, but, the late 1990s (Näsi et al. 1998; Koskinen 1999; simultaneously, they have to appear as attractive Donner-Amnell 2000; Moen & Lilja 2001). global corporations with market power. The risks Simultaneously, the structures of company own- of rapid fall in the market are numerous. They ership went through a major transformation as emerge increasingly often from the speculative part of the expansion. Global investors, seeking side of trading, as is typical of the current age. maximal profit, emerged as influential actors of The international sphere of speculation is a sig- forest trade. The shareholders followed the com- nificant element behind the current Finnish for- pany investments keenly, bringing a new layer of est-industrial policy and an integral part of the sensitivity to the decision-making. During the past company dynamics as an outcome and a price of few years, the companies have faced a stronger speeded outward orientation. In the spring of signal to slow down the speed of capital alloca- 2000, the share of foreign (that is, non-Finnish) tion. Behind this pressure have been internation- ownership in the three principal Finland-based al investors who react quickly against risky moves (‘Finnish’) companies ranged from Stora Enso’s 70 of the firms by selling their shares and thus low- percent to UPM-Kymmene’s 59 percent and Met- ering the stock prices. The setting is crucial to a sä-Serla/M-real’s 35 percent. It is evident that the capital-intensive industry where over-investment American-style ‘shareholder ideology’ has arrived
Fig. 1. The world’s largest pa- per and board producers in the fall of 2000; per capacity (Forest industry… 2001a; Lilius & Rantanen 2000). FENNIA 180: 1–2 (2002)Globalisation and the Finnish forest sector 241 in European economies, putting considerable pres- it seemed that the Finnish forest map was to be- sure on the companies to improve their financial come exclusively Western European, with strong attractiveness and short-term profitability (Saasta- regional concentrations in Germany, Great Brit- moinen 1999; Lammi 2000; Moen & Lilja 2001). ain, and France (CD-Fig. 1). This was especially true till 1997. In Europe, outside Finland, UPM-Kymmene Finnish companies in Europe (United Paper Mills-Kymmene Inc.) has become an important producer of coated magazine paper The major Finnish forest companies and the state in Wales and Scotland, whereas its operations in clearly sought international competitive positions northern Germany are based on fine paper pro- actively. The societal support was considered nec- duction. In addition, the company is an impor- essary among those involved in national forest- tant producer in France, where it concentrates on sector politics. Consequently, the companies in- pulp, newsprint, and fine paper grades. UPM- tegrated in the EU ahead of the state of Finland. Kymmene’s ‘French strategy’ has faced serious The initial connection was, of course, the Finnish drawbacks, however, partially as a consequence export orientation, but the actual contextual of the above-mentioned trade confrontation be- change took place during the 1980s in the form tween Finland and France. A withdrawal from of expansive continental ownership of production magazine paper production near Rouen in 1997 capacity. lessened the company’s visibility in the country. The Europeanisation was not an easy process Enso (Enso Gutzeit Inc.) merged with the Swed- for the Finnish companies. The northern newcom- ish Stora (Stora Kopparberg Inc.) in 1999. The new ers were considered outsiders which played with company immediately won a place among the unfair rules, e.g., gained benefits from devalua- three leading paper and board producers in the tions of the Finnish currency (markka) and kept world. Both companies were among the world’s the domestic production costs (i.e., timber and en- top ten forest companies already before the merg- ergy prices and employer expenses) at an artifi- er. In Europe, Stora Enso has a strong position in cially low level. The most heated debate, howev- Finland, Sweden, and Germany. During the er, was related to overcapacity. The supply of fine 1990s, before the merger, Enso had actively in- paper, magazine papers, and sawn timber had vested in Germany. It opened a newsprint unit, exceeded the demand for several years during the supplied by recycled fibre, in eastern Germany in early 1990s, resulting in serious reductions in 1994 and bought a newsprint and magazine pa- price levels and in unused capacity of the mills. per unit near Karlsruhe a few years later. Stora In France, especially, the paper producers and Enso also owns a sizeable fine-paper unit in the sawmill managers felt that their economic space Netherlands. Sawing, traditionally a central ele- was eroded unjustly, and the Finnish ‘invaders’ ment in Enso’s domestic strategies, now has an- faced protectionist governmental reactions. The other base in Austria. Stora Enso has activities also main Finnish forest exporters were therefore in- in the Baltic countries and Russia. A branch unit vited to negotiate with the EU in 1994 in order to Pakenso has invested in cellular board production solve the serious structural overcapacity problem in Tallinn, Riga, and Palapanovo, south of Mos- (Laitinen & Jokelin 1994). cow. Stora Enso has joint operations with its part- The setting changed in 1995, when Finland en- ners in the Karelian Republic. There, Ladenso is tered the EU together with Sweden and Austria. an important purchaser of timber for the pulp and The era of domestic devaluations of the Finnish paper plants in eastern Finland. markka was over and the EU became a self-suffi- Stora Enso also inherited Stora’s earlier Europe- cient exporter of paper. Soon afterwards, the EU an operations, including eight major paper or founded a central office for the coordination of board plants in Sweden and five large pulp, pa- the forest-industrial benefits. It also specified the per, or board units in Germany, Belgium, and role of forest-based industries as one of the trad- France. In addition, the pulp production at Stora ing policy emphases that could benefit from struc- Celbi in Portugal is strategically important for the tural funds and internal research programmes company. The supply of wood for Stora Celbi is (Hazley 2000). based on eucalyptus plantations (Stora… 1998). The leading Finnish forest companies achieved Metsä-Serla/M-real is another important fine- a firm hold in the continental market. For a while paper producer in Europe. After the purchase of 242Ari Aukusti Lehtinen FENNIA 180: 1–2 (2002) Swedish Modo Paper in 2000, it became a conti- Transcontinental operations nental market leader in this grade (Modo Paperin osto… 2000). Modo Paper has large fine paper The active globalisation of the Finnish companies units in Sweden, Germany, France, and Austria. is a novel phenomenon, but it was not launched The merger was originally accompanied with the without earlier contacts and experiments in trans- plan to sell the production of tissue papers to the continental production. Past experiences evident- Swedish SCA (Svenska Cellulosa Aktiebolag), but ly had a significant influence on the new strate- the EU Commission prevented this: the SCA’s mar- gies that varied from one company to another. ket share in tissue papers would have grown too The overseas success of Ahlstrom Industries was large. The setback caused serious liquidation due to a strict concentration on special papers, problems for Metsä-Serla/M-real and it seems to mainly industrial filters. The strategy was based have forced the company to withdraw form mag- on flexible customer orientation. This recipe has azine paper production in southern Germany. proved useful in Europe, Brazil, South Korea, and During the latter half of 1990s, Metsä-Serla the USA. Among the other Finnish companies, achieved a visible role in the production of coat- only Myllykoski has long-term overseas experi- ed magazine papers in Germany, thanks to the ence. In 1980, Myllykoski bought a paper mill cooperation with Myllykoski Paper. This alliance (Madison Paper) in Maine, USA, following a cus- is now under reconsideration (Iivonen 2001). tomer’s demand: The New York Times, after acci- Myllykoski Paper, a family-owned company dentally discovering the special quality of Myl- from southern Finland, has succeeded in keeping lykoski’s magazine paper, sought closer coopera- the ownership in the hands of the Björnberg fam- tion. Myllykoski is still the local supplier to the ily. This has secured some entrepreneurial free- journal’s special Sunday issues. After two decades dom and elasticity: decisions are made accord- of low profile in the USA, Myllykoski announced ing to managerial aims, not for attracting broader a new move in 2000: Madison Paper bought an ranks of shareholders (Rantanen 2000; Iivonen old (recycled fibre -based), bankrupt newsprint 2000a). In comparison, Metsä-Serla/M-real is very unit in Chicago. As in Maine, the aim is to replace dependent on the cooperative organization of the old machinery and invest in the production Finnish forest owners (Metsäliitto) that aims at of coated magazine papers (Iivonen 2000b). keeping the major shareholder’s voice heard in Initially, however, Enso was the first Finnish for- the company (Seppänen 2000). est company to start transatlantic cooperation in Ahlstrom Industries has a highly specialised wood processing. The project, begun already dur- production profile and a well-established trans- ing the 1960s, gradually turned into Enso’s major continental production network that deviates ownership of Eurocan Pulp & Paper in British Co- strikingly from the volume-based strategies of the lumbia, Canada. The company concentrated on other companies. Ahlstrom’s notable paper units saw milling and kraft paper production. After eco- in Germany and northern Italy produce industri- nomic and political setbacks, Enso withdrew from al filter papers, package covers, and some other British Columbia in the early 1990s. The difficul- special paper grades (Ollikainen 2000). ties were partly related to the growing local envi- The Europeanisation was generally a natural ronmental concerns regarding the company’s and necessary step for the Finnish companies. clear fellings (Brax 1991). The merger with Stora New limits and risks soon emerged, however. This in 1999 nevertheless brought Enso back to trans- was primarily due to the emerging stronger regu- atlantic paper processing: Stora had long experi- lative interests of the EU. In the eyes of the forest ence in Eastern Canada (Hornborg 1998). The industry, the Union had become a bureaucratic new Stora Enso soon expanded over to the US unit that did not develop enough its competitive markets by purchasing Consolidated Paper (in advantages within the global spatial division of 2000), an influential actor in the Great Lakes area. labour (Ehrnrooth 1995). The last years of the At the time of the merger, the combined enter- twentieth century consequently witnessed a new prise was announced to be the world’s largest pro- emphasis on transcontinental relations and oper- ducer of paper and board by capacity, reaching ations. 15 million tons per year of mainly magazine pa- pers (Lindberg 2000). Stora Enso’s inheritance from its constituent companies included Stora’s footholds in Canada, FENNIA 180: 1–2 (2002)Globalisation and the Finnish forest sector 243
Brazil, and China, and Enso’s orientation towards pion International) hence turned into a serious Indonesia. In Borneo, Enso has a 20-year project backlash for the Finnish company (Lilius 2000a, of tree plantations (mainly Acasia) that utilises the 2000b; Meadows 2000). logged areas of rain forests. The cooperation is This backlash forced UPM-Kymmene to recon- organised as a joint venture called PT Finnatara sider its transatlantic strategy. It is therefore likely Intiga. Its owners are Inhutani III, the state com- that the future steps become smaller and better pany of Indonesia (40% of the shares), Gudang prepared. The aim will be the same, however: to Garamin, with a Chinese background (30%), and win a secure position in North America. This was Enso (30%). Their aim is to establish a pulp plant in fact confirmed in the early fall of 2000 when on the island in the near future. Stora Enso also UPM-Kymmene announced a purchase of Repap owns 20 percent of the shares of Advanced Argo in New Brunswick, Canada. Repap was a deeply which processes eucalyptus plantations into pulp indebted company that had been for sale for in Thailand. In addition, Stora Enso controls half years, but its main product, magazine paper, suits of the shares of a large pulp plant in Aracruz, Bra- well the purchaser’s profile. zil, which is planned to be expanded in the near UPM-Kymmene initiated its Southeast Asian future. This cooperation is a signal of the rising operations also in 1997. The company announced global importance of pulp production in South a cooperation plan with Asia Pacific Resources America (Nousiainen 1996; Kuvaja et al. 1998; International (April) in fine paper production and Forest industry… 2001b). marketing. The initial plan included a joint foun- During the last few years of globalisation, the dation of a paper unit close to a pulp mill in Riau most active and visible of the Finnish forest com- in Sumatra, Indonesia. It was rejected, however, panies has been UPM-Kymmene that had practi- due to the economic recession in Southeast Asia cally no overseas experience before 1997. Per- during the last years of the century. The plan was haps due to the limited experience, its leaps over also severely criticised by a network of local and to Southeast Asia and the USA have resulted in global rainforest conservationists (Kuvaja et al. partial drawbacks, and the real transcontinental 1997; Miettinen & Selin 1998), possibly affecting breakthrough had not taken place by the spring the withdrawal. The April cooperation, however, of 2001. The North American strategy was initiat- resulted in UPM-Kymmene’s ownership in a fine ed by purchasing a paper mill (Blandin Paper) in paper mill near Shanghai, China. Its future suc- Minnesota in 1997. This move strengthened the cess is highly dependent on China’s political sta- company’s leading global ranking in the produc- bility. tion of coated paper for magazines, although the The Southeast Asian project has tied UPM- purchase was expensive and loaded with risks due Kymmene into economic cultures and resource to old machinery, low profitability, and supply policies that differ from the Western ones. This problems. The purchase, however, made UPM- makes the company vulnerable to risks that arise Kymmene an internal actor in the US markets from the culture gap. The most worrying issues are (Miettinen 1997). related to undemocratic political practices, hu- The landing of UPM-Kymmene in the USA was man rights, and the continuing exploitative dev- soon planned to be followed by a merger with astation of rain forests. For a Western company Champion International, a company not much this means entrepreneurial risks, but also new smaller than the Finnish partner. The two compa- marketing problems due to the rising global nies’ boards had already agreed to the merger, but awareness of the consumers. it became seriously contested by International Pa- The most transcontinental of the Finnish forest per, the world’s largest forest industry enterprise. companies is Jaakko Pöyry that has specialised in Even more seriously, the shareholders and the mill forest-industrial consulting. In the late 1990s, the communities expressed their worries over the company had offices in over 20 countries, with merger with a European company. After a few dra- regional clusters of consultation in South Ameri- matic weeks in the spring of 2000, International ca, Europe, Southeast Asia, and the USA. Jaakko Paper made a better offer, leading the sharehold- Pöyry concentrates on country- or area-specific ers of Champion International repeal the earlier “Forest Sector Master Plans” that cover consultan- agreement. The widely publicized merger plan cy from forestry practices, wood processing, and that included a symbolically significant name logistics to market and management development change (UPM-Kymmene was to become Cham- with an aim at expansive pulp and paper produc- 244Ari Aukusti Lehtinen FENNIA 180: 1–2 (2002) tion. The Master Plans are programmes for inten- The wilderness role of Finland within the EU sifying wood mobilisation and paper production has added a new dimension to the setting. The in the client countries. Recent clients include Bra- EU’s environmental regulation that emerges, e.g., zil, Nepal, Russia, and many of the Southeast in the form of Natura programmes and Greenbelt Asian countries. The programmes have functioned visions (CD-Fig. 2), functions as a risk signal to as tools for introducing Finnish expertise to the the companies. They therefore invest abroad, be- clients. In many cases, the Finnish companies spe- yond Europe. This brings along the risk of slower cialised in different branches of forest expertise modernisation rates in domestic production tech- (from reforestation and tree plantations to the nology. The problem of stagnation in wood whole chain of forest industrial machinery, such processing design therefore arises. The companies as forest tractors, entire plant units, and integrates) still hold a key position in national forest econom- have initially arrived in the target countries as sub- ic policy, however. This tends to keep Finnish for- contractors of the Master Plans. Both the United est-industrial activities deeply integrated in the Nations Development Programme (UNDP) and international division of paper production. The the Finnish development cooperation agency export orientation is thus structurally determined, FINNIDA have supported this cooperation finan- and especially the country’s leading forestry prov- cially (Ulvila 1997; Lehtinen 1999). inces remain vulnerable to fluctuations in pulp and paper markets. This translocalisation process is not only a mat- Local and global Finland ter of changing roles within a broader spatial di- vision of labour. It is also loaded with symbolism. The gradual globalisation of the forest sector is For example: precise identification of the largest loaded with risks and drama – at least if observed forest companies has become difficult. During the from Finland, a country with a strong historical era of globalisation, it is misleading to talk about dependency on forests. The Finnish know-how ‘Finnish’ companies when referring to those com- spreads in different parts of the world and the panies from Finland that are largely owned by US ‘Finnish model’ is applied to joint projects. The American investors and whose central production overseas success and visibility of Finnish forest capacity is located abroad. This confusion is ob- companies is undoubtedly one central element of vious in the names of the companies and the con- the Finnish globalisation. The world map of for- tested renaming during mergers and acquisitions. estry is made partly by Finnish expertise. Often the purchaser ‘swallows’ the one purchased The forest-based globalisation has a dark side, and its name or trademark simply disappears off however. The leading companies can no longer the market. Some names, however, are combina- integrate any local or national premises into their tions or compromises of names that incorporate strategies, as they did earlier (Koskinen 1999; Kor- the past of the merged companies. Stora Enso has telainen 1999b; Rytteri 2000). This would now a Swedish-Finnish background and even some cost too much for their competitiveness. Similar- specific localities can be distinguished behind the ly, Finland’s position has changed during the on- names: Stora Kopperberget originates from a min- going transnational networking of paper produc- ing locality in central Sweden (Axelsson et al. tion and company ownership. In the new spatial 1980), whereas Enso is an industrial town in the division of labour, Finland might keep its role as territory ceded to the Soviet Union after World a home base for some key companies. It might War II and now called Svetogorsk (Kortelainen & also remain an important supply and production Kotilainen 2000). area for these companies. Finland will evidently Of course, the naming is (only) a matter of sym- exist on the world map of the companies as a re- bolic significance and easily ignored when set source base and an area of mass production, a against hard economic benefits. During the merg- supplier of virginal fibre and selected paper er negotiations in North America in the spring of grades. The setting is framed by Finland’s geo- 2000, UPM-Kymmene was ready to take the name graphical location in the boreal coniferous zone, of Champion International. ‘Kymmene’, however, providing the market with long-fibred pulp. Fin- relates the company to its Finnish roots: the val- land is also part of the EU’s northern wilderness ley of the Kymi River (in Swedish, Kymmene) is a and a bridge to the forest resources of north-west- central part of Finland’s forest-industrial history. ern Russia. The use of the Swedish name reminds of the ori- FENNIA 180: 1–2 (2002)Globalisation and the Finnish forest sector 245
gins of the company’s initial capital that came pany identification. Today, the owners keenly steer from Finland’s Swedish-speaking entrepreneurs. the managers and changing strategies cause rap- This capital was unified with the majority popu- id shifts in the stock markets. Often the owners lation’s forest capital in 1995, when UPM- seek the best short-term options, which can run Kymmene was established. The historical merger counter to the long-term benefits of the compa- wiped away the deep-rooted confrontations be- ny. From another perspective, this shift may be tween the two leading private forest industry regarded as an opening towards more participa- groups in Finland (Näsi et al. 1998). tory decision-making in the forest-industrial poli- The other Finnish global forest actors also carry cy. Even the minor owners have a vote in the similar pasts in their names: Ahlstrom is a name meetings and critical issues can thus be brought of a family, Jaakko Pöyry refers to an individual, to the agenda. All this can be considered posi- and Myllykoski is also related to family ownership. tive, at least if set against the old patrimonial mod- Metsä-Serla/M-real has roots partly in Serlachius, el of decision-making in company towns. a family company integrated in the operations of Depending on the shareholder interest, the cur- the Finnish forest owners’ Metsäliitto in 1986. In rent reshaping of the forest companies can take the winter of 2001, soon after Metsä-Serla’s reori- radically different paths. The practices may be- entation towards fine paper production, the com- come more accountable and polyphonic or, more pany announced its new name, M-real, which can likely, they may move towards increasingly ag- be seen a symbolical disengagement from the past. gressive private profit maximation. As the past For the consumers, Serla stands for tissue papers decades show, however, the former alternative and washroom convenience, whereas the new M- can only surface with the help of non-governmen- real is a key actor in fine paper in Europe. In ad- tal organizations (NGOs) and intergovernmental dition, the Finnish word metsä (forest) connects regulations (see Jamison 1996). The ethical dimen- Finland generally to its eastern Finno-Ugric past. sion needs to be publicized and made a routine The importance of the companies’ initial local- measure of forest trade via negotiation processes. ities and ‘founding fathers’ underlines the value Some preliminary steps towards this direction of symbolism and cultural continuity within for- have been taken already in the shareholder meet- est-industrial restructuring. Most of the symbolic ings of UPM-Kymmene, where environmental ac- connections have disappeared during the mergers, tivists have raised their voices as minor owners however. Only few of the localities are still repre- of the company, directing the debate towards eth- sented. This is a striking contrast to the era of na- ical and eco-social challenges of the company tional forest sector, when the company names profilation (e.g., Lilius 2000a) (Fig. 2). were closely related to their main operational bas- es or the companies were named after the towns: Oulu had Oulu Inc. and Kajaani had Kajaani Inc. Forest trade and green images Even Nokia Inc., a global actor in telecommuni- cations business, has its roots in a small forest Globalisation has made environmental values in- company in the mill town of Nokia near Tampere. tegral elements of forest trade. In order to secure The local and family pasts of the companies are their market share, the companies need to address also loaded with memories not so willingly re- their environmental performance and profile. This called. Towns with only one significant industrial is also true for the Finnish companies. They have employer were often paternalistic communities, become cautious of the political risks of loggings where the companies, local elites, and townspeo- in the old-growth forests, because today’s con- ple behaved single-mindedly (e.g., Solecki 1995; sumers want to know the origin of timber. The val- Kortelainen 1999b). Public disagreement was ue preferences become concrete for the forest sometimes unthinkable. In this respect, the North companies via such customers as the leading American experience of UPM-Kymmene was im- newspapers, journals, producers, and media portant: the patrimonial tradition was broken, houses. In the name of their interest in circula- when the shareholders’ interest overcame that of tion and profit, they wish to minimise the new the top managers. environmental (and economic) risk. Hence, read- Recently, the rules of global financial specula- er responses and even boycott risks increasingly tion have emphasised the role of shareholders at condition forest-industrial strategies (Fürstner the cost of leading managers, affecting the com- 1996; Lehtinen 1996). 246Ari Aukusti Lehtinen FENNIA 180: 1–2 (2002)
The transnational companies have not been sumer politics. Similarly, broader social and ethi- able to free themselves from the intensifying com- cal issues concerning the legitimation and justice petition while becoming bigger than ever. They dimensions of paper production have been intro- are subjected to changes in their operational con- duced to the companies as critical aspects of glo- texts and networks. This makes the companies balisation. The problems of uneven and unjust de- vulnerable to varying contextual shifts – and also velopment have emerged both in Finnish domes- to their own strategies. Wrong moves in global tic settings and overseas, and now at stake is not competition turn easily into falling profit options only the green image of the companies. Instead, and losses in the stock markets and even difficul- the role of the whole of Finland and its national ties within the markets of the end products. The credibility are weighed in the global division of global economy thus seems to become more frag- labour. ile over time. The problem of credibility is entangled in the In the 1990s, the fate of the remaining old- issue of forest certifications. Originally, they were growth forests emerged as an aching issue in Fin- introduced as a means to guarantee the respect land’s forestry (Lehtinen & Rytteri 1998). As seen of sustainability and biodiversity concerns in eco- from Central Europe, these forests are among the nomic forests and that certain areas of old-growth last remaining natural areas of the entire conti- forests would be left untouched. Later, however, nent. The consumers of Finnish paper are aware it has been debated whether the certifications of this and the most marginal lands of the North should also cover such social criteria as the have occasionally emerged as ‘hot spots’ of con- wealth of logging communities and forest work-
Fig. 2. A nature activist sat on a bench of top councellors at the UPM-Kymmene company meeting and was proposed by another shareholder-activist an alternative candidate to Martti Ahtisaari, the former president of Finland, to be elected to the company’s board. The activist Thomas Wallgren lost the election (0.25% of the voters supported and 99.75% opposed him), but the event redirected the discussion towards the risky features of vested state–company interests during the era of globalisation. Consequently, the practical mode and ethics of exporting the ‘Finnish model’ was widely debated in the media after the meeting. From left to right: Martin Granholm, Juha Niemelä, Gustaf Serlachius, Iiro Viinanen, Tauno Matomäki, and Thomas Wallgren. (Published in Helsingin Sanomat 22 March 2000, front news page A3. Reprinted by the permission of Lehtikuva Oy.) FENNIA 180: 1–2 (2002)Globalisation and the Finnish forest sector 247 ers and the general eco-social viability of the en- by the meeting of the United Nations’ Conference tire chain of forest-based production and con- on Environment and Development (Earth Summit) sumption. This is indeed a contested process in Rio de Janeiro in 1992 and include the de- which has brought several difficult and yet unre- mands of broader participation in the criteria. This solved dilemmas into the global forest map (e.g., claim is related to the accused dominance of in- Beckley 1996; Rees 1999; Barnes et al. 1999) dustrial and private forest owners’ interests in In Northern Europe, there are two competing PEFC-based cooperation. Thirdly, PEFC has to systems of forest certification. The Pan-European look beyond Europe and include global forest is- Forest Certification (PEFC) is an intergovernmen- sues in its views. The European scope, as PEFC’s tal forest certification process guided by Finnish critics say, should necessarily be linked to Eura- expertise. The model concentrates on forest man- sian and transatlantic issues, as well as to global agement and aims at guaranteeing the sound ori- North–South relations (Asunta 2000). gin of timber. Changes in forest cover and health, The certification debate has emerged as a cen- lumber production, non-timber values, diversity tral element in the current restructuring of the for- and conservation issues, and the socio-economic est trade. The forest practices and production aspects of forest management are highlighted. For- processes are followed keenly and demands of est Stewardship Council (FSC) certification is sup- accountability and broader participation have be- ported by several international environmental or- come difficult to ignore. For the forest companies ganisations. The Council has included several so- this means adjustment to the changing rules of the cial factors into its certification procedure and the global game: the previously excluded costs of pro- participatory dimension of forest planning and duction are now becoming part of the business. wood processing is underlined in particular. The This might appear as a major threat for some com- long-term socio-economic well-being of forest panies, but it can also be regarded as a means to workers and forestry-dependent communities conquer new markets. must be confirmed via negotiations and consul- tations with people and groups directly involved in, and affected by, the operations. In the case of To conclude loss or damage that affects the legal or custom- ary rights of local people, a fair compensation The analysis underlines the necessity to include mechanism is demanded (Ahas et al. 1999; Lloyd the previously ignored eco-social costs of eco- 2001). nomic restructuring in the calculations of actor- FSC is the more proactive one of the two sys- and product-specific credibility. The forest indus- tems, whereas PEFC proceeds more reactively, try is part of this reorientation, as the heated ne- emphasising the certification as a means of mar- gotiations for the criteria and certificates of sus- keting (Salmela 2000). In general, it seems that tainability suggest. The main forest companies – the ecological concern has become widely ac- as the key actors of change – have become em- cepted as a conditioner of the forest trade while bedded in a global ranking competition that tends the broader eco-social dimension still causes con- to keep the new eco-social openings in the mar- fusion. gins. The ongoing debate is intensive, even though We are therefore left with some critical dilem- the result seems largely clear already: the broad- mas. Volume-based expansion through mergers er eco-social criteria are to be implemented into has become the guiding principle for the forest- the assessments of the sustainability of wood industrial globalisation, but not without obvious processing and refining. As a telling signal of the exceptions. There still is life behind the main ac- setting, WWF Europe and several other environ- tors of the global stock markets, including some mental civic organisations published a series of entrepreneurial creativity, as the profiles of Ahl- claims addressed to PEFC in April of 2000. First- strom and Myllykoski indicate. But how to secure ly, the civic organisations demand PEFC to show the variety in the future, if the large companies that it actually leads towards better forest man- keep eating the small ones with some financial agement and not only to a confirmation – i.e., attractiveness? The question is also important to greenwashing – of the differing national and lo- peripheral forest resource communities, such as cal practices already in use. Secondly, PEFC has the provinces of the so-called Forest Finland: what to follow the Local Agenda 21 directions, agreed is left of the regional (horizontal) dynamics when 248Ari Aukusti Lehtinen FENNIA 180: 1–2 (2002) these provinces become thoroughly integrated in REFERENCES the companies with global vertical power and, accordingly, are located in the New Wood Order Ahas R, T Puura, A Janssen & E Peters (eds) (1999). Boreal forests of the world IV: integrating cultur- as producers of pulp and bulk? al values into local and global forest protection. On the other hand, the growing shareholder Proceedings of the 4th biannual conference of the interest in forest-industrial operations can also Taiga Rescue Network, October 5–10, 1998, Tar- provide an alternative to the older managerial tu, Estonia. Estonian Green Movement, Tartu. model of decision-making, as the UPM-Kymme- Asunta A (2000). 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