I recently criticized Apple Computer (Nasdaq: AAPL ) for its lack of disclosure on its sustainability efforts. With 500,000 acres of forestland in the United States, 370,000 acres in Brazil, and harvesting rights to another 500,000 in Russia, you'd think my critique of global paper and packaging giant International Paper (NYSE: IP ) would be even more pronounced, given the level of impact its operations have on the environment.
On the contrary, I applaud IP's sustainability efforts and the detail in which these are disclosed. Its efforts in recent quarters to both transform into a more profitable business, while at the same time do more to protect the environment, are worth highlighting.
Back in July 2005, International Paper announced a major restructuring plan that would include the possibility of selling the majority of its forestland in the U.S. The company did just that. In 2006, it sold off a staggering 5.6 million acresin the U.S., totaling approximately $6.6 billion, and representing "the largest private forestland sale in U.S. history," according to its 2006 sustainability report.
Of this, almost 218,000 acres were sold to conservation groups across 10 different states. The remaining lands were sold off to companies like TimberSTAR and Lyme Timber Company, and included contract language that required the lands to be harvested under the Sustainable Forestry Initiative Standard.
International Paper's remaining acreage largely utilizes both a form of genetic cloning called vegetation propagation and planted forestry in order to get more production out of less land. For example, "95% of [its] Brazilian managed eucalyptus plantation forests are regenerated with clones from superior trees." These processes have helped the company to double the volume growth of these trees in just the last 20 years.
Similarly managed loblolly forests in the U.S. grow four times faster than their naturally grown counterparts. Because of these efforts, planted forests are able to reduce environmental impact and place less pressure on natural forests. International Paper's sustainability report indicates that although planted forests "only make up 5% of total forest cover [worldwide], they supply 35% of the world's commercial wood."
At the outset of its sustainability report, an ideal was conveyed that entailed bringing the company's "economic and environment goals into perfect, mutually reinforcing alignment." International Paper and other sustainability leaders like Unilever (NYSE: UL ) , Johnson & Johnson (NYSE: JNJ ) , and General Electric (NYSE: GE ) are not there yet. Nonetheless, International Paper shareholders are no doubt applauding a rebound in company shares since July 2005, when its efforts to be more profitable while doing more to protect the environment were enacted.
International Paper has turned a new and greener leaf -- a welcome sight to both shareholders and environmentalists.
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