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. 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'll look forward to your questions, which you can 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 will present our sustainability priorities and their value add to business. She will be followed by Jari Suominen, Executive Vice President, Forest Division, who will detail the Forest Division's sustainability strategy. The latter part of the presentation will start with Annika Nordin, Vice President, Sustainable Forest Management. She will give us general perspectives on biodiversity in the Nordic forests. The presentation will be concluded by Johan Lindman, Senior Vice President, Global Forests 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 Åström. 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 gonna listen to for the rest of the call. Starting at helicopter view, if you take the first slide here, we are really seeing an acceleration of the sustainability agenda or ESG agenda, as you know, over the last one to two 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. 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 and making ambitions for their companies. 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. 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. 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. We've set a target for 2050, which is all about delivering products that are 100% regenerative. For us, that means that they are fully circular, that they enhance biodiversity, that they are biodiversity net positive, we will talk more about what that is, and that they are CO₂ net positive, meaning that we are taking more CO₂ out of the atmosphere than we are bringing in.
Eventually, this is helping our customers become regenerative. 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. Going to the next slide, diving into a little more concrete target, which is our 2030 targets on these three 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 one that is aligned with a 1.5°C scenario, and we are setting ourselves the ambition to reduce our CO₂ emissions by 2030, with 50% in absolute terms, with a 2019 baseline, which is very ambitious, so building on what we've already done.
We're asking the same from our supply chain. Again, by 2030, having a 50% reduction in absolute emissions with a 2019 baseline. That means working a lot more diligently, closely with our suppliers to deliver on this target. Secondly, we have circularity, which we already have a lot of experience on. We've set ourselves a target that by 2025, our Circular Design Guidelines will be fully implemented across all our innovations. Innovation is really key here because we have to invent new things in order to be able to deliver on these targets. By 2030, we want to be able to deliver 100% recyclable products by factory gate. 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'll be very transparent about our approach here, how we are progressing. Of course, a lot more on this in the hour to come. If we just move to the final slide from me, I just wanna 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. 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, we'll be better able to set direction for our innovation, as well as having a long-term perspective of capital allocation. Obviously, that's a clear advantage for us as well. Because we are progressing here, we will step by step demonstrate that we are able to become regenerative eventually. This will gain us more acceptance 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.
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. Being closely liaised into these circles, it will also give us an opportunity to look around the corner, as it were, and that's obviously a big opportunity for any company. We believe we are in a very good place. This is very timely development for us. Now we're just looking forward to diving into the issue of biodiversity. I'll hand over to Jari.
Thank you, Annette. Happy to meet all of you. My name is Jari Suominen. I have long experience in Stora Enso. I have been working here more than 25 years. I have been working so far in paper business, wood products business. Now two years ago, I moved here where everything in Stora Enso starts in forest. I will start with short recap what is Stora Enso Forest. 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 are interested about our values, and if you're looking our forest value today, it's EUR 7.4 billion. This is representing some half of our balance sheet.
In right side, you can see that forest is global. Our forest is global. We are one of the largest forest owners. On top of forest ownerships, we in Forest Division are running the wood procurement around Baltic Sea area. If you are combining this all together, 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. We are sourcing up to 40 million cubes of wood annually and globally.
Our own forest is representing an important role there, but still now and in the future, private forest owner will be the one single largest source of wood. When 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%. Let's move to our strategy. We have categorized Forest Division strategy in four different areas. In the mid-side wood supply, I will not use so much time today because that's an area we have been running for decades. Left side, the own forest, that is where we started two years ago as we became large forest owner. 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. 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. We know we want to understand, and we want to consider in future better the external stakeholder views. I'm so much waiting for the discussions today and going forward to get your feedback and your contribution in this field. Let's go to next slide.
This is my last slide for strategy and looking a bit future. We see great potential in our own forest growth going forward. Of course, timelines 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. 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. 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 four focus areas. These are biodiversity, carbon, land use, and communities.
Due to well-known reasons, biodiversity and carbon have had special attention during the past years and it will have also during coming years as well. 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. On the 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 site or whatever, how the wood is annually growing, what is the growth rate or what is the absorbing of carbon, which is more or less the same. You can see that in the first 10 years, the seedling is growing slowly.
After that, the annual growth will increase rapidly until the tree gets 30 years old. After that, the annual growth will reduce until when the tree has age of 80-100 years, and then the growth has close to stopped. This is the message that only growing forest is absorbing carbon. In order to allow forest to grow, it need to be also used, but used naturally with sustainable way. 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. What do I mean with better? Of course, I mean that it need to grow faster, but not only that.
It needs to become more resilient towards diseases, more resilient against storms. One example in Central Europe is the very difficult situation with bark beetles, and these bark beetles are coming towards the north, and those are visible already in Sweden. This area is of utmost importance for our development, and it's a significant part of our sustainability agenda as well. Let's move further. Now coming to our biodiversity ambition. We have set high ambition 2050, Annette was already referring. Our aim is to become net positive 2050. We will use our unique position here, so we will use our own forest as experimental lab. Our experiences we will share with private forest owners as a service.
We will not only limit to own forest or forest itself, we will participate to development of overall biodiversity in society. Let's look my last slide, which is then a bit concretizing this. 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.
My last but utmost important message is also that biodiversity is a 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 adaptation for our sustainable forest management practices. Let us continue now the deep dive around biodiversity, and I give word further to Annika, please.
Thank you, Jari. Hello, everyone. 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. In my talk here today, I will first provide a brief fly-in 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. Biodiversity, it's all about the variability of different biological life forms here on Earth. Normally we talk about biodiversity on three different levels: on genetic level, on species level, and on ecosystem level. Biodiversity has been regulated internationally since 1992 in the UN Convention on Biological Diversity. 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. 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 two arguments that are important to make biodiversity relevant for the public. The first one is about functionality. It's about biodiversity is needed to maintain proper ecosystem function. The other sort of argument that is often raised, it's about the moral dimension that we need to conserve biodiversity to respect all different life forms on Earth. Next slide. Why do we talk so much about biodiversity at this point in time?
I think there's many answers to that question, but I would like to mention one process, and that is the IPBES process. IPBES is for biodiversity, but 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. 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. Red Lists, they are issued country-wise. It's really about the risk of a species to become extinct within the specific country. I will use Sweden as an example.
In Sweden, the latest version of the Red List was issued in 2020. The Red Lists are also, I should mention, they are according to a system set by the International Union for the Conservation of Nature. The basis for the Red List is the same everywhere, and it's about assessing the risk of a species to go extinct in the short term or in the long term. It's not really based on counts 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.
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 grows on the branches of trees. It's an epiphytic lichen, it's called. 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, 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. When you hear about the Red List, you often only hear about the negative parts of it. You hear about the negative trends.
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 List-ed, and if this group reach one on this y-axis, then it would disappear from the Red List, because the species in that group would no longer be threatened. Here you see the trends of two 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.
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 five 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. Here you see two such examples. It's two insects that you can find in the southern part of Sweden. Here it's on the sort of border of its distribution. These two species are much more common further south in Europe, but here in Sweden, they are on the outskirts of where it can live.
If the weather goes bad for a few years, it disappears, and that was what happened in 2010 or something. Now they have both reoccurred, these two species. That's the good news. Next slide, please. At least examples of good news. Going out in the forest, how should a forest look like then to be a good place for biodiversity? It's really about structural variation. If you have a forest with lots of variation, you will also have lots of potential habitats for different species. 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.
Perhaps mainly the trees need to be dead because it's dead wood 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. Dead wood must be also of different kinds, different stages of decomposition. It's not just like creating dead wood 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. 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. It's not only natural processes that creates biodiversity.
We can also help nature to create biodiversity, and here I show two 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. We have different vascular plants that need fires for their seeds to grow, and we also have insects that are dependent on dead wood from fire to be able to complete their life cycles. What we do in forestry today is controlled burnings to enhance the sort of structures and habitats that these species require.
Another thing that was very common like 120 years ago or 100 years ago in the Nordic landscape, that was cattle grazing in the forest. 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 word to Johan, I would like to mention something about the legacy of previous forest management that is impacting the biodiversity we have today. If we look back, you know, 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.
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 lots of dead wood then. The forests became quite low-productive. Then those forests were replaced with large-scale forestry operations that started in the 1950s, 1960s. Thanks to those operations, we have today very well-grown forest in the Nordics. Also this was not good for biodiversity because we created large and also homogeneous forests. Since the 1990s, the forestry operations have changed a lot. Today we have much more small-scale operations, and we do considerations to the natural features of the landscape.
On this picture, the color picture, you see a small stream, and you see buffer zones along the streams with different tree species, mixed tree species buffer zone. Also in the harvested area, you see groups of retained trees. For the future, these trees will contribute to the structural variation that the forest that is coming will be part of, so to say. Now I will leave the floor to Johan to talk more about the management practices Stora Enso does 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. I would like to share a little with you today how we now will work with continued development biodiversity activities in the forest. If I get next slide, please. As Annika said, biodiversity is very much about variation and variation in different scales. 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.
As you know, the life cycle of a Nordic forest is somewhere between 70 and 100 years. In the 1990s, also as Annika mentioned, there was a radical change in how we do sustainable forest management. This we now see solid track records on the development of biodiversity as a consequence of that. We also want now to increase our activities, be more active, and also develop 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 people who love to be in the forest and have a big heart for nature and biodiversity as such. I will give you a couple of examples on how we approach this.
If we take next slide. If we start with the life cycle of the forest, as Annika mentioned, we breed trees for good growth and for resilience in the future. Out in the forest, it's also about adapting the trees to the right places. Pine trees on the drier places, parts of the plantations and areas, and spruce and birch in the more moist and fertile areas. We also use native trees all the time.
During the life cycle, when the forest becomes 30, 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 the species composition and promote more deciduous trees in the forest since that is a bit limited from beginning. When you come to the final felling somewhere when the forest 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 dead wood or retention trees in the harvesting sites. Let's look at next slide.
Monitoring and managing the forest is of course, if you look at left-hand on the slide, it's of course dependent on the actual state of biodiversity in the forest. What we many times have talked about and what has been a focus in is setting aside areas, protect areas that they should not be managed at all. This is of course a powerful tool, but it's not the only tool. We now want to widen the activities and combine this with much more active management of biodiversity. That can of course be done in set aside areas, but it mainly also occurs in the forest where we produce wood for commercial reasons.
Keep track on our operations so that the quality of our operations do not harm biodiversity is one key area, and especially then adding biodiversity management activities that enhance the different features that we want to have on landscape level, on habitat level, and for the species to live in this. Let's go to next slide. Annika talked about forest fires. That is, of course, one element, and that is a large scale element of it. It's a bit risky. I am a bit worried when I start a fire because it has to be ended in a good way. Promoting the variation in the harvesting sites is key. Decaying wood, different types of dead wood. To promote that, we can create high stumps.
We cut the trees off three or four meters high and leave a stump 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 shade into the forest. For example, mosses that Annika talked about need to have more moisture 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 small areas that we keep untouched to promote that type of habitat. Soil and water, very important to protect the waters from damages and to clean streams. Sometimes the fishes can move better and more undisturbed.
The same for not destroying the soil as such with tracks and often machines. Towards the water streams, we also have barriers, buffer zones of different type of kinds. These are examples on how we do 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 two 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. Since this is variation, it is very, very important to describe and monitoring biodiversity in different scale. We talk about landscape scale, we talk about habitat scale, and we're talking about species in itself.
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. If there is sufficient variation in a landscape, it also gives room for different type of species to move around in the landscape. That means that we have indicators for describing the variation on a landscape level. Habitats is a little what Annika showed on the picture with dead wood and water. It is the structure of the forest where the species can live, and some species have some structures that they prefer, others have other structures that they prefer. We want a mix of different structures in the forest. Then when it comes to species and Red-listed species, et cetera, we want to monitor them as well.
Even here, it's not necessarily only the Red List species that are of interest. Sometimes it's more valuable to follow quite common species, but in the effect that they are responding to change, so they can show that things are moving in the right direction. That is also a species that we will follow going forward. Next. This is. I will not go into details in this, but this is a set of indicators. As said, they are then selected carefully based on science, so what can be followed and reasonable to follow on landscape level, what can be followed on habitat level, and what species would be selected, and what is the quality of our work.
All this has together will give us a picture on the status of biodiversity over time, the quality of our work, and the active management that we can gradually develop. 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 forestry or precision biodiversity. It is the possibilities with the digitalization, remote sensing, laser scanning, data processing. So it's a bit more data driven, and by that, be more accurate, more granular in the data we have in our work in the 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. 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. 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 a long list of actions that we will work on and be able to deliver results out of that.
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, in an efficient way, promote biodiversity and manage biodiversity. 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. 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.
Yes.
Does Stora Enso have a preference for a biodiversity reporting framework? If so, which one and why?
That's 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 yet 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.
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. We have the next question goes to Annette. What will your baseline of your biodiversity net positive be? Will it be a set of metrics from a particular year, or how will it work?
Yeah. Another tough question. The net biodiversity target is for 2050, so quite many years ahead. That's some of the work that's ongoing now, that we will start measuring on. I think what Annika alluded to as well was that this is not as well-defined as CO₂, for instance. 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 that eventually. What we know at this point is that it needs to be done, and that's why we've set this target. A lot of development ahead.
Thank you. The next question goes to Jari. How do you want to reconcile increased 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, we can manage both parallel. In startup phase, of course, this will include certain investments that we need to do to enhance biodiversity. On the other hand, biodiversity longer term is giving us even business opportunity as we have this unique opportunity that we are global forest owner, one of the largest forest owners and wood suppliers, and these are then the services we can provide externally. We believe we can parallel manage both. However, including some investment, 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 on 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 ultimately to increase the output of our activities, and that output can be that we get more forest growth out on the areas where we focus on forest growth, that we get more biodiversity out on the areas where we focus on biodiversity mainly. 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 preserve the birds for it that has come after a fire, and after a while, the spruce has started to grow in and change the environment.
Then you can go there and take out the spruce and get some volume out, and at the same time promote additional biodiversity. There are possibilities to combine these, and that is one of the examples of active management that we are gradually learning how to do better and more effective.
Thank you. We have another one 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. The proportion for us is that the absolute 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. In some spaces, for example, dry areas of the pine forest, there could be good opportunities for natural regeneration of pine trees under using seed trees of pine. That is normally not our common way of doing it.
Thank you. 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 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. It's enough if you do it once a year because these species, the insects and so forth, 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. There's different techniques depending on which species you like to monitor. 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 lingonberry bushes with remote sensing. You could monitor it on a rather large scale if you like. It really depends on the species. 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 choose what we call umbrella species that if you find them, they are also connected to other species you may find because you have that specific species. Lots of different techniques will be used and are used already.
Okay. I thank you for that. I suggest we continue on the same theme with another question for Johan on the similar subject. How are you planning to achieve accurate reporting on the indicators you outlined? Would it be spot checks or some drone geospatial technology? Especially also interested in how this will work in our own forests 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 standard 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. 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 wood properties in the forest.
Even here, we will need to use a mix of tools. You need one tool if you're on landscape level, you have another tool if you're on very granular level out in the forest. All in all, of course, the technology is developing, so we will have opportunities in the future that do not exist today. We put a lot of focus on developing new remote sensing technologies to be applied. As well as data processing of the data that we will have.
Thank you. We have a question for Jari. Pulp and paper mills use a variety of chemicals. How do you prevent water pollution and having a negative impact on biodiversity at Stora Enso?
Thank you for this question, and this is area where our industry has been working in 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. These are investments which we have done during the decades ago, and we are continuously further developing our progress. I think this is pretty well under control at the moment.
Okay, let's continue with another one for you, Jari. What proportion of your current forests do you think are already in a good position from a biodiversity perspective?
I don't have any exact figure. It's maybe, Johan better to answer there. Basically, when looking overall, we have considered biodiversity in our work already since or since 1990s, like Annika was referring. Our existing situation is we are very satisfied with that, and we have local professionals working around biodiversity. 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. We can, for example, see on habitat level that we have the increase of dead wood that is measured by the national 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. A lot of these large scale parameters, we have clear proof points on gradual development. When we look at the Red List, it's a quite stable situation on the different species group, as Annica mentioned earlier, with some positive development for some groups.
If I continue from here, a lot of work has been done. Still, we want to make a significant step change there during the coming years and coming even decades. We are not net positive yet, but we will be.
Thank you. I have a question for Annica. 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 seven to five years anyhow. Much more in Europe than in Sweden, I would say. Dry summer weather is a problem that enhance the bark beetles. They like that kind of weather. 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 three species have different kinds of enemies, insects and pathogens that like to live from them.
What I would say is that the three species composition in southern Sweden may need to be adjusted, and we may need to have less spruce there in the future, since we have been seeing very many years now with quite dry summer conditions down there. Pine, yes, that's part of the solution, but maybe we also need to look at other species, broadleaf species, and perhaps even what we call exotic species like Douglas fir and so forth. Stora Enso is really not operating in this exact areas. I wouldn't prescribe solutions for southern Sweden, really. I think this is what we deal with at the moment.
We have 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 one for you, Annica, while we're at it. How do you ensure the tree species you innovate are nature positive, as well as growing faster 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 black currants, for example, is a good example. The black currants 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 black currant berries. It's really breeding that we use to make the trees more adapted to the future climate. Trees, they really rely on day length and the seasonal period for their start in the spring and how they become ready for winter in the autumn.
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. There's tools we can use. To do this, we, of course, need to be able to do tree breeding. That's one thing. We also need to do planting because 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. 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, Annica, on the same subject. Can you provide more details around your progress on 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. 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. 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.
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. 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, a mother and a father, and you get the children, so to speak. Then you select among that generation, and then you do a new breeding, and then you get a new set of children. 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 needs to flower to be able to set seeds, and that is taking 15-20 years for a spruce or a pine to do that.
For each of these generations, you gain some 8%-10% increased growth if that's what you want to measure or a better improved resistance to drought, for example. If we are now on 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, another question on the same subject. In your tree breeding and seed 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 a 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 look at the mother and the father, see the genes, and then you can look at the next generation and see that the ones that have the same fingerprints as the fast-growing, they will most likely grow well in next generation by that speeding up the breeding cycle. That is not genetic engineering. It's about utilizing the gene as markers for understanding the trees.
When it comes to our R&D, we are working with a company called SweeTree Technologies, where we see if we can transfer genes, and we have done that to eucalyptus. We're also trying to learn this CRISPR-Cas, that was the question, which is not transferring genes, but as a, cutting out genes or making genes not active. 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 start to see how this can work. It is a long journey. I think we will not have anything that is commercial possible to use on, for example, in eucalyptus, at least not until five to 10 years perspective from now.
Thank you. A question for Annika. It's about the data 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, naturally regenerating forests, 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. Also we have species measurements 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. Now we want to step up on collecting more data and trying to find new ways of using the data.
I think that is where we are at the moment.
A question for Johan. Has Stora Enso considered an agroforestry strategy beyond cattle grazing?
Yes, we have. We have other examples of agriculture combination with honey production and with other agriculture 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 two 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. 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 one reason why we don't have deadwood in the forest so much today, or why we haven't had it all the time, is that our own foresters, they really like to remove all deadwood to decrease the forest fire risk. It is a risk to have more deadwood in the forest for having larger fires and fires that are also more difficult to handle if they start. Since we know we need the deadwood, this is also something we have to deal with. I think what we can work with here is really how to distribute deadwood in a forest landscape. Perhaps we don't want very deadwood rich forests close to communities or houses and things.
Also we may put deadwood in forests where the forest is a bit more moist. Of course, we also need deadwood in dry forest for the biodiversity, and that is where we perhaps then create risk for fires in a way. We will learn as we go along, I would say.
Thank you. A question for Johan. When a tree is felled, the roots die, which has a large impact on the soils. How do you balance the economic value of the tree against the soil impact from any forestry?
I'm not sure if I really grasp the core of the question. 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. It is we do not practice to take up the stumps in the soil in the Nordic forest.
Thank you. Another one for you, Johan. Will reducing pesticide use be part of the biodiversity improvements?
At this stage, we do not use pesticides at all in the Nordic forest.
Another one for Johan on the beetles. What is the long-term implication for this for forest management?
With the bark beetles?
Yeah.
Annika mentioned the bark beetles as the natural enemies to the trees, and that is absolutely correct, and dry summers has accelerated this. 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. That is that if you remember the curve that Jari showed in the beginning of the presentation, that the young forest are the ones that capture carbon. It's also example that when the forest becomes older, it grows less and it's also less resilient to attacks. A lot of the forest in Central Europe that has been damaged by the bark beetles has been too old. From a forest management perspective, overage forest, big trees with lower vitality.
I think that one 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 or their resilience toward different type of stress could be drought, could be insects, could be fungus, is lower, and that reduces the growth, and it also emits a lot of carbon when these trees are dying.
Thank you. 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 said, we are working with native trees, and we are not working with trees that are adapted to the boreal forest. I don't see in that respect a difficulty. 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 doesn't fit, the trees will not grow well, and that will not be trees that we want to use. I think here, the production and the biosafety 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. We are in a situation that we have not dedicated any budget for biodiversity investment. As one example is that where we are investing at the moment is so-called precision forestry, where Johan was several times referring. To improve the data and connect that to digitalization, analytics, and even building digital twin from forest. This will support our forest management, but this will also support biodiversity management. There are a lot of investments which will benefit both biodiversity and sustainable forest management. 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 open and report on our activity there.
Thank you. Another question for you, Jari. Do the rates of other ecosystem service provisions also accelerate during the years 10-30?
I think that when we are 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. When we are looking especially different kind of services and services also to private forest owners, so we can see some tangible results already until 2030, for sure. Any quantification, I cannot give you yet.
Thank you. I have a question for Annette Stube. The COP26 meeting in Glasgow is a hot topic, and do we have any comments about the outcomes regarding forests? There's been a lot of talks about 120 countries representing more than 85% of the world's forest committed to halt and reverse forest loss and land degradation by 2030.
Well, we can say very clearly that we support that 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. 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 our work, 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. 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's as the difference towards the Nordics. The approach is it has to be localized to the context. In Uruguay and Brazil, in both cases, we 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 two effects are kind of combined in the same place in the forest.
In Brazil, we work very much, which is an area where, in the 1920s to 1940s, the Atlantic rainforest was logged down and the landscape has been used since then for cattle grazing mainly. What we do there is that we, between the eucalyptus plantations, which is roughly half of the area, restore and develop the native rainforest coming back gradually and also do that jointly with some agriculture and agroforestry practices. In Uruguay, the historical land use is not rainforest, it's Pampas. Pampas is a savanna type of landscape where it has been more of grasslands. That means that in the areas, roughly 65%-70% of the area is eucalyptus, and the remaining part is grassland areas.
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 twofold 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. That means that the combination there is very intensive land use in that respect. Land becomes flat enough for agriculture. There is agriculture in the area where it could be ducks or hens or other type of cattle.
In the more hilly areas where we have our eucalyptus plantation, there we combine that with the similar type of border zones and variations that I that I showed for the, for the Nordic forest, that you leave dead wood, that you have buffer zones towards water, and that you try to promote, in that scale, biodiversity. 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 one 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 dead wood and how fast it decays. I cannot give a figure on that. At the same time, the forest where the dead wood is lying is absorbing carbon at the same time as it grows. It's part of the integrated cycle.
Thank you. 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 this question. In my previous role when I was heading wood products and also building solutions, I got this question each time in any interview. Forest is growing more than we are using today, especially if you are looking from European perspective, and also how we use wood is improving continuously. If you are looking at the fact that high-rise buildings, there has been high-rise buildings since Roman times, so maybe 2000 or 3000 years. High-rise wooden building, there has been only 20 or 30 years. This is one area where we are putting a lot of efforts to improve the efficiency and material efficiency of those solutions.
Those are efficient already today, those are highly sustainable, but we have still possibility to make those even more efficient. My firm belief is that, yes, there will be enough wood available for wooden construction.
Thank you. Another one 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 mass timber wood construction, as we were just talking about?
Thank you for the great business idea and to be serious, especially when looking at the wooden construction site, we have had already for years development regarding carbon footprint. If you're looking at different municipalities who are building, like, schools from our wood, we have been making offers not just what is the euro price, but also what is the carbon footprint of the coming building. I expect that something similar will be developed going forward regarding biodiversity. Of course, if and when we are successful in our work, this will give a great advantage in the marketplace. We have already deep collaboration and cooperation with many of our customers around the field of biodiversity.
Thank you. 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're running out of time, I will try to be very, very short. I think the difficulty with the European Union proposals here is that they have a good aim. They want to promote biodiversity, they want to mitigate climate change in connection to that. 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. This is where European Union, in one way, try to find a one-size-fits-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, which they have done a really good job. Thank you all people who participated in this event today. Really appreciate all your good comments. I know that there are a few that we still haven't been able to answer yet due to lack of time, but please send us the question, and we make sure we answer every single one of them. This is a starting point for our engagement with you on this subject, and we really encourage and welcome an open dialogue with you. 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.