CICERO
24 March 2014
‘Second Opinion’ on
SCA’s Green Bond framework
Contents
Summary ........................................................................................................................................................ 2
1.
Introduction and background ....................................................................................................... 2
2.
Brief description of SCA’s Green Bond framework and environmental policies ........ 3
3.
Assessment of SCA’s Green Bond framework and environmental policies ................... 5
Corporate environmental policies................................................................................................................... 6
Eligible projects under the Green Bond framework ................................................................................. 6
Strengths ................................................................................................................................................................... 7
Weaknesses.............................................................................................................................................................. 7
Pitfalls ........................................................................................................................................................................ 7
Impacts beyond the project boundary ........................................................................................................................ 7
Rebound effects .................................................................................................................................................................... 8
Transparency and monitoring, reporting and verification .................................................................... 8
References ..................................................................................................................................................... 9
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Summary
Overall, SCA’s green bond framework and supporting environmental policies provide a transparent,
comprehensive and robust approach to investments that promote a transition to low-carbon and climateresilient growth. SCA takes a broad view of climate change impacts in its corporate environmental
policies, incorporating life-cycle analysis and suppliers. The green bond framework lists eligible projects
that are generally supportive of the objective of promoting a transition to low-carbon and climateresilient growth.
SCA’s policies support regular and transparent updates to investors and the public.
Strategies and processes supporting low carbon and climate resilient growth are well developed at the
general level, and clearly described in documents. Despite good reporting of general achievements and
some reporting of specific projects, more accessible details on monitoring, measurement and verification of
performance of green bond funded projects would be useful. The project categories ‘Investments in
production technologies and manufacturing process’ and ‘Water & waste management’ could be more
specified.
1. Introduction and background
As an independent, not-for-profit, research institute, CICERO (Center for International Climate and
Environmental Research - Oslo) provides second opinions on institutions' framework and guidance for
assessing and selecting eligible projects for green bond investments, and assesses the framework’s
robustness in meeting the institutions’ environmental objectives. The second opinion is based on
documentation of rules and frameworks provided by the institutions themselves (the client) and
information gathered during meetings, teleconferences and e-mail correspondence with the client.
CICERO’s Second Opinions are normally restricted to an evaluation of the mechanisms or framework for
selecting eligible projects at a general or overall level. CICERO does not validate or certify the climate
effects of single projects, and, thus, has no conflict of interest in regard to single projects. CICERO is neither
responsible for how the framework or mechanisms are implemented and followed up by the institutions,
nor for the outcome of investments in eligible projects.
This note provides a Second Opinion of SCA’s Green Bond Framework and policies for considering the
environmental impacts of their projects. The aim is to assess SCA’s Green Bond Framework as to its ability
to support SCA’s stated objective of low-carbon and climate resilient growth.
Climate change will have a significant impact on economic development, both from the perspectives of
sustainable future development pathways and adapting to changing circumstances. The recently released
Intergovernmental Panel on Climate Change report (IPCC, 2013) on the physical science of climate change
highlighted the seriousness of human-induced climate effects. The report can be viewed as an immediate
call to action on the challenge of reducing greenhouse gas (GHG) emissions. The 195 countries that have
ratified the United Nations Framework Convention on Climate Change (UNFCCC) have agreed to reduce
GHG emissions to limit global temperature increase to below 2°C. Reaching this target requires shifting
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development pathways towards low- or zero-emitting economies without delay, and avoiding locking-in
high-emitting capital.
CICERO takes a long-term view on activities that support a low-carbon climate resilient society. In some
cases, activities or technologies that reduce near –term emissions result in net emissions or prolonged use
of high-emitting infrastructure in the long-run. CICERO strives to avoid locking-in of emissions through
careful infrastructure investments, and moving towards low- or zero-emitting infrastructure in the long run.
2. Brief description of SCA’s Green Bond framework and environmental
policies
SCA is a leading global hygiene and forest products company that develops and produces personal care,
tissue and forest products including pulp and solid-wood products. SCA is also Europe’s largest private
forest owner. Sustainability forms an integral part of SCA’s operations. SCA’s business is based on economic,
environmental and social value creation (SCA, 2012a).
SCA’s investment framework includes a Green Bond framework, which is supported by the company’s
environmental vision, policies, and code of conduct (SCA, 2014a). The documents that can impact the
environmental soundness of the company’s investments are described briefly in this section, see Table 1
for an overview of all documents on which this second opinion is based.
The company’s Sustainability policy highlights a broad approach to sustainable development, where the
environmental impact of products during various stages of their lifespan is assessed. This includes life-cycle
assessment of resource use, renewability and recyclability (SCA, 2014b). SCA suppliers and subcontractors
are also included in this process (SCA, 2011; 2012b).
SCA has embedded the ESAVE (Energy Savings and Efficiency) program throughout its operational business
units, with a focus on smaller projects. Over ten years ESAVE has encompassed 1700 projects leading to a
saving of around 1 TWh. The ESAVE target is to reduce the amount of energy used per ton of product
produced by 14% by 2020. Savings generated by ESAVE projects are typically derived from improving or
replacing pumps, compressors, fans or lighting (SCA 2012a).
Regarding forest management, SCA has goals for both preservation of biological diversity and responsible
use of wood raw material. A minimum of 5% of productive forest is to be set aside for ecological landscape
plans and biodiversity concerns, as well as a further 5% for nature considerations (SCA, 2012a). SCA is
currently using ISO 14001 for all its forest management and in all the group’s European mill operations, and
ISO 50001 for energy efficiency and improved energy performance. SCA’s forests are FSC (Forest
Stewardship Council) and PEFC (Programme for the Endorsement of Forest Certification) certified (FSC,
2014; PEFC, 2010). FSC has introduced a worldwide standard of forest stewardship principles, promoting
environmentally responsible, socially beneficial and economically viable forest management. In 2012, SCA
became a member of the World Business Council for Sustainable Development (WBCSD).
In 2012, SCA launched a set of new sustainability ambitions and targets. While the ambitions describe the
long-term vision, the targets are specific and measurable and represent the milestones on the road to
achieving the ambitions. Environmental targets include targets for fiber sourcing and biodiversity, water
usage and treatment, and climate and energy targets such as a 20% reduction in CO2 emissions from fossil
fuel usage and from purchased electricity and heating from 2005, a tripling of production of biofuels from
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SCA forests from 2010, and an increase of 5 TWh in production of wind power from SCA forest land from
2010, all by 2020. Furthermore, the annual net increase in standing timber in SCA forest corresponds to 1%,
which absorb an equivalent of 2.6 Mt CO2. Emissions from SCA’s production activities are measured at 1.8
Mt CO2. SCA is advising other biomass suppliers. All deliveries of wood to SCA wood consuming units are
FSC or PEFC certified or fulfils the FSC standard for controlled wood..
Water consumption in water-stressed regions is to be reduced by 10% in the period 2010 to 2015. Through
recovery of material streams useful to other industries production waste can be minimized. SCA is also
addressing post-consumer waste, such as used consumer tissue (SCA, 2012a). Major investments in
technology improvements will be a key to achieving these ambitions and targets (SCA 2012a).
Table 1: Document overview
Document
no.
0
Title
Comments
Table of contents
List of documents submitted by SCA
1
SCA Green Bond framework
Brief memo on the Green Bond framework
2
SCA Sustainability Policy
Brief description of sustainability policy
3
SCA Sustainability Report
4
ISO 14001 guidelines summary
Overview of SCA’s strategies to support sustainable
development (short version)
Short description of ISO 14001
5
ISO 50001 guidelines summary
Short description of ISO 50001
6
FSC (Forest Stewardship Council)
Certification principles
PEFC (Programme for the Endorsement of
Forest Certification) Sustainable Forest
Forest Products Global Supplier Standard
Short description of FSC principles and criteria for forest
stewardship.
Description of PEFC requirements for sustainable forest
management certification schemes
Brief description of global supplier standards for SCA
forest products business (short version)
Brief description of global supplier standards for SCA
hygiene products business (short version)
Short overview of the WBCSD work program
7
8
9
10
11
12
13
Hygiene Products Global Supplier
Standard
WBCSD (World Business Council for
Sustainable Development) summary
SCA Sustainability Report – full doc
Forest Products Global Supplier Standard
– full doc
Hygiene Products Global Supplier
Standard – full doc
Comprehensive overview of SCA’s strategies to support
sustainable development
Comprehensive description of global supplier standards
for SCA forest products business
Comprehensive description of global supplier standards
for SCA hygiene products business
SCA’s sustainability performance is tracked and published annually through SCA’s sustainability report. Data
provided in the report is compiled through various systems, primarily the company’s ABS accounting
system, Resource Management System (RMS) and Global Reporting Initiative (GRI) reporting system. The
Resource Management System (RMS) provides detailed information on how the company uses energy,
water, transport and raw materials, and allows SCA to monitor waste and emission levels. The SCA
sustainability report is prepared in accordance with GRI guidelines (level A+), using a set of GRI
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recommended key performance indicators (KPIs) and a number of supplementary indicators. The
sustainability report and the reporting and monitoring system RMS are externally audited.
SCA’s Green Bond Framework includes a list of eligible mitigation projects that promote the transition to
low-carbon and climate resilient growth (see Table 2). Eligible projects for SCA’s green bond are selected by
SCA’s Environmental Affairs and Energy Department together with the Treasury Department.
Table 2: Eligible project categories
Eligible project types
• Renewable energy
o Wind power
o Geothermal
o Biomass boilers, sludge incinerators and combined heat and power production (CHP)
• Fuel-switching from carbon-intensive fuels to biofuels
• Biofuel from forest waste
• Energy efficiency
o Energy savings according to SCA’s ESAVE programme (including replacements of pumps,
compressors, fans or lighting)
o Investments in production technologies and manufacturing process
• Water & waste management
• Sustainable forestry
SCA is a signatory to the UN Global Compact principles (SCA, 2012a). The relevant UN environmental
principles are:
•
Principle 7: Businesses should support a precautionary approach to environmental challenges.
•
Principle 8: Businesses should undertake initiatives to promote greater environmental
responsibility.
•
Principle 9: Businesses should encourage the development and diffusion of environmentally
friendly technologies.
In terms of transparency SCA is committed to open communication, and demands the same commitment
from its suppliers and subcontractors (SCA, 2014b). To enable investors to follow the development and to
provide insight to prioritized areas, SCA’s green bond procedure stipulates that investors will receive an
annual letter listing the projects financed, a selection of project examples, as well as a summary of green
bond developments. These investor letters will be made publically available on SCA’s webpage.
3. Assessment of SCA’s Green Bond framework and environmental policies
Overall, SCA’s green bond framework and environmental policies provide a progressive, clear and sound
framework for climate-friendly investments. The framework and procedures for SCA’s environmental
investments are assessed according to both the micro or project level impacts and the wider (macro-level)
impacts in this section.
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Corporate environmental policies
The company’s environmental policy focuses on contribution to a sustainable world and proactive
environmental management at all levels from local to global. The environmental management system is
certified to ISO 14001. SCA incorporates a life-cycle based perspective on management of projects,
products and services to reduce negative environmental impacts. The company also reflects the UN Global
Compact in the Environmental Policy, through considering the environmental impact of the supply chain as
well as life-cycle assessment (principle #8).
Table 3: Eligible projects and likelihood of meeting objective
Eligible project types
Renewable energy
o Wind power
o Geothermal
o Biomass boilers, sludge incinerators and combined
heat and power production (CHP)
Fuel-switching from carbon-intensive fuels to biofuels
Biofuel from forest waste
Energy efficiency
o Energy savings according to SCA’s ESAVE program
(including replacements of pumps, compressors,
fans or lighting)
o Investments in production technologies and
manufacturing process
Water and waste management
Likelihood of meeting objective
Good, but be aware of environmental
impacts.
Good. Observe complex impacts of some
biofuels.
Good.
Good, but be aware of possible rebound
effects.
Good to medium. Water management is
important given future climate change
scenarios and expected regional water
shortages. Limited effect on mitigation,
although reduction in hot water use
reduces energy use.
Good practice waste management to
recycle resources and reduce methane
emissions.
Post-consumption waste recycling could
have sizeable potential.
Good. There can be some trade-off
between biomass energy, carbon storage,
and concerns for ecosystems and
biodiversity.
Sustainable forestry
Eligible projects under the Green Bond framework
The eligible projects listed in the Green Bond Framework are generally supportive of SCA’s identified
objective of promoting a transition to low-carbon and climate-resilient growth. Table 3 shows the likelihood
of meeting the sustainability objective for eligible project categories with respect to the long-term
environmental objectives.
SCA adheres to the UN Global Compact principles. Principle #9 encourages the use of ‘best-available
technology’, the reuse of materials, and reduced use of raw materials.
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Strengths
SCA’s strategies and procedures are wide-spanning, comprehensive and ambitious.
SCA has a resource management system to evaluate performance with respect to its emission objectives,
and this is third party verified.
Life span and supplier chain considerations are widely embedded in strategies and in the choice of energy
sources and technologies.
SCA’s extensive program for fuel-switching has led to 50% biofuels use.
Water management is flexible, encompassing ground water use and cleaning of process water, dependent
on regional water supply and shortages.
All SCA forests are in Sweden. Due to the forests being boreal and since less biomass is extracted than
regrowth of biomass, trade-offs between carbon storage, energy use, biodiversity, and interests of local
inhabitants are reduced.
Weaknesses
Strategies supporting low carbon and climate resilient growth are well developed at the general level, but
more details on criteria for project selection in the categories ‘Investments in production technologies and
manufacturing process’ and ‘Water & waste management’ would be beneficial.
Despite some reporting in SCA’s Sustainability reports, more details on monitoring, measurement and
verification of performance of green bond funded projects would be useful.
Pitfalls
Beyond the consideration of specific project types, it is important to evaluate the potential for macro-level
impacts of climate activities. SCA’s policies take a progressive approach to consider macro issues such as
cross-boundary impacts and rebound effects, as discussed below.
Impacts beyond the project boundary
Due to the complexity of how socio-economic activities impact the climate; a specific project is likely to
have interactions with the broader community beyond the project borders. These interactions may or may
not be climate-friendly, and thus need to be considered with regard to the net impact of climate-related
investments.
SCA uses a life-cycle approach to environmental sustainability as described in the company’s sustainability
report. It also includes suppliers and environmental impacts of its supply chain. Both of these approaches
implicitly consider impacts beyond the project borders. Since SCA imports some pulp from outside Europe
one concern is the effects of this forest biomass extraction on biodiversity, carbon storage, and local
inhabitants of forests. However, all purchased pulp is certified with FSC or PEFC or fulfils the FSC standard
for controlled wood. Strict international standards like the FSC or PEFC are the best assurance of
sustainable forest management.
SCA states that the choice between more energy-efficient fossil-fuelled power plant and use of bioenergy
generally depends on local context and conditions. In some countries, however, this strategy can lead to a
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difficult trade-off between climate change mitigation in the form of life time CO2 emissions from a fossilfuelled power plant and concern for local conditions and interests.
Rebound effects
Another macro-level concern is the potential for rebound effects. This can occur when GHG reductions
result in a net increase in emitting activities. For example, energy efficiency improvements that lower
energy costs, inducing more energy use and partially offsetting energy savings. This can have the end result
of lower reduction in GHG emissions than anticipated. While these effects can never be entirely avoided, it
is recommended to be aware of possible rebound effects and avoid investing in projects where the risk of
such effects is particularly high.
Transparency and monitoring, reporting and verification
The reporting and validation procedures are described well in the description of the Green Bond framework
and other documents. SCA’s policies support regular and transparent updates to investors and the public.
Annual reports on green bond investments, a selection of project examples, and a summary of SCA’s Green
Bond development will be made public on their website.
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References
FSC (2014). FSC (Forest Stewardship Council) International Standard. FSC Principles and Criteria for Forest
Stewardship. FSC-STD-01-001 (version 4-0) EN.
IEA (2012). World Energy Outlook 2012, International Energy Agency.
IEA/UNDP (2011). Modernizing Building Energy Codes, International Energy Agency and United Nations
Development Programme.
IPCC (2013). Climate Change 2013: The Physical Science Basis, Fifth Assessment Report, Intergovernmental
Panel on Climate Change.
ISO (2011). ISO 50001 on energy management systems, International Organization for Standardization.
ISO (2009). Environmental management: The ISO 14000 family of International Standards, International
Organization for Standardization.
PEFC (2010). Sustainable Forest Management – Requirements. PEFC international standard. Requirements
for certification schemes. PEFC ST 1003:2010.
SCA (2014a). SCA Green Bond Framework.
SCA (2014b). SCA Sustainability Policy.
SCA (2012a). SCA Sustainability Report 2012.
SCA (2012b). Global Supplier Standard for SCA forest products business, March.
SCA (2011). Global Supplier Standard for SCA hygiene products business, January.
UN (2000). UN Global Compact, Principles 7, 8, and 9, United Nations.
WBCSD (2014). WBCSD (World Business Council for Sustainable Development) summary.
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