Pulp and Paper Canada

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CEO Series: Tremendous Changes in Forestry Practices


August 1, 2002
By Pulp & Paper Canada

He may be new to the industry, but he’s a quick study. “There has been a tendency among Ottawa politicians to take our industry a bit for granted,” says Avrim Lazar, president and chief executive offi…

He may be new to the industry, but he’s a quick study. “There has been a tendency among Ottawa politicians to take our industry a bit for granted,” says Avrim Lazar, president and chief executive officer of Forest Products Association of Canada in Ottawa, the national lobby and trade group. “Except when there’s a crisis — like the softwood lumber dispute — the federal government seems to forget about us.”

Lazar, who spent more than 20 years working for the federal government before being appointed head of FPAC in January 2002, has a good understanding of the thinking among Ottawa’s political decision-makers. “A lot of public and political understanding of our industry is about 15 years behind reality,” Lazar points out. “They don’t know what we’ve done environmentally. They don’t know the tremendous job we’ve done with mill effluents, and the tremendous changes we’ve made in forestry practices. They don’t know the extent to which we’ve mechanized and become more efficient.”

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Simply put, the view held by many of Ottawa’s political elite is of an industry operating as it was in the 1980s. Lazar wants to bring a new clarity to Ottawa. “The first thing I want to do is make certain that they [the federal government] never forgets us, that they understand the industry dynamics,” he says. “A large part of my job is to make certain that the industry cannot be taken for granted. After all, we are a modern, dynamic, forward-looking industry.”

In part, the government’s ignorance of the forestry sector is attributed to its narrow focus on the New Economy. Yet for Lazar, the New Economy doesn’t only include newly created sectors like biotech and information technology, but rather, it’s a new way of operating. “The New Economy is everywhere,” he says. “It’s the way that modern mills operate today with computerized technology and process control.”

Still, forest products rarely gets the notice it deserves, even though the industry generates billions of dollars of taxes for federal coffers. “It’s like background noise,” Lazar says. It flows into the Receiver General. They have heard the numbers, but they haven’t internalized it.”

Sore spot

Like many industrial sectors, forest products is going through a bit of a rough time: the softwood lumber dispute, the closure of sawmills, industry consolidation, competition from overseas are some things that keep company CEOs awake at night. Still, despite soft markets, mill owners have to invest in the future. “Unless the industry continues to invest in new machinery and new processes, it will not be competitive,” Lazar says.

Yet, current Canadian tax laws tend to penalize capital investment. Here’s why. Mill owners have to pay capital taxes on capital investments, whether or not a company is profitable in a given taxation year. Such taxation puts more pressure on mills, and as Lazar puts it, “discriminates against competitiveness.”

“In an industry like ours that is cyclical, when you’re at the bottom of the cycle, you’re still paying taxes on your investment,” he points out. “It’s a double penalty.”

Another sore spot is the level of government regulations overseeing the industry, notably in energy, environment and transport, says Lazar, who served as assistant deputy minister, policy and communications, for Environment Canada between 1995 and 1998. “We’re not against, for example, environmental regulations. In many areas we exceed the requirements. However, we’re against red tape, inefficiency, federal-provincial overlap and regulations that don’t take into consideration the different operating conditions in various parts of the country.”

To be sure, Ottawa’s a place where competing interests reside. Lobbyists and special interest groups all want to bend the ear of ministers, and bring their case to the highest levels of government. It’s a matter of building relationships, explains Lazar, who has built up a list of very high-level contacts over the years. “I have personal relations with lots of these people, including the ministers. We’re meeting with people at trade, at finance. And the first thing is to get the attention of the leaders and decision-makers and make certain that they understand our story — what we need done.”

Concerted action

There’s strength in numbers. That’s what makes Ottawa listen and take notice. One action plan in the works is that Lazar plans to is speak to the mayors of the 350 communities in which forestry plays a large role in job creation and tax generation. “We’re asking them to join us in our lobbying efforts,” Lazar says. “As well, we’re speaking to suppliers — chemicals, equipment and energy — and to anyone whose livelihood depends on the industry. We’re asking them to join us in our lobbying efforts, so that the government can see how broadly based our industry is.”

Besides facing unenthusiasm in Ottawa, the industry continues to face challenges from environmental groups. Historically, the industry had been losing ground to environmental groups like Greenpeace and Sierra Club over environmental concerns like forestry practices and emissions. But public opinion has swung ever so slightly to forestry companies, as their practices have improved, and the public has been made more aware of the changes. For one, the industry has spent billions of dollars to develop and implement clean environmental processes. “Society has been changing, and so has the industry,” Lazar says. “The changes that we have made are spectacular.”

For example, forest-products companies have lowered greenhouse gases (GHGs) 25% below 1990 levels, more than four times the requirement set at Kyoto, which was 6% for Canada.

No doubt, debate will continue, particularly as it applies to forest conservation. The debate will likely centre on the acceptable percentage of forests that ought to set aside for parks and recreation, and the percentage that ought to be commercially used. “My hope is that the debate would be conducted on the basis of science, and not on misinformation,” Lazar says.

Still, public opinion counts, making it more important than ever to tell a good story. “I think that we can do a huge amount more in getting our story out there,” Lazar says. “He who frames the story first has a huge advantage.”

Lazar might be a newcomer to the industry, but he brings a fresh voice and an aura of confidence. “Ten or 15 years ago, it would have been hard to frame the story with integrity,” he points out. “Today we can — because we’ve done our homework. We’ve made our commitments. We can stand tall.”


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