Given the growing shift in public support for the environmental movement, it’s not surprising that resource companies generally prefer to avoid disputes with the greens. Even energy giants like Exxon Mobil Corp. and Royal Dutch Shell PLC, formerly climate change skeptics, have changed their spots and are now championing the once-hated carbon tax. So what to make of Resolute Forest Products Inc.?
The name may not trip off the tongue of the average Canadian, but the Montreal-based company—one of the world’s largest newsprint producers—recently found a novel way to raise its profile. In May, Resolute (TSX:RFP) launched a US$7-million lawsuit against Greenpeace that accuses what is arguably one of the world’s foremost environmental groups of fabricating evidence and defamation. Greenpeace has long been a vocal critic of Resolute’s forest practices, and it and the company have been butting heads and battling in and out of court for years. But what’s remarkable about this suit is that it was filed in the state of Georgia under the U.S. anti-racketeering (RICO) law, which was originally created to go after organized crime.
Those who follow Resolute may be less surprised, as chief executive Robert Garneau isn’t shy about airing controversial views. Late last year, he criticized Ottawa for unfairly subsidizing a competitor’s struggling paper mill and filed a claim under NAFTA seeking $70 million in damages. And in April, Garneau slammed West Coast lumber producers for their willingness to give up their right to free trade in lumber to settle the softwood battle with the U.S. (It probably didn’t help that, in February, Resolute reported a $257-million loss for 2015 on $3.6 billion in revenue.)
Greenpeace, it must be said, often takes a confrontational approach as well. The group, which says the RICO suit is “entirely without merit,” has in the past accused Resolute of harming pristine northern ecosystems and targeted both the company and its customers in a North America-wide campaign headlined, “Resolute: Forest Destroyer.” It’s safe to say that no one is pulling any punches in this fight.
In other words, don’t expect a quick resolution. Along with the two parties’ strong positions, the depressed state of the industry and the complexity of the marketplace weigh against it. But what the story does offer in the short term is a window on the questions raised and the decisions companies face when the ground under them shifts and new values, stakeholders and standards begin to define the norm.
Right now, when it comes to Resolute and Greenpeace, it’s hard to imagine the two sides ever seeing eye to eye on anything. But in fact, only a few years ago they were working together, finding common cause in the preservation of Canada’s vast northern forests. In 2010, Resolute became a founding member of the Canadian Boreal Forest Agreement (CBFA), a landmark deal initially signed by more than two dozen companies and environmental groups, including Greenpeace, promising to set aside the massive swath of forest running from Newfoundland to British Columbia as protected habitat for woodland caribou. The idea, according to the signatories, was to combine “boreal forest conservation” with “forest sector competitiveness.” Notably, the deal was signed before Garneau took up his role as chief executive in early 2011.
Resolute also joined and received certification for the sustainability of its practices from the Forest Stewardship Council (FSC), a Bonn-based, independent international organization whose stamp of approval has become a key standard for environment-minded retailers, printers and consumers. Considering the amount of forest that Resolute manages, much of it in the boreal, that’s a big undertaking. But it was important, another major proof of values to display alongside the CBFA deal.
But just as its relationship with Greenpeace has soured, so too has Resolute’s standing with the FSC. And in today’s forest products marketplace, that carries very direct, bottom-line risks. FSC certification “is something companies look for, to show their customers and investors” that they walk the talk on sustainable practices, says Lauren Holland, a senior analyst at CreditSights, an independent credit rating firm.
What does it mean for a company’s sales? “It’s impossible to quantify,” says Benoit Laprade, an analyst at Scotia Capital. But he suspects the figure is significant. “A number of buyers of newsprint and other grades [of paper] would need that certification for comfort from their perspective.” Indeed, along with major retailers, that list also includes major publishers like The New York Times Co., Hearst Communications Inc., The McClatchy Co. and The Globe and Mail Inc., all of which have sourcing policies that give preference to FSC-certified paper.
Greenpeace is a member of the FSC but in no other way are the two affiliated. “We are not an environmental organization, just a voluntary certification system,” says FSC Canada president Francois Dufresne, noting that even its certifications are based on the work of qualified third-party audit groups. However, their conflicts with Resolute are linked. The unraveling between Resolute and Greenpeace within the CBFA started almost as soon as the ink on the alliance deal was dry. Greenpeace accused the company of failing to live up to its promises. In particular, it charged that the company was operating in protected, old-growth forests and disregarding the concerns of First Nations communities. Resolute denied it. In 2012, Greenpeace and other environmental groups within the CBFA tried to sort it out through mediation but it proved unsuccessful. That December, Greenpeace pulled out of the pact (at least one other green group, Canopy, left a few months later) and stepped up its advocacy campaign.
Resolute actually filed its first lawsuit against Greenpeace claiming defamation in Ontario court in 2013. By then, Greenpeace had backtracked on earlier claims that Resolute had violated the CBFA in 2012. But it held by its charges regarding Resolute’s representation of its forestry practices and interactions with First Nations. The plot thickened later that year when FSC auditors (the Rainforest Alliance) found issues at Resolute’s operations, putting several of the company’s certifications, which are done by location, into question. At the start of 2014, three Resolute certifications for more than eight million hectares of forests were suspended.
In response, Resolute took Rainforest Alliance to court and accused the FSC of bowing to Greenpeace’s influence, which it strongly denied. But some damage was done. In December 2014, for example, giant retailer Best Buy announced it was dropping Resolute in favour of other certified suppliers. (In its new U.S. suit, Resolute describes the suppliers as those who “acquiesced to Greenpeace’s threatening tactics.”)
Critics of Resolute say the company has been trying to silence its detractors through court action. Company spokesperson Seth Kursman says that’s not the case. “We discuss our concerns in an open and transparent manner, we don’t believe we have disparaged FSC certification,” he says. “We continue to support FSC certification.” The FSC seems less sure. Through last year, it was pushing for mediation to resolve the disputes between the company, First Nations and environment groups. But in February, after Resolute repeatedly refused and continued to criticize the FSC, the group’s director-general, Kim Carstensen, said it was considering asking its members to vote on ousting Resolute as an FSC member (results of that discussion are not yet public). Such a vote wouldn’t nullify its remaining FSC certifications, but it would further isolate the paper giant. What’s missing in all of this bitterness, say some observers, is a clear endgame for Resolute. In the company’s 124-page RICO suit it says Greenpeace’s actions have cost it more than $100 million. The company does have its status within the industry as a smart operator with modern equipment and a focus on efficiency going for it. And if pulp and paper ever does break free of its present brutal down cycle, analyst Holland says it is positioned to generate big profits. Yet even if you accept that Resolute is fighting for principles, it’s hard to see how its currently strategy won’t cost it more.
The FSC’s Dufresne doesn’t understand it either. Respect for the rights of indigenous peoples and the environment “is the emerging reality in the natural resources sector,” he says. “The question of how to manage the boreal forest is going to be the topic of the forest industry for this century.”