Friday, February 08, 2008

Business Gets It. When Will Politicians?



Staples Cuts Off Paper Supplier


By TOM WRIGHT
February 8, 2008; Page A4

Office-supplies retailer Staples Inc. has severed all contracts with Singapore-based Asia Pulp & Paper Co. Ltd., one of the world's largest paper companies, in a move that shows concerns over forest destruction and global warming are having an impact on big U.S. paper buyers.

Until recently, Staples sourced about 9% of its total paper supply from APP and used the paper for its own Staples-branded stock, mainly photocopy and office paper. Staples had stuck with the company even as other large paper sellers in the U.S., Europe and Asia, including Office Depot Inc., stopped buying from APP in recent years because of alleged environmental misdeeds.


The Framingham, Mass., company canceled its contracts late last month, said Mark Buckley, vice president for environmental issues at Staples. Staples is expected to announce the move next week.

"We decided engagement was not possible anymore," Mr. Buckley said. "We haven't seen any indication that APP has been making any positive strides" to protect the environment. Remaining a customer of APP was "at great peril to our brand," he added.

—The Wall Street Journal

As long-time readers know, it is the official policy of NotMakingThisUp that global warming is no mere figment of the imagination of “pot-smoking journalists,” as Warren Buffett’s partner, Charlie Munger, ventured during last year’s otherwise pleasant and enlightening Berkshire Hathaway annual meeting, in what was one of several Grumpy-Old-Man pronouncements that served more to highlight Munger’s age than his famous wit.

Yet, as today's article demonstates, the ranks of skeptics—several of whom will, no doubt, post caustic rebuttals as soon as this hits their screens—ascribing the horrendous and staggering climate change that has occurred since the advent of the internal combustion engine to random temperature fluctuations comparable to past warming patterns, is growing thinner.

GE—to name but one of many large capitalist enterprises that could very well run its business without the least nod to global warming, but don't—sees both the writing on the wall and the business opportunity inherent in the problem of slowing, if not reversing, the change.

Of course, companies like GE and Staples don’t do stuff just because “pot-smoking journalists” write alarmist stories about something. Consider how long it took for GE to settle on a Hudson River cleanup of the 1.3 million pounds of PCBs GE's plants dumped in its waters.

And since NotMakingThisUp normally prefers to tweak captains of industry than praise them, we thought it worth highlighting Staples’ move, as reported in today’s Wall Street Journal, cutting off Asia Pulp & Paper as a supplier of paper stock.

Knowing, as we do, something of APP’s past—an old friend used to buy paper from APP, and said exactly the same thing companies like Staples are saying—we are not at all surprised at the link being made between Indonesia’s rapidly depleting rain forest and APP’s rapidly growing topline in the last two decades.

At the risk of stretching “fair use” standards to include the entire Wall Street Journal story—we always urge everyone read the Wall Street Journal cover-to-cover every day, and not just for the business stories—we continue with the rest of today’s article.

APP representatives didn't return calls seeking comment. In the past, it has said it is moving toward relying for all of its wood on plantation trees but needs to cut natural forest to maintain production levels.

APP runs one of Asia's largest pulp mills on the Indonesian island of Sumatra and has operations in China. The retailers worry that APP is destroying natural rainforest to feed its mills.

Concerns over rainforest destruction have been heightened in recent months because new data show that Indonesia is the world's third-largest emitter of carbon dioxide, the heat-trapping greenhouse gas, behind the U.S. and China. Fires set to clear natural forests and forested peat swamps after they have been logged are the major cause of those emissions.

APP last year sought permission to use an environmentally friendly logo issued by the Forest Stewardship Council. In October, after inquiries from The Wall Street Journal about APP's planned use of the logo, the FSC barred the company from using it.

Write to Tom Wright at tom.wright@dowjones.com


Next time NotMakingThisUp needs new copy paper, we’ll be going to Staples.



Jeff Matthews

I Am Not Making This Up

© 2008 Jeff Matthews
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

8 comments:

Jim Gardner said...

Jeff,

Why would you buy copy paper at Staples instead of Office Depot? The article states "Staples had stuck with the company even as other large paper sellers in the U.S., Europe and Asia, including Office Depot Inc., stopped buying from APP in recent years because of alleged environmental misdeeds."

Hooray for Staples. But Hooray-er (?) for Office Depot, who was in the game earlier. You know, McDonald's got good press several years ago when they abandoned styrofoam containers to great fanfare, though Burger King had done it much earlier.

In today's business environment (no pun intended) its a good idea to let your PR department know when your company does something worthwhile, lest latecomer ne'er do wells steal your spotlight.

Chips Whitesugar said...

Setting aside the debate about global climate change, deforestation is a disaster worthy to stand on its own. Lumping a quantifiable, observable, and certainly man made effect like rainforest destruction with (what some would argue is) the dubious fear mongering of climate change, risks diminishing this far more serious problem.

dividendsrus said...

Most people understand that rainforest destruction or waterway contamination is directly caused by man. It is a far greater leap to say that global warming is caused by man, and more then global cooling. It is however, disingenuous for politicians to assume that because there is (a) global warming and (b) mankind's generates pollution, that (b) causes (a), particularly when there is several billion years of history that suggests that the causes of climate change come from far more powerful sources than man, like for example, the sun.

Some have suggested that the consumption of mind-altering drugs, such as marijuana, do impact the user's ability to understand the difference between correlation, and cause-and-effect. Could there be a connection here? :)

Sam E. Antar said...

"We decided engagement was not possible anymore," Mr. Buckley said. "We haven't seen any indication that APP has been making any positive strides" to protect the environment. Remaining a customer of APP was "at great peril to our brand," he added."

Now can some one please ask Al Gore to stop burning so much jet fuel?

Maybe we can get Hillary, Barack, and John to take trains, too.

At least their heads will be closer to the ground instead of being up in the sky.

Respectfully,

Sam E. Antar (former Crazy Eddie CFO and a convicted felon)

Buzz said...

Your last sentence says all you need to know as to why Staples cut off APP.

Andrew said...

Jeff - you're right to give kudos to Staples and others for halting their purchases from APP. Unfortunately it's my belief that this just gives a discount to those countries(China, Russia, et al) who pay no mind to the environment and thus continuing buying their paper from Indonesia. until all countries come on board, we'll have to continuing accept the lowest common denominator.

Mark E Hoffer said...

Andrew,

if we check our spending, through the supply chains that are Russia, and China, as well, we gain, closer, to the goal of not subsidizing Rain Forest degradation, and other forms of, highly measurable, negative Economic actions--masquerading as positive Financial Profits.

Mark E Hoffer

Andrew said...

Gotcha, I hope you're right Mark.