Tornator scenarios – what will happen to forests?

Tornator Plc is a leading European company specialized in sustainable forest management. During the 21st century, Tornator has grown to become the largest private forest owner in Finland and Estonia, as well as a significant forest manager in Romania. Sustainable forestry, forestland purchasing and lease, and silvicultural services form the company’s core business, but Tornator also develops wind power projects and is active in land and soil trading. The business is based on sustainable use of forests as well as a strong environmental expertise and utilization of digital technologies. In 2021, Tornator’s forest assets were valued at around EUR 2.2 billion.

Forestry is undergoing profound changes  

In 2021, the European Commission proposed a large number of new forest regulations. There was even talk of a regulatory landslide. The Commission published its much-anticipated Forest Strategy and promoted several regulations and directives related to the environment, climate, and energy policies. These regulations and directives will also directly or indirectly affect the forest sector by highlighting the role of forests in achieving climate and biodiversity objectives.

To better understand the changes in the operating environment and their impact on Tornator’s business, as well as to strengthen the company’s internal strategic thinking and to define strategic options for the future, Tornator started a scenario study with Capful. The goal of the study was to examine the development of the Finnish forestry sector until 2030.

After the project had already started, the uncertainty in the operating environment increased significantly: Russia invaded Ukraine, and the outlook for the economy that was still recovering from the shock caused by the pandemic became misty again. In addition, the invasion directly shook the Finnish timber market, as timber imports from Russia stopped.

Scenario work contributes to foresight and decision-making – what will happen to forests?

Some of the key questions in the scenario work were: 1) how are forests used in the future and by whom, 2) how will regulation evolve in the future, 3) what is the role of forests in protecting biodiversity, 4) what is the role of forestry in combating climate change, and how will this affect the use of forest assets, and 5) what new forest-related businesses and business models could emerge  by 2030?

Perspectives for the scenarios were sought through an internal survey and interviews with Finnish and international experts on issues such as the green transition, economic and technological development, the EU taxonomy for sustainable activities, and emergency supply in addition to questions directly related to forestry. The impact of the war in Ukraine on the scenarios was also assessed separately by Capful experts.

Capful’s proprietary Scenario Builder™ was used in the project to build logical, plausible, and differentiated scenarios.

Three alternative futures of forestry

The alternative futures of forestry were summarized in three scenarios: 1) Market-driven green transition, 2) Strict EU regulation and energy self-sufficiency, and 3) Forest management secures emergency supply.

The scenarios shed light on the alternative developments that could lead to, for example, a total ban of clear-cutting, a stronger role of the member states in biodiversity questions, a shift towards a higher value-added production in the Finnish forest industry, a ban on plastic use, an increased use of wood fiber in the clothing industry, and a stronger growth of wind power generation. The scenarios also include topics such as energy self-sufficiency, hydrogen economy, the worsening shortages of raw materials, extreme natural events, emissions trading systems, and their implications for Tornator’s alternative operating environments in 2030. Geopolitics had a strong effect on the development of the operating environment in the Forest management secures emergency supply scenario. The scenarios were also quantified in terms of business variables identified as the most significant to Tornator.

Eventually, the implications of the alternative futures to Tornator’s business were examined by analyzing the strategic fit of the company’s current strategy against the scenarios, the scenario independent actions, the scenario specific strategic options and lastly, the contingency plans. In addition, the scenario work and the identified trends and uncertainties provide a solid basis for strategic and future-oriented monitoring of the operating environment.

“Our goal was to enhance our competency in scenario work and thanks to Capful, we succeeded in this. The work took on a whole new dimension when the war in Ukraine broke out in the middle of the project, and the importance of scenario thinking became more concrete for the participants. Capful ran the workshops in an excellent manner and got people talking at an appropriately strategic level.”

– Henrik Nieminen, CEO, Tornator Oyj

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