Global sourcing, Enterprise Risk Management (ERM) and Implications for Strategy- Stora Enso Corporation
Stora Enso is one of the big players in the global paper, packaging, and related forestry industry. It is the result of the merger between Stora and Enso, from Sweden and Finland respectively, and it operates in a global setting. It sources produces and sells its products and services in diverse countries. Hence, it is embedded in many different environments and markets, which brings complexity and multiple risks to corporate strategy and decision-making. The company sees itself as a sustainable business actor, as a leading actor in its field.: Stora Enso, a global leader in providing renewable solutions for packaging, biomaterials, wooden constructions, and paper, has demonstrated the importance of corporate governance for integrating sustainability into Enterprise Risk Management (ERM). Stora Enso’s stated purpose of “Do Good for the People and the Planet” embodies the importance of sustainability to the company. Sustainability is fundamental to the investor proposition and strategy. Further, it is integral to decision-making across all of Stora Enso’s operations and activities such as the production and sales of renewable products, buying trees from local forest owners, selling electricity generated at its mills, and managing its logistics on a global scale.
However, this view of being sustainable is not shared by all stakeholders. See below: “New Finnish Forestry Act Could Mean the End of Sami Reindeer Herding – Sámi Representatives Call for Swift Support From the International Community”, 28 Mar 2016 An unprecedented land grab will threaten the last old-growth forests of Finnish Lapland and the homeland of the indigenous Sámi Peoples if a new Forestry Act is approved by the Finnish Parliament this week…The new Forestry Act would no longer require Metsähallitus, the Finnish state-run enterprise which already controls 90% of the Sámi Home Area, to liaise with the Sámi Parliament and the Skolt Sámi Village Council on issues of land management and their potential impacts on indigenous people’s lives…The new Act would affect 2.2 million hectares of water systems and 360,000 hectares of land, mostly in the Sub-Arctic and North Boreal areas of Finland, the Sámi’s Home Area…If the new Forestry Act is passed, Sámi areas in Upper Lapland, including large tracts of boreal old-growth forests, will be opened up to a range of economic uses…The preparation of this Act has not been conducted with the Free, Prior, and Informed Consent of the Sámi People…
There have been several challenges related to the global sourcing and manufacturing operations of Stora Enso that have turned into risks and negative implications, even damaging the corporate reputation and stakeholder relations. The minority land rights and the vulnerable arctic nature, usage of child labor, and diverse strategies claiming sustainability, e.g. the plantation-based sourcing in Uruguay, has triggered several discussions and pointed out business aspects and risks that influence Stora Enso’s reputation and strategic decision making. Stora Enso has tried to respond to these aspects also referred to as “media hunt”, but many concerns are diachronic and persistent. Holmberg and Karlberg point out problems in Stora Enso’s strategy, with “the main focus is on the years 2012-2017 when the company ran into trouble regarding responsible behavior and, in response, initiated a series of activities to strengthen internal practices and restore the reputation of the brand
Q 1.1: Should Stora Enso decide to continue its “Do Good for the People and the Planet” sustainability strategy -or should it take a step backward and stop claiming that it is sustainable due to all reported problems (in its global sourcing and production) and just focus on profit-making and reducing other business risks?
Sources for material:
format of the case:
Theories/ framework: only 1 theory to be used.
Analysis and Evaluation.
Interpretation and Findings.
Recommendations for strategy. For more information on Enterprise Risk Management check on this: https://en.wikipedia.org/wiki/Enterprise_risk_management
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