An interview with Resolute Forest Products President and CEO Richard Garneau

Richard Garneau, President and CEO, Resolute Forest Products. Photo: Guillaume Roy, LMP


Resolved to go Green

Born in Saint-Prime in Lac-Saint-Jean, Richard Garneau likes to point out that he has deep roots in the largest forest area of Quebec where "green gold" happens to be present.

Appointed President of Abitibi-Bowater in June 2010, the company changed its name to Resolute Forest Products (RFP). It was no coincidence that at this time, the word on the street suddenly took a turn greener. The terms 'sustainable development', 'life cycle analysis', 'carbon footprint' and 'eco-friendly products' are now ingrained as part of Garneau's vocabulary, and are equally important as 'profitability' and 'competitiveness.'

"The future requires us to get outside of the box and review the traditional ways of thinking and doing," commented Garneau in his speech at the Congress of the Forestry Association of Saguenay-Lac-Saint-Jean on October 26. Le Maître papetier took the opportunity to discuss RFP's vision on sustainable development challenges in the coming years.

In your speech, we heard a lot about sustainable development. What is the vision of Resolute Forest Products?

Richard Garneau (RG): This is a great opportunity for sustainable development. It can be difficult to come up with a definition of sustainable development, but it builds on three pillars; the environment, communities and the economy. We are constantly thinking about ways to protect the environment, and about how to create jobs by ensuring they are economically viable. We hope that all the decisions we make have beneficial effects in the long term.

Resolute Forest Products is a global leader in the forest products industry with a diverse range of products, including newsprint, commercial printing papers, market pulp and wood products.

We didn't hear you speak as much about the environment in the past. Does this represent a new focus for you?

RG: We did hear less about it before, but it was still present. Now, this is really an area that has a lot of support and will possibly allow us to have better crops or to increase the allowable cut in forests. I think this is a big plus.

Commercial Pulp. Courtesy of Resolute.You recently received the award for the RISI CEO North America 2012. What does that mean for you?

RG: While it may have been me who received the honour, I think it was really the team that worked hard to help put the company back on track and make the changes that were necessary to ensure our sustainability and long-term profitability. These decisions will allow us to meet our obligations.

Since you arrived at RFP, what have been some of your biggest challenges?

RG: The industry is in crisis. You have to be able to make quick decisions that will enable you to position the company in the global marketplace. The culture change that has taken place at RFP allows us to make sure we quickly execute changes when a decision is taken. It's been a matter of not only making decisions for tomorrow, but for the coming years. There is a tendency in any public company to make decisions for the next quarter. I do not even look at the quarterly results. Decisions are taken to ensure that in the long term RFP will be a major player.

The Company owns or operates 22 pulp and paper mills and 22 wood products facilities located in the United States, Canada and South Korea. Marketing its products in close to 80 countries, Resolute has third-party certified 100% of its managed woodlands to sustainable forest management standards.

In the short and medium term, what are your biggest challenges with the coming into play of a new forest regime?

RG: The new forest regime is a challenge in itself. When we look at our operations, we lose 11% of the volume permanently and another 30% of which was guaranteed will be auctioned. We lose 40% of the volume and we do not know how we will recover this, or when it will be available. It's the chief forester, who represents the government and the Department of Natural Resources, who will make decisions on planning, road development, monitoring and certification of forestry. These are a lot of changes and they're happening fast. We also can't forget that the cost of timber delivered to mills is among the most expensive of all our operating units. It is not competitive. Is it going to be more competitive? Will costs go down in response to some of these changes? We'll see, but I have my doubts.

Between 2500 and 3000 RFP employees will be retiring in the coming years. With the lack of students in areas related to forestry, pulp and paper and wood processing, how do you recruit skilled labour?

RG: This is a challenge. When a company is successful, it is much easier to find employees who are willing to meet the challenge. By ensuring we position the company for the future, we will be able to meet this challenge and then attract labour to fill the positions of these retiring employees.

Resolute is also a member of the World Wildlife Fund's Climate Savers program, in which businesses establish ambitious targets to voluntarily reduce greenhouse gas emissions and work aggressively toward achieving them.

Markets disappear in the paper industry while new niches seem promising. What areas are shaping up to be the most promising for the future of RFP?

RG: There are many new opportunities. We talk about biodiesel, granules, and others, and while the markets for these are still very fragile, the technologies exist. For example, we have a project that would allow us to make resin from lignin in wood to replace the resin base made of petroleum products. But, prospective clients are hesitant to use new technologies. It will take three, four, five, or even ten years before they can use more of the 'green gold' that we have here. We have to make certain there will be markets to support your products before you announce them. We have to be careful, but we know there is an opening with wood.

Paper mill – Iroquois Falls (Ontario). Courtesy of Resolute.RFP is now the largest manager of FSC-certified forests in the world. What does it mean for the company?

RG: It allows us to provide opportunities for the sale of pulp, paper and wood. There are many producers in Asia or Indonesia who get attacked by environmental agencies because they do not have in place good sustainable development practices. We aim to have 80% of our forests FSC-certified. We had 18% of our territories certified in 2006. We now have more than 50% certification and other certifications are pending. FSC certification allows us to have better access to new markets and it enhances our reputation.

With the consolidation of assets in the Saguenay-Lac-Saint-Jean, how is RFP positioned to face the future?

RG: There will be more consolidation to come. Next year we are talking about an 11% reduction of forest harvesting. We will have to continue to work with communities to address the issue of a lack of wood in two of our six sawmills.

Since becoming the head of the company, what accomplishment are you most proud of?

RG: Establishing a management team and a team manager who is able to address the problems and challenges we're facing. We have a highly motivated team, which allows us to make quick decisions and do the right thing.

Do you have any major investments planned for the short or long term?

RG: We have invested $ 200 million in acquiring Fibrek St-Félicien. We will invest an additional $23 million to meet Résolu environmental standards. In Dolbeau, we made a further investment of $ 20 million. We announced a new line of sawing Girardville and glider La Doré. When favorable investment conditions are certain and we can anticipate how much wood we will have access to, we will continue to invest. Having a favourable climate for investment is very important.

Richard Garneau
President and CEO

Richard Garneau has been a director of Resolute Forest Products since June 2010. He most recently served as President and CEO of Catalyst Paper Corporation. Prior to his tenure at Catalyst, Mr. Garneau was Executive Vice President, Operations, at Domtar. He also held a variety of roles at Norampac,, Future Electronics, St. Laurent Paperboard, Finlay Forest Industries and Donohue Inc.