CLIENT CASE STUDY: PFLEIDERER
Good wood
German wood panel producer Pfleiderer wants to further increase the share of recycled material used in its production. This is not only an essential part of the company’s ESG strategy, but also relevant for its first sustainability-linked bond, as Mani Herold, CFO, and Carsten Linker, Head of Treasury, tell flow
I
t would be hard to find a company these days that doesn’t consider the environmental impacts of its business. Yet
few, such as German wood panel producer Pfleiderer, can claim that “sustainability has always been part of our DNA”, to use the words of its CFO, Mani Herold. He adds, “In the past, we just didn’t talk so much about it with banks and investors.” Lately, this has changed. On the back of
the increasing importance that sustainability now enjoys amongst investors, employees and the public, Pfleiderer recalibrated its sustainability strategy over the course of 2021. To start, in April 2021 the company issued its first sustainability-linked bond of €750m, with Deutsche Bank being one of six banks that arranged the deal. More recently, Pfleiderer mandated Sustainalytics, an agency designed to help investors understand the risks companies face with respect to environmental, social and governance (ESG) factors. “Our goal is to provide more transparency to our investors, and we are very proud of the outcome of our ESG rating,” says Carsten Linker, Head of Treasury. Sustainalytics ranks Pfleiderer third amongst the 135 companies in the building products industry that the agency evaluates. “Nowadays, we are not only acting sustainably, but we are also talking about the good we are doing,” adds Herold. According to Herold, who joined Pfleiderer in early 2021, this change in communication is driven by the new mindset of investors and other stakeholders, and by the company’s new ESG strategy, presented at the end of 2021.
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Using recycled wood But let’s start from the beginning: in 1894, Gustav Pfleiderer founded a timber trading company and a rafting business in Heilbronn, Germany that used wood-based products. As early as 1993, the company started utilising recycled wood in its main facility, and four years later, Pfleiderer installed its first combined heat and power (CHP) plant that significantly reduced the energy needed in production processes. Nowadays, 84% of the company’s energy is fuelled by biomass, on average. Pfleiderer produces premium wood and laminate products for applications in kitchens, furniture and construction markets, as well as industrial resins for the packaging, construction and building materials
industries. According to the company, “no trees are deliberately felled to make Pfleiderer’s wood-based panels.” Instead, the largest part of the wood mix (about 40%) comprises sawmill residues such as chips, sawdust, or edgings – so-called pre-consumer recycled material. Another 45% (roughly) comes back from the end consumer. This material includes broken pallets from the packaging industry, for example, or old kitchen cabinets fed back into the production cycle. A small proportion (around 15%) of the wood Pfleiderer uses comes from forests and is typically a by- product, such as thinning or residual wood (see Figure 1). By following this approach, Pfleiderer enables a win-win situation from a purchasing point of view too, as the company becomes more competitive and flexible on the wood-supply side. While Pfleiderer has made significant
Our banks told us that investors were showing great appetite for sustainability- linked bonds. This proved to be very good advice Mani Herold, CFO, Pfleiderer
progress on its sustainability agenda, the company defaulted on its debt in 2012 before successfully restructuring. Following this turnaround, Pfleiderer went public on the Warsaw Stock Exchange in early 2016. After the delisting in 2019, the wood specialist now completely belongs to the private equity investor Strategic Value Partners and employs around 2,200 staff, generating net sales of about €1bn in 2021.
Setting up an ESG framework While Pfleiderer’s sourcing strategy reduces waste and promotes a circular wood ecosystem, the company’s management feels it can get even better. By 2025,
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