Figure 1: Circular wood ecosystem at Pfleiderer
l1 The potential of wood products 1kg wood stores 1.8kg CO2
CO2 stored in wood remains bound after harvesting for the entire service life.
l 1m³ wood stores 1,000kg CO2 l1 l2 Logs are delivered to sawmills –
cutting of bars and planks. Thinning and residual wood flows into the production of wood-based materials.
l3 Chips, sawdust and edgings are
residues that can be used for the production of wood-based materials.
l4 Finished wood and wood-based
products are supplied to consumers via trade, craftsmen and industry.
l5 At the end of their service life, used
wood and wood-based products are dismantled and processed in accordance with Waste Wood Ordinance rules. Disposal and processing of mineral and metallic components takes place, as well as chemical and organic pollution tests.
l6 Only tested wood of the highest l7 Wood that can no longer be -neutral way.
quality classes A1 and A2 is re- used as recycled material for the production of wood-based materials.
recycled is used thermally in CHP plants. By dispensing with fossil fuels as far as possible, Pfleiderer gets the energy and heat it needs in a climate/CO2
l7 l4 l6 l3
for climate protection is high. CO2 storage of wood: l
l2
l5 Source: Pfleiderer’s ESG Framework Report 2021
Pfleiderer wants to increase the share of post-consumer recycled material to 50%. This is one key performance indicator (KPI) that the company has promised to deliver. “We have thought long and hard about
the ways we can build on the sustainable foundations of our business,” writes CEO Dr Boris Gorella in his introduction to the ESG framework. “Ultimately, we want to ensure that we play a more active role in transitioning to a lower-carbon economy and do our part to help solve global challenges. Our stakeholders demand a response from us and we are determined to meet their growing expectations.” The outcome of this thinking was Pfleiderer’s ‘naturally sustainable’ strategy, comprising three priority areas: materials, climate and people. For each of these areas, the company has defined two or three measurable targets (see Figure 2).
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Linking strategy to finance These KPIs also provide the foundation for the sustainability-linked finance framework that Linker and his treasury team set up in early 2021. However, for simplicity reasons, they didn’t include all KPIs, opting for two only. “We didn’t want to create too much complexity for our investors,” Linker explains. “Therefore, we decided to combine a target that everybody
understands immediately – reducing CO2 emissions – and one that is Pfleiderer- specific, which is increasing the share of recycled wood.” The idea of linking financing instruments
to the company’s sustainability targets in the first place was driven by the market. Herold recalls: “Our banks told us that investors were showing great appetite for sustainability-linked bonds. This proved
to be very good advice.” When Pfleiderer issued its first sustainable bond in April 2021, it was three times oversubscribed. “This was a positive surprise to us since we were new to the market and our approach – refinancing our existing €450m debt, that we had taken on in 2019 as part of the delisting, by a new bond with a volume of €750m – was quite aggressive. Moreover, uncertainty around the Covid-19 pandemic was still shaping markets,” he says. The bond is split into two tranches:
Pfleiderer raised €400m with a fixed coupon of 4.75%, and a floater of €350m at three months Euribor plus 4.75%. If the company fails to adhere to one or both ESG targets that the bond is linked to, investors will receive a step-up. However, according to Herold, the company “is well under way to reach its 2022 interim goals for both KPIs”.
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