Avrim Lazar has come a long way since his days teaching high school students at St. George’s school in Vancouver. That was 40 years ago; now he’s president and CEO of the Forest Products Association of Canada, the voice of wood, pulp and paper producers across the country.
Although he spends most of his time in Ottawa, Lazar was in Vancouver last week for a United Nations Association in Canada gala event where he was honoured for his role in the Canadian boreal forest agreement.
The deal saw forestry companies and environmental groups agree to improve environmental standards while maintaining logging practices in Canada’s vast northern forest. The frank-speaking executive sat down with Business in Vancouver to talk about his speech at the UN gala, the coming $200 billion bio-age and how Canada’s railway system has made life difficult for forestry companies.
Your UN gala speech focuses on solving global problems in the local world. What does that mean?
There’s hardly a single issue that isn’t global. You go to work in Quesnel but you’re working in the global marketplace. U.S. banks, Chinese industrialists, European subsidies; we have all these issues that affect us locally but are globally driven, and we have very poor mechanism for addressing them. The UN is inefficient, full of self-interest, basically not a hugely capable organization. So I’m going to be talking about what kind of models are there for solving problems in a global world, and I’m going to talk about the boreal agreement as providing some hints as to how to do it.
You’re being honoured by the UN, but you’re saying it’s an inefficient organization. Do you risk causing a ruckus?
Causing a ruckus is part of the job, but I will pay them a compliment. What are the models for resolving global problems now? Bomb each other’s children? Government-sponsored rape? Trade embargoes? Terrorism? War? The UN may be a pig, but compared to the other things it’s a prince.
What’s the topic of conversation among forestry companies in Vancouver?
There’s always two issues. One is: what are the markets doing? And the other is: what are we doing? We’ve been struggling for a while with what kind of structural changes would make a difference. If you’re in a cyclical industry it’s easy to get mesmerized by the cycles and forget the structural shifts. The changes people have been making are old-fashioned improvements to productivity. The other thing we’ve been doing is being less dependent on the U.S. market. The third thing we’ve been doing is just changing the story on our environmental reputation. We used to be synonymous with environmentally bad, and now we’re held up as the good example, the good kids in the class. Who would have expected that five years ago?
What else are you focused on?
Extracting more value from every tree harvested and that’s bio-energy, bio-diesel, bio-ethanol, dissolving pulp [and] bio-plastics. We see a $200 billion market for those things.
Could these new products combat the industry’s cyclical nature?
It’s always going to be cyclical but it would be less vulnerable in cycles. For example, if you’re a pulp mill and you’re making pulp for paper and you’re also producing bioenergy, in a downturn for pulp prices you can jack up energy.
What will it take for forestry companies to embrace these new biotechnologies?
I’ve seen in the last three years a huge shift in most companies’ sense of this as a possibility. You’ve got to remember that in the United States the government is massively investing in this. In Europe, government is massively investing in this. We’ve been after our government to step up to the plate. I’m quite willing to compete with American companies, but we can’t compete with American government. I’m hoping to see more government investment, otherwise we’ll have private companies competing with foreign governments.
How would you rate the Conservative government’s support for these initiatives?
The Conservative government has done a very good job for us, partly because we’ve managed to agree with them on what their role is. In the past, the industry would go to government and say, ‘I’m in trouble, save me.’ What the government was doing wasn’t saving us, it was weakening us. [Now] they’ve invested in exports to China and they’ve invested in green energy.
What does the Harper government’s majority mean for your industry?
We’ve worked well with them in the past, and we plan to work well with them in the future. Just before the last budget there was an announcement of the government forcing the railways to enter into service agreements with us, which will really help us with our cost structure.
Can you explain the challenges the current rail system creates for the industry?
In some ways it’s simple. In Canada, for the forest industry, 80% of our mills are captive to one railway. The [railways] serve us when it’s easy for them and they ignore us when they can make more profit somewhere else. They run a very good railway, we haven’t got complaints about their efficiency or their intelligence, but they’re focused on making profit for their shareholders. When you have an unregulated monopoly it’s a huge business disadvantage. A, they don’t promise everything we need. B, they don’t deliver everything they promise. C, sometimes they deliver cars that are damaged or dirty. Even the very finest and gentlest of monopolies basically screw over their captive customers for the benefit of their shareholders. We actually haven’t got an argument with the railways; what we have an argument with are governments that haven’t been doing their job of sufficiently regulating or putting boundaries around how the railways get to use their monopoly.
How much would service agreements between forestry companies and railways improve the sector?
It would reduce our cost structure by hundreds of millions of dollars across the country. More importantly, we [increase] our dependability for our customers.