Black Liquor Bungling

Thursday, April 16th, 2009

I’ll refrain from a strong temptation to weave several amusing references to the term “black liquor” and simply state that my preference in liquor tends more toward a golden color. Let’s define what it is and why it is important.

Black liquor is a byproduct of the papermaking process.

Black Liquor

Pulp mills use caustic chemicals to boil wood which separates pulp from combustible chemicals in the wood. What is left after the pulp is removed is called black liquor, which is then refined and burned as an energy source in the mill. Nothing new about it; been going on for decades.

What IS new is that the US taxpayer is now subsidizing it through a loophole in the 2005 Highway Bill which was intended to encourage the use of alternative fuels in cars and trucks by crediting the excise tax when a taxpayer blended at least 0.1% of a taxable fuel (kerosene, diesel or gasoline) with the qualified alternative fuel.

This credit never applied to the paper industry, until the powerful paper lobby managed to get it applied to them in December 2007. What was estimated to be a $61 million cost to taxpayers could balloon to $10 BILLION according to Kevin Mason of Equity Research Associates. Just as maddening, mills must blend fossil fuels with the black liquor to be eligible for the credit.

Understandably, Canadian mills are crying foul, because the credit changes the economics of production, with the potential to cover perhaps 60% of pulp production costs.

We’ll leave those points to be debated by others, while focusing on this related issue:

This legislation is environmentally bankrupt. It discourages recycling.

Recycled corrugated is mechanically pulped and does not create the black liquor byproduct. The tax credit changes the economics of pulp production in favor of virgin pulp over recycled pulp.

The result: more trees cut down (aka carbon dioxide gatherers) more energy used, and more pollution created. This is going in the WRONG direction.

At least two U.S. containerboard mills recently switched from recycled corrugated to wood chips as their fiber source (source: Dead Tree Edition), with more on the way.

Commodity prices for recycled paper have crashed during the past year, (discussed in a previous blog “Freefalling Recycled Paper Prices“) raising fears that environmentally friendly practices driven by economics may falter. Ill conceived tax policy only adds (alternative) fuel to that fire.

Sound off about the environmental effect, or the other ramifications of this law by posting a comment below.

Tags: Carbon Sequestration, environment, green movement, paper recycling
Posted in Business | 1 Comment »

Bank Loan Blues

Wednesday, March 11th, 2009

With all the talk about banks not lending and no credit, I feel the need to say it has not been our experience.

Today’s historically low interest rates demand that we refinance long-term debt. We’ve got a 75,000 square foot facility financed with two notes: an SBA 504 loan on 40% and conventional bank loan for the 50% with 10% equity investment.

With our 5 year prepayment penalty having recently expired on the bank note, which is currently a variable rate adjusted quarterly, I have sought lenders to refinance into the longest fixed rate they would offer, and got three offers. Three.

I’ll admit that the bank has a very secure position, since the SBA takes the second lien, meaning that the bank gets their 50% first, should a default occur. Also, our balance sheet is, well, in balance, but we’re a small business in an uncertain economy with…you know the tiring refrain.

The offer we took will get our payments fixed for ten years in the high six percent range, so much better than the variable rate that has soared to over 9% at times during the past five years. As a business manager, I can now budget more accurately, and my guess is that there will certainly be higher interest rates in the next ten years that will make this deal, well, a deal.

Maybe this locked-up credit market is about what the talking heads call “interbank” lending, which my international finance background (not) doesn’t understand. The point is, not all lending is shut down, and we will be better off financially because of it.

Does anyone else have a similar experience?

Posted in Business | 1 Comment »

UL combating Greenwashing

Thursday, January 29th, 2009

Green Biz published an article describing the entrance of UL into the Green Certification area as a “key growth strategy” for their business intended to combat greenwashing.

I have many years of electronics industry experience in a previous life, so I offer my perspective on UL. You provide them with your test results with an exorbitant fee (because it is an electronics industry requirement) and you are Certified! Rubber stamped based upon their previously-defined qualification criteria.

How would that model translate to the dynamic and extremely diverse eco-business climate? Would standards be flexible enough for innovation?

Another model is to bring together interested and knowledgeable constituents, both public and private, without the bias of a profit motive, to develop standards using already-accepted methodologies.

An example of this is the process used by various committees of the CCX (Chicago Climate Exchange) to establish “protocols” for use by verifiers when an entity wants to sell carbon credits on the exchange. With significant investment sums at stake, they seek to establish a trustworthy valuation mechanism necessary for the proper functioning of markets.

In my opinion, a similar approach would be a more valuable, transparent, and flexible method to evaluate eco-friendly claims.  This is an important issue in the eco-business community, and I would like to hear from you whether you agree with my premise, or disagree, believing UL can provide a valuable contribution.  If not them, who?

Posted in Business, CCX, Certification, Greenwashing | 4 Comments »

Why write “Trees in the Forest”?

Tuesday, January 20th, 2009

Foundational concepts behind this blog

• Growing a profitable business
• Attracting the very best talent into a virtual organization
• Recycling paper for environmental benefit
• Securely shredding sensitive personal information
• Re-establishing forests with environmental sensitivity
• Engaging in dialogue to encourage thought leadership
• Become a center connecting point

The dynamic forest is ever-changing, made of individual trees

Posted in Business | No Comments »

The CEO’s guide to Social Media

Tuesday, January 20th, 2009

While some early adopters (read:  your kids) have been involved with the social aspects of the internet for several years, when it comes to business, this has only recently become a topic and option.  As parents, our concern was what our teenagers were posting on their MySpace pages.  Now, as CEOs, we are trying to figure out what our companies need to be posting, and where.

CEOs have the role of establishing the vision for the organization.  As you would influence which “traditional” marketing channels best fit the organization, so too with social media.  Here are my suggestions on how to get up to speed so you can participate in defining your company’s approach.

Attitude.  This will likely need adjustment.  Embrace the new, take responsibility to understand it.  You learned how to navigate your cell phone (you may even have ventured into texting), you can e-mail, you can search the web, and you can become knowledgeable about social media.  This cannot be abdicated to someone else.  It is too real and too important.

Self-Directed MBA.  Here’s where those web searching skills are useful.  Because this space is changing so fast, you are not going to learn it through the traditional educational methods (forget about books, and consultants with powerpoints.)  Dig into the web, and you will find an amazing amount of information.  In particular, read blogs, and follow the hyperlinks they share.  Threads will become your personal course syllabus.

Get Started.  You learn by doing, not watching.  Go to www.LinkedIn.com and sign up.  This is a professional networking site.  Don’t worry, you are not exposing your personal life to the world, but it is a good place to start, and it will begin the networking process.  Once you are comfortable with that, go to www.facebook.com and post a personal page.

Facebook is evolving into a very important networking site, and your company will also want to create a presence, separately.  If you create your profile on the same computer you store your contacts (i.e., Outlook), facebook gives you the option to compare your contacts against their user database, and you will be amazed to see how many people in your circle have profiles posted.  You will be given the option to send “friend” invitations to anyone you want to add to your personal network.

Your company has many options in the social networking universe.  Here’s a useful map of those options, published by Overdrive Interactive.

Explore and have fun.  The benefits you receive will be proportional to the amount of effort you put into learning this phenomena.  I welcome your thoughts and any experiences you have had in your personal journey

Tags: CEO, Facebook, LinkedIn, Overdrive Interactive, Social Media
Posted in Business | 2 Comments »

Freefalling Recycled Paper Prices

Friday, January 16th, 2009

What a difference a few months make. The commodity price decline experienced during the second half of 2008 is well known. Oil prices are probably the most widely reported since each of us can easily translate $147 per barrel equals $4 gasoline while $38 per barrel six months later equals $1.35 gasoline. Copper, aluminum prices are at three year lows.

SOP prices have collapsed as well. What?

Sorted Office Paper is the most common grade of bulk, baled, shredded paper purchased by mills to be recycled into post consumer paper products. The September price of $235 per ton has fallen to $120 per ton.

Why is that important? Two reasons:

1.) its impact on the document destruction business economics, and
2.) how recycled paper prices affect the “green” movement

The document destruction industry relies upon “back end” revenue generated by the bulk sale of shredded paper. Companies charge their customers to pickup and shred confidential documents, and in a very competitive market, pricing and margins are influenced by an expectation of the price mills will pay for the shredded paper.

1300 pound bales of shredded paper ready for recycling

Margins will be squeezed, since contracts for service typically do not provide for adjustments based upon SOP prices. Companies prefer not to disclose that they get revenue coming and going. Sneaky? No. Transparent? Now it is.

More disturbing, is how recycling programs may be affected.

How many people would be willing to pay an additional service fee for their “free” curbside paper recycling usage? Will companies who jumped on the green bandwagon and began scrap paper recycling programs because recyclers would pay them $50-$100 a ton for non-confidential scrap paper drop their initiatives once those recyclers begin to charge for hauling it away?

Even more grim is the prospect that we are close to a price level where it is more economical to landfill paper than recycle it, and how will that affect corporate decisions when the bottom line conflicts with the desire to do the right thing for the environment?

What do you think? Will higher costs trump environmental impact? How sustainable is the sustainable movement when faced with this economic shift? I’d love to hear your comments.

Tags: document destruction, environment, green movement, landfill, paper recycling
Posted in Business | 7 Comments »