Leading with purpose: Jussi Vanhanen on forest value and community

Jussi Vanhanen assumed his position as President and CEO of Metsä Group at a difficult time: The United States had just struck Iran, the war in Ukraine had entered the fourth consecutive year, and global trade relations were seeking a new direction. The situation improved little during the summer. All this affects Metsä Group, whose ability to make a profit depends on the general economic situation and people’s expectations for the future. 

Vanhanen prefers to be an optimist. According to him, if you take a long-term view of the world, it’s fair to assume that better things are in store for you.

“In the short term, negative events are more powerful, there’s no denying that. But one way or another, the economy has always moved forward.”

Vanhanen has had a long career in the forest industry. Metsä Group has become particularly familiar to him in recent years, as he sat on the company’s Board of Directors from 2022 until his appointment as President and CEO this spring.

According to Vanhanen, Metsä Group  acts like an asset manager: First, the company buys wood from its owners – Metsäliitto Cooperative’s owner-members – for whom wood is a valuable asset. Second, Metsä Group creates added value for wood, so that interest can be paid on the members’ capital and additional investments. Third, the company supports forest owners with forest services, ensuring that their forest assets remain as valuable and vital as possible in the future.

“Our ownership is diverse, and there’s no one way to think about forest asset management. This makes the job challenging, but also interesting.”

Vanhanen believes that Metsäliitto Cooperative’s owner-members are mainly forward-looking forest owners with an open mind. He got to know them while sitting on Metsäliitto Cooperative’s Board of Directors and says that he learned a lot about forest management at the District Committee meetings.

A cooperative represents the future

Metsä Group’s parent company Metsäliitto Cooperative was founded 91 years ago, and apart from the first years, it has operated as a cooperative ever since. You may occasionally hear claims in public that cooperatives are a thing of the past, and limited liability companies are more suitable for the modern world. 

In contrast, Vanhanen believes the cooperative form represents not only the present but also the future.

“Young people look to the future and appreciate a sense of community. If anything, a cooperative is a communal company structure.”

Vanhanen would like to see younger people become interested in forest management – and Metsäliitto Cooperative. However, one obstacle is difficult to overcome: forest ownership is often inherited, which means that many new owners are close to their sixties. However, Vanhanen believes that the thought patterns acquired in youth persist.

“Today’s young people will also reach their sixties, but the desire for community won’t change.”

A strong balance sheet carries over uncertain times 

Metsä Group posted a weak result in the first half of the year, which is why it has launched a profit improvement programme. The last time the company dipped this low was in 2009, when the global financial crisis shook economies everywhere. As Vanhanen points out, the company is now in completely different shape than it was 16 years ago. Back then, the company had to humbly request money from banks, but now Metsä Group has a strong balance sheet and is only moderately indebted, despite the big investments made during Ilkka Hämälä’s time as President and CEO.

There are three reasons for the difficult situation – all of them external.

First, the war in Ukraine creates uncertainty and led to rapid global inflation during its first years.

“The situation is good for our owners in the sense that the price of wood is high. However, we really should provide them with more added value than that offered by wood trade,” says Vanhanen.

The reconstruction of Ukraine, which will hopefully begin in the near future, may bring a peak in demand for construction materials. As Vanhanen points out, it is still unclear who will pay for the construction.

Second, the tariffs prepared by Washington curb exports to the United States, which is an important market for Metsä Board. Third, the disputes between the United States and China reduce the demand for pulp in China, which is an important market for Metsä Fibre. The Chinese buy Finnish pulp to make packaging, in which products purchased from online stores, for example, are sent to the United States. The trade war has reduced this trade and therefore the demand for pulp.

Even if acute crises are resolved and trade agreements concluded, companies may remain suspicious and cautious in case the rules of the game soon change again. This reduces economic activity.

Vanhanen also sees positive signs. For example, the German Bundestag has eased the debt brake, allowing the German state to invest more than before. This will stimulate the economy across Europe.

Bright spots can be found even closer. The laminated veneer lumber (LVL) that Metsä Group produces is selling well, despite the construction sector otherwise experiencing a slowdown. The company is currently constructing a new Kerto LVL mill in Äänekoski.

“This is an important investment. Metsä Group’s main focus remains on pulp and paperboard, but more and more attention must be paid to wood construction. I hope investments related to construction can be continued,” says Vanhanen.

The company is also planning new products, and the Kuura textile fibre and Muoto packaging product are key projects in this respect.  

“We have invested a lot in product development. The focus now needs to be shifted to identifying and commercialising the right business model.” 

He adds that new product development is slow, and that Metsä Group’s current products will continue to generate the bulk of the company’s sales ten years from now. This is dictated by the simple fact that in the forest industry, the life-cycle of mills spans decades, which means the production structure changes slowly.

The forest owner does not need to worry

Forest owners will not need to lose sleep. Vanhanen does not believe that the demand for logs and pulpwood will vanish.

“In the long run, the main issue is not the economy but climate change. It’s already visible in various ways. For example, insect damage has increased especially in southern Finland, and perhaps also in the north in future. Yet the location of Finnish forests in relation to climate change could be considered one of the best in global terms.”

Nevertheless, there are also some advantages: the warming climate leads to faster tree growth. Admittedly, the ratio between benefit and risk is difficult to predict due to the high level of uncertainty.

One potential change is the slow replacement of tree species. Vanhanen says this is being researched and discussed with forest owners.

“We know for sure that a variety of tree species is a positive thing. It works like insurance and protects the forest in many ways. The effects of climate change are unpredictable, but when a forest is home to many tree species, it is easier to prepare for them.”

The Chinese philosopher of Leadership

Vanhanen says he is curious by nature. He is interested in people and listens to their ideas. He frequently thinks out loud and tests his own ideas.

“I can and should be challenged,” he often says.

Before assuming his position as President and CEO, Vanhanen visited several Metsä Group mill locations. He personally interviewed a hundred employees and conducted a survey among the entire personnel to learn what they expected from the company. Based on the survey, the things to retain include the company’s values, pragmatism and way of developing forest management. The personnel would like the company’s internal operations to be simpler.

Vanhanen says he wants the company to be more customer-oriented – that is, pay attention to what customers need. To this end, he welcomes ideas from employees; Vanhanen intends to delegate more than before, share work and responsibilities. His guiding principle comes from Lao Tzu, an ancient Chinese philosopher, whose maxim can be freely translated as:

“A leader is best when people barely know he exists. When his work is done and his aim fulfilled, people will say: ‘we did it ourselves.’”