Episode 23: TC Transcontinental – A Market Leader in Sustainable Packaging

TRANSCRIPT:

Magali Depras: …plastic also has, you know, lots of benefits. We have to recognize those qualities, those important features of plastic packaging, but at the same time, we have to shift to those fully recyclable packaging material while maintaining the technical properties and areas where technology and research and development are coming to play.

Michael Torrance: Welcome to Sustainability Leaders. I’m Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices and our world.

Legal Disclaimer: The views expressed here are those of the participants and not those of the Bank of Montreal, its affiliates or subsidiaries.

John Uhren: I’m John Uhren, Head of Products and Strategy at the Sustainable Finance Group at Bank of Montreal. Consumer packaging and plastics are undergoing significant changes with regulatory and consumer preferences driving these powerful trends. At the core of it all is sustainability. Regulators around the world are adopting legislation to minimize packaging waste and excess. In the U.S., 16 states have enacted state-wide regulations around packaging waste, which tend to target single use plastics, shopping bags and increased recycling targets. The Canadian government has created a Canada-wide strategy for sustainable packaging that includes a goal of zero plastic waste by 2030. And France, Germany and the U.K. have arguably gone the furthest by implementing some of the most aggressive targets on single use plastics, as well as fees for non-recyclable packaging. In parallel with these regulatory developments, or perhaps directly causing them, is heightened public awareness around the environmental impact of packaging in plastics. Consumers are increasingly noticing plastic waste leakage into the environment with visceral images of ocean plastics pollution stirring up consumer sentiment globally. Couple that with stories of people in India seeing the Himalayas from their villages for the first time, or images of bright, beautiful, smog less days in L.A., and it’s obvious that climate change and environmental sustainability are front of mind for many consumers and here to stay. The good news is that these regulatory and consumer shifts have resulted in more and more packaged goods manufacturers and retailers making commitments to act on packaging waste. These commitments tend to range from an emphasis on a higher degree of recycled content to a reduction of total plastic usage to innovation and promotion in changes in how packages are used. The end goal is to achieve a sustainable circular economy where products can be seamlessly reused, repaired and remanufactured. Enter TC Transcontinental, a market leader in flexible packaging in North America and a company built with sustainability at its core. Magali Depras, Chief Strategy Officer of TC Transcontinental, has joined us today. Welcome Magali to BMO’s Sustainability of Leaders podcast.

Magali Depras: Thank you for having me, John.

John Uhren: Magali, for those are unfamiliar, can you tell us a little bit about TC Transcontinental and what it does?

Magali Depras: Sure. TC Transcontinental is a Canadian based family owned control corporation founded in 1976, actually. We’re headquartered in Montreal and listed on the Toronto Stock Exchange. We have a few activities; we are the largest Canadian printer on one hand. We have become through acquisitions one of the largest flexible packaging manufacturers in North America and we also have media and education activities in Canada. We employ about 8,500 employees and the majority of which are based in Canada, in the United States and in Latin America. We operate in about 44 different facilities and we had in 2019 revenues of 3B dollars.

John Uhren: Thank you. Now TC was recently named as a top 10 corporate citizen and Corporate Knights' best 50 ranking, so congratulations to you and the TC team on that. You know, BMO was also named as a top 10 corporate citizen earlier this year and we were incredibly excited, so it’s great to know that we’re in really strong company.

Magali Depras: Thank you.

JOHN: Now Corporate Knights specifically called out your high clean revenue score, solid safety record and strong gender diversity at the board and executive levels. Tell me a little bit more about some of the initiatives that TC has undertaken in each of these three E, S, and G categories.

Magali Depras: Sure. So, congratulations also to BMO for being one of the top Corporate Knights. We have been ranked among the Corporate Knights for 16 years, actually, and it’s the second time that we are among the top 10 so we are really proud and very thankful about this recognition. So, to answer your question John about, first of all, the high clean revenue score, maybe to explain what it is, it’s really about looking at what is the percentage from the goods and services that you produce, which have clear environmental benefits, and that includes revenues from low carbon economy or circular economy, for instance. So, when you look at our 2019 portfolio, we had about 59% of our revenues stemming from the printing sector, and in the print sector, as you may know, we are a purchaser of paper and we have actually participated very actively in the past decades in building a circular economy for paper. Close to 100%, 96%, to be precise, of the paper that we use is certified or recycled. So, that participates into our very high score in terms of clean revenues and the other part of it is obviously the packaging part and I’ll elaborate about it in a moment but we have onboarded a circular economy for plastics, making sure that some of our portfolio is made of recycled content or fully recyclable, so that participates also to the other part of the high clean revenue score and anything that you do in terms of manufacturing processes, reducing your greenhouse gas emissions, reducing your waste as you know is also supporting these goals. So, that explains the high revenue score that we got from the Corporate Knights. On the safety record, that was another one that they have looked at and obviously you know the safety of our employees is paramount. We are in a manufacturing sector; we want to make sure that we ensure a healthy and safe environment for our employees. We have a target, actually, which is about reducing the total incident rate for our printing and packaging sectors by 15% until 2021, this is the current target, and in the past years, we have made progress. Actually, in 2019, we decreased our total frequency rate by approximately 9%, compared to the prior period, and how we did this, it’s really about several projects and several programs that we’ve put in place. We have actually the right structure with a dedicated manager reporting to the president of each sector. We have expanded the teams of our health, safety and wellness advisors that support our plans, that support our offices. We ensure that we provide the right training to our executives, to our managers and we have implemented a number of initiatives across our operations. I wanted to mention something that we have put in place is really a program, which is called Health, Safety and Community Partners Program in which we reward excellence in occupational health and safety in our site with a cash donation to a charity from each qualifying site. And for 2019, 19 of our sites qualified actually with no loss time incident and we could make a donation of 28,000 dollars through this program, so we are really very, very committed to ensuring the health and safety of our employees and continue progressing on this front. And the last, but not least, you mentioned the strong gender diversity and this is also for us quite an essential target. We strongly believe that, you know, diversity is paramount, it leads to better performance, to a healthier balance sheet and to greater talent retention, to a competitive advantage, so we are truly, truly committed. We have various targets on this front. We have one, which is to ensure at least 30% of female representation on the board of directors, and I am proud to say that we exceeded that target, we actually exceeded it and reached 39% women on our board of directors, starting with our chair of the board, actually, and also our lead director and chair of the human resource and compensation committee. Then, the second target we have is to have at least 3 women on the executive management committee, and there again, we reached our target, actually, we have our chief legal officer, we have our chief human resources officer and myself who serve on the executive management committee. And last but not least, we want to have at least 30% of women in executive and management positions across our sectors. We improved our result, we are now at 25%. We had actually a number of appointments and nominations that were done last year and we keep, you know, working on programs, on mentoring programs, onboarding programs, coaching programs. And I’ll finish by mentioning also that we make sure that our managers are also incentivized by promoting women in management positions. So, yes, we did achieve already good results on all those fronts and that was recognized by the Corporate Knights of Canada. We are very proud about it, but the work continues and we’ll continue progressing on this.

John Uhren:  Thank you for sharing Magali, and I think I understand why you’re top 10 Corporate Knights' best citizen as well. You know, from an environmental perspective just pulling out you mentioned 96% of paper is being certified or recycled so that’s really impressive there, but I do want to focus a little bit on the social aspect and specifically around safety and you’ve mentioned health and safety as being paramount of your employees. One thing we found through COVID-19 is, you know, a lot of companies are coming under the microscope a little bit in terms of, you know, what are their sick leave policies, what are their health and safety and occupational hazard type policies, so it’s really great to hear that you’ve prioritized that particularly as a manufacturer and you actually have, you know, programs like the partners program that incentivize good safety behaviour through, you know, cash rewards and things like that so that’s great to hear. And the last point that I heard that I just want to pull out too around governance, you know, you have extensive training, it sounds like. There are reporting lines all the way up to governance type committees for, you know, everything from safety to some of the commitments you’ve made for, you know, women on the board and you’ve already achieved them. You know, that’s all really powerful and meaningful, you know, in this space, but in all sectors. So, just want to congratulate you there and it’s obvious to me why you’re a top 10 corporate citizen.

Magali Depras: Thank you, John.

John Uhren: Now, I just want to shift gears a little bit. TC recently released its 2019 CSR reports and, you know, through that report, you’ve continued your progress on your 3-year goals and plan related to employees operations, products and communities. I wanted to dive specifically into some of the environmental commitments that TC has made, and maybe let’s start with TC becoming the first Canadian-based manufacturer to join the Ellen MacArthur Foundation’s new plastics economy global commitment, that’s a mouthful. Can you explain to our listeners what the Ellen MacArthur global commitment entails?

Magali Depras: Sure. So, indeed yes we joined the Ellen MacArthur’s Foundation’s new plastics economy commitment in 2019, as you said. It was obvious to us, you know, being one of the leaders in flexible plastics in North America and with our, you know, continued vision and commitment to being a good corporate citizen that we had to be part of it. And what it entails is that you have to commit by 2025 to have first 100% of your portfolio, of your packaging portfolio to be either recyclable or compostable or reusable, that’s one part. You have to commit to a given percentage of recycled material that you will integrate in your packaging. You have to also look at removing single use plastics from your operation, looking at the waste that you produce and reducing your waste, so there are a number of actions that you have to take and commit to and every year, we actually make a report, produce a report for the Ellen MacArthur Foundation where we explain what we have done, what we've achieved. It’s a journey obviously, you know. Many people say these are ambitious targets. Yes, they are ambitious targets, but we believe that it’s only through these that we can move the needle, you know, and make any progress, so it’s a supply chain effort. There are many signatories among our supply chain, whether they are consumer good manufacturers, whether they are retailers, whether they are governments, even in certain geographies or manufacturers like us and we all work towards those common targets.

John Uhren: And so Magali, are you getting pressure from any of your purchasers to sort of transition or use sustainable packaging?  You mentioned a few of those stakeholders just a moment ago. Are they sort of pressuring you or incentivizing you to kind of transition to even more sustainable packaging?

Magali Depras:  Actually, it’s a great question. I’m not sure that we are getting pressure in the way that we are not forced, you know, in the way that I think our customers, our partners, they see how much we are committed, how much we are active into it so we are kind of embracing it, right. So, for us, we are welcoming it in a way. This comes of course with technical technological challenging plastics, it has lots of advantages you know, plastic and sometimes it’s not even, you know, recognized I’d say, but during this pandemic, we have seen that health and safety is paramount, that plastic had really a very important role to play in protecting the goods, in protecting the food. And even in certain areas, you know, in avoiding food waste, plastics also have, you know, lots of benefits. We have to recognize those qualities, those important features of plastic packaging but at the same time, we have to shift to those fully recyclable packaging material while maintaining the technical properties and  there is where technology and research and development are coming to play. Just to mention to you, we have committed at TC Transcontinental that 1% of the revenues in our packaging sector are investing into research and development and we are very active. We have, you know, teams working on various fronts, whether it’s create compostable packaging for certain applications, whether it’s creating fully recyclable packaging, which we are aiming at, whether it’s integrating or a given percentage of recycled resin into our packaging. So, the research and development is really, really important. So again, there is, you know, not pressure in the way that we are already embracing it, but we definitely see a lot of interest because of, you know, the current trend to more sustainable packaging and the commitments that the brands have taken. So, we work hand-in-hand with our suppliers, we work hand-in-hand with our customers to develop new recipes, new products that can replace the existing products made of virgin resins, for instance, and produce something which meets their needs.

John Uhren: That’s wonderful to hear around the, you know, portion of revenues being invested directly into R&D. It feels to me like technology, you know, and clean tech companies as we can sort of scale them up and new technologies will be the key solvers and drivers of, you know, what the future of sustainable packaging and at some point packaging looks like. So that’s good to hear. You know, at BMO, we’ve also created an impact investment fund where we’re investing in early stage clean and social tech companies and scaling them up to solve some of the challenges of tomorrow and certainly as it relates to packaging, you know, that’s one of the bigger areas across the supply chain where, you know, new technologies can really drive change. And so, you know, more to come from our fund, but it’s great to hear you know, that T.C. is really focused on R&D necessary as well to move the market forward.

Magali Depras: Absolutely, yes.

John Uhren: Now Magali, TC signed on to the UN global compact principles, which commits your organization to aligning its operations with the universal principles of human rights, labour standards and environmental protection, including an alignment with the UN sustainable development goals. Can you talk to me a little bit about how TC decided to sign on to the UN global compact principles?

Magali Depras: Sure. So, as you know, the UN global compact dates back to 2015 where the member states that make up the United Nations met in New York back then and it was back then I believe the UN summit for sustainable development, and it’s where they decided to commit and to pledge to 17 goals, and these goals are very holistic. It’s really about protecting the planet, fighting poverty, create equal opportunities. So, following this, a number of companies have followed, right, and I think right now we are coming close to 10,000 companies across 160 countries representing all sectors and size who have joined the UN goals are signatories. So, the target of those 17 goals is 2030, and we looked at it and we felt, you know, that it was still timely to join it. It was a natural move to join the signatories of the UN goals, and because when you look at these 17 goals, you start, you know, putting your business goals and perspective to it and try to see, okay, which ones are really fitting to our reality and which ones are really close to our strategy? And it was really interesting to do this exercise and we realized that 7 of them, even though I’d say, you know, we support the 17, obviously, you know, all of them are goals that we can abide to, but 7 of them were very embedded into our CSR strategy already, so that was, I would not say, you know, easy, but it’s logical that we get into it. So, let me mention a few ones just to illustrate, you know. There’s one of their goals around gender equality and we talked about it earlier to ensuring, you know, that women have full and effective participation and equal opportunities for leadership. That’s exactly aligned with the goals that we have internally on gender diversity, right. They have another one, which is about affordable and clean energy, about, you know, renewal energy, increasing this percentage of renewable energy, or energy efficiency, and again, this was very logical to us. We have, you know, the target of reducing our greenhouse gas emissions internally, that fits perfectly with this vision. There is another one, which is about decent work and economic growth and it’s about occupational injury. And there again, you know, I mentioned it earlier we want to maintain a safe and healthy work environment, we want to reduce the total incident rate, that was a perfect fit. There’s even one also on innovation, on research and development spending. And there you go, we have committed to this 1% investment from our packaging sector’s annual revenues in R&D, so that goes perfectly aligned with the UN goals. We have others on reducing inequalities and eliminating discriminatory practices and this is again aligned with our corporate policies, you know, whether we talk code of conduct, or whether we talk the equal employment opportunity policies. And then you have all the ones around the food waste, around the recycling rates and reducing the waste generation, around the sustainable practices, and there again, you know, it’s very aligned with our targets to reduce waste, to increase the recycling rates and reproduce recycled contents in our packaging and produce fully recycled and recyclable packaging. So, it was really, you know, a very logical move, we are thrilled to be part of it. It’s going to help us continue our efforts and, you know, make improvements and reach our goals, I’m sure.

John Uhren: Well, thanks for sharing, and, you know, 7 of the 17 STGs already have alignment, that’s really impressive. I noticed you left out life under water, that’s maybe the most intriguing STG to me, so if you could crack life underwater from a plastics perspective, that would be very interesting.

Magali Depras: Yes, this one I mean again, you know, out of the 17 I’d say we can definitely you know support there is also forestry, you know, protect forest. I think it’s something we have done for years in our activities as a printer and purchaser of paper to protect the endangered forest. We have done a number of projects on that front, but I’d say the life underwater, anything we can do to make sure plastics, you know, never becomes waste and is truly recycled and recyclable is supportive of that goal anyhow.

John Uhren: Yeah, you’re right, you’re right. Okay, Magali, my last question for you and for this one, I’m pulling out the crystal ball, and I’m wondering if you could share any thoughts on what you believe is the future of the packaging industry, and specifically, you know, is there a world in the future where, you know, all packaging is just required or must be what we currently consider sustainable packaging?  Is that just a standard in the future or where do you see this market going?

Magali Depras: Yeah, that’s a great question looking into the future. I’d say, you know, again, I mentioned earlier that packaging is there for a reason. We need to protect the goods, we need to have the right quality level, the right properties, the right technical properties and that’s going to be here to stay, but at the same time, you have these obligations, you know, to be a good corporate citizen with sustainable practices, and for sure not tolerate that any packaging material, whatever material it is, ends up in litter in nature. So, in order to do this, we definitely have to progress on the sustainability front, make sure that we have fully recyclable packaging, make sure it is fully recycled and working, you know, closely as we already do with the supply chain to make sure we create a local market for recycled material. And, you know, it can take various forms, it can be recycled content, it can be mono layers with the same properties as multi-layer in the case of flexible plastics, which are then fully recyclable. It can be compostable packaging as well, so that can take various forms, but I do believe that we will have a very sustainable future in the packaging sector.

John Uhren: You know, through COVID and beyond, more and more retail customers are using e-commerce for the bulk of their purchases and e-commerce just inherently requires extensive packaging and delivery. So, I agree with you that consumer packaging, and particularly sustainable or recyclable packaging, really is going to remain top-of-mind for most consumers into the future.

Magali Depras: Yes, and you mentioned e-commerce, it’s a very important one. There are very specific requirements for packaging on e-commerce that you have to be 3 or 4 times, you know, more solid because of the shipment and all the logistics. That doesn’t prevent it from being sustainable by all means, so for sure we’re going to see also lots of developments in this area that’s going to be again, you know, very sustainable in the future. I have no doubt personally about it.

John Uhren: Magali, thank you for taking the time to join the Sustainability of Leaders podcast and we look forward to seeing some continued great work from TC as it drives towards a sustainable future.

Magali Depras: Thank you very much, John. It was my pleasure to discuss with you. Thank you very much.

Michael Torrance: Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today’s episode, and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcast, or your favourite podcast provider and we’ll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO’s marketing team and public creative. Until next time, I’m Michael Torrance. Have a great week.

Legal Disclaimer: The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries. This is not intended to serve as a complete analysis of every material fact regarding any company, industry, strategy or security. This presentation may contain forward-looking statements. Investors are cautioned not to place undue reliance on such statements as actual results could vary. This presentation is for general information purposes only and does not constitute investment, legal or tax advice and is not intended as an endorsement of any specific investment, product or service. Individual investors should consult with an investment, tax and/or legal professional about their personal situation. Past performance is not indicative of future results.