Scope#38 | Kraft of Asia Paperboard & Packaging

Towards a Carbon-neutral Future: KOA’s Sustainable Plant Makes Containerboard-the Backbone of Asia’s Distribution System

On May 9, 2020, Katsuhide Miyagawa took off from Narita Airport on a chartered flight bound for Vietnam. Miyagawa and his 18 colleagues, who were flying with him, were about to embark on a new journey: starting containerboard production in Vietnam.

Their destination was Phu My 3 Specialized Industrial Park, which is situated about 60 kilometers southeast of Ho Chi Minh City and only five kilometers away from Cai Mep Port, the largest port in southern Vietnam. On this site, Marubeni established Kraft of Asia Paperboard & Packaging Co., Ltd.(KOA) and built its paper mill, where Miyagawa, a veteran engineer, would oversee production as the company’s executive officer. The brand-new mill was awaiting fine-tuning, just several months before the launch of commercial operations.

KOA is new, wholly owned Marubeni subsidiary that functions all by itself-procuring raw materials (wastepaper), manufacturing, and selling products (containerboard). The containerboard sold by KOA will eventually be transformed into containerboard boxes by its customers. As opposed to investing in an existing company, Marubeni literally started from scratch—with the very design of the blueprint for the mill—a new form of commitment that goes beyond the traditional business model favored by Japanese trading companies.

Having two paper-manufacturing companies (Koa Kogyo and Fukuyama Paper) already on its roster, the Marubeni Group boasts more than 60 years of experience in the containerboard business in Japan. The company has also developed ways of doing business in the same market outside of Japan, by investing in several paper makers in Asia. KOA is the fruit of these experiences and accumulated knowledge. Since the initial phase, dozens of Koa Kogyo’s engineers have contributed to this project. Sixteen out of the 19 KOA employees currently based in Vietnam are engineers from Koa Kogyo, including Miyagawa.

Miyagawa joined Koa Kogyo 28 years ago and has primarily dealt with energy management and wastewater treatment at the company’s paper mill in Fuji City, Shizuoka. Despite his long career in the industry, he had never experienced being a part of a project to construct a new mill. For the first time, he worked on facility design, and his current responsibility is to ensure the successful operation of KOA’s brand-new mill. While he says that it has been an exciting endeavor, Miyagawa emphasizes the importance of staying alert. “Manufacturing containerboard requires a lot of machines, all of which have a different role to play. Successful production can only be made possible when all of them are working properly, which is not an easy thing to do.” All of his subordinates are locally hired young Vietnamese men and women, many of whom are new to the paper industry and needed to learn the basics of the operation. “They are the ones who will be leading KOA in the future. I want them to become full-fledged engineers as soon as possible, like a father wants his own children to grow,” Miyagawa says. “We are committed to making our business a profitable one so that we can make these young people smile.”

Economic Growth Equates to Market Expansion

The containerboard market of a country grows in proportion to its Gross Domestic Product. The more people earn, the more things they buy, and the more products are distributed. “The containerboard box is an essential product, which sustains the world’s logistics industry from the sidelines. In other words, we can find a market in any part of the world,” says Hiroshi Matsumura, KOA’s general director. The use of containerboard boxes drastically increases the efficiency of container loading because they are stackable, and above all, inexpensive.

Vietnam has maintained its solid economic growth thanks to its strategy of vigorously promoting foreign direct investment, which has expanded its export activities. The country has also successfully contained the spread of COVID-19, keeping the negative impact on its economy minimal. Vietnam is expected to become the driving force of economic growth for post-pandemic Southeast Asia.

“Many companies in the world are becoming more interested in making their new factories in Vietnam, which has exponentially boosted the demand for containerboard boxes. The Vietnamese containerboard market is expected to grow at an annual rate of 10 percent,” Matsumura explains. KOA’s annual production capacity will reach 400,000 tons once its commercial production begins in earnest. The company aims to eventually add more paper machines, which will increase its production capacity by a few hundred percent. Furthermore, the company’s longer-term goal is to branch out to neighboring countries. This is the very reason why the company was named Kraft of Asia, not Kraft of Vietnam.

Atsushi Nakano, deputy general director, has been involved in the KOA project since 2013. Many factories currently reside in Phu My 3 Specialized Industrial Park, but when he first came to visit for research, it was an undeveloped marshy land where cattle were grazing nearby. He remembers wondering if his company would ever be able to build a factory on this land. “This project continues to bring us so many things that we have never faced before,” Nakano says. “We have overcome one hurdle after another.”

When the entire process finally flowed seamlessly after many test runs, and the machine successfully reeled a roll of paper for the very first time, Nakano quietly wiped away tears from his eyes. “The last time I wept for joy was when my child was born,” he says. “In retrospect, we started this project with a small team. But it grew bigger as we continued to believe in our mission,” Nakano recalls. “When I witnessed the moment when the paper machine became fully capable, turning wastepaper into containerboard, I felt immense joy.”

Leading the Packaging Industry Toward a Sustainable Future

Containerboard production requires electricity and steam. While many paper companies in Vietnam use coal to generate the power needed for production, KOA opted for natural gas, which is friendlier to the environment. Although it pushes up the cost of production, the company can cut their carbon dioxide (CO₂) emissions by half compared with coal.

KOA also goes the extra mile when it comes to wastewater treatment. The Vietnamese government has imposed regulations that are more stringent than those of Japan, after it was revealed in 2016 that a company had discharged untreated effluent to the ocean. KOA has its own wastewater treatment facility on premises, where 11,000 tons of wastewater can be treated per day. There is a centralized wastewater treatment plant inside Phu My 3 Specialized Industrial Park, which collects all the effluent coming from the plants operating in the park, but KOA goes so far as to carry out thorough treatment at its own facility beforehand. During the process in which pulp is made from wastepaper, a large volume of water is used to clean the wastepaper. The water, which will eventually be released to rivers, contains impurities such as paper fiber that is too small to be recycled, starch glues and organic sludge that come from adhesives and so on. KOA treats its wastewater in the most rigorous way possible in an effort to conserve the environment.

To go greener, KOA plans to install solar panels in 2021 on the roofs of all the buildings of its mill. In doing so, more than a quarter of its power consumption will be covered by clean energy. The company is also exploring ways to generate electricity using hydrogen, aiming to go carbon-neutral. These decarbonizing efforts, however, will have little social impact if others in the industry do not follow suit, Matsumura says. “People will stop using containerboard boxes unless they can acknowledge that the whole packaging industry is an eco-friendly one and that our products are sustainable,” he says emphasizing the urgency and importance of coordinated efforts. “Before it is too late, we want to lead the whole of Asia, not just Vietnam, towards a sustainable future. If changes can be made at all levels, the packaging industry will be able to last for many years to come.”

KOA’s Next Generation Leaders

Among KOA’s nearly 200 Vietnamese employees, around 60 are fluent in Japanese; they have either studied or worked in Japan, or both. Among them is Nguyen Thanh Dat, the leader of the wastewater treatment team. After he learned Japanese at a language school in Tokyo, he worked for a Japanese company as a salesclerk at one of its retail stores in the city.

The most challenging work of his team is to control the flow of wastewater, which comes incessantly from the plant. If there is too much water in the tank, it will kill the microbes that decompose pollutants. Furthermore, if KOA fails to meet any one of the requirements defined by the regulatory effluent standards, it will be sanctioned, which means that the company will have to suspend production. At any brand-new factory, the need to make adjustments during the test-run period is inevitable. Dat’s team has also repeatedly explored solutions to problems through trial and error. “KOA moves very fast to find a solution,” Dat says proudly. “Whenever a problem arises, we work together as one team to solve it.”

As a newlywed, Dat’s personal short-term goal is to be able to own a car within two years. As a part of KOA, his short-term goal is to gain more knowledge and become a good, reliable boss. He also hopes that he will have a chance to visit Koa Kogyo’s paper mill in Fuji City to see its operation firsthand. That said, his professional long-term goal is to help build a sustainable future for the Earth. “I would like to help KOA find solutions to reduce CO₂ emissions further,” Dat says. “I believe that this will be beneficial not only for our company, but also for the whole world.”