# European pulp and paper industry at an operational crossroads Weak demand and rising costs push the sector towards operational efficiency solutions. - **Source:** [McKinsey Insights](https://www.mckinsey.com/insights) - **Published:** 2026-08-18 - **Topic:** [Business](https://brifing.si/c/business) - **Original article:** - **On Brifing:** https://brifing.si/s/f6dc00cd-87bd-411e-babd-4d073fd041ee ## Current industry landscape Europe's pulp and paper industry faces declining demand and rising energy costs. Sector revenue contracted by 8% in 2022 amid intensifying global competition. Asian and North American producers gain advantage with lower production costs compared to European counterparts. This pressure forces European companies to seek operational efficiencies. ## Operational efficiency focus Companies are optimizing production processes to reduce costs. New technologies that minimize energy consumption and improve recycling rates are gaining traction. Some facilities have already achieved 15% energy efficiency improvements. Digitalization of supply chains is also enhancing inventory management capabilities across the sector. ## Commercial strategy shifts Manufacturers are reevaluating customer segmentation to improve profitability. There's noticeable movement toward high-value segments like specialty paper products. While packaging paper demand is expected to grow 4% in 2023, newsprint demand may decline by 6%. Companies are reshaping product portfolios accordingly. ## Capital allocation priorities Investment decisions are becoming more selective. Resources are being directed toward sustainable production facilities and R&D projects. One Scandinavian company plans to invest €500 million in biomass-based production by 2025. Simultaneously, inefficient plants face closure or divestment. ## Digital transformation impact Industry 4.0 technologies are gaining adoption across the sector. AI-powered maintenance systems can reduce equipment failures by 30%. Digital twin technology helps simulate production processes to identify optimization opportunities. These innovations play crucial roles in driving operational efficiency gains. ## Sustainability regulations The EU Green Deal mandates compel industry transformation. Companies must reduce carbon emissions by 55% by 2030. Investments in biomass energy and wastewater treatment systems are accelerating. Sustainable forest management certifications also influence consumer preferences significantly. ## Global competition dynamics European producers compete against low-cost rivals from Asia and North America. High-quality products and sustainability certifications create differentiation. While 72% of European paper products carry FSC certification, the global average stands at 45%. This advantage is leveraged in premium market segments. ## Industry outlook The European pulp and paper industry is undergoing an efficiency-driven transformation. Operational excellence, product differentiation and sustainability will be key differentiators. Analysts predict that successful transformers could achieve 8-12% higher profitability by 2030. Despite challenges, strategic adaptation can ensure sector resilience. ## Sources covering this story - https://www.mckinsey.com/industries/packaging-and-paper/our-insights/reinventing-the-european-pulp-and-paper-operating-model — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._