Financial landscape for Swedish logging contractors

The transition to fossil-free operations in the forestry industry is crucial for achieving the EU's climate goals for 2030 and 2050. Logging contractors (LCs), key players in the softwood lumber supply chain, face financial challenges due to their capital-intensive, small-scale, family-owned operations. This study examines the financial health of Swedish LCs through two objectives: (a) assessing industry structure using the Herfindahl-Hirschman Index and (b) analyzing financial stability using the financial triangle framework (liquidity, profitability, solvency) and Altman's Z-Score model. Data from a Swedish database reveal a highly competitive industry with an HHI of 47.69, indicating low concentration. Financial analysis shows 19.7% of LCs are in the distress zone, 34.3% in a gray zone, and 45.9% in a healthy zone, highlighting variability in financial health. The study evaluates the impact of liquidity, working capital, profitability, and equity ratios on financial stability, emphasizing their role in sustainable practices. Findings indicate that financial stability influences LCs' ability to invest in sustainable practices and absorb higher operational costs associated with for instance fossil-free transitions. This study provides insights into the financial dynamics of the harvesting industry, offering valuable information for policymakers and stakeholders to support the transition to fossil-free operations.