Forestry, forest, pulp and paper industries provide important cases for environmental and ecological economics and for corporate environmental management, because of the large quantities of flows of material and energy that are derived from the natural ecosystem. Because of the natural capital intensive nature of its activity, the forest industry also offers a fruitful case study for industrial ecology (IE), the practical concern of which is the comparison of material and energy flows of nature to these same flows in economic and industrial systems. In this paper, the concept of an industrial ecosystem is reflected in a typical local forest industry system in Finland, known as ‘a local forest industry integrate’. We present a material and energy flow model that can be used to study forest industry environmental management and for the planning of environmental policies directed to forest industry. Flows of matter (biomass), nutrients, energy and carbon are described, and the waste utilization possibilities are considered. A local forest industry system can be a fruitful case for IE development as the cuttings of forests in Finland are below the renewal rate, material cycles, nutrient cycles and energy cascades are developed and the carbon dioxide (CO2) binding capacity of the forest ecosystem is maintained. The difficulties and barriers in light of the industrial ecosystem vision of a materially closed local system include the high export rates of paper, energy intensive production and problem displacement in waste utilization efforts. The presented material and energy flow model of forest industry environmental management is compared with a case of a local agricultural and food industry system. For agro-food sector applications, a different emphasis on the flows may have to be adopted than in a forest industry application. Copyright © 2003 John Wiley & Sons, Ltd and ERP Environment.