Business Unusual

Business Unusual. Much has been published recently about the importance of building a greener and more resilient world post-COVID 19. There seems to be agreement that although the temptation to jump back in exactly where we were prior to the outbreak of the pandemic in order to ‘get the economy going’ is great, it would be wise to take advantage of the current disruption to think afresh and introduce new and more sustainable business models. In other words, not to ‘waste a good crisis’.

Pivot Indonesia? I spent most of the first two months of 2020 travelling. I was lucky to make it back home before travel restrictions were imposed and have had the opportunity to spend my confinement digesting impressions. Indonesia is a vast archipelago of a country and home to the third-largest tropical rainforest in the world. It has suffered (though the pain is mostly self-inflicted) significant deforestation over the past three decades, most of it linked to clearing land for the cultivation of oil palm and fast-growing timber. In order to prevent further destruction and to rebuild some of what has been lost, philanthropists, NGOs, and local communities are scrambling for alternative business models. The fundamental challenge is to find sustainable crops which can provide enough revenue to remove the temptation of turning to fast-growing destructive species. It does not even have to be crops: fish farming, non-timber forest products (nuts, honey) selective logging and tourism all provide incomes, and when added together these activities create a ‘mosaic’ of incomes which may permit existing forests to remain standing and new trees to be planted.

It is not easy of course. In Indonesia, political support for the environment often changes when the governor of a region changes. Corruption is widespread and education levels in rural areas is – as one would expect -low. And then there is the challenge of convincing companies and communities to adopt new business models which are sustainable but slow to produce revenues and require upfront and long-term financing. The list of excuses (many of them reasonable) for inaction is long. But they are not insurmountable. And lessons exist which can be built on: that one should invest in quality products which people want to buy sounds self-evident, but I have seen many examples of wasted product lines over the past few years. Moreover, the products should ideally have a good profit margin (because a lot of the profit will be eaten up along the supply chain). Market access for the product should be handled up-front and not as an after-thought, etc.

Things Take Time (TTT). Despite its lack of eloquence, TTT is true. Forest enterprises can succeed, but from what I have seen they usually require slow and patient developments over several years – decades even. Guatemala’s Maya Biosphere Reserve became a national park in 1990. In the 30 years since then, community enterprises have been given licenses to undertake selective logging (of high-value species such as mahogany) in accordance with international sustainability standards (FSC) and develop other income opportunities. The result is a win-win: zero deforestation, higher incomes than in neighbouring communities without similar enterprises and – importantly in the region’s geopolitical context - low outward migration. However, it has not happened automatically and it is too early to declare victory: the monetary support over the years, primarily from USAID, has been substantial[1] and the community businesses still require mentorship and capacity building. But the results so far are promising and particularly impressive for an area whose principal objective is forest conservation (not economic growth).

So, what will it take? The world post-COVID 19 will require a number of ‘fixes’ but I would be willing to pick forest enterprises as one of my ‘top three’. If they are rooted in the community, professionally led and patiently funded they stand a good chance of accomplishing their aims. If successful, they will lead to reforestation, reduced GHG emissions, increased biodiversity, reduced poverty levels, and increased resilience. These results in turn are likely to stand us in good stead to fight the outbreaks of new viruses. So, what are we waiting for?

Not Godot, but political leadership and carbon payments: It’s not like in Waiting for Godot where it is unclear what Estragon and Vladimir are waiting for. To achieve change at scale, what we are waiting for is political leadership and incentives. Global environmental problems are not something private enterprises have much motivation to tackle on their own: they need policies to create the conditions to invest. Such political leadership should produce a global price on carbon, but while we wait for that (more waiting!), I’d settle for robust markets for carbon credits which can supplement the incomes of forest enterprises and incentivise reforestation. In the interim philanthropists, bilateral aid programmes and multilateral institutions will continue doing what they can in their usual well-intentioned but piecemeal fashion. It won’t get us to where we need to be, but it will help and the alternative of not doing anything would be unbearable.

[1] One estimate puts the contribution of USAID alone at USD135 million in the period 1990-2006 (B. Hodgdon et al., The GuateCarbon initiative and REDD+ readiness in Guatemala, ETFRN News 53: April 2012)

Pernille Holtedahl29 May 2020