Preserving forests means business thinking beyond its own value chain

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum./

Author: Luiz Fernando do Amaral, Chief Executive Officer, Science Based Targets initiative (SBTi), Giulia Carbone, Director, NCS Alliance

• The current incentives structure is failing to protect the world’s forests, which are crucial to climate mitigation.
• Nature-based solutions currently receive only a third of the finance required by 2030 to meet climate goals.
• Agricultural and other companies must increase investments in nature-based solutions beyond their own value chain.

In parts of the tropics, the sound of a chainsaw, followed by a tree crashing to the ground, has become all too familiar. The world lost 11.1 million hectares of tree cover in 2021, with more than a third occurring in primary tropical rainforests. This expanse of forested land was storing as much carbon annually as the fossil fuel emissions of India – the third highest emitting country after China and the US.

The causes behind this environmental devastation are widely recognized. Some in the logging and agriculture industries operate under a basic model that prioritizes short-term financial gain over the priceless, long-term benefits of a living forest.

We must change this structure of incentive and disincentive if we are to protect our forests, for the environmental and social costs of destruction are extensive. Not only are unsustainable forest practices driving flora and fauna to extinction, but tropical deforestation has been linked to large reductions in rainfall. Such changes to precipitation patterns can cause drought, potentially harming agricultural productivity. Until we alter our economic structures to reduce the incentives for landholders to clear trees, we won’t see an end to deforestation.

For example, in 2021 alone, the two Brazilian states with the highest deforestation rates produced $50 billion worth of agricultural goods that were bought and sold by companies of all sizes and types. The power of supply chains dwarfs the amount promised by carbon finance for forests. Under our current economic models, in many cases, deforestation still pays. To keep forests standing, we must place significantly more value on the benefits that these forests provide.

In our quest for innovation, we often forget that which is simple and already available to us – the world’s tree cover naturally removes carbon dioxide from the atmosphere. Since the industrial revolution, forests have been combating global temperature rise. Land-based ecosystems take in nearly 25% of all the carbon dioxide in our atmosphere. Without them, we cannot keep global temperatures below the Paris Agreement’s 1.5°C threshold. In fact, tropical forests have been shown to have an overall global cooling effect – not only from their carbon removal, but also from high rates of evapotranspiration and their ability to stimulate cloud cover. When we account for the non-carbon effects of tropical deforestation, the estimated contribution to global warming increases by 50%.

However, the importance of these natural carbon sinks is not reflected in the levels of protection, care and investment they receive. Nature-based solutions to climate change – which include efforts to protect, restore and sustainably manage these vital ecosystems – receive a mere third of the finance that is required by 2030 to meet our climate goals. By not delivering the necessary funding to nature-based solutions, we are collectively and shortsightedly compromising our ability to mitigate human-induced climate breakdown. Therefore, it is imperative we close the gap between financial requirement and reality this decade.

Fortunately, there is still hope. The rate at which companies are setting science-based climate targets is accelerating: Businesses representing more than $38 trillion of the global economy – including from the agricultural sector – now have a validated science-based target or have committed to set one. What’s more, attitudes to climate action are shifting. The newly proposed Green Claims Directive by the European Parliament highlights a growing demand from consumers to see genuine emissions reductions. Science-based climate action is increasingly considered not as a nice corporate add-on, but as an expected prerequisite of responsible business.

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This is a welcome trend that should accelerate and expand. But given the level of reductions and removals required, even if many food and agriculture company leaders make science-based emission reductions, it still might not be enough to achieve our global climate and nature goals. Nature requires avoidance and mitigation activities from companies across all fronts; first from within their supply chains. Then companies both inside and outside of agriculture also need to invest in natural climate solutions beyond their immediate value chains. Only then can we keep 1.5°C within reach.

Beyond value chain mitigation refers to actions or investments outside of a company’s value chain that serve to limit or reduce the impacts of climate change. This includes, among other mechanisms, carbon market investments in natural climate solutions that either prevent additional emissions from being released (e.g. tropical forest conservation) or remove carbon from the atmosphere (e.g. mangrove forest restoration).

Many corporate climate leaders have already integrated nature-based solutions into their beyond value chain strategies, complementing their internal decarbonization plans. But faced with such an array of differing climate mitigation strategies, it is only too easy for corporates to feel lost at sea. Fortunately, many stakeholders across carbon finance and the voluntary carbon market are developing guidance and innovative mechanisms to assist businesses.

To help guide corporate action, the SBTi has developed a Net-Zero Standard, a central pillar of which is the mitigation hierarchy. While the hierarchy states that companies should prioritize cutting emissions from their own value chains and business operations, it is also clear that the urgency of the climate crisis leaves no time to delay external mitigation. Corporates that want to be climate leaders should simultaneously invest in climate action beyond their value chains. It is essential for companies to combine approaches to climate action. To support this, the SBTi is developing Beyond Value Chain Mitigation guidance. While these guidelines are in development and the integrity of carbon credits continues to improve, investing in these efforts today – in addition to absolute emission reductions – is a no-brainer.

The new NCS Buyer’s Guide by the NCS Alliance offers pertinent guidance to promote investment in high quality, nature-based solutions. A high-quality project is one that delivers true, additional and long-lasting benefits for both people and the planet. Indeed, many of us, particularly those in the global South, can gain substantial benefit from carbon finance. If equitably shared, revenues generated via the sale of carbon credits can be channelled to change incentives and disincentive structures for landholders. Companies should also look for projects that not only split proceeds equitably with local people, but which also involve them in the planning, decision-making and implementation of the conservation or restoration work.

The SBTi’s Beyond Value Chain guidance navigates the edge of knowledge as we develop these global systems for corporate climate action. But that will not be the end of this journey. The SBTi will also publish a discussion paper to highlight additional work and mechanisms that might be needed to further unlock investments. For this, we depend on players in the ecosystem that are working on other pieces of the puzzle, like guidance on nature-based solutions issued by the We Mean Business Coalition, Voluntary Carbon Market Integrity (VCMI) initiative, Integrity Council for the Voluntary Carbon Market (ICVCM) and Tropical Forest Credit Integrity (TFCI).

Given the urgency of the climate crisis, we need to deploy every tool in the toolbox. While it is crucial for food and agriculture companies to prioritize addressing deforestation within their supply chains, companies operating far from forests should also channel finance into climate mitigation beyond their own value chains. This means investing in both emissions reductions and scaling natural and engineered carbon removals. Only by securing and enhancing our natural carbon sinks can we prevent the release of additional emissions from deforestation and land degradation.

Discover

What’s the World Economic Forum doing about deforestation?

Halting deforestation is essential to avoiding the worst effects of global climate change.

The destruction of forests creates almost as much greenhouse gas emissions as global road travel, and yet it continues at an alarming rate.

In 2012, we brought together more than 150 partners working in Latin America, West Africa, Central Africa and South-East Asia – to establish the Tropical Forest Alliance 2020: a global public-private partnership to facilitate investment in systemic change.

The Alliance, made up of businesses, governments, civil society, indigenous people, communities and international organizations, helps producers, traders and buyers of commodities often blamed for causing deforestation to achieve deforestation-free supply chains.

The Commodities and Forests Agenda 2020, summarizes the areas in which the most urgent action is needed to eliminate deforestation from global agricultural supply chains.

The Tropical Forest Alliance 2020is gaining ground on tackling deforestation linked to the production of four commodities: palm oil, beef, soy, and pulp and paper.

Get in touch to join our mission to halt to deforestation.

By embracing and safeguarding sustainable practices, investing in nature-based solutions and challenging current economic incentives, we can secure a hopeful, sustainable future. Perhaps then, the sound of chainsaws will finally be replaced by the harmonious chorus of thriving forests and the whispers of a healed Earth.