There’s gold in them forests – but not for plantations

London, Aug. 16, 2010 (RISI) - I recently took part in a web meeting on the future of the financial industry's interest in forestry. It was surprising how sophisticated banks, insurance companies and analysts are becoming in evaluating forestry investments.

The discussion explored issues such as the investment in forestry and the sale of carbon credits. From an investors perspective carbon credits achieved through reforestation projects are the most desirable, while 'reduced impact logging' is another acceptable technique. Commercial plantations, such as those being developed by the large paper companies in the Southern hemisphere, came a long way down the desirability list. Clearly the finance sector is now recognising the broader opportunities through forest projects.

On a related topic, TEEB for Business was recently launched, which is a report giving businesses practical guidance on the issues and opportunities created by including biodiversity issues in business thinking and practices. The report is a key component of The Economics of Ecosystems and Biodiversity (TEEB), a major new study of the economic benefit of biological diversity and the costs of biodiversity loss. TEEB for Business was launched at the first Global Business of Biodiversity conference in London. The report cites an assessment of the value of carbon storage by global forests at US$3.7 trillion.

A wake up call for pulp and paper

This initiative is about how business and society should pay for the ‘ecosystem' services' that nature currently provides for free. It is a significant, global project and looks set to focus public policy attention on issues such as the value of the carbon store services provided by trees and soils in forest environments. These developments might further influence investor attitudes to forestry.

The themes discussed at these two conferences should be a wake up call for the increasingly globalised paper industry. Greater recognition of forests as carbon sinks will undoubtedly put pressure on the forest products companies. Will some paper companies regret the decision to sell off their forests?

There is a relatively unchallenged worldview that online media are environmentally more benign than print and paper, which I believe will be shown to be short-sighted in the face of the growing energy demand for IT infrastructure. Paper companies are influenced heavily by trends in investment decisions made by the financial world, while ICT drives progress to make our mills more efficient and productive. These complex interactions all add a level of complexity to the debate.

I believe the paper industry needs to fight to achieve recognition as a producer of sustainable products from sustainable sources. There is scope for a proper debate between the ICT or financial sector which would be an interesting approach, as both of these industries have close and complex inter-connections with paper sustainability.

Lowest common denominator

To achieve real progress, the paper industry needs to collaborate on sustainability issues and messaging on a global scale. Some companies are doing a great job of promoting their individual stories, supported by trade associations but it is fragmented, either by geography or product type. The scope of the discussion needs to be broadened to a global and cross-sector scale and this in itself presents a challenge.

If paper industry's story is to believed the floor needs to be raised in terms of standards. Perceptions of the paper industry will always be based on the performance of its lowest common denominator - the companies that do not produce responsibly. There is growing NGO concern about paper supplies from areas of high conservation value in the South. Should other producers distance themselves from the companies being targeted or try to help them as an industry collective?

At a Two Tomorrows roundtable early this year, the conclusion we came to was that the sustainability message was largely understood within the paper and print industry; it is getting this message to consumers that has been lacking. Global standards would help bring clarity to the situation - the range of forest certification and eco labels remain confusing to end users.

Other industries - such as food and ICT - are collectively looking at global sustainability standards for many of their products. The paper industry should not delay in doing the same.

At Two Tomorrows, we know that our paper industry clients have made great efforts to embed sustainability into their operations. Their approach compares favourably to what many of our companies in other industries are doing. It's frustrating to see the paper industry struggling to portray its positive message while being labelled unsustainable.

Getting serious

Perhaps one practical step would be for the paper industry to engage seriously with those media companies working seriously on sustainability issues. The big players are huge consumers of media-related products, be it for paper or online solutions. Some influential companies like Guardian News & Media are looking to move the sustainability debate forward through their outputs and have the potential to influence the attitudes of a significant number of consumers. They also have the buying power to influence their suppliers from a range of industries and may hold one of the key to changing the perceptions the paper industry.