Natural Systems: Trees
Reforestation: Profit - v- Good

Planting Trees Has Become a Big Business

Burgess COMMENTARY
A good essay and report. But the idea that reforestation is a business investment opportunity is really quite wrong and very sad. What this is saying is that in order for something to get done ... that is to get investment allocations ... there has to be conventional profit business results. The reality is that many ... in fact most ... of the world's big problems cannot be addressed by 'for profit' business organizations. There are many opportunities to do a huge amount of social good and a huge amount of environmental good, but the resources to do value adding good things is very small in the total scheme of things.
Back in the 1980s I did a lot of work in connection with the drought in the Horn of Africa and the Sahel. More than a million people died. The technology to keep people alive was available ... pumps and pipes move water, and this technology has been available for a very long time ... but there was little money to do what needed to be done ... it could not be a 'profitable' investment. It would have done a lot of social good. Business cannot make profit serving the needs of poor people, even though business could do good serving their needs if the system was radically different. With profit dominating the way investment decisions are made, business will only do good at the margin. We absolutely have to have a mechanism and metrics to make investment decisions based on doing social good and/or environmental good and not merely on making more and more and more profit for the owners. There is interest in doing good at the economic margins, but it is far from mainstream. Better metrics is the purpose of TrueValueMetrics.org ... an incredibly important little bit of what is needed to enable a better world! Peter Burgess ... http://truevaluemetrics.org
Peter Burgess

Planting Trees Has Become a Big Business


Atlantic forest cover in northeastern Brazil

The exercise of planting trees sometimes gets a bad rap; just note the term “treehugger,” which is not always complimentary.

But a report issued this morning by the World Resources Institute (WRI) and The Nature Conservancy (TNC) suggests that the planting of trees is far more than a good deed, and in fact, has the potential to scale and become a booming business.

Enter in a new term in the sustainability lexicon: the “restoration economy.”

Global efforts to restore degraded land worldwide will not be easy. After all, getting past red tape is among the many hurdles that get in the way of land remediation and replanting forests. And as the WRI-TNC report explains from its beginning, many investors struggle to understand the concept of land restoration in the first place.

But according to the report’s authors, there is plenty of money that can be made in forest restoration, to the tune of $84 billion annually. WRI has already hopped on this bandwagon with its announcement last fall that is leading a $2 billion land restoration program across Latin America and the Caribbean.

In gauging how companies within the nascent land restoration space perform and can find success in the first place, WRI and TNC researchers evaluated approximately 140 such companies operating across the world. The report’s authors then analyzed these companies’ profitability, scalability, environmental and social benefits and whether their business models could be replicated elsewhere.

The report found that there are significant risks within this sector. Transaction costs are often high, and many of these firms struggle to score capital. Investors shy away from these projects in part because they offer almost no liquidity – in other words, they cannot be bought and sold quickly to churn a quick profit. Finally, many of these lands are in countries where land tenure and title are tenuous; these same countries often have weak governance structures and frequently struggle with corruption.

Nevertheless, there are companies finding success in this sector. One of them is United Kingdom-based Biocarbon Engineering, which operates a fleet of drones reforesting areas that are difficult to access. The Dutch firm Land Life Company, maker of water vessels based on an ancient Mesopotamian technology, manages ongoing projects from Chile to Zambia and expects to be profitable in a few years. Land Life claims its “cocoons,” made out recycled wood pulp, offer a much higher survival rate for tree seedlings compared to traditional tree planting methods.

Other companies may not be generating revenues directly from their forest restoration efforts, but are planting trees while building a successful business. A leading example is Guayakí, which markets the herbal drink mate across North America. As mate grows best in shade, the company says it has planted over 500,000 hardwood trees across Argentina, Brazil and Paraguay to protect its mate shrubs and therefore, its investments. The company expects to reach $60 million in revenues this year and $100 million at the end of the decade.

The restoration economy still faces an uphill climb. Investors have to be patient, as they may not see robust returns for 10 to 20 years. And many governments still provide agricultural subsidies that encourage the degradation of lands instead of their restoration. Nevertheless, the evidence suggests private companies can make money, communities can benefit from employment opportunities; and the planet, naturally, can benefit from these renewed carbon sinks. WRI and TNC have showcased a compelling template of how businesses can generate profits and yet be sustainable in the long term.


Image credit: Alex Popovkin/Wiki Commons

Based in Fresno, California, Leon Kaye has written for TriplePundit since 2010. He has lived across the U.S., as well as in South Korea, Abu Dhabi and Uruguay. Some of Leon's work can also be found in The Guardian, Sustainable Brands and CleanTechnica. You can follow him on Twitter (@LeonKaye) and Instagram (GreenGoPost).