It had been hoped that incentives for REDD+ (Reduced Emissions from Deforestation and forest Degradation) activities would help tip the balance and make sustainable resource use the financially sound thing to do.
The incentives would, with appropriate and robust safeguards, use the finances and skills of the private sector to help tackle deforestation the world over. All of this is essential given the public sector alone will not be able to provide the billions of USD per year needed to tackle global forest loss.
Unfortunately these incentives have not materialised at the scale or speed needed to make this happen. Engaging the private sector has continued to be a challenge, not least because of the challenging global economic climate. The role of developing economies, and private sector engagement is worth focusing in on when we consider how and why we value the benefits of REDD+.
Emerging market and developing economies grew by 5.1% in 2012. However this has often been at the expense of the planet’s forests. This link needs to broken, but as PwC’s Low Carbon Economy Index last year showed, it has been hard for many countries to break. Our analysis reveals a number of interesting relationships between economic activity and forest emissions over time. Brazil managed to reduce its annual emissions from deforestation (albeit from a high baseline) while increasing GDP and Russia also appears to have started to decouple economic growth from forest emissions. However, Indonesia’s increase in GDP has been accompanied by a steep increase in forest carbon emissions.
The UN-REDD Programme’s latest policy brief outlines some ways in which the challenge of engaging the private sector could be overcome. It highlights the need for a combination of public sector, demand and supply side interventions as well the important role of financial intermediaries in overcoming shortages of financial capital for sustainable activities.
A basket of actions is necessary to achieve the objectives of REDD+. However, in order to get policies, programmes and financing working in sync, the public and private sector need to have aligned objectives and indicators with which to measure success. Currently most public and private sector organisations focus on a narrow view of value and growth (with countries using GDP, and the private sector focusing on profit or share price). They have few metrics to record the growth (or loss) of the multiple non-market values of forest resources and the impacts of these losses on forest dependent communities.
However, we think that this is about to change.
Within the public sector, there have been movements to shift growth accounting away from the narrow view of GDP towards methods such as Wealth Accounting and Valuation of Ecosystem Services (WAVES), GDP+ and the System of Environmental-Economic Accounts. These developments are looking to provide a broader view, taking into account the creation/depletion of the social and environmental capital needed to generate that GDP.
This approach also lies at the heart of ‘Green Growth’ economic planning process which many countries are embarking on. Green Growth brings together a consistent way to value the three pillars of sustainable development – economic, environment, and social – into a single policy planning framework. Encouragingly a significant number of countries (such as Indonesia, Colombia and Kenya) are already starting to think in these broader terms which will value the multiple benefits REDD+ can bring.
On the private sector side, PwC is working with leading organisations to develop a more balanced approach to measuring corporate value called Total Impact Measurement and Management (TIMM). This new decision-making model is driven by an organisation’s social, environmental, tax and economic impacts.
Puma are one of the pioneers of this approach and in 2011 published an Environmental Profit and Loss account for their operations. The results showed that land use change accounted for 25% of their total environmental impact (valued at $37 million), with the majority of this occurring due to raw material sourcing (conversion of forest to pasture for cattle and rubber plantations). These findings have inspired a commitment to reduce the impact of their products and the development of lower impact products such as the recycled ‘Re-Suede’ line of trainers. In addition, Puma’s parent company Kering (previously PPR) purchased REDD+ VCS credits from Wildlife Works as well as taking a 5% stake in the REDD+ in the project development company.
At PwC we highlighted how these public and private sector initiatives work together in a paper submitted to the UN High Level Panel on the Post-2015 Development Agenda. Armed with broader information, governments are able to apply sustainability principles to the decisions they make at a policy and project level, whilst the private sector will make better business decisions driven by an understanding how they create and destroy economic, social and environmental value.
The old adage, “what gets measured gets done” is often quoted. In the case of REDD these developments in reporting and measurement are important. Measuring the broader dimensions of growth will put greater value on sustainable use and protection of forests; hopefully a key step to finally breaking the link between unsustainable resource use and economic growth.
Christopher Webb is an Assistant Director at PwC and leads much of the firms work on climate finance and policy, in particular as it relates to sustainable landscapes.
Adam Gibbon is a Manager at PwC and focuses on REDD+ and climate smart agriculture with both private sector and government clients. He previously worked as Technical Manager of Rainforest Alliance’s Climate Programme.