Right now, the EU is delaying its landmark deforestation regulation that was due to come into force at the end of the year.
The proposed law requires companies that import goods including soy, beef, palm oil, and paper to show their supply chains did not contribute to the destruction of the world’s forests.
The delay comes after concerns over the impact on trade and farmers, and the feasibility of tracing products through complex supply chains.
“While regulatory efforts continue to evolve, it’s important to double down on efforts to improve the health of our forests. That includes both sustainable management of existing forests and planting the forests of the future,” says Lucyann Murray, a BCG partner who specializes in forestry.
The UN reports that:
More sustainable management of forests is largely driven by local regulation and forest stewardships certifications. Moving forward, voluntary target-setting and disclosures will also help drive progress.
When it comes to planting or restoring forests, the biggest efforts to date are being spearheaded by not-for-profit organizations such as the World Economic Forum’s Trillion Trees project, which has enlisted the support of many global companies.
But a market-based approach will also be needed to scale projects in a way that will protect our planet, Murray explains.
The finance to plant and care for forests has largely come from industry which uses the raw material in supply chains. Carbon credits are emerging as a new market for forests that does not depend on cutting down trees.
Organizations looking to offset their carbon emissions can buy two categories of credits, known as nature-based solution (NBS) removals:
NBS demand is expected to outstrip supply in 2030 by >100 MTCO2epa even in “bear” BCG scenario.
Double down on the quality of carbon credits. The carbon credit market for forests has had some teething problems and nature-based solutions have faced criticism for not being robust enough. Certifying bodies have undergone some deep structural and content change, and the voluntary carbon markets for forests are now in their second life, Murray explains. An ongoing focus on rigorous standards and centralization is essential to forestry credits becoming an important part of the mix in a company’s carbon credit portfolio.
Measure and impact relationship with nature. Companies should aim for a holistic view of their impact and dependency on nature, and work toward integrating nature-based solutions into their sustainability plans. This includes water stewardship, air quality, and biodiversity.
Continue traceability efforts. Despite the increased recognition of the difficulty of accessing and reporting data from different geographies, companies should continue to double down on efforts to understand where their raw materials are coming from, and build stronger relationships with their suppliers, making sure all parties are aware that traceability is a priority throughout the value chain. Regulators, meanwhile, could consider step changes to maintain momentum.
ABOUT BOSTON CONSULTING GROUP
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.
© Boston Consulting Group 2024. All rights reserved.
For information or permission to reprint, please contact BCG at permissions@bcg.com. To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcg.com. Follow Boston Consulting Group on Facebook and X (formerly Twitter).
Related Content
Read more insights from BCG’s teams of experts.
Global warming will alter the quality and quantity of water on every continent, triggering a massive displacement of people around the world. Who is most at risk?
Companies will soon need to comprehensively report on their impact and dependence on nature.
Global forests are worth as much as $150 trillion—nearly double the value of global stock markets. Six actions can stop their destruction and help limit climate change.