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Guest view: How companies can cut deforestation

5 minute read

The Mamiraua Sustainable Development Reserve is seen in Uarini, Amazonas state, Brazil, May 16, 2016. REUTERS/Bruno Kelly

SAO PAULO, May 20 (Reuters Breakingviews) - New data show that 2020 was yet another bad year for the Brazilian Amazon. Destruction of the rainforest increased by 13%, according to the Monitoring of the Andean Amazon Project, despite the Covid-19-induced global economic downturn. That may reinforce the impression that deforestation is a necessary evil to feed a growing global population, and that corporate Brazil is immune to calls to end it. Neither is the case.

Preventing the denudation of rainforests is unlikely to harm economic growth in South America. In the late 2000s and early 2010s, curbing deforestation in the Brazilian Amazon was accompanied by rising agricultural production, research led by Columbia University’s Marcia Macedo shows. Deforestation-free production can deliver better overall economic performance and more jobs, while improving local livelihoods that derive economic value from standing forests, including indigenous people and traditional communities.

Deforestation is disquieting to South Americans. It already affects rainfall patterns – starkly illustrated by the severe water scarcity that hit Sao Paulo in 2015 – and agriculture yields. Also, global-warming scenarios outlined by the Intergovernmental Panel on Climate Change, among others, predict that rising temperatures would have much worse effects in the tropics than in cooler zones. Deforestation will make large forests and wooded areas such as the Amazon, Gran Chaco and Cerrado more vulnerable to those global changes, probably with dire consequences.

Of particular concern of late have been fires associated with the clearing of tropical forests. Tropical forests hold large amounts of carbon, provide renewable natural resources and harbor the planet’s richest biodiversity, delivering environmental services that are crucial to humanity.

Producers in South America increasingly understand these risks and hear the concerns of investors and consumers about the links between unchecked livestock and agriculture production and deforestation. There are smart options to improve these industries, reducing their carbon footprint while keeping or improving the benefits attached to their production.

A first step toward addressing the impact of livestock on forests is to trace the origin of every animal, ensuring that none is bred in a deforested area. Existing technology makes it possible and affordable, complementing animal health-certification processes. One example is the Conecta system, a traceability tool that uses blockchain technology to monitor cattle purchases and deforestation using publicly available government data and data voluntarily released by producers and slaughterhouses.

Top global meatpackers in Brazil, such as JBS (JBSS3.SA), Marfrig (MRFG3.SA) and Minerva (BEEF3.SA), have committed to implementing supply-chain monitoring in less than five years, and large banks are leaning in. The central bank is implementing a green agenda that includes promoting sustainable agriculture. Banks, including the largest ones, Banco Bradesco , Itaú Unibanco and Banco Santander (SANB3.SA), are increasingly engaged in promoting sustainable development in the Amazon, exploring investments in sustainable infrastructure and technologies that advance development of a bio-economy.

Achieving supply-chain traceability is pivotal for the region and its businesses because failure to do so would eventually translate into higher risk premiums and lower valuations, as pointed out by simulations from Bain & Co, commissioned by The Nature Conservancy.

A second step toward addressing deforestation is to foster integrated crop, livestock and forestry production, an approach that has proven profitable and sustainable across South America. Integrated systems can increase producers’ income, boost land productivity and mitigate greenhouse-gas emissions, according to research by TNC. I have been particularly encouraged by TNC’s experience supporting mid-sized ranchers with pasture improvements and the introduction of crops, such as açaí in Brazil’s Pará state. TNC has found that sustainable cattle intensification can generate returns that are 10% higher over an eight-year period, while freeing for regeneration up to 60% of the land previously used, with the potential for substantial carbon sequestration. This freed area can become an additional source of income if local producers can monetize the environmental services it starts to provide by selling carbon credits or leveraging other compensation mechanisms.

Third, it is possible to substantially limit clearing virgin land for agricultural production by converting existing pastures to farmland. More financial support for these initiatives, together with effective enforcement of the law against deforestation and occupation of public land, could change the land dynamics and generate greater economic value. With corporate and investor support, such a transformation is possible where soy and beef production are major drivers of deforestation in South America.

These measures, as part of a comprehensive approach to create a more diverse, inclusive, sustainable and productive economy, have the potential to lift the competitiveness of small and large producers. According to a recent WRI study, a low-carbon economy with a deforestation-free and highly productive agriculture could create millions of jobs in Brazil and grow national GDP by $500 billion in the next 10 to 15 years.

Responsible companies and their chief executives in the region and around the globe can safeguard South America’s natural areas by harnessing innovations that expand integrated production practices, complying with and supporting the enforcement of environmental regulations, and promoting ways to reward producers that conserve or help regenerate the forest. These actions will help to improve living standards of local communities, contributing to global climate, biodiversity and sustainable development goals. They will also further the region’s contribution to global peace and prosperity through the plentiful supply of quality food to the world.

CONTEXT NEWS

- Joaquim Levy is director of economic strategy and market relations at Banco Safra and a member of The Nature Conservancy’s Latin America Conservation Council. He served as Brazil’s minister of finance and was president of BNDES, the Brazilian Development Bank.

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