The Latest Skirmish in a Long Battle to Save the Amazon

Amazon-Rainforest-Deforestation

When one of Brazil’s most respected forestry monitoring institutions, Imazon, released discouraging data in August pointing to a jump in the rates of Amazonian deforestation, it provoked tough questions from the media and civil society. Are we witnessing a return to the annual devastation of just a few years ago? Why is the government not doing more? Why are illegal practices so common and more sustainable policies so rare?

The numbers are undeniably dispiriting. Between August 2012 and June 2013, 1,855 square kilometers of the Brazilian Amazon were lost, a yearly increase of 103%. Degradation, where the forest appears intact but has been stripped of many commercial woods, increased 1,078%, albeit over a much smaller area. Already 17% of the forest has been irrevocably destroyed, according to Greenpeace data. Still, longer-term trends are more positive. Deforestation in the Brazilian Amazon has slowed in recent years from a peak of 27,000 square kilometers lost in 2004 to about 5,000 square kilometers in 2011.

The debate over what happens next is proving divisive, however. Media coverage, based on what looks like one-off data may be overly negative, according to Roberto Waack, chairman of the board of directors at São Paulo-based forestry company Amata and a sustainability advocate. He sees continued, gradual improvements.

Noam Lior, a professor of mechanical engineering and applied mechanics at the University of Pennsylvania, agrees that “tendencies are moving in the right direction.” But the important question to ask, he adds, should be: “Is it moving fast enough?”

Márcio Astrini, coordinator of Greenpeace Amazon, thinks progress could stall, given that the government has become complacent. “The situation has improved. But it’s gone from truly awful to just bad. That’s not much progress,” he notes, adding that the government now seems to believe that 5,000-6,000 square kilometers of deforestation per year is acceptable. “It’s not,” he says, pointing out that deforestation continues to take place against a backdrop of slave labor and land conflicts with indigenous peoples.

“I am worried … deforestation is going to continue, thanks to current, existing policies.” –Sergio Amoroso

The Brazilian ministry of environment did not return messages seeking comment at press time. In recent statements to other media outlets, however, the government has emphasized that Amazonian deforestation has been slowing and that government officials are investigating causes for the recent increases as a matter of urgency, particularly within those states where the impact has been greatest.

Discounted Wood, Lower Prices, Less Investment

The problems confronting the legal forestry sector in Brazil are myriad. Chief among them is the market for illegally sourced wood. Legal logging companies can’t compete with prices offered by rogue operators who are able to bring wood to market at 40%-60% discounts. That has sapped prices, and legal producers have slowed or halted investments, Waack says.

It comes as no surprise, then, that most forestry companies in Brazil have tended to focus on fast growing trees, cultivating them over a wide area and for a large number of consecutive years. Nevertheless, a handful of lumber companies have defied the difficult economics and implemented best practices, thereby juggling profits and sustainability.

Jonas Perutti, a 23-year veteran of the industry, runs Madeflona in Itapua do Oeste in the southwestern Amazon state of Rondônia. He says illegal competition has been suffocating his business, and he knows who to blame. “The government pays only lip-service to buying properly certified wood,” he notes.

There are more than 40 species in his native forestry plantations, and his own enthusiasm for careful management imbues workers with the same respect for those practices, Perutti says. His strategy stems from time spent on the ground, immersion in the business and respect for the forest. “I learn something new every day and look to put experience into practice,” Perutti states. “Recently, I’ve been improving road management to cause less damage to the soil.”

Small companies such as Perutti’s face difficulties, however. He has 70 employees and, after recently winning a forestry concession covering close to 88,000 hectares, is hoping to take his workforce up to 200. But credit from the public National Development Bank (BNDES), which offers subsidized rates far below that available from commercial banks, is hard to come by, he notes. “This is a long-term business. Returns only come after years.”

Grupo Orsa, a company with 545,000 hectares in the Jarí Valley in the Amazon states of Pará and Amapá, has also been working to develop advanced practices. Sergio Amoroso, CEO of Orsa, was an early adopter, maintaining native forest species and limiting damage caused by infrastructure. Improvements have come in large part through trial and error, he says.

Amoroso’s conversion came from personal motivation. Indeed, Brazil’s preponderance of family-run companies means this is frequently the agent of change. “There was a period in my life when I had money, but I found that was not enough. After a personal, internal crisis, my conclusion was that I had to do something different.”

Yet he is cautious about the future, given government policies: “I am worried … deforestation is going to continue thanks to current, existing policies…. Plans do not allow for effective control; that’s a fact,” he says. “Monitoring consumers and distributors would be the most efficient possible strategy.” To that end, he plans to work on projects with the Forest Stewardship Council as well as invest in technology and process innovation.

One multiplier can be the involvement of communities, notes Amoroso, who tackled the issue head-on through a foundation to support local initiatives. “The key is to listen to community concerns rather than make top down philanthropic decisions,” he says. “We thought malnutrition would be considered the most pressing problem locally, but we discovered that this was less of a preoccupation than child prostitution.” Projects were amended accordingly, he adds.

Another company has also been instrumental in developing sustainable practices, although it is far from the lumber sector, experts say. Cosmetics giant Natura is the Brazilian company most often cited as the country’s sustainability leader, and it is working to source products more carefully from the Amazon.

In 2011, managers announced the far-reaching and long-term Amazon Program based around a series of targets for 2020. Natura is investing R$1 billion in total in the region, working to increase from 10% to 30% the proportion of materials it sources from the Amazon, build a team of 1,000 researchers and bring up to 12,000 the number of small producers in its supply chain, among other initiatives. The supply chain target alone represents a more than eightfold increase.

“There are few initiatives to work with the sustainable use of resources in the Amazon and they are … insufficient, almost symbolic.” –Beto Veríssimo

Yet Natura’s programs are a drop in the ocean. According to Beto Veríssimo, a member of the program’s consultative council: “There are few initiatives to work with the sustainable use of resources in the Amazon and they are … insufficient, almost symbolic.” The programs need to act as a catalyst to really have an impact, Veríssimo says. “We need to attract other companies interested in development to the region … Alone, this project changes nothing,” he says.

A Value Proposition

What galvanizes Brazilian companies to implement these expensive policies? The most important drivers are civil society and the media, says Waack. Associated reputational risk is an ever greater consideration. “There is an increasing understanding that companies should behave responsibly for their own benefit to protect the intangible assets that they have and to gain the respect of customers,” Lior notes. “This is becoming a very significant part of their value.”

Brazil has high levels of Internet penetration and is a leader in social networking, making it ripe for campaigns on sustainability. Magazines, including Ideia Sustentável and Revista Sustentabilidade, campaign and debate ideas to improve environmental management in Brazil. Moreover, there is an increasing number of awards for companies adopting best practices sponsored by media such as Valor Econômico and organizations like the American Chamber of Commerce in Rio (Amcham Rio).

Kárim Ozon, president of the Environmental Committee at Amcham Rio, notes that this year the runner-up for the preservation and management of ecosystems award was a mining company in the Amazon that goes well beyond its legal obligations in mapping out fauna and doing extensive replanting. The awards, in their ninth year, are gaining more attention, and were talked about this year in Brazil’s dominant media outlet O Globo, she adds.

The local stock exchange, Bovepsa, has created indexes that filter in companies with sound environmental policies. The Sustainable Company Index was launched in 2005, and the newer Carbon Efficient Index has 37 companies listed.

Finally, local and international NGOs highlighting deforestation are attracting high caliber patrons. Jose Olympio Pereira, managing director of Credit Suisse, is also a senior member of the Foundation SOS Mata Atlantica, which campaigns for better forestry practices in Brazil’s depleted coastal forests.

The rise of the Brazilian middle class is the key to this growing environmental consciousness, just as it has been in China, says Lior. The environmental movement is already building political momentum — as the 19% share of votes garnered by Green Party presidential candidate Marina Silva in 2010 testifies. This development is key, since the government is the essential mover if deforestation is to be permanently slowed, experts note.

Rampant Corruption

The precarious economic situation faced by legal logging companies is not just a result of the government’s purchase of illegal wood, experts say, noting that legislative missteps have whittled away the role of the federal government based in Brasilia, allowing both illegal certification to flourish and overall control to slip out of government hands.

Brasilia took away licensing of forestry from the federal-level Brazilian Institute of Environment and Renewable Natural Resources (IBAMA) in 2007 and gave that power to the states. The goal — to reduce bureaucracy — was achieved, but there have been devastating collateral effects, according to critics. Brazilian states are poorly funded and ill-equipped to monitor and punish infractions, and politics at a local level in Brazil are rife with corruption, says Astrini. The Amazon state of Pará (roughly twice the size of France) has just 20 state forest rangers. Power must be returned to the center, Astrini adds.

“There is an increasing understanding that companies should behave responsibly for their own benefit to protect the intangible assets that they have and to gain the respect of customers.” –Noam Lior

Waack agrees. Control by individual states has made it harder to produce accurate, nationwide maps of legal areas for logging and maintain control over national policies, he notes. The licensing process for the Brazilian certificate of origination has also been fragmented, and illegality has flourished in the cracks, he says.

Lior echoes their concerns about state-level control. “One of the conclusions that I drew on sustainability is that the biggest enemy is corruption. At a high level within [the federal] Brazilian government, institutions and research groups, there is a keen and sincere attempt to do the right thing, but when it boils down to local government, there is very little control,” Lior notes. “In general, only where there is strong government regulation can better practices be implemented.”

The government has also failed to make sufficient provisions for demand with domestic consumption consuming close to 90% of supply, critics say. There are just three million hectares of managed forestry, while some 30 million are needed (compared to a total of some 500 million hectares in the Brazilian Amazon), according to Waack. A marked acceleration in the program of public forest concessions, such as the one that Perutti recently won, is urgently required, experts state.

The Brazilian government is close to taking two crucial steps to restore balance, says Waack. Brasilia is working to require states to share information on concessions, which will provide national mapping. It is also working to improve certification and to develop realistic production targets for lumber, which should result in more public concessions of sustainable forestry.

‘One Day, the Wood Will Run Out’

Brazilian politics are volatile and the environmental lobby is pitted against a vocal and highly influential agricultural lobby, however. Most forestry companies see little need to change practices: One manager said that Brazilian customers have no interest in paying extra for sustainably sourced wood — even though they talk in lofty terms about environmental protection — so there is no motivation to supply it to them.

Astrini notes that degradation threatens diversity. Close ties to agro-industry have already persuaded the government to water down legislation, he adds. “The federal government needs to admit to the scale of the problem. And it needs to do this soon. One day, the wood will run out.”

Government policies, technological improvements and pioneering corporates have the potential to create a virtuous circle in Brazil where deforestation is permanently reduced, advocates say. But time is not on the government’s side.

Demand for wood at home is growing, while at the same time, the U.S. housing recovery is pushing a global pick-up in demand. There is urgent need for a greater supply of legal, properly certified wood from Brazil.. Given that Brazil will hold presidential elections in October 2014 soon after the World Cup in June, Waack expects legislative gridlock. That will be another year lost in the long battle to bring about lasting change in the Amazon.

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