The Staggering Value of Forests-and How to Save Them
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The Staggering Value of Forests—and How to Save Them
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 help clients with total transformation—inspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact. To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures—and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.
THE STAGGERING VALUE
OF FORESTS—AND HOW
TO SAVE THEM
GEORG KAPPEN
ELISABETH KASTNER
TORSTEN KURTH
JOHANNA PUETZ
ANDREAS REINHARDT
JUUSO SOININEN
June 2020 | Boston Consulting GroupCONTENTS
3 THE FOREST IMPERATIVE
5 THE VALUE OF FORESTS
An Overview of Forests
Quantifying the Value of Forests
11 THREATS TO FORESTS
Land-Use Changes
Rising Temperatures
Unsustainable Logging
Abiotic Disturbances
Biotic Disturbances
The Impact of Forest Threats
15 ACTIONS TO SAVE GLOBAL FORESTS
Restore and Plant Forests and Manage Existing Forests Sustainably
Boost Sustainable and Productive Agriculture
Promote Sustainable Sourcing
Reduce Meat Consumption
Push Recycling of Wood-Based Products
Limit Global Temperature Increase to Less Than 2°C
29 A CALL TO ACTION
30 APPENDIX: ASSUMPTIONS AND METHODOLOGY
Methodology for Valuing Forests
Quantification of the Impact of Forest Threats
Quantification of the Impact of Actions
38 FOR FURTHER READING
39 NOTE TO THE READER
2 | The Staggering Value of Forests—and How to Save ThemTHE FOREST IMPERATIVE
T he world’s forests—which today
cover 30% of the earth’s land surface—
are an incredibly valuable resource, storing
Among our findings:
•• The estimated total value of the world’s
massive amounts of carbon, helping to purify forests is as much as $150 trillion—nearly
water and air, ensuring natural biodiversity, double the value of global stock markets.
and providing livelihoods for millions of The ability of forests to regulate the
people. But despite the vital importance of climate through carbon storage is by far
forests, they are under worldwide assault, the largest component of that total value,
with the equivalent of 30 soccer fields accounting for as much as 90%.
disappearing every minute.
•• The most serious threats are not always
In response to the growing crisis, BCG con- the ones garnering the most public
ducted a comprehensive analysis to answer attention. Recent media coverage, for
three questions: What is the financial value example, has intensely focused on the
of global forests? What are the biggest threats devastation brought by wildfires. However,
to that value? How and to what extent can our analysis finds that land use changes
we preserve (or even increase) the value of and rising global temperatures, major
forests? drivers of deforestation, will actually be
the main causes of forest value losses. Of
Our analysis addresses the value of forests the five primary threats to forest value
across four attributes: their climate regulato- that we identified, these two account for
ry function; their environmental benefits, about 70% of projected losses between
such as air purification and water filtration; now and 2050. Ultimately, if the five
their commercial output; and their social val- major threats to forests today are not
ue. We realize that quantification of these di- addressed, global forest value will drop by
mensions is difficult, and certainly always im- roughly 30% by 2050.
perfect. For example, the value of forest
biodiversity cannot fully be captured. Never- •• All stakeholders, including governments,
theless, we believe that a valuation is essen- NGOs, the private sector, and consumers,
tial in order to create transparency with re- have a role to play. Governments are partic-
spect to the value of forests in comparison ularly important and must create a robust
with other assets and thereby introduce clari- regulatory framework that drives real
ty to a discussion that is often dominated by change. We have identified six critical
emotion. actions that can protect forests and limit
Boston Consulting Group | 3deforestation—and therefore preserve As our analysis underscores, the value of for-
forest value: (1) restore and plant forests ests and the threats facing them are inextrica-
for the purpose of protection as well as bly linked to climate change. Existing forests
wood production, sustainably manage store CO2 in the form of carbon on a massive
these and more of the existing forests, and scale—and young, growing forests absorb sig-
increase their productivity; (2) boost nificant amounts of CO2. However, on a glob-
sustainable and productive agriculture; (3) al scale, because of deforestation (the perma-
reduce meat consumption; (4) push for nent loss of forested area) and decay, forests
deforestation-free production of palm oil, are now releasing more CO2 than they are ab-
soy, beef, and timber; (5) increase wood sorbing—meaning forests are net carbon
recycling; and (6) limit global temperature emitters. Depending on the actions we take
increase to less than 2°C. Ambitious but today, forests will either be a powerful tool
realistic action, including follow-through on for combating climate change or a major con-
current global pledges for forest protection, tributor to rising CO2 levels.
can preserve 20% of value and thus reduce
value loss to about 10% by 2050. If adopted, the measures we outline in this
report would drive significant progress in pro-
To preserve the full value of today’s forests tecting forest value—something that must be
we would need even more aggressive steps, achieved if society is to ensure a sustainable
such as new forest plantings that cover an planet for future generations. With a collec-
area larger than Australia and, critically, sus- tive push for action, we can preserve a su-
tainable management of 100% of new and ex- premely valuable, but increasingly endan-
isting forests, up from the 40% currently. gered, global asset.
4 | The Staggering Value of Forests—and How to Save ThemTHE VALUE OF FORESTS
F ew of the numerous publications on
forests offer a comprehensive yet easily
understandable overview of forest value. To
in regions such as North America, Europe,
and China.
help fill this gap, we studied the current state Tropical forests can capture and store more
of forests around the world and developed a carbon in their biomass than other forest
methodology for valuing them. types owing to their fast-growing and very
dense trunks, canopies, and roots. In addition,
thanks to the mild climate in which they grow
An Overview of Forests and the fact that much of their acreage re-
Forests today cover nearly 4 billion hectares mains undisturbed, they are the most biodi-
around the world. They are found in almost verse, providing a home for many more spe-
every region, but their sizes and compositions cies than do the other two biomes. Temperate
differ greatly among continents and countries forests, meanwhile, are the smallest biome
(See Exhibit 1.) Five countries jointly account (accounting for 15% of total forest area) but
for more than half of the global forest area: account for an outsized share (29%) of global
Russia (20%), Brazil (12%), Canada (9%), US forest product output. That’s because they’re
(8%), and China (5%). generally more easily accessible than the oth-
er types of forests, are relatively dense com-
From a biological perspective, forests are cat- pared with boreal forests in particular, and
egorized according to their biome: tropical, are often managed using processes that make
temperate, or boreal. The differences be- them highly productive. (See Exhibit 2.)
tween forest biomes are determined largely
by precipitation patterns related to tempera- It is also instructive to assess forests in terms
ture. Tropical forests are generally located of the type and degree of use by humans.
close to the equator and are concentrated in Commercially used forests, such as planta-
South America (including the Amazon), Afri- tions and natural forests that are used for pro-
ca (primarily the Congo Basin), and Asia duction, are major drivers of carbon capture
(largely in Southeast Asia), where they cover and storage through the young, growing trees
roughly 2.3 billion hectares. Boreal forests, they hold and the wood products that they
about 1.1 billion hectares in total, are found yield. Other forest types include those that
in the coldest regions, mostly North America, have limited or no commercial activities to-
Northern Europe, and Russia. Temperate for- day, such as inaccessible primary forests and
ests are located between tropical and boreal mixed-use forests. Primary forests are forests
forests, covering roughly 600 million hectares with high levels of biodiversity but no visible
Boston Consulting Group | 5Exhibit 1 | Forests Worldwide Cover Roughly Four Billion Hectares
3,982
752 841
193
2,299
(58%)
North and Europe CIS
Central America
596
(15%)
829 609 580
1,087
(27%)
172
2019 world forest South America Africa Asia Oceania
area (millions
of hectares)
Tropical Temperate Boreal ### Forest area in millions of hectares
Source: UN Food and Agriculture Organization Global Forest Resources Assessment 2015.
Note: Area extrapolated to 2019 from historical net forest cover change rate for 2005 to 2015. Region totals may not add to the composite total
because of rounding.
indications of human activities. Mixed-use for- are a self-sustaining asset that will continue
ests have portions that are undisturbed and to provide benefits into the future.
portions that are used commercially.
Our analysis reveals that the total value of
forests is $50 trillion to $150 trillion—with
Quantifying the Value of Forests the upper limit being roughly double the val-
Drawing upon previous research, we devel- ue of global stock markets and more than ten
oped a methodology for valuing forests. This times the value of the world’s gold, including
exercise can drive a concrete discussion about reserves. (See Exhibit 3.) It is worth noting
the asset value at risk, the impact of certain that this is a conservative estimate; we consis-
actions to preserve that value, and, by exten- tently used figures based on academic con-
sion, the amount we should be willing to sensus or, where none existed, the most con-
spend to implement those actions. servative values in our calculation. (For
details on the data and sources used in our
Our goal was to capture the full value of glob- calculation, see the appendix.)
al forests, not simply the value that can be ex-
tracted through commercial activities such as The largest share of forests’ total value—be-
harvesting timber. Consequently, our analysis tween 65% and 90%—lies in their climate-
assesses value in four dimensions—climate- regulatory function. Commercial value ac-
regulatory, commercial, environmental, and counts for the next largest share, and environ-
social. We are not looking at the value in just mental and social value, in equal amounts,
one year; rather, we are calculating the cumu- account for the remainder. (See Exhibit 4.)
lative value in all four dimensions in perpetu-
ity, much as one would in valuing a stock. Climate-Regulatory. Trees regulate the
This approach makes sense given that forests climate in two ways. First, they absorb CO2
6 | The Staggering Value of Forests—and How to Save ThemExhibit 2 | Three Types of Forest Biomes: Tropical, Temperate, and Boreal
Tropical Temperate Boreal
Brazilian Germany's Russian
Examples Amazon Black Forest Taiga
Temperatures
Eastern North America,
Broad belt of Eurasia
Geographical location Near the equator northeastern Asia, and
and North America
western and central Europe
Area (millions of hectares) 2,299 596 1,087
Available timber volume
121 112 77
(cubic meters per hectare)
Commercial use of wood
(cubic meters per hectare 1.5 2.6 0.8
per year)
Carbon storage
91 53 41
(tons per hectare)
Trees 45,000 1,500 160
Biodiversity
(species/
hectare) Animals 15,000,000 7,000 3,000
Sources: UN Food and Agriculture Organization Global Forest Resources Assessment 2015; UN Food and Agriculture Organization STAT data
(2017); University of California Museum of Paleontology; ZDF documentary “Faszination der Wälder” (2017).
1
Includes subtropical and Mediterranean forests.
2
Refers to growing stock (i.e., volume of all living trees).
3
Data on wood in tons was converted to cubic meters using a conversion factor of 1.4.
4
Includes living biomass above and below ground.
from the air, store the resulting carbon in the current 50-day moving average of the car-
their biomass, and release oxygen into the air. bon price in the EU, while the higher figure is
Second, they play a significant role in regulat- the price necessary to keep global warming
ing temperature and precipitation. below 1.5°C by 2030 according to the Inter-
governmental Panel on Climate Change
We quantified the first component by deter- (IPCC).
mining the amount of carbon currently
stored in tree biomass. On the basis of that We excluded from our calculation timber that
figure, we calculated the CO2 emissions that has been removed from forests but still exists
existing forests have prevented from being re- in the form of products such as building mate-
leased into the atmosphere. Those prevented rials. Certainly, the carbon in such wood prod-
emissions, roughly 1,000 Gt of CO2 in total, ucts also represents a form of carbon storage,
are priced at $27 to $135 per tCO2 to arrive at and its impact is especially considerable when
the climate-regulatory value from carbon cap- looking at the “substitution effect,” the avoid-
ture and storage. The lower figure represents ed CO2 emissions from materials substituted
Boston Consulting Group | 7Exhibit 3 | The High End of Forest Value Is Roughly Double That of Global Stock Markets
Value in $trillions
50–150
74
66
14
Forest Global stock markets Gold Oil
Sources: Bloomberg (2020); World Gold Council (2020); OPEC (2020); BCG analysis.
1
Based on Bloomberg World Stocks Market Capitalization Index (April 29, 2020).
2
Based on approximately 197,500 metric tons and an average 2020 LBMA gold price of $1,586 per ounce.
3
Based on approximately 1.5 trillion barrels of crude oil reserves and an average OPEC basket price ( January-April 2020) of
about $44.
with wood, such as cement. The European Tropical forests, heavily concentrated in
Forest Institute estimates that every ton of South America and Africa, account for a stun-
wood used in place of non-wood products ning three-quarters of that value, thanks to
represents 1.2 tons of avoided carbon emis- several factors. First, they are the largest for-
sions.1 But given that we focus on the value est biome by area (58% of total forest area).
of forests as they exist today, we did not in- Second, they hold a large share of primary
clude the value of those prevented emissions forests, which have the highest carbon densi-
in our calculation. ty. Third, they have higher tree biomass than
other biomes. That translates into carbon
Although a clear methodology exists for de- storage per hectare of roughly 90 tons, more
termining the carbon capture and storage val- than double that of boreal forests.
ue of trees, the value created by their role in
lowering temperatures and regulating precip- Environmental. Forests help manage natural
itation is trickier to quantify. Transpiration systems. Trees, for example, absorb harmful
and evaporation of water stored in forests particles and help provide clean water by
help regulate heat flows and aid in the forma- filtering it. They also help prevent or regulate
tion of precipitation. A loss in forested area natural disturbances, providing protection
can influence this cycle and lead to a signifi- from soil erosion, rock falls, and high tides,
cant reduction in local rainfall.2 However, giv- for example. In coastal areas, forests such as
en the complexity of forests’ impact on pre- mangroves shelter local populations from
cipitation and the complex spillover effects, tsunamis. Forests also provide critical support
we did not quantify this value. of species-related and genetic diversity.
The capability of forests to regulate climate We based our environmental valuation on
through carbon capture and storage is the avoided costs, such as what it would cost to
most important factor in our value assess- filter water through a mechanical process, the
ment, accounting for 65% to 90% of the total healthcare costs that would result from high-
value of forests. er air pollution levels, and the increased
8 | The Staggering Value of Forests—and How to Save ThemExhibit 4 | The Majority of Quantified Forest Value Lies in Climate Regulation
% of total forest value/$T
50–150
65–90%
2–7%
5–20%
2–7%
Total forest value Climate-regulatory Environmental Commercial Social
in 2020 value value value value
($trillions)
Value element not quantified
Sources: United Nations; Markets Insider; BCG analysis.
Note: All values are rounded; all values are perpetuated annual values, with the exception of climate regulation, which
reflects current carbon stock in forests.
1Carbon stock valuation; underlying carbon price range: 27–135 $/tCO2; does not quantify temperature regulation.
2Does not quantify biodiversity or soil nutrient cycling.
3Does not quantify intangible value of forests.
disturbance-related costs that would be in- The environmental value of forests in our cal-
curred without forests. culation is about 2% to 7% of the total. The
value from air purification is the most signifi-
Calculating the value associated with biodi- cant, followed by that of watershed services.
versity support is more challenging. Biodiver- The latter is especially important in Asia,
sity exists on multiple levels. It is reflected in which accounts for more than 60% of the vol-
the different types of ecosystems, including ume of fresh water that is withdrawn global-
forests, around the world, in the variability ly. The disturbance regulation value is a small
and abundance of species within those eco- part of the total, but it can be critical in such
systems, and in the diversity of genes within regions as Asia and Oceania, where forests re-
those species. The details of how biodiversity duce damage from landslides and cyclones.
works within and across ecosystems are not
fully understood. But we do know that forests Commercial. The commercial value of forests
both rely on biodiversity (to remain healthy) stems from profits generated by their use in
and provide biodiversity (by offering habitat the production of certain products. These
that supports species and genetic variety). In profits, distributed among players along the
addition, biodiversity has a direct impact on a production chain, including forest manage-
forest’s ability to provide benefits such as dis- ment, harvesting, manufacturing, and retail,
turbance regulation. come largely from wood products and fiber
products such as pulp and paper. Each of
Given the fundamental importance and inter- these product categories accounts for roughly
relatedness of forests and biodiversity, we ex- half of our total estimated commercial value
pect the value of biodiversity to be a multiple of 5% to 20% of total forest value. Non-wood
of our total forest value estimate. We exclud- forest products such as food and animal-
ed this factor from our environmental value based products (mushrooms, fruits, and
calculation because of the difficulty in isolat- honey for example), medical raw materials,
ing its value from that of the other benefits and exudates (including latex and gums) are
forests provide. important raw materials for certain processes
Boston Consulting Group | 9and products. However, they account for a rely on forests for subsistence—they reside in
very small share (1%) of forests’ commercial and live off forest resources.3 We based the
value. calculation of this subsistence value on what
those individuals would need to pay for
Interestingly, Europe and Asia jointly account things like housing and food if they lived in a
for almost half of forest economic value but nonforested rural community. Second, forests
only 20% of global forest area. That’s because provide jobs and income to another 12.6
they each hold a relatively high share of the million people worldwide who work in the
world’s productive forests and have very effi- forest industry.4 We calculated the personal
cient commercial forestry operations. Further, income for this group of people to determine
both hold a large share of temperate forest, the associated value. Third, forests offer
which provides the best conditions for pro- recreational benefits, which we quantified by
ductive use in terms of accessibility and rate considering the travel costs people are willing
of tree growth. Forest plantations are the to pay for access to forests.
most productive type of forest in terms of
commercial output, accounting for only 3% of Forests certainly have significant intangible so-
total forest area but 12% of total forest com- cial value as well, for example the psychologi-
mercial value. cal and emotional benefits that the mere pres-
ence of forests provide to humanity. This value,
If anything, the commercial value of forests is however, is difficult to quantify accurately, and
likely to increase. To meet the demands of a we do not include it in our valuation.
growing population while decarbonizing the
global economy, humanity must increasingly Social value constitutes 2% to 7% of total for-
rely on nature-based solutions—what is est value, and the vast majority of that value
called the “circular bioeconomy.” Forest- comes from subsistence use of forests and for-
based products are at the heart of multiple estry employment. Recreational value is a
industries in the circular bioeconomy, includ- very small percentage.
ing bioenergy, biofuels, textiles, building ma-
terials, chemicals, and packaging. And with By far the largest share of global social value
the World Business Council for Sustainable comes from tropical forests in Asia and Afri-
Development projecting that the circular bio- ca, where the forest products industry is a
economy will grow to $7.7 trillion by 2030, major employer and large numbers of people
forest-based products will be in increasing de- also live in and rely on the forest for their
mand. In order to avoid a loss of forest value livelihood. Only a small share of forestry em-
in other dimensions, such demand must be ployees and forest-dependent people are
met through sustainably harvested timber. from South American countries.
Social. The social value of forests has several
components. First, nearly 200 million people
10 | The Staggering Value of Forests—and How to Save ThemTHREATS TO FORESTS
F orests are disappearing at a rapid
pace—we lose an area equivalent to
40,000 soccer fields every day. These heavy
ter of 2020, reaching an all-time high.5 Similar
trends have been reported in other areas and
countries that are subject to deforestation, in-
losses are driven by a number of threats that cluding Indonesia, Malaysia, and the Republic
destroy the value of forests through deforesta- of the Congo.
tion, degradation, or both. (See Exhibit 5.) We
studied each threat and, extrapolating from
current trends, calculated the potential Land-Use Changes
impact each is likely to have on forest value Our analysis shows that land-use changes,
between now and 2050. through the deforestation of 425 million hect-
ares, will account for 14% of forest value loss.
Our analysis yielded sobering results. On the There are three key elements to this threat.
current trajectory, one-third of forest value First, and most significantly, forests are being
will be lost by 2050. The major culprits: land- removed so that land can be used for large-
use change and rising temperatures. (See Ex- scale production of commodities, primarily
hibit 6.) Although wildfires are responsible through agriculture but also through mining.
for 23% of annual forest loss, most of this is Second, use of the “shifting agriculture” mod-
temporary loss. Understandably, wildfires of- el in small-scale subsistence farming involves
ten dominate the news, but they are likely to clearing land for farming for a limited period.
account for less than 1% of forest value de- Third, urbanization in many parts of the
struction over the next thirty years. In gener- world is leading to the destruction of signifi-
al, tropical forests, which account for a large cant amounts of forest to pave the way for
portion of overall value, face the greatest new cities or the expansion of existing ones.
potential loss, with land-use change and ris- In all three cases, responsible parties gain
ing temperatures the biggest threats. Temper- more direct benefits (in terms of money or
ate and boreal forests are also at risk, primar- food) from converting land than from leaving
ily from logging and abiotic and biotic the area forested.
disturbances.
Large-scale agriculture is a particularly sig-
The COVID-19 crisis has exacerbated forest nificant factor. Indeed, the top three com-
loss. The crisis led to less aggressive law en- modities driving deforestation are palm oil,
forcement and relaxed regulations in some soy, and beef. Meat consumption alone, in-
locations. Deforestation in the Amazon, for cluding beef, poultry, and pork, is currently
example, increased by 107% in the first quar- responsible for more than 2 million hectares
Boston Consulting Group | 11Exhibit 5 | Five Key Threats Put Forest Value at Risk
Land-use Rising Unsustainable Abiotic Biotic
change temperatures logging disturbances disturbances
Permanent Forest biomes shift Unsustainable Disruption of forest Disruption of forest
conversion of forested due to climate removal of wood from health from increased health from increased
area for agriculture, change, which leads natural forests for the impact of wind-throw, impact of pests,
mining, and to a loss of tropical commercial use of floods, and wildfires diseases, and invasive
urbanization— forest area forest resources species
cleared through
cutting or fire
Source: BCG analysis.
of deforestation annually. This includes the 13% of the projected decline in total value
clearing of forest for use as pastureland and through deforestation of roughly 400 million
for soy cultivation (some 80% of soy produc- hectares. The trend is expected to lead to
tion is used in animal feed). As the global widespread deforestation in the tropics as for-
population expands and incomes rise in the ests in those areas die and essentially be-
years ahead, the rate of deforestation associ- come deserts. Rising temperatures will cer-
ated with meat consumption is likely to grow tainly have some countervailing effects. Some
significantly, if no action is taken. areas, such as those in which permafrost
thaws, may become more forested. And high-
At the same time, shifting agriculture, the er CO2 concentrations in the atmosphere (a
conversion of small- or medium-scale forests leading cause of temperature rise) may in-
and shrub land to temporary farmland, also crease forest growth rates (the “fertilizer ef-
contributes to deforestation. Under shifting fect”). Still, the net impact on forest value will
agriculture, the land is farmed for a period be negative.6
and then left fallow, often followed by a re-
sumption of farming or the regrowth of for- Rising temperatures will also have indirect
est. Although this practice allows for refor- effects on forest value. They may reduce wa-
estation (the planting of trees in an area that ter and air purification and other environ-
was previously forested), that can take a long mental benefits of forests without necessarily
time, roughly 15 years or so. In addition, in leading to complete deforestation. Higher
countries with fast-growing populations, such temperatures will further exacerbate other
as the Democratic Republic of Congo, the disturbances: faster growth of pest popula-
pressure for agricultural output increases and tions puts more strain on forests, and rising
fallow periods get shorter, ultimately leading sea levels lead to forest death through salini-
to depletion of the soil and poor prospects zation of soil. Given the difficulty in isolating
for reforestation. The shifting agriculture and valuing the net impact of such indirect
model is the dominant system in tropical de- effects, we excluded them from our analysis.
veloping countries where the quality of soil is
low and farmers have limited access to fertil-
izers and sustainable farming practices. Unsustainable Logging
The rising demand for forest products is ex-
pected to trigger more unsustainable logging,
Rising Temperatures activity that we project will remove an
An increase in global temperatures, and the amount of wood equivalent to 65 million
resulting decrease in precipitation, will have a hectares of forest. Such activity will account
major impact on forests, accounting for about for 3% of the total decline in forest value.
12 | The Staggering Value of Forests—and How to Save ThemExhibit 6 | Roughly 30% of Forest Value May Be Lost by 2050
% of total 2020 forest value threatened
14%
13%
~ –32%
≈425 million
hectares 3%
1% 1%
≈400 million
hectares ≈65 million ≈35 million ≈20 million
hectares hectares hectares
Total 2020 Land-use Rising Unsustainable Abiotic disturbances Biotic disturbances Total 2050
forest value change temperatures logging (e.g., wildfires) (e.g., pests) forest value
≈ xx Impacted area
Sources: “Supplementary Data for Forest Restoration Potential,” ETH Zurich, 2019; Global Forest Watch dashboards (www.globalforestwatch.org/),
2019; L. Soerensen/UNEP World Conservation Monitoring Centre, 2007; BCG analysis.
1
Gross loss of forest area; no afforestation assumed on areas newly available due to rising temperatures (e.g., thawed permafrost areas).
2
Refers to forest area where amount of growing stock is equal to logged wood (4 billion tons); does not imply deforestation.
3
Refers to additionally degraded area compared with today.
Unsustainable logging involves the excessive through 2015 reveals that the area burned
harvesting of trees and leads to significant each year actually decreased over that 17-year
degradation (reduction in a forest’s ability to period.7
provide services such as air and water purifi-
cation) and even deforestation. It is often Going forward, however, a majority of studies
driven by volatile timber prices (which incen- predict an overall increase in burned area
tivize high-volume logging when prices are and/or fire intensity due to a warmer and dri-
high), unclear ownership rights (which con- er climate. And as recent events in Australia
tributes to illegal logging), a lack of long-term have proven, such a development would pose
management plans from public- or private- a significant threat to biodiversity. Still, given
sector forest owners, or subsistence use of the uncertainty and complexity of climate
wood by economically disadvantaged models, and the fact that rising temperatures
populations. could increase precipitation and therefore re-
duce wildfires in tropical areas, the ultimate
trajectory of global wildfires is difficult to
Abiotic Disturbances predict.8
Abiotic, or nonbiological, events such as ex-
treme storms or wildfires are projected to ac-
count for roughly 1% of forest value loss Biotic Disturbances
through the degradation of an additional 35 Although threats from pests, diseases, and in-
million hectares. Although wildfires have dev- vasive species are on the rise around the
astating effects on local populations, they are world, they are expected to account for only
generally natural events in forest ecosystems, roughly 1% of the value deterioration be-
returning nutrients to the soil from decaying tween now and 2050, through the degradation
plants and allowing growth of native species. of an additional 20 million hectares. The rela-
And contrary to the impression left by much of tive importance of this threat is highly depen-
the media coverage, historical data from 1998 dent on the region, of course. For instance, in
Boston Consulting Group | 13the past two decades, reduced tree diversity timber industry in these regions. Although cli-
and rising temperatures have fueled the ex- mate change will have a major impact on the
pansion of pine and spruce beetle outbreaks extent and intensity of biotic disturbances
across North America, Europe, and Siberia, well beyond 2050, it is difficult to forecast
causing millions of dollars of damage to the those effects today.
14 | The Staggering Value of Forests—and How to Save ThemACTIONS TO SAVE
GLOBAL FORESTS
T he current range of threats to forests
around the world requires aggressive and
immediate action by all stakeholders. Con-
ic backgrounds. Action by governments and
the private sector—including investors—is
particularly vital. (See the sidebar “The Role
crete actions can be taken today to address of Investors.”)
these threats. We zeroed in on actions in six
areas that can have significant impact. These Even if we take ambitious action in all of the
actions take aim at the threats outlined areas described here, our model shows a val-
above, either directly (by restoring forest ue loss of 10%. Preserving, or even bolstering,
area, for example) or indirectly, by reducing the total value of forests today would require
the drivers of deforestation. (See Exhibit 7.) more aggressive action: we would need to not
only start managing all existing productive
As detailed below, we have based our projec- and mixed-use forests (an area of more than
tions on ambitious but feasible assumptions. 2.7 billion hectares) sustainably but also af-
Those assumptions largely reflect existing forest and reestablish forests on about 900
commitments and goals as outlined by play- million hectares—all the land, including pri-
ers in the global community. Under this sce- vate holdings, available for such activities to-
nario, forest value loss can be reduced from day.9 To implement measures on such a large
roughly 30% to 10%. That equates to the pres- scale, we would need a much greater commit-
ervation of $30 trillion in value—an amount ment from public- and private-sector leaders
roughly six times the combined value of Ap- than is currently evident.
ple, Microsoft, Amazon, Alphabet, and Face-
book. (See Exhibit 8.) Given that the overall
value does not include components such as Restore and Plant Forests and
biodiversity, it is likely the value preserved Manage Existing Forests Sustainably
through these measures could be even higher. The largest impact of our six areas for action
comes from driving sustainable management
We focused our recommendations on four of forests through large-scale restoration and
key stakeholder groups: governments, both afforestation (the planting of trees in an area
those in countries with significant forest ar- that was not previously forested) and the es-
eas and those in countries with less forested tablishment of the right incentives and regu-
acreage but a commitment to preservation of lations to promote sustainable practices in ex-
global forests; NGOs, including both interna- isting forests. In total, these efforts can
tional and local organizations; the private reverse about one-third of value loss, preserv-
sector; and consumers from all socioeconom- ing 13% of current forest value.
Boston Consulting Group | 15Exhibit 7 | Action in Six Areas Can Preserve Forest Value Plant, restore, Boost sustainable Promote Reduce Push recycling Limit manage forests and productive sustainable meat of wood temperature sustainably agriculture sourcing consumption products increase Increase health Reduce Fully eliminate Limit meat-driven Increase the Keep global of productive deforestation deforestation for deforestation by share of recycled temperature rise forests through from shifting key commodities reducing meat wood-based
Exhibit 8 | Action in Six Areas Can Prevent Two-Thirds of Projected Value Loss
Value savings categories (% of total 2020 forest value)
3% –10%
2% 2% Overlap
2%
3% ≈25 M ha
≈90 M ha
~32% 13% ≈50 M ha
≈75 M ha
≈100 M ha
≈300 M ha
1 2 3 4 5 6
2020 Value 2050 value Plant, restore, Boost Promote Reduce Push Limit 2050 value
forest value loss at current and manage sustainable sustainable meat recycling temperature with
trends forests and productive sourcing consumption of wood increase to actions
sustainably agriculture products less than 2°C taken
≈ xx Avoided loss
Source: BCG analysis.
Note: Uplift potential does not reflect costs associated with levers; figures are rounded, and the sum of the value preservation percentages
exceeds the total impact of the actions (22%) because there is overlapping impact for actions 2 through 4 that totals 3%.
1
Action also includes sustainable forest management on about 200 million hectares of existing forest.
2
Refers to forest area with an amount of growing stock equal to the amount of fresh wood saved through recycling (1.5 billion tons). This estimate
does not suggest that, without recycling, deforestation of 25 hectares would occur.
To drive large-scale restoration and afforesta- to ensure that these forest areas are managed
tion initiatives, governments need to leverage sustainably and thus preserved in the long
both public- and private-sector resources. term. Consider Turkey’s ambitious initiative
They should integrate such initiatives into in 2019 that involved the planting of more
budget planning at national and subnational than 300,000 saplings in a single location in
levels through tools such as “ecological fiscal one hour. Nearly 90% of those trees died
transfers,” which allocate tax revenues to for- within a few months, most likely owing to
est owners based on the maintenance and poor timing of the planting and the selection
expansion of forest areas. At the same time, of a location with insufficient precipitation.11
they should find ways to fund restoration and Such projects should be planned with a holis-
afforestation initiatives through blended fi- tic view of existing forest landscapes. In addi-
nance, an approach that uses public resources tion, every project should include a clear de-
(in the form of insurance, for example) to at- lineation of whether restored or newly
tract private investment. The Land Degrada- planted areas will be used primarily for wood
tion Neutrality Fund, for instance, is an in- production or for the establishment of pro-
vestment vehicle that raises public, private, tected areas to support biodiversity and other
and philanthropic capital for land restoration environmental benefits. Such protected areas
projects implemented by the private sector. should be used to strategically link forest is-
The fund lowers private investment risk lands, forested areas that are too small to sus-
through public money from “de-risking part- tain biodiversity and are more likely to dry
ners,” such as the government of Luxem- out and become susceptible to disturbances
bourg, who cover more risky measures and such as wildfires.
give priority in the payment of returns to pri-
vate investors. Large-scale restoration and afforestation proj-
ects, however, will not be enough. Govern-
All publicly funded restoration and afforesta- ments must also create a system that sup-
tion efforts must be combined with incen- ports the development of sustainable and
tives and rigorous outcome-based monitoring increasingly productive commercial forestry
Boston Consulting Group | 17THE ROLE OF INVESTORS
Large investors are increasingly making on sustainable timber proceeds or other
capital allocation decisions to both miti- forest products, sale of carbon offsets, or
gate environmental and societal risk in leasing or sales of land for conservation.
their portfolios and advance critical
societal goals. They are motivated by Investors can be catalysts for even more
mounting evidence that companies with progress in the years ahead. Sustainable
strong environmental, social, and gover- forestry funds, for example, are a relatively
nance performance can also outperform small asset category despite their attrac-
financially. When it comes to the protection tiveness. Policymakers should build a
of the world’s forests, they are making an regulatory environment that incentivizes
impact in two main ways. (or requires) investors to take sustainability
into account and promotes further develop-
First, some leading investors are encourag- ment of the market. This can include the
ing companies to commit to sustainable, development of a robust market for
deforestation-free supply chains and are forest-backed securities and open-ended
steering their investments toward those sustainable forestry funds that provide
public companies that do. In the fall of more liquidity than their closed counter-
2019, investors with a total of $16.2 trillion parts. Governments and NGOs can also
of assets under management signed an ensure improved access to information on
open letter urging companies to prevent sustainable forestry investment opportuni-
deforestation. Such action could have ties for investors, reducing the need for a
significant impact. According to CPG, a resource-intensive, detailed due diligence
nonprofit that runs the global environmen- and the level of perceived risk in a current-
tal disclosure system, more than $940 ly complex investment landscape. At the
billion of public company revenue is same time, large investors need to contin-
dependent on forest-risk commodities. ue to push the public companies in their
portfolio to take aggressive action on
Second, investors are putting some funds deforestation. Such action can make
directly to work in sustainable forestry institutional investors a potent force for
funds. These funds generate revenue based forest preservation.
operations. A robust commercial forestry sec- will help to stabilize timber prices and reduce
tor can drive increased investment in resto- the tendency of commercial operators to
ration and afforestation, spur innovation and overharvest.
efficiency in managing healthy and produc-
tive forests, and establish incentives to pro- Such a benefit, however, will depend on the
tect them at a local level. degree to which wood-based products come
from sustainably managed forests. After all,
This should start with steps to advance the unsustainable logging will drive degradation
development of the wood-based products or ultimately even deforestation, regardless of
market. Governments can do this through how the end product is used.
multiple actions, including the promotion of
long-term uses of wood, such as in construc- That’s why governments need to marry their
tion, and requiring a certain share of wood- support of the wood-based products market
based materials in public procurement. In ad- with policies that drive an expansion of sus-
dition, governments in regions where access tainable forestry. They should establish policy
to commercial forests is limited may need to and regulatory frameworks that include clear
invest in infrastructure such as road construc- standards for sustainable forestry and trade
tion and maintenance. Ultimately, action to regulations that favor sustainably harvested
support steady demand for wood products wood. They must also clarify and secure land
18 | The Staggering Value of Forests—and How to Save ThemExhibit 9 | Key Requirements and Practices of Sustainable Forest Management
Pillar Requirement Practice
• Undertake management planning at appropriate levels
Management
• Periodically revise management levels
planning
• Make summary of plan publicly available
• Set harvest rates at sustainable levels
Sustained yields
Economic • Maintain record of actual production
of forest products
• Justify choice of silvicultural system
• Conserve diversity at genetic, species, and ecosystem levels
Conservation of
• Establish conservation zones and protected areas
biodiversity
• Avoid genetically modified organisms
• Adopt integrated pest management
Reduced use of
Ecological • Employ appropriate procedures for handling, storage, and disposal of chemicals
chemicals
• Provide training and equipment for chemical use
• Uphold legal and customary rights of local communities
Recognition of
• Protect sites of special importance to indigenous people
rights and cultures
• Compensate indigenous people for knowledge application
• Meet or exceed all applicable labor laws
Relations with
Social • Provide adequate training for all staff
employees
• Strive to strengthen and diversify the local economy
Sources: “Global Forest Resources Assessment 2015,” Forest Ecology and Management, September 2015; L.Tacconi et al., “National and international
policies to control illegal forest activities,” Center for International Forest Research, Jakarta, 2003; BCG analysis.
ownership rights—without which commercial NGOs. Nongovernmental organizations
operators will not make the investments re- should continue to research and share their
quired to operate sustainably. Governments expertise with other stakeholders to maxi-
must ensure that their regulatory approach is mize the impact of restoration and afforesta-
consistent; unpredictable changes make it tion initiatives. For example, they can work
difficult for commercial operators to plan for with the private sector to identify and devel-
the long term. And they should avoid exces- op technology-based solutions for sustainable
sive bureaucracy and such interventions as forest management or identify and help scale
subsidies for wood-based bioenergy, which new funding mechanisms. In countries where
distort market prices. there is no public body equipped to drive
restoration and afforestation projects, non-
At the same time, governments can look for governmental organizations should also help
new, innovative ways to support sustainable design and monitor such efforts. They can, for
forestry. They can, for example, establish example, facilitate landscape planning
schemes such as ecosystem service payments, initiatives, projects where NGOs and public
which provide remuneration to forest owners and private actors come up with a compre-
who use sustainable practices for the public hensive land use plan based on social,
benefits their forests provide. These pay- commercial, and environmental goals.
ments can in some cases be funded by reve-
nues generated by taxes on CO2 emissions. In Further, NGOs should encourage and facili-
Germany, one state is exploring a program tate donations for afforestation projects
under which the government would redirect through initiatives such as the Trillion Tree
tax revenues to private forest owners on the Campaign, a program that links donors with
basis of the value of the ecological benefits forest conservation ventures around the
that those forests provide. world.
Boston Consulting Group | 19Private Sector. As governments create the bonizing operations with currently available
right incentive structure, companies and technology is still challenging.
investors should embrace sustainable forest
management and productivity-boosting
measures in their commercial forestry opera- Boost Sustainable
tions. Such practices will enhance revenues and Productive Agriculture
and lower risks by reducing forests’ suscepti- A movement toward permanent, sustainable
bility to disturbances, lowering costs for agricultural cultivation, and away from shift-
protecting and planting through natural ing cultivation, and the adoption of more pro-
regeneration, and promoting continuous and ductive farming practices reduce the need for
improved timber yields. Plantations in farmers to clear forested land for agriculture.
particular must be managed in a way that We believe aggressive moves in both areas
creates more diversity in tree types and that can reduce deforestation by up to 100 million
adjusts the composition of tree species (what hectares by 2050, preserving roughly 3% of
is known as “assisted migration”) toward the today’s forest value.
varieties that are most likely to thrive as
temperatures rise and, potentially, those that Transforming agricultural practices, however,
also maximize CO2 capture. is not a matter of simply giving farmers infor-
mation on more productive, permanent culti-
Forestry companies can increase the produc- vation techniques. Shifting agriculture today
tivity of their sustainably managed forests by is deeply rooted in the traditions and heritage
adopting solutions such as genetic improve- of many developing countries. There are very
ment, plant breeding, and precision forestry. tangible obstacles to encouraging permanent
However, the development and application of cultivation, including poor soil quality, a lack
technology-based solutions in forestry (laser of infrastructure and market access, inade-
scanning to track forest inventory, for exam- quate credit availability, and lack of clarity
ple) lags behind that in comparable sectors around property rights.
such as agriculture. Startups and established
forestry players should push to develop tools Governments. In order to enable a movement
and gain an early mover advantage. away from shifting agriculture, governments
in countries where the practice is prevalent
In addition, commercial forestry players can must create conditions under which farmers,
acquire and cultivate trees on land that was especially smallholders, can take such action
previously used for other purposes, including without risking their subsistence.
marginally productive farmland or land that
was previously covered by permafrost but is The public sector should promote long-term
now suitable for planting thanks to rising investments by clarifying property rights. Fur-
temperatures. The latter category is likely to ther, they should provide independent train-
involve as much as 150 million hectares by ing and technical assistance to help farmers
2050.12 And they should develop long-term be more successful over the long term by lim-
applications for a wide range of wood types iting their dependence on agriculture-related
on the basis of both the natural attributes of companies.
the tree and its resilience in the face of cli-
mate change. Governments should also provide direct fi-
nancial support for farmers. They can, for ex-
Companies can also lead or support afforesta- ample, provide funding assistance for invest-
tion initiatives as a way to accelerate their ments in agricultural input, such as fertilizers,
progress in becoming carbon neutral, an ef- and establish a financial safety net for farm-
fort that may be driven by legal require- ers against crop failures. At the same time,
ments, the demands of investors or consum- governments should require that farmers who
ers, or voluntary commitments. This is receive financial support adopt sustainable
particularly true for industries such as air- farming practices that will limit environmen-
lines and petrochemicals, where the environ- tal degradation. This includes agroforestry, a
mental pressure is highest and where decar- popular approach in the tropics that involves
20 | The Staggering Value of Forests—and How to Save Themintegrating trees and shrubs into farmland as Food companies, for example, can expand
a way to preserve biodiversity. Further, gov- their network of smallholder farmers. Such
ernments should ensure that the regional efforts can have dual benefits, helping to
market infrastructure is adequate to handle improve the productivity and sustainability of
increased agricultural output from both pro- those farm operations while making the
ductivity improvements and the shift toward supply chain more resilient.
permanent agriculture.
In addition to supporting the move toward
Governments should also address the poten- permanent agriculture, technology-based
tial negative ripple effect of increased agricul- companies can improve agricultural produc-
tural productivity. As productivity improves, tivity by developing tools that expand the
returns on a hectare of land increase—mak- time periods when crops can be grown. These
ing the opportunity costs to farmers for pre- tools include precision watering, analytics-
serving forested acreage even more steep. optimized LED lighting, and hydroponics
Therefore, governments should include farm- (growing plants in a nutrient-rich solution
ers in their discussion of afforestation and rather than soil). They can also invest in tech-
restoration initiatives and possible financial nologies, such as saltwater-cooled greenhous-
compensation mechanisms for those preserv- es, that have the potential to turn unproduc-
ing forests on their land. tive areas such as deserts into arable land.
And governments should track their overall
progress in promoting permanent agriculture, Promote Sustainable Sourcing
employing satellite-based and other data to Right now, more than 3 million hectares of
develop sophisticated monitoring systems. forest are lost every year for the production
of just four commodities: soy, palm oil, beef,
NGOs. Nongovernmental organizations can and timber (a significant share of which is
run design courses and workshops on perma- used for fuelwood). We estimate that 75 mil-
nent cultivation, as well as community-based lion hectares of deforestation driven by these
projects focused on watershed and soil “forest-risk” commodities can be avoided by
management, tree-based farming, diversified 2050, preserving roughly 2% of current forest
cropping, animal integration, and seed saving. value. That projection assumes that the pro-
Such programs will also reduce food loss by duction of these commodities becomes
minimizing the need for farmers to harvest deforestation-free by 2050. This estimate may
crops prematurely in order to address a cash prove to be conservative, given that many or-
flow crunch. ganizations, including companies, NGOs, and
governments, are advocating for these com-
In addition, NGOs can shape the dialogue modities to be deforestation-free by 2030.
around deforestation in a way that encourag- While there is a role for all stakeholders, the
es collaboration by farmers, governments, poor transparency within forest-risk supply
and conservationists. Often, public communi- chains makes it difficult for consumers to
cation by NGOs, intended to raise awareness have an impact. The responsibility for sus-
on the causes of deforestation, seems to re- tainable sourcing lies most prominently with
flect the perspective of developed countries governments and the private sector.
and does not account for some of the com-
plexities in developing countries, including Governments. Governments must create a
the expanding need for arable land. Such regulatory environment that enables, pro-
messaging often triggers a blame game rather motes, and forces change in the private sector.
than the constructive development of com- Extensive analysis of 500 companies that play
mon solutions. major roles in the forest-risk commodities
supply chain shows that only a fraction have
Private Sector. Companies and investors been able to make their supply chains
should support farmers in order to accelerate deforestation-free over the past decade.
the move away from the shifting agriculture Voluntary commitments alone have proven
model to permanent cultivation systems. insufficient: Despite growth in the number of
Boston Consulting Group | 21deforestation commitments of 63% from 2014 financial institutions will be required to con-
through 2018, average annual forest loss has duct due diligence to ensure they are not sup-
increased by 44% over the same period. porting practices or companies that contrib-
That’s why legally binding regulation is ute to deforestation.
critically necessary to level the playing field
among all players in the supply chain for Governments must also ensure that both do-
forest-risk commodities and penalize and mestic and trade regulations are designed to
incentivize change on the ground. minimize unintended consequences—spill-
over effects that can arise in a number of
There are two levels of regulations that sup- ways. First, developed countries that put
port sustainable sourcing—those aimed at strict regulations on domestic producers,
domestic production and those related to im- without similar rules on imports, can end up
ports. A significant share of beef, for example, having little net impact on deforestation be-
is consumed in the country where it is pro- cause they essentially transfer unsustainable
duced—making domestic regulations critical. practices from their shores to countries (often
At the same time, roughly 25% to 30% of those in the developing world) that do not
products produced in deforested areas are have strict rules on deforestation. Further-
sold to international markets, underscoring more, the new location may have less effi-
the importance of import regulations.13 If Chi- cient production and require more land to
na, for instance, required that all soy import- generate the same output—worsening the de-
ed from Brazil and the US be deforestation- forestation problem. Second, pressure to elim-
free, it would affect more than 30% of today‘s inate deforestation impact in one product can
global soy production. Smaller countries can shift the problem to other product types. For
exert influence through multilateral free example, increased demand for deforesta-
trade agreements (such as the one between tion-free soy may result in soy production ex-
the EU and the Mercosur, a South American panding to land that was previously used for
trading block of nations) that cover trade re- cattle grazing—with cattle farmers then ex-
lated to forest-risk commodities. These regu- panding into forested areas. Such displace-
lations must be based on well-established ment effects are possible in many product ar-
certifications, to make it easier for companies eas. The World Wildlife Fund (WWF)
to ensure that they are complying with the calculated that if all the palm oil currently
regulations. consumed in Germany was replaced with oth-
er vegetable oils, it would require five times
There are clear signs of momentum on both as much cropland.
domestic production and import-related de-
forestation policy. The EU Forest Law Enforce- In the case of timber, governments can lead
ment, Governance and Trade (FLEGT) Action by example—for instance by establishing pol-
Plan, for example, is designed to encourage icies to ensure that wood sourced for public
sustainable practices and sourcing among construction projects has zero deforestation
both suppliers and buyers of forest-risk com- impact. While some governments, including
modities. In 2018, France introduced a Nation- those in Norway and the state of California,
al Strategy Against Imported Deforestation to have already made general deforestation-free
end the importation of nondurable forest or commitments, those efforts must be paired
agricultural products that contribute to defor- with a robust implementation plan and effec-
estation by 2030. In 2019, the UK government tive monitoring.
established an independent taskforce, the
Global Resource Initiative (GRI), to develop NGOs. Nongovernmental organizations such as
recommendations to reduce deforestation and the Forest Stewardship Council (FSC) play a
degradation related to agricultural and forest- vital role in establishing standards related to
ry products. Having concluded its assessment, sustainable sourcing and operator certification.
the GRI has recommended a legally binding (See the sidebar “The Impact of Certification.”)
target to make UK supply chains deforestation-
free as soon as possible—but no later than NGOs must continuously adapt these certifi-
2030. As part of that target, businesses and cations on the basis of market developments
22 | The Staggering Value of Forests—and How to Save ThemYou can also read
