The exercise of planting trees sometimes gets a bad rap; just note the term “treehugger,” which is not always complimentary.
But a report issued this morning by the World Resources Institute (WRI) and The Nature Conservancy (TNC) suggests that the planting of trees is far more than a good deed, and in fact, has the potential to scale and become a booming business.
Enter in a new term in the sustainability lexicon: the “restoration economy.”
Global efforts to restore degraded land worldwide will not be easy. After all, getting past red tape is among the many hurdles that get in the way of land remediation and replanting forests. And as the WRI-TNC report explains from its beginning, many investors struggle to understand the concept of land restoration in the first place.
But according to the report’s authors, there is plenty of money that can be made in forest restoration, to the tune of $84 billion annually. WRI has already hopped on this bandwagon with its announcement last fall that is leading a $2 billion land restoration program across Latin America and the Caribbean.
In gauging how companies within the nascent land restoration space perform and can find success in the first place, WRI and TNC researchers evaluated approximately 140 such companies operating across the world. The report’s authors then analyzed these companies’ profitability, scalability, environmental and social benefits and whether their business models could be replicated elsewhere.
The report found that there are significant risks within this sector. Transaction costs are often high, and many of these firms struggle to score capital. Investors shy away from these projects in part because they offer almost no liquidity – in other words, they cannot be bought and sold quickly to churn a quick profit. Finally, many of these lands are in countries where land tenure and title are tenuous; these same countries often have weak governance structures and frequently struggle with corruption.
Nevertheless, there are companies finding success in this sector. One of them is United Kingdom-based Biocarbon Engineering, which operates a fleet of drones reforesting areas that are difficult to access. The Dutch firm Land Life Company, maker of water vessels based on an ancient Mesopotamian technology, manages ongoing projects from Chile to Zambia and expects to be profitable in a few years. Land Life claims its “cocoons,” made out recycled wood pulp, offer a much higher survival rate for tree seedlings compared to traditional tree planting methods.
Other companies may not be generating revenues directly from their forest restoration efforts, but are planting trees while building a successful business. A leading example is Guayakí, which markets the herbal drink mate across North America. As mate grows best in shade, the company says it has planted over 500,000 hardwood trees across Argentina, Brazil and Paraguay to protect its mate shrubs and therefore, its investments. The company expects to reach $60 million in revenues this year and $100 million at the end of the decade.
The restoration economy still faces an uphill climb. Investors have to be patient, as they may not see robust returns for 10 to 20 years. And many governments still provide agricultural subsidies that encourage the degradation of lands instead of their restoration. Nevertheless, the evidence suggests private companies can make money, communities can benefit from employment opportunities; and the planet, naturally, can benefit from these renewed carbon sinks. WRI and TNC have showcased a compelling template of how businesses can generate profits and yet be sustainable in the long term.
Image credit: Alex Popovkin/Wiki Commons