Strategic Corporate Social Responsibility: Strategic CSR

Thursday, November 30, 2023

Strategic CSR - COP 28

In recognition of the COP 28 meeting (an attempt to layer binding global policies and targets on top of national regulation and practices), which started today in Dubai, the article in the url below argues that "the biggest obstacle to saving rainforests is lawlessness." The area of ground that law enforcement agents are expected to cover is so great, that illegal mines and logging operations are easy to hide in plain sight. Even when authorities are able to identify an illegal operation, arriving in time without first alerting the perpetrators is next to impossible:

"The pickup trucks left before dawn. Their occupants—six military police and nine agents from Brazil's national parks service—wore bulletproof vests. Their target was an illegal gold mine deep in the Amazon. To save the rainforest, Brazil's new government is trying to catch the criminals who cut it down. First, though, it must find them. Satellite images had revealed the location, 140km from Itaituba, a city in the state of Pará. After seven hours of driving, two men on a motorbike spotted the convoy and sped off to alert the miners. The trucks gave chase, but got stuck in knee-deep mud. Five kilometres from their target, the forces of law and order had to turn back. That gave the wildcatters time to hide their equipment, which the agents would have torched. A follow-up raid is unlikely."

But, given that the article appeared in The Economist, there is a market-based solution:

"The destruction of the world's rainforests is not only a scandal; it is a colossal market failure. Rainforests brim with biodiversity and help regulate the water cycle. Most importantly, the forests are giant carbon sinks. Deforestation accounts for 7% of global carbon-dioxide emissions. … clearing and burning a hectare of the Amazon pumps 500 tonnes of carbon dioxide into the atmosphere. It each tonne causes $50 of harm by accelerating global warming, … then the total damage is $25,000. Set against this, the profits are puny."

Thus, the way to prevent the criminal activity is some form of upfront compensation (that exceeds the likely profits, but is less than the likely harm) to incentivize the protection of the forests, rather than their destruction. This is where "lawlessness" reenters the conversation:

"If rainforests were in countries where property rights were clear and the rule of law was strong, it would be straightforward to pay the landowners to conserve them. Where property rights are muddled and the rule of law is weak, however, whom do you pay, and how do you know he or someone else won't chop down the forest anyway? Alas, rainforests are often in the second kind of country."

The article provides examples of how difficult it can be to introduce obvious market solutions in Brazil, Indonesia, and Congo, given the contextual poverty and political instability. The graphic accompanying the article shows the amount of rainforest in these three countries that was lost between 2000 and 2020. There is still a lot left, of course, but the physics of tipping points suggests that we do not have much room for further loss: