The forest industry’s conundrum: What does measurement have to do with it?

To combat the growing risks from unsustainable business practices, governments and regulators worldwide require corporates to bring greater transparency and reporting to their sustainability impact. 

When comes to reporting, however, arguably, not all industries are the same. Forests are key to addressing both climate change and biodiversity loss, two of the most urgent challenges for the global community, as they have the ability to sequester carbon and host 80 percent of terrestrial plant and animal species (link). The Nordics, despite having only 1.6% of the world’s forested area, account for 13% of the world’s wood and pulp production (link). They provide the case for this article.

If reporting (and other) regulations are to encourage forestry organizations, and their stakeholders, to make more sustainable choices, more needs to be done to increase understanding of the specific sustainability impacts of the industry. Three key areas should be addressed: reporting models, underlying data, and success cases.

1. Models provide the measurement frames – but are not yet fully developed or uniformly adopted

Forestry organizations, like peers in other industries, report on greenhouse gas (GHG) emissions from their own operations and value chain (known as scope 1,2 and 3 through the methods developed by the Green House Gas Protocol). However, forestry also has the potential to remove carbon through the uptake of carbon dioxide, storage of carbon, and the contribution of forest-based products in replacing fossil raw materials (link). The models for accounting of this removal are yet to be adopted uniformly. 

In addition, the Science Based Targets Initiative presented the final version of their guidance on setting targets for the Forest, land and agriculture (FLAG) sectors at the end of 2023 (link). Whereas CLEAR, a different set of guidelines, has already been adopted by several large Swedish forest companies (link). This hampers comparability of data and communication to broader stakeholder groups.

Reporting of biodiversity is even less mature which means individual actors need to interoperate and devise more of their own reporting metrics. Comparability is further aggravated through regional variations in forest type, conditions and management practices which entails a difference in what is relevant to report on. 

Ultimately measurement models and methods need to be integrated into internal management control systems that can help organizations implement strategies and investors to allocate resources. Recent progress is encouraging, yet more needs to be done to strengthen the models for effective decision making.

2. Data provides input to the models – but is difficult to gather and interpret

Challenges in climate reporting are compounded by the difficulty in capturing data. For instance, in addition to the notoriously difficult Scope 3 emissions, forestry companies can account for their FLAG emissions, which include emissions related to restoring natural ecosystems, improving forest management practices, and enhancing soil carbon sequestration (link). 

The difficulty of collecting reliable data often results in companies adopting modeled estimates (link) with varying degrees of accuracy. Companies are also increasingly trying to gather primary and secondary data. Differences in the unique makeup of soils, local climate, or weather conditions can affect emissions and aggravate accounting. This fragmented landscape has entailed a real risk of reporting on “the same metrics but in different ways”(link). 

There are also difficulties in capturing biodiversity data. However, new technologies offer solutions. For instance, remote sensing to create a forest digital twin has shown biodiversity on a very granular level (link). Initiatives like this provide understanding of complex cause and effect of different measures on biodiversity. 

“We do not only need metrics and data but a clearer understanding of future scenarios for the industry.”

– Katarina Kolar, Head of Business Improvement & Business Control, SCA

The question is how to act on available data. What will the role of the organization be in reporting and controlling if the knowledge about climate science or biodiversity is insufficient to interpret the signals provided by the collected data?

3. Cases can provide a map for the do’s and don’ts – but are still evolving

Beyond reporting of metrics, there is also a need for examples of initiatives and concrete scenarios that provide viable pathways for the industry to both drive financial growth and address climate impact. This relates to the more narrative elements of reporting on progress.

Examples could relate to good forest management practice, which is particularly relevant for an industry tackling a divergence in opinion on what constitutes good forest management practice (a source of major debate between the EU and the Nordics on regulatory design). 

Examples could also relate to innovation in technology and business models. For instance, several companies pilot novel carbon capture technology. One large Swedish forestry company is currently analyzing the potential to offer Carbon Capture and Storage as well as carbon credits to their customers, potentially making their products carbon neutral. Other examples relate to product development projects where fiber-based products could replace plastics. This would imply the avoidance of emissions, again something that the current measurement system does not capture fully. 

Scaling of good examples and broad backing of sustainable scenarios will require sharing knowledge from successful deployments and business models that also secure a return on investment.

On the virtues of measurement and narrative

The drive to measure sustainability impact has arguably never been stronger. The forestry industry has huge potential to either improve or aggravate sustainability efforts. Therefore, it is important that actors within and around the industry have good information to make the right decisions and do justice to the sustainability benefits that this industry can provide. 

An evolving regulatory environment with potential broad implications for forest companies combined with a fragmented reporting landscape diminishes the useability of information for stakeholders as a steering tool. Actors within the industry should seize the opportunity to better shape and align on models, metrics, and narratives that provide clarity into an industry central to climate action and biodiversity. The potential benefits of such a venture could be worth the effort.