Growing Trees and Growing Profit: Is Your Business a “Restoration Enterprise?”
This piece is co-written by Eriks Brolis, the conservation business lead on The Nature Conservancy’s Global Lands Team.
As one of our most powerful natural climate solutions, forest and landscape restoration is among the cheapest and most effective ways to store carbon and curb climate change. What’s more, expanding restoration can create enticing investment opportunities in a “restoration economy.”
One hundred and fourteen governments have made commitments to restoration as part of their overall plans to tackle a changing climate, pledging to restore 162 million hectares (400 million acres), an area six times the size of the United Kingdom. But transforming land use at a large scale means that we cannot rely on public or philanthropic resources alone. To reach the $26 billion needed each year to meet countries’ pledges under the Paris Agreement, the private and commercial sectors need to be involved.
One barrier to attracting the needed funds has been lack of awareness of the investment opportunities. Investors ask, what are the business models? How can restoration generate a return on investment? What is the growth potential?
As we noted in a previous blog post, restoration can generate both income and capital gains. More and more enterprises are seeing the commercial potential in restoration-related sectors, including those whose main value proposition is linked to forest and landscape restoration. This may be a direct link—enterprises that plant trees, for example—or an indirect one, such as companies that offer technology or consulting services for restoration. A restoration enterprise can also include companies whose revenues are not directly linked to restoration, but whose customers are drawn to them because they channel their profits toward restoration.
What Does a Restoration Enterprise Look Like?
When envisioning a restoration enterprise, sustainable forestry companies, such as Better Globe Forestry, are typically the first that come to mind. The Kenyan company works with smallholder farmers to plant Melia volkensii trees, a native species known for its resilience to drought. Providing farmers with a range of resources to plant the trees on their lands—from seedlings and water supplies to training and microfinance—Better Globe intends to purchase the trees from farmers once they are mature, harvesting them and exporting them as high-quality timber. By establishing the trees on semi-arid lands – with more than a million planted to date – the company helps retain water and improve soil quality, transforming dusty farmlands into oases of grass and vegetation.
Restoration enterprises, however, come in many shapes and forms. Another example is Fresh Coast Capital, which exemplifies the potential of restoration companies to deliver financial, environmental and social returns. As a project developer, Fresh Coast partners with cities throughout the U.S. Midwest to restore and revitalize underserved urban communities through the transformative power of nature. By paying Fresh Coast to install large-scale green infrastructure such as native plants and trees, cities can naturally manage stormwater runoff while improving soil and air quality. These projects can save cities millions in built infrastructure costs while creating restoration jobs and improving property values, delivering triple-win scenarios for the company, the city and the environment.
Ecosia takes a more indirect approach to restoration. An online search engine that displays ads next to its search results, Ecosia earns revenue every time a user clicks on one of the ads. At least 80 percent of its profits are invested into tree-planting programs in Burkina Faso, Madagascar, Peru, Indonesia and Tanzania. While Ecosia’s business model does not directly benefit from trees, its customer value proposition is intimately linked to restoring degraded land. Its platform enables users to see how many trees have been planted based on individual online activity. With 9 million trees planted to date, Ecosia proves that business models that indirectly promote restoration can be effective at creating large-scale impact.
Criteria to Consider in Restoration Enterprises
WRI and TNC are asking enterprises for information about how they’re restoring land, directly or indirectly. These enterprises may be showcased in a forthcoming report. We’re looking for restoration enterprises that are:
- Environmentally beneficial: Does the enterprise result in degraded lands being restored? Some benefits of restoration include carbon sequestration, improved air and water quality, and greater biodiversity.
- Profitable: Does the enterprise make money today (or is on track to do so in the future)? Long-term commercial viability is key for private investment, so we focus on companies that aim to generate returns that can be used to fund their ongoing restoration activities.
- Scalable: Does the project have the potential to become much bigger than it is today? Since investors are often looking to allocate sizable funds to the same investment, we focus on companies that have massive room to grow their operations from current levels.
- Replicable: Can this concept inspire change and be replicated in other countries or regions? This is important to ensure that attention is directed to ideas that can be replicated rather than one-time projects.
- Socially beneficial: Does the enterprise have a positive impact on people through employment and other means? There are always competing uses for land, and sustainable change requires that people benefit in some way.
SOURCE: World Resources Institute