The two environmental organisations allege that McKinsey’s advice to rainforest nations based on the firm’s greenhouse gas abatement cost curve (explained and deconstructed by the UCL Energy Institute here) on how to reduce carbon emissions from deforestation could have significant perverse consequences. It is charged that, if followed, McKinsey’s advice could actually lead to increases in both deforestation and carbon emissions, as well significant biodiversity loss and the mass violation of the rights of rainforest peoples.
McKinsey has influenced national plans for reducing emissions from deforestation in several rainforest nations including Indonesia, the Democratic Republic of Congo, Guyana and Papua New Guinea.
Being linked to bad advice with potentially appalling environmental and social consequences is obviously not a good look for a consultancy firm that not only claims to possess problem-solving powers that are unique and superior to everyone else on earth, but to always “[s]how respect to local custom and culture”.
So how has McKinsey responded? The answer is very quietly indeed. Despite the detail set out in the claims made by Greenpeace and the Rainforest Foundation, and the potential for ongoing and significant brand damage, McKinsey has stuck by a bland bland statement emailed to journalists:
“We disagree with the report’s findings and stand firmly behind our work and our approach … In our work for public-sector clients, we provide a fact-base on the emission-reduction potential from forestry and land-use measures, which can be used to inform complex national debates on equitable low-carbon economic growth strategies.”
It may be that McKinsey is just hoping that if it keeps quiet, the storm will pass — the firm has certainly demonstrated the Teflon touch in the past. For example:
“Enron was a company where McKinsey conducted 20 separate projects, where McKinsey’s billings topped 10 million dollars a year, where a McKinsey director regularly attended board meetings, and where the CEO himself was a former McKinsey partner … The one Enron partner that has escaped largely unscathed is McKinsey, which is odd, given that it essentially created the blueprint for the Enron culture.”
Elsewhere, McKinsey has defended its carbon emissions methodology by saying, in effect, that its advice should not be taken too literally. Per-Anders Enkvist, a partner at McKinsey, is reported as having declared that it would be a mistake for governments to “mechanically translate” McKinsey’s technical modelling “into policy implications”. And therein lays a dilemma for the consultancy: how to simultaneously big-up and play-down their product? As one commenter perceptively noted on the REDD Monitor website, McKinsey
“…are in a bind because on one hand they need to talk up the influence and importance of the unique and copyrighted methodology and how useful and successful it has been to many countries in order to sell their wares, and at the same time they need to talk down the influence and importance of the methodology to protect themselves from NGO criticism.”
It may be that in McKinsey’s perfect world, the firm would be able to have its cake and eat it too, being seen to wield influence but without accepting any responsibility for real world problems.
Meanwhile, events seem likely to keep McKinsey’s controversial role on rainforests under scrutiny. In Indonesia, for example, where President Susilo Bambang Yudhoyono (whose commitment to tackling deforestation has been laudable) has just signed a two-year moratorium on new forest concessions, McKinsey is heavily involved in giving advice on deforestation (“virtually writing the playbook for how the program will be implemented there”, according to independent US journalist Robert Eshelman). No doubt international supporters of Indonesia’s efforts to reduce emissions from deforestation — including Australia through its International Forest Carbon Initiative — will want to ensure that scarce resources that are meant to reduce deforestation are being applied to achieving that end, rather than precisely the opposite.