Jun 14, 2011

McKinsey’s record on deforestation under microscope at UN talks

There may be no honour among thieves, but things can be pretty fierce among consultants, too, writes David Ritter, from the UNFCCC Intersessionals in Bonn.

There may be no honour among thieves, but things can be pretty fierce among consultants too. The credibility and credentials of global consultancy giant McKinsey&Co (known to its staff as ‘The Firm’) have been taking a battering lately and it has not taken long for competitors to sniff the opportunity. McKinsey has been the leading provider of advice on how to reduce carbon emissions from deforestation and degradation of forests (REDD), retained to advise on national plans for Indonesia, Papua New Guinea and the Democratic Republic of Congo among others. But The Firm’s dominance of the REDD advice market has recently been rocked by serious allegations from Greenpeace and the Rainforest Foundation.  According to the two leading environmental organisations, McKinsey influenced REDD plans for rainforest nations are fundamentally defective and could actually lead to significantly increased deforestation, as well as biodiversity loss and mass human rights violations. As reported in Crikey, so far McKinsey’s public response has been subdued. But things are getting harder for The Firm, with major commercial rivals publically distancing themselves from McKinsey’s controversial approach. This fortnight has marked the resumption of the United Nations’ climate negotiations in Bonn, and with the urgency of reducing emissions from deforestation high on the agenda, the suite of allegations about McKinsey was sure to be of interest in the corridors. Your correspondent was in Bonn to join a panel at an official side event covering the McKinsey controversy.  Also part of the discussion was Richard Gledhill from PriceWaterhouseCoopers (PWC) in London. Naturally, the immaculately courteous Mr Gledhill did not comment on McKinsey directly, but in a report recently provided to the UK Government (which along with Australia, Norway and other is among the key donor nations to the emerging international REDD scheme) PWC have already warned against heavy reliance on ‘external consultancy support’.  It is hard not to read these words as a thinly veiled reference to the ubiquitous McKinsey. Even more significantly, the PWC report repeatedly emphasises the need for safeguards on biodiversity and the rights of forest peoples – marking a striking contrast with the problems associated with the McKinsey influenced plans reviewed by Greenpeace and the Rainforest Foundation. Speaking in Bonn, Gledhill was at times quite blunt.  He warned, for example, that without sufficient community and civil society involvement plans to reduce emissions from deforestation simply ‘ain’t gonna work’. Gledhill’s observations were supported by the comments of another speaker, Dr Justin Ondopa, Director of Climate Change at Ecoforestry Forum in Papua New Guinea who warned that in his country the rights of traditional land holders were being ignored in the development of the McKinsey influenced national REDD plan. These comments come in the same week that the whistle blower website PNG Exposed released details of monies being paid by the Papuan Government to McKinsey. Intriguingly, the website also reports that ‘McKinsey and Co have refused to comply with PNG laws and register with the Investment Promotion Authority and Internal Revenue Commission’. PWC’s explicit recognition of the need for proper safeguards on biodiversity and the rights of forest peoples for proper engagement is in welcome and stark distinction to the problems associated with the McKinsey influenced plans reviewed by Greenpeace and the Rainforest Foundation. Not that one should get dewy-eyed about PWC: like any big business consultancy, the bottom line is always going to remain the bottom line. But it seems apparent that PWC have recognised the fundamental methodological failings in the McKinsey influenced plans and see commercial prospects in their rival’s shortcomings. What makes this doubly commercially dangerous for McKinsey is that the Firm’s advice is known to have influenced a number of national plans for reducing deforestation which have then in turn been criticized by multilateral funding institutions (as set out here).  The clear implication is that when rainforest countries employ McKinsey to advise on their REDD prospects they may be at risk of their wasting money on a product that is unfit for purpose. No wonder PWC can sense the opportunity.

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One thought on “McKinsey’s record on deforestation under microscope at UN talks

  1. jimD

    The REDD concept is fraught with major problems, and it would be fair to say that participants from all sides of the argument(s) about implementing it are contributing to the problem. I hold no brief for McKinsey, nor PWC in this matter – nor, for that matter, for Greenpeace (who are cited under the reference to criticism by multilateral funding institutions).

    Some realities are relevant here:

    First, Greenpeace, plus other large international environmental NGOs, plus all involved UN specialized agencies, plus development assistance agencies, plus multilateral financing organizations such as the World Bank and other regional development banks (ADB, IADB and so on) cannot hope to raise anything like the funding needed to finance REDD: that will require large amounts of investment from the private sector, whether we like that idea or not. The development agencies and NGOs are happy to spend generously on designing REDD, on “building REDD-readiness” and so forth (and these are definitely necessary tasks) but they will never finance large scale REDD projects – especially when it is acknowledged that REDD can only work if applied at the national scale; individual projects at sub-nationalscale run high risks of leakage of deforestation from one place (the designated project area) to somewhere else not under control of the project.

    Second, while local community involvement in REDD is desirable, it is going to be extremely difficult to achieve in many cases. In Indonesia – the REDD potential country I know best – traditional or historical ownership of much of the land where forests presently grow is heavily disputed amongst local groups. Even on the island of Java, where long standing local title to farming land on that populous island is well established, the process of assigning formal title to that land is generally expected to take 20 to 30 years to complete – and this in a situation where national, provincial and district governments want this process to progress. Consider how difficult this will be in the contested outer islands of Indonesia. Rights of entry, rights to a share of carbon revenues from a REDD programme, could be assigned more easily than actual title, but all many of the international agencies want to talk about is local ownership of the involved forest areas, as if this is the only acceptable solution: Ican assure you that it will not be acceptable to political and other interests in Indonesia.

    Third, many of the international groups involved in REDD preparation and negotiation see REDD as a primary vehicle of biodoversity conservation tropical forests. However, some of the most attractive areas remaining for biodiversity conservation are not in the forested areas where deforestation is most rife. The main purpose of REDD is to reduce carbon emissions by keeping areas of forest most subject to imminent deforestation under forest cover: attempts to piggy-back other objectives onto this primary goal will weaken the whole process, which will be difficult enough to implement anyway. It is easy to make a list of all “drivers”of deforestation, but it is a lot more difficult to determine which is happening where in the forest. Many commentators on this area will suggest, for example,that oil palm is a prime displacer of natural forest, and indeed this seems perfectlyobvious. But in reality, the pressure on accessible forest land may well have begun in many cases long before the oil palm option was introduced in a given area. Oil palm can be grown on degraded, long-since deforested land, but don’t expect oil palm producers – especially those holding permits over forested areas – to volunteer to move to those sites: it will take money and will to bring this about.

    We could continue like this all day – my purpose here has been to try to caution enthusiasts of REDD to bear in mind the harsh realities, and to refrain from allowing mission creep and agenda loading to get in the way of effectiveness in this area.

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