Controversial global consultancy McKinsey & Company has been unceremoniously dumped from giving advice on how to reduce emissions from rainforests in Papua New Guinea, Crikey has learned.

It’s not surprising. As every good conjuror knows, the appeal of an act lies in both the attractiveness of the illusion and the secrecy surrounding how the trick is executed. But if the performance fails or the secret is revealed then the magician might need a new career.

For McKinsey (aka The Firm) those conjuring consultants who boast (“abracadabra!”) that never before has anyone had such problem solving powers, it has been a pretty bad year for tricks being discovered.

Earlier this year Crikey covered the fiasco of McKinsey’s international advice on rainforest preservation, pilloried in analysis undertaken by Greenpeace and the Rainforest Foundation respectively. The environmental critique of McKinsey’s rainforest work has now gone without significant substantive response for many months, despite numerous others including rival consultancies and a senior official at the World Bank giving support to the criticisms.

And now it seems McKinsey has been given its marching orders from advising on reducing carbon emissions from deforestation in PNG. According to an anonymous well-placed source inside the PNG government:

“The McKinsey consultants are no longer working on reducing emissions from deforestation in Papua New Guinea. The last time I saw a McKinsey consultant at the Ministry was in September this year. To be honest, we’re relieved that they are gone, now our own national experts can take up a leading role again.

“It was very confusing when they were here. We were not sure what they were engaged to do. The terms of reference for the consultancy contract were not available to us, and they stepped over into other peoples’ roles. They had close contacts with the old government.

“They were good at presenting their results, but a lot of what they did was copied and pasted from the information we provided them. The cost-curves they provided us were exaggerated and many of the studies used were outdated.

“They left because of the new government that has come in PNG, but also due to NGO campaigning, although we joke that the real reason is that we can no longer afford their bills!”

The government official was corroborated by a second source from civil society in PNG who said:

“The Greenpeace report on McKinsey, and an earlier one by Rainforest Foundation, made us ask a lot of questions about what these guys were doing in our country. ‘What are they here to do? How much are they being paid? How much are our local people paid? What about our national experts?’ These are the questions we were asking. These reports had some impact. McKinsey are a very respected company and before no one could shake them, but these reports shook them. It gave national NGOs a platform to lobby on, and when the new government came in the lobbying paid off.”

Neither source was prepared to be named.

But McKinsey’s annus horribilis has not been confined to rainforest policy. In June, following a journalistic campaign conducted by no less than Paul Krugman, McKinsey was forced to reveal the methods behind what the Nobel laureate clearly considered to be some pretty dodgy work in a report on US health policy. According to Senator Max Baucus, chairman of the US Senate Finance Committee, the McKinsey report was:

“… filled with cherry-picked facts and slanted questions … It did not provide employers with enough information for them to make honest choices and fair evaluations. Rather than correct the major deficiencies in their report, McKinsey has chosen to again stand by their faulty analysis and misguided conclusions.”

McKinsey’s participation in health reform in Britain has also been controversial, with a conflict of interest row erupting after it emerged that The Firm was not only advising the government on reforms to the NHS but also those who would financially expect to benefit financially from the changes. Typically, McKinsey has declined to comment.

But without doubt the most damaging revelation of all has been the insider trading scandal centring on Rajat Gupta, who ran McKinsey from 1994 to 2003 and remained a senior partner until 2007, and another ex-McKinsey partner, Anil Kumar. The fall-out worsened in October when Gupta was charged with five counts of securities fraud and one count of conspiracy to commit securities fraud before a Manhattan court. The current McKinsey chief Dominic Barton has conceded the case is “incredibly distressing and embarrassing” for The Firm.

All of these fiascos are bringing McKinsey unwanted attention. On Saturday an extensive feature in London’s Financial Times was obviously sympathetic to McKinsey (drawing fascinating and derisory assertions about the paper’s partiality in the open comments section) but still highlighted The Firm’s eye-watering charge-out rates, cultish mentality and obsessive secrecy arrangements.

So what happens to the business model of the conjuring consultants when the tricks get found out? When it comes to McKinsey’s advice on reducing emissions from deforestation, the government of PNG has given a clear answer. It now remains to be seen whether other key rainforest nations — including Indonesia — follow suit.

*Disclosure: the author works for Greenpeace and has been involved in the campaigning focused on McKinsey’s work on rainforests

Get Crikey for $1 a week.

Lockdowns are over and BBQs are back! At last, we get to talk to people in real life. But conversation topics outside COVID are so thin on the ground.

Join Crikey and we’ll give you something to talk about. Get your first 12 weeks for $12 to get stories, analysis and BBQ stoppers you won’t see anywhere else.

Peter Fray
Peter Fray
Editor-in-chief of Crikey
12 weeks for just $12.