SpruceRoots - Transcript No. 4
November 5, 2003

Questions and Answers
Business Innovation and the Environment

Moderated by John Farrell.

Question: You talked about capital, the importance of not spending it all on conflict and having some for developing businesses. I’m wondering if you could speak a little bit about what is happening on the central coast with the Coast Investment Incentive Initiatives. I know there are people out there in many walks of life who are trying to deal with that issue, I don’t believe people here are very familiar with what is happening?

Linda Coady: Okay, I’ll try and take stab at it. Since I left Weyerhaeuser I haven’t been as involved in this, I stay in touch with it obviously with some of the individuals but I’m not directly involved in negotiations so I won’t be bogged down by the facts so I can give you a more creative explanation.

The idea around [the coast investment] is the recognition that not all conservation needs to occur under ecosystem-based management planning, and for a variety of reasons not all of that conservation can occur in formally protected areas and parks. So the idea is to create a fund that turns conservation into a land-use and communities, First Nations and companies who are interested in managing areas differently can. Some managers may say, ‘Okay I’m going to manage it as a so called working forest, small ‘w’ small ‘f.? So that would be in land normally allocated for integrated use, it’s not in a park but you still want to manage it for conservation and create some economic benefit. The owner or the manager may want to use it for timber but also manage for biodiversity, wildlife habitat, water, carbon, or whatever. So how does that owner or manager get some return on the investment that they are making in that ‘incremental conservation,’ which when you add it all up together equals ecosystem-based management or something that approximates it. So the idea is to create a fund that First Nations, communities or land management ventures of different types could apply to for investment in that incremental conservation.

The idea is to create a revenue stream from that incremental conservation that would go back in to some kind of trust. The trust would hold the biodiversity values or the carbon values or the wildlife habitat values and would manage them for twenty-five years to meet certain targets of conservation and would pay money and that money would go into the different communities involved. The basic idea is to set it up so that conservation can be a land-use and that people who are managing for conservation actually get an economic benefit doing it. It’s not just something that is paid for by the BC taxpayer in some Order-in-Council and then people kind of forget about it. The idea is to integrate it into the management scheme across the landscape.

Every time I hear myself explain this I think it feels so fuzzy, how can anybody even get their head around it? And yet, there are other people in the world that are doing this. Before I came here I met with a group from Mexico, all private forest land owners and farmers who are in a UNESCO biosphere reserve. They’ve just done a deal for twenty million dollars involving a trust-like mechanism—I think they did it through the World Bank and it’s for watershed conservation across all their different private properties. The twenty million dollars will go to individual farmers in that area so that they manage their timber holdings for watershed conservation. It means they harvest less in them, but there is an economic incentive, they get some benefit for doing that because the water is a benefit.

In this province we have never attached an economic value to water, we’ve never attached an economic value to biodiversity or to carbon or to wildlife habitat. We need to begin to do that so that those uses can compete with timber. And it’s not a question of achieving all the conservation we need through gazetted protection, because I don’t think we’ll get there. I think it is a great concept to pilot here on the coast in our high conservation value forest. It is another tool for conservation. I would argue from a company perspective it places the companies that are harvesting in adjacent areas in a better position to state and validate that their management is sustainable. The prize from a business perspective is that what they would be doing is more sustainable. It would be easier to get certified, they’d probably be more eligible for Forest Stewardship Council (FSC) certification than they would be otherwise.

Question: What role do you see a longer rotation age playing to try to compensate forest land owners and timber companies for managing forests in a more environmentally friendly way. It would also provide the communities in the province a better, sustainable, high quality source of wood than if it’s managed on a ninety-year cutting cycle?

Linda Coady: I’m sorry I don’t understand the question. Do you mean harvest the trees when they are older?

Follow up question: Yes, what role does that play in encouraging conservation? What role do you see that potentially playing?

Linda Coady: I don’t know, I haven’t thought about that. I’m not a forester. It delays harvest, I guess. I think you probably need a variety of rotation ages to make this kind of thing work. I can’t knowledgably comment. Is there a forester here who would like to take a plunge at that?

Question: I’ve been hearing a point that was, I thought, quite important about the conflict and resolution on the coast. I’m trying to understand the way our society is working today. There is the global market that you are talking about and that seems to increase consistently and I see that there is, as well, an increase in conflict around globalization. I was wondering if there is a place where the conflict may be too great and too costly for our society to deal with globalization in the market?

Linda Coady: I think it could be, but then I think a lot of people get disenfranchised if you can’t deal with the conflict. What I like about this approach is that this money would probably come globally and it would be made available locally to people who are doing innovative things around forestry. Those innovations would be forest management practices and new types of products that can be branded in the marketplace because of unique environmental values associated with high conservation value. This is a model where you can try and reconcile some of this. Here are your global resources coming in that can be used locally according to what people here want to do. It is a better way to funnel it, in my view, but I am not so naïve as to not realize that it won’t work in all instances. I think there is an appetite to try this now in some of the high conservation areas on the coast, to see if it is a way to reconcile global pressures with local opportunities.

Question: Maybe I was making an assumption but you talked about money coming globally, what does that mean? I guess I was assuming that the logging companies would put money back in to…

Linda Coady: I think the concept here would be that this is new money coming into BC, this isn’t money from forest companies.

Follow up question: Companies from around the world decide to invest in…

Linda Coady: Yes, what a concept! Invest in standing forests. I actually think they would, insurance companies will, perhaps some energy companies will, I realize it opens a can of worms around the Kyoto Accord but how do we know unless we ask. We’ve never really asked anybody to invest in anything other than timber. We do tourism and eco-tourism and all that, that’s a type of investment too. I appreciate that, but in terms of the actual value in the forest we’ve only really allowed investment to occur in timber and I would argue it’s not even really good for timber to do that. So we’ve got to open it up, we’ve got to allow investors in. I can assure you World Wildlife Fund is always talking about what they do at a global level, maybe the world wants to invest in some of those values and make that money available to do innovative things. That’s the premise of this model and maybe it’s wrong, maybe the world will say, ‘You’ve got really cool forests and we just expect you to look after them, good luck, go away.’

Question: My question was along the same lines in that the money is from external sources then you’re saying…

Linda Coady: That’s the theory.

Follow up question: It’s not generated within the…

Linda Coady: No. If we expect timber to pay for incremental conservation I can assure you that won’t work, I’ve seen the ‘telephone book’ full of numbers on it, it won’t work.

Follow up question: Just as a comment, I have land that is ecologically sensitive and I very much doubt whether people would fund me to conserve it. I would really like to see that happen but I have my doubts. I’ve tried different means to get people to do that—I mean government—it hasn’t happened.

Linda Coady: Well maybe it won’t work but how do we know unless we try. There are models elsewhere in the world where people have created conservation easements on privately owned land and people have invested in them. There are some global organizations that do that as business—the Nature Conservancy and others do it as a business. Increasingly, the scarcity of natural resources becomes more of an issue and the resources we have here on the coast take on different values.

This is a controversial issue, you don’t want to monetize every value and not every value should be commodified. But if you’re losing biodiversity because it can’t compete with commercial uses and not all those uses are timber then? A lot of British Columbia’s biggest loses in biodiversity are in the Okanagan and they are occurring because of urban pressures and fragmentation.

Some of these models may have application but we haven’t tried, it’s a real gap in our forest policy portfolio. We haven’t tried, I think, because we have been afraid of change and we have our existing structures. I think the heat’s going up and we’re getting to the point where people are thinking, ‘What do we have to lose by trying something different?’ I would argue very much that it’s in the interest of forest dependent communities and resource companies to see this be successful in the high conservation forests in British Columbia.

Question: I was curious, you talked about Clayoquot being the event that created change within the organization [MacMillan Bloedel]. I’m curious as to when that began and when it actually turned out to be a practical reality on the ground. How long did that take?

Linda Coady: Probably about five years.

Follow up question: Here on the Islands I really haven’t seen any changes in my life time as to how forestry occurs. Every barge load that goes out looks the same to me. I’m wondering when change will actually happen?

Linda Coady: Sometimes change is in the eye of the beholder. I found that out, I should write that point down too, for when I do this talk again. I appreciate it; change looks different from where you slice into it. From the company’s point of view the idea of a joint venture, the idea of transferring the tenure in Clayoquot to a joint venture with the Nuu-chah-nulth and committing it to ecosystem-based management was a big change. It may not sound like a big change now but it was then. The idea of the Coast Information Team and some of the other things that are beginning to revolve around land use planning processes, including the one here, that was a big change too from the company’s perspective.

Follow up question: I guess I’ll follow up with: What sort of milestones were observed throughout that process as well?

Linda Coady: Milestones in terms of…?

Follow up question: Successes of seeing real change happen at a local level?

Linda Coady: We had a process of change around variable retention harvesting and certification and targets were set for introduction of these. There were milestones set for managers, you have to set those milestones or it doesn’t happen. At the policy level there were some around new approaches to ecosystem-based management and at an operating level that was translated into more tangible things.

It was a huge change within the company, it actually seemed to put at risk industrial forestry. I mean, the belief when I started in the forest industry was that any kind of ecological management was a threat to industrial forestry and therefore a threat to the basic survival of the company. So, even the change of thinking that it was possible, that in fact an ecosystem-based approach might actually be good for business—that was change. In my view it was good for the shareholders and the employees. There are different perspectives and I’ve heard some of them and there are a lot of people that think it’s crazy, that we sold out, that we should never have done those things, it was wrong. My response to that, and I find it works nine out of ten times is, ‘Okay, so what would you have done? Take it away.’ At that point there would usually be an overwhelming silence.

Question: I would like to come back to the global market. I see the global market actually increasing the power for the corporations to control the resources even if we have some local decisions. The more global markets increase, the more pressure there will be on specific areas. I am wondering about the places where there are critical situations. How will those companies and the governments be flexible enough to be able to change those situations fast enough to maintain biodiversity. How should we deal with this, because it is going to be increasing and some businesses are just going to get bigger and they are going to get more control?

Linda Coady: Yes, but as businesses get bigger they look inward and they don’t necessarily get smarter and they often lose their ability to innovate. Business schools are pumping out papers trying to tell big corporations how they can maintain entrepreneurial ideas and innovation within a big organization. It is hard to do but I think businesses need to form alliances with local groups or governments that are doing things differently. I think that harnessing diversity is actually more strategically important in the global market place now than it was ten years ago. I would be fairly optimistic with the combination of circumstances that we have, especially with treaty and title being unresolved, that we can actually go quite far to push change.

I wish I could tell you that you could live here and you can keep globalization away from you, but you can’t. Because even if you control the land base here you still have to sell into international markets and you’re going to have to make that reconciliation with those global forces somehow. So you’ve got to be able to pick the parts of it that are going to work for you, while keeping away the parts that are going to tip over your boat and have you lose control. That is very hard to do, but in my experience it’s in the harnessing of diversity that you’re going to find the answer. It’s intergenerational I’m afraid, that’s another one of my conclusions.

Comment: It’s too bad that we have to wait until it’s almost gone, like where I came from in Toronto. In the Greater Toronto area a fund has been set up to pay for the intangible costs like air and dust. They were able to set up a fund of twenty-seven million dollars that isn’t just paid for by government but everybody chips in. It is used to start working out all the different types of processes to acquire land, to set up leases where landowners would be allowed to live out their entire lifetime on the property, free of charge, if you are going to conserve the land. It didn’t mean that it had to be conserved outright, it could be good forestry taking place on the property and they could still maintain their livelihood. So it is being done, and it’s not being done a world away, it’s just being done in a different province.

Linda Coady: You’re right, it usually happens in a private land context and it often happens after much of the biodiversity is gone.

Follow up comment: It’s a lightning rod. That’s one of the things that I wanted to point out with your dollar sign. I think what a lot of people don’t understand is that what we’re talking about is going to cost money. It’s not just going to cost money to the global markets it’s going to cost us money. I’ve certified one forest FSC and worked on another and once you certify the forest it costs more to pull wood out of that forest. People don’t understand that. The cost has to be born by somebody and you’re not going to grab a company out of the world and have them pay for it. It’s us that are going to have to pay for this and we have to start realizing that.

If you have a certified 2x4 worth two bucks and a 2x4 that was harvested in your typical way that was a buck, which one are you going to buy? I will tell you right now the majority of people are not going to buy that FSC certified wood, they’re going to buy that buck 2x4. Especially when it goes into building your house where the cost of that certified 2X4 escalates to ten thousand dollars extra cost. We all talk about the companies needing to pay, rightfully so, but on the bottom line it’s going to be us that ends up paying.

That’s one of the things that you talk about in Clayoquot—there is no consistency. You have a lightning rod of activity and then it kind of peters out. I remember the Blue Box program in Ontario, although it never worked, everybody put cans in that box because of the marketing to get people to buy into the idea. We need to do the same thing for wood and the idea of the products that we actually are putting out there. Those are the ideas we need to start putting out. I like your model and I hope it works.

Linda Coady: That is true, I think you’re right. Iisaak Forest Products, which is FSC certified, has been in business for four years and it’s made money the last two years. I don’t know if it will make money next year because of the stumpage changes and because it’s volume constrained. Iisaak is finding by and large there is no price point margin on FSC wood. I will tell you though, Iisaak is finding a five percent to ten percent premium on FSC certified cedar in Europe and parts of the United States, but to get it it actually has to market the wood. It has to tell the Clayoquot story, it has to say this is Clayoquot Sound and it’s a UNESCO biosphere and there was a big fight here and now we’re having an ecosystem-based approach and it is FSC certified… here you go and have some salad dressing and some berries, and here is a very nice cedar box that we can put it in and wouldn’t you like the video tape that tells the story and all that kind of stuff.

I’m not quite sure but I think that’s Marketing 101. And you know we really haven’t done that around our coastal forests. There is a great story emerging around forests in British Columbia. I believe there is a differentiated market for certain types of high-end products but you have to tell the story from the log right into the market place—from the forest floor into the market place. That is not how we have sold wood products in this province but we are moving into a period where companies won’t harvest without order forms so surely this creates the opportunity to do that kind of marketing. Anybody that’s doing innovative stuff around conservation and biodiversity ought to be able to take that and put it on their product and say, ‘You should buy this product because it’s actually helping conserve coastal old growth.’

I know that’s a bit of a leap, you have to wrap your mind around that. It’s not a huge market. I am not saying you could take all of the wood from the coast and put it into that market, but there is a niche market out there. There is a story here, there is a story in Clayoquot, there are stories up and down the coast. You have to produce some wood to tell the story, obviously, but maybe it is five hundred thousand cubic meters on the coast as a whole that can go into a differentiated market place with that story behind it. A high conservation value product might do okay in the market place, it might help pay for incremental conservation, it might help change the way people see what we’re doing here, including ourselves.

Question: I really like the idea of passing that extra cost to support conservation-based programs onto the consumer. I think it makes way more sense to try to price things appropriately for sustainability than to just start commodifying other parts of the ecosystem. So if we are sustaining a water resource, to complete that dollar cycle you’re eventually going to have to start selling the water.

Linda Coady: It’s envisioned that it is conservation values that you sell, it wouldn’t be water, it would be biodiversity or carbon.

Follow up question: How is that represented by money, how does that money end up getting back into the trust? Where does that money come from unless you are selling the thing that you are preserving, I don’t understand that…

Linda Coady: You’re usually allowing someone to offset, like carbon trading, you are allowing a company that is producing more carbon than they’re allowed under Kyoto to buy some credits. So, to offset the extra carbon being produced by one company they make sure more is preserved somewhere else. That’s how a carbon-trading network is set up. I don’t know that much about it. I don’t think carbon would work for a BC coastal forest because they’re not Kyoto forests, which is usually about taking agricultural land and putting forests on it. But we do have a lot of biodiversity in our forests, would there be any biodiversity units that can be traded?

Follow up question: I guess I just like keeping it as simple as possible. People don’t have a lot of time and energy to go through the logistics of all this. But this costs more because it costs more to make things in a sustainable fashion…

Linda Coady: It does get complicated but in my experience some consumers will pay for it. It is a very small, differentiated market. There is a segment of architects in the United States and Europe that are looking for these kinds of products. We really have to change the way we think about markets and the products we produce for them. I do think they are out there. If the experience of Iisaak is any kind of indicator there are people who will pay a premium for some very special products that come from very special places and have a story around them. It’s probably a combination of all these things, in the end, that will work and in ten years from now people will think all this stuff is so basic.

Question: You were talking about how corporations respond to pressures and crisis and how they change, and like it or not that is an important part of where we’re going to go from here in global forest management. You were also describing the post Clayoquot scenario where a corporation changed quite dramatically, as you said, it began to look outward for leadership and lots of things happened. I’m wondering whether you think that is the only case. The pressure is still there, conflicts are still happening, change is still necessary but I think what we’re seeing in lots of coastal communities is a company like MacMillan Bloedel, which ten years ago decided to stand up and change, is now disappearing. The reaction to that change is that many big companies are just hiding, and are in fact creating contractors, they’re basically disappearing into the background. How do you think this is going to play into the future? Do you think we’ve turned another corner on dealing with conflict…run and hide from it and set up some other guys to take the heat?

Linda Coady: It’s irrelevant, that’s what my daughter tells me, but that is a possibility, that’s a strategy too. The points I tried to hit tonight are more generic and applicable across any large organization whether it’s a big company, government, a large community group or First Nation. I would describe them as human dynamics.

The model of the enlightened corporate interest can be very powerful in influencing governments. So it is always a great hope that you can get a large corporate player to back a new model with capital, accept the risk, and share it with others. But at the same time, go to government and other players and validate that it is worth a try. It’s an important element and a strategy for change in the model that is emerging. I agree with you that forest corporations in BC right now have got so many other problems bearing down on them that they are really in a perfect storm for a variety of different reasons—the soft wood lumber dispute, the bark beetle. They are having a hard time coping and stepping forward. But there are others that can step forward. I think First Nations and treaty can step forward and keep this process moving. Right now the corporate coastal forest industry is moving laterally through a whole series of other issues and problems. You don’t have that big icon company stepping up and saying, ‘We are going to do this differently,’ and then that becomes a lightning rod for change. But you do have other factors working here, particularly the First Nations issues, treaty and the title case. Put not your faith in corporations. They can help, they can be good allies but there definitely is a limit to what they can do and you have to respect that and understand that. I was very fortunate with the environmental groups and the First Nations I worked with, they were smart enough to know that. If they had put impossible expectations on us then nothing would have happened because even the people in the company that were pushing for change wouldn’t have been able to build the support for it.

Follow up question: Do you think we are prior to another big storm? The reaction of Interfor, is that they seem to have retreated back to the big fight issue. They want to fight everybody all the time, they don’t seem to have followed the model that you described.

Linda Coady: I haven’t spoken to them in a long time. They want to fight? In what context?

Follow up question: I just didn’t see them as fitting into your model of trying to reach outward and adapting, to try and respond to pressures.

Linda Coady: Actually, I would argue that they did on the central coast. For a while they left the planning process because they were so mad. In the end, Interfor came back and played an important role in setting up some of the things that led to this current thinking. I hope they get FSC certified in Clayoquot. They are talking about it. It’s hard for me to comment on the behavior of others, because I worked in the industry I don’t feel right about commenting on how other companies behave.

Question: I really appreciate this analysis of the forces that affect change. One of the things that I wonder about, particularly with our forests being largely crown assets, is that our ability to act with any kind of real innovation is stymied by the fact that it is owned by the crown. The crown seems to want to apply one-size-fits-all and I don’t think it matters what kind of organization you belong to. Years ago I went to this course and they said that General Motors at the board level has a model that says there is progress through conflict. What they were saying is that General Motors promoted that there would be conflict. I think Interfor and other companies should be looking at other options. I don’t think we should be looking at one-size-fits-all.

I’ll point out that I think that Weyerhaeuser and MacMillan Bloedel are proud of variable retention. I think as a concept, at the time that it came out, it was a wonderful idea and seemed to leap over some of the obstacles of the moment. It’s not a perfect solution. I would suggest that one of the greater alterations to the landscape is road construction—variable retention accelerates road construction. Saying that, I like variable retention, I think it achieved a lot of things and there are things that it falls short on as well. I’d like to see this continued effort to be innovative and to come up with different solutions and I really dislike the idea that we all have to do it the same way.

Linda Coady: It’s out of the diversity that you get innovation. I guess that’s what General Motors is saying about progress through conflict. I would say it is innovation through diversity. You need different groups doing different things across the landscape.

The problem in British Columbia is that when you raise some of these ideas people don’t want to give up crown land. They don’t want to give up the notion of public land. So the challenge for groups that are doing this kind of thinking is to present it in a way that doesn’t run afoul of that value. If you ask most British Columbians in a poll they won’t be in favor of privatizing publicly owned forest land but they are in favor of settling treaty which will create new ownership rights around forest lands or recognize title rights around forest land. The traditional idea around crown land is starting to change. I would argue that title and treaty is starting to change that monolithic view and that’s why I think that might be the driver for change.

I agree with what you say about variable retention. The idea of the industrial management system incorporating ecosystem values, this was just unheard of, and apart from the Clayoquot science panel nobody had thought about it. I should say, this was only unheard of in big forest companies, it was not unheard of in other groups. That has now changed and other innovations have to take place on top of that. It is a continuum for sure.

John Broadhead: I certainly heard a lot of new information tonight—especially the perspectives on the thinking in the corporate world. I appreciate the scope of work you have done and coming here to share your ideas with us tonight. So on behalf of everybody here I would like to thank you.