The trade-off between profitability and sustainability is a sensitive issue for Chile’s booming timber industry. It accounts for $2.3bn in exports a year but faces many challenges — including competition for water, forest fires and a loss of biodiversity. Still, Francisco Ruiz-Tagle, the chief executive of forestry company CMPC, insists that he can deliver value to shareholders as well as contribute to Chile’s environmental plans.
“We don’t see this business being sustainable without being 100 per cent committed to the [UN climate goals],” he explains.
Ruiz-Tagle argues that the activities of CMPC — the world’s second-largest wood pulp producer — are “a win-win” for Chile, given the capacity of its forests to capture carbon dioxide and the country’s aim to be the first in South America to reach targets to cut emissions in line with the Paris climate agreement.
However, while the industry inevitably has a role in helping Chile to reach its target of carbon neutrality by 2050, the closure of coal-fired power stations and policies to boost renewable energy will be more important.
A recent paper published in the Nature Sustainability journal even questions how much forestry can contribute. It points to a state subsidy for tree-planting, in place from 1974 to 2012, that had an adverse effect on biodiversity — because new plantations were made up of just one or two species, mainly eucalyptus and pine. This also did little to increase the forests’ capacity to capture greenhouse gases.
Although the size of Chile’s plantations more than doubled between 1986 and 2011 — and native forests shrank by 13 per cent — the carbon stored in vegetation increased by less than 2 per cent in that time.
“Chile provides a lesson about how we can advance towards sustainable development in a way that doesn't have an undesirable impact on climate change, the ecology and society,” says Cristian Echeverria, a professor at Chile’s Concepción university and co-author of the paper.
He notes that while Chile has been eliminating its insurance against climate change — its native forests — there are plans to increase commercial plantations by about a third, to 4m hectares.
“The question is where, and what consequences, that expansion will have,” Echeverria says. “Stronger regulation is required. So far, it hasn’t been effective.” Part of the problem, he believes, is that small landowners lack the economic muscle to manage and maintain native forests given “measly state assistance”.
Pablo Marquet, an ecologist at Chile’s Institute of Ecology and Biodiversity, says companies have improved their practices since Chile committed itself to climate goals. “The question is whether solutions are scalable and will generate a transformation of the sector,” he says. “Time will tell.”
But concerns that forestry companies may be helping the country to “greenwash” its environmental credentials are misplaced, says Horacio Gilabert, an agronomist at the Pontifical Catholic University of Chile. “It’s fair to say that [companies such as CMPC] are an asset for plans for the decarbonisation of Chile,” he observes, pointing out that the loss of native species has been caused mostly by agroindustry and urbanisation, rather than forestry.
Vast areas of native forests, which included oaks and giant redwoods, were cleared as immigrants began to settle in the mid-19th century. Soil erosion then led to the tree-planting subsidy programme but this created forests that are more vulnerable to fire.
Nevertheless, analysts at Fitch Ratings recently noted “the nearly ideal conditions for growing trees in the region, [making] plantations extremely efficient by global standards and [providing] a sustainable advantage in terms of cost of fibre and transportation costs between forest and mills.”
In addition, the companies that dominate Chile’s forestry sector have increased innovation. Since the pandemic, CMPC has digitalised its business. It has maximised the use of data, increased production of natural fibre to replace plastics, and is using less waste in industrial processes, says Ruiz-Tagle.
“Sustainability is our biggest challenge, [and I] mean being perfect in our operations,” says Ruiz-Tagle, who points out that there is “zero tolerance” of the company’s mistakes among communities and activists.
That’s why state of the art production is all important. “We need to be a good business for our shareholders, but we also need to be a good neighbour.”