Brazilian Amazon Rainforest: The ESG Agenda in the Context of Sustainable Forest Management

It is not news to anyone that the Amazon rainforest plays a crucial role in the world’s ecosystem. It absorbs and stores massive amounts of carbon dioxide from the atmosphere, which helps to regulate the global climate. It also exerts a profound influence on rainfall patterns, critical for agriculture across South America and beyond.

The Amazon rainforest’s unparalleled biodiversity embraces around 10% of the world's plant and animal species. The tallest trees in the world, powerful rivers, and unique fauna contribute to one of the world’s most breath-taking ecosystems. However, this living poetry is under threat, and that is also not news to anyone.

The main causes for the deforestation of the Amazon are mining, illegal logging, and agricultural expansion. The adoption of measures to increase the sustainable management of the Amazonian forests is urgent, not only to prevent deforestation but also to meet – in a sustainable manner – the increasing demand for wood in the world.

According to a report published by the Food and Agriculture Organization of the United Nations (FAO), global consumption of primary processed wood products is expected to grow by 37% between 2020 and 2050. The study concluded that this growth would derive from the projected increase in the world population, the higher income of people in economically developing countries, and the material’s growing use in construction. Apart from that, woody materials will be increasingly relevant as sustainable alternatives to non-renewable materials and products.

Brazil only holds a 4% share of the global market for forest products, estimated at USD350 billion.

The Brazilian Amazon rainforest amounts to 5 million km²  (ie, 500 million hectares). In 2020, public state and federal forests totalled 284.2 million hectares in the Amazon. Despite this immense potential, only 1.4% of the Brazilian Amazon rainforest has some sort of sustainable management plan.

Among the public federal forests, 44 million hectares are eligible for forest concessions, but only 1.3 million have been granted to concessionaries. When it comes to public state forests, the situation is even worse. Only 0.72% of the public forests in the Amazon biome under the states’ administration fall under the forest concession regime.

Sustainable forest management is defined in Brazilian environmental laws as forest management aimed at economic, social, and environmental benefits; that respects the support mechanisms of the ecosystem; and that considers the use of multiple timber species, multiple non-timber products and by-products, as well as the use of other goods and services of a forestry nature.

Sustainable forest management requires the presentation of a sustainable forest management plan (PMFS), a technical document that presents the guidelines and procedures for forest management following the principles of sustainable forest management.

Analysis of sustainable forest management in the Amazon biome through the lens of environmental, social, and governance (ESG) factors will allow an evaluation of the benefits brought by the activity and the aspects that deserve improvement.

The most obvious environmental benefit of sustainable forest management is the protection of the forest against predatory deforestation.

The applicable sustainable forest management regulations set harvest cycles of 25 to 35 years with a logging intensity varying from 15 to 30 cubic meters of timber per hectare. To better illustrate, one can say that the allowed logging would be, on average, six to eight species, over an area equivalent to a soccer field, returning to this same area after 25 to 35 years, depending on the forest’s regenerative capacity.

Over the years, sustainable forest management techniques have evolved into reduced-impact management techniques.

The environmental benefits in sustainable forest management include the protection of biodiversity, and other important environmental resources, such as the conservation of water and the mitigation of the effects of climate change.

The Amazon rainforest is inhabited by more than 20 million people. This population is highly diverse and includes various Indigenous peoples and traditional communities who rely directly on the forest’s natural resources for their survival.

The PMFS must include a social impact study on the surrounding communities that presents the prospects for improving the quality of life of the local population, the benefits of integrating the project with the community, and the use of local labour, along with capacity-building of the workforce.

When it comes to public forest concessions, the social requirements are broader. Law No 11.284/2006 outlines the following, inter alia, as social requirements:

There is certainly room for improvement in the scope of social requirements for sustainable forest management on private lands. This can be achieved through measures that foster community engagement and raise awareness of the value of the natural capital of the forests. Without the true input of Indigenous populations in forest management processes, forest preservation will be threatened by conversion into agropastoral areas. Having local communities be genuine stakeholders in the value chain of the forest products guarantees that the forest will be watched over and conserved, thus developing a socially and environmentally sound forest economy.

Proper governance in a PMFS should include transparency, proper monitoring, accountability, and law enforcement.

The sustainable forest project holders must comply with laws, regulations, and permits governing the forest management activities. They must also establish forest monitoring systems and regularly report on compliance with environmental standards and laws.

The sustainable forest projects are monitored by the environmental authorities through satellites and physical inspections.

Control and regulation of sustainable forest activity is electronic and covers the complete chain of custody of the natural forests’ timber products and by-products, providing traceability at each stage of exploration, transformation, and trade in these products. In 2018, the management and control of the activity was improved by the release of the Sinaflor Platform, managed by the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA).

An extra layer of proper governance in the forestry sector can be achieved with independent monitoring and certifications such as those offered by the Forest Stewardship Council (FSC) and the Brazilian Forest Certification Programme (Cerflor). The certification verifies that the forest is responsibly managed and adopts best practices. The forest concession policy provides for the granting of performance bonuses to concessionaries that obtain certification.

The natural capital of the Brazilian Amazon rainforest is underused and under serious threat. Sustainable forest management should be scaled up to protect it against deforestation by promoting responsible environmental practices over the long term, while also providing economic benefits to local communities.

The forestry sector is deeply affected by the unfair competition caused by illegal logging. New financing models for the activity should be created, as well as the development of a solid legal framework for payment for environmental services (PES) and the regulation of the carbon market, adding value and extra income to sustainable forest projects.

The good news is that the law governing public forest concessions for sustainable management has recently been amended to, among other provisions, authorise the concessionaire to trade certificates of carbon credits and associated environmental services, in accordance with regulations to be published. The new law is anticipated to enhance the economic attractiveness and the legal security of public forest concessions, enabling Brazil to occupy a more relevant position in the global wood market.

The implementation of sound forest management plans, with economic, environmental, social, and governance consistency will balance the need for economic development with the urgent need to protect the Amazon rainforest, ensuring that the forest continues to provide vital ecosystem services for the present and future generations, as provided for in the Brazilian Federal Constitution.