It's a truism that if business can't make a profit it can't survive.
It is also becoming recognised that if business is not sustainable, our society cannot survive.
Certainly, there is no way our society can be sustainable if business is not sustainable.
Sustainable business is not a "nice idea if you can afford it" — it is a prerequisite for continuing to live on this planet with any reasonable quality of life, and that's something all of us want tor ourselves and our families and the children not yet born.
So somehow we have to work together to meet all those needs.
The way we have been doing things as a society is clearly leading to accelerating climate change, loss of water resources and water quality, loss of top soils, an accumulation of toxic materials in all our bodies and those of every living creature, the exhaustion of resources of which the end of cheap oil is just the beginning, and imminent starvation for millions of people as food grain shortages result from oil price rises, conversion of grains to fuel, climate change, loss of water and soil resources, and relentlessly rising population.
Those things are not the topic of my talk today, but they are the background against which we must plan our businesses and which we daren't forget.
To respond to these challenges business can benefit from mimicking natural systems. Ecosystems drive the major chemical cycles of the planet, synthesise incredibly complex chemicals, support huge numbers of living things, recover from catastrophes, evolve into new organisms, all without using any energy source but the sun that falls on the planet every day, purifying the water they use as they go, without producing any toxic materials that accumulate and without producing any wastes other than those which are raw materials for some other process.
If we are trying to make business sustainable, these are good principles to use as a guide. No material made by industry is as strong as spider's web. It seems delicate only because it is extremely fine. A wetland can purify water better than most sewage treatment plants, using no external chemicals or energy.
Put in practical terms it means industry needs to shift as soon as possible and as far as possible to renewable energy sources to minimise carbon emissions and reduce dependence on oil; see itself as part of the water cycle that discharges water at least as clean as it takes in; sustain the fertility of the land it uses and its top soil; ensure its waste products can be used by another industry as raw material, or can go back to nature to be broken down into original elements, and ensure the remaining habitat for other species and ecosystems is protected.
Many businesses have already embarked no that journey. It will take some time to achieve, but the important thing is to set those goals and make progress towards them.
The role of government must be to make it easier for business to make sustainable decisions.
That means overcoming a number of barriers for business. In an unregulated environment, any company that takes the trouble to spend a bit more to get closer to the sustainability ideal is undercut by businesses taking advantage of them. So regulation to ensure basic standards are met by everyone is essential if competition is to be fair.
Another issue is the price of resources and the price of polluting. Mostly now there isn't any price. The environment is treated as a free good. No wonder it gets badly treated. The current tax regime mainly taxes the things we want to encourage — like work, and enterprise — so we get less of them. The things we want people to do more sparingly, like waste, pollution, use of scarce resources, is mainly untaxed, so we get more of them.
The new Emissions Trading Scheme is a start towards putting a price on pollution, though in our view it has a number of defects.
Green parties around the world campaign for a tax shift, where some tax — not all of it — is shifted off incomes and company profits on to pollution, energy, water, waste, and other scarce resources like, say, minerals levies. This is intended to be revenue neutral. There has been a lot of debate recently about how much tax take there should be. This is a separate debate, about what should be taxed. We will be releasing more detailed proposals on this some time next year.
Then there is the barrier that investments in sustainability can have a higher capital cost, but lower running costs. Take for example the cost of converting a coal fired boiler to wood waste, or a boiler with smart computer controls rather than a dumb boiler. That can lead to a very good NPV, but for a long term investment the simple payback can exceed the company's capital threshold, which for many firms is as short as a year and a half. We believe that there is a role here for government to help with accelerated depreciation or first year write offs or straight grants to enable business to overcome this obstacle in the interests of wider sustainability. EECA's grants to businesses to help with improvements in energy efficiency are an example of this.
There is also a role for government is providing R&D support at the early stage where a technology is not well enough developed for industry to invest much. It should not replace business investment in R&D but can start the ball rolling and get enough done to establish a business case for business to invest further. An example might be the relatively new field of bio char to store carbon in soils, although I know there is some company investment happening now too.
In particular, it is the role of government to hunt out and destroy subsidies that encourage unsustainable practices. The renewable energy industry has never had government assistance even approaching what oil and gas exploration has had. Conventional chemical based farming has had decades of government support, to the point where it doesn't need it now, but the emerging organic framing industry has had very tiny amounts as it goes through the same early establishment phase.
The dairy industry is currently heavily subsidised, though they claim overseas not to be, because the subsidies are hidden.
From next year the forestry industry will have to face the cost NZ is liable for under the Kyoto protocol for deforestation, with just a little help in the form of credits to offset this cost. Farming will face no costs under Kyoto for its very substantial greenhouse emissions until 2013, after the first commitment period is over. The public, in the form of the taxpayer, will cover the full cost of the growth in farming emissions since 1990 for five years. They also pay nothing for their use of water, which is huge in the dairy industry, and nothing for their water pollution from animal and fertiliser runoff.
The Greens are still campaigning to get this modified.
So where does the wood processing industry stand in this move to a sustainable society?
In my view it is potentially a huge help to our sustainability and has a very bright future in a carbon constrained world provided it responds quickly enough to the environmental challenges it does still face.
I'm going to take a full life cycle approach because you can't consider the processing without also considering the raw material and its impacts.
Trees as a crop have some real environmental advantages. They store far more carbon than grasslands, they need little or no fertiliser and water to grow, they grow well on land not suitable for cropping, and they offer some flexibility in harvesting times.
Wood products can provide a longer term carbon store, and can be designed so at the end of their useful life they can be recycled or used for energy. I've been excited to visit the work being done at Canterbury University on pre-stressed laminated wood as a replacement for steel and concrete, both much higher carbon emitting processes, in large buildings.
Wood processing has the opportunity to provide all its own energy from its lower grade raw material. It doesn't now, because electricity and fossil fuels are still cheap, but when price favours the use of wood instead you have an advantage over other industries, particularly steel and cement.
You even have an option for all the wastes in your industry, from the forest floor and skid site to the lumber mill, to be sold as fuel, providing a second income stream, as long as you can collect them economically, and I know some good work is being done on that.
I believe there will eventually be whole forests planted for energy — boiler fuel to replace coal, co-generation fuel for industries needing heat and power, domestic heating fuel, liquid biofuels.
We know that the warmest homes in the country are those heated with wood burners. Many of them contribute unacceptably to air pollution and have to be phased out, but there are several models that easily meet the clean air standard — in fact I recently purchased one that does five times better than the standard, even when it heats water as well. Wearing my other hat, I've been working to get domestic wood burners and industrial use of wood wastes recognised as a significant contribution to the Energy Efficiency Strategy.
That Strategy has a target of providing an extra 7 PJ of consumer energy from forest residues by 2025 — that's nearly nine times what it is now.
A project I've particularly worked for is a pilot to convert 30 coal fired school boilers to wood pellets or chip over the next year. Cleaning up the air in schools and demonstrating to children and their families the potential for wood as a renewable fuel could have huge educational benefits. I hope the experience we gain from that pilot will enable us to roll it out more widely.
Then there is the vexed question of biofuels. Much of the biofuel produced in the world to date is totally unsustainable and unethical. US corn to ethanol often doesn't even gain any energy in the process — it uses more fossil fuel to make the ethanol than you get in the product. That's disguised by the subsidies from the US government. It is also contributing to the lowest stocks of food grain in the world for many years. The buffer between survival and starvation for many people in the developing countries has become very slim indeed. Tortilla prices n Mexico have doubled, and that's just the start. If it comes to a competition in the market between the stomachs of the very poor and the cars of the rich countries the poor don't stand a chance.
The other unsustainable biofuel is biodiesel from palm oil in south East Asia where old growth forests, the last refuge of many endangered species like the orang-utan are being clear felled to plant palms. The orang-utan can't win a market competition with cars either, and the result will be many extinctions.
That's' why the Greens have insisted on the clause in the Biofuel bill, currently before the House, to require biofuels admitted into NZ to meet sustainability criteria, including no food grains and no clearing of important biodiversity. It will be easier when the world reaches some agreement on an international certification scheme for sustainable biofuels. That work has begun but is a long way from completion.
Why is this of interest to the wood industry? Well, in NZ we may have the potential to produce really sustainable biofuels if we can get the cellulosic ethanol process to work at commercial scale and to deliver real net energy. That would require specially grown wood crops — they are currently working with willow — but it has to be good for the wood industry generally to have all these diverse products and markets.
So is it all good news for the wood industry as the sustainable face of the future? Unfortunately not quite yet. There are some real environmental problems that prevent your industry from being seen as a shining light of sustainability but I believe they can be solved, and that to realise the potential of your industry they must be solved.
The industry suffers criticism for being a monoculture with all the ecological disadvantages and vulnerabilities of this. I'm a firm believer in more species diversity for timber, particularly species that can be used for building and even fence posts without toxic treatment. The net is closing on a number of toxic timber treatments and it would be smart to widen your options on this one and plant some species that don't need it. More diversity in forests would also improve their biodiversity values.
There is doubt about how soils will stand up after three generations of trees; how much work has the industry done on this, including the acidification story, and can you demonstrate there isn't a problem — or is the plan just to harvest the final crop and walk away?
Logging practices are improving but still leave a lot to be desired in some places where I've seen riparian strips damaged, trash left in stream beds, and major erosion problems from clear felling on steep land.
Logging trucks come in for their share of public objection, especially where roads are narrow or congested. Anything you can do to get more of your logs on rail or coastal shipping where they aren't already will help with this.
There is a relatively small gap as far as I understand it between the forestry industry and the environmental movement on proposed standards for sustainable forest certification through the FSC. I've been encouraging both sides to try to reach agreement so you have a flag to wave internationally and at home. The Greens are running a big campaign against the import of illegally and unsustainably logged timbers such as kwila for decking and outdoor furniture. We should be using only sustainably certified timbers here, so we can require that of our imports too.
Processing industries have issues with water and air discharges which don't at this stage meet the conditions I outlined — mimicking nature by leaving water in as good a state as you find it, redesigning the process so that air emissions are not harmful and wastes of all kinds naturally degrade or are useful to others. These issues are the reason communities often don't want your large plants in their midst, despite the jobs and economic development they bring. There is a win-win for your industry and the community if those issues can be overcome with smart design and the concept of "cleaner production".
I believe the prize for your industry is worth working for. The opportunities for the wood industry in a carbon constrained world where environmental performance is taken more and more seriously by the main stream are so great that scrutinising your processes from planting the seedling to processing it into its final product and disposing of any waste and mimicking nature in designing your processes will be well worth while.
Subscribe to email newsletters
