McKinsey’s ‘bad influence’ over rainforest nations around the world
April 7, 2011
A new Greenpeace report entitled 'Bad Influence' has revealed how advice given by global consultancy firm McKinsey to national governments could lead to an increase in the destructive logging it is intended to prevent.
As two former McKinsey executives face accusations of insider trading in the US, the report raises further questions about the consultancy giant, examining the damaging influence of McKinsey’s advice on rainforest nations’ forest protection plans. McKinsey is the market leader in advising national governments on Reducing Emissions from Deforestation and Degradation (REDD+) programmes, yet its advice has played a key role in distorting this process to a point where donor money could be used to subsidise the expansion of the logging industry.
“Greenpeace’s report shows the destructive and perverse effects that the McKinsey approach will have when applied to REDD+. Key problems with McKinsey’s REDD + work included that it does not lead to a reduction of deforestation, provides an incentive for rainforest governments to over estimate future levels of deforestation, omits important costs and barely acknowledges governance issues in rainforest countries”, said Sarah Shoraka, Greenpeace Forest Campaigner.
As an example Guyana’s plan, written with input from McKinsey, allows logging to increase to 20 times its current rate  and the Democratic Republic of Congo (DRC) plan proposes at least an additional 10 million hectares given as logging concessions.
The basis for Greenpeace’s report comes from a new study done by University College London’s prestigious Energy Institute. The study shows the inherent flaws of the Marginal carbon Abatement Cost (MAC) curve, used across the world to rank the cost effectiveness of carbon abatement measures including measures to reduce emissions from deforestation and forest degradation (REDD+).
The Greenpeace report also shows how McKinsey’s approach offers an incentive to governments to artificially increase predicted deforestation rates so that later ‘reductions’ can secure more compensation. Such inflated projections will ultimately come at the expense of taxpayers from donor countries and the environment.
McKinsey’s cost curve overestimates the benefits of the logging industry and underplays or entirely ignores the costs of biodiversity loss and social upheaval. In some cases reports on which McKinsey advised make recommendations based on wholly inadequate data. In the DRC study, for example, a table is given showing confidence in individual emissions factors. The table reveals that illegal logging and fuel wood factors have been reached despite there being ‘no exact data available’. It is unclear what assumptions have been made or analysis done in the absence of this data .
Rainforest nations are currently working to develop proposals for REDD schemes with $3.5 billion[i] of funding agreed at Copenhagen. McKinsey received $300,000 for its work in the DRC paid for by a Multi-Donor Trust Fund overseen by the World Bank and funded by the UK, France, Belgium, Germany, Luxembourg and the EU.[ii] Norway directly funded McKinsey’s work in Indonesia .[iii]
If properly administered, the fund should radically reduce emissions from deforestation, which currently account for up to a fifth of global greenhouse gas emissions.
For more information, interviews contact:
Sarah Shoraka, Greenpeace Forest Campaigner + 44 20 7865 8216
Natalia Truchi, Greenpeace Communications Manager + 31 6 24940977
Pictures available from Greenpeace International Picture Desk – firstname.lastname@example.org
Mob. +31 (0) 629 00 1152
Bad Influence report can be downloaded http://www.greenpeace.org.uk/sites/files/gpuk/Greenpeace_BadInfluence_Report_LOWRES.pdf
UCL Energy Institute report can be downloaded
Greenpeace’s McKinsey-inspired infographics are available print-ready, or as artwork toolkits for you to dismantle, adapt and use as your own, in part or in full:
Notes for Editors
Reducing Emissions from Deforestation and Degradation programmes – or REDD – are global schemes intended to provide tropical forest nations with financial incentives not to destroy or degrade their forests. The concept of REDD has in some forums been subsequently expanded to also allow for financial support for restoration, reforestation and afforestation activities (i.e. REDD+).
The 1st meeting of international negotiators after the REDD + framework agreement at Cancun is currently taking place at the UN intersessional meeting, 3-8 April, negotiating the
implementation of safeguards to protect biodiversity and uphold indigenous peoples’ rights.
Bad Influence shows that MK-inspired plans may be in violation of these safeguards. It remains to be seen how fit for purpose this advice has been or indeed how rainforest nations will reconcile McKinsey’s inspired plans with public and donor expectations.
The next meeting and workshop of the REDD+ Partnership will be held in Bangkok, Thailand 10-11 April 2011. http://reddpluspartnership.org/en/
[ii] Republique Democratique du Congo: Fonds Commun Multibailleurs pour le Renforcement de la Gouvernance Forestière (2010) Rapport Final, August, pp.1, 9, 11, 14.
[iii] Mogstad, Per (2010) Email to Greenpeace from Norwegian Ministry of Foreign Affairs in response to freedom of information request, 26 November, 2010.