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Tasmania’s forest industry is experiencing its worst downturn in a decade, prompting a much-needed restructuring. While analysts focus on factors like exchange rates, the key lesson really has to do with corporate scale.

The larger the company the greater the impact, for good and bad. Given this equation, large companies need to be held to much tougher accountability, transparency and sustainability requirements than they currently are.

The losses

These are tough times for the Tasmanian forest industry. Almost everywhere one confronts a sea of red ink, failed investments, lost contracts and redundancies. The losses do not discriminate. The private and public sectors are affected as are large and small companies and cities and rural areas.

The once-mighty Gunns Ltd’s recent end-of-year accounts illustrate the problem. At the end of August, the company announced a $904M loss for 2011-12. This followed a loss of $356M the year before. The red ink has forced the company to announce that its much-vaunted Bell Bay pulp mill is no longer “probable to proceed”. They’ve expensed the $255M spent to date instead of treating it as an investment.

Gunns is not the only company doing it tough. Forestry Tasmania, a government business enterprise (GBE), is also in trouble. Designed to pay a divided to the state, the company has incurred two years of losses following several years of anaemic returns. Its poor performance has been independently reviewed by URS Forestry, which recommends that the GBE be downsized and restructured to more narrowly focus on commercial operations.

URS predicts that Forestry Tasmania — either in its current or restructured form — will continue to incur losses of around $25 million per annum for the next five years.

The reasons

Given the scale of the crisis, a small industry has emerged to explain it. Simplistic mono-causal accounts abound. Business pundits predictably sheet blame home to “greenies” and the market campaigns conducted in Japan and elsewhere against Gunns, Ta Ann and Forestry Tasmania.

More thoughtful analysts recognise that market campaigns, while effective, are not the sole reason. Structural factors are at work. These include a historically high Australian dollar; a decline in per capita paper demand thanks to computerised workplaces; the superiority of plantation over native hardwood woodchips coupled with a significant increase in plantation woodchip volumes; and the growth of third-party, Forest Stewardship Council, certification.

There can be much debate over the relative importance of these factors. But they have collectively placed a greater load on Tasmania’s forestry model than it can bear.

There is an instructive ecological political economic lesson about corporate size and scale that needs to be teased out and understood if the state is to avoid lurching from one unsustainable industry structure to another.

The issue of scale

The issue of corporate scale and impact has recently reappeared on the global agenda. Appalled by the ramifications of the collapse of Lehman Brothers that signalled the existence of a global financial crisis, governments suddenly recognise that some businesses were “too big to fail”.

News Corporation’s phone-hacking scandal in the UK has highlighted the power of big media and its no-holds barred ethics.

Closer to home, many Australians are concerned that mining companies are too big to be responsible. The machinations of mining magnates Gina Rinehart and Clive Palmer have been the subject of much recent public comment.

To these concerns can be added protests over Seafish Tasmania’s decision to bring a giant super trawler, the FK Margiris, from Europe to fish Australian waters.

And then there are the pressures confronting farmers from Australia’s supermarket duopoly.

In short, corporate scale and size matter: the larger the scale, the greater the power and impact – for good and bad.

Read the full article, with full links, The Conversation, today, here

Fred Gale is   Senior Lecturer at University of Tasmania. Disclosure Statement: Fred Gale is a member of FSC International and FSC Australia and has undertaken consulting work for both organisations in the past.

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• Dr Phill Pullinger: Environment group welcomed release of study into the carbon stored in Tasmania’s forests

Environment Tasmania, the state’s peak environment body, welcomed the release of the final Tasmanian Forest Carbon Study report.

“We all know that Tasmania’s native forests clean our air, safeguard our water and are home to our unique animals and plants,” said Dr Phill Pullinger, Director of Environment Tasmania. 

“It is valuable to have new information on the amount of carbon stored in our forests and the impacts that different land use decisions could have on those carbon stores into the future” said Dr Phill Pullinger. 

This new independent report provide detailed estimates of the amount of carbon stored in our forests under a number of different scenarios and outlines the potential economic benefits that could flow from protecting the forests, and their carbon stores, from degradation. 

“The forest carbon study shows that protecting Tasmania’s native forests can benefit the climate and our economy. The results show that the greatest emission reductions can be achieved by protecting native forests from all degrading activities, followed by protecting forests and reducing harvesting rates in remaining wood production areas. We look forward to reviewing the report, its methodologies, underlying data and findings in more detail” said Dr Pullinger.

Environment Tasmania commends the professional approach that has been taken by the independent consultants CO2 Australia, the members of the Steering Committee and the Tasmanian Government who commissioned this worthy report.

• Vica Bayley: Forest Carbon study welcomed and volunteer contribution recognised

The Wilderness Society today welcomed the Tasmanian Government’s Forest Carbon Study and its findings that the carbon stores in Tasmania’s public forests are both significant and that their protection would deliver immediate benefits in the fight against climate change and potential economic benefit.

The Society’s Tasmanian Campaign Manager Vica Bayley also paid tribute to the hundreds of volunteers who had participated in its citizen science project that undertook thousands of on-the-ground measurements in threatened forests around the state. The data from this project was fed into the Forest Carbon Study and helped to inform the findings.

“This study is a welcome look into the carbon value in our forests and how various management options will influence carbon storage and Tasmania’s contribution to the fight against climate change,” said Mr Bayley.

“It reinforces previous science that protecting forests from logging will secure important carbon stores and can present important economic opportunities for Tasmania.”

“This report can help the Tasmanian Government understand emerging opportunities and the policy settings required to fully realise these opportunities for the Tasmanian community. Simple policy changes can significantly increase financial benefits, over and above those outlined in the report.”

The Wilderness Society’s Community Carbon Accounting Project has been running for over three years and measured the carbon storage in coupes scheduled for logging in forest areas around the state, including the Tarkine, Blue Tier, Upper Florentine and the Styx Valley.

“Not only did this citizen science project get hundreds of people out into the forests to experience them first hand, but it collected important raw data that was processed, interpreted and ultimately published in a scientific journal,” said Mr Bayley.

“It is fantastic that volunteer work has helped inform the Forest Carbon Study and a testament to citizen science and the importance of volunteers working to improve our knowledge of key issues and helping to address them.”

• Christine Milne: Forest carbon analysis shows forests worth more standing up

Australia’s first comprehensive analysis of Tasmania’s entire forest carbon storage capacity, launched today by Tasmanian Greens Minister for Climate Change Cassy O’Connor, shows that our forests are worth more standing up than logged.

The new research shows that as a baseline, Tasmania’s forests could hold between 3 and 4.4 billion tonnes of C02 equivalent, and reducing the timber harvesting rates would significantly increase the rate of carbon sequestration.

“For years now the Greens have argued that the forests are worth more standing than they are being sold through a loss on global markets.” Senator Christine Milne said.

“The value of our forests for marking our biodiversity and as carbon storage cannot be underestimated.

“The figure of $280 million is at best an approximation of the value of the forests because no one can anticipate now how quickly and strongly the carbon price will rise in coming years as the world increases its level of ambition in addressing global warming. As yet Australia has not committed to article 3.4 on forest management under the Kyoto Protocol, but it is likely this will occur in coming years.

“Protecting Tasmania’s forests is not only good for the environment, it will be of increasing value in years to come.