Reforestation: What indicators should you include in your 2024 ESG reports?

Recent research conducted by UBS has revealed a significant trend: over a span of 10 years, an investment portfolio in companies excelling in environmental, social, and governance (ESG) factors outperformed those with lower ESG ratings by 30%, translating to an additional annual return of 1.6%. 

This study emphasizes the increasing importance of integrating sustainable practices across all ESG domains, including one particularly pertinent aspect: ecosystem restoration and biodiversity. This approach, involving tree planting and the restoration of degraded areas, stands as a major response to current global challenges.

Linking to McKinsey's recent analysis of 31 solutions to mitigate climate change, ecosystem restoration has been identified as one of the most mature and widely adopted solutions. Before defining key indicators and embarking on a reforestation project, it is crucial to adhere to five best practices:

1. Ensure planted species enhance biodiversity by promoting variety and opting for species suited to the local environment.

2. Acquire knowledge of the local ecosystem by selecting local species essential for reconstituting the local ecosystem.

3. Ensure precise soil analysis is conducted before planting to determine specific planting needs.

4. Ensure project monitoring persists post-planting to assess its success.

5. Engage stakeholders and integrate local communities by collaborating with them for a participatory approach.

It's crucial to select relevant and meaningful indicators to effectively evaluate the efficacy of any reforestation project. It's essential to shift from a quantity-focused approach to one emphasizing quality, necessitating a change in perspective where the goal isn't merely planting trees but restoring ecosystems.

Emphasis should be placed on the balance between the structure and function of planted trees, thus promoting genuine ecological restoration. These indicators should encompass the entire ecosystem, combining social, environmental (soil, water, nature), and biodiversity aspects. To be engaging and easily communicable, these indicators should be understandable to all.

These criteria may lead to the use of different indicators, ranging from less to more complex, corresponding to the maturity level of your CSR strategy. To facilitate communication, we suggest employing two levels of indicators:

Level 1 Indicators: These are simple yet impactful, easily communicable and understood by a wide audience, including overall reforestation goal, number of species introduced, hectares to be restored, and specific species planted.

Level 2 Indicators: More complex, providing an in-depth understanding of project quality, encompassing post-planting tree diversity, soil quality index, biodiversity index, and regeneration trajectory compared to a reference or natural area.

While recognizing the need for simple indicators for communication purposes, it's paramount to employ additional, more detailed metrics to comprehensively understand the success of the restoration project.