Carbon market will need to have excessive integrity, says Natura director
Denise Hills, sustainability director at Natura, bets on a new environment for carbon credits
“We are a collective to increasingly increase Brazil’s contribution to creating a high integrity carbon credits market”, says Denise Hills, global director of sustainability &Co Latin America at Natura, who this year was one of the winners of the SDG Pioneers Brazil 2022 award and SDG Pioneer, a tribute from the United Nations Pact to outstanding leaders in promoting the UN SDGs (Sustainable Development Goals).
Denise is a strategist looking for solutions, such as formatting a carbon credit market that takes into account the native forest and its exploitation as a source of sustainable income from products with commercial value for the agroindustry. Like the cosmetics based on products from nature, of which it is a part. At Natura, 20% of total raw material purchases come from the Amazon. The estimate is that the company closes 2022 with a net revenue close to R$ 38 billion.
Natura is part of a collective of companies and institutions that are working together to find solutions to structure the voluntary carbon market in the country, such as Amaggi and Raízen, on the Forbes Agro100 2022 list, in addition to Bayer, Rabobank, Auren, B3, BNDES, among others. According to an estimate by the North American consultancy McKinsey, in September of this year, of the “80 main companies operating in Brazil, 77% have already published some emission reduction goal”.
The consultancy claims that, considering only the current commitments of the mapped companies, the demand for credit in the voluntary carbon market in Brazil should reach 7 million tons of CO2eq in 2030, which would represent approximately US$ 200 million (CO2eq, from equivalent, it means that other gases are computed, such as methane).
But there is a growth potential that points to a carbon market of around US$ 1.5 billion to US$ 6 billion. “If we only talk about solutions based on nature – adding our main challenges in agriculture and forestry – in terms of the national Amazonian territory with the potential to receive alignment of incentives, where it would start to receive for this great environmental service provided, we are talking about a very important market for Brazil. It is impossible to solve the climate crisis without the Amazon”, says Denise. “Our main mission is to unlock this potential, bringing together several actors. Where are the problems? The challenges are many and we don’t have a silver bullet.”
In search of carbon solutions
It is estimated that, today, Brazil realizes only 1% of its carbon credit generation potential, but it can capture a large share of the global generation market, precisely from nature-based solutions. For Denise, it makes sense for companies and organizations to act collectively to accelerate and catalyze this movement with greater force, whether to generate knowledge, tropicalize methods or create a credit scenario that is effective for Brazil and that can capture funds not only in the country, but in the world. “Developing a high integrity market is, in fact, one of the main instruments to attract flows and constancy of flows to this market in Brazil”, she says. “Bring benefits, such as protecting biodiversity and paying for environmental services provided by biomes.”
Felipe Santos da Rosa_Embrapa
Forest carbon credit needs social as well as economic ballast
According to the executive, the big challenge today is how much alignment of economic incentives can be generated for the development of a bioeconomy, for example, standing forests. Including that it values social aspects of the communities that carry out this protection. In the case of Natura, the protection of its own value chain. And, above all, opposing an economy with high emissions, based on the use of fossil fuels or that devastates systems that balance the gas ecosystem that gives rise to all life. “We need to develop an economy that is capable of generating development, without a negative impact on the system itself. And in that, credits and pricing are essential,” she says.
The idea of the group of companies in the collective, which has McKinsey as a catalyst, is now, after COP27, the supreme body of the United Nations Framework Convention on Climate Change, to prepare a first version of new mechanisms for this market and draw a next wave of stocks. “The idea is to be a great accelerator, if you could say that there is an accelerator in this context. Perhaps a more modern incubator of some experiences in a more collective and scalable way”, explains Denise. “But this is a marathon, it’s not a journey of months, it’s a marathon that will probably take a lot longer than a year.”
But the course is already defined, since Brazil is one of the greatest potential for the origination of natural climate solutions, mainly due to the forest theme. However, Brazil is not alone. Indonesia is also a case of forests that can strongly enter the voluntary carbon credit market. “It is interesting how countries that have a very powerful forest, in general, have solutions linked to nature that are born from an evolution of agriculture”, says Denise. “Solutions are born from the forest and the development of agriculture combined with the forest. And through the global forest conservation pact, Brazil is the first scale economy to adopt more sustainable agricultural practices.”
Denise reinforces that the diverse potential for capturing carbon and, therefore, issuing high impact credits in added value, with an important cost of scale, the forest is at the center of the wheel. In other words, between reforestation and conservation, the salvation may be forest management. “If I manage the Amazon forest in some places, not transforming it into agriculture, I can boost income generation and add to the payment of environmental services in the issuance of credit”, she says.
Carbon market and SAFs
His theory is in line with what has become common sense, especially among rural producers, that the country does not need illegal deforestation to increase its areas of conventional or regenerative agriculture, since there are around 60 million hectares of areas of degraded pastures and what part of it can be used for planting crops. And even the areas that could be deforested within the law, which are currently around 90 million hectares – much of it within rural properties – could be included in voluntary carbon credit projects.
SAF area monitored by nature, with palm cultivation
For her, this is part of the challenge package. “One of the idiosyncrasies in Brazil is that those who preserved more than they should, now pay the bill because they cannot capture benefits”, she says. In the case, for example, of a producer who could legally deforest 20% of his area, but deforested less than that. “Actually, this is based on the old economic logic, in which the standing forest is worth less than the lying one. This is one more reason why it is necessary to develop various mechanisms, because a farm with more reserve than the law requires could function as a clearinghouse.
Currently, for this type of asset, Brazil is able to issue credits in very small amounts. Farms like this could provide an environmental service, which is remunerated, including for being protected by law. “Probably, many producers would not need a carbon credit to finance a harvest, because there are multiple mechanisms for this. But, definitely, for the forest, credit is an important mechanism.”
In the case of Natura, which buys products managed in the forest, the order is conservation and restoration. And of course, look for value. For example, among the açaí trees, when identifying, through traditional knowledge, a molecule that can have a cosmetic effect, the company seeks to manage and develop it with the community. “So, I’m going to thicken the forest, create economic activity, boosting the system”, says Denise. One of the examples of managed agroforestry systems is that of CAMTA (Cooperativa Agrícola Mista de Tomé-Açu), in Pará, founded by Japanese immigrants, who are originally producers of cocoa, vegetables and rice, and who expanded their activities through the management of the forest.
With Natura, the cooperative has systems implemented seven years ago and four years ago, in addition to the first experience 10 years ago. “The cooperative decides what to do with the forest”, says Denise. “What we do is advance resources, working on research into which species in association could coexist well, for example, with palm for the production of oil, which is one of the raw materials used by the industry and which is being produced in the Amazon. ”
According to data from the 2017 Agricultural Census, the most recent, Brazil has around 490,000 agricultural establishments in which there are AFS (agroforestry systems) occupying an area of 13.8 million hectares. Denise says that in the SAFs, which is the combined use of native species, Natura’s demand is for products such as andiroba, açaí, cocoa, among others, the carbon credit market represents an important step towards Brazil’s potential to offset 1 .9 gigatons of carbon equivalent per year, which is roughly equivalent to around 70% of the emissions of the entire European Union, and recovering around 70 million hectares of native forest.
“Credits are financing mechanisms for regeneration, restoration, creation of economic value for a standing forest economy”, she says. “We have examples of SAFs on land close to forests that have been devastated and that, in addition to agriculture, they are a good combination of economic production, with the vocation of keeping the forest standing. Even using biodiversity itself for regeneration”. In this environment, there is a modern economy, with new technologies also emerging in land management and use, so that there is no incompatibility between preservation and development. “We need to align the incentives and guarantee that the mechanisms can, more and more, take this regenerative model as a normal practice”, she says. “The expectation is that we can generate around R$ 16 billion to 26 billion per year in impact, in the added value of the economy, including jobs that are generated, whether by certification, by application of technology, education of locals, among others. .”