Robert McKellar
Part 1 of this series on political risk management and the Canadian forest products sector speaks to the problem with assuming political risk only applies to multinationals with operations in volatile and dangerous places. If we are aware of political risk, we can still use a tacit approach where it works, but we will know when and how political risk is a significant factor and will have the option of ramping up political risk management capabilities accordingly. With that preamble, two broad political dynamics affecting the Canadian forest products sector are discussed—the ‘China-West rivalry’ and ‘climate change confusion’—in preparation for the question—is it time for Canadian forest products companies to develop an explicit sense of political risk and how to manage it? Part 2 of this series continues with the political dynamics of ‘Canada-US trade friction’ and ‘emerging market challenges’ and concludes with what a political risk management capability could mean in practice.
…If the answer is Yes, what then? A political risk management capability generally includes: senior management and board buy-in; a strong concept of political risk in the company’s context; a corporate intelligence process that identifies relevant trends and dynamics and derived potential implications (or risks); straightforward but practical guidelines for how managers could apply political risk intelligence; and a seat of coordination and institutional learnings. These elements could manifest in a number of different organisational forms… but there are four things that probably would not work in most cases: treating political risk management as something different from what managers already do; creating a political risk department and expecting it to somehow lead to effective political risk management; managing political risk only within enterprise risk management functions and processes; and creating a few policy documents and then ticking a box beside “political risk managed”.
GERMANY — The State of Baden-Württemberg faces potential liability of up to Euro 500 million following a precedent-setting ruling by the Stuttgart Court of Appeals. On August 15, 2024, the court held the state liable for violating EU competition laws through its centralized sale of timber, in a decision that marks the first time a German court has established civil liability in a major cartel case without a prior decision from an antitrust authority. The case centers on Baden-Württemberg’s decades-long practice of bundling and jointly selling timber from state, municipal, and private forests. The court found that this arrangement restricted competition and led to inflated timber prices, ultimately harming sawmills that depended on the state as a dominant supplier. The next phase of the legal battle will focus on determining the exact compensation owed to the sawmills. The ruling is open to appeal. …Its broader implications, however, may ripple across the European Union.
DUBLIN, Ireland — The Climate Change Advisory Council (CCAC) has urged the government to adopt more sustainable construction methods to reduce sector emissions immediately. Publishing its annual review of Ireland’s industry and waste sectors, the CCAC emphasised the need for increased timber use and modern construction methods (MMC). It also called for whole-life carbon assessments and targets in planning public buildings to meet sectoral targets. …Marie Donnelly, Chair, CCAC, said: “One of the primary sources of industrial emissions is cement production. …“Updates to the building regulations that support increased use of timber in construction should be consolidated with the establishment of a high-level cross-departmental task force to prepare an overarching national strategy for the development and expansion of all aspects of the timber industry in Ireland. …48% to 50% of new-build homes in Ireland are timber-framed, compared to less than 25% in 2021. 
Tiny plastic particles reach the leaves and needles of trees via the roots and disrupt photosynthesis, researchers at federal technology institute ETH Zurich have discovered. After absorbing plastic particles, the trees no longer used part of the sunlight’s energy for photosynthesis, but dissipated it as heat. This is a typical stress reaction of trees, wrote the Swiss National Science Foundation (SNSF). For their experiment, the researchers grew 200 young trees and added different concentrations of tiny plastic particles, known as nanoplastics, to the water. After just a few weeks, the researchers discovered one to two milligrams of nanoplastics per gram of plant material in the roots. In the trunk and in the leaves and needles, it was around ten to a hundred times less. Measurements showed that the effectiveness of photosynthesis in the torminalis trees fell by a third within two weeks and by a tenth in the spruce within four weeks. 
FSC celebrates the entry into force of the European Union’s Nature Restoration Law, a major step forward in the effort to restore and protect Europe’s forests and natural ecosystems. Effective from 18 August 2024, the Nature Restoration Law sets forth ambitious goals to restore degraded ecosystems throughout Europe. “The implementation of the Nature Restoration Law marks a significant development in Europe’s commitment to environmental stewardship. It represents a significant move towards addressing habitat loss, strengthening ecosystems, and fostering long-term environmental resilience,” says Anand Punja, Chief Engagement and Partnerships Officer at FSC International. This landmark legislation is designed to enhance biodiversity, mitigate climate change, and ensure the preservation of Europe’s natural landscapes for future generations. The legislation aligns closely with FSC’s mission to uphold responsible forest management, and balances ecological integrity with social and economic benefits.
Ottawa, Ont.-based carbon reduction company Invert Inc., and Merida, YU-based carbon project developer, The Earth Lab, have announced the successful first issuance of more than 380,000 high-quality, North American Improved Forest Management (IFM) Climate Reserve Tonnes (CRT) to market. Invert said in a press release the issuance marks a significant milestone in the organizations’ projects in the Yucatan Peninsula and their shared strategy to develop high-quality carbon projects to combat climate change, promote sustainable development, and empower local communities. Bonos Laguna Síjil Noh-Há — a collaborative endeavor between Invert, Earth Lab, and the local ejido community — has been verified under the Climate Action Reserve’s Mexico Forest Protocol version 3.0. This verification confirms the project’s impact in preserving and enhancing forest carbon stocks through sustainable management practices.
BRAZIL — Extreme weather has made 2023 virtually certain to be the warmest year on record, signaling unprecedented climate and biodiversity crises. Brazil, the world’s most biodiverse country, with two hotspots and complex social and economic layers, has experienced escalating environmental degradation over the past years. Alarming rates of native vegetation loss, wildfires, severe and prolonged droughts, and heatwaves have adversely impacted several Brazilian ecosystems and societies. Despite the country’s decisive role in global carbon neutrality, bridging the gap between Brazil’s discourse on the international stage and its concrete actions at home remains a significant challenge. This correspondence underscores the urgent imperative for national engagement and commitment to halt and mitigate these crises.
