WWF’s Living Forests report research suggests that global demand for timber could triple by 2050. This startling statistic reflects the steadily growing demand for solid wood and paper products in emerging markets as population and economic growth takes place as well as increasing the use of wood as a feedstock for bioenergy.

Yet the world already has lost half of its forests, and continues to lose an area the size of England every year. Deforestation is driven by a range of factors, particularly increased use of land for agriculture — the global population will surpass 9 billion by 2050, and will require expanding food supplies by 70 percent. At the same time, climate change will reduce crop yields in many countries, which means food, fiber and fuel will compete intensively for limited land and water resources in the future, putting increased pressure on forests.

Businesses that depend on timber and timber-based products in the U.K. are not immune to these changes. Many timber industry players in the U.K. have expressed serious concerns over the future of domestic softwood supply in the next 10 to 30 years, potentially threatening the viability of U.K. sawmills and with the implication of increased reliance on imported timber. But international supplies of timber are subject to considerable forces of change as well.

The real costs of timber production

While using forests for timber production has yielded considerable income for many countries, it can generate severe economic, environmental and social costs if not managed in a sustainable way. This is increasingly recognized by governments everywhere, resulting in regulatory responses.

While forest clearance generates a short-term one-off cash windfall from the timber sold, it undermines prospects for ongoing forest-based livelihoods, with significant impacts for those who rely on forests (around 1 billion people globally). If forests are managed poorly, it reduces the scope for income from forest products such as nuts and medicinal plants as well as tourism and pharmaceuticals. Genetic resources obtained from forests, such as medicines, alone have been valued at $79 billion per year.

We at WWF think the full value of forests to global economies and businesses needs to be recognized if we are to ensure their sustainable future. As forest cover is lost, so are ecosystem services — the benefits people obtain from the ecosystems that forests provide, which are difficult to value in quantitative terms but are very large. These include carbon sequestration and storage; protection against floods, landslides, avalanches, ocean surges and desertification; provision of clean water, medicines, crops and fish; space for recreation and exercise; and places of cultural and religious value.

So unsustainable forest management and forest loss can have substantial and widespread impacts on a country’s economy. In Kenya, it has been estimated that deforestation deprived the country’s economy of the equivalent to $68 million in 2010 alone, far outstripping the revenue from forestry and logging each year.

Protecting forests to tackle climate change

Widespread deforestation has significant implications at the global scale for tackling climate change: Forests represent the best investment option for large-scale carbon storage, so protecting existing forest resources and managing their use for production sustainably presents relatively cheap carbon mitigation, compared with more innovative and technically challenging alternatives, or the cost of restoring forests after clearance or degradation.

This is why the international community is working towards mechanisms such as REDD+, to facilitate global investment in maintaining forests for carbon sequestration and storage, and which should create stronger incentives for sustainable forest management.

For all these reasons there is a strong economic case for sustainable forest management at the national and global level. Both Brazil and Indonesia, countries with the highest net loss of forest in the 1990s, significantly reduced their rates of loss (PDF) in the first decade of this century.

According to the International Tropical Timber Organization’s latest survey, there has been continuing progress towards sustainable forest management in tropical forests from 2005 to 2010, including new forest laws and regulations and increasing interest in certification and forest law compliance, stimulated particularly by demands from importing countries for legality-verified products.

But while many countries have seen improvements in forest management in the past decade, progress varies considerably. Some countries, such as Cambodia, Democratic Republic of Congo, Nigeria and Papua New Guinea, have faced major challenges; others, including Brazil, Gabon, Guyana, Malaysia and Peru, have made significant progress.

In response to growing awareness of the economic case for sustainable forestry, new trade legislation, procurement policies and buyer preferences for legality-verified wood are being developed and enforced in major markets such as the U.S., the EU and Japan.

Wider moves to promote sustainability also are being developed, including through increased demands for integrated reporting by business on environmental and social performance; by an increased focus on the need for assessment of business impacts on natural capital; and by increased calls for transparency on procurement policies, including through WWF-U.K.’s new timber scorecard to be published later this year.

Industry groups also are committing to action for a better future for forests. The Consumer Goods Forum’s 400 members committed to achieving zero net deforestation in their supply chains by 2020, and under the "Soft Commodities Compact" part of the Banking Environment Initiative, nine banks have committed to play their part in supporting this goal.

What does it mean for businesses?

Improving forest management, along with society’s growing expectations of the need for business to operate in a way that is sustainable and in the long-term interests of society, means that both regulatory risks and reputational risks are growing in relation to unsustainable timber.

As the push for certification and clear sustainability credentials grows, it is possible that the supply of sustainably certified timber may not keep pace, given the limited resources and capacity that many source countries face, which also represents a potential supply risk for companies who want now or in the future to purchase only certified product in order to meet regulatory or reputational requirements.

This points to the need for forward-looking companies to be thinking about how their business future may be affected if they trade forest products: establishing how they can secure future sources of supply of sustainable timber; take the steps to establish relationships with sustainable or potentially sustainable suppliers; and work with them to maintain or achieve the required standards. Doing so now positions them well to manage these future risks and maintain their market position in a changing global environment.

This article first appeared at 2degrees.