Forestry governance: What you can model – and what you can’t

Kaingaroa Tipu is building a digital twin of its roughly 220,000-hectare forest estate, with the ambition of eventually modelling individual trees. This aim is to model the whole value chain across the estate.

Chair Jon Hartley says the same confidence is often harder to achieve with government policy. He says forestry businesses can work on the risks within their control and prepare for and mitigate events they cannot influence.

“We can get on and do everything that we can be in control of,” he says. “There are external things we can’t be in control of – whether that’s the Strait of Hormuz or whether China invades Taiwan.”

Hartley places domestic policy uncertainty between the risks businesses can control and global events they cannot.  

Hartley points to the time and money forestry businesses spent preparing for log-trading licensing that was withdrawn three years later. He also points to uncertainty around the Emissions Trading Scheme and long-term climate policy, and delays around government partnering and funding decisions.

“These are risks imposed on businesses without understanding the risk they impose.”

Forestry’s long horizons can magnify the cost of uncertainty. A decision about genetics, species or planting may not be fully tested until harvest decades later.

“Given it takes you, let’s say, 35 years to go from the genetics through to harvest, it takes intergenerational time to rotate and move things around.” 

Drawing on LIDAR, artificial intelligence and years of operational information, Kaingaroa Tipu has spent more than five years developing the knowledge needed to eventually progress its digital twin.

“We’re constantly harvesting data as much as we harvest trees.”

Hartley says the digital twin aims to bring decisions around harvesting, customer sales, species and genetic deployment into one end-to-end decision support and resource allocation system.

“For example, you can look at it to develop harvest plans. Whether you choose that plan is a different matter,” he says. “It’s linked to the forest valuation, it’s linked to the harvest optimisation, planting and nutrition. The goal is an integrated tool that still requires critical thinking and judgement.

“Ultimately, you could well end up in a situation where your logging crews are in a remote-control room.”

However, Hartley is wary of getting ahead of the technology, saying: “I think it has the potential to become a significant game changer, dependent upon how you’re able to use it.

“We’re running a 24/7 business, 50 weeks of the year. While we progress this development, keeping business as usual going is fundamental.”

Kaingaroa’s scale makes investment in the digital twin possible.  

“The continuum of scale alters the conversation dramatically,” he says. “There’s a real gap between hearing about it and starting to do it.”

Nature is the business

Kaingaroa Tipu’s vision is to be ‘a global leader growing sustainable fibre solutions for future generations.  Its purpose is: ‘Together we grow a more sustainable future for New Zealand and beyond’.

“We’re in the fibre business,” Hartley says. 

“Our purpose speaks clearly to being a leader, to being responsible for growing in the holistic sense. That means being aware of the consequences as much as the outcome of your aspirations.

“Our owners and our landowners require us to be good stewards.

“The intersection of your owners and landowners, their aspirations and values and purpose underpins how we run our business.”

“We are nothing without the land that we’re on,” he says. “The land is owned by iwi and we have a kaitiaki responsibility for that land. The owners invested in a plantation forestry business on that land.”

Nature is not separated into its own part of the board agenda.

“The reality is that our business is in the natural resource sector. It’s in the nature sector. So, it doesn’t demand a separate column or a separate topic. We don’t think or operate in humanly convenient silos. Nature is integrated into our conversation.”

Land, water, biodiversity, communities and iwi run through discussions about strategy, ownership, partnerships, risk appetite, reputation and climate reporting.

“Our board sees the integrated whole, so that everything is connected and our board diversity brings different views for consideration.”

Kaingaroa Tipu has taken the United Nations Sustainable Development Goals and recast them as what it calls Restorative Development Goals.

“What we’re doing should always be tested against whether we’re leaving the place better than we found it. It’s a never-ending mahi. You never reach the end because this is an intergenerational conversation.” 

Risk on the ground

Biosecurity is one of the highest risks on Kaingaroa Tipu’s register.

The company has dealt with a nematode worm incursion that ultimately came to nothing, but tested whether people knew what to do and how to do it.

Kaingaroa Tipu also operates its own network of microclimate stations because weather stations around the estate boundaries do not provide enough information about conditions within the forest.

Water quality and nutrient runoff are monitored. Drones are used to find blockages in high-country creeks before they cause larger problems.

Hartley travelled to the East Coast after Cyclone Gabrielle.

“I couldn’t believe how awful it was.”

He says Kaingaroa Tipu’s topography, soils, river systems and more contained estate give it a different risk profile from many East Coast forests.

“If we have a blockage in a high-country creek, we can find that with a drone and we can go and clear it before it causes any problems.” 

Beyond the boardroom

Every Kaingaroa Tipu director attends four field trips a year.

“You learn more on a field trip and in the cabin of the ute and the dinner afterwards than you necessarily do in the boardroom.”

The board combines owner representatives and independent directors. An iwi observer attends, along with shareholder observers and analysts.

“We work in an open and cooperative manner that allows everybody to be heard and respects the owners’ statements as much as the individual directors’ statements.

“Some board chairs wouldn’t put up with it, but I think it’s fine. It’s taken quite a bit of intentional work. It doesn’t just happen.”

The board receives regular briefings from technical and strategic specialists and has created room for discussion about risks that may play out over years or decades. This means accepting conversations may not lead to any immediate decisions.

“When you’ve got a great board who want to contribute, that’s what you do. You facilitate those types of things.”

Hartley says these conversations depend on the relationship between the chair and chief executive.

“If there wasn’t a good relationship between myself and the CEO, we wouldn’t be having these conversations. It continually reinforces that having the right leader in your organisation at the right time is fundamental.

“We’re there at a point in time, harvesting what has been given to us as an endowment and working to pass on a legacy that’s better for the next generation.”

Mō tātou, ā, mō kā uri ā muri ake nei – for us and our children after us