The challenge

The Landing the real restoration demand, a previous P4F project, found approximately 1.3 million hectares in restoration-related lawsuits in Brazil, of which 800,000 hectares are judicial cases.

It also identified the barriers that stop producers from meeting their legal obligations and creating this pipeline: they lack the knowledge and funding fore restoration, which leads to fear of conducting the process and attempts at legally reverting the decision. Many cases take up to 10 years to resolve.

With this context, the same project designed a business model that could aggregate producers with legal liabilities, provide technical assistance, and link large corporations that could fund at least part of the implementation efforts and bring costs down. This new model would have a company at the centre that would articulate the interests of all these stakeholders, craft equitable contract models, and manage the implementation of the restoration projects, while receiving a percentage of restoration funding.

This new business model was called the H2A Hub, and a new P4F project was put in place to conduct the implementation of restoration projects to test and refine this business model, assessing its efficiency to achieve the goal of unlocking restoration demand. This was to be done with 11 producers pre-procured in the state of São Paulo during the previous project, alongside an already engaged corporate funder.

The project

The project had three main objectives: piloting the business model by conducting the first restoration cases; structuring the hub’s operational structure by developing its processes, roles, and governance; and preparing a more detailed business plan and financial model that included expansion plans for other Brazilian states.

The project team was formed from different organizations, but mainly Imaflora, a well-regarded NGO in the sustainability space in Brazil; Ludovino Lopes Advogados, a law with special knowledge on environmental law; Flexus, an economic consultancy, and André Lima Socioambiental, a law firm specialising in environmental law. In addition, the project team have a network of restoration companies’ partners and a large corporation in the food and land use space that wishes to fund restoration projects.

Eleven producers received the hub’s support to conduct restoration projects in their properties, which also supports their legal regularisation efforts.

P4F support

P4F supported the project to achieve its three main objectives by funding 75% of it’s the activity costs, and co-creating a structured milestone-based management system to deliver each objective, used by H2A to develop the project.

P4F also supported the hub’s business development by participating in workshops, procurement processes and discussing the business model and developments with H2A’s leadership.

Impact

Economic and social value: The project achieved its main goal of solidifying a business model that overcomes the barriers to the scaling of legal restoration projects, having proven to exist a value proposition to all stakeholders. Producers were finally able to conduct their legal restoration obligations due to the cost reduction brought by the funding, supporting their legal regularization. Restoration executors found more demand as producers who would not pay the full price for restoration themselves became their clients. Finally, the corporation was able to deploy its ESG-related restoration commitments more efficiently by articulating only with H2A in place of having to coordinate many different restoration companies and producers by themselves.

It was also able to craft an operation capable of delivering that business model, as processes and roles were not only modelled, but also tested against the reality of the restoration pilots and refined. The business plan also was crafted and iterated with the new financial information discovered throughout the pilot process, leading to a clear pathway to profitability. Finally, H2A is planning its expansion, looking to start moving to Minas Gerais state soon after the project’s end.

Environmental value: H2A has not only created a viable model that could unlock the legal restoration pipeline in Brazil and unload the environmental legal system, but also restored approximately 280 ha of land in the Mata Atlântica. Although this is relatively small in comparison to needed efforts to fight climate change, this a huge benchmark for the sector in Brazil, where companies in the restoration market usually deal with very small areas due to prohibitive costs.

Extending impact

This Project sets a benchmark for an innovative model of combining different actors to break sectoral barriers with a profitable business. Making corporations, technicians and producers work together is a difficult task as many interests must be accounted for. The project’s success made it capable of attracting other philanthropic funders and the model is now preparing its expansion for the state of Minas Gerais.