Conservation Forever Case Interview | Case Studies - Interview Preparation PDF Download

Client goal

Our client is Conservation Forever (CF), a conservation-focused nongovernmental organization (NGO). CF has asked McKinsey to help prioritize restoration and conservation efforts.

Situation description

The degradation of nature is a major cause of the twin global climate and biodiversity crises. That is why McKinsey commits pro bono resources to nature conservation worldwide.

Our client, CF, was formed in 2011 at the start of the United Nations Decade on Biodiversity.

CF aims to permanently conserve large areas of land and ocean over the next decade. Land-use planning in these natural areas will be conducted in such a way that it considers biodiversity outcomes as a priority. This will require restoring natural habitats and ecosystems.

Biodiversity, or the variety of life on Earth at the genetic, species, or ecosystem level, has enormous intrinsic value, but is also essential to human well-being and our economies. It provides essential ecosystem services, such as clean air, food security, and fresh water. Investments in biodiversity can therefore contribute directly to reducing poverty and safeguarding sustainable development.

However, biodiversity is in severe decline, putting its intrinsic value and its ecosystem services to indigenous peoples, local communities, and economies worldwide at risk.

Large conservation projects at the scale required to reverse this loss entail significant upfront financing, complex legal frameworks, and extensive coordination between all parties involved, such as civil society, government, NGOs, and donors.

Due to the complexity and magnitude of these projects, conservation efforts must be carefully selected early on. CF shortlisted three candidate geographies: the coastal areas of Peru, the steppe grasslands of Ukraine, and the mountain forests of Uganda.

McKinsey study

As part of a pro bono study, McKinsey has offered to help CF prioritize these geographies and the activities it should focus on.

Helpful hints

• Write down important information.
• Feel free to ask the interviewer to explain anything that is not clear to you.
• Remember that calculators are not allowed - you may want to write out your calculations on paper during the interview.

Q.1. What factors could the team consider when choosing one of the three specific geographies on which to focus the conservation efforts?

When considering establishing a protected area, there are several factors to consider, including:
(i) Local economic development: Assess the benefits of the protected area to residents and identify areas with potential for self-sufficient community development and job creation, such as ecotourism or small-scale sustainable fisheries.
(ii) Biodiversity gains: Identify endangered species or ecosystems in the region and evaluate if protecting specific areas would allow merging with other already protected areas, such as reducing fragmentation to create a large-scale habitat for wildlife.
(iii) Climate impact: Identify which ecosystems could sequester and avoid releasing the most carbon.
(iv) Costs: Evaluate the opportunity costs of alternative developments in the area and determine the initial one-time costs and ongoing operational costs for setting up and maintaining the protected area such as land acquisition and infrastructure development.

(v) Other risks: Assess potential risks associated with working in that area, including political, financial, and operational risks, and determine how these might reduce the feasibility of the project and the likelihood of its success. Potential sources of risk could include government instability, low political support for conservation, low availability of public and private funding sources for conservation, and limited community support for existing conservation efforts.

Q.2. The CF and McKinsey team decided to focus their initial efforts on protecting the coastal areas of Peru. Coastal vegetation provides critical habitats for multiple species, protects shorelines, and sequesters carbon at significant levels.

The coastline is also beautiful and relatively unspoiled, making ecotourism an interesting opportunity. Ecotourism is different from other kinds of tourism in that it is designed to attract visitors who want to experience a natural environment with the assurance that their visit will not damage ecosystems or biodiversity.

There are currently five communities that have suitable tourism infrastructure, and each one welcomes 100,000 visitors each year. By protecting that area and setting up ecotourism infrastructure to welcome visitors, the team came up with the following estimates:

• annual visitor numbers to the main coastal villages will increase 20 percent over the next five years
• average length of stay in the local communities will double from two to four days
• the average amount visitors will spend in the communities is not expected to change and will remain stable at $100 per person per day

How much additional revenue will come from ecotourism in these five communities five years from now?

(i) The five villages currently attract 500,000 visitors annually, generating $100 million in revenue. This revenue is calculated based on 100,000 visitors per village, with each visitor staying for two days at a cost of $100 per day.
(ii) Over the next five years, visitor numbers are expected to increase by 120%, bringing the total number of visitors to 600,000. With an extended length of stay of four days per visitor, the new annual revenue is estimated to be $240 million.
(iii) The expected additional revenue from ecotourism is $140 million ($240 million - $100 million), representing a 140% increase from the current revenue.

To summarize, the answer considers the current and projected number of visitors, their length of stay, and the associated revenue generated from ecotourism in five villages.

Q.3. The director of CF likes these initial projections, but is not convinced that the assumptions are realistic. They tell the team, “According to your model, there are three levers we need to focus on to generate revenue from ecotourism in Peru: number of visitors, length of stay, and spending amount. What are your best ideas for how to maximize each lever? And how about some ideas outside of the constraints of this model?”

Your team is meeting in ten minutes to generate ideas in preparation for a workshop with leaders from several coastal communities, and you are jotting down some notes.

What ideas do you have to generate revenue linked to ecotourism?

The proposed strategies for increasing revenue through ecotourism are as follows:

(i) Ideas to lengthen stays: To encourage visitors to stay longer, the proposal suggests providing package deals that incentivize longer stays. For example, offering a five-day, four-night package deal that includes meals. Another strategy is to work with local communities and travel agencies to promote week-long stays and run promotions to visit all five villages.

(ii) Ideas to encourage visitors to spend more per visit: The proposal recommends focusing on experience tourism, such as local cooking classes using sustainably harvested products, educational tours of coastal mangroves and coral restoration projects. Providing unique and exclusive experiences like safe interaction with wildlife, diving, and surfing can also encourage visitors to spend more. Donations can also be requested.

(iii) Ideas to increase the number of visitors: The proposal suggests advertising in places visitors can easily travel from, such as nearby South American countries. Promotions during the off-season can also help increase the number of visitors.

(iv) Other ideas: The proposal suggests offering sponsorships for specific areas and providing regular updates for sponsors on development across the years. Creating different offerings that are relevant year-round can also help avoid large seasonal variations in revenue. One such strategy is to export value-added products such as regional crafts or local foods.

Q.4. CF has decided to launch ecotourism pilots in a small number of communities in Peru to test some of the team’s revenue generation hypotheses. The team mapped out how ten of the largest coastal communities compared in terms of number of expected new visitors and therefore determined the amount of investment required in addition to the return on investments.

Looking at this information, which communities in Peru should CF prioritize for the pilots and why?

(i) The chart shows communities ranked by their expected increase in visitors and return on investment (ROI).

(ii) Urgent investment is required for communities with high expected increase in visitors to support tourism demands and prevent environmental degradation.

(iii) Communities with high ROI are expected to capture more value per dollar invested, making better use of resources.

(iv) Prioritization can be done by looking for communities with both high expected increase in visitors and healthy ROI.

(v) Larger communities like C and F will deliver a positive impact to more people.

(vi) Communities facing difficulties managing visitor flow, even if visitors are not expected to increase, like in community J, also have an urgent need for financial and management support.

(vii) Proximity to other priority communities could play a role in prioritization to allow for bundled interventions, spreading out investment costs, impacting more people, and accelerating overall implementation