State of Green Business
A clear-cut case for business action on deforestation
Reprinted from GreenBuzz, a free weekly newsletter. Subscribe here.
The issue of corporate deforestation is on the rise, taking root in supply chains in a surprising range of sectors. And the risks to companies for inaction are rising, too.
This is hardly a new issue — "Save a tree" and "Plant a tree" having been rallying cries since the earliest days of the modern environmental movement. Nearly every continent has seen swaths of its forests disappear over the past several decades, and converting forests — from cooler boreal regions to warmer tropical ones — to farming, cities and other purposes has been part of human development for centuries, even millennia.
More recently, climate and biodiversity issues have given new life to old concerns. As forests, which serve as massive carbon sinks, are cut, burned or otherwise cleared, they release the carbon dioxide they naturally store. Deforestation and forest degradation are responsible for around 15 percent of all greenhouse gas emissions, according to WWF.
Along the way, we lose the biodiversity forest ecosystems provide, roiling the chain of life that often leads to benefits for humans, such as flood protection, pollination, pest control and new foods and medicines.
Concern over deforestation has led activists to aim their campaigns at companies within commodity supply chains. Their targets include upstream producers and manufacturers of everything from food and beverages, to pulp and paper, to ingredients that are embedded in thousands of products — along with the retailers that sell these products and the banks that finance them.
Moreover, emerging technologies — drones, satellites, data analysis — are enabling governments and watchdog activists to hone in on companies that are sourcing from high-deforestation areas to monitor their progress, or lack thereof. In response, many firms are committing to deforestation-free supply chains.
But according to two recent studies, when it comes to deforestation risks, companies' efforts simply aren't cutting it.
- New research by Forest Trends found that just 484 of the 865 companies identified with the most forest-risk exposure have committed to sourcing commodities sustainably, and just 72 of those companies — a mere 8 percent — have committed to achieving either "zero deforestation" or "zero net deforestation" for at least one forest-risk commodity.
- A new CDP study, focusing on 306 high-impact companies that reported to the organization in 2018, found that disclosure and transparency on deforestation from the largest brands in the world is poor. Seventy percent failed to report critical forest-related information requested by shareholders or purchasing organizations, and more than 350 companies consistently failed to report over the last three years. It concluded: "Despite global commitments and mounting public pressure, companies are still unaware of deforestation risk."
CDP found that companies that disclosed to either shareholders or purchasing organizations did so on one or more of four critical forest risk commodities: cattle; soy; palm oil; or timber and derivative products. Its survey included 104 companies within the food, beverage and agriculture sectors; 89 of the world’s largest manufacturers; and more than 65 companies participating in the retail, services and materials sectors.
These companies reported a cumulative $30.4 billion in potential losses due to the impacts of deforestation, said CDP, adding, "As the vast majority of companies (75 percent) did not report the potential financial impact, the figure is likely to be much greater."
The logjam seems to be primarily in the supply chain for so-called "soft commodities" — cocoa, coffee, corn, cotton, fruit, livestock, palm oil, soybeans, sugar, wheat and other things that are grown, not mined, and are traded on futures and options exchanges.
For years, forest land cleared to grow soy, palm and other crops has been a major concern, primarily in the Amazon region of South America but also in large swaths of Asia. Last year, for example, a Greenpeace report alleged major household food brands were part of supply chains responsible for destroying tens of thousands of hectares of orangutan habitat in just two years, largely to make way for palm oil plantations. Palm oil is a vital ingredient in many processed foods and toiletries.
Some leading brands are stepping up, thanks to a growing arsenal of online tools. A group of apparel companies including Eileen Fisher, H&M, Kering and Marks & Spencer worked with the Canadian nonprofit Canopy to fashion an online map of ancient and endangered forests around the world. Canopy launched ForestMapper in November to enable businesses to track their supply chains and avoid buying materials from endangered forests. Global Forest Watch offers its own online tool to track forest clearance and reforestation occurrences around the world.
Meanwhile, H&M’s pledge to stop using wood pulp from ancient or endangered forests for making fiber has been emulated by others in its sector, including Guess, Levi Strauss, Ralph Lauren, Stella McCartney and VF Corp.
Other sectors are seeding their own initiatives to combat deforestation. For example, last year Apple revealed a plan to plant and preserve 27,000 acres of mangrove forest in Colombia. Earlier, in 2015, the electronics giant announced projects to buy forests in the United States and China to conserve and implement sustainable logging and management plans. Unilever, for its part, has supported the development of forest mapping and monitoring technology while pressing its vast network of suppliers to disclose how and where they source raw materials, particularly palm oil.
But it will take a lot more effort by a lot more companies to effectively cut down deforestation. In some jurisdictions, it will mean pushing to reform government policies that incent forest devastation. In the case of soy and palm oil, for example, global demand has been artificially increased by policies that subsidize the use of these crops as feedstocks to produce biofuels (PDF).
The pressure for companies to take action will only grow. As Justin Adams, who heads the Tropical Forest Alliance 2020 at the World Economic Forum, wrote for GreenBiz earlier this year: "I see an unstoppable movement toward sustainability. People demand it. Governments respond with new regulations. Markets respond by insisting on verified products. And pockets of bad practice progressively are squeezed out."