Companies Worldwide Are Risking Billions By Ignoring Deforestation
A new report from CDP has found that 87% of companies identify deforestation as a financial risk and 32% are already experiencing impacts from those risks, but only 13% of companies are making any effort to mitigate the risks of deforestation, a decision which could end up costing billions.
Published by CDP (formerly the Carbon Disclosure Project) this week, the new report —From risk to revenue: The investment opportunity in addressing corporate deforestation — is based on survey responses from 201 companies asked by CDP on behalf of investors. It is important to note that CDP asked 1,103 companies, which means less than a quarter of those asked took the time to respond, highlighting the lack of engagement and accountability when it comes to deforestation. According to CDP, such lack of transparency masks corporate risk which, in turn, is handed straight on to the investor. Despite growing awareness of the risks of deforestation, CDP concluded that “disclosure on forests is still not the norm.”
“With deforestation accounting for around 15% of global emissions and putting almost a trillion dollars of listed equity turnover at risk, protecting forests has become a pre-requisite for both a stable climate and a stable economy,” explained Morgan Gillespy, Director, Forests at CDP.
“The six companies on 2017’s Forests A List are showing real leadership with board-level oversight of the issue and commitments such as zero deforestation, but investors require much greater levels of measurement and reporting from companies around the world on their deforestation risk. We call on investors to ramp up their engagement and demand greater levels of disclosure from companies.”
Up to $941 billion worth of turnover in publicly listed companies is dependent on commodities linked to deforestation — such as soy, palm oil, cattle, and timber. Of the 201 companies which provided data analyzed in this report, 87% recognize at least one risk tied to deforestation, while 32% of companies that responded are already experiencing impacts on their business from deforestation risks.
No surprise, then, that investors are increasingly wary of the risks from deforestation — especially when coupled with the lack of information available to investors on the potential risks being faced by their investments. More than 36% of those companies surveyed fail to assign their boards with responsibility for addressing deforestation, while only 13% have made time-bound comprehensive commitments to zero (net) deforestation, failing to follow in the footsteps of big-name companies who have made such commitments, such as McDonald’s and Asia Pulp & Paper.
Further, the risks of deforestation are inherently tied into climate change risks and have the potential to end up as stranded assets before too long. A total of 33% of carbon emissions could be cut in half by halting and reversing deforestation, which is currently responsible for 15% of global greenhouse gas emissions.
There are a few companies taking action to address deforestation, however. CDP works with forests scoring partner South Pole Group to assess every company disclosing to the forest program on their own efforts to eliminate commodity-driven deforestation from their value chains. CDP awarded A’s as part of their A List 2017 to the following — Brambles, L’Oréal, SCA, Tetra Pak, Unilever, and UPM-Kymmene.
Unilever is the only company to score A’s across all four forest-risk commodities — as well as on water and climate change — proving that climate action and action to mitigate deforestation need not impact financial profitability.
“The 2017 CDP Global Forest Report clearly illustrates the scale and systemic nature of market risks related to deforestation and unsustainable land use,” added Florian Reber, Senior Manager, Land Use & Sustainable Supply Chains at South Pole Group said.
“It is encouraging to see the leadership of those companies that are moving towards deforestation-free supply chains, and investors asking for forest-risk related information. Together with public policy and market incentives, those voluntary actions are important enablers of the necessary transition towards climate-resilient and low-carbon growth. At South Pole Group, we also see a clear need for equipping mainstream investment professionals with innovative tools to integrate financial risks related to deforestation – as well as the benefits of good practices – into the financial valuation of assets and liabilities.”
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