What actions are companies taking to remove deforestation from commodity supply chains? That’s the question that a new report tries to answer as it focuses on 306 companies that reported a high forest impact risk. Almost a third (29%) of reporting companies do not even include forest-related issues in their risk assessments — but nearly all that do (92%) identify substantial risks.
Just over a quarter of global forest loss is due to deforestation through permanent land use change to produce agricultural commodities, including beef, soy, palm oil, and wood fiber. The disclosures, which took place in 2018, are revealed in a CDP title, “The Money Trees: The Role of Corporate Action in the Fight against Deforestation.”
The report includes:
- 104 companies within the food, beverage, and agriculture sectors
- 89 of the world’s largest manufacturers
- More than 65 companies participating in the retail, services and
Of these, 202 companies are publicly listed, worth in excess of $4 trillion. This report focuses on a critical assessment of corporate awareness of deforestation risk and the action these companies are taking to remove deforestation from commodity supply chains.
Why Deforestation is an Essential Component of Climate Action
The recent Intergovernmental Panel on Climate Change (IPCC) report highlights that action to reduce emissions must be immediate. In less than 12 years, emissions need to be 45% below 2010 levels, and science shows emissions need to be net zero by 2050 if warming is to be limited to 1.5 degrees Celsius.
Deforestation is the second largest source of anthropogenic greenhouse gas emissions on the planet. Protecting forests is not only part of the solution to stop rising greenhouse gas emissions, but as forests also remove CO2 from the atmosphere, halting deforestation is critical to reducing emissions in line with a 1.5 degrees Celsius world. Tropical forests are more greatly impacted by these commodities, as they cause more than 60% of the forest loss in Latin America and Southeast Asia, and this is a usually a permanent loss.
Research also shows that if deforestation continues in a “business as usual” manner, we could have phased out the use of fossil fuels in 2015 and still see 1.5 or potentially 2 degrees warming relative to the pre-industrial era by 2100.
The Economic Impacts of Deforestation Risk
Companies that understand the risk due to deforestation report $30.4 billion in potential losses due to the impacts of deforestation.
As the vast majority of companies (75%) did not report the potential financial impact, the figure of $30.4 billion is likely to be much greater. Typically, 15% of revenue for the companies analyzed is dependent on commodities driving deforestation.
What about the 350 or so companies that have consistently failed to report over the last 3 years?
Partially, failure to report may have been a result of companies’ lack of awareness of deforestation risk. If that is, indeed, so, such an oblivious position comes despite global commitments and mounting public pressure.
A quarter (24%) of reporting companies have yet to begin removing deforestation from identified commodities within supply chains. Further analysis identifies an execution gap. While 90% of retailers and manufacturers have begun implementation, more than a quarter (28%) of suppliers have yet to do so – perhaps preventing companies from achieving public commitments.
A further 11% do not report revenue linked to a commodity, including Associated British Foods, The Kraft Heinz Company, and Avon. But not all is lost. Recognizing that forest degradation is a pressing issue requiring urgent action, Alexandra Palt, chief corporate responsibility officer for L’Oréal, states,
“In 2018, thanks to CDP’s risk assessment framework, we have continued to inform our palm strategy by reinforcing the evaluation of the potential financial impacts of risks identified along our supply chains. Beyond the sustainable certification of 100% of our sources and our efforts to trace back our derivatives, a key pillar of our strategy is working with our suppliers, including the use of CDP data to further engage them, mitigate risks, and build resilience.”
There is a significant opportunity for companies willing to lead the way. 76 companies reported business opportunities valued at $26.8 billion, more than half (55%) of which are highly likely or virtually certain to transpire.
The Power of Individuals to Demand Climate Action
By 2018, at least 450 companies had made a public commitment to remove deforestation from supply chains by 2020. As this deadline approaches, it is clear that many of these companies will not meet this critical ambition.
While the private sector cannot solve this problem alone, research suggests that companies that produce, source, and market products containing critical commodities have also not done enough to make meaningful progress. As a result, they are facing greater scrutiny by investors and consumers as the impact of deforestation becomes ever more apparent.
Social movements are increasing in frequency and urgency. In the first half of 2019 alone, there were large numbers of demonstrations globally calling for governments to act to protect the earth from impending climate disaster. The school strikes for climate action saw more than 1.4 million young people in 2,233 cities and towns in 128 countries from Australia, Argentina to India, the UK, and the US walk out of school and demonstrate for action on climate change.
Governments and firms in 28 countries spanning Colombia, Indonesia, Norway, Pakistan, South Africa, and the US have been sued over the climate crisis with 1,300 legal actions brought since 1990. Forests are central in developing solutions both to mitigate and adapt to climate change. These terrestrial ecosystems have already removed nearly one third of human-produced carbon dioxide emissions from the atmosphere.
Through sustainable management, forests could remove much more.
Policymakers are taking heed. In the UK, a climate emergency was called. In the United States, hundreds of Mayors called for the introduction of a carbon tax, the passage of ambitious Green New Deal climate action, and allowance for fossil fuel companies to be held liable for climate-related costs and damages. Meanwhile, the Asian Development Bank earmarked $80 billion for climate change impacts in Asia.
Today, deforestation continues, ecosystems are deteriorating more rapidly than ever, and climate change is still progressing at pace. Transformative change is needed if we are to successfully halt negative trends in nature, ecosystem functions, and the projected impacts of increasing climate and land-use change. Forests play a central role in the solution.
Avoiding deforestation could help provide over one-third of the cost-effective climate mitigation necessary and will help to secure a long-term stable economy. Business as usual on forests is no longer an option. Action on deforestation needs to be renewed and gaps in awareness and execution addressed. Leading companies must drive greater change at scale to secure the future for their customers, employees, and society.
Companies not engaged on this topic can no longer sit by passively. Science dictates we have 12 years to save the forests. Now is the time to rise up as individuals and persuade companies by an active and overt consumerism to switch from a laser focus on profits to a global view of protecting our forests.
The example set by the Sunrise movement to hold persons in power accountable is one that we — of all ages — must follow.
CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts.
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