Companies need to do more to avoid deforestation, study finds

Many companies that deal in commodities such as beef, timber, palm oil and soy beans know that the production of these items can come at the cost of forests. But while they may have identified deforestation as a potential problem for their businesses, many still have work to do in sussing out the points in the supply chains that could do the most damage, a new report by the group Carbon Disclosure Project (CDP) says.

“Supply chains are like rows of dominoes: [I]f unsustainable commodities enter the top of a supply chain, the effects will cascade throughout,” said Katie McCoy, the head of forests at CDP, on the organization’s website. “Failing to address deforestation will have knock-on reputational impacts, manifesting themselves as consumer boycotts, community opposition, and increased regulatory scrutiny. Business growth is at risk.”

The Carbon Disclosure Project compiles environmental data from governments and companies. They recently released a study looking at how companies’ handle the risk of deforestation in their supply chains, which could lead to issues such as habitat loss, greenhouse gas emissions, and conflict.

The CDP’s annual forest report is one of several recent global efforts to give private companies the power to control their own supply chains and ferret out potential links that may be exacerbating deforestation. In November the Responsible Timber Exchange was launched in Brazil to allow buyers of wood products a more complete picture of where their purchases were coming from.

CDP received responses of 187 companies that replied by mid-summer 2016 to their requests for information. Among those responding were agricultural heavy hitters such as Archer Daniel Midlands and Cargill, as well as Nestlé and Starbucks.

Members of the CDP team then set out to elucidate whether companies are working to stop deforestation in making the products that they ultimately sell – and if so, what steps they are taking.

They hope their analysis influences decision makers at these companies. “CDP has established the most comprehensive platform for purchasing organizations to easily engage with suppliers on reducing the risks associated with deforestation,” says the organization’s website.

Most – 77 percent – of the companies said that they had at least one risk in their supply chains related to deforestation. CDP figured that almost a quarter of at-risk companies’ revenues could evaporate because of deforestation, worth $906 billion. And poor management of deforestation risks could have exponential impacts on the investment capital they receive. The report states that 365 investors – and their $22 trillion in assets – wanted to see how the corporations that they’re investing in are dealing with deforestation issues.

“We have seen an increasing level of investor concern regarding deforestation, corporate commitment to address the issue, and political momentum at the international level and within some jurisdictions,” the report’s authors write.

However, CDP also found that nearly 60 percent of the respondents weren’t looking at how deforestation risks might affect their supply stocks beyond the short term. Along with a limited supply of guaranteed sustainable supplies such as those certified by groups like the Forestry Stewardship Council, convoluted tracking systems and poor enforcement of government policies and laws were cited as other barriers to creating a sustainable supply chain.

In addition to a longer-term strategy, they said that top-level leadership must take a bigger role in girding their supply chains.

“Manufacturers and retailers that work with their suppliers report far greater levels of traceability and are significantly more likely to identify supply chain-related opportunities,” write the authors.

According to the data, 92 percent of companies find more opportunities combat deforestation from their supply changes, compared to 73 percent of companies without “board-level responsibility for deforestation risk.”

CDP also counsels more collaboration between companies and supply-side producers. “We believe that, to meet the challenge posed by deforestation, companies should: Ask for transparency and disclosure from suppliers,” reads the report.

To provide a real-world example of what’s involved in investing more oversight in a company’s supply chain, CDP examined the practices of JBS, the world’s largest meat producer, in Brazil, and found evidence of the sorts of relationships CDP advocates.

“The JBS vision of the future of livestock farming in Brazil is about increasing productivity, improving the quality of the raw material, and addressing the sustainability of cattle farms. It’s a very integrated view,” said Márcio Nappo in a summary of the report. Nappo directs the company’s corporate sustainability from São Paulo.

“We verify, every single day, that our suppliers are in compliance,” Nappo added. In total, 70,000 ranchers in Brazil supply beef and other meat products to JBS.

The company worked with Brazilian civil society to create the “New Field” program in 2013, which aims to increase productivity and cut the demand for new pasture lands, while allowing them to remain in compliance with Brazil’s Forest Code.

The company reports results benefitting both the environment and the ranchers’ bottom lines: In the three years since the program started, ranchers now save money by getting their cattle to market faster and increased profit margins on their land. They also claim that the approach has halved methane emissions.

“JBS can be a ‘gamechanger’ in several issues across the beef value chain,” Nappo said. “We can influence the entire supply chain over time to prevent deforestation, one of the most important sources of greenhouse emissions in Brazil.”

Now CDP is trying to get other companies to follow JBS’s lead.

Citations:

• CDP. (2016). Revenue at risk: Why addressing deforestation is critical to business success, (December).

Banner image of pasture in Brazil by Rhett A. Butler