Companies risk almost $80 BN without action to tackle deforestation in their supply chains, study says

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New research from the Accountability Framework initiative (AFi) and CDP shows that companies cannot afford any more delay in tackling deforestation across supply chains, with forest-related risks identified at almost $80 billion by 211 disclosing companies.

The report calls for rapid company action at a time when more than 100 world leaders and 30 of the world’s largest financial institutions pledged at COP26 to halt and reverse deforestation and destruction of other ecosystems, which account for at least 11% of annual GHG emissions created by human activity.

This report, ‘From commitments to action at scale: critical steps to achieve deforestation free supply chains’ assesses company disclosures to understand how they are working to mitigate risks within their supply chain, using data from CDP’s 2021 forests questionnaire, which is aligned with the AFi’s Core Principles and the Task Force on Climate-related Financial Disclosures (TCFD).

It includes disclosures from 675 companies that produce or source at least one of the seven commodities responsible for most commodity-related deforestation: timber products (491 companies disclosing), palm oil (233), cattle products (126), soy (154), rubber (51), cocoa (54) and coffee (27).

The report found that disclosing companies are taking some positive steps:

  • 76% of companies (512) report having a traceability system for at least one commodity
  • Two-thirds of companies (444) report that they are engaging with direct suppliers to manage and mitigate deforestation risks.
  • Half of all traders, manufacturers or retailers (194/390) disclose that they are working with their indirect suppliers to manage and mitigate deforestation risks

However, the report found that companies lack clear targets and milestones that are vital in driving corporate systems towards long-term sustainable sourcing of commodities.

Jeff Milder, Director, Global Policy & Coalitions at Rainforest Alliance (also Director of the Accountability Framework initiative) commented on the findings: “As this report highlights, attention around eliminating commodity-driven deforestation has rightly shifted beyond commitments to focus on action.

“While we find major gaps in areas such as traceability, supplier engagement, and monitoring, the progress achieved by leading companies shows us that transforming business to address deforestation risk is well within reach.

“The bar is not set too high: by scaling up the adoption of known solutions we can go far toward reaching it on an industry-wide basis.”

According to the report, current company action is not going far enough, as companies must increase scale (actions must be expanded across the whole company), scope (companies must act across all commodities, regions, and ecosystems), and rigor (implementation must be driving measurable impact) needed to halt deforestation.

  • Only 36% of disclosing companies (245/675) have public company-wide no-deforestation or no-conversion policies. Only 13% of companies have commitments to no-deforestation/no-conversion that are well-aligned with good practice.
  • Only 26% of companies report having a monitoring system to assess compliance with no-deforestation/no-conversion policies.
  • 38% of companies (257) report having no information about origins for at least half of their commodity volumes, and 28% (191) report having no traceability system for at least one commodity that they source.
  • Just 46 companies (7%) report that at least 90% of one of their commodities is certified by a certification scheme that provides assurance of no-deforestation/no-conversion.
  • Only 19 companies have a target of sourcing 100% no-deforestation commodities through the use of certification and report making progress towards this target or having achieved it.
  • Only a quarter of companies report providing technical or financial assistance to direct suppliers (25%) or smallholders (22%), and a third report having processes to manage supplier non-compliance.

The report calls for rapid progress from companies and further engagement throughout supply chains to scale and strengthen action not to end deforestation and eliminate land sector emissions in line with Science-Based Targets and meet nature and biodiversity goals.

More information about the report findings, along with the full report, is available on the CDP website.