Companies urged to heed call for deforestation-free supply chain

ABOUT 90 percent of companies recognise opportunities in adopting more sustainable practices for sourcing of key commodities, according to a report from the CDP, an international NGO behind sustainable economies.

Launched at the Asia Pacific Rainforest Summit held in Sydney, Australia from 11-12 November, the report, Deforestation-free supply chains: From commitments to action, presents the business case for disclosing exposure to forest-risk commodities.

A record number of companies have promised to veer away from deforestation in meeting commodity supply chain requirements, a significant first step toward making sure their business is safe from climate-related risks. But despite the growing corporate awareness as evidenced by deforestation pledges from leading businesses such as Wilmar International Limited of the palm oil sector, CDP’s report admits there is much to be done in order to translate these promises into action.

In the last decade alone, 13 million hectares of forest were lost annually. If the goal is to limit global warming to 2°C, companies need to act now to break the link amongst commodities, deforestation and climate change.

A significant contributor to global deforestation is the strong demand for cattle products, palm oil, timber products, and soy. A great number of companies across different sectors ranging from food to fuel, use these four critical agricultural commodities in their supply chains.  Meanwhile, deforestation plays a key role in climate change. It accounts for 10 percent to 15 percent of greenhouse gas emissions worldwide, equivalent to the emissions from the entire transport sector.

The CDP report studies disclosures from 152 companies worldwide. These companies, including Asia Pulp & Paper, Cargill, and Unilever, represent more than US$3 trillion in market capitalization. They have responded to the investor call for transparency and accountability on deforestation and forest-risk commodities. 

Highlights from the report

- Companies are inconsistent in recognising risks and taking action.  Across both commodities and supply chains, businesses are inconsistent in assessing and acting on risks and opportunities.  Companies further along the supply chain are for example less likely to recognize operational risks to their business, with only 35% of manufacturers identifying operational risks associated with soy when 83% of producers see that same risk.

- Companies see opportunities in tackling deforestation.  While many companies have yet to realize a comprehensive strategy for tackling deforestation, CDP’s forest data shows nearly 90% of businesses identify opportunities with the sustainable sourcing of at least one forest-risk commodity.  British Airways for example reports that increasing consumer awareness of environmental issues means acting to minimize deforestation could offer it competitive advantage.

- Businesses failing to act on deforestation risk lagging behind their competitors. The 30% increase in the number of investor signatories demanding corporate disclosure through CDP’s forests program shows that investors are increasingly paying heed to these issues.  Companies that do not disclose to investors and other stakeholders through CDP could have vulnerabilities in their supply chains and are at risk of lagging behind their competitors.  

Disclosure to CDP also enables companies to better understand their exposure to deforestation risks and the opportunities that exist to mitigate against them. 

CDP has six years of corporate forest-risk data. It motivates companies to disclose this information on behalf of 240 investors with a combined asset worth US$15 trillion. 

Access the full report, Deforestation-free supply chains: From commitments to action.