A joint report from the environmental disclosure charity CDP and the Accountability Framework initiative – an ethical supply chain body – has cast significant doubt on the deforestation-tackling policies being used by global companies involved in the forestry supply chain.
Using data from CDP’s 2021 forests questionnaire, which is aligned with the Task Force on Climate-related Financial Disclosures, the report found that only 36 percent (245) of the 675 companies surveyed have a company-wide no-deforestation or no-conversion policy, putting them at odds with their COP26 deforestation commitments.
All 675 surveyed companies either produce or source at least one of seven commodities responsible for the most commodity-driven forest loss, and are made up of producers, processors, traders, manufacturers and retailers. The seven commodities in question are palm oil, timber products, cattle products (excluding dairy), soy, natural rubber, cocoa and coffee.
The report does present some encouraging signs of progress, such as 76 percent (512) of companies saying they have a traceability system for at least one commodity; two-thirds (444) engaging with direct suppliers to manage and mitigate deforestation risks; and half of all traders, manufacturers or retailers (194) saying they are working with indirect suppliers to manage and mitigate deforestation risks.
However, a recurring message in the report is that despite these positive policies, companies lack clear targets and milestones, which are critical in driving corporate systems towards long-term sustainable sourcing of commodities.
Some of the governance gaps this lack of targets creates can be seen in the fact that only 19 companies (2.8 percent) have a target of sourcing 100 percent no-deforestation commodities through the use of certification, or report making progress towards this target at all. Meanwhile, only 26 percent (176) of respondents said they have a monitoring system to assess whether they are compliant with no-deforestation or no-conversion policies.
“Without the right systems in place to address deforestation – including effective traceability, supplier engagement, monitoring, verification, and landscape-level collaboration – companies will be unable to address GHG emissions and other environmental impacts in their supply chains,” the report warns, adding this is a reality that reiterates the mantra, ‘no net-zero emissions without no-deforestation’.
This same mantra has long since been supported by data (which was updated in March) from the Berkeley Carbon Trading Project’s Voluntary Registry Offsets Database, which shows 45.8 percent of all voluntary offsets have been generated by forestry and land use changes, with renewable energy the second biggest contributor at 28 percent. Agriculture, by contrast, has only contributed 1 percent of voluntary offsets according to the data.
While there is certainly a sense across financial markets and in the natural capital asset classes that investors and corporates are more conscious of ESG issues and want to be involved in impactful ventures, for many, the best place to begin that work remains in-house.