Companies Need to Wake up to the Urgency of Ending Deforestation in Supply Chains. Here’s How

By Leah Samberg, Lead Scientist, Global Policy, Rainforest Alliance and Thomas Maddox, Global Director of Forests and Land, CDP

There is one thing companies can do right now that will help the global community meet the interwoven targets of addressing the risks of nature loss and climate change: halt deforestation and ecosystem conversion in agricultural and forestry supply chains.

The announcement in June this year that parties to the COP15 biodiversity convention, billed the ‘Paris agreement’ for biodiversity, will meet in Montreal in December, ends uncertainty about the meeting taking place at all this year, after two years of delays.

The urgent need to address the ongoing biodiversity crisis was highlighted at Davos earlier this year, when global leaders called for progress towards addressing the interconnected risks of nature loss and climate change, both of which will be critical to meeting the United Nations’ Sustainable Development Goals.

But there is one thing companies can do right now that will help the global community meet these interwoven targets: halt deforestation and ecosystem conversion in agricultural and forestry supply chains. Not only is this a prerequisite for achieving the goal of limiting global warming to 1.5 degrees Celsius, it will facilitate a transition to nature-positive business models, and ensure the wellbeing of the 1.6 billion people who depend on forests for their livelihoods.

A joint report from international non-profit organisation CDP and the Accountability Framework initiative (AFi) outlines the critical steps companies need to take to assess and address deforestation risks, and provides a snapshot of current progress by 675 of the companies that produce and trade the commodities that drive deforestation and ecosystem conversion: timber, palm oil, cattle products, soy, cocoa, rubber and coffee.

The report looks in turn at each of the essential steps companies must take to halt commodity-linked deforestation, including setting robust deforestation policies backed up by effective governance, achieving supply chain traceability and supplier engagement, engaging in multi-stakeholder collaboration, and monitoring progress.

The data, based on disclosures through the 2021 CDP forests questionnaire, tells us that, while many of the companies that produce or source these products have started taking steps to identify and address deforestation, the extent of action does not yet match the urgency of the moment.

For example, two-thirds of companies reporting to CDP have a policy related to deforestation, three-quarters have some level of traceability for at least one commodity and two-thirds report on working with direct suppliers on deforestation.

However, far fewer companies are taking action at sufficient scale or speed to effectively address commodity-driven deforestation by 2025, in line with the recommendation of the AFi and with science-based climate targets. Only one-third have a policy that is public, company-wide and committed to no deforestation, only a quarter have sufficient levels of traceability to track progress against deforestation commitments and very few engage with indirect suppliers or smallholders.

The report also shines a light on the use of certification to address deforestation across a company’s entire supply chain. While two-thirds of companies report using some form of third-party

certification, only 7% report that they are approaching full certification of any commodity they produce or source, using a programme that provides assurance of no-deforestation and no-conversion.

This finding suggests that, even though certification offers a direct and tangible way to implement sustainability commitments, reported barriers such as insufficient supply of certified products and added costs mean that most companies should also invest in additional approaches to managing deforestation and conversion risk.

In sum, the report points to significant gaps in action but also highlights that no-deforestation supply chains are well within reach, as demonstrated by the progress made by leading companies in each sector and sourcing context. Scaling up proven good practices is not only a sustainability imperative; it is also good business: 211 companies disclosing through CDP identified forest-related risks with a potential financial impact of over $79.2 billion, while 267 companies estimated the costs of responding to those risks at only $6.7 billion.

Looking to the future, corporate disclosure related to deforestation in supply chains continues to shift beyond governance and actions to focus on performance and impacts. To support this critical shift, the 2022 CDP forests questionnaire (open now for responses) for the first time asks companies to disclose the proportion of supply chain volumes that can be assessed or verified to be free from deforestation and ecosystem conversion, as well as the amount of recent deforestation and conversion associated with their supply chains.

Together with this year’s launch of the Greenhouse Gas Protocol’s guidance on measuring, accounting for, and reporting on land sector emissions, the inclusion of these indicators within CDP disclosure will provide new visibility into companies’ deforestation footprints and associated climate impacts, as well as the ways in which companies are addressing these impacts.

Accurate and comprehensive company disclosure of impact on forests and ecosystems is an essential step for all companies working to achieve individual and collective forest, climate and nature targets, and will also become increasingly necessary to satisfy forthcoming Scope 3 greenhouse gas emissions disclosure requirements, investor pressure to manage deforestation risk, and government due diligence regulations.

Eliminating deforestation and ecosystem conversion in supply chains is the single most important thing that many companies can do to stem biodiversity loss, avert the worst impacts of climate change, and protect livelihoods and communities. Doing so requires effective and fully scaled systems for traceability, supplier engagement, monitoring, verification, landscape-level collaboration and disclosure. Following the Accountability Framework and disclosing progress through CDP provides a clear pathway for companies to take action that rises to the urgency of this moment.

Previously published by Thomson Reuters

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