ECOSYSTEM MARKETPLACE: Davos and the salad sauce of sustainable supply chains

Published 11:09 on January 22, 2019  /  Last updated at 11:09 on January 22, 2019  /  Africa, Americas, Asia Pacific, China, Climate Talks, Conversations, EMEA, International, REDD, US, Views  /  No Comments

Something is happening in the “Zero-Deforestation Supply Chain Movement,” which is a key component of the global effort to end climate change, and this week’s Annual Meeting of the World Economic Forum (WEF) could provide the impetus for moving beyond lateral drift into fervent activity.

In his 1974 book Zen in the Art of Motorcycle Maintenance, the late American philosopher Robert Persig described periods of “lateral drift,” which most of us enter at some point, after realizing that the beliefs and premises we’ve been taught don’t always match our experiences. Lateral drift brought Persig into a “far orbit of the mind” that seemed unproductive at the time, but which set the stage for periods of fervent activity.

Something similar is happening in the “Zero-Deforestation Supply Chain Movement,” which is a key component of the global effort to end climate change, and this week’s Annual Meeting of the World Economic Forum (WEF) could provide the impetus for moving beyond lateral drift into fervent activity.

First, some background: the supply chain movement merged almost ten years ago, when hundreds of leading companies pledged to reduce their impact on forests by changing the way they produce, procure, and process commodities. Since then, scores of companies have dramatically reduced their individual impact on forests, but overall rates of deforestation are continuing to rise as bad actors step into forests that more sustainably-minded organizations have spared.

While failing to end deforestation, the supply chain movement has catalyzed a complete restructuring of global supply chains for cattlesoy,  palm oil and pulp & paper – the “big four” commodities responsible for most of the world’s deforestation, which in turn generates almost 20 percent of the world’s greenhouse-gas emissions.

The supply chains of these and other commodities are now more transparent than they were just five years ago, and that makes it easier than ever to reward good actors while purging bad ones.

What’s been missing is the will to execute that purge, but the WEF’s most recent Global Risks Report shows where that will can come from. Business leaders, it turns out, see climate change as the single greatest threat to prosperity, and they have the clout to address it. The question is: will they muster the courage?

Brief History of the Supply Chain Movement

The supply chain movement began germinating after the 1992 Earth Summit in Rio de Janeiro, after it became clear that deforestation was generating a massive amount of the world’s greenhouse gasses. In 1993, the Forest Stewardship Council (FSC) emerged to promote sustainable pulp & paper harvesting, but deforestation continued to surge as forests were cleared to meet our ravenous appetites for other commodities.

Responses varied from commodity-to-commodity and region-to-region. Palm oil, for example, was the main driver in Malaysia and Indonesia, where a consortium of NGOs and industry groups formed the Roundtable on Sustainable Palm Oil (RSPO) in 2004 to promote sustainable palm oil. Cattle and soy were the drivers in the Amazon region, where NGOs took a more aggressive approach. In 2006, NGOs pressured consumer-facing companies in the United States and Europe, as well as exporters in Brazil, to sign a Soy Moratorium that ended purchases of soy from farmers who’d recently chopped forest to expand production. In 2009, Greenpeace began publicly attacking consumer-facing companies that purchased deforestation-related cattle products from the Amazon region.

Large-Scale Pledges to End Deforestation

The first large-scale deforestation commitment came in 2010, when the 400 companies comprising the Consumer Goods Forum (CGF) passed a resolution to achieve zero net deforestation within its sphere of influence by 2020. The companies quickly realized they couldn’t achieve the goals without broader support from governments and NGOs, so CGF and the US government launched the Tropical Forest Alliance in 2012 to include these sectors, and eventually christened it “TFA2020” to emphasize the target year.

In 2014, UN General Secretary Ban Ki Moon launched the New York Declaration on Forests, which is a cluster of ten pledges to cut the global rate of deforestation in half by 2020, and to end it by 2030 while restoring hundreds of millions of acres of degraded land.

Taking Stock

Last year, TFA2020 hired environmental consultancy Climate Focus to evaluate the impact that these myriad supply chain efforts had on deforestation, and Climate Focus in turn contracted Ecosystem Marketplace publisher Forest Trends to support that effort. We interviewed scores of people active in commodity supply chains – from smallholder farmers to chief executives to environmental NGOs – and published the findings in a report called “Impacts of Supply Chain Commitments on the Forest Frontier.”

The findings are

How Commitments Work

Consumer-facing companies like Mars and Marks & Spencer rarely grow their own cacao or raise their own cattle. Instead, they buy from hundreds of millions of ranchers, farmers, and fishermen scattered around the world.

When they sign onto something like the NYDF, the good ones will then look for ways to meet their commitments – sometimes by purchasing only commodities certified under something like the RSPO, but other times by mapping their entire supply chains to see which traders they can trust. At that point, they usually examine three strategies: move forward by avoiding purchases from high-deforestation areas, help suppliers improve their practices, and/or look for alternate materials.

If you’re curious about individual corporate strategies, the Forest Trends Supply-Change initiative tracks both corporate strategies and reported progress.

The Bifurcated Supply Chain

The supply chain movement is largely driven by consumer demand, and environmental NGOs have spent decades educating consumers in North America, Europe, and Australia, on the need for sustainable practices and outing bad actors. As a result, almost 90 percent of the companies with deforestation commitments are based in these three regions.

Unfortunately, these three regions aren’t where the demand is. China is the world’s largest importer of both soy and pulp & paper products, while India is the world’s largest importer of palm oil, and much of Brazil’s beef is consumed domestically. This is why global supply chains have separated, like vinegar and oil, with some segments becoming transparent and sustainable, and others operating in the shadows. It’s no coincidence, for example, that RSPO certification applies to 19 percent of the world’s palm oil, roughly the amount that is exported to Europe and the United States.

This clear bifurcation is, obviously, an oversimplification, as many companies are somewhere in the middle – especially since RSPO certifies plantations rather than entire operations. This enables companies to join the organization without putting their whole network under a microscope, but that in turn means more scrutiny.

Environmental research group AidEnvironment, for example, found that RSPO member Indofood was using shell companies to deforest in Borneo’s Ketungau peat swamp to make way for future oil palm plantations, and an earlier investigation showed that Malaysian palm oil giant, Felda Global Ventures (FGV), had violated Indonesia’s peat moratorium and Malaysian labor laws. More prominently, Greenpeace last year published two reports documenting systematic deforestation being undertaken by companies associated with RSPO members and companies with supply chain commitments. In each of these cases, the NGOs used a dual approach – filing formal complaints with the RSPO while aggressively campaigning to force action.

Globalization 4.0

While consumer demand is great, most executives will concede that, ultimately, governments must step up with minimum standards that are high enough to save forests, and a majority of delegates to last year’s annual TFA2020 meeting in Accra, Ghana, called for just that.

This is where the WEF can help, too.

Business leaders have clearly identified climate change as the greatest threat of our day, and the theme of next week’s meeting is “Globalization 4.0,” which WEF founder Klaus Schwab describes as an effort to build a new “shared future” akin to that forged in the wake of World War II.

The supply chain movement has created the transparency and tested the methods of ending deforestation, but lateral drift needs to give way to fervent activity. That’s the only way to blend oil and vinegar.

This post appeared first on Ecosystem Marketplace.

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