Just four of 53 of the world’s biggest companies most at-risk from deforestation loss have a policy on the topic covering their entire supply chains, non-profit Ceres has found.

Brazilian firms Amaggi and Suzano, French luxury group Kering, and UK packaging company Mondi, were the only corporations to have a no-deforestation policy spanning all parts and regions of their supply chains, Ceres said.

Ceres assessed 53 of the world’s largest companies across 15 industries with the greatest risks from sourcing high-risk commodities, like soy, timber, and palm oil, for its Deforestation Scorecard.

“Few of the largest global companies are taking ambitious action to tackle commodity-driven deforestation, and drive progress toward a net zero economy,” Ceres said. The report comes days before COP28 kicks off in Dubai, where progress on deforestation will be a key focus.

However, most of the assessed companies have started to tackle deforestation. Some 87% of companies have some form of a policy in the area, Meryl Richards, food and forests programme director at Ceres told Carbon Pulse.

Just 25% of the over 700 financial institutions, who are members of the Glasgow Financial Alliance for Net Zero (GFANZ) or Race to Zero, have at least one deforestation policy for a high-risk commodity, Global Canopy said in a separate report released Monday.

“Our key findings align in that we are seeing a slower-than-needed pace of deforestation action,” Ceres’s Richards said of the two reports.

THE 2025 TARGET

Companies recognise the urgency for action, but many still need to improve their policies, Ceres said in its report.

Many firms only achieved part of Ceres’s key indicators on deforestation, for having policies that only apply to direct suppliers, specific markets, select product lines, certain ownerships, or distinct geographies.

McDonald’s had only “partially” published a no-deforestation policy by committing to achieving it by 2030, rather than 2025, Ceres said. The Accountability Framework initiative has recommended eliminating deforestation from supply chains by 2025, to reduce emissions in line with the Paris Agreement.

However, just eight of the assessed companies have policies ambitious enough to meet the 2025 target date, Ceres said. These included French firms Fromageries, Louis Dreyfus, and LVMH, in a country where mandatory nature-related disclosures have spurred some action.

“Companies will need to broaden the coverage of their commitments and actions to meet new regulatory frameworks,” Richards said.

Key policy developments in the EU include its regulation on deforestation-free products, starting in 2024, and the developing Corporate Sustainability Reporting Directive.

The findings aim to inform investor engagement with companies, Richards said. “Divestment may be an appropriate option in cases where companies have a long track-record of inaction,” she said.

However, “instead of divestment, we recommend engagement approaches to drive action within the company”, she said.

THE RESULTS

Ceres selected the 53 firms based on their exposure to commodities, EU market presence, influence over key sectors, and Global Canopy’s Forest 500 database.

EUDR TO FORCE ACTION

In a webinar hosted by Ceres Tuesday, panelists responded to the report and discussed mechanisms to reduce deforestation.

“The thing that jumps out is that very few companies are doing very much, which isn’t a surprise, to be honest,” said Julie Gorte, senior vice president for sustainable investing at London-based asset manager Impax Asset Management.

But panelists highlighted the upcoming EU regulation on deforestation-free products (EUDR) as a mechanism for change.

The EUDR entered into force on June 29, mandating that companies will only be allowed to sell products in the EU if a due diligence statement confirms that the product does not come from deforested land or has led to forest degradation, including irreplaceable primary forests, after Dec. 31, 2020.

Gorte highlighted the policy as a way to “force” improvements in environmental management.

“It’s fair to say that this regulation does have some teeth. The fines and penalties can be quite significant, with gradually increasing fines for repeating offenses that can go up to 4% of the annual turnover in the EU,” added David D’Hollander, principal project manager at UK environmental non-profit Proforest.

Nonetheless, the EUDR still has its shortcomings, the two panelists noted.

“We are a little bit concerned about the fact that several of the commodity-producing countries earlier called it neocolonialist in a fairly pointedly, not friendly way,” said Gorte.

A joint letter from 17 commodity-producing countries published in September, led by Indonesia, demanded a say in the new law, noting that the EU’s “one-size-fits-all” approach will impose additional cost and may even produce adverse effects such as increased poverty, diversion of resources, and hindrance of the attainment of the sustainable development goals.

The EUDR also doesn’t consider wetlands, grasslands, and savannas, which are critical ecosystems not considered as forested areas under the regulation, added D’Hollander.

“I think it’s fair to say that first, they want to see how companies manage with the current list of commodities that are already in scope before adding a lot more to those.”

However, panelists expressed cautious optimism that this may be the only mechanism to effectively reduce deforestation.

“Very little that we’ve tried in the past has worked, so it’s understandable that those who really want to move the needle on climate change and biodiversity loss would try stronger mechanisms like this,” said Gorte.

“We hope it’s going to be a positive signal for further action to move towards net zero and to reduce biodiversity loss. And really, this is all stuff that absolutely has to be done and it has to be done as of yesterday.”

By Thomas Cox and Allison Gacad – t.cox@carbon-pulse.com

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