July 2, 2018
The World Resources Institute released the latest global deforestation data, and it’s not looking good. A total of 15.8 million hectares of tropical forests disappeared in 2017; a high only surpassed by deforestation in 2016. With many companies committing to reduce or eliminate deforestation in their commodity supply chains by 2020 (Forest Trends Supply Change Initiative has tracked 248 such companies), environmentalists are concerned companies aren’t following through or moving fast enough to complete their commitments.
Supply Change finds that certification is the most popular method companies rely on for implementing their commitments. For example, 81% of palm oil commitments, 68% of timber commitments, and 65% of soy commitments depend on the Roundtable on Sustainable Palm Oil (RSPO), Forest Stewardship Council (for wood), and Round Table on Responsible Soy certifications respectively. Despite each certification having requirements for protecting forests, their effectiveness in reducing commodity-driven deforestation remains in question (see February newsletter introduction for research on the RSPO).
Being able to trace commodities back to the source is a prerequisite for verifying results. That’s why many environmental groups have started to ratchet up the pressure on companies to investigate and disclose more information about where their commodities (particularly palm oil) come from. For example, in the run up to publishing a disparaging report on commitment implementation, Greenpeace urged the 16 leading brands under review to publicly release the names of their source palm oil mills and the mills’ producer groups, so that their efforts would incorporated in its assessment. Half of the 16 companies investigated for the report disclosed this information in time and others, like Ferrero, published soon thereafter.
Supply Change has also started to track traceability progress in more detail. In February, Ceres and Supply Change joined forces to identify trends and leading practices for goal-setting and disclosure around commodity traceability. From this research, we developed a tool tailored for a network of philanthropic investors to use in behind-the-scenes engagements with companies to encourage them to set/strengthen traceability goals and share their traceability data.
Supply Change monitors all of the companies assessed by Greenpeace, and found companies divulged varying levels of detail about the palm oil mills from which they source. Nestle, for example, provided a one-page list of supplier and parent company names for November 2017. Mars went further by disclosing the country location and the name of company operating mills (sometimes a different name than the mill) for 2016. Finally, Unilever’s 24-page list of the palm oil mills for 2017 noted whether the mill was RSPO certified and the specific mill location (country, province, district, and geographic coordinates).
The differences in the level of detail companies share about their sourcing locations (e.g. frequency of reporting, geographic location, and age of data) can impact how accurately and efficiently third parties can verify commodity sources and supplier compliance in a given time period. This can also dictate how well disclosures are received. In an effort to streamline these metrics, and provide clearer guidance to these companies, a coalition of environmental groups developed Reporting Guidance for Responsible Palm to help companies figure out what to disclose.
Collecting this type of information can be time consuming, which is why companies often turn to others for help. Behind the scenes, Unilever notes that its disclosure was made possible by the use of the RSPO’s PalmTrace platform and its collaboration with its suppliers and UTZ (now Rainforest Alliance). These relationships are increasingly important for commitment implementation, which is why Supply Change has begun tracking partnerships and collaborations centering around commodity traceability and sustainability.
It’s clear that there still a long way to go before companies can confidently say that they are tackling deforestation in their supply chains. In particular, traceability and transparency are key to provide consumer and investor confidence in commitment progress and to recognize and manage deforestation risks.
More stories about changing supply chains are summarized below, so keep reading!
- The Supply Change team