January 24, 2018

Dear Colleagues,

Ceres is pleased to be a guest contributor to this newsletter and to partner with Supply Change to support sustainable supply chains. Ceres works with a network of institutional investors with $17 trillion in collective assets to assess investment risks and opportunities associated with supply chains and to develop strategies for engaging with companies whose practices contribute to deforestation and global greenhouse gas emissions. 

Investors recognize that many supply chain risks are linked to deforestation.  In November 2017, Climate Advisors and Ceres published case studies describing the extreme business risk and negative consequences experienced by IOI Corporation, United Cacao, and JBS as a result of deforestation. Fortunately, more and more companies are choosing to minimize such risks by creating sustainable supply chains.

As part of the transition toward a sustainable economy, consumers and investors are demanding sound environmental management not only in the companies’ direct actions but also within companies’ extended supply chains. And companies are stepping up with deforestation commitments across their whole supply chains. Supply Change’s 2017 report documents that an increasing number of companies have publicly committed to ending deforestation in their supply chains.

But investors know that company commitments to sustainable sourcing alone are insufficient to ensure change on the ground; reliable traceability is an essential building block for understanding and mitigating risks from deforestation. Investors want to ensure that companies use traceability programs to identify the geographic sources of commodities, raw materials, and related primary production so that they can verify that their products are deforestation-free.

Agricultural supply chains—the major driver of deforestation—are highly complex, making for significant, but not insurmountable, traceability challenges. Ceres is partnering with Supply Change to analyze traceability ambitions of companies with deforestation commitments in 2018.  Together, we will outline examples of best practices in disclosing traceability, and investors will be able to highlight these examples when engaging with companies.  We look forward to sharing the results of this work in an upcoming webinar.

As a part of this partnership and many more, we aim to catalyze change that will incentivize companies to proactively create deforestation-free supply chains.

Committed to a sustainable future, 

Julie Nash, Senior Manager, Foods and Capital Markets

Ceres is a sustainability nonprofit organization working with the most influential investors and companies to build leadership and drive solutions throughout the economy. Through powerful networks and advocacy, Ceres tackles the world’s biggest sustainability challenges, including climate change, water scarcity and pollution, and human rights abuses.

More stories about changing supply chains are summarized below, so keep reading!

- The Supply Change team



Recent News

New year’s resolution: valuing forests

New CDP research suggests that up to $941billion (B) in corporate profits came from key deforestation-linked commodities, highlighting the financial challenge of eliminating deforestation from corporate footprints. And despite known risks associated with deforestation, Forest Trends’ State of Forest Carbon Finance 2017 report tracked only $662 million in spending (among governments, businesses and individuals) to keep forests standing through the purchase of forest carbon offsets. In this approach, carbon that is captured and stored as a result of forest management, reforestation, and avoided deforestation activities is quantified and monetized allowing companies to buy and sell credits within a growing number of carbon markets. Currently, an additional $2.9B in finance is pledged by developed countries to support tropical forests, which could be unlocked once avoided deforestation programs become operational.
Read the State of Forest Carbon Finance 2017



According to a recent study by the World Resources Institute and the Nature Conservancy, investors in Latin America and Africa have committed $2B to go toward restoration investments in the last two years, thanks in part to two restoration initiatives (Initiative 20X20 and the African Forest Landscape Restoration Initiative). After reviewing 140 companies, the green groups identified 14 companies (including forestry ones) with restoration projects that are profitable, scalable, replicable, and provide social and environmental benefits. In comparing these 14 companies, the authors found four common motivations for these companies to pursue these investments: 1) new business opportunities in an immature market, 2) long-term government demand for restoration, 3) diversification of investments, and, 4) hedge against inflation.
Read more at the Digital Journal


A long view

Five recently released case studies by Princeton University suggest that certification schemes for commodities highly associated with deforestation have not achieved sufficient uptake by farmers to achieve broader sustainability objectives. For example, in Brazil soy and cattle farmers have been slow to adopt certification. In fact, the author concluded that globally certification of soy using the Round Table on Responsible Soy standard is likely to decline because subsidies for certification have dried up and consumers appear to be unwilling to pay extra for certified products, making it difficult for farmers to recoup the high certification costs. Despite facing similar challenges, interest among ranchers in beef certification may grow because of gains in productivity and profitability afforded by certification.
Read more on the case studies on soy, palm, cattle, tea, and coffee.



Monthly Insights from the Supply Change Desk

Each month, the Supply Change team reviews hundreds of corporate commitments to reduce deforestation in commodity supply chains. Monthly Insights shines a spotlight on companies that deserve recognition for their diligence or innovation at crafting, implementing, or reporting upon their commitments.


A Golden Example

Agricultural producers often fall short of investor expectations for managing and reporting on environmental and social risks within their supply chains. Last year’s addition of the first Southeast Asian palm oil company, Golden Agri Resources, to the Dow Jones Sustainability Index for the Asia-Pacific marked an important milestone. As part of its push for transparency, the agricultural giant developed clear approaches for tracing palm oil supplies back to the source and for identifying and protecting forests within its plantations. Also, to demonstrate its commitment to eliminate deforestation, Golden Agri Resources shares detailed metrics and reporting on a number of supporting aspirational elements, which Supply Change tracks, including: supply chain maps, fire incidents within plantations, participatory conservation planning, grievance logs, and action plans for non-compliance.

Forest Trends CDP WWF GEF UNEP