SUPPLY CHANGE

 

August 2, 2018

Dear Colleagues,

Climate Focus is delighted to provide a guest commentary to this month’s Supply Change newsletter. Over the last six months, we collaborated with the Tropical Forest Alliance 2020, a public-private initiative whose goal is to reduce tropic deforestation related to agricultural commodities by 2020, to produce two reports on the progress and implementation of corporate supply chain commitments.

Insights from the first report, Progress on Corporate Commitments and their Implementation, that was prepared in cooperation with CDP found that while the rate of new commitments has decreased significantly, existing commitments have an outsized impact on certain deforestation hotspots. Overall, of the 250 most influential companies in forest-risk commodities identified in the Forest 500 group, 58% now have at least one forest related commitment. Areas where deforestation-related commitments are sending the strongest market signals include international palm oil markets in Southeast Asia, the largest pulp and paper organizations operating in tropical regions, and beef and soy export markets from Brazil.

We also find that there is a strong correlation between the quality of a commitment and the likelihood of it being implemented. In the palm sector commitments are generally strong, concrete, and actionable. In the Brazilian cattle and soy sectors, individual commitments are often vague and weak. However, there is strong support of collective agreements; for example, all major soy companies support Brazil's Soy Moratorium, and 70% of the country's slaughtering capacity is covered by companies that have signed sectoral agreements.

The second study, Impacts of Supply Chain Commitments on the Forest Frontier – co-authored by Climate Focus and Forest Trends – explores the impacts of supply chain commitments on the broader political and socioeconomic environment to reduce deforestation associated with agricultural commodities. The authors find that – while deforestation continues in areas covered by commitments – the movement to eliminate deforestation from supply chains is having a positive impact on the ground by encouraging more transparency and accountability. This is especially true among large commodity trading groups in the middle of the supply chain that have started to implement traceability systems and positively react to calls for more transparency.  For example, in Brazil, company traceability systems have helped to push farmers to comply with environmental registration requirements. The supply chain movement has also led to better farm management of agricultural areas. For some initiatives (such as corporate pledges to comply with the Soy Moratorium in Brazil) there is also a clear correlation with reduced deforestation rates. But the supply chain movement has not been able to stop deforestation at the forest frontier because of the narrow scope of most supply chain commitments.  

The studies leave little doubt that much more needs to be done. For example, even though commitments cover 60% of palm production, a close look at the two largest producing countries—Indonesia and Malaysia—reveals large gaps in coverage. Many existing commitments come from larger producers with intensified (high-yielding) operations. In contrast, areas at least partly managed by smallholders are typically not covered by company pledges. Even where the coverage is regional, as in the case of moratoria (e.g. the Soy Moratorium), the risk of displacing deforestation to other locations remains high, in particular where alternative production areas are readily available and unprotected.

Public-sector collaboration in supply-chain efforts is also growing but has not yet been implemented at scale. Important steps have been taken, but there is an urgent need to embed existing company efforts in larger-scale regional agreements, involve smallholders, and link efforts to public sector programs. An initiative that embeds existing pledges into more comprehensive political frameworks could play an important role in transitioning existing efforts into a longer-term (2030) framework.

These challenges come at a time when media attention on deforestation issues has roughly doubled since 2015, indicating that public perception of commodity-driven deforestation risks is on the rise, especially for palm. With mounting pressure from the looming 2020 deadline, it’s clear that relying on individual company pledges will not be sufficient to change incentives and impacts at the forest frontiers. Effectively scaling up public-private partnerships on deforestation-related supply chain efforts will require careful alignment with existing corporate pledges and will be vital to achieve larger international forest conservation targets.

Sincerely,

Charlotte Streck, Co-founder and Director, Climate Focus

 

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