SUPPLY CHANGE

 

 October 8, 2019

Dear Colleagues, 

Deforestation in Brazil has increased around 30 percent in recent months. According to the Brazil’s major monitoring organization, the National Institute for Space Research (INEP), 5,884 kilometers were deforested from January to August, far exceeding the rate of last year. Additionally, fires from slash and burn agricultural   have risen by up to 80 percent, and drew international attention as smoke in the Amazon, Cerrado, and Gran Chaco biomes plunged Brazil’s largest city—Sao Paulo, into sudden darkness.

The rise in deforestation can be attributed to Brazil’s President Jair Bolsonaro, and Minister of the Environment Ricardo Salle’s anti-environment, and pro-agribusiness platform, which has worked to gradually undermine various environmental protection agencies. For instance, over the last year the administration has committed to decreasing funding for INEP, as well as Brazil’s major enforcement agency, the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA), both of which provide significant oversight around deforestation. In particular, IBAMA’s budget has been decreased by 25 percent since 2018. The decline in government funding and enforcement for environmental legislation has not only emboldened farmers and ranchers to illegally deforest, but continues to undermine the quality and availability of data companies rely on to accurately assess commitment compliance.

Agribusiness generates more than  20 percent  of Brazil’s GDP, and many in the industry support reducing environmental protections in order to  advance the country’s farming industry. Nevertheless many companies, investors, non-governmental organizations, and foreign governments have protested the Brazilian government’s inaction. Based on the tracking of 37 companies with commitment(s) to reduce or eliminate deforestation associated with leather supply chains, Supply Change has identified a couple common approaches to address deforestation in the Amazon, including seven companies that have committed to avoid sourcing from the region altogether. Most recently, the owner of popular Timberland and North Face brands, VF Corporationannounced that it would no longer purchase Brazilian leather. In comparison, 13 other companies identified by Supply Change rely on certification programs like the Leather Working Group (LWG) to ensure supplies adhere to higher environmental sustainability standards. While the LWG has a heavy emphasis on addressing water quality in leather tanning it also includes requirements around acceptable criteria for suppliers in Brazil.

In addition to the actions taken by these companies, Ceres and Principles for Responsible Investment released a statement from 230 institutional investors representing USD $16.2 trillion in assets, which demanded companies involved in this deforestation implement no deforestation policies, increase the use of verification systems, and disclose annually on their progress. Moreover, corporate commitments can play an important role in protecting land beyond existing government regulations in countries including Brazil. Given that the Brazilian Federal Government has deprioritized forest protection, action from the private sector is more important than ever in reducing and eliminating commodity-driven deforestation.

As cattle ranching and forest fires continue to encroach on these lands, it may cause significant damage to the national health, and overall economy of Brazil. For instance, the smoke has been particularly devastating for communities in close proximity to the fires, as reports have indicated rising cases of respiratory illness. The fires in Brazil bear a resemblance to those in Indonesia, in which massive peatland and forest fires were linked to 100,000 premature deaths and economic losses estimated at USD $16 billion in 2015. In this way deforestation can have wide ranging impacts, and the action taken by the Indonesian government following the widespread damage to curb emissions, reduce deforestation, and preserve biodiversity represent an important case for Brazilian federal as well as state governments in the months ahead. While the fires continue, Supply Change is increasing efforts to research companies operating and sourcing from these areas, in order to track the commitments seeking to end deforestation. In an upcoming collaboration with the International Finance Corporation, Supply Change will explore how cattle ranching has driven deforestation in the Chaco biome in neighboring Paraguay, and how companies and government are addressing it.

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

- The Supply Change team

 

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Upcoming Events and Updates

Environmental Markets and Finance Summit 2019
Washington, D.C., U.S. | October 29 –31, 2019

Join us in October for a high-level gathering of public, private, and philanthropic leaders in forestry, carbon, ecological restoration, water resources management, and corporate sustainability. This working summit is designed to advance a new agenda for investment in climate action and nature-based solutions. Don't miss keynote sessions on scaling up markets and finance for restoration and expert led discussions on carbon finance, supply chain sustainability, and market infrastructure. It will include speakers David Antonioli, CEO of Verra, Julie Nash, Program Director of Ceres, and our very own Stephen Donofrio, Director of Ecosystem Marketplace. To register or find out more about the summit please visit here.

 

Sustainable Landscapes and Commodities Forum
London, U.K. | November 20-21, 2019

Innovation Forum will be holding a conference, exploring the latest innovations and solutions to how companies can deliver on their sustainability commitments. Supply Change will be participating alongside 60 other speakers, underlining the power of sustainability and how business can transform supply chains. To find out more please visit here.

 

 

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Recent News

California Bill Stuck in Legislative Log Jam

In the last month, legislators in California deliberated over a new bill seeking to establish legally binding guidance to ensure companies are sourcing certified wood. Through requiring new contracts and penalties around non-compliance, the bill emphasizes accountability and the protection of tropical forests. The legal pressure adds to the reputational and financial risk experienced by many companies with exposure to deforestation in their supply chains, pushing them to make more meaningful commitments. Although the bill received broad support by the public and officials alike, committee members expressed concern around the fiscal uncertainty. The bill now remains with the Appropriations Committee, but in light of the substantial support it will likely receive another hearing in the future.
Learn more at ProPublica

 

Indonesian Government Pulls ‘Palm oil free’ Products

In recent weeks, Indonesia's Drug and Food Control Agencies began to remove products labeled as “palm oil-free” from supermarkets in Jakarta. This move signals a shift in the government's efforts to bolster domestic demand and market competition in the midst of the rising demand for more sustainable palm oil. Moreover, in recent months, the European Commission introduced new legislation to eliminate biodiesel fuel made from palm oil by 2030. The shift will likely have a significant impact on Indonesia, which currently produces over 51% of palm oil exports globally. In response, Indonesia has introduced new trade measures, including threatening to withdraw from the Paris climate agreements. Only time will tell how the battle to support palm oil will continue to play out domestically.
Learn more at Reuters

 

Palm Oil Industry Ignites Fires Across Indonesia

According to a recent audit, over 80% of palm oil plantations are still not fully compliant with government regulations. Over the years, Indonesia has come under intense scrutiny as land clearing practices for palm oil plantations have accounted for up to 80% of fires across the country. The fires have been particularly damaging in recent years, leading to thousands of cases of respiratory illness and the loss of over 26 million hectares of forest since 2001. Although many companies sourcing from Indonesia have committed to purchasing from producers who do not deforest, multinational corporations such as Nestle, Mars, PepsiCo, and Unilever still face cases of non-compliance. Until these commitments and government action lead to substantive change, fires will continue to spread across in Indonesia.
Learn more at Quartz

 

 

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