In a year of extreme weather events, commodity price spikes and supply chain disasters, the latest data from CDP’s forests program reveals that the business community remains largely unaware of the deforestation risks in their own supply chains, threatening shareholder value.
CDP’s forests program’s annual report, The Commodity Crunch: Value at Risk from Deforestation, highlights the fact that most companies must do more to engage. On behalf of 184 investors with US$13 trillion in assets, CDP’s forests program, formerly The Global Canopy Programme’s Forest Footprint Disclosure Project, asks companies to disclose their exposure to deforestation risks through their use of five agricultural commodities that are responsible for most deforestation: palm oil, soy, biofuels, timber and cattle products.
This year, the CDP says the number of investor signatories requesting corporate information through its forests program more than doubled — 139 listed companies with a market capitalization of more than US$3 trillion, including 52 new businesses, responded to the investor call for transparency and accountability on this issue. CDP’s forests program helps companies understand and address their exposure to deforestation risks. The sector leaders disclosing the most comprehensive information can be found below.
Companies told CDP’s forest program that they face three key challenges:
- Lack of traceability in global commodity supply chains
- Challenges with certification
- Regulatory uncertainty
CDP assesses these companies on the quality and completeness of information provided. Businesses such as Marks & Spencer, Unilever, Nestlé and British Airways that have engaged with the program for five years have continued to improve their scores. Across all companies, there was an average improvement of 27 percent this year, suggesting progress in managing deforestation risks.
CDP’s chief executive officer Paul Simpson said: “Many companies do not understand the full complexity of deforestation risks in their supply chain. But if no action is taken on this, there will be many more supply chain disasters like the ‘horse meat’ scandal to undermine shareholder value. At CDP, we provide the world’s largest system to enable businesses to disclose and understand these operational, reputational and supply chain risks, while alerting investors to the value implications.
“CDP believes a common solution, via other organizations like the Tropical Forest Alliance 2020, will be a powerful driver of action.”
Tropical Forest Alliance 2020 representative Gavin Neath, adviser to Unilever CEO Paul Polman on post-2015, says, **“**Deforestation does not need to happen. We can meet even the most optimistic estimates of future demand for palm and soy and beef without chopping down another tree. The facts are absolutely clear on that. More and more companies are coming to realize this and are taking the necessary action to eliminate deforestation from their value chains.”
While the CDP report cites a slow response from the business world on the growing risks inherent in deforestation, governments are beginning to pay attention: At the COP19 climate talks last month in Warsaw, UN negotiators agreed to rules on financing forest projects in developing nations, paving the way for multibillion-dollar investments from governments, funding agencies and private firms in schemes to prevent further deforestation. The agreement calls for “results-based” funding for Reducing Emissions from Deforestation and Forest Degradation (REDD), a UN initiative that uses market and financial incentives to halt deforestation. Under the new rules, the Green Climate Fund will channel funding for projects to host governments, who in turn must set up national agencies to oversee the money, which will be provided to host countries when they can prove they have reduced carbon emissions without harming local communities or biological diversity.