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Supply Chain
L'Oréal, McDonald's Commit to Nix Deforestation from Commodity Supply Chains

Forests play a critical role in mitigating global climate change and deforestation is responsible for 10-15 percent of global greenhouse gas emissions, as well as habitat loss and social conflict. With the development of the Paris Agreement on climate change and the UN Sustainable Development Goals, the protection of forests has become a top priority for policymakers, investors and consumers.

Teaming up with non-profit CDP, McDonald’s and L’Oréal are taking strides to eliminate deforestation practices from their supply chains. The multinationals are joined by McDonald’s Latin American franchise Arcos Dorados, Swiss fragrance and flavor company Firmenich, Brazilian meatpacker JBS, American healthcare company Johnson & Johnson, Brazilian paper producer Klabin and Canadian restaurant group Restaurant Brands International.

Working with CDP’s newly expanded supply chain platform, the companies will gather information from key suppliers on how they are managing deforestation-related risks, with a focus on strategies for measuring and monitoring the use of forest-risk commodities, progress against deforestation targets and engagement with suppliers.

“Ending deforestation will be fundamental to global efforts to prevent dangerous climate change. With such a large proportion of company revenues attached to commodities in their supply chain that are driving deforestation, this is now a critical business issue,” said Dexter Galvin, head of supply chain at CDP.

“Supply chains are like rows of dominoes: if unsustainable commodities enter the top of a supply chain, the effects will cascade throughout. Collaboration with suppliers is therefore essential for companies to reduce their exposure to deforestation and meet their zero deforestation targets — which makes sense for the bottom line and the planet.”

Approximately a quarter of the participating companies’ revenues depend on the four commodities responsible for most tropical forest loss — cattle, timber, palm oil and soy. Deforestation therefore represents a significant business risk and as much as $906 billion in annual turnover could be at stake, according to a 2016 CDP analysis.

An increasing number of companies are making commitments to eliminate deforestation from supply chains, with 400 members for the Consumer Goods Forum, representing $3.9 trillion in revenue, having already pledged to achieve zero-net deforestation in supply chains by 2020.

Earlier this year, cocoa giants Cargill, Nestlé and Mars agreed to end deforestation and forest degradation in the global cocoa supply chain, while retailer Target put its responsible sourcing aspirations into action with the release of a new forest products policy in line with the US Lacey Act, which bans trafficking in illegal wildlife, plants and plant products, including timber and paper. Governments are also taking action to promote sustainable, transparent supply chains. Back in April, European Parliament approved a resolution to introduce a single certification scheme for palm oil entering the European Union and to phase out the use of vegetable oils that drive deforestation by 2020.

CDP’s new reporting program, which builds on the success of CDP’s existing supply chain work across climate change and water, is in its pilot year and is funded by a grant of $3.7 million from the Norwegian Agency for Development Cooperation (NORAD) for the 2016-2020 period. Together with project partners Global Canopy Programme, Fundacíon Natura Colombia and Sociedad Peruana de Ecodesarollo, CDP is working to establish a program of collaboration in Latin America and advocacy in China, which will bridge private sector action and public sector policy goals. Analysis of the supplier data collected in the 2017 pilot year will be published in CDP’s annual supply chain report in January 2018.

“The supply chain is the missing link in corporate environmental action and cannot be ignored by any company serious about reducing its environmental impact. By leveraging their influence, the world’s big buyers can cascade action and catalyze transformational change right across the global economy,” said Galvin.