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Supply Chain
NGOs, Investors Losing Patience with Lag Between Deforestation Commitments, Implementation

Despite recent commitments to deforestation-free palm oil by several well-known brands and producers, many companies are delaying implementation of these commitments. Commitments are just the first step; the implementation stage is where companies can really start to make a difference – and both conservation groups and the investor community are voicing their dissatisfaction and concern about the lack of follow-through from companies including McDonald's and Bunge Limited.

Despite its commitment in October to ensure the palm oil that it sources will be deforestation- and peat-free, shareholders concerned that Bunge Limited is exposed to severe risks due to the large-scale forest clearance still taking place across its global supply chains voted Wednesday on a proposal filed by Green Century Capital Management, urging the agribusiness giant to establish clear goals to curb this environmental degradation.

Bunge, among the largest suppliers of agricultural commodities globally, exports staple ingredients such as soybeans and palm oil — the production of which has become a leading driver of deforestation — to companies around the world.

“Clearing forests to grow food destroys the very ecosystems that agriculture depends on, and is a short-term business model that poses long-term threats to global food security and our climate,” stated Lucia von Reusner, shareholder advocate for Green Century. “As one of the world’s largest agricultural suppliers with a stated mission to feed the world, Bunge’s refusal to tackle this obvious threat to its business model is frankly illogical and very concerning to investors.”

Clearing forests for agriculture has become the single leading driver of deforestation globally. As one of the world’s largest processors and distributors of agricultural commodities, Bunge has significant influence over agricultural supply chains around the globe, meaning that the company both contributes to and is highly exposed to the negative impacts of deforestation.

Recognizing the risks associated with destroying forests, a growing number of companies have adopted no-deforestation sourcing policies for key ingredients, often in response to consumer and investor concerns. Major consumer goods companies including Kellogg, Procter & Gamble, Unilever, General Mills, Colgate and more, have adopted no-deforestation sourcing policies for their palm oil purchases to avoid having these controversies linked to their brands and reputation. Green Century worked directly with Kellogg, ConAgra and Smuckers — of which Bunge is a major supplier — to secure these policies.

In response to the growing demand for deforestation-free ingredients, major agricultural suppliers and key Bunge competitors including Cargill, Wilmar and Archer Daniels Midland (ADM) have adopted policies to ensure that the ingredients they supply do not contribute to deforestation. Most recently, Green Century convinced ADM to adopt the first no-deforestation sourcing policy for both palm oil and soy, which it announced at its annual shareholder meeting earlier this month. In contrast, Bunge does not have practices in place to monitor and reduce deforestation taking place across its global supply chains. While the company announced a no-deforestation policy for the palm oil it sources, it has not released a timeline for when it expects to have implemented this policy.

In September, Green Century led a group of institutional investors representing over half a trillion dollars in assets under management to call on four other major palm oil producersSime Darby Plantation, Kuala Lumpour Kepong Berhad, IOI Corporation Berhad and Asian Agri — to cease their efforts to weaken the existing threshold for no-deforestation to adopt an immediate moratorium on deforestation.

Green Century and a group of environmentally responsible investors are also attending McDonald’s annual shareholder meeting today**,** to call out the fast food giant for its refusal to address shareholder concerns about the reputational and business risks caused by the deforestation and community exploitation likely taking place across its palm oil supply chain.

Last month, McDonald’s — among the top 10 palm oil-consuming companies globally - became the first global fast food chain to pledge to eliminate deforestation from its supply chains, but the company continues to face pressure from environmental and consumer groups over its weak palm oil sourcing policy, and Green Century says it has treated shareholders' concerns about the issue “with hardball bargaining instead of open and transparent dialogue.” McDonald’s shareholders will be voting on a shareholder proposal filed by Green Century; First Affirmative Financial Network; and the Sustainability Group of Loring, Wolcott & Coolidge urging the burger giant to curb deforestation and community exploitation.

"How are shareholders to be assured that McDonald's is addressing brand risks when the company shuts down the conversation?" Green Century president Leslie Samuelrich said.

McDonald's would only share information if the investors signed a confidentiality agreement — something even the company admitted was not standard. When shareholders opted for open negotiations, direct communications about any and all details of a potential policy stopped.

"Without transparency or specifics, the company has left investors little choice but to voice our concerns publicly," Samuelrich said.

While McDonald’s recently announced its intent to curb deforestation across its global supply chains, it has not released commodity-specific plans or timelines for when customers and suppliers can expect this commitment to go into effect. The only timeline that McDonald’s includes is an overarching goal to achieve this vision by 2030, which is over 10 years later than the 2015 or 2020 timelines that the rest of the industry is working towards. The company furthermore refused to agree to a meeting with the shareholder groups to discuss when or whether these more specific plans would be released, according to Green Century.

“With McDonald’s having generally pledged to a move in the direction of a no-deforestation policy, we believe its shareholders can’t afford the risk of its not following through with a plan to really accomplish this,” said Ken Jacobs of First Affirmative Financial Network, a network of socially conscious financial advisors. “If they drop the ball, their statement will amount to greenwashing, which would harm their reputation with consumers and investors alike.”

Meanwhile, as Lael Goodman — an analyst with the Tropical Forest and Climate Initiative at the Union of Concerned Scientists (UCS), explains in a blog post this week, it is not only possible — but necessary — for companies to implement deforestation-free commitments today. Goodman also specifically calls on McDonald’s to reassess its 2030 timeline for implementation in a palm oil plan due out later this year. The science is clear: Company commitments to deforestation-free palm oil are vital to reducing carbon emissions. But these commitments aren’t worth their weight until they are fully implemented.

“While here at UCS we cheer each time a company takes the step to promise that in the future it will be deforestation-free, it isn’t until these commitments are implemented that the difference is really made,” Goodman says. “In the meantime, every year, approximately 3 billion tons of carbon dioxide are released to the atmosphere as a result of tropical deforestation, or about 10 percent of the world’s total emissions.

“So we must hold companies accountable for swiftly moving forward to end commodity-driven deforestation and setting ambitious target dates for full implementation. We know that with high expectations, great things can be achieved.”


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