From commitments to action - Deforestation-free supply chains: Written on behalf of 240 investors with US$15 trillion in assets
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Deforestation-free supply chains: From commitments to action Written on behalf of 240 investors with US$15 trillion in assets CDP Global Forests Report 2014 November 2014
01
Contents
2 CEO foreword
3 UK Government perspective
4 Investor demand for corporate action
6 Executive summary
7 Key findings
8 Roadmap to deforestation-free supply chains
10 Commitments
12 Risk asssessment
16 Targets
20 Implementation
26 Leadership
28 Unlocking opportunities
30 Join our participating companies
32 Should you be participating? Non-responding companies
35 Investor signatories
36 Acknowledgements
To read company responses in full please go to
www.cdp.net/en-US/Results/Pages/responses.aspx
Important Notice
The contents of this report may be used by anyone providing acknowledgement is given to CDP. This does not represent a license to repackage or resell any of the data reported to CDP or
the contributing authors and presented in this report. If you intend to repackage or resell any of the contents of this report, you need to obtain express permission from CDP before doing so.
CDP has prepared the data and analysis in this report based on responses to the 2014 climate change information request. No representation or warranty (express or implied) is given by CDP
or any of its contributors as to the accuracy or completeness of the information and opinions contained in this report. You should not act upon the information contained in this publication
without obtaining specific professional advice. To the extent permitted by law, CDP and its contributors do not accept or assume any liability, responsibility or duty of care for any conse-
quences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it. All information and views expressed herein by
CDP and its contributors are based on their judgment at the time of this report and are subject to change without notice due to economic, political, industry and firm-specific factors. Guest
commentaries where included in this report reflect the views of their respective authors; their inclusion is not an endorsement of them.
CDP and its contributors, their affiliated member firms or companies, or their respective shareholders, members, partners, principals, directors, officers and/or employees, may have a position
in the securities of the companies discussed herein. The securities of the companies mentioned in this document may not be eligible for sale in some states or countries, nor suitable for all
types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates.
‘CDP’ refers to CDP Worldwide, a United Kingdom company limited by guarantee, registered as a United Kingdom charity number 1122330.
© 2014 CDP Worldwide. All rights reserved.
02 03
CEO foreword UK Government perspective
The imperative to act on deforestation
As the key milestone of Our challenge now - besides
2020 approaches, how can encouraging ever more companies
commitment translate into to join this reporting initiative - is
corporate action? There is no to turn words into action.
one single solution, as this report
clearly shows, but a vital step for
companies is to tackle the global
drivers of deforestation.
Forests are critical for keeping the global average temperature rise Next year—2015—will be an important one for all who share an interest
below 2°C, providing one of the cheapest and most effective ways of in a sustainable future. International agreements on the post-2015
removing carbon from the atmosphere and therefore mitigating climate development agenda and on climate change offer a unique opportunity to
change. In the past few decades the world’s forests, two-thirds of set the global economy on a more sustainable and equitable trajectory.
which are managed by humans, have absorbed nearly a third of the
annual CO2e released into the atmosphere from fossil fuels1. Tackling poverty and climate change are two sides of the recognizing that they need to act now to stop
same coin. Climate change could swiftly reverse progress deforestation. More need to follow this lead.
If deforestation rates in the Brazilian Amazon had remained Some in the finance world are recognizing the potential that has been made in reducing global poverty in recent
at 2005 levels, an extra 3.2 billion metric tons of carbon risk this poses to the value of their portfolios. A number years; while measures to combat climate change will only Over time, commitments to take deforestation out of
dioxide would have entered the atmosphere. While Brazil of activist investors, notably in the US, have filed be effective if they help people in developing countries to supply chains for ‘forest-risk commodities’, such as timber,
has made progress in curbing these levels of deforestation, shareholder resolutions and earlier this year Storebrand, improve their livelihoods in a sustainable way. Forests bring palm oil, cattle products, soya and paper, could have a
the rates are once more increasing2. Worryingly, we are one of Norway’s largest insurance and pension savings these interconnections into stark relief. Over 1 billion people transformative impact, supporting sustainable jobs and
now also seeing increasing deforestation in South East companies, divested from 11 palm oil companies due to depend on forests for their livelihoods. Forests provide growth in developing countries, while meeting global
Asia: in fact in 2014 the rate in Indonesia is thought to perceived sustainability risks6. habitat for over half of the world’s terrestrial plant and animal demand for these commodities without destroying forests.
have surpassed that of Brazil3 - historically the country with species. 10% of global greenhouse gas emissions come
the highest rates. An unprecedented number of companies have also set from deforestation. Transparency and disclosure are the first tentative steps on
strong deforestation targets over the last year. Notably the road to realizing this ambitious agenda. That’s why I’m
The message that deforestation must be addressed is Wilmar International, a discloser to CDP’s forests If we can get it right on forests, then we can also crack so proud of what has been achieved by CDP’s forests
filtering through to government and policy makers: some program, committed to zero deforestation. This is many of the other big sustainability challenges which we program, which DFID has supported since its launch as
1 http://www.sciencemag.
ambitious new commitments were made at the 2014 expected to save emissions of more than 1.5 Gigatonnes need to address in the post-2015 world. ‘The Forest Footprint Disclosure Project’ in 2009. The initiative
org/content/333/6045/988
UN Climate Summit in New York, including a strong of CO2 by 2020 – roughly equivalent to the combined has grown rapidly from humble beginnings. This year’s report
2 http://www.vox.
pledge by governments and multinational companies to annual carbon emissions of Central and South America Conversion of forests to agricultural commodity plantations has been compiled on behalf of 240 investor signatories with
com/2014/10/21/7023415/
deforestation-brazil-surging- eliminate deforestation from the production of agricultural from energy consumption7. has been the largest single cause of deforestation in recent US$15 trillion in assets, and draws together data collected
again-after-years-decline
commodities altogether by 20204. years. Some of this conversion has been legal, but large from over 160 of the world’s largest companies.
3 http://www.nature.com/ Companies that regularly respond to CDP’s forests tracts have also been illegally cleared.
nclimate/journal/v4/n8/full/
But as the key milestone of 2020 approaches, how can program are now identifying many more of the Our challenge now—besides encouraging ever more
nclimate2277.html
commitment translate into corporate action? There is opportunities available to them, including securing Private sector entities on all scales, including multinational companies to join this reporting initiative—is to turn words
4 http://www.un.org/ no one single solution, as this report clearly shows, but their supply chain against the risks associated with corporations, national companies, small and medium into action.
climatechange/summit/
wp-content/uploads/ a vital step for companies is to tackle the global drivers deforestation and commodity sourcing. This in turn is enterprises, cooperatives and smallholder farmers, play a
sites/2/2014/09/FORESTS- of deforestation. helping to secure shareholder value. role in this process of change, connected together through This is a shared challenge. If companies are willing to step
New-York-Declaration-on-
Forests.pdf
supply-chain links and national and international trade. forward and build the ground-breaking partnerships required
The major driver of global deforestation comes from the Different parts of the supply chain are moving at different Encouraging companies to identify and manage the risks to take deforestation out of supply chains and work with us
5 http://www.nature.com/
demand for four critical agricultural commodities – beef, rates to tackle this issue. What is clear is that leading to their businesses stemming from deforestation, and to to build a more sustainable future, then the British
nclimate/journal/v4/n10/
full/nclimate2353.html palm oil, paper/pulp and soy. These commodities feature companies, as identified by CDP, are those that are recognize the positive role which they can play in a shift government will use its influence and its climate finance to
in the supply chains of countless companies, ending bringing their supply chains with them on this journey. away from this business-as-usual pattern, are key parts of help you to go that extra mile.
6 http://www.bloomberg.
com/news/2014-01-22/ up in food, fuel and many other everyday products. As the sustainability challenge which we face.
storebrand-puts-palm-oil-on-
demand for these commodities grows, we can expect Paul Simpson Rt Hon Lynne Featherstone MP
blacklist-with-tobacco.html
global agricultural cropland to expand by 42% by 20505. CEO, CDP Recent trends are encouraging, with an increasing Parliamentary Under-Secretary of State
7 http://greencentury.com/
This demand cannot be met without incurring significant number of companies showing leadership and for International Development
palm-oil-starbucks-wilmar-
kellogg/ business and environmental risk.
04 05
Investor demand for corporate action
We press companies to make Most notable over the last year
strong commitments to tackle has been the collaboration
deforestation, eliminating between investors on the issue
unsustainable forestry practices of deforestation.
from their supply chains, and
report on progress through
CDP’s forests program.
As long-term investors, climate-related effects will structurally and Investor focus on the issues around deforestation in supply
systematically affect the markets in which we invest and therefore chains has seen unprecedented increase in 2014, as evidenced
the underlying value of our portfolios over time. Climate change and by the 30% increase in the number of investor signatories
its drivers, such as deforestation, must therefore take centre stage demanding corporate disclosure through CDP’s forests program.
for companies to ensure that investment decisions taken today will
be relevant and value creative in the future. Palm oil in particular has received much of the made an offer in October to buy New Britain Palm Oil,
investors’ attention, with many facing their own one of the leaders in sustainable production, at an 85%
Forests are an important method of carbon capture There is also reputational risk companies should pressure from NGOs to act on the deforestation premium12. Companies ignore this investor focus on
and storage and key in perpetuating the water cycle. address. Consumers and companies alike are hidden within their portfolios. Following the lead set deforestation to their disadvantage.
For a heavily diversified universal asset owner such as becoming more and more aware of the damage by the Government Pension Fund of Norway in 2013,
a pension fund which is focused on long-term wealth caused by unsustainable practices and are choosing Storebrand, one of Norway’s largest life insurance and James Hulse
pensions companies, reported it had divested holdings Head of Investor Initiatives, CDP
240
creation, destruction of such a valuable ecosystem with products which are sourced or produced in a
no comparable alternative makes no sense. sustainable way to reflect this. This is fuelled by activist in 11 palm oil companies earlier this year for failing to
NGOs and negative press coverage which further meet its sustainability criteria8.
One company externalizing its costs (for example by not create risk to the top line.
paying for the value it is destroying through deforestation) 8 http://www.bloomberg. Investor activism has also manifested itself through
simply means that the costs will manifest themselves For all of these reasons, we press companies to com/news/2014-01-22/ the filing of shareholder resolutions in the US. Ceres
storebrand-puts-palm-
elsewhere and those short-term benefits to one are felt make strong commitments to tackle deforestation, oil-on-blacklist-with-
reported that 150 climate-related resolutions were filed
as costs elsewhere. These costs are likely to be borne by eliminating unsustainable forestry practices from their tobacco.html by institutional investors during the 2014 proxy season,
wider society so they affect adversely the context in which supply chains, and report on progress through CDP’s 9 http://www.ceres.org/
resulting in 20 major corporations committing to reduce
all companies do business. This is not conducive to overall forests program. press/press-releases/ emissions or to source sustainable palm oil9.
investors
investors-secure-
wealth creation and presents a significant portfolio risk. groundbreaking-
Freddie Woolfe corporate-commitments- However, most notable over the last year has been
We need companies to be aware of and prepared for Associate Director - Corporate Engagement,
to-protect-forests- the collaboration between investors on the issue
regulatory changes to tackle unsustainable practices. Hermes Investment Management
reduce-carbon-emissions
of deforestation. Starting at the end of 2013 with representing US$15 trillion in assets
For instance, a clamp-down on illegal deforestation or a
10 http://www.unpri.org/
press/investors-urge-
a coalition of investors that contributed to Wilmar are signatories to CDP’s forests
sudden policy change on permits or licences means that greater-sustainability- International’s significant commitment to zero program to understand corporate
companies will face significant risks to security of supply
commitments-from-palm- deforestation, the momentum has continued into management of the risks associated
oil-producers/
2014. The UN-backed Principles for Responsible
and input costs if they are not appropriately prepared. In with deforestation.
addition, regulation that forces companies to internalize
11 http://greencentury. Investment’s Sustainable Palm Oil Working Group
com/major-palm-
costs that they have previously been externalizing, oil-growers-agree- has called for producers to make commitments10
for example through trading schemes, means that to-moratorium-on- and a coalition representing over half a trillion dollars
deforestation-following-
unprepared companies will be exposed to increased letter-from-investors/
successfully urged five major palm oil producers to
margin and competition pressure. Both of these present adopt an immediate moratorium on clearing high
12 http://www.
potential material impacts on business operations and bloomberg.com/
carbon stock forest11.
corporate strategy. news/2014-10-09/
sime-offers-to-buy-new-
britain-palm-oil-for-7-15-
This investor interest is not surprising. In a sign of the
pounds-a-share.html increasing value of sustainable palm oil, Sime Darby
06 07
Executive summary
162
We now need business to
move from commitments to
action with a sense of urgency,
something leading companies
are already recognizing.
162 companies with market capitalization
of US$3.24 trillion* demonstrate an
understanding of the imperative to tackle
deforestation by responding to CDP’s
forests program.
You would be forgiven for thinking that 2014 has been the year of
‘deforestation-free supply chain’ commitments. This year has seen Key findings:
many large global companies make a commitment to rid their supply
chains of deforestation. These commitments are in part a response Making a corporate commitment is the first step
to demand from investors for companies to recognize and act on the on the journey to deforestation-free supply chains
risks facing their business. and critical for addressing climate change.
On palm oil alone, 19 major consumer goods companies, This brings into question whether companies are
including L’Oréal, Kellogg’s and Danone, adopted zero-
deforestation policies between January and September
in 2014. Some companies, such as Cargill, extended
really proactively addressing the risks associated with
deforestation across all their commodities, or whether
they are reacting to pressure from more recent
1
these pledges to cover commodities beyond palm oil. NGO campaigns. There is an urgent business imperative for these
According to the Action Statements and Action Plans commitments to be translated into action;
document accompanying the UN’s New York Declaration Action on commodity-linked deforestation has to be
on Forests, these commitments taken together mean taken by companies at every stage of the supply chain.
that the share of palm oil-related zero deforestation
commitments has grown from 0 to about 60 percent in
the last year.13
However, retailers and manufacturers need to catch up
with producers, processors and traders in progressing
along the journey to achieving their commitments.
2
Despite the considerable momentum corporate
From commitments to action Despite these inconsistencies, opportunities associated commitments on deforestation have seen over
However, commitments are only meaningful if they with sustainable sourcing, such as increased brand value the last year, our data shows a number of
are acted upon and this report seeks to push the and securing the best suppliers, are recognized by the inconsistencies concerning corporate action
conversation forward to enable companies to act on majority of respondents and more so by companies that
these policies. The report outlines the current state of play are long-term respondents to CDP’s forests program.
on this journey, both across commodities and
and identifies steps on the journey to implementing such supply chains; and
commitments. If your company has not made a commitment, now is the
time to take that first step on the journey and to disclose
Despite the encouraging momentum on corporate
commitments, we see varying levels of performance
this to demonstrate to your investors and other important
stakeholders that you are truly tackling and managing the 3
by companies on the journey and some concerning issue. We now need business to move from commitment Businesses can realize opportunities
inconsistencies: to action with a sense of urgency, something leading
companies are already recognizing.
from partaking in the journey.
Although we know that the commodities covered by
13 http://www.un.org/
climatechange/summit/ CDP’s forests program are major drivers of deforestation Katie McCoy
wp-content/uploads/ globally, recognition of the risks, target setting and Head of CDP’s forests program
sites/2/2014/07/
FORESTS-Action-
implementation in many instances is more advanced on
Statement_revised.pdf palm oil and timber than it is for the other commodities.
*market capitalization includes an estimation for the value of responding private companies based on the best available data.
08 09
Roadmap to deforestation-free supply chains
From commitments to action
Making a corporate commitment is the first step on Despite the considerable momentum corporate
the journey to deforestation-free supply chains and commitments on deforestation have seen over
critical for addressing climate change. There is an the last year, our data shows a number of
urgent business imperative for these commitments to inconsistencies concerning corporate action
be translated into action. Moving from commitment on this journey, both across commodities and
to action can be challenging and requires risk supply chains.
assessment, target setting, implementation and driving
continuous improvement towards leadership.
1 2 3 4 5
Commitments Risk assessment Targets Implementation Leadership
The first step for Understanding how Effective implementation Acting to achieve corporate Companies should be
companies is to make your company may of a deforestation deforestation targets is striving for leadership
a public commitment to be exposed to the commitment requires an iterative process and in their work towards
remove the commodity- risks associated with a roadmap of specific, can differ depending on removing commodity-
linked deforestation deforestation is a critical interim targets. the company concerned. driven deforestation,
embedded within their scoping exercise and one Typically companies use a which will help unlock
global supply chains. that should be reviewed combination of the many opportunities
on a regular basis. certification, supply chain available to those
engagement and traceability. working on sustainable
commodities.
*Please note that analysis for the roadmap was conducted on company responses received before 18th August 2014
10 11
1
Commitments
Making a deforestation commitment
The first step for companies is to make a public commitment to remove
the commodity-linked deforestation embedded within their global
supply chains. An unprecedented number of such commitments have Checklist: common elements of corporate commitments
been made in 2014. CDP believes this commitment and the progress
towards it should be transparently disclosed in a standardized format Any commitment must be worth the paper it is written on. The importance
to investors and broader stakeholders through CDP’s forests program. of making a strong, actionable and time-bound commitment on
deforestation is made clear in Greenpeace’s ratings of corporate ‘zero
deforestation’ commitments as part of their Tiger Challenge14. The
strongest company commitments reported to CDP include:
Company examples: commitments 3 Legal compliance 3 No peatland clearance
3 High Carbon Stock protection 3 Social criteria
As part of its “zero deforestation” commitment Peat lands shall not be used for the cultivation
by 2020, the Group plans to take this of palm oil [and] Existing plantations on peat 3 High Conservation Value protection
commitment further by closely involving land shall observe best management practices
its suppliers in this objective. [...] L’Oréal with regard to protecting the environment and
commits to ultimately work with suppliers workers’ health and safety.
whose responsible practices can guarantee
[...] the conservation and restoration of High Orkla Inconsistency across commodities:
Conservation Value and High Carbon stocks (Regarding the % of reporting companies with commodity specific policies
Areas when expanding palm plantations. protection of peatland)
L’Oréal
(Regarding palm oil
plantation expansion) Compliance with applicable legal
requirements of each country in which
85%
we operate and from which we source. 53% 82% 61% 65%
PepsiCo
(Regarding legal compliance)
Soy Palm oil Cattle products Biofuels Timber
Impact of deforestation commitments* Inconsistency across supply chains:
% of reporting companies with commodity specific policies
Wilmar International’s “No Deforestation, No Peat,
1.5 Gigatonnes No Exploitation” policy alone is estimated to prevent 0 20 40 60 80 100
of CO2 emissions the emission of more than 1.5 Gigatonnes of CO2
saved by 2020 by 2020, equivalent to the annual carbon emissions
80%
from the consumption of energy in Central and Biofuels
68%
South America combined.
Cattle 83%
products 61%
100%
Palm oil
81%
The New York Declaration on Forests, launched at the
4.5-8.8 billion UN Climate Summit and endorsed by over 150 organizations, including 100%
tons of carbon 40 companies, commits to halve global forest loss by 2020 and strive Soy
51%
emissions to end natural forest loss by 2030, remove forest loss from commercial
saved per year supply chains by 2020 and restore at least 350 million hectares of
89%
degraded forest lands by 2030. By 2030 action on this declaration is Timber
86%
expected to cut carbon emissions by 4.5-8.8 billion tons per year.
Producers, Processors & Traders
*Analysis conducted by Climate Advisors with publically available methodologies online: http:// Manufacturers & Retailers
www.climateadvisers.com/the-climate-impact-of-wilmars-no-deforestation-no-peat-no-
exploitation-policy/; http://www.climateadvisers.com/wp-content/uploads/2014/09/Climate-
Advisers-Quantifying-Benefits-of-the-New-York-Declaration-on-Forests.pdf.
14 http://www.greenpeace.
org/usa/tiger-challenge/12 13
2 Risk assessment
Identifying exposure to deforestation risk
Understanding how your company may be exposed to the risks
associated with deforestation is a critical scoping exercise and
one that should be reviewed on a regular basis. After establishing Types of risks recognized
baseline data on your company’s contact with each of the forest-
risk commodities (timber products, palm oil, soy, cattle products &
biofuels), you can begin to establish exposure to risks, the nature
55% of companies recognize at least one
reputational risk across commodities 55%
of those risks and their magnitude and likelihood. 51% of companies recognize at least one
operational risk across commodities 51%
Shifting to sustainable palm oil is
45% of companies recognize at least one
regulatory risk across commodities 45%
Ultimately, I want to understand whether cheaper than facing reputational risk
management understands its impact. Do
they understand their supply chain and A study from Euromonitor15 earlier this year looked
its contribution to deforestation? Do they at the potential impact of consumer boycotts
understand the risks they face, and the on the sales of a packaged foods company.
risks they are creating? I think any investor, If Kellogg’s was to lose 1% of its customers, Inconsistency across commodities:
regardless of their ultimate concern, is going to Euromonitor estimated it could face a fall in sales % of companies identifying material reputational risks
want to know the answer to that question. of US$200 million. The cost of sustainable palm
oil for this type of company pales in significance
Adam Kanzer against this potential risk.
Managing Director and
62% of companies reporting 46% of companies reporting
General Counsel,
on palm oil identify material on cattle products identify
Domini Social Investments 62% reputational risk.
46% material reputational risk.
15 http://www.foodnavigator.com/Market-Trends/Sustainable-
palm-oil-shift-is-cheaper-than-bad-publicity-impact
Palm oil Cattle products
74%
The inconsistency with which reputational risk is recognized across commodities suggests that companies
do not recognize any potential for past NGO campaigns, such as on cattle products and soy, to resurface.
Operational risk: Extreme weather
linked to deforestation is threatening
agriculture in Brazil Inconsistency across supply chains:
% of companies identifying material operational risks associated with soy
A record drought in central and southeast Brazil,
followed by an unusually heavy deluge of rainfall
Producers, Processors & Traders 83%
across some states, has taken its toll on agricultural
Manufacturers & Retailers 35%
production this year. Brazil was expected to produce
74% of companies recognize more soy than the United States for the first time
at least one material business in 2014 but the year’s harvest is expected to have 83% of producers, processors and traders reporting on soy identify operational risks.
been seriously affected, resulting in large losses for 35% of manufacturers and retailers reporting on soy identify operational risks.
risk associated with the key agricultural producers and driving high commodity
commodities driving deforestation. prices on the market16. Overall, recognition of operational risks does not seem to translate along the supply chain. However, when a
company reports to have full visibility along its supply chain, it is then more likely to identify material operational and
Scientists have long connected the precipitation regulatory risks. This implies that understanding your supply chain is important for revealing hidden risk.
in this region with the movement of water vapour
evaporated from the Amazon, termed ‘flying rivers’.
Leading Brazilian climatologist, Antonio Nobre,
was quoted as saying: “Destroying the Amazon Future demand
to advance the agricultural frontier is like shooting 35% of all respondents
yourself in the foot. The Amazon is a gigantic on palm oil are unable to
hydrological pump that brings the humidity of the identify sufficient sources of
Atlantic Ocean into the continent and guarantees the sustainable palm oil to meet
irrigation of the region.”17 their future demand.
16 http://www.forbes.com/sites/kenrapoza/2014/03/03/brazil-loses-billions- 35%
as-crop-losses-mount-from-wacky-weather/;
17 http://www.theguardian.com/environment/2014/sep/15/drought-bites-as-
amazons-flying-rivers-dry-up14 15
2 Risk assessment
Identifying exposure to deforestation risk
Company examples: risks
A good reputation is a fundamental resource that can The Group now needs over 7 million m3 roundwood equivalent
(RWE) of wood to supply its customers with the product it
significantly help Sofidel to create added value for its
does today. We rely on an estimated forest area the size of
products and to develop long term, loyal relationships Switzerland. The sustainable wood market will see marked
with its customers. [...] A bad reputation could also shortages to 2020: Brazil, Russia, India and China will absorb
decrease the possibility to get access to financial 55%of global wood demand by 2020. European ‘clean energy’
targets drive demand for biomass to 10-20% greater than the
markets (reducing dramatically the negotiation power current demand for wood. Increased demand for sustainable
with banks and financial institutions preventing wood from retail, building, pulp/paper. We can expect 10-30%
Sofidel from doing future investments) and to get wood shortages over the next 5-10 years. These factors are
already impacting cost prices and species availability today. We
access to the labour market since, for an equal pay,
expect scarcity and price increases in sustainable wood. […]
talented people will prefer a sustainable company As deforestation and illegal logging distort global markets and
than a company with a bad reputation. timber prices, security of supply is fast becoming a myth.
Sofidel Kingfisher
Large changes in the FSC/PEFC criteria or in new As we directly import some A drought or excessive Whilst we are not major A possible problem with buying
timber regulations could affect the availability and timber based products in rainfall influences on pasture users of palm oil […] due to soy from deforestation areas
access to certified timber, which would drastically the EU we are subject to productivity and result in animal its unique qualities, we are may cause a trade embargo,
the EU Timber Regulations. feed, since it is the main source reliant on palm oil for a wide which can affect exportation
reduce SCA’s supply. This […] could also prevent
There is then a risk of of cattle food, affecting its range of food and non-food to Europe and other markets.
SCA from delivering FSC/PEFC Chain of Custody both product seizure entire production cycle. During products. We have identified With the expiration of the
certified products to its customers. This is seen and prosecution if our the year 2013 there was an that palm oil is difficult to Soy Moratorium, JBS cannot
as a material risk since this would negatively due diligence against the increase of the value substitute, and possible guarantee to have suppliers
influence SCA’s sales and thereby profit. importation of illegal timber paid for the animals due to alternatives come with their involved or signatories of a
is not adequate. We have the scarcity and because of the own sustainability challenges substitute soy commitment.
SCA chosen to only import drought that affected the offer (e.g. GM). Therefore an inability The uncertainty about the Soy
timber and timber fibre of pasture, which affected the to source sufficient quantities Moratorium future can generate
products covered by the fattening of animals, affecting of palm oil would undermine insecurity on JBS as a grain
regulation that are credibly the capacity to slaughter our product development buyer, and on its clients in
In addition to paper being a major raw material certified to either FSC of the Brazilian industry. and offering, and relation to the sustainable origin
or PEFC. competitiveness. of soy fed poultry and pork.
for printing companies, it is also a raw material
that is familiar to consumers, and as a result, Travis Marfrig Woolworths JBS
social concern runs high. […] It is believed that Perkins Alimentos Holdings
loss of order opportunities, “outing” by NGOs and
the media, and purchase boycotts are examples
of reputational risk.
Dai Nippon Printing Co.16 17
3 Targets
Effective implementation of a deforestation commitment requires a
roadmap of specific, interim targets. The level of ambition of these
targets clearly needs to reflect the urgency of global environmental Average target date for 3rd party certified material
challenges, but using baseline and risk assessment data to prioritize The average company with certification targets for the next decade, regardless of commodity, is
action in different parts of the business helps to ensure that targets striving to meet them before 2020. This is in the context of deforestation commitments from the
are effective and achievable. How these targets are subsequently Consumer Goods Forum, the Tropical Forest Alliance and contained in the New York Declaration,
all of which have a target date of 2020, just over 5 years away.
embedded and incentivized within the company is key.
Biofuels
Case study: KAO Corporation
Palm oil Soy Timber Cattle products
Motohiro Morimura Q: What is KAO Corporation doing to monitor and
Executive Officer, communicate progress against those targets?
Vice President Environment Coordinate with various stakeholders, including the 2014 2016 2017 2018 2019 2020
and Safety Management, RSPO, plantations, suppliers, non-governmental
*For targets set in the next ten years: average date by which targets for 3 party certification will be completed
organizations, specialists and third-party organizations
rd
KAO Corporation (taking 1 Jan 2014 as the baseline & averaging ranges provided as target dates).
to carry out items above. We will notify all our suppliers
that they should comply with Kao Sustainable Palm
Oil Procurement Guidelines. If our suppliers are
found in contravention of Kao guidelines, we will take
appropriate action including auditing of our suppliers.
Q: What is KAO Corporation’s overarching Inconsistency across commodities:
commitment to tackling deforestation? By studying and reporting to CDP’s forests program, % of companies with a quantified procurement target for third party certified material
Recognizing the dependence of its businesses on natural Kao recognizes the latest trends in forest issues. CDP’s
capital, Kao commits to zero deforestation at the source forests program is one of the important drivers to urge
in its procurement of raw materials including palm oil and our own activity.
paper. Over the medium-to-long term, Kao strives to
reduce its use of natural capital by reducing the amount
of raw materials used in its business and shifting to 78% have a quantified 36% 36% have a quantified
alternative raw materials such as algae or other non- procurement target or
edible biomass sources, in addition to working toward
78% have already achieved
procurement target or have
already achieved their target for
sustainable procurement that also takes into account their target for third party third party certified soy.
ethical issues that have emerged due to globalization. As investors we look for a company certified palm oil.
to clearly define its expectations for
Q: What targets have been established for sustainable production and to report Palm oil Soy
reaching that goal? regularly on progress in upholding
By 2020, Kao commits to zero deforestation at the source those standards throughout the
of palm oil through cooperation with plantations, suppliers
(mills and refineries) and third-party organizations. We will
supply chain.
not purchase palm oil that contributes to development of
any high conservation value (HCV) forests, high carbon Lucia von Reusner Inconsistency across supply chains:
stock (HCS) forests or peat lands, regardless of the depth. Shareholder Advocate, % of companies with a quantified procurement target for cattle products
Green Century
By the end of 2015, Kao commits to purchase only
Capital Management
sustainable palm oil traceable to the mill for use in Kao Producers, Processors & Traders 83%
Group consumer products. Manufacturers & Retailers 55%
By 2020, Kao will purchase only sustainably sourced
palm oil that is traceable to the plantation for use in Kao
Group consumer products. 83% of producers, processors & traders report to have a quantified target
for meeting their defined standards for cattle products.
55% of manufacturers and retailers report to have a quantified target
for meeting their defined standards for cattle products.18 19
3 Targets
To embed this strategic
shift we have established
eight targets specific to Our Net Positive timber aspiration
timber to be achieved
by 2020. for 2050 is to create more
forest than we use. Recognizing
that timber is an essential raw
material for our business, used
in up to 40% of the products
Case study: Kingfisher day-to-day management and assurance processes which
are in place and formally on an annual basis using our
we sell, we must aim beyond just
Q: What is Kingfisher’s overarching commitment
to tackling deforestation?
Foundations Questionnaire. The results (e.g. timber KPIs)
are reviewed by our Operating Company CEO’s and senior avoiding deforestation.
Our Net Positive timber aspiration for 2050 is to create directors at Group level and are presented to the
more forest than we use. Recognizing that timber is Board annually. […]
an essential raw material for our business, used in up
to 40% of the products we sell, we must aim beyond We use a combination of performance targets,
just avoiding deforestation; we aim to protect forests training and communication to engage and involve our
and our timber supplies by ensuring that the forests employees in achieving our Net Positive goals. Much
are sustainably managed (using certification standards of our focus for 2013/14 has been on our most senior
such as FSC as our proxy) and additionally by taking a managers (including the Board) who must take the lead
restorative approach to forests. on integrating Net Positive into our commercial strategy
and day-to-day operations. Net Positive related targets
Q: What targets have been established have been integrated into the performance objectives for
for reaching that goal? key members of our One Team Board (linked to bonus
To embed this strategic shift we have established eight payments) and further work with our HR team is underway
targets specific to timber to be achieved by 2020. to roll this out at Group and Operating Company level.
These include targets and KPI’s for timber product,
store construction, packaging, palm oil, leather as well We have also now established a Group Sustainability
as strategic sourcing initiatives with the value chain and Committee made up of Director level members from
the roll out and exploration of forest projects that are around the Group which will provide collective assurance
able to secure sustainable supply. The business’ main to the executive teams over the delivery of the Group Net
area of focus is to achieve ‘100% responsibly sourced Positive plan.
timber and paper in ALL our operations by 2020’. B&Q
UK achieved this (FSC, PEFC, TFT & recycled) for all of Q: What is Kingfisher doing with the
its products last year and recently opened a new store wider industry?
where not only the product but the timbers in the store Our sustainability aspirations are very ambitious and
build itself were certified. We are quickly building on that to achieve our goals (including with regards timber)
success in operations in Spain, France and Poland. we need to look beyond our own boundaries to find
Each of our companies has a plan for how they will new ideas and sources of innovation. […] One such
contribute to these Net Positive targets, with targets for initiative is the VIA (Value and Impact Analysis) Initiative
their business. The CEO of each of these businesses is whereby Kingfisher, IKEA, and Tetra Pak are co-building a
responsible for the delivery of their plan. Each operating methodology for collating impact data related to the
company also has a representative who coordinates the FSC certification scheme.
management of Net Positive on a day-to-day basis.
Jamie Lawrence
Q: What is Kingfisher doing to monitor and Senior Sustainability Advisor.
communicate progress against those targets? Forests and Timber - Net Positive,
We track progress at Operating Companies as a result of Kingfisher20 21
4 Implementation
and continuous improvement
Acting to achieve corporate deforestation targets is an iterative
process and can differ depending on the company concerned.
Companies reporting to CDP’s forests program demonstrate a wide Certification
range of approaches towards managing their impact but typically
use a combination of: % of companies reporting to have already 23% Palm oil
met their procurement target for third
Certification party certified material: 20% Timber
19% Biofuels
Supply chain engagement At least half of the companies claiming
to have already achieved 100% certified 15% Cattle products
Traceability palm oil are relying on GreenPalm
certificates rather than physical material
11% Soy
to meet that commitment. 0 50% 100%
Most improved companies 2013-2014
Supply chain engagement
Sector grouping Company
Inconsistency across commodities:
Agricultural Products Wilmar International Limited % of companies reporting engagement in capacity building activities in their supply chain
Food & Staples Retailing Delhaize Group 51% of companies 79% of companies
51% reporting on soy claim to reporting on timber claim
Hotels, Restaurants & Leisure Sodexo be engaging in capacity to be engaging in capacity
building activities in their 79% building activities in their
Household & Personal Products The Hain Celestial Group, Inc. supply chain to provide or supply chain to provide or
use sustainable materials. use sustainable materials.
Soy
Industrials & Autos Travis Perkins
Timber
Materials Klabin S/A
Inconsistency across supply chains:
Media British Sky Broadcasting
% of companies reporting engagement in capacity building activities for palm oil in their supply chain
Packaged Foods & Meats / JBS S/A 0 20 40 60 80 100
Brewers and Soft Drinks
Producers, Processors & Traders 100%
Retailing Williams-Sonoma Inc. Manufacturers & Retailers 68%
Textiles, Apparel & Luxury Goods LVMH
100% of producers, processors & traders reporting on palm oil claim to be engaging
in capacity-building activities in their supply chain to provide or use sustainable materials.
Transportation SAS
68% of manufacturers & retailers reporting on palm oil claim to be engaging in
Note: Companies are identified as most improved for their sector based on their scores across the two responding years. Scores are awarded
based on our scoring methodology, publically available on https://www.cdp.net/en-US/Pages/guidance-forests.aspx and updated every year. capacity-building activities in their supply chain to provide or use sustainable materials.
Traceablility
Top 10 most commonly cited multi-stakeholder intiatives
Roundtable on Sustainable Palm Oil
Over ½ of companies Traceability down to the level of the plantation is critical - we
reporting on timber become very concerned when companies are not able to identify
Forest Stewardship Council where their palm oil is coming from or verify the conditions under
and palm oil claim to
Roundtable
have alreadyon Responsible
met their Soy which it was produced…Certification can be a tool that companies
The Leather Working Group
procurement target for use, but in some cases companies will need to go beyond
WWF -third party
The Global Forestcertified
& Trade Network 35% certification to meaningfully address risks related to deforestation.
material
The Sustainable Aviation Fuel Users Group
In only 35% of commodity responses do Lucia von Reusner,
WBCSD - Forests Solutions Group
companies report being able to identify Shareholder Advocate,
The Consumer Goods Forum the actual location of production. Green Century Capital Management
Roundtable on Sustainable Biomaterials
Retailers’ Soy Group22 23
4 Implementation Company examples: implementation
and continuous improvement
Klabin is providing technical Cargill is working with the RSPO Since the horse meat crisis in
Through Marfrig Club we are able to knowledge and training and Control Union Certification to 2012/13, Unilever has had to
promote a closer relationship with to improve the ability provide training to the company’s demonstrate due diligence in
ranchers, explaining our commitments of producers to obtain crude palm oil suppliers to raise understanding the origin of all of
and the importance of promoting good certification. One of the actions awareness of RSPO. Cargill our meat products back to the
was a joint effort developed launched a sustainability program farm. Supplier questionnaires
practices for their everyday work, in Malaysia in 2013 with NGOs have helped us accomplish this.
with FSC Brasil, other forest
aiming to meet social and environmental companies and WWF to adapt Wild Asia and Solidaridad to help We have included the traceability
regulation and promoting continuous principles and criteria for more than 2,400 independent requirement in the publication of
improvement in their management. small landowner producers smallholder farmers meet an updated Quality Manual and
(SLIMF)... Using this new RSPO standards for palm are directing the sourcing of our
standard, Klabin started a pilot production. This three-year materials as much as possible to
project to certify a group program will provide technical vertically integrated operators. In
of producers. Almost three assistance, training and Brazil our suppliers have provided
thousand hectares of more capacity building. In July 2012 us with maps of all the origins of
than 40 different producers are Cargill announced its collaboration our beef prior to slaughter.
being certified in this group. with one of Indonesia’s leading
Unilever
agriculture institutes, Institut
Klabin
Pertanian Bogor (IPB), to build
Case study: Marfrig Q: What work have you done to improve Indonesia’s first oil palm
visibility along your supply chain? teaching farm which will provide Our sustainability team works
Q: What actions are you undertaking to decouple Marfrig have a team of technicians working closely training to students on the with over 50 suppliers to provide
your supply chain from deforestation? with ranchers, through our Marfrig Club Program. We latest plantation production and
During 2013, SCA developed support in preparing their
Marfrig have implemented a deforestation monitoring visit farms, collect relevant information and provide management techniques.
and launched a shared business systems for sustainability audits
system for our cattle suppliers in the Amazon biome. knowledge on market demands and government
system – the Global Fiber Cargill by providing training packs,
Through that, we are able to know if any deforestation compliance documents, such as environmental licensing
Database – for the assessment conference calls and site visits.
took place within our suppliers’ farm boundaries, (CAR), which is a farm management tool based on the
and purchase of fiber in We also help in the registration
removing from our sourcing those who have deforested New Forest Code.
compliance with SCA’s forest process and even conducting gap
from 2009 onwards. We have more than 7000 suppliers
management policies. The audits and expert consultation
monitored in the region, making up around 15 million The Marfrig Club Program promotes best practice tools The major European energy
database is an internal system for suppliers…Our work with
hectares of monitored area. Our monitoring systems for livestock production and has been contributing utilities have been collaborating
containing all the Group’s pulp, downstream supply chains is
have blocked more than 2000 suppliers due to new on information sharing and technical assistance over on the development of
recovered fiber and alternative rarely on an exclusive basis
deforestation and encroachment into indigenous land different production regions, as the main contact the Sustainable Biomass
fiber suppliers. It provides meaning all buyers in the industry
and conservation units. channel between industry and producer. Partnership (SBP) with the
[…] fast and easy access have access to certified product.
aim of developing a Common
Marfrig uses INPE (Brazil’s National Institute of Spatial Q: How are you engaging and working with your to important information Greenergy
Assurance Framework – a tool
Research) deforestation data to monitor each farm: if supply chain to achieve your desired outcome? about suppliers, volumes,
to credibly demonstrate legal
any deforestation polygon is found on a supplier´s farm, Through Marfrig Club we are able to promote a closer forestry, pulp specifications,
and sustainable sourcing of
animals are not purchased. Apart from this geospatial relationship with ranchers, explaining our commitments life cycle assessment data
woody biomass, specifically
monitoring system, we also check Brazil’s Environmental and the importance of promoting good practices and bleaching methods, We are founder members of
being focused on those areas
Agency blacklist, using each farmer´s social security for their everyday work, aiming to meet social and supplier audit reports on PREPS, a joint initiative from
where there is little FSC/
number, which is blocked, if their name is on the list. environmental regulation and promoting continuous fibre traceability, species of twenty-six leading publishers
PEFC forest management
improvement in their management. wood, regions of supply and to develop understanding of
certification. Moving forward as
Q: How important is establishing traceability for so forth. […] This means that responsible paper supply chains.
an industry initiative will expedite
acting on your targets? Marfrig Club seeks alignment between social, the Global Fiber Sourcing unit The group is supported by a
development of a common and
Traceability is key for our business. As we are the link environmental and animal welfare issues, promoting can locate the actual location of database which holds technical
credible level of assurance which
between field and consumer markets, traceability is very knowledge and awareness to suppliers and its production, ensure traceability, specifications and details of the
is in line with the forest products
important for our process, considering both sanitary employees, over environmental legislation and the development department pulps and forest sources of the
sector and in a way that is not
aspects (diseases, vaccines) and socio environmental production alternatives which promote environmental can check the availability of a papers used. This covers country
considered anti-competitive.
aspects (deforestation, forced labor). conservation on farms, social responsibility and animal certain raw material and the mills of origin of pulps and tree species.
welfare. It gives a premium to farms that achieve the can show customers exactly Drax We ask our suppliers to certify
Marfrig understands traceability as a vital effort and a highest levels of compliance, reaching Platinum level. what has been purchased. origin and carry out random
way for the company to differentiate its work, showing The program’s intention is to promote development The database covers Europe, fibre testing to verify the fibre
consumers the product story, relating food security to of the whole supply chain, from the beginner level, Americas and Asia. mix reported to us.
social and environmental management throughout its going through bronze, silver and gold, giving a special SCA Pearson
value chain, promoting sustainable development and premium for the top level.
providing a stimulus to local communities.
Mathias Azeredo De Almeida
Sustainability Manager, Marfrig Global Foods24 25
4 Implementation
and continuous improvement
Barriers and challenges
Implementing actions to tackle deforestation is
undoubtedly challenging and relies on a number of
different actors to drive progress and collaborate.
The key barriers our reporting companies identify
as limiting their progress are identified below.
Government regulation Standards and certification Internal organization
When companies disclose Governance and regulatory compliance is still There are particular challenges reported with regard CEO and board level buy-in and ongoing support is
problems they are encountering, seen as weak in many of the countries in which to the compatibility of multiple existing standards; needed within companies to ensure that all parts of
the commodities are produced. Economic and the time, effort and bureaucracy required for
this gives investors greater incentives are also considered generally lacking certification. The same is true for national regulations,
the business, including procurement and finance,
are actively aligned. Companies report that there
confidence that management is for supporting sustainable supply and uptake of where respondents appeal for governments to do needs to be a lot more training, support and
sustainable products. There is an onus on bodies more to consolidate, coordinate and streamline the investment in the supply chain and its organization.
facing reality, rather than seeking such as the United Nations, and regional and requirements placed on companies. This investment is expected to pay off in the long
to paint us a pretty picture. economic groupings, to disseminate best practice run as customer demand picks up and supply risks
and put pressure on countries where illegal and There are also serious challenges for smallholders, are reduced.
Adam Kanzer, unsustainable activities are taking place. There is medium-sized farms and plantation holders, for
Managing Director and also an onus on governments and companies in whom certification is proportionately more costly and
General Counsel, Domini consuming countries to ensure that they do not time consuming. More work is particularly requested
Social Investments engage in purchasing products from unsustainable on the quality, development and roll-out of the
or illegal sources. certification standards for palm oil, soy and
cattle products.
Market demand Collaboration Supply chain organization Corporate drivers
High cost, lack of availability and low consumer The need for better cross-sector and industry Long, fragmented and complex supply chains are More examples of corporate action on
and customer demand for certified sustainable collaboration is a strong theme throughout inherently more challenging when managing and deforestation being linked to strong financial
products is the most frequently mentioned company responses. This is particularly important tracing products. For commodities and particularly returns need to be publically communicated to
challenge across all sectors. Collaborative efforts because most companies, particularly small and for derivatives, segregated supply chains are reinforce the business case for action.
from supply chain players, government and medium-sized businesses, are unable to effect physically challenging and costly to monitor and
NGOs, are crucial to expand product supply, and significant change on their own. Monitoring, audit. Securing engagement from traders and the
to set clear market direction in terms of demand. managing and improving product traceability ability to shift the supply chain to more responsible
Respondents across all sectors stressed the need and transparency can be time consuming and practices is limited when organizations act in
to inform and educate consumers, customers, costly, so it is important for organizations to pool isolation. This is where industry collaboration,
investors, suppliers, and their own staff, on the knowledge and resources, and share the load. ethical codes, and the dissemination of best
importance of sourcing sustainable products. There is also a lot of work to be done to improve practice systems and risk approaches is crucial.
the cross-sector systems and tools which support
traceability and policy compliance and this is
difficult for companies to do in isolation.You can also read
