By Alisha Staggs, Project Manager, Corporate Partnerships, and Ben Young, Intern, Corporate Partnerships
Over the last 12 months, we’ve seen a number of companies commit to reducing deforestation in their supply chain. At last count, 273 companies have made some sort of deforestation pledge across a multitude of agricultural commodities.
Yet, we often find ourselves questioning the sincerity of these claims. Are these companies simply trying to save face? Surely any action to avoid deforestation will be costly, and companies aren’t known for taking on added expenses voluntarily. So what’s in it for them?
The answer: a lot. Here are the top 5 factors that catalyze corporate leaders into taking global forest loss seriously:
- Reputational risk. Roughly a decade ago, Greenpeace launched major campaigns against companies whose products contribute to deforestation. With good evidence, they charged that demand for agricultural products was causing unprecedented forest loss in regions around the globe. Over several years, Greenpeace uncovered how soy (“Eating the Amazon”) and beef (“Slaughtering the Amazon”) production by major international corporations were driving deforestation in the Amazon. The resulting flurry of news articles and negative press led to a number of new corporate sourcing policies, and consumer boycotts for those companies that failed to take swift action.With an ear to the loudest NGO’s, consumers are demanding change. New tools are making it even easier for consumers to support the brands and companies that align with their values. For example, both the Forest500 and Supply-Change track companies’ deforestation commitments and their progress. Intangible assets like reputation and brand equity can make up a significant share of a company’s valuation, so protecting them is a bottom line consideration.
- Supply chain risk. Studies show that high rates of deforestation risk the long-term health of the Amazon; deforestation reduces the ability of the forest to manage drought and other stressors. Major climate shifts can have serious consequences for agricultural supply chains, like billions in lost revenue in the case of coffee retailers in Brazil. As a result, companies need to consider the impacts of deforestation on their ability to access raw materials and maintain revenue streams in the future.
- Legal liability. In some regions, companies that are unable to track their products could be breaking the law. For example, the Brazilian government levied fines and filed charges against a number of beef processors in 2009 for supporting the purchase of cattle from deforested lands, even though they themselves were not directly responsible.
- Investor demand. Major investors see climate change and deforestation as significant risks to future profits. Activist investors have found success pushing companies to adopt stringent deforestation policies. Those that fail to react have faced divestment. Banks are actively seeking to finance sustainable agriculture to reduce pressures on forests. Companies with their head in the sand will be caught unaware and will miss opportunities.
- Pending regulation. State and federal governments around the world are taking swift action to protect forests by increasing enforcement and tightening regulations. As one investor describes, “We need companies to be aware of and prepared for regulatory changes to tackle unsustainable practices. For instance, a clamp-down on illegal deforestation or a sudden policy change on permits or licenses means that companies will face significant risks to security of supply and input costs if they are not appropriately prepared.”
We hear these arguments directly from a number of corporate leaders who are poised to direct their companies to drive the swift change necessary to halt global forest loss.
EDF is actively engaged in helping companies identify and quantify the multitude of benefits that come from protecting forests. In a future post, we will focus on our work making sure that their commitments translate into actual improvements in deforestation on the ground.
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