With forestry and agriculture responsible for around 23% of net man-made greenhouse gas emissions, there's an urgent need for companies to come clean about their relationship with the land, says Morgan Gillespy of CDP
Deforestation of the Brazilian Amazon has shot up by 278% since last year, according to recent reports, putting an end to years of progress.
Meanwhile, the IPCC has released a new report looking at the vital role of land use in the climate crisis. The key finding is stark: to limit climate change to 1.5C, a global transition in energy and transport, while essential, won’t on its own be enough. We also have to transform our relationship with the land. That means protecting forests, investing in sustainable food systems, and more.
In the face of the latest climate science, the fight against global deforestation has never been more urgent.
If 'business as usual' deforestation continues we could have phased out the use of fossil fuels in 2015 and still see up to 2C of warming by 2100
Resources from forests are vital to the world’s economy. Yet the world’s forests contribute far more than just providing commodities for companies to produce the food, cosmetics, furniture and other consumer goods we all use.
Forests are crucial for the long-term health and stability of our planet. They act as a huge carbon sink – absorbing around 30% of man-made carbon emissions – and are vital to the global water cycle.
Yet with demand for commodities like timber, palm oil, cattle and soy driving logging and land conversion to agriculture, the ancient forests are fast becoming degraded and shifting from carbon sinks to a carbon source.
The statistics paint a stark picture. This month’s IPCC report found that agriculture, forestry and other land use is now responsible for around 23% of net man-made greenhouse gas emissions.
Indeed, if deforestation continues in a “business as usual” manner, we could have phased out the use of fossil fuels in 2015 and we would still see up to 2C of warming by 2100. Bold action is required to change the course, and it needs to happen fast.
All sections of society, from heads of state, to business leaders and investors, to consumers of products like cosmetics and beef, need to completely rethink their approach to forest-derived products. Business as usual is no longer an option.
Your average high street might seem worlds away from the vast swathes of trees that populate the earth’s temperate, tropical and boreal forests, yet major consumer brands from Dominos to Sports Direct have close links to these ecological powerhouses.
As the urgency of the climate crisis becomes clearer, market forces are beginning to shift
These companies use commodities that drive deforestation, for example through their purchasing of paper for pizza boxes and leather for shoes, as forests are cleared for logging, plantations, cattle ranching or agriculture.
To date, the relationship between forests and big business has remained largely under the radar of consumers, investors and society at large. Not anymore. As the urgency of the climate crisis becomes clearer, market forces are beginning to shift.
To have deforestation in your supply chain is a clear business risk – not least in terms of brand reputation.
Consumers want to know their shopping basket isn’t driving destruction of the Amazon or extinction of the orangutans in Borneo. Indeed, research commissioned by the Environmental Investigation Agency finds that 87% of European consumers are demanding deforestation-free products.
Data disclosed to CDP from hundreds of companies that have a high impact or dependence on forests shows that, on average, 15% of these companies’ revenue is dependent on the commodities that drive most deforestation: timber, palm oil, cattle and soy.
You might think that big businesses that are reliant on these commodities for their revenue would have robust strategies in place to ensure sustainable and secure supply. Yet our data shows that is far from the case.
In 2018, 1,500 companies were requested by their customers and investors to disclose through CDP on the impacts they have on deforestation and the associated risks and opportunities they face.
But 70% failed to do so. These included major consumer-facing brands like Dominos, Oetker-Gruppe and Sports Direct, along with Louis Dreyfus, one of the world’s biggest soy traders.
The good news is that for the companies willing to take bold action on forests there are major rewards up for grabs
Indeed, these make up part of a group of more than 350 companies with a high dependence on forests that have consistently failed to disclose data over the last three years.
As our recent report The Money Trees shows, even the minority of companies that do provide this data are yet to prioritise forest-related issues, with almost a third failing to include them in standard risk assessments.
The small proportion of companies that do report on forest-related risks calculate a combined total of $30.4bn in potential losses due to the impacts of deforestation, something that should serve as a sharp wake up call to those that don’t.
Take PepsiCo for example. The company recognises that severe weather events, loss of ecosystem services, and an unsteady supply of certified sustainable materials could put its supply chain at risk over the next few years.
We also see that disclosure and action on soy and cattle products continues to lag behind that on timber and palm oil. With the increasing focus on the high emissions of meat-heavy diets, this could turn out to be a critical oversight for companies.
The good news is that for the companies willing to take bold action on forests there are major rewards up for grabs.
For example, French beauty giant L’Oréal, having estimated its forests-related risks at over $180m, has responded by setting an ambitious zero-deforestation policy and developing a Sustainable Palm Index to assess suppliers’ commitments to fighting deforestation.
L’Oréal is just one of 76 companies reporting business opportunities from addressing deforestation. CDP’s latest forests report shows that, in total, these are valued at $26.8bn. And as the overall rate of disclosure and awareness is so low, the true scale of the business opportunities is bound to be much greater.
It’s time for corporates to play their part – come clean on their impacts and risks and take action to drive solutions
Many are associated with increased brand value. For example, Japanese chemical and cosmetics firm Kao Corporation sees a financial opportunity in investing in sustainable palm oil as consumers’ demand for ethically sourced products grows.
These early actions are just small shoots in what needs to be an entirely new approach to our management of forest resources.
As the urgency around the climate crisis continues to escalate, companies everywhere will have nowhere to hide when it comes to their forest-related activities. All stakeholders are now demanding transparency and action.
It’s time for corporates to play their part – come clean on their impacts and risks and take action to drive solutions. The data shows this will benefit their bottom lines as well as being essential for the world. It’s a win-win, and there is no time to lose.
Morgan Gillespy is global director of forests at CDP.