Notes on business issues in reducing deforestation
A few weeks ago we held one of our “How business can tackle deforestation” conferences in Washington, D.C.
I was a bit concerned beforehand because it was the third year of the event and I wondered if we’d have too much repetition of previous years issues, comments and speakers.
Happily this turned out not to be the case, not least because of the hard work of my colleague Boris Petrovic, but also because we ARE seeing progress.
Before you get stuck into the bullet point notes below (all anonymised as all our event are run under the Chatham House Rule) here’s the headline changes I think we’ve seen since 2015, when we first ran this event in D.C.:
- Two years ago there was much more focus on policy development for many companies, than performance.
- Now that 477 companies have made deforestation-related commitments, the focus is shifting to that performance.
- The political environment, although febrile, generally supports this progress, although the capacity and enforcement gap is becoming much clearer. Companies are struggling with their role here, given past mis-steps (IPOP in Indonesia)
- Conversations about jurisdictional approaches are being taken more seriously, with pilots being watched closely. The models (moratoria/produce and protect) are evolving, but companies seem cautious given the politics.
- Brazil and S America in general, particularly the Cerrado and generally with beef and deforestation, is a growing and pressing concern, once again.
Here are my notes from the event from the sessions I chaired. All anonymised carefully. This is not all of those from the event, which will be available to attendees in a week or so. More on our upcoming events for 2017 can be found here.
• Some key challenges we face include land conflicts, carbon challenges, intensity vs. expansion, declining yields, tree replacement, and breeding problems (e.g. in palm)
• In palm it’s entirely possible to get 12 tonnes per hectare in yield, but in many cases we’re getting only 4 tonnes.
• 83% of palm oil is uncertified yet NGOs focus so often on hammering the leaders.
• Studies are clearly showing beef is a now a bigger driver of deforestation than all the other key commodities combined. Up to 10x worse than palm for example.
• However, we are seeing a ‘norm shift’ on attitudes to deforestation, for example Chinese firm Cofco saying they will “‘endorse and support’ farmers producing crops in environmentally friendly ways.”
• Engaging medium sized companies (AND middle managers / middlemen) in their role in preventing deforestation is a major challenge.
• The convergence of the various groups around High Carbon Stock methodologies to define forests has finally happened, this is real progress.
• Stock exchanges are way behind in Asia on deforestation issues.
• In the Amazon Soy Moratorium covers a specific area, but we need to look beyond these models. ADM for example, is focusing on pragmatic and transparent solutions outside the Amazon area.
• Soy farms are usually large scale, already utilising technology and are owned by often politically savvy operators.
• In areas outside the Amazon, we need to know more about whether remote sensing can work in scrubby savannah.
• With HCV and HCS as guiding principles there’s a need to focus on farmer engagement with shared definitions and monitoring tools. But note that farmers can switch buyers easily.
• Zero deforestation in the Cerrado region of Brazil et. al. a significant challenge in a region three times larger than Borneo with a highly variable landscape. Soy is spread out across this huge region.
• In the Amazon soy went from causing 25% of deforestation to causing 0.25% in three years due to the Soy Moratorium.
• Now Bolivia is losing huge amounts of forest due to Soy expansion, possibly up to 800,000 hectares per year (or acres, need to check)
• Around 7.8% of the Cerrado region is currently planted with Soy. Recent investigations show how complex preventing deforestation there is, but also a need more much more focus by traders and producers and brands.
• The Amazon is currently around 75% intact whilst the Cerrado is up to 50% ‘destroyed’ already.
• Can the IBAMA ‘deforestation list’ model be employed in the Cerrado?
• We need a ‘tipping point’ as we saw with GAR/Wilmar/APP in SE Asia.
• A common definition of what constitutes land conversion is required.
• One reason Soy lags behind is far fewer NGO campaigns around it have been seen. This may now be changing.
Cattle and beef:
• Three important stages in cattle supply chain before processing of meat: 1) Cows and calve breeding 2) Rearing and fattening 3) Slaughtering.
• The more disaggregation there is, the less transparency there is.
• List-based and geo-spacial checks are being used but many areas are outside current monitoring, i.e. cattle ‘laundering’.
• 50% of the market in Brazil has few controls, with much direct and indirect supply chain ‘leakage’ causing problems.
• There’s a highly complex web of cattle movement before slaughter.
• Two key issues for sourcing companies buying Beef are the incentives for ranchers/farmers and the demand side for deforestation free beef products.
• Direct and indirect beef supply chains highly different.
• Mapping farms that sell to slaughterhouses is stage one.
• Big companies that buy a lot of beef are looking at whether they can use a carbon sequestration model as in Canada and at inputs like algae and insects as feedstock.
• 50% of the market in the Amazon is a not yet a tipping point, a level playing field is needed. ‘Leakage, loopholes and laundering’ key issues in the current scandals in beef in Brazil.
• Sourcing companies can influence via strategic sourcing reviews, including bulk buy purchase agreements/requirements.
• Indirect meat supply issue is key and can be tackled.
• Even in USA, only Michigan has full traceability, whilst EU cattle have ‘passports’.
• Cattle could all be RFID chipped so the problem is not technical but both economic and political.
• Can we look harder at Soy and Beef together to get synergies?
• There’s a need to utilise degraded land for beef and other commodities, and huge yield opportunities in cattle are possible.
• Decoupling is key, and yield growth and land impact key factors here.
• Preferential purchasing linked to continuous improvement in SME slaughterhouses and meatpackers important to drive change.
• Companies are making good progress on targets but progress on the ground, and how that is tracked, measured and reported on is key.
• Greater transparency and better monitoring is needed.
• Out of the hundreds of commitments made not all are particularly credible.
• There are concerns about certification: ‘Market demand has been reached’ so how do we move beyond?
• We need to see much greater business engagement in policy and jurisdictional approaches.
• Engaged investors are concerned about material risks in portfolios, the tools being used for local implementation and local capacity on the ground.
• Some investors ARE rewarding firms in how they invest but it’s not always immediately obvious.
• Local incentives, company and NGO alignment and local capacity for implementation and monitoring (i.e. FPIC concerns) vital components for success.
• There are approximately 64 jurisdictional approaches underway around the world but all are in very early stages.
• As with REDD+ this has not even really been tried yet.
• There’s a government role in ‘set aside’ areas in the long term.
• There are not political incentives for politicians to engage. They currently win more votes by advocating deforestation than protection.
• Can regional governors be incentivised by anti-corruption commission-related nudges?
• What are the local fiscal incentives that can work?
• Preferred sourcing agreements i.e. Unilever and M&S are one important business led incentive tool.
• Can a network of ‘green districts’ be created and empowered? (like C40 cities)
• Without a plan to engage third party suppliers you won’t see anything meaningful happen down the chain
• What companies need to do is enable a cultural change programme in the supply chain.
• Incentives for those medium sized companies, and middlemen are vital.
• Real progress can mean ‘nothing happening’ in deforestation. That’s tough to measure and report on.
• We need to understand much more what internal buy in to sustainability looks like in buyers/procurement and in areas such as R&D.
• It’s important also not to drown in indicators, many companies suffer questionnaire overload.
• Amplification of policy to group level vital.
• Major challenge is on the ground practical capacity, seriously lacking in most countries, and it’s very hard to find someone without a conflict of interest of some sort.
• Sourcing companies are not best placed to solve community issues and tracking them is extremely tough.
• Cutting off suppliers: If we measure these afterwards, what do we see?
• Better to put them on notice, add conditions, than to cut them loose.
• We need to double, treble the yields that smallholders are getting.
• Many of them now need to replace trees which are 20 years old. Who pays for this, and particularly how should SH finance their lives whilst waiting for new trees to deliver palm fruit?
• Companies need to face up to tackling challenges in legality, debt, incentives to bring smallholders to the table.
• Brokers who buy from smallholders are also lenders who hold debt.
• 60% approx. of the smallholders who are RSPO certified are suppliers to Cargill.
• RSPO standard needs to be more accessible for smallholders
• Global Forest Watch has huge potential.
• We are close to a palm oil national action plan in Indonesia
• Verification of smallholder work a major challenge, what does credible third party verification look like?
• SH’s are not a monolithic group, there are major variations in their income, and income streams. This needs to be taken into account.
Related recent webinar: https://soundcloud.com/forest-trends/are-companies-going-to-meet-their-deforestation-commitments
Upcoming from Innovation Forum in 2017:
- How apparel brands can transform supply chains – 13-14 June – Amsterdam
- How business can measure the impact – and ROI – of corporate sustainability – 21-22 June – London
- How business can tackle forced labor and human trafficking – 26-27 June – Washington DC
How business can tackle deforestation
October 2017, Jakarta
Digital advantage: How to improve factories and farms in your supply chain: Capacity, finance, transparency and technology
19th-20th October 2017, Washington DC
Measurement and ROI for corporate sustainability
24th-25th October, Washington DC
Human rights and business forum
1st-2nd November 2017, London
How business can tackle deforestation
14th-15th November 2017, London
Sustainable sugar forum
4th-5th December 2017, London
More from us, here. (Free newsletter written by proper journalists, practical webinars, etc)