Deforestation-free failures: Report reveals industry inaction on responsible supply chains

23 May 2024 --- Based on disclosures made on the achievement of deforestation- and conversion-free (DCF) supply chains, it appears that while deforestation, which has been high on the EU agenda, is possible, efforts remain scarce. The latest findings reveal not enough is being done to tackle deforestation. 

Only 64 companies have managed to eliminate deforestation from at least one supply chain, according to a new report released by the NGO and the Accountability Framework Initiative (AFi). Those supply chains include palm oil and soy. This is from a total of 1,152 that reported on Carbon Disclosure Project’s (CDP’s) forests questionnaire.

Leah Samberg, lead scientist at AFi, tells us this report is vital because “it analyzes responses to up-to-date and best available metrics for assessment of deforestation- and conversion-free progress.” Moreover, CDP’s methodology is reviewed annually and kept current in collaboration with leading reporting and assessment organizations.

“The report is a good example of this. It is the first-time a standardized methodology has been available to make a meaningful assessment of progress toward deforestation and conversion free supply chains. DCF is now the key metric when it comes to assessing deforestation performance and so it is vital for businesses to report against it,” says a CPD spokesperson.

In 2023, in partnership with AFi, CDP introduced new indicators for more transparent disclosure practices of performance and progress toward DCF supply chains. Between April and September 2023, 1,152 companies reported on how well or poorly they have been able to eliminate deforestation from their supply chains.

This information comes months before the implementation of the EU’s deforestation regulation, effective December 30, 2024. Under this regulation, businesses must implement a due diligence procedure and present data on the origin of the products to confirm that no deforestation occurred since 2021.

Key findings
Key findings from the report Time for Transparency suggest that 881 companies disclosed their impact on at least one commodity supply chain. However, only around half (445) claimed they were progressing toward DCF supply chains.

The EU deforestation regulation requires companies to ensure products sold in the EU have not led to deforestation or forest degradation.The figures get starker with just 186 companies providing comprehensive and high-quality information obtained using legitimate measures, such as certification and monitoring systems, to back their claims. 

Experts suggest companies can invest in greater expertise and encourage stakeholder engagement to improve DCF transparency.

“Companies will benefit from a better understanding of what tools and approaches are available to effectively monitor deforestation and conversion in supply chains. Further, stakeholders like investors and regulators can request this information from companies. Stakeholders can also incentivize company transparency by rewarding these disclosures and company progress over time,” Samberg tells Food Ingredients First.

What’s holding companies back?
The report has also laid bare several inadequacies in companies’ understanding of the importance of risk assessment tools for proper DCF assurance. The most common issue with DCF disclosure was certification models that did not provide sufficient assurance. Among these are certifications that do not have strict no-deforestation and no-conversion criteria.

Experts warn that while many companies have transparently shared data on progress made toward the DCF supply chain, the majority have yet to do so. As a result, the immediate target of eliminating deforestation from critical commodities by 2025 seems overly ambitious, as required by the Science Based Targets initiative (SBTi). 

However, experts maintain that there are lessons to be learned from this process. The 64 companies that reported achieving at least one 100% deforestation- and conversion-free commodity supply chain used a variety of methods to demonstrate this effectively.

“These included using third-party certification while ensuring that sourcing is largely derived from lower-risk jurisdictions or using monitoring systems to verify compliance,” says Samberg.

An important best practice for businesses to adopt is to invest in understanding the capabilities of various tools and using them appropriately and complementarily. “Roughly half of the supply chains that achieved 100% deforestation- and conversion-free were in the timber sector, where certification is sufficiently robust and available at scale to support deforestation- and conversion-free sourcing,” adds Samberg.

The report suggests companies to expand the scope of DCF reporting beyond forests, like the soy footprint.None of the companies were named in the report.

Recommendations
While the present figures might seem bleak, AFI and CDP have recommended guidelines for businesses to assess and better communicate deforestation- and conversion-free production and sourcing.

These include responding to disclosure requests to foster transparency. Additionally, expressing explicit intent to achieve DCF supply chains through well-informed policy-making and support to suppliers is also considered crucial.

To address the issue of credible and sufficient certifications, companies must build awareness of different certification schemes and how they can be applied to demonstrate DCF status.

Sometimes, certifications fall short despite robust no-deforestation and no-conversion criteria, especially for businesses that obtain materials through models that mix sustainable and non-certified resources.

In such cases, certification standards can be combined with additional monitoring or due diligence systems because, just on their own, these models cannot always guarantee that the materials are completely free from environmental harm, explains Samberg.

Expanding the scope
Additionally, the report recommends companies increase the scope of DCF reporting beyond forests and on all natural ecosystems.

Another critical recommendation, particularly for the EU, is to understand and disclose the soy footprint of animal products on highly transformed commodities in their supply chains. According to research, 90% of the soy eaten by Europeans is not listed as an ingredient and consumed indirectly by livestock. With the average European consuming about 60.6 kg of soy each year, there is a need to make soybean supply chains more traceable.

Reiterating the report’s importance, Samberg says that the goal of the CPD process, facilitated by AFi, is to “ensure that current technology and capabilities are reflected, as well as current expectations of company stakeholders, voluntary targets and legislation.”

By Anvisha Manral