Related Expertise: Consumer Products Industry , Climate Change and Sustainability, Supply Chain Management
Companies are accelerating efforts to ensure their products do not contribute to global forest loss. But individual company action, while necessary, is not enough.
Forests, grasslands, and savannas are being destroyed and degraded at a rapid clip, with dire consequences for climate, nature—including many of the most critical ecosystems—and humanity. Consumer companies, grocery retailers, commodity traders, and other players in the food and beverage supply chain have an important part to play in arresting that destruction. And indeed, many have been moving to eliminate deforestation from their value chains for more than a decade. Yet the impact of these efforts has not matched the growing urgency of the challenge.
There are a number of reasons for the frustrating pace of progress, but a major one is that most of the action by companies to date has focused on their own supply chains. While that’s an important step, action at the individual company level is not sufficient. Deforestation is a systemic problem, and it requires a systemic response—one that engages all stakeholders across the value chain and within key production landscapes to find ways to ensure that trees are worth more standing than cut down.
Momentum for systemic action is building, most notably the announcement at the UN Climate Change Conference (UNFCCC COP26) that 114 countries—representing 87% of forests—committed to reverse forest loss and land degradation by 2030. And in the consumer industry a number of companies have already stepped up to drive more collective action. The efforts of coalitions such as the Consumer Goods Forum’s Forest Positive Coalition of Action, the Lowering Emissions by Accelerating Forest finance (LEAF) Coalition, and the One Planet Business for Biodiversity (OP2B) coalition reflect that while putting a stop to deforestation is a societal imperative, it can also yield significant business benefits, including enhanced customer loyalty and operational resilience.
As more companies join these groups, they should embrace four principles to unlock the impact of collective efforts:
Ultimately, the drive to eliminate deforestation will require more than incremental changes to the way business has historically been done. A profound transformation of supply chains for key commodities is needed. As a result, the success or failure of collective efforts will depend on the commitment and resilience of the corporate leaders who will be driving that business model. Consumer company CEOs must put deforestation at the center of the C-suite agenda, not just delegate it to the operations or the sustainability teams within their organizations. In doing so, they can be catalysts for progress—demanding results and accelerating alignment and coordinated action within their own organizations while influencing others within the industry (and beyond) to step up and support collective action.
Deforestation, including the conversion of land for agriculture and the degradation of forested areas, is increasing at an alarming rate. In 2001, an estimated 6.6 million hectares of forest disappeared; in 2020, the loss was 14.7 million hectares, according to Global Forest Watch. That’s the equivalent of roughly 40 soccer fields disappearing every minute.
The accelerating loss comes with a steep price. For one thing, forests are a massive carbon sink, capturing and storing 7.6 billion net metric tons of CO2, the equivalent of 1.5 times the total annual CO2 emissions in the US. And grasslands and savannas store another 150 to 250 tons of carbons per hectare. As those ecosystems are destroyed, carbon is released: according to the Environmental Defense Fund, roughly 20% of current greenhouse gas emissions come from deforestation.
In addition, deforestation is a major driver of biodiversity loss. Forests are home to 80% of the world’s known terrestrial species, with vital tropical forests in particular being highly threatened. As those forests are lost, biodiversity declines. Biodiversity is critical to the functioning of the planet through the provision of “ecosystem services” such as climate regulation, air purification, and water filtration—services estimated to be worth roughly twice the global annual GDP. The loss of those services creates massive sanitary risks for humans, threatening the livelihood of billions of people and degrading the overall ability of the planet to support human life.
The Role of Consumer Companies. Agricultural and forestry activities are a key driver of deforestation. As the primary user of agricultural inputs globally, the food sector has a vital part to play in arresting that loss. Between 2001-2015, forestry and agriculture activities accounted for roughly 39% of total deforestation, according to the World Resources
Four major commodities that are important components in the food supply chain—beef, palm oil, soy, and pulp and paper—account for roughly 54% of agricultural deforestation. Beef is the single largest driver, responsible for 37% of total agricultural deforestation—including the conversion of land for the creation of pastures as well as for the production of animal
The Imperative for Action. Consumer companies are increasingly focused on addressing their impact on deforestation. Their action is spurred by three factors.
First, eliminating deforestation from the supply chain aligns with the purpose and sustainability agenda at many companies. By ensuring a deforestation-free supply chain, companies can also advance other critical sustainability initiatives. Forest protection and restoration, for example, is a key lever to meeting the Paris Agreement goals: nature-based solutions are expected to represent up to 35% of economically viable climate-mitigation measures needed between now and 2030. Those solutions—including putting a stop to forest conversion, supporting reforestation, and adopting sustainable forest management—are projected to be among the most cost-effective levers for emissions reductions over that period. However, companies that do not move now to secure agreements for nature-based solutions (carbon credits backed by specific reforestation or afforestation projects, for example) will find those solutions are in short supply in the years ahead.
Second, the business case for action has grown more compelling. Stakeholders are increasingly demanding that companies in general, and food companies in particular, take the lead on addressing sustainability issues, with deforestation being a top priority. These stakeholders include:
As stakeholder pressures mount, particularly from consumers, companies that move quickly to become forest positive—meaning they have removed deforestation from their production footprints—will strengthen their overall resilience. That’s because they have reduced their reliance on sensitive commodities (those that drive deforestation in important ecosystems) while ensuring sufficient access to sustainably sourced commodities such as soy and palm oil—inputs that may be in short supply in the years ahead.
Finally, consumer companies have the leverage to coordinate and drive change. While their suppliers are often smaller players operating amid a large number of competitors, food, consumer packaged goods companies, and food retailers are typically large companies operating in a relatively unfragmented stage of the value chain. Not only do these larger companies have greater resources; they also have greater influence, and they can more easily bring other actors from the sector to the table to set and commit to improved practices and standards.
Certainly, a number of companies are taking ambitious action to build a forest-positive supply chain. And all companies should redouble such efforts. But as deforestation continues unabated, it is clear that individual action by even the most committed companies isn’t enough.
Company Efforts to Combat Deforestation. There are 14 actions designed to reduce deforestation in company supply chains. According to a March 2021 report by the Carbon Disclosure Project (CDP), 93% of companies (consumer and otherwise) are taking at least one action against
However, roughly 85% of companies are still at an early or developing stage for action, meaning they have incorporated less than 8 actions against deforestation. The most common actions adopted to date include board-level oversight, legal and compliance measures, risk assessments, and the use of certification and traceability for the products the companies procure. (See Exhibit 2.)
Fewer companies have taken actions such as engaging across their whole supply chains—including with smallholders and suppliers beyond the first tier—and restoring and protecting ecosystems. Not surprisingly, these are areas where individual company action is likely to have less impact and where collective efforts therefore make the most sense. In addition, company actions frequently fail to cover all of the commodities they purchase, some of which contribute significantly to deforestation. So, while 71% and 66% of companies have made commitments on palm oil and pulp and paper, respectively, just 31% have made commitments on soy and 28% on beef. That’s problematic, given that soy and beef combined account for approximately 44% of commodity-driven
The Power of Coalitions. Even if the pace of activity at the company level picks up dramatically, it won’t be enough to halt deforestation. However, coalitions can be powerful catalysts to build on and amplify individual company action. They can bring more companies to the table, expanding deforestation commitments across the industry’s production footprint and driving change throughout the supply chain. Furthermore, coalitions, by working also in close cooperation with local authorities and public institutions, non-governmental organizations (NGOs), and other partners, can address more difficult systemic problems such as those associated with illegal activities or poor forest governance.
As companies consider how to best drive collective action, they should give particular attention to the power of coalitions, a form of collaboration that has increased significantly in recent years. Among the advantages of coalitions:
In addition to COP26, a number of important events this year, including the UN Food Systems Summit and the UN Biodiversity Conference (UNCBD COP 15), will intensify the focus on advancing action to fight deforestation. At the same time, consumer companies are redoubling their efforts toward collaboration. In 2020, the Consumer Goods Forum launched the Forest Positive Coalition of Action, which now has 20 international consumer and retail company members. These companies have not only taken steps to address their own impact on deforestation but are also moving to collectively address the impact from the production of key commodities including beef, palm oil, soy, and pulp and paper. Similar forms of collective action through coalitions are also gaining traction—including organizations such as LEAF, which aims to mobilize at least $1 billion in financing to protect tropical forests, and OP2B, which is catalyzing action to address the agriculture-driven decline in global biodiversity.
Nevertheless, gaining traction against deforestation—at the individual company level or through coalitions—is not easy. Companies that want to move the needle on deforestation must start by ensuring strong endorsement and leadership at the top. CEOs must drive the effort in a way that reinforces their companies’ sustainability purpose and values, focusing relentlessly on the issue of deforestation and ensuring that the commitment to a forest-positive business is integrated into all company functions. To do this they typically address three levels of action:
Companies have direct control over the actions at levels 1 and 2. Coalitions, meanwhile, can serve as catalysts for progress at level 3—the ecosystem level. This requires a coordinated effort by businesses, one that rallies support from governments—national, regional, and local—as well as the finance sector and NGOs working at the source, especially in the most sensitive production landscapes.
To maximize the impact of a coalition, companies should take four steps.
Act, learn, and adapt. The threat from deforestation is too dire for companies to delay. Certainly, the commitments at COP26 to halt deforestation by 2030 are encouraging. However, what happens in the interim—and the degree to which forests are preserved or lost over that time period—will be as important as hitting that 2030 goal. With the UN calling for a “decade on ecosystem restoration,” companies in the food sector have a unique opportunity to take a leadership role in ending deforestation.
Those who have not yet joined a coalition should do so. And those who have should demonstrate leadership by not only accelerating their individual and collective commitments but also by rallying others. Companies should, for example, relentlessly encourage others in their ecosystems to join the fight against deforestation and share best practices.
At the same time, they should work with local and national governments, NGOs, local community groups, and regulatory authorities to scale up impact in production landscapes or jurisdictions. For their part, government and regulatory authorities should help companies by providing adequate legal and regulatory frameworks as well as guidance on the prioritization of initiatives and their implementation.
Raise the standards on certification and embrace transparency. Certifications, including those related to deforestation, are a good lever for improvement. However, they come with some significant limitations. For example, certifications often have differing standards and definitions; there can be significant variation in strictness among standards, and many certifications do not enforce traceability and transparency in the supply chain. Companies and key stakeholders should work together to address issues related to certification standards, including agreeing on common definitions and measurements of deforestation. And they should help suppliers understand the new standards and offer support to suppliers as they transform their businesses to meet them.
Coalition members should also work together to create transparency and define KPIs in line with their commitments, and report both on individual and shared KPIs. When it comes to individual-company level commitments, companies should set clear and rigorous targets, with concrete milestones and KPIs, and specify their implementation mechanisms. And they should be transparent on their progress—or lack of progress. According to the CDP, only about 66% of companies with a deforestation commitment had reported on their progress toward their deforestation commitments in the last two years. There is certainly room for improvement, especially considering companies’ relative progress in reporting on other areas such as climate change or water security. (See Exhibit 3.)
Aspire to a system-level response. Coalition members need to keep in mind that converting forests for agriculture has been a growth driver and a way to foster economic returns for rural communities in Latin America and Asia, and even in Europe and America, for decades if not centuries.
Consequently, actions that only target conservation and sustainable management of forests and restoration or rehabilitation of deforested areas are not enough to create a forest-positive future.
Coalition members also need to build well-rounded economic systems that will incentivize local populations to embrace the forest-positive vision. This means supporting their rights and helping them improve production yields—and their livelihoods—through regenerative farming practices. Companies need to work together with local communities to identify credible and attractive economic opportunities that offer a win-win alternative to deforestation.
Developing the right approach is a complex undertaking. Companies need to step out of their comfort zones and accept the complexity that comes with advancing system-level change.
Educate consumers and encourage awareness. Increasing consumer demands for sustainable products should not be perceived as a risk but rather as an opportunity to enhance a company’s brand image, create positive differentiation, and (in some cases) develop and launch premium products.
Companies can work within their coalitions to educate consumers about the threat posed by deforestation as well as the most promising solutions. That will help consumers understand and better value actions by companies that are leading the effort against deforestation. Companies should encourage consumers to be adamant about avoiding products and brands that drive deforestation and to be willing to pay a premium for products that are deforestation free. And companies and coalitions should share lessons along the way—in particular, those related to how to drive change at the production-landscape level.
Deforestation poses a significant threat to climate, the planet, and humanity. For companies in the food sector, reshaping their businesses and supply chains to be forest positive is not only a business imperative—one that will help them secure a sustainable supply of critical raw materials—it’s also an opportunity to strengthen ties with their consumers and other critical stakeholders.
To seize that opportunity, companies cannot simply go it alone. Food sector companies must find ways to drive change across the larger system in which they operate. A critical lever for doing that is the establishment of coalitions. Coalitions can scale and accelerate efforts to stop deforestation at both the sector and landscape level. Companies across the entire food production sector—consumer companies, retailers, and other participants—should leverage that potential to address a critical planetary challenge.