Forest 500: Tackle deforestation across more commodities in 2022

By Helen Burley, Global Canopy

The COP26 climate talks in November 2021 raised expectations on the need for a concerted effort to address emissions arising from agriculture, forestry, and other land use. World leaders from 141 countries signed the Glasgow Leaders Declaration on Forests and Land Use, committing to halt and reverse forest loss and land degradation by 2030.

To deliver on that pledge, governments must seek to drive change across the economy – with action from companies and from the finance sector an essential part of this.

Despite this public recognition of the central role of eliminating commodity-driven deforestation in meeting emissions reduction targets, the latest Global Canopy Forest 500 ranking shows that neither companies nor financial institutions are showing sufficiently rapid progress toward effective action on deforestation.

Global Canopy assesses the 350 companies with the greatest influence on deforestation – the companies with the greatest exposure to palm oil, soy, beef, leather, timber, pulp and paper – and the 150 financial institutions that provide the most finance to those companies. Using indicators aligned with the Accountability Framework, we look at the commitments they have made on deforestation and related human rights issues, and also on how those commitments are being implemented.

This year’s report – drawing on data collected over the second half of 2021 – found little sign of progress compared to the previous year. One third of companies do not have any commitments in place to address deforestation, and three out of four do not have a commitment for all of the commodities they are exposed to.

Commitment coverage also varies between supply chains. While 72% (142) of companies in palm oil supply chains have a commitment to deforestation-free palm oil supplies, just 30% (26) of companies exposed to beef have a commitment to deforestation-free beef.

Commitments are an important step but are only meaningful if they are implemented. Of the companies that have made commitments, 71% (165) have a process in place to monitor compliance. Only 42 of those companies require their suppliers to have deforestation– or ecosystem conversion-free standards equivalent to their own commitment for at least one commodity. As with commitment coverage, scores for reporting and implementation are far lower for soy, beef and leather than for palm oil.

Despite the increasing number of banks and investors signing up to net zero climate commitments, financial institutions are even further behind. Just one in three of the 150 financial institutions that we assessed was found to have a deforestation policy, with financial institutions channeling some US$5.5 trillion into the companies most linked to deforestation.

Just 11 of the financial institutions assessed have a deforestation policy covering all of the commodities they are exposed to (palm oil, soy, cattle products, timber products). No financial institution had a strong policy on deforestation that covered the conversion of natural ecosystems and associated human rights, specifically land rights, labour rights, and free, prior and informed consent.

The commitments made at COP26 provide a much-needed spur for greater action by companies and financial institutions. Indeed, some of the key agricultural companies and financial institutions made their own pledges at the UN climate talks.

Resources are available to help them do this. The Accountability Framework provides companies with clear guidance on the steps they can take to address deforestation, conversion, and human rights risks in supply chains. The Framework identifies best practices for every step a company needs to take to reduce its deforestation footprint, including policy setting, risk assessment, supply chain traceability, supplier management, monitoring, and reporting.

These same steps can also be used by companies to understand their Scope 1 and 3 land sector emissions, using the Accountability Framework in tandem with tools such as the GHG Protocol’s land sector guidance and Science Based Targets initiative Food, Land and Agriculture guidance.

And new guidance is now available for financial institutions to help them take the same journey. The Finance Sector Roadmap, which is aligned with the Accountability Framework, sets out a phased approach to achieving deforestation-free portfolios by 2025, mapping out the key steps needed at each stage of the route as well providing a comprehensive list of tools, data, and resources.

New legislation in the UK and European Union will also help drive that change, with new due diligence requirements for companies importing forest risk commodities, although disappointingly, the UK legislation only covers illegal deforestation, and is unlikely to cover all commodities.

We cannot deliver on the ambition of the Paris Agreement – or the pledges made in Glasgow – without halting deforestation in company supply chains. The guidance on how to do this is available and the data is rapidly improving. Companies and financial institutions need to act now on deforestation to meet their climate commitments.

Helen Burley is Communications Lead, Corporate Performance, at Global Canopy.