Companies and investors: no more waiting around to eliminate commodity-linked deforestation in your business and supply chains (Global Canopy)

Anna Triponel

February 24, 2023
Our key takeaway: Ending deforestation and land conversion are fundamental to meeting global net-zero climate change goals. See: the outcomes of COP27 on climate, COP15 on biodiversity and just about every other major report and conference on environmental and human rights topics of late. In short, protecting forests and natural ecosystems is a ready-made (and passive!) investment in avoiding the worst impacts of climate change over the coming decades. Yet companies and their investors are blowing past their time bound deforestation goals—or in some cases, not even setting them—which means lost progress towards net-zero emissions goals. All of this also means that human rights are likewise at risk: human rights risks and impacts are inextricably linked not only with deforestation impacts but also with broader climate and biodiversity impacts. Global Canopy provides recommendations for both the leaders and the laggards among companies and investors exposed to commodity-linked deforestation, including: recognizing deforestation as both a business and human rights risk; understanding how deforestation, climate change and human rights intersect; creating policies that link these topics; and setting a goal of 2025 for supply chains without deforestation, land conversion and the associated human rights impacts—and, this time, sticking to it. 

Global Canopy released the findings of its 2023 Forest 500 benchmark (February 2023), which tracks policies and performance on deforestation among 350 companies and 150 financial institutions:

  • “Partial action” on deforestation risks undermining net-zero goals: The report focuses on 350 influential companies that Global Canopy considers to be the most exposed to forest-risk commodities, as well as the top 150 investors in these companies. This year, Global Canopy’s assessment of company policies and practices found that "109 (31%) of the companies with the greatest influence on/exposure to tropical deforestation risk through their supply chains don’t have a single deforestation commitment for any of the commodities to which they are exposed.” There are 100 companies that do have a deforestation policy for each commodity, but Global Canopy found that only half of these are conducting real due diligence on suppliers and sourcing regions in line with their own commitments. For Global Canopy, this signals that too few companies are taking action on deforestation and that even fewer are fully acting on their commitments. On their part, “only 48 (32%) of financial institutions in the Forest 500 publicly recognised deforestation as a business risk.” Financial institutions who see exposure to commodity-linked deforestation as a risk interpret its importance in different ways: “[t]he majority of financial institutions in the Forest 500 see deforestation as a reputational risk (24), then financial risk (22) then material risk (18).” Ultimately, with our knowledge that deforestation is a significant driver of climate change, the current rate of progress across the private sector suggests that company and investor net-zero goals will soon be out of reach.
  • Little awareness of the links between deforestation and human rights risks: Another key finding of the report is that few companies are actively linking their policies and initiatives on deforestation to their human rights responsibilities. Deforestation is often closely linked with human rights impacts. For example, this could include community displacement to clear land for agriculture and development; a subsequent loss of livelihoods that may lead to even more deforestation risk; and attacks on human rights and environmental defenders. To this end Global Canopy added new indicators to this year’s benchmark that explicitly focus on the links between company policies and performance on deforestation and on human rights. However, “action on the human rights abuses associated with deforestation is failing across the board. Our assessments found that companies were not keeping up with the best practice for companies in forest-risk supply chains, and the average company’s score on associated human rights fell by 7 percentage points with the addition of new indicators.” Further, “companies that may be taking action on human rights issues in other areas are failing to recognise and act on the wide range of human rights abuses linked to deforestation they are helping to drive.” Without the recognition of the drivers linking human rights and deforestation, companies are likely to have major blind spots when assessing and taking action on risks related to both topics.
  • Steps to speed progress among companies and investors: The report advises companies and financial institutions to collaborate among themselves, as well as with government and civil society. For companies that are already taking action, Global Canopy recommends that companies “ensure commitments apply to all forest-risk commodities exposed to, including ambitious target dates of 2025 or earlier; Implement the commitments and crucially report on them transparently; Include remediation for any deforestation and human rights abuses post 2020 in line with AFi [Accountability Framework Initiative] guidance; Collaborate within and across supply chains and sectors to drive broader change; and Speak up and use influence to invite others to join collective action.” The report recommends that “laggards” should “recognise the risks of continued inaction (legislative, financial, operational); Set deforestation commitments, including conversion and associated human rights abuses, with a target date of 2025 at the latest and begin implementation; Include remediation for any deforestation and human rights abuses post 2020 in line with AFi guidance; and Seek out others who are on the same journey, connect and collaborate.” Financial institutions should: “Follow [Global Canopy’s Deforestation Free Finance Roadmap] and start from where you are; Set deforestation policies with ambitious target dates of no later than 2025 including conversion and associated human rights abuses; Acknowledge the risks posed through continued inaction; Start engaging with exposed clients and holdings and report on progress; and Join collective action to shift the sector.

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