Supply chains are coming under increasing scrutiny. Was the beef in your burger sourced from the Amazon, where forest is being cleared to make way for cattle ranches? Was the pork in your sausage fed with soy imported from plantations which are destroying Paraguay’s rich wildlife? Some consumers are starting to ask these questions. And the answers matter.
Yet a supply chain report from the Economist Intelligence Unit finds that almost a third of the 800 companies surveyed had reduced their focus on supply chain responsibility in the last five years.
No More Excuses – Responsible Supply Chains in a Globalised World asked 800 executives in key industrial economies about issues they faced in their supply chains. Four out of five of those questioned described their supply chains as responsible, yet when it came to specifics, the report found “insufficient attention” was being paid to issues such as climate change - fewer than one in four companies said they were addressing this.
Recognising the risks of deforestation
Recognising the environmental risks in a company’s supply chain is critical – and nowhere is this more important than on the issue of deforestation. Destroying and degrading forests not only exacerbates climate change, it also affects water supplies, biodiversity, communities and crucially, the availability of future resources.
Some two thirds of tropical deforestation are driven by demand for land for agricultural commodities, particularly for global markets. Palm oil, soy, timber, pulp and paper, beef and beef-related products come with the biggest deforestation warning. Cocoa, coffee and rubber also play a part.
“Brands and other large buyers hold significant influence over their supply chains and should do more to exert this influence” No More Excuses, ECIU, 2017
Global Canopy’s Forest 500 project ranks the 250 companies whose activities have the greatest influence on deforestation. Some are aware of the risks of deforestation. Last year’s ranking showed 34 /250 companies had a zero deforestation policy in place, but these were usually only in relation to palm oil or soy supply chains. The analysis also found that progress on implementation was inadequate.
Deforestation is not an inevitable consequence of growing consumer demand as the best performers in the Forest 500 ranking show. They have recognised the business case for sustainably managing their supply chains and are seeking to implement the polices to eliminate forest impacts.
Flexing financial power
Shareholder engagement can have a positive influence on company behaviour, as a recent analysis by Global Canopy’s Forest 500 project found. But it also found few major investors used their influence. Indeed, the 2016 Forest 500 ranking found that only 3% of investors and lenders had policies committing to remove deforestation across all the key supply chains.
No More Excuses also found that financial investors are “missing opportunities to positively influence supply chain responsibility”. Investors that promote clear policies on deforestation can help to drive more sustainable behaviour, and can even provide incentives.
The challenge of complex supply chains
Half of the executives interviewed for No More Excuses list supply chain complexity as the number one hurdle to improving responsibility. Global supply chains distance the end product from problems at source, and companies do not always know where they are buying from.
Global Canopy is working with SEI to improve transparency in commodity supply chains. Trase currently allows soy importers, for example, to track supplies back to source areas in Brazil and to map these against deforestation rates. Trase also contains data on beef and soy in Paraguay and Argentina, and will start to map palm oil supply chains from Indonesia later this year.
Tools such as Trase provide companies with an opportunity to get to grips with the complexities and the impacts of their sourcing policies. Some, perhaps encouraged by consumer and civil society pressure, are seeing the need.
Aside from the reputational risk, there is also growing evidence of a business case to act, as the report highlights:
“Even without a media scandal, excessive resource depletion and climate change impact will financially damage a growing number of firms in coming decades”.
Companies and investors need to look to their supply chains and recognise the business case for upping their game. Deforestation rates are rising, global consumer demand is increasing, and climate change impacts are increasingly being felt. Yet some businesses seem to have decided that this is not their problem. They must think again. We all depend on the world’s forests and we all have an interest in keeping them alive.
Photo caption: Pigs are often fed a soy-based diet, photo: CAFNR via flickr.com, creative commons licence