Deforestation for palm oil plantations in West Kalimantan, Indonesia. Image:
E-commerce giant Amazon, fast food company Wendy’s and Asian probiotic drinks maker Yakult are among the famous brands that are still ignoring the deforestation risk in their supply chains caused by demand for key commodities including soy, beef and timber, said environmental group Global Canopy.
Demand for six key commodities, which also include palm oil, leather and pulp and paper, cause vast tracts of tropical forest to be cleared each year.
Yet, nearly half—242 out of 500—of the leading companies that produce, trade, use or sell the six commodities, as well as their biggest financiers, have made no public commitment to end deforestation, said Global Canopy.
On Wednesday, the group released its latest annual Forest 500 report, which tracks 350 companies and 150 of their biggest financiers.
Indonesian conglomerates with palm oil interests top Forest 500 report
Indonesian conglomerates Astra International and Harita Group took the top two spots in the latest Forest 500 report for their commitments to tackle deforestation, and implementation of the commitments. Astra International had the highest score of 73 points out of 100, which shows that even the top scorers have significant room for progress, said environmental group Global Canopy.
Harita Group, whose palm oil division is Bumitama Agri, took the second spot with 71 points, while Nestle was third with 70.
The previous year, Japanese consumer goods firm Kao Corporation was tops, Nestle was second and Astra International emerged third. The assessment methodology was updated and strengthened this year, Global Canopy said.
The companies are assessed, using publicly available information, on the strength of their deforestation commitments, reporting and implementation, and social considerations such as human rights and inclusion of smallholders in supply chains.
Astra International is a conglomerate with interests in the automotive, financial and other business segments. It is a subsidiary of Singapore-listed, Hong Kong-headquartered Jardine Matheson Holdings, which is itself a diversified conglomerate.
Astra International grows and processes palm oil through its subsidiary Astra Agro Lestari, said Global Canopy. The latter is Indonesia’s third largest palm oil grower by landbank and controls plantations in Sumatra, Kalimantan and Sulawesi, according to a recent sustainable finance report by several NGOs.
But Astra Astro Lestari has not been without controversy. The sustainable finance report noted that although it prides itself as one of the most professionally managed corporations in Indonesia, “its plantation business in Central Sulawesi faces social conflict and legality issues, which represent compliance, operational, reputational and legal risks for financiers”.
An area of tropical forest greater than the size of the Netherlands was lost to agriculture each year between 2014 and 2018, said Global Canopy, a United Kingdom-based group that targets market forces driving tropical deforestation. Last year, fires raged in the Amazon, largely in areas that had been deforested in recent years.
Companies that have not made any public commitment to end deforestation include Hong Kong conglomerate CK Hutchison, which has the international store brands Superdrug and Savers. Fashion brands include United Kingdom-based Capri Holdings, which has high-end labels Versace, Jimmy Choo and Michael Kors in its portfolio. Switzerland’s Bata, the world’s leading shoemaker by volume with a significant presence in Asia Pacific, was also found lacking.
Food companies made up 114 of the 350 companies tracked in the report. According to Global Canopy, Tyson Foods of the United States and Japan’s Bertolli (sold in 2014 by Unilever to the Mizkan Group), Kikkoman and Yakult are among those without a commitment to end deforestation.
“Many of the world’s best-known brands are complicit in the destruction of tropical forests, which undermines our ability to combat global climate change,” said Sarah Rogerson, an author of the report. “They are turning a blind eye to deforestation caused by demand for the commodities they use and failing to publicly recognise their responsibility to act.”
The report added that these companies, shielded by complex supply chains, often escape scrutiny by staying quiet.
Some have no-deforestation commitments for only one commodity but not for others.
Sixty per cent of assessed companies in Asia Pacific had a commitment for at least one commodity. This was lower than companies based in Europe and North America (80 per cent), but higher than Africa (50 per cent) and Latin America (33 per cent).
Companies from China, the largest market for commodities with deforestation risk, did not fare well. Only 20 per cent of them had a commitment for at least one commodity they sourced or produced.
The latest Forest 500 report shows that voluntary commitments by companies on deforestation are failing, Global Canopy concluded. But they remain an important tool, such as in places where environmental governance is being rolled back.
Many companies—such as the 400-member Consumer Goods Forum—imposed a 2020 deadline to end deforestation but some have quietly dropped the commitment, the group noted.
Backsliders and greenwashers?
While 80 companies are improving their commitments, a similar number are weakening pledges or reducing reporting.
Backsliders include food giant Danone, which Global Canopy said removed a commitment to engage with non-compliant suppliers within specified timeframes, as well as agribusiness firm Cargill, which removed the 2030 deadline from its policy to have deforestation-free agricultural supply chains.
The report also questioned if some companies could be greenwashing. Noting the “disconnect” between the strength of their commitments, and quality of reporting and implementation, Global Canopy singled out clothing manufacturer Aditya Birla (which supplies to brands like Forever 21, Ted Baker and Ralph Lauren), retailer H&M, home furnishings giant IKEA, and coffee company Starbucks.
“Transparent reporting on activities…such as monitoring systems and grievance mechanisms, and on progress towards commitments is essential for accountability,” the report stated.
‘Financiers should use their leverage’
Meanwhile, the list of “laggard” financial institutions with the most influence on forest-risk supply chains was lengthy. Global Canopy said 102 of the 150 financial institutions were laggards with no policies to address deforestation. They include four of the world’s five biggest asset managers: BlackRock, Vanguard, State Street and Fidelity Investments, which have a combined US$17.6 trillion in managed assets.
Some of the institutions branded as laggards were also identified in a different report last December on sustainable finance reforms in Indonesia, as being complicit in Indonesia’s 2019 haze crisis caused by illegal burning. They include Malayan Banking, Industrial and Commercial Bank of China, CIMB Group and Bank of China. The report in December was a joint effort by non-governmental organisations Rainforest Action Network (RAN), TuK Indonesia, Riau Forest Rescue Network (Jikalahari), Friends of The Earth Indonesia (WALHI) and Netherlands-based research firm Profundo.
In both reports, the authors said financiers have leverage to transform companies’ behaviour. Measures can take the form of incentives or sanctions, said Global Canopy. “The most influential financial institutions are failing to use their leverage,” it said.
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