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Sleeping giants of deforestation - the 2016 Forest 500 results and analysis

The third annual rankings and analysis of the Forest 500 companies, countries and financial institutions have been published today in GCP's report, 'Sleeping giants of deforestation'.

by Christina MacFarquhar

The full report is available here

It asks the fundamental question: to what degree are the most influential actors in the global palm oil, soya, cattle product and timber product supply chains committing to address deforestation? Through a systematic analysis of the 250 companies, 150 financial institutions and 50 national and subnational jurisdictions selected for inclusion in the Forest 500, the report reveals not only whether these powerbrokers have established policies to address deforestation, but also whether their policies are robust enough to produce meaningful change on the ground. It finds that: 

Despite signs of improvement among leading companies, the rate of progress by most companies is inadequate to meet 2020 targets to address deforestation. 

  • Entire sectors lack action: The cattle industry continues to be the largest commodity driver of deforestation yet only 26% of companies operating in the cattle product supply chain have any policy to address environmental impacts, with even fewer (16%) including adequate commitments specifically on deforestation.
  • The leaders continue to lead, and the laggards to lag: While a handful of companies have published new policies or improved existing ones, the majority of companies in the Forest 500 have weak policies or no policies at all.
  • The rate at which new company policies are emerging is too low to meet 2020 targets, with an increase of only 5% in the last three years in the number of companies with policies for all commodities to which they are exposed. Many of these policies also lack robustness, omitting key environmental and social factors, processes for publicly reporting progress, or parts of the companies’ supply chains.

Demand for unsustainably produced commodities remains uncurbed by major importing countries, while producer countries are increasingly committing to address deforestation within their borders. 

  • Four countries that produce forest risk commodities have now established new national commitments on avoiding deforestation in priority forest types (including natural, intact or high conservation value forests) with two of these established in the last year. These countries are Colombia, the Democratic Republic of Congo, Ivory Coast and Liberia.
  • However, major importing countries such as China and India have yet to address their role in the demand for commodities driving deforestation. While the EU and US have policies such as FLEGT and the Lacey Act to cover illegal timber sales, these importing jurisdictions also lack policies that address the full range of forest risk commodities. 

Strong policies from a small number of leading financial institutions are yet to be matched by their peers and client/investee companies. 

  • Only four investors and lenders (3%) in the Forest 500 have policies committing to remove deforestation arising from their financing of companies in all four supply chains. A larger number (nearly a quarter) have policies that apply to one or more supply chains.
  • Among those financial institutions with forest policies, many continue to finance clients and investees without such policies, indicating a lack of policy implementation. The 2016 assessment finds that 75% of lenders with forest policies have made loans - totalling over US $64 billion - to companies that have not published their own policies. 

The report concludes that, if 2020 goals for addressing commodity-driven deforestation are to be met, company, government, and financial sector action requires great improvement in the following ways: 

  • Company policies need to address the largest drivers of deforestation such as cattle products and soya, and not just the commodities receiving the most public attention - timber products and palm oil.
  • Companies need to close current policy loopholes by expanding policies to address all forest risk commodities in their supply chains, and to do so in all geographies from which these commodities are sourced, not just those under the most scrutiny.
  • To address the impacts of growing demand, and to increase market signals for sustainable commodities, major importing countries can establish policies committing to sustainable sourcing.
  • To create financial and market incentives for sustainable production, financial institutions need not only to establish forest policies for all four commodities, but also to clearly communicate their policies and expected behaviour changes to their clients and investees, such as through direct engagement.