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Deforestation in Brazil

What does good look like? - Forest 500 assessments

This insider perspective explores how companies are assessed for the Forest 500 rankings and the lessons offered by those companies that score well.

by Bronwen Fraser and Chloe Rollscane

More than half of the companies most exposed to deforestation risk in agricultural supply chains have made commitments to address the problem, yet as the latest Goal 2 report from the New York Declaration of Forests makes clear, forests are still being felled to make way for cattle pasture, soy, palm oil and timber. And as the report also highlights, many of these companies do not publish progress reports, making it hard to know what, if anything, is being achieved.

Forest 500 identifies and ranks the most influential companies, and financial institutions in forest risk commodity supply chains. By objectively identifying and ranking these 500 powerbrokers on a yearly basis, the Forest 500 holds them accountable for their actions. As the Forest 500 team works through the annual task of assessing the companies and financial institutions, patterns of good and bad practice emerge. This insider perspective explores which companies are doing well, and how those which are lagging behind could learn from their example.

Why do the assessments matter?

The level of transparency about what companies are doing to deliver on their commitments to prevent deforestation varies dramatically. Clear, publicly-accessible information is vital if companies are to show that they are sourcing deforestation-free commodities. Having knowledge of this data - what proportion or volume are deforestation free and what is still exposed - is crucial for companies who are far removed from production, as well as supporting consumers to make more informed decisions, and investors to assess and mitigate risks of exposure.

How easy is it to find this information? 

The Forest 500 assessment uses publicly available information which has been published on the websites of the most influential companies in forest risk supply chains.  

No two companies’ websites are the same - and the complexity and layout of a site can potentially make information difficult to find. By using key-word searches, as well as meticulously reading through web pages and documents, the team finds and assesses company commitments. Companies that present their stance on deforestation via a dedicated webpage, annual report, or policy document make it easier to understand the potential areas of risk their supply chain may contain, and any positive impacts or statements they make. 

Defining commitments - good and bad practice

As well as making policies accessible, companies need to ensure the contents of their policies are clear and precise. The highest scoring companies in the latest Forest 500 assessment, such as Kao Corp, outline exactly what they require of their suppliers. For example, rather than a simple reference to achieving ‘full traceability’ in its palm oil supply chain (which would not score in the Forest 500 methodology), PT Astra International clarifies that it traces its palm oil back to the plantations where it was grown. Aside from scoring highly, the company increases visibility within supply chains by publishing map locations of each mill and plantation, exposing and highlighting gaps and opportunities for improvement.

Companies also need to be clear on the timeframes they are working to. Setting a clear target date for achieving zero deforestation in the supply chain, as L’Oreal has done, makes it clear that a company is holding itself to account for meeting its goals, and has a time-bound plan in place to do so.

What “good” looks like for palm oil
Figure 1. What “good” looks like for palm oil

Do policies extend far enough? 

Some companies exclude certain commodity sources from their deforestation policy, such as suppliers below a certain size, or certain sourcing regions. Or their policy might only apply to some products, such as Costco’s ‘sustainable’ line of furniture. Companies need to be transparent about exactly what their commitments cover, ideally through a clear statement explaining and justifying any exclusions.

Whilst deforestation occurs at the source, the risks associated with it ripple throughout the entire supply chains of many industries, therefore companies should address this risk comprehensively. The Forest 500 assessment gives higher scores to companies such as Precious Woods which apply strong commitments on zero deforestation to all of their suppliers - regardless of size, location, or position within the supply chain - and to all of their products.

What “good” looks like for scope
Figure 2. What “good” looks like for scope

What about social issues? 

Human rights violations, such as forced labour, child labour and encroachment on indigenous lands, are also key risks in forest-risk commodity production. This is why the Forest 500 assessment includes multiple social indicators, assessing companies for their commitments to uphold human rights in their supply chains, such as ensuring gender equality, and requiring the Free, Prior and Informed Consent of local and indigenous communities. 

However, many companies only specify ethical requirements for their own offices and operations, ignoring risks they may be exposed to through their suppliers. To fully address these risks and to score full points in the Forest 500 assessment, like Nestlé, companies must apply stringent human rights principles throughout their supply chains and ensure these policies are published.

Figure #4 - What “good” looks like - Progress
Figure 3. What “good” looks like - Supplier Code of Conduct

How comprehensive is reporting?

Having clear deforestation commitments is only the first step. The Forest 500 assessment looks for evidence of companies actively monitoring and engaging with their supply chains, showing progress towards implementing their policies effectively. As demonstrated by Unilever, reports should be quantifiable, defined by date or year, and be frequently updated.

It is critical that companies provide some form of verification that their progress reporting is accurate. Whether via auditing, third party certification, or geo-spatial monitoring, it can provide assurance to stakeholders that a company is operating in line with their deforestation commitments. An example of the way they can do this is by using certification schemes such as the Roundtable on Sustainable Palm Oil (RSPO). This particular tool creates a unified standard across companies and provides one way of verifying the volume of palm oil brought, produced, or traded (subject to national interpretation and adaptation).

The 2019 Forest 500 assessment found that only 36% of companies in forest-risk supply chains were reporting on progress. By publicly updating progress on commitments, companies are enabling others to benchmark performance against their industry peers, and allowing NGOs and consumers to hold them accountable too. Although this does not yet enable third-parties to verify their progress, taking the step to self-report is key in the shift to greater transparency of entire supply chains including supplier lists and the location of plantations.

What “good” looks like - Supplier Code of Conduct
Figure 4. What “good” looks like - Progress

How do we move forward? 

Sifting through websites and documents will always be a time consuming process, but by being as transparent as possible, companies allow the Forest 500 team to understand what they are doing, highlight progress and shine a light on those leading the way.