Deforestation accounts for 15 per cent of global carbon emissions, and the biggest driver is the demand for palm oil, soy, beef, leather, timber, and pulp and paper. The environmental organisation Global Canopy took a look at the 350 companies that produce, use, trade or sell the largest amounts of these commodities, and the 150 biggest banks, institutional investors and pension funds that finance them.
The majority of companies driving trade in these commodities, and the banks and institutional investors that finance them, have inadequate policies on deforestation or none at all, Global Canopy states in its annual Forest 500 report released in January 2022, warning that companies and financial institutions which are failing to act now will struggle to implement the new due-diligence requirements in force or in the pipeline in the UK, EU and US.
It finds that a third of companies have no policies to ensure their products are not driving deforestation. Another 38 per cent of companies lack comprehensive deforestation policies covering all forest-risk commodities. Many ignore soy, which can be a hidden ingredient in meat, fish, dairy and eggs, because it is commonly used in animal feed. Moreover, none of the companies assessed have a comprehensive approach to protect human rights.
Financial institutions are providing a total of USD 5.5 trillion to the 350 companies with the most exposure to deforestation-risk in their supply chains, but they are not using this leverage to drive change, Global Canopy states. Nearly two thirds have no commodity-specific policy to address deforestation risks in their portfolios.
Even financial institutions committed to climate action are failing to recognise the link with deforestation and undermining their targets. The report found that 22 of the 150 had made net zero climate pledges but all continued to finance companies with no commitments to end deforestation, supporting them with a total USD 66.9 billion.
Governments are now introducing a requirement for companies to carry out checks to ensure there is no illegal deforestation in their supply chains. In November 2021, the Environment Act made this law in the UK and the government is consulting on the full scope of the measures. Similar due-diligence legislation is in the pipeline in the European Union and the US.
Read more at Global Canopy website