Deforestation

Global deforestation is at a very high level, losing five million hectares a year or the equivalent of 15 football pitches of forest every minute. The election of the new Brazilian President Jair Bolsonaro in January led to a rapid reacceleration in Brazil; the Brazilian Space Agency found that deforestation had increased by 88% in June this year relative to last. In the past forty years, the Amazon rainforest has lost about 18% of its territory.

More than 40% of forest loss is directly related to agricultural commodity production, particularly palm oil, soy, cattle and rubber. Deforestation is hugely damaging for the climate, biodiversity, as well as for indigenous people. This is even more relevant at a time when the UN organization IPCC (Intergovernmental Panel on Climate Change) recently launched an alarming report on land use. The problem, according to the IPCC, is that humans exploit soil resources too intensively with heavy agriculture practices that cause important land degradation, releasing significant CO2 into the atmosphere from soil that had historically absorbed it.

Source: Bloomberg

Companies that are the largest purchasers of commodities causing deforestation are responding to the growing attention to these issues, but there remain challenges to gaining full transparency to the source of these products. Many companies and governments have pledged to remove deforestation from agricultural supply chains but a high proportion still struggle to achieve this according to a recent CDP report.

For this reason there is much enthusiasm for the proposed new framework from the European Commission on deforestation. It looks to install and investigate ways to regulate supply chains of companies, laying out five priorities for fighting the degradation and destruction caused by commodities imported by the EU. An important suggestion from the proposal is to establish standards and certification schemes that help to identify and promote deforestation-free commodities. These certifications should help guide conscious consumers in their shopping decisions, and help to avoid general boycotts such as those called for of all palm oil products in the UK, Norway and France.

Evidence from addressing other major issues such as war diamonds, illegal logging, modern slavery, have showed that governmental regulations have been essential to tackling urgent problems that companies struggle to face alone. Thus, implemented in an efficient way, the measures proposed by the European Commission could support and accelerate action from companies leading the way on responsible sourcing and increase pressure on the laggards.