In January 2019, the European Commission released an open consultation for different stakeholders’ opinions on its “Deforestation and forest degradation – stepping up EU action” initiative. Sharing analysis of 80 companies’ forest risks across the four key forest commodities timber, cattle, palm oil and soy from our 2018 Europe Report, CDP provided its feedback and expertise. You can read the full response here.
We now welcome the European Commission’s announcement of 23rd July of a new set of actions to protect and restore forests. It lays out a definitive blueprint for the incoming new EU Commission and comes at a critical time when the level of action taken will determine whether we will meet the well-below 2 degree goal.
Nearly 450 companies and more than 50 governments have pledged to remove deforestation from agricultural supply chains. But with this milestone fast approaching, industry action so far has not been enough. As CDP’s recent forests report, “The Money Trees”, shows, the level of transparency and action from the largest brands in the world is lacking.
If deforestation continues at ‘business as usual’ rates, we could have phased out fossil fuels in 2015 but still see 1.5 to 2 degrees Celcius of warming by 2100.
Business as usual on forests is no longer an option.
Over 70% of European companies asked by their investors or customers to report critical forests-related data to CDP failed to do so in 2018. These are companies whose products and supply chains have a high impact on deforestation, like Ferrero Spa, Auchan, and major soy trader Louis Dreyfus.
Among the companies that do respond to CDP, not enough is being done. Close to a quarter of these companies have yet to begin taking action on removing deforestation from identified commodities in their supply chains, and nearly one in three don’t yet include forest related risks in their risk assessments.
Moreover, there is a substantial gap in 2020 commitments made by companies closest to production and those that control land. Only 16% of these companies have a 2020 forest commitment in place, compared to 86% of companies with no control over land. This means all market actors, policymakers and civil society organizations must develop incentives for supporting producers to commit to commitments set downstream.
While the private sector can’t solve this problem alone, our research is unambiguous: companies that produce, source and market products using critical commodities have not made meaningful progress.
It's vital that European companies in supply chains of agricultural commodities disclose their impact, set clear commitments and implement them so that faster progress is made.
That’s why the Commission’s next steps are key. Unless the EU sets clear policies to ensure deforestation-free supply chains, companies may not comply. The EU Commission should develop regulation and legally binding agreements to clean the market of deforestation.
So far, the regulatory and non-regulatory actions put forward and implemented by the European Commission have proved insufficient.
In 2003, the EU adopted its Action Plan on Forest Law Enforcement, Governance and Trade (FLEGT) to eliminate illegal timber trading with the EU.
However, trends in global deforestation are moving in the wrong direction: between 1990 and 2015 a net loss of 129 million ha of forest was registered, and 2017 was the second worst year on record for tropical tree cover loss. The high ambition level set by the European Commission in its previous communication “Addressing the challenges of deforestation and forest degradation to tackle climate change and biodiversity loss” did not deliver the envisioned results.
That’s why the Commission has itself said that its “objective to reduce gross tropical deforestation by 50% by 2020 is unlikely to be met [and] conservation and sustainable use of forests cannot be ensured by current policies”.
With the EU-Mercusor trade deal now agreed, risking greater deforestation through higher European demand for soy and beef or other deforestation-linked commodities, the EU must set clear policies to ensure deforestation-free supply chains and drive companies to act faster.
Science dictates that we have twelve years to save forests, so now is the time to implement transformative changes.
Setting policies for transformative change
As CDP recommended to the Commission during its consultation, there are many key policy areas to address to secure changes at the scale needed.
Because most important companies are so far failing to report key data, minimum disclosure requirements for large European companies must be strengthened, by implementing a fit-for-purpose framework for corporate reporting.
Disclosures on forests have to be comprehensive and consistent, so data can be used to support decisions by stakeholders determining which companies to buy from, invest in, or divest from.
Progress is under way through the new EU guidelines on Non-Financial Reporting.
Supply chains must be better managed. Nearly 30% of suppliers to companies reporting to CDP have yet to begin work on removing deforestation from the products they sell – an issue affecting public procurement where transparency is often lower.
On public procurement, we need to see sustainability criteria embedded into buying standards, as part of a drive to use this purchasing power to influence suppliers to better manage their forest impacts.
Second, deforestation and forest degradation issues must be integrated explicitly in the legislative and non-legislative measures of the EU’s Action Plan on Sustainable Finance.
Incentives that promote ‘grey’ agriculture and disincentives that discourage sustainable agriculture should also be removed. To achieve that, work must be done urgently with the investor community to require transparency about investments in high deforestation risk sectors. .
Linked to that, better conditions for higher levels of private sector financing need to be encouraged, such as mandating banks to work with private investors, and putting in place improved governance and anti-corruption mechanisms.
The Commission’s new announcement outlines its five main priorities and the necessary actions needed to achieve them:
- Priority 1: Reduce the EU consumption footprint on land and encourage the consumption of products from deforestation-free supply chains in the EU;
- Priority 2: Work in partnership with producing countries to reduce pressures on forests and to ‘deforest–proof’ EU development cooperation;
- Priority 3: Strengthen international cooperation to halt deforestation and forest degradation and encourage forest restoration;
- Priority 4: Redirect finance to support more sustainable land-use practices, and;
- Priority 5: Support the availability of, quality of, and access to information on forests and commodity supply chains. Support research and innovation.
The incoming Commission has a major opportunity to take these priorities and turn them into real action by revising and amending current legislation to strengthen measures to combat deforestation and forest degradation. It is through legislation that the EU’s ambition will be unambiguous, companies can clearly see the direction of travel, and the necessary transformation in the level of action on forests can happen.