Businesses are unaware of deforestation supply chain risks

EMBARGOED UNTIL 01.01 CET 20TH NOVEMBER 2013
In a year of extreme weather events, commodity price spikes and supply chain disasters, CDP’s latest data from its forests program reveals that the business community remains largely unaware of the deforestation risks in their own supply chains, threatening shareholder value.

The commodity crunch: value at risk from deforestation.  

CDP’s forests program today launched its annual report at an event attended by HRH The Prince of Wales at The Royal Society in London.  It highlights the fact that most companies must do more to engage. On behalf of 184 investors with US$13 trillion in assets, CDP’s forests program, formerly The Global Canopy Programme’s Forest Footprint Disclosure Project, asks companies to disclose their exposure to deforestation risks through their use of five agricultural commodities that are responsible for most deforestation: palm oil, soy, biofuels, timber and cattle products.

This year the number of investor signatories requesting corporate information through CDP’s forests program more than doubled.  139 listed companies with a market capitalization of more than US$3 trillion, including 52 new businesses, responded to the investor call for transparency and accountability on this issue. Companies use CDP’s forests program to understand and address their exposure to deforestation risks.  The sector leaders disclosing the most comprehensive information can be found below.

Companies told CDP’s forest program that they face three key challenges:

- Lack of traceability in global commodity supply chains;

- Challenges with certification; and

- Regulatory uncertainty.

CDP assesses these companies on the quality and completeness of information provided. Businesses such as Marks and Spencer, Unilever, Nestlé and British Airways that have engaged with the program for 5 years continue to improve their scores. Across all companies, there was an average improvement of 27% this year, suggesting progress in managing deforestation risks.

However, few companies are yet to recognize supply and price volatility as a risk, customers assert no risk to their business from climate change and only one company recognized fraud as a problem. 

CDP’s chief executive officer Paul Simpson says: “Many companies do not understand the full complexity of deforestation risks in their supply chain.  But if no action is taken on this, there will be many more supply chain disasters like the UK ‘horse meat’ scandal to undermine shareholder value.  At CDP, we provide the world’s largest system to enable businesses to disclose and understand these operational, reputational and supply chain risks, while alerting investors to the value implications.

“CDP believes a common solution, via other organizations like the Tropical Forest Alliance 2020, will be a powerful driver of action.”

Adviser to Paul Polman, chief executive officer, Unilever, on post-2015, and as representing the Tropical Forest Alliance 2020, Gavin Neath says, “Deforestation does not need to happen.  We can meet even the most optimistic estimates of future demand for palm and soy and beef, without chopping down another tree.  The facts are absolutely clear on that.  More and more companies are coming to realize this and are taking the necessary action to eliminate deforestation from their value chains.  I value today's meeting hosted by HRH The Prince of Wales, in partnership with CDP, to shed more light on this complex issue.”

The commodity crunch: value at risk from deforestation is available on the CDP website, where the publicly available individual company forest responses can also be found.

Sector Leaders 

For media information:

Penny Cross//
director of communications // + 44 (0) 20 7415 7083 // +44 7919 074 926

Catherine von Altheer
// communications manager // +44 (0) 20 7970 5682 // +44 (0) 7794 003 903

Claire Barry // +44 (0) 7939 844 614