A study by the Carbon Disclosure Programme (CDP) suggests almost a quarter of company revenues depend on deforestation-linked commodities.
These commodities are cattle products, soy, palm oil and timber products. The findings are based on disclosures from 365 investors worth US $22 trillion (£17 trillion).
‘We found this year that a substantial share of corporate income depends upon commodities that are linked to deforestation risk,’ explained Katie McCoy, CDP’s head of forests. When we carried out our analysis, we found that – on average – about a quarter of companies’ revenue are dependent on commodities that have been linked to deforestation.’
She said there was a clear message for companies to take the issue of deforestation in their supply chain very seriously. ‘It is having an impact on their potential to generate revenue.’
Ms McCoy added: ‘Another key message that is coming though is that while companies are confident that they have a secure and sustainable supply of these commodities, our analysis suggests that companies are overlooking how deforestation impacts are going to affect their growth.
‘In this era of increased scrutiny, we are asking companies in order to capitalise on opportunity and minimise risk, they really need to engage more meaningfully with their supply chain and, in some cases, more deforestation risk into the boardroom.’
She said that taking ‘deforestation into the boardroom’ would help shift the paradigm into a long-term issue, making it more sustainable.
At present, a third of companies that responded to CDP’s request for information said that the issue of deforestation was not being discussed at boardroom level.
‘[It] affects the way risk assessments in the company are conducted, making sure that this issue is part of the mix.’
She added that that by increasing levels of transparency and disclosure from their suppliers would be beneficial.
‘This means recognising that the biggest risks and opportunities are to be found in the supply chain, and we would ask companies to disclose the relevant information, and also to collaborate with those suppliers to implement change,’ she told BBC News.
‘Finally, we are asking companies to work sectorally. This is where the boardroom level and working with the supply chain comes in.
‘So they are working with “peer companies” across the sector. We are also asking them to also work with customers, governments and civil society as well, because there needs to be an enabling environment in order for companies to deliver.’
The assessment by the CDP found that regulatory signals in landmark agreements such as the Paris Agreement placed decarbonisation of economic and financial activity, and that a sustainable post 2020 economy relied on the shift away from deforestation.
‘Companies are moving forward, the manufacturers and retailers that have reported that they are working with their suppliers and that they have far greater levels of traceability and they are more significantly more like to identify supply chain related opportunities.’
Ms McCoy added that she was hopeful that the corporate world was heading in the right direction.
She said: ‘On a more positive note, we have never seen transparency be more important and have companies actively asking for transparency, and we are pleased that more investors are signing up to our programme.
‘Since last year, we have had 20% more investors interested in this issue. I am encouraged about how many companies are seeing the value in being transparent about how they tackle this issue.’