2Sustain

The UK Government Department for International Development has published a report that reveals how the supply chains of businesses involved in timber, beef, soy, palm oil, and biofuels production all contribute –both directly and indirectly –to deforestation.

Titled “Global Forest Footprints: How businesses around the world contribute to deforestation –the risks of inaction and the opportunity for change,” this 23-page document is part of the Forest Footprint Disclosure (FFD) Project and represents a starting point to help businesses begin to realize: a) the impact of their supply chains on forests, and b) the impact of deforestation on future earnings.

The report is loaded with facts and figures regarding deforestation. For example:

• Deforestation releases 7 billion tonnes of CO2 into the atmosphere every year. That’s the equivalent of total emissions of the U.S. or China.

• Researchers estimate that halting deforestation could save the global economy between $2 and $5 trillion per year in lost ecosystem services.

• The U.S. is the world’s largest importer of wood and paper products, amounting to 20% of global trade in 2006.

• The EU consumes about 16% of global palm oil production; 34% of Brazil’s beef, and 32% of its soy. Less than 5% of wood consumed in Europe is from certified sources and at least a third of its illegal timber imports come from South-East Asia. (Data like this serves to underscore the importance of  Jewson’s commitment to sustainability.)

• The flow of illegal timber into the global market has a negative effect on timber prices (7-16%, depending on the product). U.S. companies have lost an estimated $1 billion in revenue because of these price distortions and lost export opportunities.

As I have posted about before, the fundamental challenge to brand owners and retailers is in tracing their supply chains back to original sources. Unfortunately, most companies have little knowledge about the origins of the raw materials used in their supply chains –but, quite simply, this indifference has to change. If it doesn’t, the report also outlines three specific ways “peak deforestation” can create valuation risks for companies and investment portfolios:

1. Regulatory risk –New regulations can threaten supply, increase compliance risk, and increase costs.

2. Environmental risk –Peak deforestation will have directly impact commodity yields.

3. Reputation risk –Poor performing companies risk losing market share as consumers become increasingly aware of forest footprints.

“Deforestation is a global emergency, the importance of which the business world needs to wake up to. Billion dollar funding mechanisms and new regulations are being put in place by governments to curb emissions from forests and agriculture,” Andrew Mitchell, chair of the FFD Project steering committee, told Reuters.

According to the article,  the FFD Project will publish an annual report in January 2010 which identifies ‘best-in-class’ companies, as well as those seeking to manage their risk, and those that declined to make disclosures. That sure sounds like good reading –and a great sequel to the current report, which is available for download at http:// forestdisclosure.com/docs/FFD-Global-Forest-Footprints-Report.pdf