How business leadership can turn the tide on deforestation

In December, the EU – the world’s single largest market – agreed on a groundbreaking deal to ban the import of goods that are linked to deforestation and forest degradation. Everyday staples, including paper, timber, coffee, cocoa, palm oil, rubber, beef, and a handful of other commodities, will have to pass strict checks to ensure forests weren’t damaged to create them.

Though the legislation has yet to be formally approved, it is a game-changer for forests. The EU is responsible for more than a third of the deforestation linked to crops and animal products traded internationally between 1990 and 2008. While governments in other countries have proposed similar policies, for now, the EU law is the first of its kind and is expected to transform supply chains. It is already creating a ripple effect across the global marketplace.

Of course, the law isn’t without its loopholes, with unclear forest degradation language around what constitutes “unsustainable” forestry operations and the omission of climate and nature-critical landscapes like peatlands, grasslands and wetlands that are also prone to commodity-driven degradation. There are also concerns over the limited scope of the product list, which failed to include forest-derived products such as tree-based fashion fabrics like viscose, rayon, and lyocell, which are growing quickly in use and responsible for more than 200 million trees being logged each year. Yet as we eagerly wait for the final language, one message is loud and clear: products that destroy, degrade ecosystems, and cause forest loss are no longer acceptable. Companies’ pledges to reach net zero emissions are no longer enough: nature needs to be on every company’s agenda.

The reality is that conserving nature is inextricably linked to stabilising our climate. Forests, wetlands, and other ecosystems help cool the earth’s surface and act as buffers against extreme weather, protecting houses, crops, water supplies, and vital infrastructure. Forests in particular are massive carbon sinks, absorbing a net 7.6 billion metric tonnes of CO2 per year, 1.5 times more carbon than the United States emits annually.

Despite the vital role of forests, only some corporations have incorporated nature into their climate agenda. One study commissioned by the United Nations-affiliated Race to Zero climate campaign analysed the environmental programs of 350 companies in the forestry, land use, and agriculture sectors that have significant impact on the world’s forests. It found that 148 of those companies have committed to net zero but judged that only nine were making progress on curbing deforestation at all.

So, what’s the solution? The answer is two-fold. Regulations will always be key because they require action of everyone and set the framework for what’s mandated. The EU Deforestation Legislation is a groundbreaking start, despite its limitations. At the country level there are pacesetters to follow – Costa Rica has implemented innovative policies which, after decades of deforestation, have helped improve forest cover to more than 50% of the nation and formally conserved or protected almost 25% of the country’s land.

However, this progress won’t scale without private sector engagement. In total, 90% of a brand’s footprint lies in its supply chains and raw material sourcing and ‘take, make, waste’ supply chains like the paper, packaging, and palm oil supply sectors have driven deforestation and forest degradation to date. Eliminating high-carbon and biodiverse forests from their supply chains is the single most important thing companies can do today to stem biodiversity loss and avert the worst impacts of climate change.

Doing so requires scaled systems for traceability, supplier engagement, stronger monitoring and response, focused sourcing, and prioritisation and scaling of low-carbon, forest-free or conservation-compatible alternatives. For years now, food companies have promised to eliminate deforestation in their supply chains voluntarily, but these pledges largely haven’t worked, in part because companies struggle to trace where their products come from. Adopting sustainability commitments is a lot easier than achieving them.

To make progress, businesses need to work internally and with external partners to ensure a vital forest-free supply chain and continually move to lower impact and/or circular solutions. For example, Unilever is working with technology partner Orbital Insight, to improve the visibility of its sourcing beyond direct suppliers and mills so they can map the origins of their soy to the municipality and farm level. Environmental nonprofit Canopy works hand-in-hand with companies like H&M, Inditex and LVMH to ensure their viscose fabrics and packaging don’t come at the expense of the world’s Ancient and Endangered Forests, and since its conception has shifted more than half of global viscose production out of the world’s high carbon forests and spurred commercial production of textiles made from low-carbon circular inputs such as waste textiles.

Though the challenge is massive, experience shows us it is moveable, and that inaction is costly from both a business and societal perspective. Insured losses from natural disasters reached a ten-year high of $42bn in the first six months of 2021, with experts saying that nature-based solutions could have significantly reduced these costs. With the impacts of the climate crisis starting to be felt and disrupting supply chains, more than half the world’s GDP – $44trn – is at immediate risk due to nature loss. However, with ambitious actions over the next 2 – 5 years, we can stall the worst of the losses and create positive outcomes. Nature-positive policies and investments could generate an estimated $10trn in new annual business value and create 395 million jobs by 2030 if corporations back their commitments with tangible actions, starting with their supply chains.

Temperatures are destined to rise unless we address our unsustainable relationship with nature. As companies turn their net-zero pledges into action, they must recognise that their progress on eliminating commodity-driven deforestation and forest degradation is critical to the solution and will ultimately get us to a nature-positive future, safeguarding the health of people and the planet for generations to come.