A Quarter of Your Company's Revenue May Be Linked to Deforestation

A recent study conducted by the Carbon Disclosure Project (CDP), a leading NGO that facilitates carbon reduction and reporting with global companies, found that on average 24% of company revenue is dependent on one or more of the following four commodities that are directly linked to deforestation: palm oil, soy, timber, and cattle products, resulting in up to $906 billion in annual product turnover at risk. Despite their widespread connection to deforestation, only a fraction of these companies report any significant action taken to combat this issue.

More than 360 investors with $22 trillion in combined assets recently requested that companies disclose their efforts to combat deforestation through the Carbon Disclosure Project (CDP). Over 200 companies reported information in response. Although 72% of companies that reported their deforestation efforts claimed “that they have identified sufficient future sustainable supply across all forest-risk commodities,” the CDP estimates that many of these claims may be unwarranted; only 42% of these companies have evaluated the impact their strategies will have on key forests in five to six years.

In the coming years, it will become essential for companies to provide evidence of deforestation risk management efforts. Companies have continually reported various challenges when attempting to manage deforestation risks, including poor traceability systems and a lack of enforcement of national deforestation policies. However, companies that decide to escalate responsibility for deforestation risk management to higher levels report increased supply chain transparency, since the company is able to send a clear message to their external partners and suppliers. Additionally, these risk management efforts then become growth opportunities; companies that assess deforestation risks at a board room level are able to identify 19% more opportunities for business growth than those that choose not to.

Both investors and consumers are now scrutinizing companies’ supply chains more than ever, and increasingly considering a company’s sustainability progress when making investing and purchasing decisions. With nearly a quarter of all global trade linked to deforestation, companies will need to combat deforestation in their supply chains in order to demonstrate their commitment to environmental issues, and to ultimately ensure their own sustainable growth.

Source Intelligence’s platform and database can easily connect you to your supply chain so that you can pinpoint areas of risk and develop actionable mitigation strategies. Click here to learn about how you can start to manage deforestation risks in your supply chain.