Non-profit warns not enough concrete action being taken by consumer goods giants to tackle deforestation and commodity risk across their supply chains
The world's leading consumer goods giants now face an "impossible" task to meet an industry-wide pledge to deliver zero net deforestation by next year and are guilty of veering far off-track towards meeting longer term sustainable development goals for their supply chains, new research has revealed.
In 2010, the Consumer Goods Forum - which includes global brands such as Unilever, Kraft, and Mondelez among its 400 members - agreed a target to end net deforestation by 2020. But analysis published today by environmental non-profit CDP shows a raft of major companies will fall well short of that target.
The investor-backed CDP analysed 22 companies in the consumer goods sector, including fast food retailers and manufacturers of food and personal and household goods. It found only a fraction had taken concrete steps to address deforestation in their supply chains, despite the high profile industry-wide target.
Only eight companies were found to be deploying comprehensive forest and land-use management practices such as regenerative agriculture and soil management, while only three companies achieved 100 per cent sustainable certifications for the palm oil they use, and just one managed the same for timber, according to CDP.
The findings lay bare the scale of the underperformance towards the UN's 2030 Sustainable Development Goals (SDG), including SDG12 on sustainable production and consumption, which includes a host of targets to encourage more responsible use of resources and better management of supply chains.
CDP said even leading companies such as Nestle and Proctor & Gamble have had to acknowledge that they will fall short of the zero net deforestation target for next year.
Ignacio Gavilan, environmental sustainability director at the Consumer Goods Forum, conceded that while companies had made progress towards addressing deforestation, there remained significant challenges and the organisation was now reassessing its approach.
"We should have been faster to recognise the limitations of narrow supply chain interventions. We are doing so now, and will be more agile in assessing our impact and optimising our efforts moving forward," he said. "The singular focus on certifications incentivised us all to think small. We want - and need - a more transformative approach that will get us to a more forest positive future."
Yet consumer goods firms face significant reputational and physical risks to their businesses from failing to address deforestation and other environmental threats in their value chains, CDP warned. It pointed to changing consumer trends, indicating increasing demand for transparency and sustainable sourcing, which it said the consumer goods sector was particularly strongly exposed to due to its close proximity to consumers.
Further compounding these reputational risks, the sector also faces risks from disruptions and price volatility in the supply chain, especially in Asia and South America, where forest-risk commodities such as palm oil, soybean, and cattle play key roles in consumer products, in addition to paper and pulp for packaging, CDP explained.
Leaders in the sector such as Unilever, L'Oreal and Mars have recognised these risks and are driving competitive advantage through product innovation - such as plant-based meat alternatives - and establishing sustainable agricultural practices direct with shareholders, CDP said.
But others, such as Tyson Foods and Kraft Heinz, came bottom of CDP's league table due to exposure to land-intensive cattle and "weak performance" on forest-risk commodities exposure.
Ling Sin Fai Lam, senior research analyst at CDP, urged consumer goods firms across their supply chains to swiftly take action to deliver full and deep transparency in order to hold producers of raw materials to account, and thereby provide consumers with full sourcing and product visibility.
The proximity of these firms to consumers then presents the opportunity for them to drive behavioural change, shape markets into which they sell, and ensure the relevance and longevity of their brands, she added.
"From plant-based meat alternatives to the move away from plastic in favour of paper-based packaging, consumer trends are impacting global supply chains and ultimately our forests," said Lam. "This report shows consumer goods companies' responsibility does not stop at transparency and certification."
She added that there were encouraging signs that some pioneering businesses were taking steps to better interact with their supply chains and enhance sustainability across their full value chain. "Smallholders manage 80 per cent of the farmland in sub-Saharan Africa and Asia, and we are seeing companies actively looking at transformative innovations to shorten the supply chain, working directly on smallholder initiatives," she said. "With increasing pressure to feed a growing population and protect the planet, companies and their customers are looking beyond their headquarters to the field."
But Gavilan stressed that consumers, policymakers and NGOs also all had a key role to play in combatting deforestation, not just companies alone.
"Other sectors, like governments need to do their part, including stepping up enforcement against illegal deforestation. We know policies such as respecting and protecting indigenous land rights and promoting decent working conditions are key to stopping deforestation," he said. "The consumer goods industry is committed to working with governments, the Tropical Forest Alliance and other stakeholders toward shared action and progress on supply chain sustainability and green economic development.
"We believe our work will enable the industry to meet the changing needs of consumers while securing a forest positive future."