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FOREST FOOTPRINT DISCLOSURE Investment, Transparency and Corporate Efforts to Tackle Deforestation

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FOREST FOOTPRINT DISCLOSURE Investment, Transparency and Corporate Efforts to Tackle Deforestation Environmental Finance PUBLISHED IN ASSOCIATION WITH FOREST FOOTPRINT DISCLOSURE Investment, transparency and corporate efforts to tackle deforestation SPECIAL REPORT // OCTOBER 2011 Ecological_Networks _A4.pdf 1 2011/09/27 12:36:27 PM Environmental Finance INTRODUCTION FOREST FOOTPRINT S2 Why disclose? Disclosing information on the use of at-risk for- DISCLOSURE est commodities may be an additional burden Investment, transparency and corporate for overstretched companies, but investors efforts to tackle deforestation are demanding it for good reason, says James Hulse, while Charlotte Dudley talks to some of the companies who are leading the way DISCLOSURE S8 Forest footprint disclosure for beginners Where do you start when it comes to reporting on forest risk commodities? Liz Crosbie guides first-time responders through the process CAMPAIGNING S13 It’s good to talk Corporate brands are at great risk from un- anticipated activist campaigns. Roger Cowe sets out some tips on how to address or defuse campaigner concerns before it’s too late Environmental REGULATION Finance S14 The rules around the corner As environmental pressures around the world This special report first appeared with 22-24 Corsham Street, the October 2011 issue of Environmental London N1 6DR build, so too will the regulatory responses de- Finance Tel: 44 (0) 20 7251 9151 Fax: 44 (0) 20 7251 9161 signed to alleviate them. Companies would do This special report was produced in E-mail: [email protected] association with, and with the kind well to engage with voluntary initiatives and try assistance of, the Forest Footprint Annual subscription: £350/$595/€455 Disclosure Secretariat. (Reduced rates available for academic and mould the debate, says Katie McCoy Editor Mark Nicholls institutions and subscribers in developing Sales director Matthew Colvan countries – £175/$295/€225) Business development Brendan Poynton Environmental Finance (ISSN 1468-8573) NON-DISCLOSURE © Fulton Publishing Ltd, 2011. All rights reserved. No is published monthly by Fulton Publishing, part of this publication may be reproduced, stored in or registered office One Duchess Street, S16 introduced into any retrieval system, or transmitted, in The silent majority any form or by any means, electronic, mechanical, pho- London W1N 3DE. tocopying, recording or otherwise, without the written Many companies have not yet responded to the permission of the publisher. www.environmental-finance.com Forest Footprint Disclosure project. Charlotte Dudley asked why SPECIAL REPORT // OCTOBER 2011 Introduction Why disclose? Reason enough to disclose? Collecting and disclosing information on the for around 20% of global anthropogenic carbon emissions – more than the entire transport sector – and tackling this commodities driving deforestation can pose problem will help to mitigate climate change, as well as im- challenges for many companies – but, says James prove social and economic conditions for the many millions of people who rely on forests for their livelihoods. A recent Hulse, the effort is repaid in better management, study by the University of Leeds shows that standing for- ests absorb almost 40% of manmade carbon emissions every reduced risk and reassured investors year; so their role in climate mitigation is by far the cheap- est way we know of sequestering carbon. Deforestation it- self releases around 10.8 billion tonnes of carbon into the he Forest Footprint Disclosure (FFD) project is a rel- atmosphere, when forests are cleared for land conversion to atively new addition to the disclosure request arena agriculture, industry or human settlement. This is a major – the latest appeal from investors for companies to source of emissions and one we urgently need to reduce. Treport on an aspect of non-financial performance. FFD’s Large-scale agriculture produces most land use change, unique contribution is in linking deforestation activity and by converting forested land to growing areas for both food its implications for global climate change to the behaviour and buying practices of global companies. CASE STUDY We focus on the five key ‘forest risk commodities’ which are responsible for most deforestation: timber, soya, palm Mondi – shaping up for a sustainable future oil, cattle products (beef and leather) and biofuels. These commodities are in use in hundreds of thousands of prod- ucts and are embedded in the day-to-day operations of INTERNATIONAL PAPER AND pulp company Mondi Group says countless companies, from their use of packaging and the FFD project provides a valuable platform for commu- marketing materials through to the ingredients used in nicating and improving the image of the broader forestry product formulations and in the consumer goods bought sector. and sold. “The basic principle is that deforestation is a critical issue In addressing this issue, FFD acts on behalf of our current and it affects our business,” says Peter Gardiner, London- 64 endorsing investors, which manage more than $6 trillion based natural resources manager at Mondi. As companies in assets. Every month more investors join up. So why do compete for increasingly scarce resources, he believes that they take the trouble? It is because they want to understand any request to report on deforestation issues is “a ginor- how the companies they invest in or might invest in manage mous step in the right direction” and one that encourages commodity-related risks. This means that they can in turn greater transparency and builds awareness of the impor- make informed judgements about the risks they are hold- tance of responsible forestry. ing, and better understand whether there will be security in Gardiner points to the forestry industry’s recent ‘dark their sources of value through the coming decades, as the past’, when it became associated in the public mind with supply of raw materials comes under growing pressure in a poor environmental standards, and says that the FFD pro- resource-constrained world, and as international policies to ject offers an opportunity to “start communicating the posi- mitigate climate change reorganise political attitudes to land tive aspects of the forest products industry” and how it can use and land-use change. “shape up” to a sustainable future. Why such a focus on deforestation? It currently accounts S2 Environmental Finance Publications October 2011 www.environmental-finance.com CASE STUDY British Airways – beyond carbon and biofuels, so improving how organisations manage the procurement and supply chains of their commodities can AS ONE OF the world’s leading airlines, British Airways (BA) is perhaps more have a rapid impact. More sustainable management of agri- keenly aware than others of the vital link between greenhouse gas emissions cultural land itself improves the land’s store of carbon, lock- and its core business. In responding to the FFD – the only airline to do so in the ing in greater volumes of carbon. first year of the project – BA has consciously decided to expand on its carbon Clearly this is an important topic, but what is the internal commitment to consider its impact on deforestation. business case for disclosing? After all, sourcing data and fill- “The most obvious link for involvement is the carbon and for BA it’s the big- ing in any questionnaire takes time, so what does a company gest environmental challenge,” says Patrick Spink, environment executive at the get in return? UK-based airline. In addition to gathering data on behalf of investors, FFD But in “trying to look that little bit further”, disclosing to the FFD presents an actively helps companies along the road to working to best obvious way for BA to demonstrate its commitment to tackling environmental practice, and assists them in communicating this progress to issues. It also serves to enhance the airline’s corporate reputation among an the investment community. increasingly environmentally-aware customer base. FFD shows its support for disclosing companies by pre- In addition, disclosure has given BA a better insight into the intricacies of its senting each of them with a personalised company-level relationship with forest-linked commodities. report highlighting how they compare to their sector, and “We had an appreciation of the impact but we didn’t understand the details,” showing where they face risks or have opportunities to im- he says, adding that the project has “enabled ways to pro-actively take steps to prove their operations with a clear SWOT (strengths, weak- improve the sustainability of our supply chain”. nesses, opportunities and threats) analysis. Internal teams BA has policies in place to ensure that timber is purchased from sustainable sources, while it is endeavouring to embed sustainability across its catering, with a focus on sustainably-sourced palm oil and soy products. The airline is also tak- Forest Footprint Disclosure is a useful tool for ing a closer look at its relationship with renewable fuels, and is a member of the companies to assess and develop their internal Roundtable on Sustainable Biofuels. Spink also notes that the FFD has also provided a “fantastic arena” to share risk management on forest risk commodities knowledge with a diverse group of companies. Charlotte Dudley find this a useful device for benchmarking their efforts. We Patrick Spink, follow up with feedback sessions, ensuring that the process BA: “Trying to isn’t just about data exchange. The process is designed to look that little be collaborative, with FFD providing access to information
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