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2019 Annual Report The companies getting it wrong on deforestation Annual Report 2019 | 2 Contents Annual Report 2019 | 3 As we start a new decade, we face a climate emergency and a crisis in nature, illustrated all too vividly by the 2019 fires in the Amazon. Ending forest loss is essential to address these crises, yet the main driver of tropical deforestation is demand for agricultural commodities. Major companies, financial institutions and complex supply chains, these companies governments signed up to ambitious goals can escape scrutiny simply by staying to end deforestation in commodity supply quiet. Companies that have been more Executive Summary chains by 2020, but these commitments transparent have faced greater pressure, have failed to galvanise meaningful action. yet many of these companies do not report on the progress they are making to achieve In fact, some companies have quietly their commitments. dropped previous commitments. The voluntary commitments to end tropical deforestation by 2020 have failed. Key findings: The Forest 500 annual assessment of the ● 140 (40%) of the most influential most influential companies and financial companies in forest-risk supply chains, institutions in forest-risk supply chains finds including internet retailer Amazon, that some leading companies have made Dutch supermarket chain SPAR and progress towards removing deforestation luxury fashion group Capri Holdings, from their supply chains. But the lack of any owner of Versace, Jimmy Choo action by nearly half of these companies and Michael Kors, do not have any and financial institutions is preventing the deforestation commitments. necessary sector-wide change. ● 75 (21%) companies, including Gap Inc, Too many companies are still not Starbucks and Adidas, have commitments acknowledging the deforestation risks in for just one of the commodities they their supply chains, or recognising their source or produce, but not for the others. responsibility to act. Often hidden in Executive Summary | Annual Report 2019 | 4 ● Some companies, including Yakult Financial institutions also have a and Danish Agro, have removed or responsibility to address their exposure to weakened previous commitments. deforestation risks in their portfolios. Despite Of the 157 companies which had high profile collective statements, including commitments to remove deforestation in response to the Amazon fires, the majority by 2020 or earlier, four removed of the most influential financial institutions in their commitment completely, and 18 the Forest 500 still do not publicly recognise companies, including Nestle, removed deforestation risks within their investments the deadline from their commitments. or portfolios. All of these institutions are exposed to deforestation risks, but even ● Of 210 companies with commitments, those that have made statements do not 100 (or 48%) do not report on progress necessarily have public policies in place for all implementation, including for the companies they finance. Unilever, McDonald's, Nike and Vans owner, VF Corp. While the latest Forest 500 assessment shows voluntary commitments are falling 40% ● The finance sector is ignoring the short, they remain an important tool to problem: 102 (68%) of the financial eliminate commodity-driven tropical of companies do institutions assessed, including deforestation. They can raise the bar higher not have deforestation BlackRock, Aviva and the Bank of New and faster than legislative measures, and in commitments York Mellon, have no deforestation places where environmental governance is policies. weak or being rolled back, as in Brazil, they can be critical in reducing deforestation. Given this voluntary commitment failure, civil society, legislators, and even some But if commitments are to be effective over leading companies have called for the coming decades, we will need to see regulatory action to ‘level the playing consequences for companies that fail to field’ and force action by companies on publicly acknowledge their exposure or deforestation risks. While moves towards responsibility to tackle deforestation, or that this in the EU are welcome, action in all fail to be transparent on progress towards major markets is needed to avoid leakage deforestation-free supply chains. and drive sector wide transformation. Annual Report 2019 | 5 Rising deforestation rates in 20191, and extensive fires in both the Amazon and Indonesia2 highlighted the on-going failure of companies to address tropical deforestation in agricultural commodity supply chains. Tropical forests are essential for stabilising the global climate3, yet they are being destroyed to meet global demand for commodities. From the palm oil used in everything from Global Canopy established the Forest 500 shower gel to chocolate, to the soy hidden in 2014 to hold the companies and financial Introduction in animal feed for fish, poultry, and cattle, institutions that have the greatest influence these commodities are found across on tropical deforestation7 accountable for supermarket shelves. their impact. In 2019, Forest 500 assessed 350 companies and 150 financial institutions Action to tackle deforestation in agricultural on their commitments to end commodity- supply chains has been long promised. In driven deforestation in their supply chains 2010 the Consumer Goods Forum adopted or financial portfolios. a 2020 deadline to zero net deforestation in commodity supply chains4. This was followed Now, as we reach 2020, the sixth annual in 2014 by the New York Declaration on Forest 500 assessment shows little Forests5 when signatory companies committed progress has been made. This report to eliminate deforestation from agricultural highlights the leaders, laggards, backsliders commodity supply chains by 2020. Many and breakthroughs among the companies companies also set their own goals. and financial institutions in the Forest 500 and provides insights on key gaps and Yet in 2020, forests continue to be cleared opportunities for more effective action to make way for agriculture, particularly for on deforestation. beef and leather, soy, palm oil, timber, and pulp and paper6. Introduction | Annual Report 2019 | 6 What do we assess companies and How do we select the financial institutions for? Forest 500? Forest 500 annually assesses 350 The Forest 500 is made up of companies and 150 financial institutions 350 companies and 150 financial on the strength and implementation of their institutions that are the most deforestation commitments8 and policies influential in forest risk commodity for all commodities they are exposed to. supply chains. Every other year This includes indicators which assess Global Canopy reviews which whether a company is being transparent companies produce, process, trade, about progress and implementation of use or sell the largest amounts of their commitments. palm oil, soy, beef, leather, timber and pulp. The largest financiers, The methodology also looks at commitments across loans, shareholdings and on issues including human rights, gender bondholdings of these companies equality, and inclusion of smallholders in 48% are then selected. supply chains. of companies do not In this way the Forest 500 is In 2019, we updated the assessment report on progress made up of the most influential methodology to strengthen our assessment companies and financial institutions, of companies’ deforestation commitments that have the greatest power to and to align with the Accountability end deforestation, if they were to Framework9. This has affected the scores take action in their supply chains of over 90% of companies, which lost points and portfolios. compared to 201810. Annual Report 2019 | 7 The Forest 500 2019 assessment of 350 companies found that despite some progress by a handful of leaders, most are still failing to take effective action to ensure that their supply chains are deforestation-free. Some companies are even dropping points for weakening commitments. How companies score points Companies are assessed on publicly available information on their commitments Companies to tackle commodity driven deforestation and their implementation of those commitments. Scores are broken down into the following sections: Overall approach out of 14 Commitment strength out of 36 Reporting and implementation out of 34 Social considerations out of 16 Total score out of 100 Companies are only assessed for the commodities in their supply chain and these scores are averaged to produce their overall score – with a total out of 100. All scores are also converted into a score out of five - with higher scores reflecting stronger commitments and greater transparency on reporting on progress. Companies | Annual Report 2019 | 8 Still no progress from Ambition differs across geographies: the laggards Companies based in Europe and North America are more likely to have Too many of the most influential companies deforestation commitments for at least Only are still not acknowledging the deforestation one commodity (North America 80%, risks in their supply chains, or that they have Europe 79%) than those based in Africa a responsibility to act. (50%), Latin America (33%), and Asia- Pacific (60%). China is the largest market ● 140 are laggards who do not have a for ‘forest risk’ commodities, yet only deforestation commitment for any of 20% of companies in China had a 20% the forest-risk commodities in their deforestation commitment for any of of companies in China had a supply chains. the commodities they source or produce. deforestation

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