OCCASIONAL PAPER Corporate commitments to zero deforestation An evaluation of externality problems and implementation gaps Peter Jopke George C Schoneveld OCCASIONAL PAPER 181 Corporate commitments to zero deforestation An evaluation of externality problems and implementation gaps Peter Jopke Particip GmbH George C Schoneveld CIFOR Center for International Forestry Research (CIFOR) Occasional Paper 181 © 2018 Center for International Forestry Research Content in this publication is licensed under a Creative Commons Attribution 4.0 International (CC BY 4.0), http://creativecommons.org/licenses/by/4.0/ ISBN 978-602-387-073-8 DOI: 10.17528/cifor/006827 Jopke P and Schoneveld GC. 2018. Corporate commitments to zero deforestation: An evaluation of externality problems and implementation gaps. Occasional Paper 181. Bogor, Indonesia: CIFOR. Photo by Nanang Sujana/CIFOR Aerial footage of palm oil and the forest in Sentabai village, West Kalimantan CIFOR Jl. CIFOR, Situ Gede Bogor Barat 16115 Indonesia T +62 (251) 8622-622 F +62 (251) 8622-100 E [email protected] cifor.org We would like to thank all funding partners who supported this research through their contributions to the CGIAR Fund. For a full list of CGIAR Fund Donors please see: http://www.cgiar.org/our-funders/ Any views expressed in this publication are those of the authors. They do not necessarily represent the views of CIFOR, the editors, the authors’ institutions, the financial sponsors or the reviewers. iii Contents Abbreviations v Acknowledgments vi Executive summary vii 1 Introduction 1 2 Background 3 2.1 Regulating high forest-risk commodities 3 2.2 The emergence of corporate zero deforestation pledges 5 2.3 Risks and implementation challenges 7 3 Methods 9 3.1 Sampling approach 9 3.2 Development of a hierarchical framework 9 3.3 Data collection and analysis 11 4 Analysis 13 4.1 Drivers of (non-)adoption 13 4.2 Commitment to zero deforestation 14 4.3 Commitment to managing social and environmental externalities 21 4.4 Overall performance 24 5 Opportunities for better leveraging the sustainability potential of zero deforestation commitments 25 6 Conclusion 27 References 29 Annexes 33 1 Hierarchical framework 33 2 Individual company scores – palm 36 3 Individual company scores – soy 37 4 Individual company scores – wood 37 5 Individual company scores – cattle 37 iv List of figures, tables and boxes Figures 1 Deforestation attributable to high forest-risk commodities in 2011. 4 2 Target year for ZDC achievement. 15 3 Forest definition adopted in ZDCs. 15 4 ZD demands on ZDC suppliers. 15 5 Commitment to full certification. 17 6 Target traceability level or certification level. 18 7 Monitoring mechanisms adopted. 19 8 Transparency commitments. 19 9 Commitment to independent verification. 20 10 ZD scores, by commodity. 20 11 Commitment to managing externalities. 21 12 Externality implementation mechanisms. 22 13 Externality management scores, by commodity. 24 14 Overall scores, by commodity. 24 Tables 1 Overview of principles and criteria used to evaluate ZDCs. 10 2 ZDC adoption rates of Forest500 companies by value chain segment and geography. 13 3 Adoption rates by value chain segment and commodity. 13 4 Probit regression results – ZDC adoption determinants. 14 Boxes 1 Forest protection under FSC 10 2 Scoring scheme 12 v Abbreviations CDP Carbon Disclosure Project CGF Consumer Goods Forum CSR corporate social responsibility FPP Forest Peoples Programme FSC Forest Stewardship Council FDI foreign direct investment GCP Global Canopy Programme GHG greenhouse gas GVC global value chain HCV high conservation value JA-ZD Jurisdictional approach to zero deforestation MPF Ministério Público Federal PEFC Programme for the Endorsement of Forest Certification RSPO Roundtable on Sustainable Palm Oil RTRS Roundtable on Responsible Soy TFT The Forest Trust TNC transnational company ZD zero deforestation ZGD zero gross deforestation ZND zero net deforestation ZDC zero deforestation commitment vi Acknowledgments This research was conducted with the financial Paolo Cerutti and Emily Gallagher for the valuable support of the UKAID-funded KnowFOR comments made to a previous version of this (Forestry Knowledge) program and the CGIAR document and to Sophia Gnych for granting access research program on Forests, Trees and Agroforestry to transcripts of interviews she conducted with (FTA). The authors would like to acknowledge some of the major zero deforestation committers. vii Executive summary Reducing the footprint of high forest-risk could result in indirect deforestation. Additionally, commodities (oil palm, soy, wood and cattle) – in many companies may be required to narrow their the context of mounting concerns over climate supply base to a smaller number of producers who change – has featured prominently in global have the capacity to conform to more stringent environmental governance discourse. In the late production standards in order to reduce transaction 2000s, this led to civil society groups putting costs. This may then further exclude smallholders increased pressure on major commodity producers from participating in profitable commodity chains. in Northern countries to eliminate deforestation from their supply chains. In 2010, a newly This research critically examines the ZDCs of established industry platform, the Consumer 50 ‘powerbrokers’ in order to identify potential Goods Forum (CGF), responded to this challenge implementation gaps and externality problems that by having its members collectively pledge to demand greater attention going forward. Through work towards achieving zero net deforestation interviews held with major ZDC adopters and an (ZND) for high forest-risk commodities by 2020. analysis of corporate policies and strategies using Many leading commodity producers, traders, a hierarchical framework, this paper evaluates manufacturers and retailers soon followed suit ‘what’ companies are committed to and ‘how’ with individual time-bound commitments. This companies are planning to deliver on those culminated in the 2014 New York Declaration on commitments. These are divided into commitments Forests, through which 190 different organizations, related to achieving ‘zero deforestation’ (ZD) including 57 transnational companies (TNCs), and commitments related to the management of committed to eliminating deforestation from the ‘negative externalities.’ agriculture and forestry sector by 2020. Our analysis, firstly, shows that while most These zero deforestation commitments (ZDCs) ZDC adopters formulated strong ZDCs, there is have the potential to make significant long- significant room for further refining implementation term contributions to curbing deforestation and mechanisms. We find that weak commitment to reducing global greenhouse gas (GHG) emissions. full transparency, notably disclosure of sourcing With influential European and American consumer locations and suppliers, and to independent goods companies predominantly driving this verification, undermine ZDCs’ transformative trend, cascade effects are anticipated throughout potential and ability to hold companies accountable the supply chain, as upstream producers will be for their failure to comply with their ZDCs. required to align their practices to more stringent Nevertheless, efforts to integrate ZDC principles procurement standards imposed downstream. into existing certification systems, such as SAN However, delivering on their promise without and RSPO NEXT, do highlight that the necessary producing unintended side effects will be no easy implementation mechanisms are becoming feat. Because of the voluntary and self-regulatory accessible to ZDC companies, even though buy-in nature of ZDCs, for example, implementation gaps into those systems has, to date, been weak. may emerge. Moreover, ZDCs may also produce externality problems. Commitments will inevitably Results also give reasons to question the level of lead to increased demand for non-forested lands, influence powerbrokers wield over the policies and which may exacerbate conflicts with other socially practices of other actors in the chain. For example, and environmentally significant land uses such as almost three-quarters of the sampled companies farmlands, grasslands or wetlands. This, in turn, did not demand that their suppliers also embrace viii company-wide ZDCs, thereby enabling suppliers commitments to full voluntary certification, to sell commodities that have not (recently) especially in the wood and oil palm sectors. This involved deforestation to ZDC companies, whilst relates in particular to commitments to applying at the same time selling commodities that did free, prior and informed consent (FPIC) principles involve deforestation to non-ZDC companies. to land acquisitions and protection of high This type of parallel marketing is further facilitated conservation value (HVC) ecosystems. However, by widespread reliance on certification using only few sampled committers explicitly sought to mass balance systems, which allows uncertified support and maintain marketing relations with producers to participate in certified chains. This smallholders in their supplier base, to address reduces the producer incentive to fully comply food security risks (e.g. arising from, for example, with sustainability standards and the capacity of increased demand for non-forestland), to conserve downstream companies to exert influence over the forested land banks (e.g. by not off-loading these policies of individual companies. Equally, since to producers