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Forrest Footprint Disclosure - Annual review - 2012



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  • 1. Forest Footprint Disclosure Annual Review 2012 1
  • 2. Contents Chairman’s Introduction 5 Climate, forests and land use change 6Forest Footprint Disclosure Project Food Security 8(FFD) is a special project of the If we halt deforestation, will the world starve? 10Global Canopy Programme, initiatedin 2008. FFD engages with private How are governments addressing deforestation at the international level? 12sector companies to ask them to The Journey 14disclose their current understandingof their ‘forest footprint’ based on 2012 Timelines: Introduction 17exposure to five key commodities –soy, palm oil, timber, cattle products 2012 Timeline: Cattle Products 18and biofuels – in their operations 2012 Timeline: Soy 20and/or supply chains. All of thesecommodities have the potential to 2012 Timeline: Palm Oil 22be sourced from recently deforestedland. FFD goes beyond simple 2012 Timeline: Biofuels 24disclosure and acts as a catalyst 2012 Timeline: Timber 26for investors to really engage withthe companies in their portfolios Results of the Disclosure Request 2012: Introduction 28on this issue. In 2012, the Forest Results of the Disclosure Request 2012: Sector Leaders 29Footprint Disclosure Request wassent to 450 international companies, Sector: Agricultural Products 30100 of which responded. Thisfourth Annual Review describes Sector: Food & Staples Retailing 32the findings of the Disclosure Sector: General Retailers 34Request based the responses ofthe 100 participating companies Sector: Industrials, Construction & Autos 36and provides some context on Sector: Media 38the current issues and concernssurrounding forest risk commodities. Sector: Oil & Gas 40 Sector: Packaged Foods & Meats 42 Sector: Paper & Forest Products 44 Sector: Personal Products & Household Products 46 Sector: Textiles, Apparel & Luxury Goods 48 Sector: Travel & Leisure 50 Sector: Utilities 52 Forest Footprint Disclosure: The End and the Beginning 54 Signatories 56 Acknowledgements 59 References 60
  • 3. Chairman’s IntroductionAndrew W. MitchellIn June 2012, Brazil announced it spoke of their commitment to tacklehad achieved a 76% reduction in deforestation in a new way – byits deforestation rate against 1990 cleaning up the supply chains thatlevels1 - an incredible achievement drive it. And in June 2012, at theand close to their target of an 80% Rio+20 Earth Summit, the Consumerfall by 2020, eight years ahead of Goods Forum and US Governmentschedule. In terms of tonnes of announced that they would workcarbon, this equates to a reduction together to reduce deforestation bygreater than the total achieved by promoting sustainable supply chains.all 30 nations participating in the These are important developmentsEU Emissions Trading Scheme which could, over time, rid supply(EU ETS) over the same period2. chains of unsustainably grown ‘forestFurther, a recent calculation by risk commodities’ (beef, soy, palmDr Dan Nepstad of the Amazon oil, timber and biofuels), which areEnvironmental Research Institute responsible for the majority of(IPAM) has shown that, per tonne global deforestation5.of carbon saved by preventing Andrew W. Mitchelldeforestation, climate mitigation FFD is ideally placed to help Chairmanaction in Brazil was 875 times companies make this vital transitioncheaper than efforts to reduce and for them to showcase theiremissions under the EU ETS3. progress, but to do this with the whose funds can, often unwittingly, urgency needed, FFD must scale facilitate the erosion of irreplaceableThese two facts clearly demonstrate up its action too. When the Global natural capital. The launch of thethe scale and value of the opportunity Canopy Programme, an NGO I Natural Capital Declaration6 atoffered by halting deforestation in founded in 2001, decided four years Rio+20 by the UNEP Financethe fight against climate change. ago to launch a disclosure project Initiative, Global Canopy ProgrammeAnd for those who remain unsure for forest footprints, we were given and the Sustainability Study Centerthat human-induced climate change marvellous encouragement and of the Brazilian Business Schoolpresents a risk, the World Bank’s support from the Carbon Disclosure FGV, attracted the endorsement ofreport “Turn Down the Heat – Why Project (CDP). Indeed we modeled 40 banks, investors and insurers.a 4°C warmer world must be our project on theirs. We were This was a firm step in the rightavoided”, released at the UN Climate delighted therefore to announce direction, as was the commitmentnegotiations in Doha, should make in June 2012, with the full support by the Government Pension Fundfor convincing reading4. of FFD’s principal donor, the UK of Norway- the world’s largest - to Government, a merger between review its portfolio of investments forBut of course reducing rampant FFD and CDP. their impacts on forests from 2012.deforestation, the ultimate purposeof the Forest Footprint Disclosure This strategic merger will be It’s clear that as the world economyProject (FFD), is not just about completed by February 2014, and is re-engineered financially, a quietcarbon. It is a global imperative in the will result in the world’s largest and revolution is also underway in itsmove towards more responsible and most comprehensive natural capital relationship with the natural capitalsustainable use of natural capital. disclosure system, covering the upon which the corporate and theThis underpins wealth creation in climate, water and forests. GCP will financial sector depends for theirthe world economy and the security then take on a new role as principal sustainable future. It is not aof water, energy, food and health for advisor on forests to CDP. moment too soon.millions of people. Over the next decade, I see the For a complete list of references,Just before Doha, I joined a meeting exclusion of deforestation from please see page 60.on curbing deforestation hosted by global supply chains gatheringHRH the Prince of Wales at Clarence considerable pace, led by far-sightedHouse in London. At this meeting, companies. This action needs also toministers and business leaders be embraced by the financial sector, 5
  • 4. Climate, forests and land use changeDr Gillian KayOver the last century, the global Because of the longevity of Climate change and variability 2060s12. It is valuable to understand degradation15. In drought conditions,average surface temperature previously-emitted GHGs in the Climate change has the potential to how climate change may affect event fires set for forest clearance burnrose by 0.75 °C and the decade atmosphere, as well as some inertia have severe consequences for the magnitude and frequency, but the larger areas. Forest fires, drought2000-2009 was the warmest in the within the earth system, there is world’s tropical forests. In Amazonia, extremes of today also give insight and logging increase susceptibilityobservational record. Global average already a commitment to some some climate and vegetation into the functioning of the integrated to further burning while deforestationtemperature provides a consistent climate change into the future models project a shift in biome from system and may provide lessons in and smoke can inhibit rainfall, whichmeasure for monitoring purposes, it regardless of how emissions evolve, tropical forest to seasonal forest how to minimise impacts and improve exacerbates the heightened fire scientifically valuable in testing the making adaptation necessary. If or savanna by the end of the 21st resilience.response to changing greenhouse emissions continue, greater global century driven by regional climate In tropical forests, mitigation andgases (GHGs) and has been a focal warming may be expected. There change – increases in temperature Land use change adaptation strategies can bepoint for policy makers engaged in is strong impetus to understand and decreases in rainfall – in the If the threat to forests by climate unified. Reducing deforestation willmitigation negotiations, but it remains how climates around the world may absence of direct deforestation7. change is uncertain and distant help to maintain a more resilienta somewhat abstract quantity. respond to this, what impacts may However, it is important to note then the threat by land use change forest under drought conditions, beWhile the global average response be felt and how human action may that there are large uncertainties is far more immediate and certain. they associated with a graduallyto increased concentrations of modify both the concentrations in these projections of climate The magnitude of land use change warming and drying climate, climategreenhouse gases in the atmosphere of GHGs and their impacts. change, particularly in rainfall. Some is unknown, but detailed scenarios variability, or local changes broughtis a rise in temperature, regional and Increasingly, these questions are Dr Gillian Kay models produce smaller reductions of land use change have been about by land use change.local responses to the warming are being explored at local to regional Met Office Hadley Centre, UKlikely to be much more complex. scales, or in relation to specific For a complete list of references, sectors such as agriculture “The most pessimistic of these scenarios bring please see page 60.Recent extreme events such as or industry. global anthropogenic emissions4.droughts, severe storms and heat Moreover, less forest equates reductions in forest cover of around 40% by thewaves have focused attentionon some of the profound and far Forests in the climate system As the recent droughts have shown, to a reduced carbon sink, thus further enhancing atmospheric middle of this century.”reaching impacts that weather and climate has influence over forest concentrations of GHGs.climate can have upon natural and health and ecosystem functioning. in the region, while others project developed, based on factors suchhuman systems. For example, However, this is not a unidirectional Forests also interact with the increases8. In addition, processes as plans for road building andthe heat wave in Russia in 2010 process and it is well established atmosphere to influence the regional such as CO2 fertilization may be very adherence to limits set throughhad severe impacts on mortality that forests affect the climate water cycle. In Amazonia, the important but are not well enough policy decisions. The mostrates and reduced crop yield by system through direct and indirect moisture is transported in from the understood, particularly for tropical pessimistic of these scenarios bring~25%1, with consequences for the mechanisms. Atlantic Ocean, where it rains and regions. Some experiments have reductions in forest cover of aroundRussian economy and global grain then is returned to the air by the shown that increasing concentrations 40% by the middle of this century13.prices. The droughts in Amazonia in At the largest, global scale is the role forest through evapotranspiration. of atmospheric CO2 are beneficial2005/2010, among other impacts, they play in the terrestrial carbon As much as 50% of the basin’s to forest productivity, but these Deforestation, climate and firedegraded the forest, facilitated the cycle through the sequestration rainfall is recycled by the forests5. benefits are eventually overridden The effects of land use changespread of fire and dried up rivers – and storage of carbon3. The Some research has suggested that by the negative effects of the climate may be compounded because athe transport network of the region clearing of forests and associated if around 40% of the Amazon is changes9. broken forest is more vulnerable cleared, it will be unable to generate to ‘edge effects’ such as strong enough rainfall to sustain itself, Climate varies naturally on a number winds, and especially forest fires14.“Recent extreme events such as droughts, severe storms leading to a positive feedback loop of more forest loss and less rainfall6. of time scales and so ‘extremes’ are naturally occurring events. However, Climate change or variability acting on a region already fragmented and heat waves have focused attention on some of the a growing body of research has found by deforestation could have larger There is a range of drivers of that the risk of extremes has already effects than on continuous forest. profound and far reaching impacts that weather and change acting upon the tropical been increased by climate change10, climate can have upon natural and human systems.” forest ecosystems and hence upon the ecosystem services they and is likely to continue in the future11. Droughts in Amazonia tend Forest fragmentation opens up the forest to points of ignition, the generate. Climate and land use to be related to tropical Pacific and majority of which are supplied by change place stress upon the Atlantic Ocean temperatures. One human activity. If the conditions in– which had many implications land use change emits GHGs forests, and synergies between study estimated that the probability of these regions become more suitablefor populations and businesses into the atmosphere, and recent these stressors have the potential to an Atlantic-related drought like that of for fire ignition and spread, then firesupported by the functioning of the estimates are that deforestation drive greater changes. 2005 will increase from a 1-in-20 year has the potential to play a potentforest ecosystem2. accounts for approximately 15% of event to a 9-in-10 year event by the role in further deforestation and6 7
  • 5. Food SecurityProf Richard Tiffin and Dr Adam WebbThe increased attention that is quantities of food are available on the route to ensuring food security. Investment in a range of areas, fromgiven to food security is commonly a consistent basis, food access is This demands a careful appraisal smart agriculture to land restorationattributed to the dramatic increases delivered when individuals have of the available options in order to systems and new methods ofin food commodity prices which sufficient resources to obtain identify those where the benefits of food production, is required towere experienced in 2008: appropriate foods for a nutritious increased food production are not meet these challenges in theaccording to the FAO food price diet, and food use recognises that achieved at a greater cost in terms future. However, such investmentsindex, in 2008, commodity prices ensuring energy and nutrient intakes of the delivery of other must draw upon expertise fromwere more than double their are adequate depends in part on ecosystem services. a range of backgrounds rangingaverage level over the period from factors such as feeding and cooking from biology to social sciences.2002-2004. Whilst prices reverted practices as well as the way in which While GHG emissions and loss of Structures to pull together suchto lower levels in 2009, subsequent food is allocated between individuals ecosystem services are key things expertise and make it available toincreases have seen them return in a household. to address for food security, there other organisations are currentlyto 2008 levels. The reasons behindthese increases are debated and The fact that the world’s populationinclude factors such as stocks is predicted to exceed nine billion “Investment in a range of areas from smart agriculture,being at historically low levels and in 2050 is well known, but it isdrought in major grain producing important to recognise this growth Prof Richard Tiffin Dr Adam Webb to land restoration systems and new methods ofareas. Whilst the debate around thefactors which cause particular food is not uniform across regions or between the urban and rural sectors. Director Centre for Food Security Research and Enterprise Manager Centre for Food Security food production, is required to meetprice spikes might be unresolved, The most significant demographic University of Reading University of Reading these challenges in the future.”what is now widely accepted is change over the next forty years isthat the “perfect storm” famously predicted to be a major shift fromidentified by the UK government rural to urban populations in the less feed for livestock. As land is already drawbacks. While deforestation is a are also other areas that need to be being developed and should bechief scientist, John Beddington, developed countries. As populations scarce - in areas where agriculture key component of GHG emissions considered. As has been discussed, commended. This will ensure thatwill threaten the ability of the planet become more urbanised the is a realistic proposition, the rate of related to food security, it is not food security is not only about food the latest and most comprehensiveto feed its population as we move composition of the diet is expected land use is at least 70% - this can the sole emitter of GHGs in this availability but also food access information is accessible whenthrough the twenty first century. to change. Evidence of this is lead to deforestation, the loss of area; agricultural production itself and ensuring that people’s diet is making investments, and will furtherThe perfect storm describes already becoming apparent in FAO natural habitats, and an increase in contributes to the emissions of healthy and nutritious. The tendency help to guarantee that the economicthe combination of increasing food supply data for China, which greenhouse gas (GHG) emissions, greenhouse gases (GHG). For for societies to become more and social considerations for foodpopulation, increasing competition indicate that cereal consumption has currently estimated to be more than example, the Intergovernmental urbanised is generally associated security are met at the same timefor energy and water resources and been more-or-less static since the one billion tonnes annually from land Panel on Climate Change (IPCC) with a change in diet that has been as the science and technologyclimate change. (2009) estimate that agriculture termed ‘the nutrition transition’. This considerations. accounts for 10-12% of total global highlights the fact that guaranteeingWhilst increasing food production “[Food security is] when all people at all times have anthropogenic GHG emissions. nutritious food for a healthy life isneeds to be part of the response tothe perfect storm, modern definitions access to sufficient, healthy safe, nutritious food These include nitrous oxide (45%), which stems largely from the not confined to avoiding malnutrition but in some cases will increasinglyof food security rightly emphasise to maintain a healthy and active life.” application of synthetic fertiliser, be concerned with what might bethat simply producing enough food methane (54%), from enteric termed over-nutrition. When it is alsofor everyone is only part of the fermentation and manure and recognised that many of the healthchallenge. The definition which has early nineties but at the same time use changes. This fact, together carbon dioxide (0.6%) from energy related problems in the developingbeen most widely accepted since meat consumption has increased, with the increasing pressure from use. As a result it is increasingly world are already associated withit was proposed at the World Food rising from 30.2 kg/capita/yr in 1992 alternative land uses, means that recognised that traditional methods the quality of the diet, for exampleSummit in 1996 is: to 58.2 kg/capita/yr in 2009. While a there is little or no prospect of to increase food production from vitamin A deficiency is widespread “when all people at all times shift towards an urbanised diet is not increasing the amount of land that is existing land may not be ideal in many parts of the world, the have access to sufficient, healthy necessarily detrimental, increased available for food production. This in in the future. This conclusion is complexity of ensuring the fact that safe, nutritious food to maintain a meat consumption can lead to turn means that we will only be able strengthened when it is recognised food security extends way beyond healthy and active life” several negative consequences that to feed the growing population by that a lot of the intensification in food just providing sufficient foodwhich leads to the identification must be addressed. Increases in using the existing agricultural land production that has occurred in the is apparent.of the three dimensions of food beef consumption have resulted in more intensively. past has come at the expense of thesecurity: food availability, food an increased need for more grazing wider ecosystem. This has led to the It is therefore clear that addressingaccess and food use. Food land, as well as more land for the However, intensive use of existing concept of sustainable intensification the food security challenge isavailability requires that sufficient production of soy, a widespread agricultural land also has its being increasingly emphasised as a multifaceted undertaking.8 9
  • 6. If we halt deforestation, will the world starve?Dr Sonja VermeulenMaking sure that we will continue to yet another 5%, meaning that food does not have much impact either in worldwide GDP over the samehave enough to eat is at the heart production releases as much as on how much people eat or on period. For wealthier households,of our shared ambitions to mitigate 29% of our global emissions. Plainly the balance of plant and animal this translates into a falling share ofclimate change. The United Nations we cannot make any serious dent in products in their diets. income spent on food. But poorerFramework Convention on Climate our emissions without the agriculture households in poorer regions doChange (UNFCCC), the convention and food sectors doing their share. The second study, by Alla Golub and not reap the benefits. For them,that has guided us through the highs And much of that share must be colleagues, paints a slightly more food expenditure takes up an everand lows of 18 rounds of annual through reducing deforestation. complex picture. These authors greater portion of household income.negotiations, states upfront that model the impacts of a globalthe reasons to stabilise emissions What does that mean for food carbon tax, roughly equivalent What conclusions can we draw fromare threefold: “to allow ecosystems security, both now and for the future to a universal carbon market, as these studies about how reducingto adapt naturally”, “to enable nine billion? Let’s dub this the Kyoto payments go to providers of the deforestation might affect hunger?economic development to proceed conundrum: if we don’t mitigate inin a sustainable manner” and “to the agricultural sector, including “We cannot make any serious dent inensure that food production is putting a brake on agriculture’snot threatened”. At the same time huge contribution to deforestation, our emissions without the agriculture and foodwe hear again and again that no then future food production will Dr Sonja Vermeulenreductions in emissions can possibly be threatened and there will be Head of Research sectors doing their share.”be expected from agriculture – massive food price hikes; but if we CGIAR Research Program on Climateotherwise how could we grow do mitigate in the agricultural sector, Change, Agriculture and Food Security carbon credits. They investigate Models are only as good as theirenough to feed nine billion agricultural production will become different scenarios that allow assumptions, so we should look forpeople in 2050? much more expensive and there will exemptions or rebates for poorer qualitative generalisations rather be massive food price hikes. There causality in the other direction: if countries. The first message is than firm numerical predictions. AllScience tells us that agricultural are no wins here. It is a lose-lose we avoid deforestation, are there that exemptions lead to leakage: three point to a minimal impact onpractices directly emit 5,100 to conundrum, and one in which poor impacts on food prices? For a start, deforestation that would have the affordability of food for more6,100 megatonnes of carbon people, who are most susceptible to the soy moratorium in Brazil offers happened in one country is simply affluent consumers. Those whodioxide equivalent (Mt CO2e) per deficiencies in calories and nutrition, a real-life example of how reduced shifted elsewhere. If there is a truly are likely to feel the pinch are theyear – which is 10-12% of total and who spend the greatest deforestation is not correlated with global carbon tax at a price high consumers at the “bottom of theglobal emissions. But agriculture proportions of their incomes on food, commodity prices. Some further enough to eliminate deforestation, pyramid”, who already struggle inalso drives deforestation; current lose the most. interesting insights come from the impacts on incomes and food many cases to eat well, in terms ofestimates are that about 80% of three recent studies that tackle this consumption are generally positive both nutrition and pleasure.deforestation is due to agriculture. But does this doomed Catch-22 question via thought experiments, for land-owning households, whoThe size of these indirect stand up to closer scientific scrutiny? using computer models to play out can gain both from carbon prices This is by no means a valid excuseagricultural emissions is uncertain, More specifically, what do we know different policy scenarios at the and from farm product prices. On for arguing that deforestation global level. the other hand, food consumption should continue unabated in “The reasons to stabilise emissions are threefold: among the large and growing order to reduce food prices for the The first, by Uwe Schneider number of landless, unskilled labour poor. The solution must be found to allow ecosystems to adapt naturally, and colleagues, looks at four households of the world deteriorates. rather in providing the economic to enable economic development to proceed different future scenarios for global development, which include The third thought experiment is opportunities for poorer consumers to achieve better incomes and in a sustainable manner, and to ensure that restrictions on deforestation. The the most troubling at first sight. By access better diets. Both the public main finding here is that constraints John Reilly and colleagues, it again and private sectors have abundant food production is not threatened.” on deforestation drive up the considers multiple scenarios, one of scope to act positively, from creating prices of water resources and land, which is the same as Golub’s global job opportunities at decent wagesbut may well be as much again about the relationships between but actually have little impact on carbon tax on all sectors, including to providing “safety nets” suchas direct emissions, doubling deforestation and food security? global food production, or on food both energy and land-use. Food as health insurance and incomeagricultural emissions to a total of Historically, experience shows prices. This is because changes prices under this scenario rise by support for the needy. Hand in hand,12,700 Mt CO2e, or 24% of total that rising prices of agricultural in land use, land management 80% by 2100 compared to a “no social and environmental innovationglobal emissions annually. The food commodities do in general and international trade are able to policy” world, due both to the direct can provide a world with forests –chain – processing, refrigeration, increase rates of deforestation, by compensate for the price effects costs of mitigating emissions and and without hunger.transport, retail, use of food in the magnifying incentives for expansion of avoided deforestation. In this to the rising costs of land. This badhome and waste disposal – adds of farmland. The trickier question is thought experiment, deforestation news is offset by a fivefold increase10 11
  • 7. How are governments addressing deforestation at the international level?Dr Nathalie WalkerThe growing global population, diet set up. At its 2007 meeting in Bali,shifts and economic development the UNFCCC Conference of theare increasing demand for Parties (COP) agreed on the “Baliproducts sourced from forests, Action Plan”, which calls for “policyand for agricultural products which approaches and positive incentivesare driving forest clearance1. on issues relating to reducingExport markets are becoming emissions from deforestation andincreasingly important as drivers of forest degradation in developingdeforestation2. Successfully tackling countries” to be addressed4.these drivers, while encouragingdeforestation-free production, Since 2007, there has been aneeds action from both the private plan of work to design technicalsector, which produces and trades rules through which “Reducingforest risk commodities, and from Emissions from Deforestationgovernments of producer and and Forest Degradation” (REDD) forests that results in greenhouse which are supporting “REDD-consumer countries3. Multinational can be incorporated into a new gas emissions, including actions to readiness” among many forest-richcompanies are well placed to international climate treaty under Dr Nathalie Walker address drivers of deforestation”, nations. Individual countries haveact at the international level, but the UNFCCC. Subsidiary bodies Forest Footprint Disclosure but no details were provided on also provided support, most notablyfor governments, international hold meetings throughout the year how to do this5. In early 2012, Norway, which has pledged oneagreements are proving more to tackle the scientific, technical and Parties and Observers to the billion dollars to both Brazil andchallenging and consensus can take implementation issues that will form because there was no agreement Convention were requested to Indonesia to reduce their nationalyears to reach. the basis for such a treaty, which is on the issues under negotiation - submit guidance on how to address deforestation rates and is also planned to be agreed in 2015. forest monitoring and verification drivers of deforestation. A number supporting other countriesThere are several international of emissions reductions - and of countries, including Costa Rica, including Guyana.forums which address forests The REDD negotiations have made more time will be given to them in the Democratic Republic of Congo,and forest risk commodities, steady progress each year since upcoming sessions. Norway, Papua New Guinea, A number of governments havemost notably the United Nations 2007 on many technical aspects. Switzerland and the United States announced their intention to workFramework Convention on Climate The COP and its subsidiary bodies One of the ongoing issues pointed to the role that the private with the private sector to addressChange (UNFCCC). The UNFCCC, operate on consensus, which means being considered under the sector can play in addressing the drivers of deforestation. Inwhich currently has 195 participating that, despite negotiations that often UNFCCC concerns the drivers key drivers6. Suggestions include June 2012 at the Rio+20 Earthcountries, is one of three Rio run throughout the night during the of deforestation. In the Cancun making links with private sector Summit, the US Government andConventions established following two-week long COP, they can run Agreements negotiated at the initiatives to address deforestation Consumer Goods Forum announcedthe 1992 Rio Earth Summit. The out of time to reach agreement. COP in 2010, all countries were (such as the Consumer Goods that they would work together torole that protecting forests plays 2012 was the first year in which encouraged “to find effective ways Forum’s Zero Net Deforestation reduce deforestation by promotingin mitigating climate change is there was no progress on REDD, to reduce the human pressure on commitment), promoting certification sustainable supply chains7. Inexplained by Dr Gillian Kay on systems and inviting the private November 2012, the governmentspage 6 and the UNFCCC is a key sector to attend workshops. There of Australia, Germany, Norway, themechanism that offers opportunities are concerns that measures to United Kingdom and United Statesto catalyse increased financing, and address the international drivers of released a joint statement on thecollaborative actions to deforestation could impact trade in urgency of tackling deforestationreduce deforestation. timber and agricultural commodities. and resolved to “support efforts These concerns and the above to transform the supply chains ofIn 2005, the governments of several recommendations will be considered the commodities that put pressureforest-rich countries, including over the coming year. on the forest”, stating that theyPapua New Guinea and Costa Rica, “welcome the commitments andformally requested that, for the first While a new international climate initiative of the Consumer Goodstime, the UNFCCC incorporate treaty which incorporates REDD Forum in this regard, and standways to stimulate action to reduce is years away, many countries are ready to contribute in variousemissions from deforestation. With taking action now. There are already ways”8. The challenge now is how tobroad recognition that deforestation international mechanisms which turn this support into effective action,is a major source of greenhouse currently provide funds for REDD, so that public and private initiativesgas emissions, a working group was including the UN-REDD Programme, can work together synergistically.12 13
  • 8. The JourneyChristoph HarwoodAs the planet comes under intense access to medicine debate was the economic drivers behind the of its journey. Whilst NGOs are vocal CDP has demonstrated thatpressure from the ever-increasing game changing. commodities taken from the forests: and have had success with moving reporting on CO2 is not a burdendemand of mankind, from time to • Impact of the “lending” banks - timber, including pulp and paper, companies towards using paper and and adds value, so much so that thetime an area of concern is identified. the finance sector does try to be UK government has now mandatedInitially a scientist or NGO tries ahead of regulation, often led it for all listed companies. One dayto share their concerns. Later by SRI teams. However, it is the “It is clear that deforestation is still at an early stage companies will also be mandatedsomebody in the finance sector - an lending banks that have more on reporting how they manage theiranalyst, investor or fund manager impact than the asset owners of its journey. Whilst NGOs are vocal and have had exposure to deforestation and other- might recognise that there arefinancial implications. Finally, and managers. success with moving companies towards using natural capital risks. FFD disclosers will demonstrate that this is not alegislation leads to the problem All this can take a long time. Climate paper and other commodities from sustainable heavy burden. In the meantime,being removed or correctly priced. change was first raised as an issue raising the need for resilience asThis is when the “externality” has in the 1950s, the IPCC was set up sources, the opportunity for regulation is resisted by well as sustainability in the supplybecome “internalised”, movingfrom a theoretical P&L to directly in 1988 and here we are in 2013 wondering whether Kyoto companies on the ground and recognition of material chain, working with buyers of forest risk commodities and helping theimpacting company valuations. That will survive. impact seems to be further down the road.” lending banks reduce their exposureprocess - from identification of an Christoph Harwood to deforestation, can all help in Theenvironmental issue to financial A lot has to happen for The Journey Partner at Marksman Consulting and Journey ahead.impact - is what we are calling to be complete and very few have Investment Relations for FFD (2009-2013) biomass and charcoal for steel other commodities from sustainableThe Journey. made it to the end. We identified making, or commodities produced sources, the opportunity for seven stages: on purposely deforested land: soy, regulation is resisted by companiesTo understand this in detail, we palm oil and cattle. It is a complex on the ground and recognition oflooked at four case studies - CO2 1. An issue is identified by a Different parts of the finance sector world requiring international material impact seems to be furtheremissions, REACH chemicals, scientist or NGO. will take an interest in these issues agreements, where there is no down the road.access to medicine, and mountain 2. A large NGO takes up the issue, at different stages. The SRI world one international body focusing ontop removal - to understand their perhaps taking it on from a usually identifies issues early on, forests and so they have to come The research into the Journey,Journeys and what this means for smaller specialist NGO. whilst the mainstream requires under the umbrella of other bodies however, did open up some newdeforestation. Out of this work came 3. Industry pushes back, although more certainty on valuation impacts. such as UNFCCC or CBD. ideas into how FFD might increasefour key lessons: some, well placed for changes, There might be some interest the pace. encourage the new ideas. during the lobbying stages, but it There are a few areas for optimism.• Expect the unexpected – 4. Government begins to draw up is only when regulation is enforced FLEGT and the Lacey Act make it Firstly, FFD can help investors industry experts and finance policy. It can formulate this in that valuations are affected. With illegal to import timber into the EU understand the resilience of analysts reviewed the carbon a number of ways: by putting less than 10% of funds invested and USA respectively if it has been commodity supply chains. Secondly, price and the European a price on the externality or sustainably and with nearly 40% Emission Trading System rationing its availability so that of the UK market in passive when it was introduced, but it the market sets the price, by investments, there is only so “FFD can help investors understand the was actually regulations and subsidies that had more impact. supporting alternatives, by changing the market’s buying much that can be done by asset managers. resilience of commodity supply chains.” The growth in renewables has requirements, or by just been more important than the regulating. It is clear that corporates see a illegally produced in another country. as part of CDP, FFD can use their trading price of CO2. 5. Industry at this stage intensifies limited role for the finance sector Dutch and British governments are supply chain experience to influence• Don’t expect consistency from its lobbying, publicly and behind in their progress to becoming pushing for the use of sustainable CO2 usage, working with existing the affected industries - they doors. Some support the more sustainable. Nike positions palm oil and the SRI finance sector and new disclosing corporates so tell governments that the costs changes, others do not. the sector in its “Road to Zero is taking increased interest, with they demand that sustainable forest will undermine their ability to 6. Regulation is applied which can System Map” as merely a provider broker reports beginning to touch risk commodities are integrated into operate, but tell investors not be locally driven or catalysed by of capital. Companies trying to on deforestation. Proxy resolutions their supply chains. Finally, FFD to worry. Some, ahead of the international agreement. deliver sustainability strategies in the USA are encouraging can encourage banks to recognise game, welcome the change 7. Regulations are enforced, or echo this, advising that they do not companies to improve their policies their risks in lending to companies whilst those caught out resist not. One of the interesting get questions from analysts on the and disclose to FFD. involved in deforestation and the change. developments is the creation sustainability of their operations. damage that they are doing.• Politics matters – Nelson and enforcement of regulations So where are we in the deforestation However, it is clear that Mandela’s intervention in the in one country on another. journey? It is complex, given deforestation is still at an early stage14 15
  • 9. 2012 TimelinesIntroductionExtreme weather events across the announcements were made by soybean production has increasedworld in 2012 resulted in the worst global corporations, for example while annual deforestation in theglobal harvest in years, depleting Unilever, who reached its target of Amazon has fallen to record reserves and contributing to 100% certified sustainable palma hike in global food prices and oil ahead of schedule (covered by The palm oil industry’s growingprompting renewed debate over the GreenPalm Certificates) and set a demand for large tracts of land‘food vs. fuel’ dilemma. In August, new target for 2020 to buy all their – notably forest areas in Africanthe UN Food and Agriculture palm oil from traceable sources. countries – has led to rising concernOrganization (FAO) called for the Despite criticism over the strength over the environmental impacts ofsuspension of US ethanol quotas in of the agreements coming out of unsustainable production and theresponse to the impact of the worst Rio+20 and the UNCCC in Doha, social impacts resulting fromUS droughts in more than half a number of corporate pledges land grabs.a century. and strategic partnerships were announced. The governments of 2012 also saw the formation of theLegislative progress continued in Australia, Germany, Norway, the Global Roundtable on Sustainable2012 with the Australian Senate UK and the US resolved to support Beef (GRSB).passing the Illegal Logging efforts to tackle deforestationProhibition Bill, joining the United of supply chains of forest risk Overall, 2012 has seen someStates and European Union in commodities. Although there has progress towards sustainable andaction against the global trade in been some significant progress traceable forest risk commodities.illegal timber. In Europe, application on the corporate sustainability Despite this, the demand forof the EU Timber Regulation begins landscape in 2012, some companies many of the certified sustainablein March 2013 and companies found themselves at the centre commodities has as yet failed toinvolved in the trade of timber of negative NGO campaigns, keep pace with production. FFDproducts are gearing up for the especially in the pulp and hopes that 2013 will see the uptake2013 deadline. paper sector. of more certified sustainable product in companies’ supply chains and theCertification, while not the endgame Commodity news highlights beginning of a real shift from futurein itself for preventing deforestation, in 2012 targets to immediate action on thedoes play an important role in issue of deforestation risk.the journey towards sustainably For biofuels, the big news storyproduced commodities and 2012 of 2012 was the Europeansaw some advances in this area. For Commission’s proposed changesexample, sustainability standards for to the EU’s Renewable Energycattle products – beef and leather, Directive (RED), which will limit thewhich have traditionally lagged use of crop-based biofuels to 5% ofbehind the other commodities total EU transport energy by 2020,- advanced in 2012 with the reflecting significant and growingcertification of the first ranches concerns from scientific evidenceunder the Sustainable Agriculture which indicates that emissions fromNetwork (SAN) standards in indirect land-use change can varythe Brazilian Amazon. In the substantially between feedstocksbiofuels sector, the Roundtable and can negate the greenhouse gasfor Sustainable Biofuels (RSB) savings of biofuels compared to theagreed to recognise farm operations fossil fuels they replace.certified by the SAN standards andFSC-certified biomass. The Soy Moratorium on deforestation in soybean productionCorporate activity to combat in the Brazilian Amazon biome,deforestation continued in was extended until January 1st2012. A number of sustainability 2014. Since its introduction in 2006, 17
  • 10. 2012 TimelineCattle ProductsJANUARY APRIL Greenpeace published the ‘JBS SEPTEMBER OCTOBER Scorecard Failed’ report, claimingAnalysts reported that JBS was on A high-level consultation for a that JBS continues to purchase Richard Sheane of Best The GRSB Executive Boardthe takeover trail, with rumours of Global Livestock Agenda for cattle from Brazilian ranches that Foot Forward challenged the meeting was held in Florida tointerest in Goias Verde Alimentos. 2020, co-hosted by the World clear rainforest areas, occupy environmental benefits of banning further develop understandingThe company denied the rumours, Bank and International Livestock indigenous lands and use slave the use of leather by Puma of sustainable practices in thestating its ambitions to increase its Research Institute (ILRI), was labour, in spite of earlier agreements and substitution by non-natural beef industry though interaction,presence in Brazil’s dairy market held in Nairobi, Kenya. The main not to do so. materials, given the leather industry discussion and observation ofinstead, which it sees as offering outcome was a joint communiqué is generally a by-product of the in-field projects. Beef producers,significant new opportunities. by eight international and regional JUNE meat industry. With leather de processors, retailers and others in organisations to form an alliance facto an agricultural by-product, he the beef industry attended the event,FEBRUARY to develop and implement a global Tesco confirmed it had cancelled argued it is better to use leather which showcased the ability of agenda to improve environmental its contract with JBS in response than to waste materials, water and cattle ranchers in central Florida toThe Global Roundtable for protection, human health and social to earlier Greenpeace claims that energy elsewhere if we are going to partner with public water agencies inSustainable Beef (GRSB) was equity in the livestock sector. beef sold in the supermarket could continue to eat meat globally in such developing sustainable practices.formed. Founding members be traced back to cattle raised on large quantities.include AllFlex, Aliança da Terra, MAY illegally deforested areas of theCargill, Elanco, GTPS (Grupo de Amazon. Meanwhile, GreenpeaceTrabalho da Pecuaria Sustentavel), Four ranches in Mato Grosso, Brazil removed the ‘JBS Scorecard’ reportJBS, McDonald’s, Merck became the first globally to earn from its website after JBS took outAnimal Health, National Wildlife Rainforest Alliance certification a legal injunction, but the NGOFederation, Rainforest Alliance, for sustainable cattle production. stated it was standing by the originalRoundtable for Sustainable Beef The ranches, which all belong to conclusions of the report.Australia, Solidaridad, The Nature the group Fazendas São MarceloConservancy, Wal-Mart and WWF. Ltda., cover a total area of 32,000 JULY hectares, including a 13,000The Dutch Ministry of Foreign hectare reserve in the Amazon. Chief executive of sportswear brandAffairs committed two million Euros About 60,000 cattle graze on the Puma, Jochen Zeitz, announcedin financial support to GRSB. ranches’ sustainably managed that future plans will includeThe funding will support producer pastures. The standards, developed stopping using leather in its footwearsustainability initiatives in the beef by the Sustainable Agriculture and football boots because it issupply chain, and it will be focused Network (SAN) in response to so damaging to the environment.on activity in developing countries. rainforest destruction resulting Speaking to the Financial Times from cattle farming, promote the at the UN Rio+20 earth summit,MARCH humane treatment of livestock, the Jochen Zeitz said that the company conservation of natural resources would have to look at alternativeA new academic study from and the rights and well-being of materials to meet its environmentalBowman et al. (2012), suggested workers. IMAFLORA, the SAN policy commitments.that pro-intensification policies representative in Brazil, carriedin the Brazilian livestock sector out the certification. IMAFLORAwill only halt deforestation if they promotes the cattle certificationare accompanied by actions to programme in Brazil in collaborationremove the incentives to clear with other local NGOs (includingforest for pasture, which discourage Amigos de Terra), governmentland speculation and increase agencies and international NGOs,accountability for land including the US-based Nationalmanagement practices. Wildlife Federation (NWF).18 19
  • 11. 2012 TimelineSoyJANUARY MAY It was argued that the outcomes supply chain will benefit from reduced AUGUST OCTOBER of soy and oil palm expansion are costs and the possibility of multipleIn late December 2011, NGOs The seventh annual international still under debate, and the authors certifications, although the Chain of Soy prices reached a record high of The Brazilian Soy Moratorium, anand all Dutch trade sectors in conference of the RTRS (RT7) was recommended a more detailed Custody implications need $622/ton, following a drought in the agreement between the Brazilianthe value chain for soy created a held in London, UK, the first to take analysis to devise pathways that can further work. US Midwest. Association of Vegetable OilSoy Initiative to transition toward place in a European country. The improve distribution of social and Industries (ABIOVE), the Brazilianresponsible soy, supported by seven conference, themed ‘Next Steps economic benefits while at the same In Curuguaty, Paraguay, six police Solidaridad announced their intention National Association of Grainmillion Euros of investment shared for Responsible Soy’, was aimed time reducing carbon emissions. officers and 11 farmers were killed to start working with large soy farms Exporters (ANEC), Greenpeace50:50 by industry and the Dutch at emphasising the need for RTRS when clashes broke out during in China towards the first responsibly and other civil society organisationsgovernment-funded Sustainable to evolve into the mainstream A Nature Conservancy Report on the forced eviction of peasants produced soy in China. The project, to eliminate deforestation in theTrade Initiative (IDH). This money standard for responsible soy. Brazilian sustainable soy, “Soybeans: occupying a disputed soy farm. One approved under the Farmer Support production chain, was extendedwill be invested to enable growers Commitments were made by EU and good agricultural practices and socio- week later, the Paraguayan Senate Programme, aims to demonstrate until January 1st 2014. In 2006,in South America, as well as other UK supermarkets, including Marks & environmental certification – Towards ousted President Fernando Lugo for the benefits of responsible soy to these industry groups agreed notsupply chain parties, to implement the Spencer, Waitrose, Sainsbury’s, Asda, Sustainability”, outlined 35 separate “mismanagement” of the land conflict. the industry, relevant ministries, soy to buy soy from any farms with newnecessary improvements for achieving Co-operative Food, Ahold, Coop and initiatives and projects as examples processing companies and industry deforestation in the Brazilian AmazonRoundtable on Responsible Soy Migros to source certified responsible of progress, most of which were JULY farmers. It will start working with two biome. Throughout these years(RTRS) certification. soy for own brand products. The instigated by Brazilian companies. large soy farms that cover a total area soybean production increased, and is state-linked Chinese Soybean The first Indian smallholders to be of 50,000 ha of soy and employ still rising, while annual deforestationAn academic study by Macedo et al. Industry Association (CSIA) also JUNE certified for Responsible Soy by the 3,000 workers. in the Amazon fell by record numbers,(2012) found that between 2006 and announced its intention to work with RTRS were announced, a result highlighting the importance of the2010, while agricultural production, its 750 member organisations towards KPMG stated that there is a business of investments made by the Dutch SEPTEMBER agreement. The identification of soyincluding soy, was higher than ever, meeting the RTRS standards. It was case for soy producers in Brazil Cheese maker, CONO, and the dairy on newly cleared land in the Amazonthere was a decline in Amazon confirmed that almost 300,000 tonnes and Argentina to comply with the cooperative, Friesland Campina. A European Soy event “Challenges biome and a change in Brazil’s Forestdeforestation in the Brazilian state of RTRS certified soy have been RTRS criteria for responsible soy Friesland Campina support a number and opportunities for supermarkets” Code were cited as reasons for theof Mato Grosso. This appears to sold since June 2011, when RTRS farming. Commissioned by IDH, in of soy farm programmes in Brazil was hosted in Zurich, Switzerland by need to extend the moratorium fordemonstrate that strong market announced an annual target of five collaboration with the International and India, and CONO participated in the Soy Network Switzerland. Led by another year.and government policies to prevent million tonnes of responsible soy to be Finance Corporation (IFC), WWF the Soy Producer Support Initiative supermarkets Coop and Migros anddeforestation do not need to negatively produced and sold by 2015. and the Netherlands Development (SOYPSI), an international program supported by the Swiss government DECEMBERimpact agricultural productivity. Institution FMO, their report showed for environmentally friendly institution for international cooperationThe impact of the expansion of The first 10 audit reports of soy that medium and large producers soy cultivation. (SECO), the event was attended by More than twice the volume and areaneighbouring areas is hotly debated. companies certified by the RTRS can expect a positive return on a variety of participants from sectors of RTRS certified soy was produced were reviewed by GM Freeze, their compliance investments after A report ‘Factory-Fed Fish’, from involved in soy. One of the main in 2012 compared with 2011, andAPRIL Friends of the Earth and Corporate three years. Concerns were raised, US-based Food and Water Watch, conclusions of the meeting was the the number of certified producers Europe Observatory who claimed however, that the initial investment highlighted the use of soy in fish feed need for a joint action plan in order to increased from 10 to 19.Soybean yields are particularly that the certification standards have was too high for small producers and stocks and links to the American transform the market.vulnerable to weather. In Latin failed to achieve any significant external investment may be required. Soy Association and agribusinessAmerican countries, all of whom social or environmental benefit, with giants Cargill and Monsanto in thedepend on commodity exports no evidence of protection against Independent body GMP+ International development of offshore fishfor significant parts of their export deforestation, reduced use of and RTRS agreed on the main farming legislation.earnings, extreme weather conditions pesticides, or any benefits being felt points of co-operation regarding thewere experienced throughout by small farmers in the areas certified. certification of the supply chain of2012, which upset crop production responsible soy. RTRS will link toand depressed potential yields. In A report by Pacheco (2012) an already internationally operatingArgentina, heavy rains delayed of the trends associated with GMP+ Feed Safety Assurancesoybean planting, raising concerns commercial agricultural expansion Scheme, with over 11,800 certifiedfor future production. In contrast, Rio in South America by the Centre for companies in 65 countries, makingGrande de Sul in Brazil suffered from International Forestry Research it easier to distribute RTRS soy toa lack of rain which impacted soybean (CIFOR) highlighted the association consumers through a controlledproduction. In a season marked by of soybean and palm oil expansion supply chain, while GMP+ will gaincrop losses, drought conditions were with food, feed and biofuel markets, links to an international scheme basedreflected in the low productivity of focusing on their economic, social on multi-stakeholder support. Mostsoybean crops. and environmental implications. importantly, feed companies in the20 21
  • 12. 2012 TimelinePalm OilJANUARY APRIL OCTOBER NOVEMBER are around development on peat and Unilever, the world’s largest single clearance of high carbon forestedThe President of Liberia, Ellen The Roundtable on Sustainable purchaser of palm oil, announced it An academic study by Kimberly et The French Senate approved a areas. A group of leading scientistsJohnson Sirleaf, intervened to end Palm Oil (RSPO) signed a is ahead of schedule with regards to al. (2012) reported that the carbon 300% ‘fat tax’ on palm oil. The called for measures to ensure thea long standing dispute between Memorandum of Understanding its palm oil targets with 90% of the emissions impacts of the palm oil proposal was made on the grounds safety of high conservation foreststhe citizens of Grand Cape Mount with PT Perkebunan Nusantara palm oil in its products covered by industry in Indonesia alone could of health, as palm oil is high in and peatlands. These issues areCounty and the palm oil company III Persero, an Indonesian oil GreenPalm certificates, the RSPO’s reach 558 million metric tons of CO2 saturated fats, as well as the critical to the credibility of RSPOSime Darby Plantations Liberia. palm plantation company, and off-setting scheme. In light of its by 2020 – more than the national environmental issues associated if certified palm oil is to be trulyThis dispute is not isolated, as palm the Sustainable Trade Initiative progress to date, and in recognition emissions of Canada. Emissions with some of its production, including sustainable and no longer lead tooil plantations are becoming more (IDH), a Dutch initiative working that certificates are not the same arise from land conversion, both from biodiversity loss and contribution destruction of high value habitat,common in West Africa and conflict on sustainable commodities to as using physical CSPO (Certified deforestation and conversion of peat- to climate change. The aim was contributing to dangerousover FPIC (Free and Prior Informed assist independent small holders Sustainable Palm Oil), Unilever rich lands for palm oil plantations. to encourage manufacturers to climate change.Consent) is one of the challenges to increase sustainability. IDH announced that it will have 100% reformulate their products with aof expansion. will provide ‘match funding’ to the CSPO in its products by 2020. The UK Government published different vegetable oil. This initiative Herakles Farms’ 73,000 hectare investment made by the palm oil a national statement on palm oil may have unintended consequences palm oil development in CameroonFEBRUARY company and/or the RSPO. This A year since the RSPO launched its pledging to use 100% certified in the long term regarding land use, was at the centre of campaigning shows how progressive plantation own trademark, it was announced sustainable palm oil in its own food since oil palm is the highest yielding as NGOs claimed that forest hadPlantation developer Asian companies can leverage civil society that only 61 RSPO Trademark procurement by the end of 2015, vegetable oil and is the most land been cleared illegally to establishPlantations reported that it is finding interest in helping their licenses across 13 countries covering all food bought in by central efficient. Criticism followed from a the plantation in a ‘biodiversity‘quality opportunities’ increasingly smallholder hinterland. have been issued. The trademark government and catering services. number of industry groups, arguing hotspot’. The opposition to thedifficult to locate in Malaysia due to connects the production and There was criticism that this initiative that the tax is discriminatory as it will development was both local anddeclining land availability. Malaysia’s MAY distribution of sustainable palm did not go far enough in setting greatly reduce the competitiveness international. Greenpeace calledrules on forest conversion, which are oil across the value chain and, specific time-bound commitments of the tropical oil. It still requires for the Cameroon governmentstricter than other palm-producing The Belgian association of importantly, aims to raise awareness for UK industry as a whole. approval by the French to stop the forest clearance andnations, are a contributing factor compound feed manufacturers about sustainable palm oil among Nevertheless, this step does send National Assembly. end the project. It wants betterin the availability of land for new (BEMEFA) joined the Belgian consumers. This is a low take-up a positive message to producers of standards to be put in place for landplantations locally. This means Alliance for Sustainable Palm Oil. from the nearly 1000 members of palm who need clear signals that the The RSPO’s Principles & Criteria allocation and development of palmthe company will have to adjust This expands the country-wide the RSPO in 2012. Later RSPO demand for sustainable palm oil (P&Cs) opened for global plantations in order to prevent socialits timeframe to meet a target of Alliance, which has a target that by announced that six million tonnes of is increasing. consultation for the first time in their conflict, disruption of livelihoods andachieving a 45,000 hectare landbank 2015 all food containing palm oil CSPO was available to purchase. 10 years in operation. Key issues destruction of forest.promised to investors by the end intended for the Belgian market mustof 2012. meet the principles and criteria of JULY the RSPO.MARCH Retailer PT Carrefour Indonesia JUNE launched Indonesia’s first RSPO-New Britain Palm Oil announced that certified and labelled cooking is investing heavily in producing Greenpeace released its ‘Frying the Indonesia, as well as being one ofbakery products in the UK made Forest’ report which linked Indian the world’s biggest producers of palmfrom sustainable palm oil, in order to companies including Britannia, oil, is also a major consumer. Palmdramatically increase the volume and Godrej and Ruchi Soya to rainforest oil is widely used as cooking oil invariety that is available to UK food destruction in Indonesia through the Asian continent and is importantmanufacturers. A large proportion their use of palm oil. India is one of for nutrition in the region. Carrefour(25-30%) of UK palm oil is consumed the biggest consumers of palm oil announced that it is in discussionsby the baked goods sector and this globally and Greenpeace formally with other Asian countries to exportoffers an opportunity to improve the called on Indian companies to this cooking oil to other marketsUK’s profile as a whole. commit to sourcing sustainable palm including Malaysia, India and China. oil not linked to deforestation.22 23
  • 13. 2012 TimelineBiofuelsJANUARY natural habitat. This certification The US Environmental Protection APRIL AUGUST OCTOBER demonstrates that sustainableLufthansa concluded its six Agency made a preliminary decision biofuels can be efficiently andmonth biofuels trial with the first that biodiesel produced from palm A Guardian article about the EU’s United Airlines joined the The European Commission released economically produced at a largetransatlantic flight between Frankfurt oil will not qualify as a renewable renewable energy targets and EU Sustainable Aviation Fuel Users a proposal to make significant scale while adhering to ambitiousand Washington DC to use biofuel, fuel under the Renewable Fuel 2020 carbon targets highlighted Group (SAFUG), an industry changes to the EU’s biofuel policy social and environmental standards.following 1,187 biofuel flights Standard (RFS) program, as it the threat of biomass from wood. working group that aims to through amending the Renewablebetween Frankfurt and Hamburg. does not meet the 20% lifecycle EU member states’ national action accelerate the development and Energy Directive (RED). It will limit NOVEMBERUsing a 50/50 blend of regular fuel greenhouse gas reduction threshold plans claim biomass energy will commercialisation of aviation the use of crop-based biofuels toand biosynthetic kerosene in one required to qualify under the provide around half of the EU’s biofuels. Group members include Air 5% of total EU transport energy by The first biofuels feedstock producerengine is claimed to have saved scheme. Indonesian and Malaysian target of 20% of energy from France, British Airways and Boeing 2020, with the aim of stimulating the to receive the RSB sustainability1,471 tonnes of CO2 emissions. The palm oil growers criticised the renewable sources by 2020. Wood and represent around 32% of development of alternative, second certification in North America wastrial ended after stocks of certified decision, claiming that data used is considered by the EU as ‘carbon commercial aviation fuel demand. generation biofuels from non-food Global Clean Energy Holdings, withbiofuel were exhausted and no other for analysis was out-of-date and neutral’, but due to the time lag feedstock, and it will introduce a three extensive jatropha farms inreliable supplies were identified. contesting the projected high between the carbon debt when a Oxfam warned that rising prices reporting obligation on emissions the Yucatan Peninsula of Mexico, deforestation rates in both countries. tree is felled and the carbon credit for corn, soy and wheat threaten from indirect land use change restoring productivity toA three year study by Anseeuw et when a new tree has grown to millions more people in developing (ILUC). ILUC emissions will not be abandoned, (2012) of large land acquisitions The Roundtable on Sustainable absorb the same amount of carbon, countries with hunger. The charity taken into account when determiningover the period 2000-2010 found Biofuels (RSB) certified their first biomass may actually increase called for the reduction in the whether biofuels meet minimum DECEMBERthat food supply is not the main operator, Shoalhaven Starches atmospheric CO2 concentrations in use of food crops for biofuels, greenhouse gas saving thresholds,focus; 78% of the 71 million Ltd., of the Manildra Group of the interim. echoing recent proposals by other which means that suppliers will not RSB recognised Forest Stewardshiphectares of deals referenced were Companies, in New South Wales, experts, including the head of the be held accountable for the indirect Council (FSC) certification ofprocured for agricultural production, Australia, which uses a by-product MAY International Food Policy Research emissions which biofuels cause by sustainably produced biomass. Thisof which three-quarters were of wheat processing to produce Institute. displacing food production into will ensure that biomass included inintended for biofuels. This high ethanol. This early certification The Roundtable on Sustainable new areas. liquid fuel and power supply chainsproportion of land being acquired demonstrated that wastes and Biofuels article entitled “Ensuring The UN’s Food and Agriculture with the RSB label will adherefor biofuels is due to anticipated residues can be an important Biofuels Deliver on Their Promise Organisation (FAO) called for a Oxfam claimed that land acquired to rigorous forest managementprofitability and the study concluded fraction of biofuel feedstocks, of Sustainability” was featured in suspension of US ethanol quotas in for biofuels over the past decade requirements, including wildlife,that rural communities’ resource reducing the pressure on land and the May 2012 G8 publication from response to the impact of the worst could have produced food for one water and soil conservation.rights and livelihoods are being especially forests. Camp David. US droughts in more than half a billion people. The charity calledjeopardised by the model of large- century on corn supplies and prices. on the World Bank to stop backingscale land acquisition. MARCH JUNE Under the Renewable Fuel Standard foreign investors who acquire land (RFA), 40% of the corn harvest must for biofuels that could be used toFEBRUARY An EU event, ‘Carbon Emissions RSB announced it will recognise be used to make ethanol, a quota produce food. from Bioenergy’, was held to discuss farm operations certified by the which the UN says could contributeThe North Coast Environmental sustainability issues linked to Sustainable Agriculture Network to a global food crisis. A Convention on Biological DiversityCouncil in Australia raised concerns biomass for energy and the impact (SAN) standard, implemented by the (CBD) report reviewing the majorover new plans to use native forest on the climate for 2020 and beyond. Rainforest Alliance. SEPTEMBER policy issues surrounding biofuelswaste to fuel power stations eligible It concluded with recommendations and biodiversity highlighted thefor renewable energy credits. There for a shift in bioenergy policies JULY Lufthansa signed a collaboration complexities of the subject, notingis growing concern that credits will to focus on additional biomass agreement with Australian-based the opportunities for biofuelssubsidise unsustainable practices sources, full accounting of all The RSPO Task Group on the Algae Tec to build a large-scale to contribute to sustainableleading to more clear felling if emissions and a greater focus on Renewable Energy Directive algae-to-aviation biofuels production development and emphasisingforest managers can decide what energy production from by-products (RED) re-submitted the RSPO- facility in Europe. Algae Tec say that the risks for energy security andconstitutes ‘waste’. of biomass, waste and residues. RED application to the EU. A final their technology captures CO2 from greenhouse gas emissions if biofuel decision accepting the RSPO nearby industrial sources and uses it benefits remain unproven. certified material for RED was to produce algae-based crude oil. announced later in 2012. Two subsidiaries of Maple Energy PLC received the RSB sustainability certification, producing sugarcane ethanol in Piura, Peru, without displacing crops or highly biodiverse24 25
  • 14. 2012 TimelineTimberJANUARY APRIL SEPTEMBER show how a mechanism meant for The Australian Senate passed its The NGO Rainforest Action Network small agricultural developments is much anticipated Illegal Logging reported that following laboratoryA coalition of NGOs expressed their Stora Enso featured in a new The Forest Trust (TFT) announced being used by large scale Prohibition Bill. The law makes it an tests, a significant quantity ofconcern over the number of ‘Private documentary film ‘Red Forest that they will be working with Asia logging companies. offence to import illegally harvested pulp from Indonesian rainforestsUse Permits’ (PUPs) for logging Hotel’, highlighting issues with the Pulp and Paper on monitoring APP’s timber into the Australian market or to was identified in books publishedissued by the Liberian Forestry company’s eucalyptus plantations new sustainability program. TFT have process timber that has been illegally by HarperCollins. The companyDevelopment Authority. The coalition in China. The film noted the lack of previously worked with Nestlé and harvested in Australia itself. The Bill stated that they had ceased usingreported that 25 PUPs covering accountability for such large scale Golden Agri Resources following follows similar legislation in the EU Indonesian fibre from February thisnearly 700,000 hectares of forest plantation projects in China today high profile NGO campaigns. NGO and the US and now awaits year and that books published afterhad been issued making them soon and their impact on local villages reaction was generally “wait and see” royal assent. this date contain material from thirdto be the main producers of logs in of water table changes and loss of as other initiatives by APP have failed party-certified manufacturersthe country. Liberia recently signed forest amenity, which has lead to to deliver the promised results. and vendors.a Voluntary Partnership Agreement violent clashes locally. This criticism(VPA) with the EU and the coalition has lead to internal reviews from a NOVEMBERfears that the PUPs will undermine company that is recognised as havingthe VPA process before it is ratified, high sustainability standards in its The NGOs Global Witness andsince they make it possible to European operations. Bank Track released a report thatcircumvent legal controls. implicates HSBC in providing The Environmental Investigation financial services to resourceMARCH Agency (EIA) petitioned the US companies claimed to be destroying government to prosecute Peru, as rainforests and abusing human rightsA WWF-US report targeted Asia Pulp a party under the Lacey Act, due in Malaysia.and Paper (APP) for the destruction to the impact of Peru’s Free Tradeof natural forest in Indonesia for Agreement legislation on trade, as A coalition of 60 environmental andthe manufacture of toilet tissue. they have evidence of shipments of social NGOs wrote to banks andCompanies and consumers were illegal timber coming into the US from financial institutions asking them toadvised to avoid Paseo and Livi Peru through this mechanism. avoid investments in pulp and paperbranded tissue products, for which mills that have been associated withAPP reportedly supplied the fibre, Asia Pulp and Paper lost one of forest destruction and human rightsuntil such a time that the products its investors, Skagen Funds from abuses in Indonesia. This followedare reformulated to ensure they are Norway, following its review of the the announcement that APP plannednot linked to any further natural forest holding, where a mismatch between to open a second pulp mill in Riau.clearing. The NGOs urged customers its ethical guidelines and their aim ofto look for products that are 100% providing their customers with ‘the The Ministry of Environment andFSC-certified or 100% recycled. best possible risk adjusted return’ Forestry in Myanmar announced that was cited. the country will suspend its wood logSafeway announced a commitment exports from April 2014. The moveto source paper products responsibly, MAY will attempt to eradicate wood logusing FSC and Rainforest Alliance smuggling and destruction of forest incertification. The announcement A number of companies, including the country.came following high profile US Airways, stopped using thecampaigns by NGOs on the Sustainable Forestry Initiative Australian company Independentprovenance of tissue paper used in (SFI) label on its products due to Timbers and Stevedoring (IT&S)the personal care sector. ongoing NGO campaigning about was reported to have reached the standard. This follows a trend of agreements with regional officials onTen Indonesian forest concessions in companies distancing themselves approximately two million hectaresKalimantan, totalling more than half from SFI after a report published of land with customary ownership ina million hectares, joined The Borneo two years ago by NGO ForestEthics Papua New Guinea. Much of this landInitiative (TBI), which commits them criticised the initiative for inadequate is reported to be natural forest. Thisto achieving FSC certification for their standards to protect forests. example of Special Agricultural andforest management. Business Leases being offered by the government to large scale business26 27
  • 15. Results of the Disclosure Request 2012 Results of the Disclosure Request 2012Introduction Sector LeadersIn 2012, FFD saw yet another Those that pioneer and do invest The 2012 FFD sector leaders Leaders by Sectorincrease in participation in in building capacity, through share a common commitment tothe project, with one hundred development of the global innovation and ensuring security Agricultural Productscompanies completing the Roundtables and more significantly of supply for their future. TheyDisclosure Request. The growth in training and supporting their lead because their vision is wider New Britain Palm Oil Ltdin the number of respondents and supply base, are therefore to than just their own operations;increase in geographic participation be congratulated. Our sector most have participated in, or in Food and Staples Retailingis warmly welcomed, particularly in leaders continue to show genuine many cases actively created and Sainsbury’s Supermarkets Ltdthe Emerging and Asian markets. leadership and strategic foresight. led, collaborative activity. In doingThe extent of participation by so, they are leveraging their own General Retailersmajor brand owners is also an The challenges of integrating significant impacts to collectivelyencouraging sign, especially new sustainability into core business address the global challenges Marks and Spencer plccompanies with globally significant practice is best demonstrated in we face.consumption levels joining the the timber value chain, where the Industrials, Construction & Autosdisclosure process. Again there legislative demand for legality Leadership consists of moving Dalhoff Larsen & Horneman (DLH A/S)is slow take-up in the producing as a minimum requirement for beyond the immediate supply chainsectors; oil and gas and agricultural those entering many markets Liz Crosbie to engagement upstream and being Mediaproduction sectors continue to be is driving companies to buy Technical Director, Forest Footprint prepared to spend time and moneyunder-represented. certified feedstocks. These are Disclosure and Founder of Strategic on finding solutions to problems British Sky Broadcasting developments which will hopefully Environmental Consulting wherever they are found inThe co-dependency on sectors reward those upstream players that the world. Oil & Gaswithin the value chain continues to have invested in improved Greenergy International starkly displayed, as good intent supply lines. scoring process and to avoid The gap between leaders andin specification from the retail sector misrepresenting companies by their sector peers in these difficult Packaged Foods & Meatsfails to be translated into changes The pages that follow provide an interpreting on their behalf. The times appears to be rising, within behaviour in other areas. In the overview of results by industry scoring methodology is available an average of 16% difference in Marfrig Group and Unilevercontext of the global economic sector for the responses received on the FFD website (www. scores between winner and runnersituation, price sensitivity continues to our 2012 Disclosure Request. up across all sectors. There are a Paper & Forest Productsto be a barrier to the take-up of Leaders in each sector have been few sectors with really significant Mondi PLCmore sustainable sourcing options. identified by FFD solely on the At this time, FFD does not carry out variances - Industrials, ConstructionShort-term gain threatens to basis of the information contained verification of the responses that & Autos and Utilities - where active Personal Products & Household Productseclipse the long term risk to climate in the company’s responses to participants send to us. However, corporate social responsibility insecurity from commodities with a the questions in the Disclosure companies that misrepresent their procurement appears not to be L’Oréaldeforestation risk. The global policy Request; FFD does not collate response to FFD are putting their the norm.context supports this depressing information from any other sources. reputation at risk. We are reliant Textiles, Apparel & Luxury Goodsprevailing trend. We do this to ensure a consistent on the financial institutions that are In the most improved category, PrimeAsia Leather Corporation signatories to the project (see page FFD were again pleased to see 56) to take FFD’s information and some companies with significant Travel & Leisure Tables Key incorporate it into their engagement improvements, including Boots UK, British Airways and assessment procedures to Next, Kingspan PLC and Whitbread Non Disclosers Commodities Covered act as a safeguard, and we ask Group PLC. We look forward to for feedback from those meetings their continued development in Utilities * Did not disclose, but did engage Cattle Products where appropriate. responsible operations and supply. Drax Group ** Disclosed in 2011 Palm Oil On the sector pages that follow, Scopes Covered we have adopted the use of some Soy conventions to make them easier to 1 Physical Operations read and these are explained in the 2 Supply Chain Management Timber key to the left. 3 Impact of Customer Activities Biofuels28 29
  • 16. Agricultural ProductsSector Leader: New Britain Palm Oil LtdTake-up of disclosure has increased in Latin America Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completeand Asia, which is to be welcomed. However, Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012engagement in disclosure by the agriculture Agropalma S.A. BRA 1 Anglo-Eastern Plantations. UKproduction sector continues to be slow. 2012 Arantes Alimentos Ltda. BRA A 100% Grupo André Maggi. BRA P 1, 2respondents come from those companies with long Archer-Daniels-Midland Company. USAstanding commitments to investing in sustainability B 85% Grupo JD. BRA 1, 2 Astra Agro Lestari. INDOand setting collaborative standards. It is notable that C 84% IOI Group. MAL P 1 Bakrie Sumatera Plantations. INDOmany members of Commodity Roundtables are Bunge Limited. USA D 90% New Britain Palm Oil Ltd. UK 1, 2, 3not disclosing the real substance of their strategy to California Oils Corporation. USAthe financial community. FFD calls on asset owners E 79% Camellia. UKto engage companies in demonstrating exactly F 84% Cargill Inc. USAhow they exercise due diligence to support their G 50% Sector Leader: China Agri-Industries Holdings Ltd. HKmembership statements. New Britain Palm Oil Ltd First Resources Ltd. SP H 87% Frigorífico Mercosul. BRA I 63% “For New Britain Palm Oil Ltd (NBPOL) it is fundamental Genting Plantations Berhad. MALProducers continue to express concern about J 74% that any development achieves an optimal balance Golden Agri-Resources Limited. SI *the willingness of consuming markets to support K 65% between social development, conservation and Hap Seng Plantations Holdings Berhad. MAL *sustainability improvements financially. This is agriculture. It is also vital that carbon accountability Heilongjiang Agriculture Co Ltd. PRCevidenced by a poor take-up of premium priced third- be embedded into an agricultural company’s thinking Kuala Lumpur Kepong Berhad. MALparty-certified products, while certified producers A Profile of Materials Bought In (By Commodity) Kulim (Malaysia) Berhad. MAL and guide all its actions. By excluding from conversion London Sumatra Indonesia. INDOexperience problems finding mutually acceptable B Risk Assessment those areas that store large amounts of carbon, we Louis Dreyfus Corporation. FRAprice points. The price premium sought for these C Review of Your Supply Chaincertified raw materials also varies widely, especially will significantly reduce greenhouse gas emissions M.P. Evans Group. UK D Public Commitments by Forest Risk Commodity and preserve the natural infrastructure that supports Nutreco NV. NETHbetween physical materials and the offset Book andClaim systems. E Strategy Development our business. In maintaining these commitments, Perkebunan Nusantara Ii PT. INDO F Managing for Performance Improvement transparency needs to be achieved at all levels. The PT Musim Mas. INDO R.E.A. Holdings. UK * G Sustainable Supply Chain Development & Support Forest Footprint Disclosure is singularly important Sampoerna Agro. INDOLack of clarity and transparency on the premiums H Scope and Coverage in the provision of impartial assurance, preservation Seaboard Corp. USAis a major issue for end users. There is resentment I Public Reporting of transparency and in communicating a company’s SIPEF NV. BELGtowards the expectations of some producers that performance to a wider stakeholder audience.” Socfinasia SA. LUXthe rest of the value chain should fund their entire J Governance Process Tradewinds Plantation Bhd. MALsustainability investment programs through product K Identifying Risks and Opportunities Nick Thompson United International Enterprises Ltd. BAHprices. This is a block to implementation and, given CEO United Plantations Berhad. MALthe upward price trends for most commodities since Vicentin SAIC. ARGthe Commodity Roundtables were established, it Wilmar International Ltd. SIraises the question as to why this additional revenuehas not been invested in performance improvementto reduce charges to the wider value chain.There is a hidden danger that confidence inRoundtable processes could be undermined bythe high number of disputes. Within the RSPO, forexample, local communities are appealing againstproducer members and there is a debate about newproduction on peat areas under the revision to thePrinciples and Criteria which is being discussed. Bothissues have the potential to erode trust in the RSPOwhich will impact all companies in the process,including our leading edge disclosing companies.30 31
  • 17. Food and Staples RetailingSector Leader: Sainsbury’s Supermarkets LtdParticipation in this sector continues to grow Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completegeographically. Action on timber and palm is Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012universal, with soy, beef and biofuels more Boots UK. UK P 2 AEON Co Ltd. JApatchy. Retailers are in general pooling their Axfood AB. SWE A 79% Carrefour Group. FRA P 2resources to create a consistent response Big C Supercenter PCL. THAIto standards setting, especially through their B 80% Coop Genossenschaft. CH P 1, 2 BJ’s Wholesale Club Inc. USAparticipation in the Roundtables, and by working C 61% Jerónimo Martins. PL 1, 2 Booker Group. UKtogether, companies are reducing the cost of Casino Guichard-Perrachon. FRA D 72% Kesko Corporation. FIN 2addressing these commodity challenges. For China Resources Enterprise Ltd. HKthose Roundtable members who choose not to E 59% Metro Group. GER P 1, 2 Colruyt SA. BELGdisclose, a higher degree of stakeholder scrutiny F 61% MIGROS - Federation of P 1, 2 Controladora Comercial Mexicana. MXseems inevitable in these circumstances. G 40% Migros Cooperatives. CH Costco Wholesale Corporation. USA H 41% Royal Ahold. NETH P 1, 2 Cremonini S.p.A. ITA CVS Caremark Corporation. USA I 58% Sainsbury’s Supermarkets P 2This combined response has the advantage Dairy Farm International Holdings Ltd. HK Ltd. UKof giving a consistent message on the desire J 64% Delhaize Group. BELG * Tesco UK. UK P 1, 2 Edeka Zentrale AG & Co. GERfor certified material to the producer and trade K 61%communities, but it does makes it harder to Wesfarmers Limited. AU P 1, 2 George Weston Limited. CANdifferentiate between individual companies’ Wm Morrison P 1, 2 Greggs. UKstrategies and level of real investment in A Profile of Materials Bought In (By Commodity) Groupe Auchan SA. FRA Supermarkets PLC. UKachieving control of their own value chain. B Risk Assessment Grupo Comercial Chedraui. MX * Grupo Pao de Acucar. BRA C Review of Your Supply Chain Kroger Co. USA D Public Commitments by Forest Risk Commodity Sector Leader: Lianhua Supermarket Holdings Ltd. PRCThere is little sign that this approach in E Strategy Development Sainsbury’s Supermarkets Ltd Mitsubishi Shokuhin Co Ltd. JAaddressing the imbalance in the Roundtable Olam International Limited. SI * F Managing for Performance Improvement “Sainsbury’s is delighted to be FFD sector leader forprocesses between the different parts of the Organizacion Soriana. MXvalue chain is working. Producers continue to ask G Sustainable Supply Chain Development & Support Food & Staples Retailing in 2012. As part of our 20x20 Pick n’ Pay Stores Limited. SAFfor greater market pull and do not understand the H Scope and Coverage Sustainability Plan Sainsbury’s is aiming that all our own President Chain Store Corp. TAIobstacles to take-up in the markets. Achieving I Public Reporting brand products do not contribute to global deforestation Raia Drogasil SA. BRAany public commitment to purchasing certified Rallye SA. FRA J Governance Process and that we are the leading ‘tree friendly’ retailer plantingmaterial requires systemic behavioural change Safeway Inc. USA *from many other sectors and at present this K Identifying Risks and Opportunities new trees at home and abroad. Ultimately, procuring Shoppers Drug Mart Corp. CANis difficult to achieve quickly. FFD will be sustainable commodities is essential for our reputation, Spar Group Limited. SAFchallenging the retailer sector to show how they for guaranteeing continuity of supply and to the long- Sumber Alfaria Trijaya. INDO *are actively working with their own supply base term success of our business. Looking forward, the key Supervalu Inc. USAon implementing use of physical focus for this year is to continue the progress we have Sysco Corporation. USAcertified materials. United Natural Foods Inc. USA made on converting products to sustainable palm oil and UNY Co Ltd. JA to connect the demand for sustainable soya to actual Walgreens Company. USA physical supply.” Wal-Mart de Mexico. MX *Most organisations continue to make reference Wal-Mart Stores Inc. USAto 2015 targets, but with a 2% premium on the Judith Batchelar Director of Sainsbury’s Brand Whole Foods Market Inc. USA *use of GreenPalm now, it is difficult to justify less Woolworths Limited. AUthan 100% coverage of companies’ consumption Woolworths Holdings Limited. SAFby offsetting, given that palm oil prices have Wumart Stores Inc. PRCdropped around 25% from their summer peaks.For 2013, FFD hopes to see universal coverageof palm footprints through offsetting and activeengagement in managing MassBalance materials.32 33
  • 18. General RetailersSector Leader: Marks and Spencer plcIn the General Retailers section, the regional Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completedifferences are quite marked. North American Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012companies are generally still grappling with timber Best Buy Co., Inc. USA P 1 Almacenes Exito SA. Colombiaissues, especially around packaging, although, Inc. USA A 64% Kingfisher. UK P 2there have been some good commitments on Barnes & Noble Inc. USApalm. In other regions, noticeably Europe, a wider B 66% Lowe’s Companies, Inc. USA P 1, 2, 3 David Jones Ltd. AUnumber of commodities are seen to be material C 56% Marks and Spencer plc. UK P 1, 2 Debenhams. UKand substantial commitments are being made to Dillards Inc. USA D 63% Next. UK P 2use sustainability as a differentiator. Dollar General Corp. USA E 52% Office Depot. USA P 2 Earth Presents. USA ** F 54% El Puerto de Liverpool SA. MXBeyond our leaders’ achievements, sourcing G 29% Family Dollar Stores Inc. USAstandards for palm, beef, soy and biofuels are H 36% GNC Holdings Inc. USAless evident, even though those commodities Grupo Palacio de Hierro. MX I 52% Sector Leader: Hallmark Cards Inc. USAhave been declared as material. J 50% Marks and Spencer plc Home Depot Inc. USA K 47% Home Product Center PCL. THAI Home Retail Group. UKThe growth of national and regional legislation “Being positioned as sector leader every year since IKEA AB. SWE *on legality of timber is making the availability of A Profile of Materials Bought In (By Commodity) the Forest Footprint Disclosure Project began is an J.C. Penney Company Inc. USAcertified feedstocks and product choices an issue B Risk Assessment honour and reflects the consistent effort M&S employs JD Group Ltd. SAFin some operational locations, particularly China. to improve management of forest risk commodities. John Lewis. UK C Review of Your Supply ChainThe companies’ strategies for securing sufficient Of course we remain focused on tackling the many Kohl’s Corporation. USAmaterials to meet their needs are not D Public Commitments by Forest Risk Commodity Limited Brands Inc. USA challenges that remain, for example the absence of truealways clear. E Strategy Development Macy’s Inc. USA traceability in mainstream leather supply chains, and are F Managing for Performance Improvement Masco Corporation. USA committed to collaboration with FFD alongside industry, Mattel Inc. USA G Sustainable Supply Chain Development & Support academic and NGO partners to develop solutions to N Brown Group. UK*With timber, the certification scheme of choice H Scope and Coverage these challenges. This partnership approach is as OfficeMax Inc. USAis FSC given its widespread acceptance by civilsociety. Currently FSC are focusing on removing I Public Reporting essential now as it was in 2009 when Forest Footprint PPR. FRA Disclosure was introduced.” Sears Holdings Corporation. USAany threat of fraud and that will increase the J Governance Process Staples Inc. USAcosts of compliance for its chain of custody K Identifying Risks and Opportunities Target Corporation. USAstandard, meaning that end users in the sector Fiona Wheatley M&S Plan A Sustainable Development Manager Raw Material WH Smith. UK**may well have to invest in their value chains to Williams Sonoma Inc. USAincentivise vendors and suppliers to maintaintheir certifications when these changes bite incoming years.34 35
  • 19. Industrials, Construction & AutosSector Leader: Dalhoff Larsen & Horneman (DLH A/S)The widening of participation, with the addition Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completeof another company from the auto sector, is Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012warmly welcomed. However, this sector needs BMW AG. GER P 1, 3 Armstrong World Industries Inc. USAmainstream participation as it continues to be Balfour Beatty. UK* A 68% Dalhoff Larsen & Horneman P 2dominated by companies with long standing Barito Pacific. INDO B 65% (DLH A/S). DENcommitments to sustainability or those who use Bollore. FRAtheir profile as a core business differentiator. C 59% Kingspan Group PLC. IRE P 2 Boral Ltd. AU D 67% PSA Peugeot Citroen. FRA 2 Bunzl. UK* Saint Gobain Building P 2 Carillion. UK E 51%Asking how companies in this sector address Distribution. FRA Citic Pacific Limited. HK F 53% Croda International. UKsecurity of supply for their raw materials is key Skanska AB. SWE P 1, 2for us. Investors should be asking questions G 29% Dai Nippon Printing Co Ltd. JA Travis Perkins PLC. UK P 2 Daimler AG. GERabout companies’ capacity to generate value H 42%in the long term without a strategic response. Desarrolladora Homex. MX* I 25% Eagle Ottawa Leather Co. USASome companies do indeed have strong supplychains, particularly in Europe; others are actively J 41% FedEx Corp. USA*engaged in building them, such as DLH who K 52% Fiat S.p.A. ITAhave invested in building FSC supply in tropical Sector Leader: Ford Motor Company. USAgrades. Those without a strategic approach Dalhoff Larsen & Horneman (DLH A/S) General Motors Co. USAwill face significant competition for materials, A Profile of Materials Bought In (By Commodity) Honda Motor Co Ltd. JAdepending on their location of operations. B Risk Assessment Hutchison Whampoa. HK “We are honored to be recognized as a sector leader for IJM Corporation Berhad. MAL C Review of Your Supply Chain a third year in a row. We take managing our impact on Jardine Matheson Holdings Limited. HK D Public Commitments by Forest Risk Commodity the world’s forests very seriously and do our utmost to Porsche Automobil Holding SE. GERWith timber, the certification scheme of choice E Strategy Development collect information on the origin of the timber we source. Renault SA. FRAis FSC given its widespread acceptance by civil This year our efforts have focused on implementing an Rexam. UK F Managing for Performance Improvementsociety. Currently FSC’s efforts are focusing improved version of our due diligence system, which RR Donnelley & Sons Co. USAon removing any threat of fraud and that will G Sustainable Supply Chain Development & Support Sime Darby Berhad. MAL**increase the costs of compliance for its chain helps us manage our forest footprint even better. H Scope and Coverage Toppan Printing Co Ltd. JAof custody standard; meaning that end users in Promoting sustainable forest management is a key Toyota Motor Corporation. JA I Public Reportingthe sector may well have to invest in their value element of DLH’s environmental policy. We believe that United Parcel Service Inc. USAchains to incentivise vendors and suppliers to J Governance Process sustainable management of the world’s forests is the Volkswagen AG. GERmaintain their certifications when these changes K Identifying Risks and Opportunities best and most effective way to reduce the global forest Volvo AB. SWEbite in coming years. footprint and we would like to acknowledge FFD’s work Wolseley. UK to improve the understanding of business impact on forests.”With leather, efforts continue to build transparentsupply chains. This year progress has been slow, Peter K. Kristensenwith problems in Brazil caused by the long debate Vice-President, CSR & Environmenton legality in the Forest Code debate, makingon-the-ground progress difficult as ranchers andfarmers waited to hear how the law would impacton their legal status and set-aside requirements.36 37
  • 20. MediaSector Leader: British Sky BroadcastingParticipation in this sector continues to Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completebe restricted to a small number of opinion Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012formers. The extension of Walt Disney’s timber British Sky Broadcasting. UK P 1, 2, 3 APN News & Media Limited. AUprocurement standards, which gained so much Axel Springer AG. GER* A 69% News International. UK P 1, 2, 3publicity this year, has again thrown the spotlight Bertelsmann SE & Company. GER*on its competitors’ lack of progress on B 51% Reed Elsevier. UK/NETH P 1, 2 Daily Mail & General Trust. UKthese issues. C 64% The Walt Disney Company. USA P 1, 2 Fairfax Media Ltd. AU D 69% Pearson. UK Sanoma Oyj. FIN E 57%We note that the challenging times experienced Singapore Press Holdings Limited. SI F 61% Tamedia AG. CHby News International have not deflected theirCSR team from this year’s submission and they G 29% Time Warner Inc. USAare to be congratulated. H 23% Transcontinental Inc. CAN I 50% J 58%With the stable trend in raw material prices K 50%and increases in the supply of certified grades,there are opportunities to increase sustainabilityof supply without major cost implications A Profile of Materials Bought In (By Commodity)and it would be good to see a higher level of B Risk Assessmentperformance in coming years. C Review of Your Supply Chain D Public Commitments by Forest Risk Commodity E Strategy DevelopmentThe participation of the wider media industryin disclosure, at a time of widespread concern F Managing for Performance Improvementabout the future of non-digital media, should be G Sustainable Supply Chain Development & Supportan opportunity to promote to consumers the wider H Scope and Coveragesocietal benefits of paper-based media. I Public Reporting J Governance Process K Identifying Risks and Opportunities Sector Leader: British Sky Broadcasting “At Sky, we’re delighted to be rated the leading company in the Forest Footprint Disclosure (FFD) Project for the media sector this year. Taking part in the FFD Project keeps on challenging us in our work with our suppliers so that we improve the way we source the products we use in our business day to day that come from the rainforest. It’s also a great fit with Sky Rainforest Rescue, our partnership with WWF, working on the ground to help local farmers find new market opportunities for products from the rainforest instead of deforesting their land.” Fiona Ball Head of Environment & Engagement38 39
  • 21. Oil & GasSector Leader: Greenergy International LtdWith the debate about use of food-grade Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completefeedstocks for biofuel and sustainable supply Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012for bio-energy having rarely been out of the Greenergy International Ltd. UK P 1, 2, 3 Adani Enterprises Ltd. INDheadlines this year, this sector has been BP. UK * A 100% Neste Oil. FIN P 1, 2under considerable scrutiny. Those companies Chevron. USAresponding to FFD continue to demonstrate B 75% Piedmont Biofuels. USA P 1 ConocoPhillips. USAresponsibility, offering market differentiation C 79% Exxon Mobil. USAunderpinned by sophisticated feedstock Petrobras. BRA D 92%control systems. Royal Dutch Shell. NETH E 91% Total. FRA F 92% Valero Energy. USAThe lack of engagement from any of the major G 48%oil and energy companies globally, with the H 41%commendable exception of BP, continues I 67%to be shameful, especially when public and Sector Leader:financial community interest in their performance J 83% Greenergy International Ltdcontinues to be so high. With the alternatives to K 89%bio-based fuels such as deepwater or fracking “Like other oil companies, we blend biofuel into our petroloperations so problematic, both environmentally and diesel to meet our biofuel supply obligations. Weand socially, and with many companies having A Profile of Materials Bought In (By Commodity) seek to minimize our impact on forest commodities bycommitments to use of non-food grade materials, B Risk Assessment manufacturing our own biofuel from food industry wastes.the lack of response is difficult to justify. C Review of Your Supply Chain Where we need to use crop-based biofuels, we choose D Public Commitments by Forest Risk Commodity to disclose their origin on our website and on BioCarbon E Strategy Development Tracker. By making available detailed information aboutThis year’s changes to the EU legislative our biofuel supply, we correct inaccurate assumptions F Managing for Performance Improvementframework for use of edible oils will reduce the G Sustainable Supply Chain Development & Support and manage reputational risk.”attractiveness of palm and soy longer term, whileincreasing the likelihood of cellulose-based oils H Scope and Coverage Tamara Earleybeing used. Therefore the material feedstock I Public Reporting Managing Directorselection process in the sector needs to learnfrom the experience of other sectors in ensuring J Governance Processthat traceability and sourcing standards for wood- K Identifying Risks and Opportunitiesbased materials are built in from day one.The reuse of materials as feedstocks for biofuelor energy is an important aspect of developingthe circular economy. It is equally importantto make transparent those companies whichare making real efforts to communicate theircommitment to food security and land efficiency.40 41
  • 22. Packaged Foods & Meats Companies that completed Disclosed Commodities Scopes Companies that did not complete Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012Sector Leaders: Marfrig Group and Unilever Bimbo, S.A. De C.V. MX 2 AarhusKarlshamn AB. SWE Cranswick Plc. UK P 1, 2 Aryzta AG. CH Associated British Foods. UK DuPont Nutrition & Health. USA 1, 2, 3 Barry Callebaut AG. SW Groupe Danone. FRA 2 BRF-Brasil Foods SA. BRA HJ Heinz Company. USA 1, 2 Britannia Industries Limited. INDThe extension of participation into new markets in Sector average scores for each section of the Disclosure Campbell Soup Company. USA InterNatural Foods. USA P 2this sector, together with the addition of the global Request as a percentage of total points available Charoen Pokphand Foods PCL. THAIreach of the iconic Heinz brand, are JBS S/A. BRA P 1, 2 China Mengniu Dairy Company Ltd. HKwarmly welcomed. Justin’s. USA P 2 China Yurun Food Group Ltd. PRC A 94% ConAgra Foods Inc. USA Marfrig Group. BRA P 1, 2 B 88% CSM NV. NETH Nestlé SA. CH P 1, 2 Dairy Crest Group. UKThe performance in this sector does however, C 66% PepsiCo, Inc. USA P 2 Dean Foods Company. USA *vary widely; this is in part dependent on product D 74% Del Monte Foods Company. USAranges and their formulations, which drive Unilever. NETH P 2 E 61% Fraser & Neave Limited. MALdependency on particular commodities. It also Fuji Oil Co Ltd. JA F 70%seems to vary according to their proximity to General Mills Inc. USAconsumers or retailers who are more aware of G 40% Goodman Fielder Limited. AUenvironmental issues. Perhaps the business case Sector Leader: H 43% Grupo Bafar. MXis easier to make if it is more tangible? Marfrig Group I 58% Grupo Herdez. MX J 67% “Building on the environmental, social, economic, Grupo Modelo. MX technological, value chain and product dimensions, Hershey Company. USA K 65% Hormel Foods. USAThis year’s sector leaders both exemplify the the Marfrig Group has furthered its sustainability Indofood Agri Resources Ltd. SIchallenges in this sector, with Marfrig and strategy. Participation in the FFD has been very Indofood Sukses Makmur. INDOUnilever covering a large number of commodities. A Profile of Materials Bought In (By Commodity) important to determine the guidelines and make Inner Mongolia Yili Industrial Group Co Ltd. PRCMarfrig’s challenge is operating in a country with B Risk Assessment us search for continuous improvements to our J.M. Smucker Company. USAan evolving political response to supply chainresponsibility, while Unilever, with its global reach C Review of Your Supply Chain management system. In the 2011 report, we were J-Oil Mills Inc. JA D Public Commitments by Forest Risk Commodity highlighted as the most evolved company and now, Kellogg Company. USA *and 100 strategically important commodities, in this report, we are proud to rank as the Leader Kerry Group. IREshares many of the same information challenges. E Strategy Development Kikkoman Corp. JABoth companies have a great deal of complexity F Managing for Performance Improvement of the Sector, which shows our evolution has been Kraft Foods Group Inc. USAto manage and are showing leadership in change consistent and solid.” G Sustainable Supply Chain Development & Support Lindt & Spruengli AG. CHand information management. Clever Pirola Avila Lotte Confectionery Co Ltd. KS H Scope and Coverage Director of Sustainability Maple Leaf Foods Inc. CAN I Public Reporting Mars Inc. USAThe growth of corporate collaboration systems J Governance Process Mayora Indah. INDOis particularly marked in this sector, with the K Identifying Risks and Opportunities McCain Foods Ltd. USA Sector Leader:Consumer Goods Forum (CGF) and the Mead Johnson Nutrition Company. USA UnileverRoundtables having a good take-up. FFD looks Molinos Rio de la Plata SA. ARGforward to other members of the CGF, with its “Unilever is honoured to be recognised as sector Nippon Meat Packers Inc. JAzero deforestation commitment, coming forward Orion Corp. KS leader for the second year. We applaud the work of Pilgrim’s Pride Corporation. USAin 2013. the Forest Footprint Disclosure Project in driving more Pinnacle Foods Corporation. USA companies to embed the right sustainable practices in Premier Foods PLC. UK their supply chains. We wish to thank all of our partners Ruchi Soya Industries Limited. IN for their support in 2012. Delivering our 100% certified San Miguel Pure Foods Co Inc. PH sustainable palm oil target 3 years ahead of our original Sinar Mas Agro Resources & Technology. INDO* Smithfield Foods Inc. USA schedule is an achievement of which we, our suppliers Stonyfield Farm Inc. USA and our NGO partners can all be very proud. Moving to Tiger Brands Ltd. SAF traceable supply and making progress across all key Tingyi (Cayman Islands) Holding Corporation. PRC agricultural resources is our intent, and we look forward Tyson Foods Inc. USA to continue working in partnership to achieve this.” Uni-President China Holdings Ltd. TAI United Biscuits Holdings Ltd. UK Gail Klintworth Want Want China Holdings Limited. PRC Chief Sustainability Officer42 43
  • 23. Paper & Forest ProductsSector Leaders: Mondi PLCThe level of participation across this sector Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completecontinues to grow, especially in Scandinavia. Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012Given the difficult times the paper and board Ahlstrom Corporation. FIN 2 Asia Pacific Resources International Holdings Ltd. SIindustry are undergoing, as the industry Billerud Aktiebolag. SWE A 100% Arauco. CHL P 1, 2restructures in response to changes in global Boise Inc. USAdemand patterns, this commitment is to B 91% Asia Pulp & Paper Group, P 1, 2 Canfor Corporation. CANbe welcomed. C 86% Indonesia. SI China Resources and Transportation D 88% Catalyst Paper Corporation P 1, 2 Group Ltd. HK Ltd. CAN Cikel Group. BRA E 85%Considerable NGO activity continues to be DanzerGroup. CH P 1, 2, 3 Columbia Forest Products Inc. USA F 87% DS Smith. UKdirected at this sector. The continued expansion Domtar. CAN P 1, 2of mills in Asia is being publicly questioned, G 49% Empresas CMPC. CHLgiven the lack of availability of third-party certified Evergreen Packaging. USA P 2 Georgia-Pacific LLC. USA H 61%feedstocks in the region, and has generated Fibria. BRA P 1, 2 Glatfelter. USA I 87% Graphic Packaging Holding Company. USAsignificant campaigns which target the Holmen. SWE P 1, 2financial sector. J 75% Ence Energia y Celulosa. SP * International Paper. USA P 1 Hokuetsu Kishu Paper Co Ltd. JA K 73% International Paper. BRA 1 Jaya Tiasa Holdings Berhad. MAL Klabin. BRA Metsä Board Corporation. FIN 1, 2The global recession and higher energy prices A Profile of Materials Bought In (By Commodity) Lee & Man Paper Manufacturing Ltd. HKcontinue to undermine the economics of some Mondi PLC. SAF P 1, 2 Louisiana-Pacific Corporation. USA B Risk Assessmentsector participants. While others are using this as PaperlinX. UK P 2 Mayr-Melnhof Karton. AV C Review of Your Supply Chainan opportunity to emphasise their sustainability MCC Meili Paper Industry Co Ltd. PRC Sappi. SAF P 1, 2, 3credentials to diversify into bio-based materials D Public Commitments by Forest Risk Commodity MeadWestvaco Corporation. USAand new segments like bio-energy. E Strategy Development SCA Skog. SWE P 1, 2, 3 Nine Dragons Paper Holdings Ltd. HK F Managing for Performance Improvement Stora Enso Oyj. FIN P 1 Nippon Paper Group Inc. JA UPM-Kymmene Corporation. FIN P 1, 2 Oji Holdings Corporation. JA G Sustainable Supply Chain Development & Support Packaging Corporation of America. USAThe level of global certification does not appear H Scope and Coverage Weyerhaeuser Company. USA P 1, 2 Plum Creek Timber Company Inc. USAto be growing to meet the regulatory demands of Portucel Empresa Produtora de Pasta e Papel. PLkey consuming markets such as the US, Europe I Public Reporting Sector Leader: Rayonier Inc. USAand Australia. J Governance Process Mondi PLC Rengo Co Ltd. JA K Identifying Risks and Opportunities Resolute Forest Products. CAN Rock-Tenn Company. USA * “At Mondi, we believe in responsible, sustainable Samling Global Ltd. HK forestry. This means balancing growing demand Schweitzer-Mauduit International Inc. USA for forestry goods and services with enhanced Semapa-Sociedade de Investimento e Gestao. PL ecological and social values to meet the needs Shandong Chenming Paper Holdings Limited. PRC of our business and our customers. To secure Sonoco Products Company. USA continuous access to sustainable and credible Suzano Papel e Celulose. BRA Sveaskog. SWE sources of fibre, it is therefore in our interests Ta Ann Holdings Berhad. MAL to ensure that we support the requirements of Vicwood Group. HK responsible forestry practice, from the management West Fraser Timber Co Ltd. CAN of our own forests and the procurement of wood Yueyang Paper Co Ltd. PRC and fibre, through the supply chain. We ensure FSC certification for all our owned and leased forests and we use chain of custody at all processing operations to ensure legality and sustainable wood sourcing.” Uwe Fölster Head of Sustainable Development44 45
  • 24. Personal Products & Household ProductsSector Leader: L’OréalPersonal and Household Products has been Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completeone of this year’s most dynamic sectors with Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012new entrants ranging from large multinationals Avon Products, Inc. USA P 1, 2, 3 Aaron’s Inc. USAto regional and smaller operations. The ongoing Bed Bath & Beyond Inc. USA A 77% Colgate Palmolive Co. USA 2consumer and NGO campaigning on raw Beiersdorf AG. GERmaterial sources continues. Companies who B 83% Earth Friendly Products. USA P 2, 3 Clorox Company. USAare in command of their supply chains benefit C 59% Henkel AG & Co. KGaA. GER P 2 Estee Lauder Companies Inc. USAfrom reputational security and potentially new Godrej Consumer Products Limited. IND * D 80% Johnson & Johnson. USA P 2communication opportunities. Herbalife Ltd. USA E 62% Kao Corporation. JA 1, 2 LG Household & Health Care Ltd. KS F 71% Kimberly-Clark Corporation. USA P 2 Procter & Gamble Company. USATimber and palm are the key commodities in use G 34% Kimberly-Clark de México. MX 2 Revlon Inc. USAin this sector but there are some significant users H 45% Sally Beauty Holdings Inc. USA L’Oréal. FRA P 1, 2, 3of beef-based tallow. Recent announcements SC Johnson & Son Inc. USA I 62% Natura Cosméticos S.A. BRA P 1, 2, 3 Seventh Generation Inc. USA**by Kimberly-Clark about their trial of substitutefibre sources, using bamboo as a fast growing J 48% Oriflame Cosmetics SA. SWE 2 Steinhoff International Holdings Ltd. SAFalternative, highlight an interesting strategic K 53% Ulta Salon Cosmetics & Fragrance Inc. USA PZ Cussons. UK P 2response to the challenge of how the industry willcontinue to grow with a finite amount of available Reckitt Benckiser Group plc. UK P 1, 2land for feedstocks without threatening A Profile of Materials Bought In (By Commodity)food security. B Risk Assessment C Review of Your Supply Chain Sector Leader: L’Oréal D Public Commitments by Forest Risk CommodityThe lack of readily available certified palm E Strategy Developmentoil-based derivatives continues to be an issue, “L’Oréal is honoured to be once again nominated as F Managing for Performance Improvement a sector leader of the FFD for its leading practices inbut the availability of Mass Balance certifiedderivatives is slowly improving the situation, G Sustainable Supply Chain Development & Support managing forest resources. As the world leader in beauty,although transparency and knowledge of H Scope and Coverage L’Oréal’s commitment is at the highest level: More thanavailability within supplying companies continues I Public Reporting ever, it is crucial to protect forests in emerging be mixed. Palm kernel oil-based derivatives J Governance Process Forests that represent an authentic natural capital forcontinue to be difficult to source and theGreenPalm market has expanded to fill the gap K Identifying Risks and Opportunities humanity today, and for future generations to come.until more physical certified ingredients become Recognizing our leading role, next steps is to promoteavailable. Disclosing companies continue to be best practices along the value chain and encourage oursome of the few organisations covering 100% of suppliers to measure and disclose their forest impacttheir consumption with GreenPalm offsets. throughout the CDP/FFD merge.” Alexandra Palt Director, CSR & SustainabilityThis sector has been very active in demonstratingleadership in the extent of its scope of operations,covering not only commodities used in productformulation but also packaging andmarketing materials.46 47
  • 25. Textiles, Apparel & Luxury GoodsSector Leader: PrimeAsia Leather CorporationFFD welcomes the wider participation in this Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completesector and the increase in its geographic reach. Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012Finding responsible supply options for companies adidas AG. GER P 1, 2 Coach, Inc. USAin the Textiles, Apparel & Luxury Goods sector Compagnie Financiere Richemont SA. CH A 75% Burberry Group. UK P 1, 2continues to be challenging as the evolution of Columbia Sportswear Company. USAtraceability and certification systems is B 67% C & J Clark International Ltd. UK P 1, 2 Deckers Outdoor Corporation. USAstill immature. C 49% Christian Dior sa. FRA 1, 2 Fossil Inc. USA D 54% Curtume Viposa S/A Ind. e 2 Gap Inc. USA Com. LTDA. BRA Geox S.p.A. ITA E 45%FFD supports the work undertaken by our Haining China Leather Market Co Ltd. PRC F 51% GUCCI. NETH 2 Hennes & Mauritz AB. SWEdisclosing companies to build capacity in theleather industry to locate feedstocks from growing G 34% Moet Hennessy Louis P 1, 2 Hermes International. FRAfarm to tannery. Vuitton S.A. FRA Inditex. SP H 22% Nike Inc. USA P 2 Jones Group Inc. USA I 39% Levi Strauss & Company. USA PrimeAsia Leather P 2 J 50% Mulberry Group. UK Corporation. USA/TAIWe salute those leaders who have proved it is K 29% Nordstrom Inc. USApossible to ensure traceability of their feedstocks Timberland. USA P 1, 2 Patagonia Inc. USAand are supporting the extension of the Leather Prada S.p.A. HKWorking Group certification system upstream. A Profile of Materials Bought In (By Commodity) Puma SE. GER B Risk Assessment PVH Corp. USA Sector Leader: Ralph Lauren Corporation. USA C Review of Your Supply Chain PrimeAsia Leather Corporation VF Corporation. USAIn coming years we hope that non-luxury brands D Public Commitments by Forest Risk Commodity Wolverine World Wide Inc. USAwill take-up the challenge to engage with the E Strategy Developmentsourcing challenges of leather in their value “PrimeAsia’s commitment to the environment guideschains, and we look to the finance industry F Managing for Performance Improvement us to create the highest quality leather with the lowestto present this issue as part of corporate G Sustainable Supply Chain Development & Support lifecycle footprint through innovation and engagementengagement given the reputational risks. H Scope and Coverage of employees, customers, suppliers, and the I Public Reporting communities in which we operate. In 2012, PrimeAsia J Governance Process set ambitious five year thirty percent energy, water, K Identifying Risks and Opportunities and waste reduction goals. To collect benchmark data, all PrimeAsia leathers were carbon and water foot-printed. Innovative engineering projects including solar hot water, biomass boilers, energy-efficiency, and re-using waste will continue to be implemented. PrimeAsia also understands the need to collaborate with the supply chain, and in 2012 had suppliers answer the first of annual sustainability questionnaires detailing their own environmental policies and actions.” Sarah Swenson Environmental Manager48 49
  • 26. Travel & LeisureSector Leader: British AirwaysThe inclusion of Alsea of Mexico in this sector Sector average scores for each section of the Disclosure Companies that completed Disclosed Commodities Scopes Companies that did not completeis warmly welcomed, building FFD’s global Request as a percentage of total points available Disclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012perspective and our food service coverage. ALSEA Group. MX 2 Accor SA. FRA A 71% British Airways. UK P 2 Air France KLM. FRA** Brinker International Inc. USA B 68% Compass Group PLC. UK P 2 Burger King Holdings Inc. USAWith commodity and food inflation growing insignificance, building traceability and security C 36% Eurostar International Ltd. UK P 1, 2 Carnival. USAof supply are big issues for this sector. The D 49% Sodexo. FRA P 2 Chipotle Mexican Grill Inc. USAdependency of the companies on growers, Darden Restaurants Inc. USA E 22% TUI Travel PLC. UK P 1, 2producers, traders and the food industry to Delta Air Lines Inc. USA F 60% Whitbread Group Plc. UK P 1, 2, 3 Deutsche Lufthansa AG. GERprovide them with information is clear. G 23% Domino’s Pizza Group. UK H 26% Dunkin’ Brands Group Inc. USA Sector Leader: easyJet. UKWith the development of corporate commitments I 29% Gondola Holdings Ltd. UK British Airwaysin other sectors, a positive response also offers J 57% Grupo Aeromexico. MXopportunities for travel and food service brands to K 50% “We are incredibly proud to have achieved sector Hilton Group. USAmeet customer needs and differentiate leader status; we believe the FFD contributes to Hyatt Hotels Corp. USAtheir operations. Iberian Airlines. SP A Profile of Materials Bought In (By Commodity) the fulfilment of our corporate vision to lead the Indian Hotels Company Ltd. IND airline industry in responsible behaviour; it also InterContinental Hotels Group. UK B Risk Assessment demonstrates our comprehensive and widespread JD Wetherspoon. UKGiven the intrinsic relationship between travel, C Review of Your Supply Chain approach to addressing climate change where we JetBlue Airways Corporation. USAbiodiversity and an interest in other cultures, D Public Commitments by Forest Risk Commodity Marriott International Inc. UKthere are significant opportunities for companies work closely with our service partners, to ensure our E Strategy Development principles apply throughout the supply chain. In the McDonald’s Corporation. USAperforming well in this sector to communicate MGM Resorts International. USAtheir global stewardship to consumers. F Managing for Performance Improvement coming year we will extend the scope of our report Millennium & Copthorne Hotels. UK** G Sustainable Supply Chain Development & Support to achieve wider footprint coverage and also we will Mitchells & Butlers. UK H Scope and Coverage set specific objectives with our service partners to NH Hoteles SA. SP I Public Reporting improve accuracy of data and to extend the volume Restaurant Group. UK of certified products.” Royal Caribbean Cruises Ltd. USA J Governance Process Ryanair Holdings. IRE K Identifying Risks and Opportunities Alessandra Cuzzoli Shangri-La Asia Limited. HK Environment Executive Southwest Airlines Co. USA* Starbucks Corporation. USA Starwood Hotels & Resorts Worldwide Inc. USA* Tim Hortons Inc. USA United Continental Holdings Inc. USA US Airways Group Inc. USA Virgin Atlantic Airways Ltd. UK Wendy’s Company. USA Wyndham Worldwide Corporation. USA Wynn Resorts Ltd. USA Yum! Brands Inc. USA50 51
  • 27. UtilitiesSector Leader: Drax GroupThe sustainability of feedstocks for the sectorcontinue to be under scrutiny. Drax Group’sfeedstock plans made headlines due to theirpotential impact on the UK’s reclaimed timber Sector Leader:market, bringing the future role of bio-energy into Drax Groupthe spotlight. “Drax is very proud of being recognised again by FFD as theThe lack of participation from other consumers of leader in the utilities sector. Wewood-based feedstocks is therefore particularly are committed to an extensivedisappointing, especially given the efforts being programme of increasing themade to establish sustainability criteria both amount of biomass we use andfor producers and buyers in the industry. As believe it to be a prerequisitethis system matures, we look forward to more that any biomass used shouldcommunication to investors on how a low carbonaspiration is being delivered in practice. be sustainable. This not only makes sense from a business perspective, that is longevity of feedstock supplies, but it is also essential for environmental, economic and social reasons. We intend to remain at the forefront of the introduction of credible standards for solid biomass procurement, anticipating that the experience gained will be beneficial as clarity evolves in the regulations for the definition of sustainability standards and associated methodologies.” Dr Nigel Burdett Head of EnvironmentCompanies that completed Disclosed Commodities Scopes Companies that did not completeDisclosure Request 2012 in 2011 Covered Covered Disclosure Request 2012American Electric Power. USA P 1, 2, 3 Acciona SA. SPDrax Group. UK P 2 Enel Green Power S.p.A. ITA GDF Suez. FRANational Grid plc. UK P 1, 2 Vattenfall AB. SWE52 53
  • 28. Forest Footprint Disclosure: The End and the BeginningJames HulseIn 2008, our Chairman Andrew source of information for these palm oil has risen to over 10% of as investors gain a clearer insightMitchell attended a Carbon interrelated issues. This ‘return to the world’s supply, although demand into the sustainability of a company’sDisclosure Project (CDP) climate the mother ship’ has been met with has so far failed to keep pace. business model and indeed theirchange report launch and identified unanimously positive reaction from licence to operate. Amalgamateda need to educate business and companies, investors and So where do we see the project data can also be presented ininvestors about the risks associated other stakeholders. heading as it moves into CDP? different formats - in sector-specificwith deforestation, which accounts Initially, our major focus will be on modules for example - which mayfor around 15% of the world’s A transition process has already integrating the project into CDP’s enable more informed decision-greenhouse gas emissions. As begun and CDP will operate FFD systems and making sure that making for both companies andCDP was about to launch its water from February 2013, leading to full stakeholders are presented with an their investors.program, it was agreed that the integration by February 2014. GCP improved interface to enable themGlobal Canopy Programme would will continue to act as the prime to input or access information more In conclusion, we believe that theset up and run a Forest Footprint funder of the project until 2014, easily. We believe that the size and merger will enable FFD to increaseDisclosure Project with CDP’s when it will take on a new role as established reputation of CDP will its influence enormously, whileassistance, and so FFD was born advisor on forests to CDP. enable us to scale up the project making disclosure simpler andand launched its first request dramatically, which should create quicker for companies. Creating acycle in 2009. Our work has contributed to James Hulse additional pressure on companies holistic natural capital disclosure greater awareness of the issues Director to disclose. platform will help to facilitateThe first four years of FFD have around deforestation and the link Forest Footprint Disclosure natural capital accounting andseen the project reach 100 to commodities, and a number There are opportunities to provide stakeholders with a muchdisclosing companies, backed by of companies have introduced or combine carbon, water and clearer picture of how companiesmore than 165 endorsing investors changed procurement policies as a were being complied with in every forests programs to create a impact and are impacted by themanaging around 12 trillion dollars. direct consequence of our feedback site and besides which, it wasn’t more comprehensive approach environment. We hope that this willGiven that it was started with one and investor pressure. Nonetheless, material - there would be an uproar to measuring an organisation’s encourage companies and theirfull time member of staff and still had companies are constantly pushing from all stakeholders, and yet this is full natural capital impact, or investors to recognise the materialonly four full time members at the back on the increasing reporting a similar argument to those we hear potentially an environmental P&L value of natural capital and the risksend of 2012, this is an impressive burden and we are aware of the on commodity supply chains for all disclosing companies. This to business of ignoring it. This in turnachievement and we thank everyone time that they devote to completing every year. could satisfy the market demand will drive companies to internalisewho has been involved in the disclosure requests. In manyproject so far. cases, however, the burden is not While much of what we are “We believe that the merger will enable FFD to the actual reporting, but rather asking for is voluntary disclosure,Earlier this year, CDP and GCP the work that needs to be done to over the last four years we have increase its influence enormously, while makingannounced an alliance that will see access and collate the data needed.GCP’s FFD merge with CDP over While we have some sympathy seen some notable shifts in the legislative landscape. The multi- disclosure simpler and quicker for companies.”two years. This strategic merger by for this, the information we are lateral negotiations of the UnitedCDP and GCP will bring corporate seeking on behalf of our endorsing Nations have introduced drivers for natural capital accounting and the costs associated with theirdisclosure on carbon and the investors is crucial to enable them of deforestation as a key element for integrated reporting, giving use of natural capital, stimulating of negotiations, in response to a stakeholders a clear idea of the the transition to good corporate “Creating a holistic natural capital disclosure platform growing awareness that supply- side measures are not sufficient to environmental issues which a company faces and how well it is stewardship that is needed to ensure our natural resources are will help to facilitate natural capital accounting and counter the financial influence of managing them. Companies have used responsibly, and to ensure global commodity markets. Laws been effective in using the insights corporate value is protected, provide stakeholders with a much clearer picture of how have been created in the US and from carbon, water and forest data not eroded.companies impact and are impacted by the environment.” Europe to try to prevent the import of illegal timber, and to prosecute those to reduce their emissions and manage related risks. One of the companies who are responsible. major challenges we face is howclimate, water and forests under to make informed decisions about Biofuels regulations have included to make information more relevantone roof, resulting in the world’s their investments. If a company sustainability criteria for the first and material to investors, to enablelargest and most comprehensive pushed back on health and safety time, via certification schemes. The them to make investment decisionsnatural capital disclosure system, information - arguing that it was first certified sustainable soy has as a consequence. Combining forestand will provide companies and too much effort to establish what been produced and the first cattle data with carbon and water is likelyinvestors with a single, integrated the policies were and whether they ranches certified, while sustainable to be a big step forward on this path,54 55
  • 29. SignatoriesFFD would like to thank the - CommInsure - Henderson Global Investors - New Forests - Threadneedlefollowing financial institutions - Compton Foundation, Inc. - Hermes Equity Ownership - The New School - Trillium Asset Managementthat have endorsed the project, - Connecticut Retirement Plans And Services - Newton Investment Corporationeach of whom has indicated their Trust Funds - HESTA Super Management Limited - Triodos Bankcommitment to understanding - Conser Invest - Ilmarinen Mutual Pension - Norges Bank Investment - Tri-State Coalition fordeforestation risk in their potential - The Cooperative Asset Insurance Company Management ResponsibleInvestmentinvestments and many of whom Management - Impax Asset Management - Northward Capital - Union Investment Privatfonds GmbHhave been very supportive of FFD’s - Cyrte Investments - Inflection Point Capital - Northwest & Ethical Investments L.P. - Veris Wealth Partnersactivities over the past year. - Delta Lloyd Asset Management Management - OceanRock Investments - VicSuper - Development Bank of Japan Inc. - Insight Investment Management - Oppenheim & Co Limited - Walden Asset Management- Active Earth Investment Management - Dexia Asset Management (Global) Ltd - Opplysningsvesenets fond - WHEB Asset Management- Advanced Investment Partners - Domini Social Investments LLC - Instituto Infraero de Seguridade - Pax World Management LLC - Zevin Asset Management- Amundi Group - Doughty Hanson & Co Social - INFRAPREV - Pensioenfonds Vervoer - Zurich Cantonal Bank- Antera Gestão de Recursos S.A. - EBG (Environmental Business - Interfaith Center on Corporate - Pensionsmyndigheten - 3Sisters Sustainable Management LLC- APG Asset Management Group) Capital Responsibility - PGGM Investments- Arisaig Partners - Ecclesiastical Investment - Invesco Perpetual - Pictet & Cie If you represent an investment- Avaron Asset Management AS Management - Investec Asset Management - Pinstripe Management GmbH institution and would be interested- Aviva - EEA Group Ltd - The Joseph Rowntree - Portfolio 21 Investments in finding out more about how you- Aviva Investors - Eko Charitable Trust - The Presbyterian Church in Canada can become a signatory to the- AXA IM - Environment Agency Active - JPMorgan Chase & Co. - Psagot Investment House Ltd project please contact:- Banco Nacional de Pension Fund - Kaiser Ritter Partner Privatbank - Rathbone Greenbank Investments Desenvolvimento Economico e - Erik Penser Fondkommission AG (Schweiz) - River Twice Capital Advisors, LLC or Social (BNDES) - Erste Asset Management - Kleinwort Benson Investors - Robeco- Banesprev – Fundo Banespa de - Ethos Foundation - KPA Pension - Royal London Asset Management Seguridade Social - Etica SGR - Legal & General Investment - RPMI Railpen Investments- Bank Sarasin & Co. Ltd - Evangelical Lutheran Church in Management - SAM (Sustainable Asset- Banque Degroof Canada Pension Plan for Clergy - The Local Authority Pension Fund Management AG)- Bank Vontobel and Lay Workers Forum (LAPFF) - Santander Brasil Asset- Blom Investment Bank - The Environmental Investment - Local Government Super Management- Blumenthal Foundation Partnership LLP - London Pensions Fund Authority - Sarasin & Partners LLP- Boston Common Asset - F&C Investments - Marc J. Lane Investment - Schroders Management, LLC - Fédéris Gestion d’Actifs Management, Inc. - Scottish Widows Investment- British Airways Pension - Financiere de l’Echiquier - Matrix Asset Management Inc. Partnership- CAI Corporate Assets International AG - First Affirmative Financial Network - Mistra, Foundation for Strategic - SNS Asset Management- California State Teachers’ - First Commercial Bank Environmental Research - Solaris Investment Retirement System CalSTRS - First State Investments - MMI Holdings Ltd Management Limited- Calvert Investments, Inc. - FRANKFURT-TRUST Investment - Mn Services - Sonen Capital LLC- Caser Pensiones EGFP Gesellschaft mbH - Monega Kapitalanlagegesellschaft - Soprise! LLP- Catholic Super - Friends Fiduciary Corporation mbH - Spring Water Asset- Cbus Superannuation Fund - Fundação Forluminas de - Mongeral Aegon Seguros e Management LLC- Central Finance Board of the Seguridade Social – FORLUZ Previdência S.A. - Statewide Superannuation Methodist Church - General Equity Group AG - Mutual Insurance Company - Storebrand- The Children’s Investment Fund - Generation Investment Management Pension-Fennia - Strathclyde Pension Fund Management (UK) LLP - German Equity Trust AG - The Nathan Cummings - Sustainable Development- Christian Brothers Investment Services - Global Forestry Capital S.a.r.l. Foundation Capital LLP- Christian Super - Good Growth Institut für globale - National Australia Bank - Sustainable Insight Capital- Christopher Reynolds Foundation - Green Century Capital Management - National Grid UK Pension Scheme Management- The Clean Yield Group - Groupe Investissement - National Pensions Reserve Fund - The Sustainability Group- ClearBridge Advisors Responsable Inc. of Ireland - Svenska Kyrkan, Church of Sweden- Climate Change Capital - Groupe OFI AM - Natural Investments LLC - Swift Foundation- Colonial First State Global Asset - Harbour Asset Management - Nelson Capital Management LLC - Sycomore Asset Management Management - Hazel Capital - New Amsterdam Partners - TD Asset Management56 57
  • 30. AcknowledgementsFFD would like to acknowledge the Staff p23: Yayan Indriatmoko/CIFORmembers of its Steering Committee FFD would like to thank all staff and p31: Achmad Rabin Taimfor their invaluable support consultants who have worked on or p53: Sam Beebethroughout the four years of the assisted with the project. Particular p58: Daniel AxelsonFFD project. All the members of the mention goes to Liz Crosbie for Other images from istockphoto.comSteering Committee volunteered their her tireless work setting up andguidance, support and commitment helping with FFD, to Steven Ripleyand their efforts are reflected in the and Tracey Campbell, to Christophsuccess of the project to date, for Harwood and Jasmine Singh forwhich we are extremely grateful. their work with investors on our behalf and to the team at StrategicFFD Steering Committee Environmental Consulting, particularly- Carbon Disclosure Project Samuel Baynes and Cyril Jobard.- Department for International Development © Global Canopy Foundation 2013- FTSE Company The Forest Footprint Disclosure- Global Canopy Programme Project is a special project of- Hermes Equity Ownership Services the Global Canopy Foundation.- Marksman Consulting Registered UK Charity (No.- The Prince’s Charities 1089110), © 2001. All Rights International Sustainability Unit Reserved, Incorporated as a- Strategic Environmental Consulting Company Limited by Guarantee (No.- UNEP Finance Initiative 4293417), Incorporated in England- WWF-UK with registered address 23 Park End- UN PRI (observer status) Street, Oxford, OX1 1HU.Donors AuthorsFFD would like to thank the UK James Hulse, Liz Crosbie, KatieDepartment for International McCoy, Nathalie Walker andDevelopment (DFID), The Esmée Frances Davis. FFD would like toFairbairn Foundation, the Waterloo acknowledge the contributions (inFoundation, the Rufford Maurice order of appearance) of Andrew W.Laing Foundation and The Climate Mitchell, Dr. Gillian Kay, Professorand Land Use Alliance for their Richard Tipper, Dr. Adam Webb,generous support of the project since Dr. Sonja Vermeulen and Christophits inception. Harwood.Partners To be cited as: Hulse J., CrosbieFFD would like to extend a special L., McCoy K., Walker N. and Davisthank you to the National Wildlife F. (2013) The Forest FootprintFederation for their outreach to US Disclosure Annual Review 2012,companies and to Reforestamos Global Canopy Programme, Oxford.México for their engagement withMexican companies in 2012. Their Image creditsgenerous assistance was invaluable Covers: © Fernando Cavalcantiand enabled the project to greatly p4: Liam Robertsextend its global reach this year. p12: United Nation Framework Convention on Climate ChangeParticular acknowledgment must be p13: Leonardo F Freitasgiven to Barbara J. Bramble, Sabrina p16, p58, p62-p63: Neil Palmer/CIATPatel, Daniel Sanchez, Eduardo Jr. p19: © National Wildlife Federation/Arenas and Karen Berges. Rachel Kramer 59
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