Downstream actors have developed various responses to address tropical deforestation linked to international trade, but these have significant limitations. Voluntary certification schemes set by companies cannot fully address the problem on their own and have weakened standards. Governments have been reluctant to regulate imports due to concerns around sovereignty and trade laws. While responses have raised awareness, deforestation remains politically and commercially acceptable. Current approaches may help transform practices over time by collectively signalling the need for change, though fragmentation limits their impact. More ambitious action is needed from both private and public sectors.

1. Governing tropical deforestation from beyond the tropics?
Limitations and possibilities1
.
Dr Samuel A. McGlennon
Introduction
Tropical deforestation has occurred since the beginning of human history, but recently its causes
have changed profoundly. Contemporary clearing of tropical forests happens mostly to make
space for large-scale, commercial production of just four commodities: palm oil, pulp & paper,
beef and soybeans. A proportion of each of these commodities is then traded internationally,
linking ‘downstream’ (ie. overseas) consumers, businesses and governments to the problematic
deforestation happening ‘upstream’.
So what can and should be done?
Downstream actors have developed a range of responses, including sourcing commitments from
companies, illegal logging legislation and biofuel standards from governments, as well as the
creation of multi-actor collaborations, such as ‘NGO-industry roundtables’. These responses have
emerged within what I call an ‘age of experimentation’, now two decades old, during which
downstream actors have innovated extremely rapidly and invested in addressing their connection
to deforestation.
Key terms
‘Deforestation commodities’: the four commodities – palm oil; pulp, paper & timber; beef; and soy –
that are responsible for a majority of contemporary tropical deforestation (ie. forests are cleared
primarily to produce them).
‘Traded deforestation’: a proportion of each ‘deforestation commodity’ is traded outside of its
country of origin, connecting jurisdictions, businesses and consumers outside the tropics to the
problem of tropical deforestation.
‘Responses’: the policy, regulatory and institutional innovations, almost all from the last two
decades, that have sought to address the connections of downstream companies, industries and
governments to tropical deforestation.
However, there are two sides to the term ‘age of experimentation’. Not only does it suggest the
dynamism of innovation, but also – crucially – it suggests a lingering uncertainty over the extent,
and even the nature, of the positive effects that these innovations might produce.
My research delved right to the core of this uncertainty.
I critically examined the limitations and possibilities of policy, regulatory and
institutional responses to tropical deforestation from beyond the tropics.
My aim was to shed light on what these responses might collectively be able to achieve, as well as
how they might achieve it. Amid the often-lofty rhetoric surrounding many of these innovations, I
also sought to establish their limitations.
1. An Executive Summary of a PhD thesis (awarded from the Australian National University in December 2015)
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2. Key findings
 Governments, companies and NGOs have all framed traded deforestation as a private sector problem.
This comes despite a groundswell of evidence that voluntary, private-sector governance is failing to
address the upstream problems that downstream actors are entangled in through international trade.
By examining and elaborating on the limitations of current responses, this study provides further
evidence that greater engagement and ambition is required, particularly on the part of governments.
 Company responses reflect a mixed picture in both understanding the problem and being willing to
make subsequent changes. In the case of palm oil, the perceived weaknesses of the relevant voluntary
standard led many companies to strike out on their own, developing company-specific sourcing
policies. This act increased the work-load for NGOs, which act as both consultants and watchdogs.
Leading companies are also increasingly calling on governments to raise the regulatory bar on poor
performers, given the competitive disadvantages they face from enacting stronger standards.
 Some of the world’s biggest retail companies, such as Nestlé and Mars, have been compelled to
fundamentally revise their supply chains, moving towards longer-term contracts and paying
substantial price premiums. This hints at reversing some current facets of globalisation, where
flexibility and cost-cutting remain primary, to ensure continued supply, transparency and quality.
 Governments, particularly the US, EU and Australia, have only really been willing to address the
narrow illegality of imports of one deforestation commodity: tropical timber. Governments face
several constraints in responding to traded deforestation, including a predisposition towards free
trade (on which sustainability is perceived as impinging), a need to adhere to international trade law
(which shapes, unfavourably, any possible regulatory responses) and the need to cultivate and
maintain domestic support for its responses, such as illegal logging laws.
 The rationale for downstream responses to deforestation remains that businesses and governments,
and to a lesser extent consumers, need to take responsibility for their contribution to and implication
in this major, contemporary problem. Ultimately, while the limitations of current responses mean
they cannot by themselves accomplish widespread changes in the way deforestation commodities are
produced, they may nonetheless spearhead that change through activating more all-inclusive
transformative pathways. Particularly promising examples include signalling the need for wide-
reaching change to both upstream and downstream actors, and exerting pressure on downstream
governments to regulate, nudge and support other domestic businesses along.
The bigger picture
Traded deforestation is but one of many environmental and social problems in which, despite the
psychological disconnect, globalisation implicates downstream societies. At the sourcing end of supply
chains, for example, problems pervade the production of minerals and metals for electronic devices. In
disposal other harms are also done, in this case by the effective dumping of electronic waste on China and
West Africa. Clearly there are ethical and political, as well as economic, considerations involved here.
Traded deforestation provides an ideal case study for exploring the current perceptions and motivations of
downstream societies towards these upstream problems. Some of what is seen is encouraging: for example,
many actors are genuinely motivated to address this problem, and frequent innovation and cross-actor
collaboration has resulted. But by and large, downstream societies begin from a self-serving starting point,
seeking to retain all the benefits of access to upstream commodities through global supply chains. Only then
do they consider efforts to ameliorate their contributions to their associated problems. From within the
refrain that reflexively promotes free trade, globalisation and continued consumerism, perhaps that can be
expected. But as the limitations of addressing upstream problems from within such a context begin to be
better understood, these so-far-unquestioned principles of contemporary economic activity must
themselves begin to be subject to much greater scrutiny.
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3. Methods. I used two separate approaches to examine responses’ limitations and possibilities.
The first was conceptual, using existing literatures and publicly-available documents to
determine the range and examine the nature of responses. The second was empirical, drawing
on interviews and correspondences with 22 practitioners, experts and commentators (on
individual or multiple innovations), illuminating the behaviour of responses. From combining
these two approaches I was able to establish the potential and limitations of responses both by
design, and in practice.
Elaboration on key findings.
Downstream businesses, industries and governments have construed the problem of traded deforestation
as their connection to deforestation through their supply chains. Actors’ responses therefore aim to
disconnect them from deforestation-tainted versions of commodities, which in practice often equates to
making sure their own imports are verified or certified as legal and/or sustainable.
 There are reasons to be sceptical about this framing of the problem. One major
shortcoming is that the fraction of total commodity exports going to ‘environmentally-
sensitive’ actors (primarily in the EU, US and Australia/NZ) remains partial and for some
commodities minimal2
. This creates the danger of ‘leakage’, where deforestation-free versions
of commodities consumed in these countries do not encourage less deforestation but simply
redirect destructive commodities to less discerning actors and locations.
 On the other hand, there are several pathways through which responses may leverage a
greater impact on deforestation than their partiality would suggest (see 5. below). The
balance of these two forces – leakage (-ve) and leverage (+ve) – will determine the overall
potential of these responses to reduce deforestation.
 Different interpretations of the problem would emphasise issues that have instead become
blindspots. The current framing ignores (eg.) the volumes of deforestation commodities used
and the increasingly obscure and complex nature of global supply chains. Therefore, few
responses attempt to minimise usage or substitute away from these commodities, let alone to
fundamentally restructure supply chains (with a few interesting exceptions; see Conclusions).
Downstream companies using deforestation commodities have conceived a diverse range of sourcing
policies and commitments. The design of these policies has dynamic and nuanced consequences for other
companies, as well as certification schemes, roundtables and NGOs.
 The deforestation commodities constitute a particularly dynamic arena of ‘voluntary’ or
‘private’ governance, where actors – companies, NGOs, certification schemes and roundtables
– interact to monitor and regulate each other in the absence of government involvement.
These arenas are highly politicised and very active, but it’s now accepted even by their
proponents that they cannot produce robust, durable and broad environmental (or social)
improvements in isolation from other instruments, particularly government regulation. As one
commentator has argued:
“Without realising it, conservationists have replaced the organs of democracy: we now have
consumers instead of enfranchised citizens; we have NGOs in watchdog roles to replace the
executive; we only have recourse to the media – the 4th
estate – as a court of appeal.”3
2. Timber (sawn wood): 15%; Timber (plywood): 22%; palm oil: 17%; Brazilian soybean: 37%; Brazilian beef: 10%
(various sources).
3. Martin Colchester speaking at the IUCN World Conservation Congress, Durban 2004.
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4. (Interestingly, however, in designing illegal logging laws in the US, EU and Australia,
governments have had to judge the validity of certain certification schemes, in essence
weighing in on the voluntary governance arena, with varying levels of discomfort.)
 A trend is emerging for companies to design independent, company-specific standards
(often in consultation with NGOs and other consultants), rather than rely on external schemes
and roundtables. This has arisen partly as a result of perceived weaknesses with schemes such
as the RSPO4
. This trend enhances the fragmentation across the industry, and requires greater
effort from NGOs as watchdogs. However, because companies adopting stronger
environmental practices often incur higher costs and are vulnerable to copycatting and free-
riding, some leading companies are requesting greater government involvement to level the
commercial playing field. Companies are also increasingly pushing for collaborative
approaches amongst themselves, such as through the Consumer Goods Forum (a consortium).
 One important theme within voluntary governance is the effects of competition between
certification schemes. Harmful effects from competition are evident, for example in the
weakening of standards and the fragmentation of industries (such as the timber industry)
across a variety of different standards. These effects threaten to outweigh the positive effects
of competition. While some indications of greater collaboration and harmonisation between
actors exist, these typically run counter to schemes’ and companies’ primary motivations.
Downstream governments have been disproportionately focused on tropical timber at the expense of the
other, arguably more destructive, deforestation commodities (palm oil, pulp and paper, beef and soy).
This narrow focus arises from strongly perceived constraints on, and conflicting interests in, any further
or more ambitious government action.
 For a number of reasons, governments are reluctant to act to promote the sustainability of
commodity imports. Perceived constraints include respecting the sovereignty of other
countries, an eagerness to promote free trade (with sustainability concerns seen as impinging
on that), as well as international trade law. Governments have shown very little inclination to
act on the non-timber deforestation commodities, especially palm oil, and where they have
their actions remain relatively weak, lagging far behind the responses of leading companies.
 Trade law is a significant constraint, although not because it restricts countries’ regulatory
ability. Rather, complying with trade law requires shaping any such regulation so that it makes
equivalent demands of firstly, all foreign producers, and secondly, domestic producers of
comparable or competing commodities. Thus it has two real consequences. It removes the
ability of governments to target problematic source countries, and it bolsters the likelihood
and extent of domestic resistance to any proposed regulation for commodity imports.
 Even absent the consequences of trade law, domestic resistance is a sizeable barrier to
regulatory action on the deforestation commodities. Because governments cannot impose
regulation on external actors, the burden of compliance (and associated penalties) for
safeguarding against destructive imports still falls on domestic actors: mainly importers but
sometimes also subsequent businesses, such as retailers.
 These burdens and penalties have clearly been a factor in the reversal – from supportive to
resistant – of some domestic actors’ attitudes towards illegal logging laws in the US, EU and
Australia. These laws have been the centrepiece of government efforts on traded
deforestation, with sizable domestic support initially, not least because they were seen as
preventing domestic timber producers from being undercut by cheap, illegal foreign timber.
But the laws have nonetheless foundered, with enforcement funding cut in the US, erratic
enforcement across member states in the EU leaving the door ajar for illegal timber, and the
4. Roundtable for Sustainable Palm Oil
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5. Australian laws at first postponed and now in ‘soft-start’ mode with no penalties for non-
compliance.
 Ultimately, inconsistent outcomes across jurisdictions and across commodities reflect an
unresolved willingness and ability by governments to navigate the perceived sensitivities and
constraints in responding to traded deforestation. The ideological commitment to a continued
expansion of international trade and reluctance to introduce sustainability-based ‘red tape’ are
key elements of this unwillingness.
Current responses to traded deforestation have multiple motivations, objectives and reference points.
When this multiplicity comes into conflict, the focus on deforestation is often compromised.
 Each response included in this study attempts to slow or reduce tropical deforestation,
although for no response is this its sole intention. When different objectives come into conflict,
the environmental stringency of some responses (such as certification schemes’ and
roundtables’ standards) has suffered, as has the strength of their enforcement (eg. legislation
against illegal timber imports in the US, EU and Australia).
 There is also a major schism between responses that use legality and those that use
sustainability as their benchmark. A much contested idea is whether legality-based responses
contribute to efforts to boost sustainability (by providing a stepping-stone) or detract from
those efforts (by lowering the bar). Here emerges a strong theme of this work: the nature of
interactions between responses, and specifically whether they complement or compete with
one another (see 2. and 5.).
Despite multiple limitations, could current responses to traded deforestation still spark more
fundamental change? There are several pathways through which they might.
 Leading companies hope to inspire change through leadership, orchestrating change
through collaboration, and pressuring for change through peer pressure. There is some
evidence of effectiveness. In 2012, for example, the rapid-fire sequence of major retailers
announcing identical palm oil commitments illustrated the effect of competitive pressures
amongst downstream businesses (though these policies obscure varying levels of enthusiasm
and intention to follow through).
 There are also several factors counting against the potency of these pathways, including
the highly fragmentary nature of the downstream timber and palm oil industries, which has
limited even the clout of major retailers (Unilever, Nestlé, Walmart etc.) accustomed to ‘calling
the shots’ in global supply chains. Interestingly, anti-trust and anti-competition regulation has
been a further brake on collaborations between major players, stymieing a potential
collaboration between Australian supermarkets on palm oil, for example.
 Ultimately, according to multiple participants in this research, the very abundance of
responses shows deforestation is less politically and commercially acceptable than it was a
decade or two ago. It’s possible, the idea goes, that industries will see the ‘writing on the wall’
and being enacting fundamental changes. This pathway – which I termed 'signalling' – is based
on the idea that the inconsistencies between downstream responses are less important than
the collective signal they send.
April 2016. Please contact the author at samuelmcglennon@gmail.com for further information on the
conclusions and figures within this text, to request a full pdf copy of the finalised thesis, or to discuss any
prospective collaborative research.
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