Deforestation-Free Supply Chains

Understanding deforestation risks in supply chains and how to achieve deforestation-free procurement.

Section: SectionLabels.biodiversityTopics: deforestation,supply chain,palm oil,soy,cattle,forest risk commodities
Illustration for Deforestation-Free Supply Chains

Overview

Deforestation and forest degradation are major drivers of biodiversity loss and climate change. Companies with supply chains connected to forest-risk commodities face significant reputational, regulatory, and operational risks. Achieving deforestation-free supply chains is increasingly essential.

The Deforestation Crisis

Current State

  • Annual loss: ~10 million hectares of forest
  • Primary causes: Agriculture (80%+), logging, mining
  • Climate impact: 15% of global GHG emissions
  • Biodiversity loss: Habitat destruction, species extinction

Forest-Risk Commodities

Commodity% of DeforestationMain Regions
Beef65%Amazon, Southeast Asia
Palm oil20%Indonesia, Malaysia
Soy15%Brazil, Argentina
Timber/Paper10%Amazon, Congo Basin
Cocoa5%West Africa
Coffee3%Latin America, Africa

Regulatory Landscape

EU Deforestation Regulation (EUDR)

Effective 2024-2025:

  • Scope: Large companies selling in EU market
  • Requirements: Due diligence, no deforestation
  • Geolocation: Prove production location
  • Penalties: Up to 4% global revenue

Other Regulations

  • UK Environment Act: Anti-deforestation requirements
  • France Duty of Vigilance: Supply chain monitoring
  • Germany Supply Chain Act: Human rights + environment
  • US零Deforestation Act: Proposed legislation

Supply Chain Risks

Business Risks

Risk TypeExamples
RegulatoryNon-compliance penalties
ReputationalConsumer backlash, media scrutiny
OperationalSupply disruptions
MarketAccess restrictions, lost customers
FinancialAsset stranding, ESG downgrades

Materiality Assessment

  • Direct operations vs. supply chain
  • Commodity type and volume
  • Sourcing region and risk profile
  • Stakeholder expectations

Achieving Deforestation-Free Supply Chains

Step 1: Map and Trace

  1. Supplier identification: Know your suppliers
  2. Traceability: Track to origin
  3. Risk assessment: Identify high-risk sources
  4. Data collection: Geolocation, certifications

Step 2: Engage and Collaborate

  1. Supplier engagement: Capacity building
  2. Industry initiatives: Collective action
  3. Direct investment: Support suppliers
  4. Multi-stakeholder: Work with NGOs, governments

Step 3: Transform

  1. Sustainable sourcing: Certified materials
  2. Transparent procurement: Public commitments
  3. Long-term contracts: Security for suppliers
  4. Deforestation-free alternatives: Innovation

Step 4: Verify and Disclose

  1. Monitoring: Satellite, field visits
  2. Verification: Third-party certification
  3. Reporting: Public disclosure
  4. Continuous improvement: Progress tracking

Certification Schemes

Industry Standards

StandardCommodityCoverage
RSPOPalm oil~40% global production
RTRSSoyGrowing
FSCTimber/paper~30% certified
PEFCTimber/paper~50% certified
Rainforest AllianceCoffee, cocoaGrowing

Limitations

  • Certification ≠ zero deforestation (some allowed)
  • Verification challenges
  • Scope 3 complexity
  • Smallholder inclusion

Practical Guidance

For Companies

  1. Commit: Public deforestation-free commitment
  2. Map: Know your supply chain
  3. Assess: Evaluate deforestation risk
  4. Engage: Work with suppliers
  5. Verify: Monitor compliance
  6. Disclose: Report progress

Tools and Resources

  • Global Forest Watch: Satellite monitoring
  • Starling: Palm oil verification
  • Trase: Supply chain transparency
  • Rainforest Alliance: Certification

Key Takeaways

  • Deforestation is material business risk
  • EUDR and similar regulations require action
  • Supply chain mapping is essential
  • Certification helps but isn't enough
  • Engagement and transformation needed
  • Transparency builds stakeholder trust
  • Deforestation-free is increasingly expected

References

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