Land System Change & Deforestation

Land system change, including deforestation and land degradation, represents one of the most significant environmental challenges facing global sustainability. The conversion of forests and natural ecosystems to agricultural land, urban development, and infrastructure has profound impacts on biodiversity, climate regulation, water cycles, and human livelihoods.

Why Land Use Matters for ESG

Deforestation and land degradation contribute approximately 10-15% of global greenhouse gas emissions, making land use a critical climate issue. Beyond carbon, forests provide essential ecosystem services including water regulation, soil protection, pollination, and habitat for 80% of terrestrial biodiversity. Companies with agricultural supply chains (palm oil, soy, beef, timber, cocoa, coffee) face significant deforestation risks that can lead to regulatory penalties, market access restrictions, and reputational damage.

The planetary boundary for land system change focuses on maintaining forest cover, particularly in tropical and boreal regions. Current estimates suggest that only 62% of original forest cover remains globally, indicating that this boundary has been transgressed. Regional variations are significant, with some biomes experiencing far greater loss than others.

EU Deforestation Regulation (EUDR)

The EU Deforestation Regulation (Regulation 2023/1115), which entered into force in June 2023, represents the world's most comprehensive mandatory due diligence framework for deforestation-free supply chains. The regulation applies to seven commodities: cattle, cocoa, coffee, oil palm, rubber, soya, and wood, as well as derived products such as leather, chocolate, and furniture.

Key Requirements:

Due Diligence Obligations
Companies placing relevant products on the EU market or exporting from the EU must exercise due diligence to ensure products are deforestation-free (produced on land not deforested after December 31, 2020) and produced in compliance with relevant legislation of the country of production.

Geolocation Data
Companies must collect precise geolocation coordinates (latitude and longitude) of all plots of land where relevant commodities were produced. This unprecedented traceability requirement aims to enable verification through satellite monitoring.

Risk Assessment & Mitigation
Companies must assess the risk of non-compliance based on country, region, and commodity-specific factors, and implement risk mitigation measures for non-negligible risks.

Reporting & Verification
Annual reporting to competent authorities is required, with penalties for non-compliance including fines up to 4% of annual EU turnover and exclusion from public procurement.

Implementation Timeline

• Large companies: December 30, 2024
• SMEs: June 30, 2025

Key Metrics & KPIs for Companies

Land Use & Deforestation Metrics

• Land footprint (hectares): Total land area used in operations and supply chain
• Deforestation-free sourcing (%): Percentage of commodities sourced from verified deforestation-free sources
• Forest cover in sourcing regions (hectares or %): Monitoring of forest cover in key sourcing landscapes
• Land use change emissions (tonnes CO₂e): Emissions from land conversion in supply chain
• Certified sustainable sourcing (%): Percentage sourced from certification schemes (FSC, RSPO, etc.)

Supply Chain Traceability Metrics

• Traceability to farm/plot (%): Percentage of volume traceable to specific production locations
• Geolocation data coverage (%): Percentage of sourcing with precise geolocation coordinates
• Supplier compliance rate (%): Percentage of suppliers meeting deforestation-free commitments
• High-risk sourcing (%): Volume sourced from high-deforestation-risk regions

Biodiversity & Ecosystem Metrics

• High conservation value areas (hectares): Land area with high biodiversity or ecosystem value
• Habitat restoration (hectares): Area of degraded land restored or reforested
• Protected area encroachment: Incidents of sourcing from protected areas or indigenous territories

Science Based Targets for Nature (SBTN)

The Science Based Targets Network extends the science-based target approach to nature, including land use. SBTN provides guidance for companies to:

1. Assess: Identify material environmental issues and priority locations
2. Interpret & Prioritize: Understand state of nature and set boundaries for action
3. Measure, Set & Disclose: Set science-based targets and disclose progress
4. Act: Implement strategies to achieve targets
5. Track: Monitor and report on performance

SBTN's land-use guidance focuses on no-conversion commitments, restoration targets, and sustainable land management practices aligned with maintaining ecosystem integrity.

Certification Schemes & Standards

Forest Stewardship Council (FSC)

FSC certification ensures responsible forest management through 10 principles covering legal compliance, indigenous rights, community relations, workers' rights, environmental values, and management planning.

Roundtable on Sustainable Palm Oil (RSPO)

RSPO certification provides standards for sustainable palm oil production, including no-deforestation, no-peat, no-exploitation (NDPE) commitments.

Accountability Framework Initiative (AFi)

The Accountability Framework provides common norms and guidance for ethical supply chains in agriculture and forestry, including definitions of deforestation, cut-off dates, and monitoring approaches.

Regional Regulations & Initiatives

Brazil Amazon Fund

Brazil's Amazon Fund supports projects to prevent, monitor, and combat deforestation while promoting conservation and sustainable use of the Amazon.

Indonesia & Malaysia Moratoriums

Both countries have implemented forest moratoriums restricting new permits for forest conversion, though enforcement and effectiveness vary.

China's Ecological Red Line Policy

China has designated ecological protection red lines covering approximately 25% of national territory where development is restricted to protect critical ecosystems.

Related Pages

• Environmental Hub
• Biodiversity Loss — Interconnected boundary
• Climate Change — Land use emissions
• TNFD — Nature-related financial disclosures
• SBTN — Science-based targets for nature