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 Deforestation	Main Regions
Beef	65%	Amazon, Southeast Asia
Palm oil	20%	Indonesia, Malaysia
Soy	15%	Brazil, Argentina
Timber/Paper	10%	Amazon, Congo Basin
Cocoa	5%	West Africa
Coffee	3%	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 Type	Examples
Regulatory	Non-compliance penalties
Reputational	Consumer backlash, media scrutiny
Operational	Supply disruptions
Market	Access restrictions, lost customers
Financial	Asset 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

Standard	Commodity	Coverage
RSPO	Palm oil	~40% global production
RTRS	Soy	Growing
FSC	Timber/paper	~30% certified
PEFC	Timber/paper	~50% certified
Rainforest Alliance	Coffee, cocoa	Growing

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

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References

• TNFD · SBTN · IPBES · CBD — nature and biodiversity frameworks