How business can tackle deforestation briefing 2. April 2015

How business can tackle deforestation

Management briefing

Spring 2015

Sponsors

INNOVATION FORUM: DEFORESTATION BRIEFING 2

Contents

This report is produced by Innovation Forum1 Rivington Place London EC2A 3BA | www.innovation-forum.co.uk | +44 (0)20 3780 7430

Editor: Design: Images: Ian Welsh Alex Chilton Design Dreamstime.com, unless credited

About Innovation ForumInnovation Forum was founded in 2014 by Toby Webb. Making up the team are Oliver Bamford, Charlenne Ordonez, Boris Petrovic and Ian Welsh.

Welcome to Innovation Forum’s new special report on business and deforestation.

This is the latest in our series of focused management briefings on the pressing challenges facing companies today.

Here, experts from Wilmar, Rainforest Alliance, Sime Darby, the World Resources Institute and many more debate how businesses, NGOs and governments are dealing with deforestation risks, and the best solutions and opportunities that are emerging.

The debate continues at our conference series – in Washington DC, Singapore and London – and online at innovation-forum.co.uk.

Our thanks to Future 500 and Permian Global for sponsoring this report.

Toby Webb Ian WelshFounder Editor

3 Work together to meet the challenges Erik Wohlgemuth, Future 500

4 Private sector can produce and protect Stephen Rumsey, Permian Global

6 Deforestation data digest Our guide to the best research and analysis

8 Transparency essential Jeremy Goon, Wilmar International

11 Report card for APP Richard Donovan, Rainforest Alliance

13 Expert adviceFive participants from the Washington conference speak to Innovation Forum

15 Governance that works Rhett Butler, Mongabay.com

17 Powerful performances Leonie Lawrence, Global Canopy Programme

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Over 20 years ago, Future 500 worked with Mitsubishi Corporation and

forestry NGOs to overcome bitter conflict and find common ground on responsible forestry sourcing practices. Together, they advanced what was then a leading market procurement standard that shifted market demand from endangered and old growth forests toward FSC-certified forest products.

Our organisation was founded on the premise that building bridges between strategic change agents across sectors and ideologies is essential to advancing lasting systemic, positive market change.

Throughout our history, we have continued working to protect the world’s forest ecosystems. We have engaged with a variety of stakeholders, often when diametrically opposed, to continually improve corporate procurement policies and transparency commitments, as well as the third-party certification standards reinforcing them.

Like many, we are inspired to protect irreplaceable ecosystems and their biodiversity, ensure essential resources for future generations, and to help reduce climate change impacts.

Not far enough Yet we collectively have not gone far and fast enough. Despite much progress, only approximately 30% of the world’s working forests currently operate under some certification standard. And only one-third of this is certified by FSC,

considered the most stringent certifica-tion standard.

Several factors have combined to intensify the problems stemming from unsustainable harvesting of the world’s last remaining forests. There is an increased global demand for forest commodities. Land tenure rights are unclear and there has been a systematic dis-entitlement of local communities. Particularly in the developing world, government corruption, and weak regulatory and legal structures remain.

This is the stark reality on the ground, a problem of the global north and south alike.

To accelerate protection of the world’s working forests, a variety of key actors across the globe have been advancing zero deforestation supply chains. In the past two years, dozens of executive leaders from some of the world’s leading companies – including some of the most demonised – have made sweeping zero deforestation commitments. The boldest apply to all commodities that contribute to deforestation: timber, pulp and paper, palm oil, soya, beef, tea, coffee, cacao and dissolving pulp.

But these are currently just commit-ments, and change takes time. Now the much harder task of leveraging supply chain power to affect positive change really begins. Full implementation, verification, FPIC implementation and robust community conflict resolution, and ensuring transparency throughout the supply chain will be challenging,

requiring sustained commitment and diligence for years to come.

To achieve such immense supply chain shifts, a multifaceted approach is necessary. This should draw from the voices of knowledgeable and practised stakeholders in frontline local and indigenous communities, local and international NGOs, and the leadership of multinational corporations and their commodity suppliers.

Successful protection We believe a holistic landscape and multi-sector approach is the only way to successfully protect and conserve forests.

And this is why we gather at conferences and share experience: to roll up our sleeves and hear from those leading this transformative change. We all need to critically challenge ourselves to consider obstacles and ideological differences in order to work creatively and collectively on solutions.

Toby Webb has been at the forefront in pushing substantive dialogue on sustainability issues, challenging change agents across sectors to break through gridlock and enable catalytic change. We have greatly enjoyed and valued working with Toby and his team over the years, so were very pleased to have the opportunity to sponsor Innovation Forum’s North American zero deforestation conference and this report. We look forward to determining next steps in forest preservation together. ★

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The real work has just begun Future 500’s Erik Wohlgemuth argues for a holistic approach to tackle the deforestation challenges

A landscape and multi-sector approach is how to protect and conserve forests

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Erik Wohlgemuth is chief operating officer at Future 500. Future 500 is a sponsor of this report and of Innovation Forum’s deforestation conference in Washington DC.

Erik Wohlgemuth

Protection and recovery of tropical forests at once conserves existing

carbon stocks and has the potential to reduce atmospheric CO2 concentrations to safe levels.

The corporate sector has a major role to play and Permian Global has been designed as an organisation which can be an effective partner, with both govern-ments and corporates. Here we look at the “produce and protect” model, offering insights on how these twin objectives can be achieved without sacrificing the mitigation opportunity or sustainable development goals.

The keys to success are properly embedding emissions reductions and sequestration as key metrics, early adoption of full carbon accounting within land-use decision making, and business-to-business partnerships across the ‘protect’ and ‘produce’ sectors. Effective protection only succeeds by working

with local communities to assist with the achievement of development goals and has the additional benefits of watershed protection and biodiversity conservation.

2014 saw an increasing commitment from companies to address the issue of deforestation and supply chain risk. It is critical that we now build on this progress by encouraging greater collaboration between the ‘produce’ and ‘protect’ sectors that embraces the degradation and sequestration challenges, alongside deforestation.

Proactive protection Increasing agricultural productivity will only lower the pressure on forests if accompanied by proactive, professional and ecologically-based forest protection.

What practical steps can we take to start this process? If we are to leverage the potential of forests as a carbon mitigation channel, reducing emissions

and safeguarding sequestration must be clearly recognised as key metrics of success.

In addition, full carbon accounting must be adopted by all tropical forest operators – governments and corpora-tions alike. Unless the full carbon impact of supply chains is properly understood we cannot make optimal decisions over the allocation of resources or properly develop a balanced ‘produce and protect’ strategy.

To understand the need for expertise in protection as well as production, consider a typical tropical lowland landscape, with the remaining forest fragmented and degraded, and larger areas given over to farming.

The ‘produce’ challenge is to intensify agriculture and achieve higher yields. If this can be achieved, it is assumed that deforestation pressure will be reduced, farming-related emissions will fall,

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Tropical forests

Private sector focus must include both ‘produce’ and ‘protect’Permian Global’s Stephen Rumsey argues for a forest model that increases agricultural productivity while preserving essential ecosystems

Full carbon accounting must be adopted by all tropical forest operators


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The proactive protection of tropical forests is the first stage of a larger terrestrial recovery process

Disciplined forest protection is required

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Stephen Rumsey

farmer incomes will rise and ‘deforesta-tion free’ labels can be attached to a wide range of domestic products.

However, this leaves out a vital piece of the plan – the need for large-scale commercially disciplined forest protec-tion, implemented alongside the drive toward sustainable sourcing. Without protective measures, the risk is that higher agricultural productivity would facilitate the conversion of more forests to farmland. So the private sector needs to be closely involved with both improved production and more effective protection.

A triple challengeWithin protection, there are three distinct challenges. The issue of deforestation is widely recognised but there are other dynamics which are less well understood. For example, it is well known that deforestation accounts for around 8% of all carbon emissions.

However, much less well known is the contribution of forest degradation (largely driven by legal and illegal logging, and wood fuel and charcoal). Research over the last decade has found that emissions from degradation are

6-14% of all emissions, perhaps more. New findings on sequestration add

a third component to the mitigation picture, indicating that current CO2 removals by both intact and recovering forests are very significant – gains that would be greater still if more degraded forests were to be fully protected. A new report by the Prince of Wales’s International Sustainability Unit estimates that the mitigation potential of stopping emissions from tropical deforestation and degradation plus safeguarding existing sequestration is in a range of 24-33% of all carbon mitigation – much higher than previously realised.

When these data are viewed in the context of current levels of atmospheric CO2 and the absorptive capacity of forest and other terrestrial systems, the climate mitigation implications are profound.

The difference between today’s 400 parts per million of atmospheric CO2 and the level over 200 years ago in 1800 of 280 ppm is (when expressed as carbon) about 250bn tonnes. This huge quantity of airborne pollution could be re-converted to stored carbon if the 5bn hectares of remaining forests, and 10bn of hectares

of other lands, were to be managed to optimise sequestration, over the next critical decades.

Strategy review From this perspective, ensuring the proactive protection of tropical forests is the first stage of a larger terrestrial recov-ery process, an insight which suggests that we need a thriving ‘protect’ industry to leverage the full potential of this mitigation pathway. All companies, and development agencies, should carefully consider this aspect when reviewing their supply chain and mitigation strategies.

More immediately, three starting points can be seen. First, we need to regard emissions reductions and seques-tration as key metrics of success; second, full carbon accounting must be adopted and embedded in produce and protect strategies, as measuring deforestation emissions is necessary, but not sufficient; third, we must foster partnerships between supply chain and protection businesses. Synergy between these two can enable specialised expertise to tackle both the produce and protect challenges in a very powerful combination. ★

Stephen Rumsey is chairman of Permian Global. Permian Global is a sponsor of this report and Innovation Forum’s deforestation conference in Washington DC.


Research

Deforestation data digest Innovation Forum’s guide to recent deforestation research and analysis

Only 1% of new soy expansion in the Amazon region came at the expense of the forest, compared to 30% in the recent past, a recently-published academic study finds. The turning point according to the research, published in the journal Science, came with a moratorium imposed by large-scale soy producers in 2006.

Soy cultivation has more than doubled in extent across the region since the morato-rium took effect, but with farmers turning to already deforested land. In addition, the study finds compliance with the moratorium to be higher than with the Brazilian government’s forest code.

Registered violations by soy producers over the last eight years number 115 in the case of the moratorium, and more than 600 in the case of the government’s policy. Less promising is the conversion rate to soy outside the Amazon, with an estimated 20% of new soy fields in Brazil’s cerrado regions coming at the expense of savannah.

A separate study on Indonesia’s moratorium presents a broadly positive story too. Introduced in 2011, the ban on district governments granting new licences for palm oil, timber and logging activities abated carbon emissions by an estimated 1-2.5% between 2011 and 2015.

Without extending and strengthening the moratorium, however, Indonesia is likely to miss its emissions reduction target of 26% by 2020, the study calculates. Between 2000 and 2010, only 15% of greenhouse gases came from deforestation within forests covered under the existing moratorium. The remainder derived mostly from deforestation in existing concessions (21.1% of emissions) and in forests and protected areas outside concession areas (58.7%).

Moratoriums can work

The fight against illegal deforestation in Malaysia has made “little progress” over the last four years, according to further recent research published by Chatham House. Recognition of customary rights, coupled with corruption and lack of transparency, are identified as key barriers to progress.

According to satellite data, deforestation rates have remained consistent at about 1.6% per year. Expansion of timber, pulp and agricultural plantations (which include oil palm and rubber) are identified as the main drivers of forest loss in the country. The latest government data indicates that 53% of Malaysia’s 4.7m palm oil areas are located in Peninsular Malaysia, while Sabah and Sarawak represent 30% and 17% respectively.

The Malaysian government aims to expand palm oil plantations to cover 5.6m hectares by 2020. Most of this expansion is projected to occur in Sarawak. Logging has already degraded an estimated 80% of the forests in the islands of Sabah and Sarawak.

Soy cultivation has more than doubled in extent across the Amazon since the moratorium took effect

Stalled Malaysian progress

The Malaysian government aims to expand palm oil plantations to cover 5.6m hectares by 2020.


Agriculture now outpaces deforestation as a cause of global warming, a high-level study in the journal Global Change Biology finds. The research, led by the UN Food and Agriculture Organisation, attributes 8% of anthropogenic emissions to deforestation, down from an average of 12% in the 1990s.

Actual emissions linked to deforestation (technically described as “net forest conver-sion”) remain stable at an estimated 4.8

gigatonnes of CO2 equivalent per year (as of 2012). In contrast, the agricultural sector is responsible for around 5.4gt CO2e annually, equivalent to 11.2% of anthropogenic emissions.

The study’s authors argue the findings indicate that the attention on forestry in global climate policy should be tempered by an increase in mitigation measures for agriculture.

Agriculture’s footprint larger than deforestation

Global chemicals company DuPont agreed at its recent 2015 annual general meeting to submit a public report detailing the impact of its supply chain activities on deforestation. The report, due for completion in November 2015, will be in line with disclosure guide-lines set by pro-transparency group Carbon Disclosure Project.

According to CDP, over one billion people around the world depend on forests for their livelihoods, while 10% of global greenhouse gas emissions come from deforestation.

Alongside environmentalists, the investment community is increasingly quick to welcome moves towards transparency such

as that of DuPont. The number of investor signatories demanding corporate disclosure through CDP’s forest programme increased by 30% during 2014, the London-based disclosure group reports.

It’s not just DuPont that is responding, either. In response to CDP’s most recent request for information, 162 companies with market capitalisation of $3.24tn submitted data. In addition, 19 major corporations made further “zero deforestation” commit-ments in the first nine months of 2014 alone, including the likes of Cargill and Unilever. CDP counts 240 financial institutions as signatories to its forests programme. Collectively, they manage over $15tn.

DuPont discloses on deforestation

The proportion of Cameroon’s active forest concessions that are verified as legal or certified sustainable now accounts for around half of the country’s total production forest, according to a report by Chatham House, the London-based thinktank.

The latest figures (taken from 2012 data) show a big rise since 2006. However, only 20% of the verified forests are certified as sustainable, with the largest proportion (45%) qualifying under the less rigorous verified legal origin standard. Either option is acceptable under the EU Timber Regulation and the US Lacey Act.

Meanwhile, exports to the US, EU and

a handful of other markets designated as “sensitive” by Chatham House dropped from 70% between 2000-2007 to around 40%, the latest figures reveal. The shortfall was made up for by exports to “non-sensitive” countries, particularly China.

The Asian powerhouse increased its imports of Cameroonian timber from 50,000 square metres in 2001 to 397,000 sq m in 2012. The jump is partly explained by a ban on log exports from Gabon in 2010. The forest sector in Cameroon comprises 89 concessions over 6.3m hectares, and accounts for around 4% of the nation’s GDP, employing 23,000 people directly. ★

The forest sector in Cameroon comprises 89 concessions over 6.3m hectares

The agriculture sector is responsible for 11.2% of anthropogenic emissions

10% of global greenhouse gas emissions come from deforestation

Forest verification on the rise in Cameroon


Wilmar’s declared aspiration is to delink its entire supply chain from deforestation and human rights abus-es by the end of 2015. Are you going to achieve this?To ensure that our “no deforestation, no peat, no exploitation” integrated policy is being implemented appropriately across our supply chain, we have been mapping and tracing supply flows from ports and refineries back to palm oil mills, and are on track to complete this by end 2015. Eventually, we aim to achieve full traceability not just to mills, but back to individual plantations.

Having detailed supply chain maps builds greater transparency and account-ability, as it facilitates the monitoring of practices on the ground. The mapping exercise also enables us to uncover challenges faced by growers in the implementation of our integrated policy, allowing us to provide the requisite support in a targeted manner.

Palm oil supply chains are multitiered and complex. For example, Wilmar has over 800 crude palm oil suppliers, exclud-ing smallholders, agents and brokers. It is not feasible for companies to monitor

100% of their supply bases. Together with our supply chain mapping exercise, we are also conducting risk assessments based on environmental and social factors such as proximity to forest reserves, peat soils, and social conflicts. This helps prioritise engagement efforts with higher risk mill owners and their suppliers, to discuss and support their compliance with Wilmar’s integrated policy.

It is important to recognise that sustainability is a journey of continuous improvement. Due to the nature of palm oil supply chains, commitment targets such as total supplier compliance and full traceability are impossible to be maintained at 100% consistently. Signs that companies are working towards targets using their best efforts, while being transparent in their progress and setbacks, are a more realistic reflection of performance.

With the no deforestation, no peat, no exploitation pledge made in late 2013, and development of a dashboard to track progress, Wilmar has set some challenging targets and instigated a robust strategy to achieve them.

How do you characterise the progress you’ve made from 2013 to now?Wilmar’s sustainability commitments have been described as revolutionary and game-changing. As the industry leader in palm oil, we felt that it was our responsibility to steer the industry towards sustainable production, having witnessed the environmental and social impacts of unethical practices, resulting in palm oil garnering a bad reputation among consumers and investors.

Palm oil is the most efficient oil-bearing crop in terms of land use, and has contributed significantly to rural development and poverty eradication in producer countries. It is important for the industry to adjust to evolving market expectations in order to remain compet-itive and to solidify its position as a pillar of sustainable development.

We have made steady progress in key areas, such as supply chain mapping and traceability, as well as engagements with targeted suppliers. Traceability data is now available for all major palm oil sourcing geographies, in Malaysia, Indonesia, Europe, India, Bangladesh, China and Nigeria. We have also completed a substantive phase of engage-ments with key suppliers in Indonesia and Malaysia. Detailed information and quarterly progress updates are available on our sustainability dashboard.

Since Wilmar’s policy announcement in December 2013, there has been a deluge of sustainability pledges. The industry has reached an inflection point, with over 85% of palm oil trade covered by sustainability pledges. Together, these pledges have the potential to accelerate industry transformation, making sustain-able practices the norm, and curtailing market access of laggard or non-compli-ant parties. Ultimately, real success will depend on how these commitments are implemented, enforced and monitored in every link of the value chain.

Are there areas where progress has been better than you’d hoped?Since the launch of our dashboard earlier this year, we have seen synergies arising from the disclosure of our supply chain

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The continuous improvement challenge Be transparent in successes and setbacks says palm oil giant Wilmar’s Jeremy Goon, outlining progress towards the company’s tough sustainability targets

Signs that companies are working towards targets using their best efforts are a realistic reflection of performance

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maps and grievance filing mechanism with publicly available satellite imagery from remote sensing technologies.

Wilmar has over 800 crude palm oil suppliers, excluding smallholders, agents and brokers. It is not feasible to monitor 100% of our supply bases for policy compliance. Remote sensing technologies, such as Global Forest Watch, coupled with traceability data – for example, disclosure of supply chain maps in our sustainability dashboard – have allowed unprecedented grassroots level participation in supply chain monitoring, to flag out errant suppliers. These cases are being documented in our grievance list on our dashboard, with regular progress updates on corrective actions taken.

Where are the most stubborn difficul-ties, and how have you tackled these?Sustainability is a shared responsibility, requiring multiple stakeholders with diverse interests to come together.

Key industry players now have similar sustainability commitments on deforestation, peat, and exploitation, albeit with differing timelines. The current challenge is in the implementa-tion gaps among buyers, which allows non-compliant suppliers to continue marketing their products, weakening the incentive to move towards sustainable production.

There is immense potential to expedite industry transformation if key players come together to implement these targets throughout their supply chains

unanimously. We have been working with organisations such as TFT, whose membership includes most of the palm oil majors, to coordinate such efforts.

Governments have an equally important role to play, in rolling out regulatory reforms to underpin the sustainability efforts of agribusinesses. For example, despite “no deforestation” policies across industries, Indonesia still lacks provisions to conserve high conservation value or high carbon stock forests. Together with the other palm oil majors, we have signed the Indonesian palm oil pledge, led by the Indonesia Chamber of Commerce (also known as KADIN). Apart from reaffirming sustainability commitments, this will also serve as a channel for the industry to lobby the Indonesian government in order to catalyse regulatory reforms.

Smallholders are an integral part of the palm oil industry, and we recognise that they face unique challenges in conforming to Wilmar’s policy, and attaining certification. Wilmar conducts ongoing consultations with smallholders, and provides them with technical assistance to support their compliance with our integrated policy. We are also working with Wild Asia, a Malaysian social enterprise, to help individual smallholders attain RSPO certification, and have a similar plan in place for Indonesia.

The debate about how to preserve forests is constantly changing and evolving, and it can be challenging to keep up with the current thinking. What is your view on the merits of (a) the high conservation value (HCV) and (b) the high carbon stock (HCS) approaches to developing conservation and sustainability in forestry?The HCV approach is the most widely used forest conservation principle in voluntary sustainability standards and certification standards across the agricultural and biofuels industry. It has also been integrated in the purchasing and investment policies of consumer goods companies, global retailers and

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There is immense potential to expedite industry transforma-tion if key players come together unanimously

A diverse supply base means transparency is tricky

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refined to adapt to the dynamic local and global environment. The develop-ment of new and innovative approaches should also be encouraged. Regardless of the approach used, it has to be tailored to local needs and priorities.

What are the challenges in developing integrated landscape management, and when is such an approach feasible, or not?Agriculture continues to be a key driver of economic and social development throughout the developing world. Sustainability policies, such as ILM must not hinder equally important development goals, such as poverty eradication.

Pragmatic implementation of ILM policies is required. Special consideration for agricultural expansion must be granted to least developed countries, which may have limited options for economic development.

Local indigenous communities must be allowed to develop the land for which they have native customary rights – which may include peat lands – despite being in breach of ILM policies.

Finally, Wilmar has made some big changes in its policies and practices in recent years, but to what extent do you still encounter internal opposition to change? And what are the best clear business benefits that you can point to that counter the resistance?Wilmar’s sustainability journey was led by our chairman, Kuok Khoon Hong. At a time when palm oil was facing increasing consumer backlash and losing favour with investors, making the switch to sustainable production was necessary in order to maintain the viability of the industry.

We have received strong support from our internal and external stakeholders to reach the progress we have achieved today. Currently, Wilmar’s headway in sustainabil-ity and transparency is widely considered to be one of our key differentiating compe-tencies that put us in a better position to cater to the needs of our customers, who are also on a tight timeline to meet their sustainable sourcing policies. ★

banks. HCV provides a common and accepted principle for forest conservation across all stakeholders, which is import-ant as it ensures a degree of consistency in implementation and enforcement of sustainability standards.

The HCS approach is a more recent development, designed to support zero-deforestation commitments. Its main novelty is in the separation of HCS areas (viable natural forests) from non-HCS areas (degraded land), which can be used for agricultural expansion. With immense pressure on the industry to delink agriculture from deforestation, the HCS approach is gaining favour with an increasing number of industry players. Wilmar has also adopted the HCS approach in our integrated policy.

There is a great degree of overlap in the two approaches. Integrating them into a single, more comprehensive assessment tool will greatly streamline and reduce

the cost of sustainability assessments, expediting industry transformation.

Moving beyond HCV and HCS, is an integrated landscape management approach the best way for future planning?Integrated landscape management (ILM) is a more holistic approach as compared to HCV and HCS, as it takes into account economic, social, and ecological sustain-ability. ILM is a good starting point, and it is the basis for Wilmar’s no deforestation, no peat, no exploitation policy.

To cope with the ever-rising consumer demand, there has been emphasis on the concept of climate-smart agriculture, which combines ILM with sustainable intensification to increase quality and yield with fewer resources.

Deciding on a single “best” approach may not be the best way forward. These approaches need to be consistently

Agriculture continues to be a key driver of development

Considering landscape as a whole is gaining traction

Jeremy Goon is chief sustainability officer at Wilmar International

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Progress in the forests for APP Rainforest Alliance’s Richard Donovan welcomes the ‘moderate’ progress made by Asia Pulp and Paper towards its conservation commitments

In October 2014, when Scott Poynton of TFT, Simon Lord of New Britain

Palm Oil and I got together for a panel at Innovation Forum’s deforestation conference in London, we had a spirited, productive debate about different means we’re championing toward the end we all share: halting forest destruction.

We argued the merits of third-party FSC certification vs internal zero-defor-estation pledges, which major companies are increasingly adopting. The two are very different; both are important. Each has their adherents and detractors. Neither is perfect, and both are evolving to better address social and economic justice, land-use conflicts and climate change.

I’d argue there’s a common thread running through them, maybe even a kind of ultimate convergence. Ideally, deforestation-free pledges can get companies started on the longer road that leads to sustainable supply chains, and perhaps to third-party certification.

But whether independent or internal, early days or advanced stages, any steps down that road need to be transparent and accountable, and work

towards the same basic goals: preventing deforestation; protecting biodiversity and high-value areas; transparency and traceability; and respecting the rights and needs of workers, communities and stakeholders.

APP: open to scrutiny Asia Pulp & Paper is an important case in point. To my knowledge it’s the only major producer so far to seek indepen-dent and publicly reported analysis of how it’s implementing its deforesta-tion-free goals.

It announced its forest conserva-tion policy (FCP) two years ago. At APP’s request, the Rainforest Alliance conducted and recently released an evaluation of APP’s progress towards meeting its FCP commitments, including on natural forest protection, peatland management, social and community engagement, mixed tropical hardwoods, and improving practices of its suppliers. The report represents a new level of accountability and public scrutiny for a company’s deforestation-free pledge.

Rainforest Alliance found APP had made “moderate” progress towards

meeting its FCP commitments overall, including “limited” progress in some areas, which anyone can read about in the published report.

That’s the way it should be, and after APP’s precedent, the way it increasingly could be. It’s critically important that deforestation-free pledges be transparent, accountable and verifiable.

The scale problem Those are the great strengths of FSC certification, but FSC currently covers only between 10% and 20% of working forests. For many non-FSC forestry operations around the world, especially in emerging economies where much of the supply and demand for forest products comes from, deforestation-free pledges could be a viable first step towards a sustainable supply chain, but only if it’s an independently verifiable one.

In APP’s case, independent verifi-cation of “moderate” overall progress is encouraging news, especially given how complicated the on-ground realities are in Indonesia.

Among other things, APP has made good on its pledge to stop its suppliers from destroying natural forest. This is a significant achievement, but it risks getting undermined by external factors, because clearing in APP supplier forests is still happening due to activities of third parties, not the suppliers themselves.

Illegal logging remains widespread in a region where felling and selling one hardwood tree can bring in what a family typically makes in a year. Other forest clearance for community subsistence plots or lucrative oil palm plantations may be happening more or less legally where land tenure overlaps with APP suppliers, and formal legal or regulatory forest governance is confused.

Communication before consent Community engagement, including obtaining a community’s free prior informed consent (FPIC) for forestry concessions, is challenging in rural areas where governance is weak and literacy rates are low. APP developed new FPIC operating procedures, but implementing

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APP has made good on its pledge to stop suppliers destroying natural forest

APP


on concepts that FSC pioneered. Other elements of the FCP, such as protecting high carbon stocks or taking a landscape approach to protecting biodiversity, are modelled on concepts we’re working to integrate into FSC standards.

If more companies like APP can make verifiable progress on these fronts despite the difficulties, not only will they be meeting their own internal standards in meaningful ways, they also may help create the conditions for more of the world’s working forests to become FSC certified. ★

them on the ground has proved tough.Two years after it announced its FCP

goals, there are still gaps between sound policies or procedures APP has devel-oped and how they are implemented in the field. But the way forward is being open about those gaps, and continuing to work to close them in transparent, accountable ways.

APP’s case illustrates the potential for alignment between deforestation commitments and FSC certification. APP policies like protecting high conser-vation value forests or FPIC are based

APP’s forest conservation policy Asia Pulp & Paper announced its new forest conservation policy in February 2013, when the company declared an immediate end of natu-ral forest clearance by its pulpwood suppliers. As part of the process of verification of the plan, APP engaged Rainforest Alliance to evaluate progress, provide perspective and increase transparency.

Rainforest Alliance’s first report on APP’s forest conservation policy, published in February 2015, covered progress in the period from February 2013 to August 2014.

Responding to this report (in Feb-ruary), Aida Greenbury, APP’s manag-ing director, sustainability, said that APP was pleased that the Rainforest Alliance had recognised the progress that the company is making.

Greenbury said: “Our FCP im-plementation measures are not set in stone. We must have the courage to continually improve them as we learn lessons from implementation. The report has highlighted a number of areas that require additional fo-cus. Its findings, along with feedback from other stakeholders, have been used to inform our FCP implementa-tion plan for 2015 and beyond.”

She also called for support from other stakeholders to help APP with its no deforestation policy, arguing that forests continue to be lost due to factors that are beyond the compa-ny’s control. “Our hope is that this evaluation will raise awareness of for-estry issues in Indonesia and prompt others, including government, NGOs and the private sector to collaborate more closely to help tackle the issues across the landscape.”

Aida Greenbury, managing director, sustainability, APP Richard

Donovan

Richard Donovan is a senior vice-president and the vice-president of forestry at the Rainforest Alliance.


Deforestation

Expert comment Ahead of the April 2015 deforestation conference in Washington DC, Innovation Forum interviewed some of the leading participants

Ben Vreeburg from IOI Loders Croklaam on the RSPOWhat is your view on the Roundtable on Sus-tainable Palm Oil? And is the reform process going far enough?

The RSPO has done a tremendous job by certifying almost 20% of the total palm oil production. We believe that the RSPO mass balance model plays a key role in stimulating the physical uptake of certified sustainable palm oil. The importance of the mass balance model is often underestimated.

The RSPO serves as a platform on which new alliances are built and new initiatives are created. The challenge for the RSPO, and also the entire palm oil industry, is how to ensure that all the new and good initiatives can be tied together.

Multiple standards and individual supply chain verification and certification schemes are not the best route, could negatively impact the competitiveness of palm oil and shift problems to vegetable oils.

Collaboration between the various stakehold-ers but also amongst processors and traders is needed to fast forward the transformation of the palm oil industry. At the same time, the RSPO needs to allow the inclusion of ideas such as high carbon stock and “no peat regardless of depth” in its model.

Ben Vreeburg is sustainability director at IOI Loders Croklaam

Cassie Phillips from Weyerhaeuser on sourcing North American fibre What are the main advantages and problems you face in sustainable sourcing of wood fibre in North America?

North Americans love wood so we’re fortunate to have strong markets for forest products. And strong markets for forest products are globally correlated with low levels of deforestation, which makes sense because markets give landowners the incentive to replant trees and expand the land they use for forestry.

We see this in the US, where both the area of land in forest and the volume of wood growing on that land has increased for almost a century, all while the industry has greatly expanded the output of forest products. We’re also fortunate to be managing native tree species, so even the most intensively managed forests are home to native populations of plants and wildlife. And we have the other essential “enabling conditions” for long-term forest investment: secure land tenure, private property rights, and an independent justice system; high safety and labour standards and a well trained and

educated workforce; an innovativeresearch and technology community; and a government committed to free trade.

Forest product markets are global, though, and we compete against places that lack this social and governmental infrastructure and thus have lower “carrying costs”. So we’re always mindful of the need to control costs. One of the related challenges forestry faces in North America and other developed countries is how to maintain support from an urbanising citizenry who may, as Aldo Leopold famously warned, believe that “breakfast comes from the grocery, and … heat comes from the furnace”.

Commercial forestry is an indus-trial process and people don’t relate to its scale and timeframes in the same way they relate to farming. So while controlling costs we also must have world class performance on the ground and strong and enduring relationships with communities.

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Cassie Phillips is vice-president, sustainable forests and products, at Weyerhaeuser


Sophie Beckham from Interna-tional Paper on engaging NGOs Most large forestry based businesses have been criticised by campaigning NGOs at one time or another. What have you learned about open dialogue with them and how to maintain that?

For decades, International Paper owned forestland and could show forest stewardship through our investments in on-the-ground forest best practices. Today we don’t own land and depend deeply on the relationships we have with our suppliers.

To address concerns from the NGO community, we have built relationships that allow for practical solutions devel-oped in collaboration. We’ve sought, and will continue to seek, common ground on tough issues that matter for different stakeholders.

Our participation in the WWF Global Forest and Trade Network and our work with organisations including the Dogwood Alliance in the southeast US have helped raise our awareness about the importance of an open dialogue as a platform for exploring different viewpoints. Collaborating with stakeholders is key to being able to advance sustainability in the forest product sector and to talk credibly about what we are doing.

Sophie Beckham is global forest stewardship and sustainability manager at International Paper.

Charles Barber from the World Resources Institute on improving governance What’s the role of companies in helping improve governance via better institutions and government engagement? Doesn’t it blur the boundaries between business and the role of the state?

Companies can lead, developing standards higher than the law requires, and can help implement higher standards in places where government institutions are weak.

The current focus on big companies’ commitments on deforestation is a bit over the top – not that those commit-ments are not welcome. But companies need to pressure governments to make such commitments legal obligations for ALL companies. If company X can sleep better at night (and get NGOs off its back) by greening its supply chain and not cutting down forests in Sumatra or the Amazon, that is good. But it in no way solves the problem, which is to ensure that no one cuts those forests down.

The role of business and the role of the state is so blurred that I think one just has to work with it.

Charles Barber is director of the forest legality alliance and govern-ment relations, forests programme, at the World Resources Institute

Simon Lord from Sime Darby on the Palm Oil Innovation Group Why was the Palm Oil Innovation Group established? And what do you make of the latest RSPO news about member suspensions?

POIG was created to fill a gap in the current output of the RSPO. It anticipated the need for mechanisms to address issues such as deforestation and social inequality.

In the last two years we have seen many single companies deliver charters as a way to highlight their requirements of a supply chain. Very few have given thought as to how such commitments can be met on the ground. POIG will deliver this.

I see POIG as a means of strength-ening RSPO and not as an agent to reduce its effectiveness or purpose. I am committed to RSPO as I have always been and it can only be a positive step to see the standard grow.

I see the disciplining of members who fail in the code of conduct demanded as a necessary step which has been long overdue. I therefore welcome it as RSPO should be encouraging a race to the top and not just working to the lowest common denominator.

Simon Lord is executive vice-president, Sime Darby Berhard

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Big business not just on paper


Tackling deforestation is one area where it’s easy to characterise some businesses as taking the lead, with government lagging behind. To what extent do you think this is fair?This statement is generally fair. There are certainly some governments that are taking more of a leadership role than others such as Costa Rica with payments for ecosystem services and protected areas, or Brazil with monitoring.

But generally companies seem to be moving forward at a faster rate. Of course civil society organisations are playing a key role in pushing both companies and governments.

This is especially apparent in the palm oil and timber sector in southeast Asia. The most progressive “zero deforestation” policies have been adopted by the private sector – including Golden-Agri Resources, Wilmar and Asia Pulp & Paper – whereas companies owned or principally controlled by governments have been relative laggards.

Some environmental groups

subscribe to a theory of change whereby early adopters in the private sector eventually push for laws that are support-ive of their policies. These companies don’t adopt these policies to disadvantage themselves in the marketplace – they want their competitors to be bound by the same rules.

What then does good government intervention in the deforestation debate look like? While it’s probably unrealistic to expect governments to take a leadership role on ending deforestation, they can certainly contribute in other ways, such as:• enforcing environmental laws fairly and

consistently; • codifying safeguards to bring the worst

actors in line; • setting standards and rules, especially

for monitoring, reporting, and verification;

• ensuring fair and equitable benefits distribution; and

• using their convening power to bring

together stakeholders. Right now, many governments are

failing in these roles. For example, in Indonesia the government has historically been a significant obstacle to progress in reducing deforestation. Unclear laws and selective enforcement mean that it is very difficult for forestry companies to be fully compliant with all regulations, which is the perfect recipe for facilitating corruption.

But current laws also don’t support conservation. If a palm oil company wants to preserve an area of high conser-vation value peat forest within one of its concessions, there’s no legal mechanism for doing so let alone options to swap that land for non-forest land elsewhere. And if the company acts unilaterally to protect that forest within its concession, there is no guarantee the government won’t simply claw back the permit and hand that forested block over to a company that has no qualms about converting it.

Traditionally governments have focused more on the stick rather than the carrot in addressing deforestation. That means things such as law enforcement, zoning, and regulation have garnered most of various governments’ attention, instead of interventions that reward landholders for preserving forests. Ending deforestation will require both approaches, as Dan Nepstad and colleagues argued well in a paper published in Science in June 2014.

How easy is it to bring together competing regional, national and international interests? It’s not easy at all. The most success seems to come when there’s a unifying issue where governments, NGOs, and respectable companies can agree, such as illegal logging. Indeed there has been considerable progress on measures to restrict illicit timber from the United States, the EU, and Australia. Sure, plenty of illegal timber still gets through, but at least there is now a framework to build upon.

For issues where there are more vested and conflicting interests, such as ending first-time logging of old-growth

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Deforestation

Forests need better laws, better enforced Governments have a crucial role in preventing deforestation, but they need to cut through conflicting interests and reward activity that prevents destruction, argues Rhett Butler

It’s probably unrealistic to expect government to take a leadership role

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INNOVATION FORUM: DEFORESTATION REPORT

Rhett Butler

forests and trade bans on endangered species, progress is extremely slow.

Why hasn’t there been more progress on forest issues at the intergovernmental level?Putting aside inevitable competing inter-ests between countries, one big problem is forests seem to suffer from the lack of a dedicated constituency within entities including the UN. The messaging around issues such as childhood mortality, HIV/Aids, and education is simple and clear.

With forests, the message reaching high level policymakers is diluted by various camps fighting over whether the policy focus should be on biodiversity, climate, water, poverty alleviation, liveli-hoods, or any number of other angles, rather than unifying around something simple, like forests are the best oppor-tunity for humanity to make a U-turn on the environment. As Erik Dinerstein of Resolve recently put it, forests can shift us from the Anthropocene, a planet shaped by man, to the Harmoncene,

where humanity lives within the planet’s ecological boundaries.

What changes do you think are required to improve governance? There are new mechanisms and platforms that are improving accountability, which should help with some ongoing gover-nance challenges. For example, advances in collecting, analysing, and dissemi-nating remote sensing data mean we no longer have to rely on old and inaccurate forest data self-reported by governments to the UN.

Tools such as Global Forest Watch have the potential to quickly render old institutions obsolete, unless those institutions embrace innovation.

On that same theme, the mobile phone revolution has democratised forest monitoring, enabling unprecedented opportunities for communities, civil society and the press. It will be harder and harder for companies and the government to get away with egregious forest destruction with satellites watching from above, citizens armed with cell phones monitoring from the ground, and activists crunching numbers to assess commodity supply chains.

Much has been made of the New York declaration on forests – as it brought together governments, business and NGOs. Some say such a non-binding agreement is too weak, while others laud it as a real achievement to get the various parties to agree to anything. Is it more complicated than that?Given the continuing and long-running absence of leadership and progress on a binding framework on climate and forests, the New York declaration on forests was useful in bringing together many stakeholders who have interests in protecting, managing, and restoring forests. While it could have certainly been improved with stronger, time-bound commitments and wider participation, in a sense it was a wake-up call that people are ready to move forward on forests regardless of what’s happening between and within governments. ★

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Rhett Butler is founder of Mongabay.com.

The message is diluted by various camps fighting over what the policy focus should be

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sensing means we can all keep an eye on the trees


The global fight against deforestation has been invigorated over the last

year by landmark commitments to elimi-nate deforestation from the global “forest risk commodity” supply chains that drive the majority of forest loss worldwide.

This includes individual pledges by some of the most significant players involved in the production and trade of these commodities – chiefly palm oil, soy, beef, leather, timber, pulp and paper – but also a number of unprecedented collective commitments.

Most notably, the New York Declaration on Forests, adopted at a UN climate summit in September 2014, unites the public and private sectors, NGOs and indigenous groups in estab-lishing a timeline to end deforestation by 2030, including by removing deforesta-tion from global supply chains by 2020.

But to what extent are these ambitious commitments echoed in the sustainability policies of those that have signed up, and indeed of other institu-tions most at risk of driving deforestation through their operations?

Forest 500, a new initiative from the Global Canopy Programme sets out to answer this question and to pinpoint where urgent action is most needed. It identifies, ranks and tracks progress among five hundred “powerbrokers of zero deforestation”: the governments, companies and financial institutions worldwide that together can effectively eliminate global forest loss.

Action pinpointedIt shows where the most influential institutions are doing well and where they are doing badly, indicating where improved policies and practices could bring the greatest benefits for the world’s forests.

The Forest 500 ranking assesses each powerbroker’s policies aimed at addressing deforestation risk. While these policies are just a first step, they signal the ambition needed to address this historically intractable problem and represent an essential starting point for a transition towards a deforestation-free economy.

By monitoring these public commit-ments over time the Global Canopy Programme aims to increase accountabil-ity and provide a way to measure overall progress towards global deforestation goals.

The 250 companies that have been assessed by the initiative have combined revenues in the region of $4.5tn. Many of these are leading the way, with commitments to overall zero or net zero deforestation, the establishment of commodity-specific policies, improve-ments in supply chain traceability, and in reporting and transparency.

But just as the leaders are pushing the boundaries of best practice, many companies of significant size and influ-ence worldwide are failing to adequately register deforestation-risk as a public concern.

Big is best The most progressive companies in terms of their deforestation policies are found within the home and personal care industries.

Companies with revenues over $10bn score twice as high as those with revenues less than $1bn in the ranking, and on average public companies outperform privately-held corporations.

Higher scrutiny associated with reporting requirements for public companies and the increased reputational risk for consumer-facing companies are both clearly playing a key part in driving sustainable business practices.

The more advanced policies of a number of key companies, such as Danone, Kao Corp, Nestlé, Procter and Gamble, Unilever and Reckitt Benckiser, which all rank in the top score bracket of the Forest 500, prove that progress is possible.

Meanwhile companies with a dominant share of global trade are demonstrating the potential for dispro-portionate impacts throughout the supply chain. For example, through global agribusiness giant Wilmar International alone, around 45% of the total volume of palm oil traded globally is covered by the company’s “no deforestation, no peat, no exploitation” policy.

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Deforestation

Deforestation’s 500 influencers that matterA new initiative from the Global Canopy Programme highlights the performance of those organisations with the most power to end deforestation, says GCP’s Leonie Lawrence

Higher scrutiny and increased reputational risk are driving business practices

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With effective implementation, policies such as this can have positive effects throughout the supply chain. Yet progress to zero deforestation will not be made if other important players continue to accept commodities linked to deforestation or if these are simply diverted to less consumer-aware markets. A comprehensive approach is required, that leads to improvements across sectors and markets worldwide.

Indian issues Forest 500 reveals that companies located in some of the most critical processing and consuming countries are currently ranking poorly as a group. For example, companies located in India (responsible for around 17% of all palm oil imported from key forest countries) and in Russia (responsible for around 20% of all beef imports from Latin America) have

minimal policies in place to address deforestation.

And of particular concern is China, the single largest importing jurisdiction of forest risk commodities worldwide, where companies are scoring well below average.

For the corporate sector, while the Forest 500 analysis highlights multiple areas for improvement, deforestation is firmly on the agenda. The same cannot be said, however, for the financial sector despite the potentially huge influence financiers could exert in the transition to a zero deforestation economy.

The 150 financial institutions assessed together hold some $1.7tn worth in shares in publicly-listed Forest 500 companies, yet none has yet adopted zero or net zero deforestation policies for their investment, financing and lending activities. And of those that do have sustainable investment policies, many

lack clear implementation processes. By region, financial institutions

based in Europe are doing better, by and large, than those headquartered in the Asia-Pacific region and North America – a priority area for action given the dominance of investment originating in the US, representing almost 80% of all shares identified in the publicly-listed Forest 500 companies.

These first-year results from Forest 500 demonstrate that vital steps forward are being taken, and highlight a number of areas for urgent action. Much can be learnt from the leaders, and much wider uptake of strong (and strongly implemented) policies will be needed across sectors and geographies over the next five years. Forest 500 will track progress to 2020, and seek to catalyse the all-important journey that has now commenced towards a zero deforestation global economy. ★

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Leonie Lawrence is senior project officer, drivers of deforestation programme, at the Global Canopy Programme.

Beef importers disregard deforestation impacts

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Leonie Lawrence

UPCOMING EVENTS

How Business Can Tackle Deforestation 14th-15th April 2015, Washington, DC

The Circular Advantage Strategy Conference8th-9th June 2015, London

Sugar SustainabilityHow to manage risk and profit from sustainability16th-17th June 2015, London

Measurement and Valuation of Corporate Sustainability Does it all add up?29th-30th June 2015, London

How Business Can Tackle Deforestation28th-29th September 2015, Singapore

If you’re interested in any of these events, please do get in touch:Oliver Bamford | Tel +44 (0) 20 3780 7431 | [email protected] | www.innovation-forum.co.uk


How business can tackle deforestation briefing 2. April 2015

Business

Transcript of How business can tackle deforestation briefing 2. April 2015