Deforestation and Ecosystem Conversion: The Call for Sustainable Agricultural and Forestry Practices

Deforestation and ecosystem conversion continue to rank among the most critical environmental impacts driven by agricultural and forestry commodity production. According to the Intergovernmental Panel for Climate Change (IPCC), this land clearance for agriculture is responsible for over 10% of anthropogenic greenhouse gas emissions, contributing significantly to climate change. Additionally, it accounts for at least one-third of global biodiversity loss, leading to the degradation of ecosystems essential for maintaining the planet's health and resilience. Beyond environmental impacts, expanding agricultural and forestry activities frequently infringes on the rights of indigenous peoples and local communities, jeopardizing their land rights and access to crucial natural resources.

Figure 1: GHG Emissions by Source

The urgency of these issues has led to increased pressure on companies involved in producing or sourcing agricultural commodities, such as coffee and cocoa. Stakeholders, including buyers, investors, and regulators, are issuing ever-clearer mandates for these companies to eradicate deforestation, ecosystem conversion, and associated human rights abuses from their supply chains. Transparency regarding progress in these areas is now a fundamental expectation.

Evolving Focus on Sustainability

In recent years, the focus on sustainability within supply chains has evolved from long-term aspirational goals to the immediate need for action to meet near-term targets for climate and nature, as well as emerging regulatory demands. Key initiatives and regulations include:

• Eliminating deforestation from key commodities by 2025 and halting all land use changes in supply chains by 2030, aligning with emissions reduction goals set by the Science-Based Targets Initiative (SBTi). This ambitious initiative aims to limit global warming to 1.5°C above pre-industrial levels.
• Eradicating deforestation and ecosystem conversion linked to commodity production to achieve conservation goals outlined in the Convention on Biological Diversity, enforced through the Science-Based Targets Network’s (SBTN) Land Targets.
• Ensuring that agricultural commodities entering the European Union (EU) market are verified as deforestation-free, in compliance with EU’s Deforestation Regulation, which will come into effect in 2025.

Comprehensive Disclosure

These stringent targets highlight the need for companies to provide detailed information on their progress toward eliminating deforestation and ecosystem conversion from their supply chains. With key milestones rapidly approaching, comprehensive disclosure has become a baseline expectation. To facilitate this, various reporting platforms and standards have been developed to capture and organize relevant information.

For the first time, in 2023, companies were able to comprehensively disclose deforestation and conversion-free (DCF) commodity volumes through the CDP (formerly the Carbon Disclosure Project), using a standardized set of metrics developed in collaboration with the Accountability Framework initiative (AFi). These metrics have been integrated into other reporting standards, such as the Global Reporting Initiative, and protocols from industry associations like the Consumer Goods Forum’s Forest Positive Coalition Key Performance Indicators (KPIs).

The release of new data by AFi and CDP offers valuable insights into companies’ current capabilities to understand, manage, and report on deforestation and ecosystem conversion within their operations and supply chains. During 2023, 881 companies disclosed information on at least one commodity supply chain, resulting in 1,498 commodity-specific disclosures across seven high-risk commodities. However, only half of these companies (445) provided detailed responses regarding the DCF percentage of their supply chains. Notably, only 186 companies submitted comprehensive and high-quality information for at least one supply chain. Among these, 64 companies reported achieving at least one supply chain that was 100% DCF.

Figure 2: Proportion of Disclosing Companies by Value Chain Stage

The methods companies used to identify DCF volumes varied widely, including certification, risk assessments, and monitoring of production units. However, many companies faced challenges in adequately explaining their methodologies or relied on approaches that might not fully assure deforestation- or conversion-free volumes.

The Path Forward

This initial year (2023) of comprehensive disclosure through the CDP marks a significant milestone toward greater transparency and accountability in the agricultural and forestry sectors. As these practices become more standardized and widespread, they are expected to drive substantial progress in mitigating the environmental impacts associated with commodity production. The increased availability of detailed, standardized data will enable more effective monitoring and enforcement of sustainability commitments, thereby promoting more responsible and sustainable practices across the industry.

Moreover, the drive for transparency and accountability is not only about meeting regulatory requirements but also about building trust with consumers and investors, who are increasingly concerned about the sustainability and ethical impacts of the products they buy and invest in. As awareness grows, so does the demand for products that do not contribute to deforestation or ecosystem conversion, creating market incentives for companies to adopt more sustainable practices.

Technological Advancements and Innovation

In the context of global supply chains, achieving DCF status is particularly challenging due to the complexity and scale of these networks. Companies must navigate various obstacles, including differing national regulations, fragmented supply chains, and the need for reliable data across diverse geographic regions. Advanced technologies such as satellite monitoring, blockchain for traceability, and artificial intelligence (AI) for data analysis are increasingly being employed to overcome these challenges and provide more robust assurances of sustainability.

Conclusion

Looking forward, the integration of sustainability into corporate strategy will likely continue to deepen, driven by regulatory pressures, market demands, and the need to address climate change and biodiversity loss. This shift presents an unparalleled opportunity for innovation in sustainable practices and technologies, fostering a more resilient and ethical agricultural sector. Ultimately, the commitment to eliminating deforestation and ecosystem conversion from supply chains is not just an environmental or ethical imperative; it is also a critical component of a sustainable business strategy that aligns with the broader goals of global climate and biodiversity conservation.