Since 2015, Forest Heroes has assessed companies’ efforts to eliminate deforestation from their palm oil and soy supply chains in our “Green Cats” report. Our analysis reveals which companies are making progress on reducing deforestation exposure and which lag on policy development and implementation.
Main conclusions for the 2019 report include:
- The palm oil sector continues to make significantly more progress than the soy industry in combatting deforestation.
- Despite progress in palm oil, there is still a long list of companies operating unsustainably, many of which continue to receive financing from major financial institutions.
- Likewise, financial institutions continue to invest in the soy sector regardless of deforestation ties and limited implementation of sustainability policies.
- The leaders of the Green Cats analysis have adopted initiatives to reduce deforestation and improve transparency, measures that the laggards should incorporate into their supply chains in the coming years as the climate crisis escalates.
The scores for each company were produced by Global Canopy as part of its Forest 500 project. They are based on the following criteria:
- Each company’s commodity-related commitments;
- Implementation of those commitments;
- Monitoring and verification of progress, compliance, and controversies;
- Other social commitments, including commitments to securing the free, prior, informed consent of affected communities for development on their land.
More details on Global Canopy’s scoring methodology are available here.
Palm Sector Well Ahead of Soy
This year’s analysis reveals that palm oil companies have made considerably more progress in their efforts to eliminate deforestation from supply chains than have soy companies. Of the 24 palm oil companies we analyzed, 14 scored above 60 (out of 100), but the same was true for only 1 of the 9 soy companies included in our analysis.
The palm oil sector’s relative progress stems from the following:
- A well-developed certification scheme. The Roundtable on Sustainable Palm Oil (RSPO), established in 2002, is a mature certification body, with recently updated Principles and Criteria that include public disclosure on the RSPO website; prohibited development on High Conservation Value (HCV) and High Carbon Stock (HCS) areas and on peat; no use of fire to clear land; requirement for consent form local landowners; and adherence to labor standards.
- Enforcement and suspensions. Although enforcement has at times been inadequate, the RSPO routinely suspends members found to be in violation of its standards. Recently, for instance, it suspended Indofood (which scored below 60) over labor rights violations.
- Leading companies have committed to standards beyond RSPO with No Deforestation, No Peat, No Exploitation (NDPE) policies. While there remains considerable room for improvement, big players have made significant progress toward the full implementation of these standards. Wilmar and others, for instance, have adopted a suspend-and-engage approach. Any suppliers linked to deforestation or development on peatland are suspended from the NDPE market, which is followed with engagement to bring suppliers into compliance.
- By contrast, although the Roundtable on Responsible Soy sets forth comparable standards for the soy industry, RTRS certification has only been embraced by a fraction of the industry. Moreover, the traceability of soy has proved to be more difficult.
- Suspensions of bad actors are not common in the soy industry, unlike in the NDPE palm oil market in Southeast Asia.
Financial Institutions Hold Debt, Invest in Bad Actors in Palm Oil
Despite palm oil’s progress, a long list of growers, traders, and refiners either have not adopted strict deforestation policies or do not adequately implement the ones they have. Yet, many well-known Western financial institutions continue to serve as shareholders and/or debt owners.
For instance, Blackrock and Fidelity both hold shares in Emami Group and Eagle High Plantations. Emami Group is the main shareholder of Emami Agrotech, which, as the largest refiner in India without an NDPE policy, plays a significant role in India’s sizable market for unsustainable palm oil. Not surprisingly, Emami received a score of only 10.5. Eagle High Plantations, a palm oil producer, fared only slightly better with a score of 38.8. Both institutions also hold debt for Genting Plantations, which received a score of 59.7.
This trend also extends to pensions and retirement funds. For example, the Teachers Insurance & Annuity Association (TIAA) and the California Public Employees’ Retirement System (CalPERS) are direct shareholders in unstainable palm oil companies, including Emami Group, Eagle High Plantations, Indofood, and Astra International (the parent of company of Astra Agro Lestari). Vanguard, which administers numerous retirement funds, holds debt for Genting Plantations and shares in Sampoerna Agro, which received a score of 0.
Western Financial Institutions Are Large Debt Holders, Investors of Soy Traders
Investors and financiers are not shying away from the soy sector either, despite low scoring for the industry. U.S. financiers are tied to some of the worst-performing companies. For instance:
- Debt holders for China’s COFCO, which scored only 41, include Deutsche Bank, Allianz, Manulife (Canadian), UBS, Legg Mason, BlackRock and Vanguard.
- The Canada Pension Plan Investment Board controls 39.99 percent of Glencore Agriculture, which scored only 24.7.
- Major U.S. asset managers, such as Vanguard (10 percent), T. Rowe Price (10 percent), BlackRock (5 percent), and Franklin Resources (3.3 percent) dominate the list of institutional investors in Bunge, which scores only at 42 in our analysis. TIAA and CalPERS are also shareholders.
Green Cats Leaders Accelerate Transparency
The better actors in the palm oil and the soy industries have accelerated transparency measures. For instance, it is common for palm oil companies to develop sourcing commitments in line with RSPO standards and to publish lists of mills from which they source, but several of the companies included in our analysis go even further. To move toward a deforestation-free commodity supply chain, the laggards will need to adopt similar measures.
- Sime Darby recently launched an online transparency tool it calls “Crosscheck,” giving users access to lists of Sime Darby’s mills and refineries, together with their names, locations, and GPS coordinates,
- Sime Darby’s initiative shows links between mills and refineries, gives users the option to overlay Sime Darby’s supply maps with forest and biodiversity information, and contains information about problems with particular suppliers that have been reported to Sime Darby.
- Musim Mas recently announced a coalition with several other companies to help smallholders in Siak District, Riau, Indonesia to produce deforestation-free palm oil. Musim Mas is also part of a coalition that has adopted a new system called Radar Alerts for Detecting Deforestation (RADD), which will monitor deforestation in real-time.
- Among the soy companies in our analysis, ADM, the only one which scored above 60, says it can trace its soy supply chain back to 99 percent of its direct suppliers in Brazil and Paraguay, and has procedures in place for dealing with delinquent suppliers. ADM also invites reports of and publishes a list of current grievances. A majority of the company’s soy supply chain is made up of indirect suppliers.
Click here to view the full report and scores.