Tropical deforestation continues to grow. At the same time, companies struggle to make clear commitments or give substance to pledges already in place. The existing ‘tool’ of commodity crop certification alone has shown to be insufficient to get the job done. A more holistic approach may therefore hold a better solution: the landscape approach. At NewForesight, we help companies explore and solidify how they can source sustainably from a landscape. So that in a few years from now, tropical deforestation is something of the past.
Deforestation
Hopes were high when in 2014 the New York Declaration on Forests was signed, declaring the ambition to halt global deforestation. But since then, the loss of tropical primary forest has increased by 44%. A recent report by Forest500 shows that of the most influential companies and financial institutions operating in key forest-risk supply chains, 57% have deforestation commitments for at least one of the forest-risk commodities they operate with. The level of deforestation commitments differs per sector: in palm oil, 71% of companies has deforestation commitments in place, followed by paper (66%) and timber (48%). Soy (31%), beef (28%) and leather (25%) are at the bottom of the league (see image). Of course, these numbers show there is still ample space for companies to step up their game. But perhaps more importantly, it poses the question: given that majority of companies has at least one deforestation commitment in place, why does deforestation continue to accelerate at such a pace?
Figure 1: Share of companies connected to deforestation-related supply chains, with deforestation commitments. Source: Forest500 (2021)
Increasing responsibility
Meanwhile, we see that globally, companies and financial institutions are increasingly held responsible for the products they source. Governments of consumer countries are exploring how they can leverage legislation to halt the imports of products linked to deforestation. The European Union, representing 10% of global deforestation, is considering the set-up of a mandatory due diligence framework, and the UK government will soon require companies to execute due diligence to ensure the absence of deforestation in their supply chains. These measures signal an increasing urge for companies to act on deforestation. In a few years, companies without such policies in place will not be able to import their products to these countries.
What companies must do to fulfill their commitment
There are at least two things companies must commit to in order to mitigate the risk of deforestation in their supply chain:
- Ensure sustainable production in their supply chain. To state the obvious, cultivation of crops such as palm oil or soy should take place under conditions that do not damage the (in)direct environment, avoiding the loss of trees and other vegetation, and related issues such as soil erosion, flooding, increased greenhouse gases in the atmosphere.
- Ensure traceability. Companies that operate downstream forest-risk supply chains should trace back where the commodity they buy has been produced, and under what conditions. Without traceability, avoidance of deforestation cannot be guaranteed.
To obtain both goals of enhancing traceability and obtaining assurance of deforestation-free products, most companies rely on voluntary certification programmes. Front-runner companies already made sure to cover the risk of deforestation through certification, such as RSPO (palm oil), FSC (paper, timber) or RTRS (soy). These programs provide benefits to producers for adhering to social and environmental standards, whilst ensuring supply chain traceability through its Chain of Custody models.
Unfortunately, the past two decades have shown that certification has not been sufficient to bring about structural, sustainable transformation of supply chains. As the Forest500 report shows, deforestation persists alongside other socioeconomic and environmental issues. Why is this the case?
Why certification has not done the job
Certification of single commodity crops has been faced by three key problems in addressing deforestation across supply chains.
- Not all stakeholders are involved. Working with a limited number of stakeholders (e.g. farmers, cooperatives and agribusiness) through only a sourcing approach, does not involve all stakeholders that are responsible for conserving the landscape and, more specifically, the forests. Especially local governments, who often have most influence to combat deforestation, are often left out of certification procedures. Addressing deforestation requires a multi-stakeholder approach.
- Disconnect between down- and upstream. With certification, there is often no direct link between downstream buyers and the landscape from which the commodity is sourced. Chain of custody standards often allow for forms in which identity preservation and full traceability is not a requirement, such as mass balance and book & claim. At the same time, downstream buyers often do not know where in the supply chain the premiums they pay end up. This is one of the reasons that recently, Fairtrade saw many of its corporate partners leave: ‘It wasn’t clear where the money was going (…) If you wanted to find out what a cooperative had done with a whole wad of Fairtrade premiums (…) nobody could tell you.’ Addressing systemic social and environmental issues requires a long-term approach with a direct connection between buyer and landscape.
- Deforestation is a multi-commodity problem. Deforestation takes place across different commodities that are produced in the same landscape. Tea plantations may be situated alongside log factories, and cocoa fields are neighbored by cattle farms. They all make use of the landscape and may all cause the destruction of forests. In areas where multiple economic activities are taking place, certifying only one of these products will therefore not solve the problem.[1] But certification often does exactly that: focusing on a single commodity. A multi-commodity approach is therefore required.
For first mover companies that are ready to go beyond certification, taking a landscape approach can address the issues that certification fails to tackle.
A landscape approach to halt deforestation
A landscape approach to halt deforestation means companies, growers, local governments, and other stakeholders take joint action to tackle the interconnected ecological, social and economic issues within a defined landscape.[2] Through a holistic landscape approach, companies can address deforestation and other sustainability issues in a way that includes multiple commodities, relevant stakeholders, and cultivates a long-term, direct connect between the buyer and other stakeholders that operate within the landscape.
At NewForesight, we understand the steps a company should take to form a landscape strategy within the areas it sources from. Having worked with different landscape models, such as the Jurisdictional Approach or SourceUp, we know that it is essential to:
1. Find a business case for all, really all. Few people would object to the statement that everyone needs to benefit from a collaboration in order to be effective in the long term. However, it is often less known who ‘everyone’ is, and what interests they have. The business case for ‘companies’ in landscape partnerships will differ according to the stage they occupy in the value chain. As a brand or retailer, your primary concern may be on how to make credible claims on fair and environmentally friendly products, in a supply chain that is largely outside of your control. At the same time, traders or agri-companies operating upstream the supply chain may possess more direct control over means of production, but lack the commitment of guaranteed off-take by downstream buyers.
Going one step further, companies in turn exist of different departments (C-suite, Sustainability, Procurement, Farmer support) that will all have their own interests and roles to play. Similarly, governments within a certain landscape are divided vertically (e.g. from national-level ministry to local-level municipality) and horizontally (e.g. different municipal departments of Environment, Work, Social issues or Economy).
When devising a landscape partnership, it is key to engage with all relevant stakeholders to find a business case that works for all. If these players are ignored in the early stages of the landscape partnership, they will disrupt the process in the long run.
2. Ensure strong local governance structures, while considering existing structures that already exist within the landscape. Building a multi-stakeholder landscape partnership is often something that has not been done before within the landscape. Creating a solid partnership with clear roles, decision-making procedures and balanced representation of the relevant stakeholders is key to ensure effective long-term collaboration.
At the same time, every landscape is already ‘filled’ with a wide variety of structures that aim to make the activities within the landscape more sustainable (e.g. combating deforestation). This may come in the form of a regulatory environment (laws, policies), but also existing voluntary certification standards (Rainforest Alliance, Fairtrade, FSC), or private company sourcing programs that deliver agronomic or management support to smallholders and cooperatives.
When devising a landscape partnership, it is therefore important to build upon what is already there. The extent to which a landscape partnership is ready to do this, depends on the level of maturity it finds itself in. Newly established landscape partnerships still require time to solidify; integrating them with existing policy-bodies or company programs is more likely to result into usurping domination than equitable collaboration.
3. Recognize a landscape partnership grows through different levels of maturity. Multi-stakeholder processes require long-term commitment and collaboration. It takes time to build trust. This means that in the early phases of a landscape partnership, stakeholders may only notice the costs (in terms of time and money, but also the efforts to comply with certain standards) they put into it, while the benefits lag behind. It is therefore important to take all necessary efforts to prevent stakeholders from pulling out pre-maturely. These efforts come in the form of getting formal, long-term commitments, setting clear targets to work towards and making progress visible.
In the long run, the evolving nature of a landscape partnership also means different governance structures and financing strategy are required over time. When it comes to finance, many landscape partnerships hamper after a few years as their continued reliance on grants and donations suddenly proves to be insufficient. To prevent this from happening, the landscape partnership will need to devise a business model (e.g. selling services, fees) that ensures consistent cashflow over time.
Partner with us!
At NewForesight, we are specialized in linking global markets to local realities.
- For the Roundtable on Sustainable Palm Oil (RSPO), we helped develop a way to complement certification with a landscape approach, by means of a ‘Jurisdictional Approach’. Gathering insights from local government officials, smallholder producer representatives, larger producers, environmental and social NGOs, traders and manufacturers, we helped create a governance structure that ensures effective functioning in the long-run.
- For IDH, the Sustainable Trade Initiative, we have provided strategic support to develop and refine the concept of Verified Sourcing Areas (now called ‘SourceUp’). SourceUp is a market mechanism that allows companies to source large volumes of commodities with specific sustainability requirements from sustainable landscapes, at a competitive scale and price.
At NewForesight, we are looking forward to create and support more of these landscape partnerships in the future.
If you would like to discuss the above trends and solutions specific for your organization, please contact Joost Backer. We would be more than happy to talk to you.
More reads:
For further reading, see
- Guus ter Haar (2020) Scaling up: Leveraging landscape approaches to successfully organize sustainability at scale
- Narita Panjaitan (2019): 2019 – The year of engaging with Landscape Approach initiatives
This article is part of a series around Landscape Approach. Stay tuned!
[1] A single-commodity approach can work if in the area no other major economic activity takes place. For example, the RSPO Jurisdictional Approach focuses on certification of only palm oil within an entire jurisdiction.
[2] The boundaries of this ‘landscape’ can be based on natural borders (mountains, rivers), or the boundaries of a given market system (e.g. the integration of agriculture, processing and transport). It can also be defined by political means (e.g. within a given jurisdiction such as state or municipality), which warrants a Jurisdictional Approach.