Deforestation-free sourcing 'at potential tipping point'

3 February 2017

A “comprehensive shift” will be needed in the supply chains for key commodities to bring a halt to deforestation, according to a new study.

The report, covering the main commodities associated with deforestation – beef, soy, palm oil and pulp and paper – said such a shift presented an opportunity for investors, with the market potentially worth $200bn a year.

The World Economic Forum report on The Role of the Financial sector in deforestation-free supply chains said production of these commodities was currently worth $180bn annually.

Future production, while at the same time preventing further deforestation and supporting some forest restoration and rehabilitation, would require “a shift encompassing virtually all producers in tropical forest regions”, it said.

“Only a comprehensive shift can ensure the sufficient intensification of production to meet demand, while preventing avoided deforestation in one location spilling over as increased deforestation in other locations,” said the report.

It cited a 2016 New York Declaration on Forests assessment report, which found 415 companies active in at least one of these commodities had made a commitment to help eliminate deforestation.

“In the palm oil supply chain, 59% of the companies have committed to commodity specific policies, followed by pulp and paper with 53% of companies, soy with 21% and beef with 12%,” it said.

The extent and pace with which commitments have been made “suggest a potential tipping point” and that deforestation-free standards will become the new norm.

“It is likely that all producers of the four main commodities in tropical forest regions will need to shift to deforestation-free methods”, said WEF, and investors could benefit from a market worth $200bn annually for deforestation-free investment and financing by 2020.

However, if they continue to invest in traditional production over the next five to 10 years they run the risk of creating tens of billions of dollars in investments that could be declared illegal and therefore “stranded”.

“The commercial case for sustainable production points to a virtuous cycle of attractive returns, reduced risk and greater access to cheaper capital,” said the report.

It argues that sustainable production possesses several advantages including better productivity per hectare, which in turn raises overall profitability, reduced input costs and improved worker productivity.

Challenges to deforestation-free methods include the cost of unplanted land areas used to create or preserve ecosystem services, foregone logging revenue, and the costs of sustainability certification, land assessment, and staff training and technical assistance.

“Where ‘traditional’ methods allow for the illegal acquisition of land at prices far below market value (land grabbing), the cost of land acquisition can further disadvantage deforestation-free options,” said the report. “In some cases, public sector support remains critical to overcoming such barriers.”

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