Besides its dramatic impact on biodiversity, local populations and water resources, deforestation in the tropics is also responsible for about 8% of the world’s annual greenhouse gas emissions. This is more than the entire EU’s emissions and is just behind the US. As stated in IPCC’s Special Report on climate change and land, drastically reducing annual emissions from deforestation is vital if we are to limit global warming to 1.5°C. Yet destructive deforestation activities continue to be well-funded worldwide.
The soya industry is one of the leading drivers of deforestation in the Brazilian Amazon and Cerrado regions. Less well-known than the Amazon, the Cerrado is the world’s most biodiverse savannah and plays a key role in Brazil’s water systems. Nevertheless, it has already lost 50% of its original area. Its disappearance would be a disaster for the climate and for biodiversity, as it stores the equivalent of 13.7 billion tons of carbon dioxide (CO2) and is home to 5% of the world’s biodiversity.
The solutions exist for financial institutions to help stop the conversion related to soya production: the solution lies in adopting and implementing “zero deforestation” measures by traders. The four most important traders of soya from Brazil are the so-called ABCD group, which include Archer Daniels Midland (commonly known as ‘ADM’), Bunge, Cargill, and Louis Dreyfus. Despite making voluntary zero deforestation commitments, these companies fail to effectively prevent deforestation in their supply chain, mainly due to the lack of a cut-off date￼*, and the lack of standardaised zero-deforestation clauses in contracts and a full traceability system.
In 2017, the ABCD group, in addition to Amaggi and Cofco, constituted 66% of the deforestation risk directly related with soya expansion. Analysis of the traders shows that Cargill and Bunge are among the worst performing in terms of mitigating deforestation-risk. Cargill is associated with more than 61,000 hectares of land clearance in Brazil in 18 months alone. Bunge is France’s largest soya importer and is linked to deforestation the size of Marseille, Lyon and Toulouse together (38,000 ha) in the same period.
Consequently, financial institutions must demand traders the following measures:
- The revision of contracts between themselves and soya producers to integrate a contractual clause, with the producers specifying that soya produced on land deforested or converted from natural ecosystems after a cut-off date no later than the 1st of January 2020 will no longer be accepted in supply chains.
- The establishment of a full traceability system. This system should also be independently reviewed and verified, in addition to covering direct and indirect suppliers.
- The adoption of an independent monitoring system for verifying compliance.
- The assurance of the full respect of human rights, specifically the rights of indigenous peoples, including the rights to their water and territories through free, prior and informed consent (FPIC).
Financial institutions must commit to suspend their financial services to the traders that have not implemented the four measures described above; and eventually cease financial services to companies who cannot demonstrate compliance with 100% conversion-free supply chains by the 1st of January 2022.
To implement these demands, financial institutions can use the following resources about the commodity trading and supply chain:
- Mighty Earth site.
- Soy & cattle deforestation tracker, connecting meatpackers and soya traders with large cases of deforestation and land clearance in the Brazilian Amazon and Cerrado. It shows clearance cases by trader and the dates on which they occurred, a useful tool to validate cut-off date commitments.
- Soy Traders’ Performance on Deforestation Ranking comparing the soya traders’ performance in four categories: 1) sustainability policy; 2) monitoring, reporting and disclosure; 3) sourcing areas, and; 4) observed impacts and violations.
- Trase Earth platform for tracking the global supply chain of forest risk commodities.
- Trase Finance platform, providing risk analysis and portfolio assessments.
- Commodity traders watchlist, providing a benchmark of commodity traders using a variety of deforestation risk metrics.
- Traders profile, showing detailed information on each trader, such as its sourcing regions and deforestation risk.
* The concept of cut-off date is a date after which no direct or indirect conversion for soya is allowed. Indirect conversion means that a parcel first converted for cattle ranching after the cut-off date and then cultivated for soya is considered as converted. In accordance with the Accountability Framework Initiative, the cut-off date should not be later than the 1st of January 2020 and should be based on best practices: in the case of Amazon, the cut-off date is 2008, in accordance with the soya moratorium.