Avoiding deforestation: controlling commodity supply chains

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1 Avoiding deforestation: controlling commodity supply chains Study for Chatham House and Forest Trends Duncan Brack Associate Fellow, Chatham House 20 th Illegal Logging Stakeholder Update Chatham House, 6 July 2012

2 Argument to be tested Supply chain controls (procurement policy, licensing, border controls, etc.) have helped tackle illegal logging All aim to exclude undesirable products illegal timber from consumer markets But illegal logging is not the major cause of deforestation; >50% due to clearance for agriculture So can similar supply chain controls be used to exclude agricultural commodities associated with deforestation from consumer markets? Note not talking about illegal products sustainable, or no-deforestation, products Aim is same: create protected markets for desirable products, exclude undesirable products 2

3 Illegal logging: consumer-country supply chain controls Voluntary measures: certification, private sector procurement policies Public procurement policies Other government regulations, e.g. building standards Licensing schemes, e.g. CITES, FLEGT VPAs Broader border/industry controls, e.g. EU Timber Regulation, proposed Australian legislation Legal enforcement measures, e.g. US Lacey Act 3

4 Impacts Chatham House indicators report (2010): significant reduction (~25%) in illegal logging % fall in major country imports of illegal timber Certification spreading rapidly 26% global industrial roundwood (May 2010) EU market 25% of timber imports (2007) UK 50% imports (2005) to 80% (2008) ETTF survey, 2011 Main drivers: public agencies, commercial big buyers, internal policies (reputational risk) EUTR and Lacey helping to drive uptake of legality verification schemes 4

5 Agriculture and deforestation Figures suggest >50% deforestation due to agricultural expansion Main commodities contributing to deforestation (global): Soy, maize, palm oil, rice, sugar Main commodities contributing to deforestation (EU imports): Soy, beef/leather, palm oil, cocoa 5

6 What makes supply chains easier to control? Identification scheme in existence Voluntary initiatives already under way Private sector (producers, traders, processors, retailers) more concentrated Geographic concentration; smaller number producer countries Higher ratio exports : domestic consumption Higher proportion exports to sensitive markets For public procurement policy, product is used by public sector Other opportunities for government regulation (e.g. biofuels) 6

7 Palm oil Identification: RSPO (10% global palm oil) Voluntary inits: Unilever (100% GreenPalm by 2012), Waitrose (2012), Cargill (2015/20), Carrefour (2015), many others Supply chain concentration: high, though also complex (component in food products, cosmetics ) Geographic concentration: very high Malaysia + Indonesia 90% Exports: high as proportion of total production Other regulation: sustainability standards for biofuels (EU under development) 7

8 Soy Identification: RTRS Voluntary inits: Brazilian moratorium; Unilever (100% sustainable by 2014/2020), Nestle no-df Supply chain concentration: high (8 companies 80% EU crushing capacity, 60% Brazilian soy) Geographic concentration: high Brazil, Argentina (50% agric land), US, China, India Exports: high as proportion of total production 8

9 Beef / Leather Identification: GRSB; Leather Working Group Voluntary inits: Macdonalds, M&S (100% sustainable by 2020), Walmart (no-df Amazon), JBS, Brazilian and Australian working groups Supply chain concentration: quite high in trading and processing Geographic concentration: Brazil largest exporter of beef; China largest producer of shoes (60% global, 2006) uses half of global leather Exports: low as proportion of total production 9

10 Cocoa Identification: Fairtrade, RA, Utz, EKO Voluntary inits: Mars (100% sustainable by 2020), Nestle (no-df target) Supply chain concentration: producers 90% smallholders; processing and chocolate manufacturing highly concentrated (top 5 >50% in each case) Geographic concentration: Ghana + Cote d Ivoire + Indonesia = 73% (2011) Exports: high as proportion of total production 10

11 Public procurement potential Public procurement policies not generally applied to food, but some examples: UK, sustainable fish for school meals Italy, organic food for school meals, other public sector Increasing use of Fairtrade standards in US, EU UK study, 2005, identified food as third highest priority for sustainable procurement policy: 2.1% of total procurement spend ( 3.2bn, ~10% of total UK catering sector) 11

12 Conclusions Compared to early days of debate around consumercountry timber supply chains control, far more and far more ambitious voluntary initiatives under way Identification systems not as well developed National initiatives, e.g. NL Sustainable Trade Initiative Public procurement policies clear potential Also biofuel policies, for palm oil Needs expectation of broader legislation? Level playing field Scoping study complete by November 12