Company net-zero targets at risk without immediate improvement on deforestation

By Climate Champions | June 28, 2022
  • New analysis finds a five-fold increase in companies committed to net-zero from the forest, land and agriculture sectors — the second highest emitting industry after energy.
  • But the study also reveals the need for urgent progress on deforestation – a key aspect of their net-zero commitments. Without much greater action, over 90% of major forest, land and agriculture companies that have committed to net-zero risk missing their targets because of a lack of progress on tropical deforestation, which is central to emissions from these sectors.
  • Some companies are showing substantive progress is possible — consumer goods giants Nestlé, PepsiCo Inc., Unilever, Mars, Colgate-Palmolive, along with Brazilian paper and pulp producer Suzano and others have made strong progress on tropical deforestation.

A growing number of companies in the forest, land and agriculture sectors are committing to reach net-zero by 2050 or sooner, with over 40% of the companies considered critical for tackling tropical deforestation by Forest 500 having set a net-zero or 1.5ºC-aligned commitment. That’s a near five-fold increase from just two years ago.

However, new analysis released today commissioned by the UN-backed Race to Zero – in partnership with Global Canopy, Science Based Targets initiative and the Accountability Framework Initiative – highlights the urgent need for increased action on supply chain tropical deforestation in the industry, as a critical part of the global effort to reach net-zero by 2050 and achieve a “nature-positive” economy as set out by the G7 last year.

Of the nearly 150 companies considered critical for tackling tropical deforestation that have already committed to net zero, just 9 companies (6%) are making strong progress on deforestation, based on a review of their Forest 500 scores across four areas. This means that over 90% of the companies could be at risk of missing their net-zero commitments because of a lack of progress on deforestation.

Deforestation from the forest, land and agriculture sectors contributes around 11% of annual global greenhouse gas emissions, half the sectors’ total emissions, according to the Intergovernmental Panel on Climate Change.

This means the world can’t reach net-zero by 2050 without ending deforestation and companies involved in the forest, land and agriculture sectors are critical to both the global efforts to reach net-zero and protecting and restoring nature. For these companies to get to net zero, a deforestation-free supply chain is a scientific necessity, which is why the Race to Zero commissioned this new research to support accelerated progress. Time is short, with expert partners like the Accountability Framework Initiative highlighting that to achieve these goals the majority of commodity-driven land clearance and deforestation must be halted by 2025.

Many of these companies are in the process of developing stronger positions on deforestation, with 75 scoring within a band of 30-59%, but need to accelerate and strengthen efforts urgently in order to meet their net zero and 1.5ºC-aligned commitments. Race to Zero member companies score on average 15% higher in terms of their Forest 500 ranking compared to those that aren’t members.

The group of companies shown to be making strongest progress on tackling tropical deforestation as a key part of their net-zero transition includes five of the world’s largest consumer goods companies Nestlé, PepsiCo Inc., Unilever, Mars and Colgate-Palmolive, along with Brazilian paper and pulp producer Suzano and others. It comes as the UN Climate Change High-Level Champions “call in” evidence of tangible progress against commitments made in the run up to COP26 last year and ahead of COP27.

However, the majority of the companies critical for tackling deforestation (58%) are yet to even commit to net-zero – highlighting a key opportunity for these companies to build resilience and contribute to the global effort to reach net-zero.

The findings come as 33 financial institutions representing $8.7 trillion in assets look to eliminate commodity driven deforestation from their portfolio companies, highlighting the growing expectation for companies to take action on deforestation.

Companies increasingly have the tools at hand, with the Science Based Targets initiative releasing this summer a new methodology for targeting emissions and removals related to forest, land and agriculture. Also there is now consensus from civil society and business on broader high-level actions for nature, put forward by Business for Nature and partners to determine and prioritize action on nature. Plus, under the updated Race to Zero Criteria, also released earlier this month, companies must pledge to halt deforestation and protect biodiversity, making their activities consistent with climate resilient development.

Nigel Topping, High Level Climate Action Champion COP26: “This research is a wake-up call. Companies need to go further and faster on tackling deforestation in their supply chains, as a core part of delivering on their net-zero commitments if we’re to have any chance of fulfilling the goals of the Paris Agreement and keeping warming to a maximum of 1.5ºC. This is also a huge economic and business opportunity. By protecting and restoring nature we can cut emissions while making businesses, customers and communities around the world more resilient to climate change impacts.”

Luiz Amaral, CEO of the Science Based Targets initiative (SBTi), said: “The impacts of climate change are increasingly devastating, and the forest, land and agriculture sector is one of the most affected – but it is also a significant source of emissions. To keep 1.5°C within reach, tackle food crisis risks and enable the transformation to a global net-zero future, cutting land related emissions is paramount. This means halting deforestation, restoring land and improving agricultural production practices. To be on the right side of history, companies in land-intensive sectors must make solutions to these challenges central to their business models.”

Mary Schapiro, Head of the Secretariat for the Task Force on Climate-related Financial Disclosures (TCFD) and Vice Chair of the Glasgow Financial Alliance for Net Zero (GFANZ): “The world will not reach net zero by 2050 unless we halt and reverse deforestation within a decade. As financial institutions turn their net-zero pledges into action, a growing number have recognized that corporate progress on eliminating agricultural commodity-driven deforestation is a critical part in delivering on those commitments and will ultimately help us reach a net-zero, nature-positive future.”

Niki Mardas, CEO of Global Canopy: “Rampant deforestation is a key factor behind the intertwined crises of both climate change and nature loss. It undermines vital foundations that allow communities, economies and the world to not only survive but thrive. Yet far too many of the world’s biggest companies and financial institutions continue to turn a blind eye to their role in driving deforestation. And those with net zero targets will not achieve their goals unless they start taking immediate steps to remove deforestation from their supply chains and investments.”

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Notes to Editors 

For media enquiries, please contact: Matthew Phillips, Communications Director, Race to Zero: matthewphillips@climatechampions.team

UN Race to Zero: 

Race to Zero is the UN-backed global campaign rallying non-state actors – including companies, cities, regions, financial, educational, and healthcare institutions – to take rigorous and immediate action to halve global emissions by 2030 and deliver a healthier, fairer zero carbon world in time. All members are committed to the same overarching goal: reducing emissions across all scopes swiftly and fairly in line with the Paris Agreement, with transparent action plans and robust near-term targets. Led by the High-Level Climate Champions for Climate Action – Nigel Topping and Dr Mahmoud Mohieldin – Race to Zero mobilises actors outside of national governments.

Methodology:

The process began by identifying those companies which are most critical to deforestation today. To do this we used the Forest500, which identifies the 350 companies with the greatest influence on tropical deforestation, based on their exposure to forest-risk commodities. The selection of the Forest500 is based on two criteria:

(1)   Risk of being linked to tropical deforestation through involvement in or potential exposure to forest risk commodity supply (FRC) chains;

(2)   Influence within the political economy of tropical deforestation. Forest500 focuses on the six highest forest-risk commodities: soy, beef, leather, palm, timber, and pulp and paper.

For more information on how the Forest500 identifies the companies, please visit their website.

From here, we looked to understand how many of the Forest500 companies have committed to net zero.

To do that we used data from the Race to Zero membership, the SBTi signatory database and the Net Zero Tracker as data sources for climate commitments and then cross referenced these companies with the Forest500 database.  To focus on the most robust climate commitments, we filtered out all those which were not either explicitly 1.5 degrees aligned or with a net zero by 2050 at the latest commitment.

This showed that 42% of the Forest500 have set a net zero or 1.5 degree aligned commitment. That means the majority of the companies critical for tackling deforestation (58%) are yet to even commit to net-zero – a vital first step for the collective efforts to guide progress.

We also looked at the change in these climate commitments over time, which revealed that there had been a nearly 5 times increase (480%) from just 2 years ago, demonstrating the overwhelming momentum towards net zero which has become the organising principle for the world economy.

Of those companies who do have a net zero or 1.5 degree aligned commitment, we then looked into their progress on deforestation by referring to the Forest500 scoring.  The Forest 500 scoring methodology is detailed in full here, and is aligned with the Accountability Framework’s Common Methodology. The Accountability Framework Initiative outlines the fundamental best practice for companies operating in forest-risk supply chains, and outlines the key steps needed and key information which companies in forest-risk supply chains should report in their progress to achieving deforestation-free supply chains.  The first Forest 500 methodology was created in 2014, and has been reviewed annually by Global Canopy and external experts working on these issues, to ensure that it continues to reflect best practice in company action on deforestation and associated human rights issues.

Companies are scored across four key assessment areas:

  1. Overall approach
  • Total score for non-commodity specific indicators, including action on land-use change emissions
  1. Commodity score
  • Total score of commitment strength, reporting, implementation and social considerations as an average for all the company’s commodities. Made up of:
    1. Commitment strength: Total score for type, scope and ambition of a commodity commitments
    2. Reporting & implementation: Total score for reporting and implementation against commodity commitments
    3. Social considerations: Total score for social consideration addressed with the commodity commitment

The overall approach is assessed once per company, with the three remaining commitment areas assessed once for each forest-risk commodity the company is exposed to through their supply chains.  50% of the available scores in Forest 500 are for the company’s implementation and reporting progress, meaning the overall score provides a strong indicator of tangible progress and implementation on deforestation

Based on a review of the scores and extensive experience reviewing the research partners including Global Canopy and the Accountability Framework Initiative discussed and agreed a credible threshold for ‘strong progress’ and set this at 60%.  This is also the threshold for a company to score 4/5 in the Forest 500 ranking.

Only 6% of the companies in the Forest 500 with net zero and 1.5 degree aligned commitments scored over the 60% threshold.

Given the critical role of deforestation in the emissions of these companies, this means that 94% of the companies could be at risk of missing their climate commitments due to insufficient progress on deforestation.

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