There is a growing demand for the corporate and financial sectors to address their relationship with nature. Recent years have seen improved understanding of the economic value at risk from the loss of biodiversity and ecosystems services, which has led to the advancement of private sector commitments towards nature. Within the agricultural sector, downstream companies in industries such as food, beverage and apparel are committing to end deforestation in commodity supply chains, with the most recent being significant pledges at COP26. However, the implementation of corporate commitments is lagging, partly due to the lack of an agreed way to assess, measure and manage dependencies and impacts on nature and people. This is further complicated for industries with global supply chains that often lack traceability to sourcing and production locations.
A country-focused approach to assessing risk and measuring impact, generating critical insights for corporate actors
TRADE Hub is supporting work at a national level through country focused research. TRADE Hub research in Indonesia is revealing how companies are exposed to deforestation risks associated with their sourcing of commodities such as coffee and palm oil from forested landscapes, and the windows of opportunity for integrating more socially and environmentally equitable practices (see our recent webinar on global green deals linked to palm oil production in Indonesia). Meanwhile, in Cameroon, our research into cocoa and palm oil cultivation by smallholder farmers is investigating the drivers of greater profits or losses, and mechanisms through which biodiversity conservation can be mainstreamed into production practices. For instance, land tenure and easy access to mills are key determinants of profitability. This work is being carried out together with the IUCN task force on oil palm for more effective integration into the ongoing international policy discourse.
Many social impacts of agricultural supply chains are poorly understood, so TRADE Hub is pioneering research to fill this gap. Production is dominated by small-scale farmers for commodities like cocoa and palm oil, and TRADE Hub research continues to show that a lack of support for smallholder farmers has exacerbated their vulnerability and the patterns of encroachment seen in the landscape. This illustrates the need for farmer support and economic reward structures to meet policy commitments. There is a need for greater synergies between public and private policies and initiatives for sustainable supply chains along with farmer support and economic reward structures to meet policy commitments (See our new series of Discussion Papers for more information).
Measuring the impact of supply chains on biodiversity
There have been many advancements in approaches to assess risk and measure the impacts of supply chain activities on biodiversity. At UNEP-WCMC, tools such as ENCORE have provided critical insights into the relative materiality of different industries based on both impacts and dependencies on natural capital, responding to the needs of the finance sector for greater visibility of nature related risks. There are many tools, methods, and datasets evolving that can support corporate assessments of their impacts and a number of mandatory and voluntary initiatives are evolving to drive uptake of standard and robust approaches (e.g. The Science Based Targets Network, the Taskforce for Nature-related Financial Disclosure). Across all of these initiatives, there is recognition of the need to improve our understanding, assessment and measurement of supply chain impacts on nature and people.
TRADE Hub’s private- and public sector-focused initiatives
TRADE Hub is helping to understand and measure the impact of agriculture commodity production and trade, especially focused on land-use driven impacts. Our researchers have been working on biodiversity indicators that link the production and trade of agri-commodities. One impact from this work is input into the UK’s Global Resource Initiative Recommendations Report which highlights the need to enable a cross over between public and private sector reporting.
TRADE Hub formed a collaboration with the EU Business and Biodiversity platform to assess the challenges and potential solutions for measuring the biodiversity impacts associated with agricultural supply chains. A corporate needs assessment was carried out, consisting of a survey and interviews with companies, followed by a workshop involving experts on biodiversity metrics, tools and datasets. TRADE Hub is engaging directly with companies alongside key initiatives including the One Business for Biodiversity coalition, focused on protecting and restoring biodiversity within agricultural value chains. TRADE Hub is also providing input to the EU Align project, funded by the EU and led by UNEP-WCMC, which aims to deliver a recommended standard for the corporate measurement of biodiversity and provide sector-focused guidance with a supply chain lens. This will enable more standardisation of corporate approaches for greater uptake, comparison and interpretation.
In addition to the above, TRADE Hub researchers are bringing together their expertise on trade models and commodity flows to improve the assessment of materiality for industries connected with agricultural commodity trade. They are collaborating with SBTN to give companies guidance on setting nature-related targets that include supply chain targets focused on production landscapes. Equally, this work will feed into the ENCORE database to improve how financial institutions understand risks within their investment portfolios. The ENCORE biodiversity module, launched in May 2021, explores the alignment of agricultural activities with a nature-positive future using the Species Threat Abatement and Restoration (STAR) metric, developed with contributions from TRADE Hub researchers.
Trase, launched in 2016, is a trade tool which uses data to map out the trade flows of commodities such as soy and palm oil. Clear integration between ENCORE, Trase and other supply chain tools such as a future Trade Tools Navigator, supported through TRADE Hub research, will be a focus going forward to enable effective and joined up engagement from the corporate sector.
Interventions to address sustainability risks
There is an array of approaches that the private sector is adopting to better manage their social and environmental supply chain risks. The effectiveness of interventions varies geographically and depends on the commodity and production system. Interventions are hard to verify or difficult to implement at required scales. TRADE Hub has been exploring several interventions that the private sector can adopt to address the impacts of agri-commodity trade, and an initial assessment of barriers and enablers for sustainable trade has been carried out.
Given the focus on forest risk commodities, TRADE Hub has investigated the mechanisms to address deforestation in supply chains. This included an in depth case study on mechanisms that enable Brazil-China soy traders to meet increasing demand while reducing deforestation. One outcome was a Corporate Advisory Forum event held in March 2021 titled ‘Innovative mechanisms to overcome barriers to ending deforestation in agricultural supply chains’. Meanwhile, TRADE Hub experts in Indonesia have linked with private sector coffee actors to tackle the illegal cultivation of Robusta coffee in the Bukit Barisan Selatan National Park, and this work is ongoing.
TRADE Hub will continue to identify and promote uptake of effective solutions for sustainable trade. One solution TRADE Hub is exploring is the potential of digital technologies to improve the sustainability of agricultural supply chains. An initial report was carried out feeding into ongoing work in this area. Another is the role of Voluntary Sustainability Standards (VSS) in driving improved production practices for people and nature, with comparative evaluations of how certification caters for social and environmental impacts, and the geopolitical understanding of the role of private sector standards in driving sustainability (see our recent discussion paper here). Finally, there is research into sustainable finance mechanisms, in particular the role of Sustainability Linked Loans to incentivise zero-deforestation action.
In addition, Trade Hub will support private sector focused events at the CBD COP-15, to convene private sector leaders and work with initiatives such as Business for Nature to support implementation of commitments made.
The content and the opinions expressed in this blog are the responsibility of the authors and researchers involved in this work stream (Sharon Brooks, Aris Vrettos , Michael Brady , Amayaa Wijesinghe, Aisha Niazi).