Investors call on soy trade companies to eliminate deforestation
- Fifty-seven investors with $6.3 trillion in assets sent a letter to companies involved in the soy trade, asking them to eliminate "deforestation within their entire soybean supply chain, and will seek evidence of this on multiple levels." The investors are worried climate and deforestation risk could harm the companies they've invested in.
- The investor names and total number of companies are not being disclosed, but they include "the largest publicly traded companies in the soy trade," said Julie Nash, the director of food and capital markets at Ceres, an organization that works with investors to find engagement opportunities and help facilitate action.
- "Companies that source soy products grown in South America are exposed to a number of deforestation-related business risks," the letter said. "These include reputational risks as consumers become aware that a company’s supply chain is linked with deforestation, or land and labour rights issues, operational risks from potential changes in local climate and falling agricultural yields, as well as regulatory and litigation risks, and market access risk."
One doesn't have to look far to see the kind of reputational risk concerning the investors. In 2017, The New York Times used satellite imagery to show how deforestation was spreading through the Amazon Rainforest and was able to link these actions to soy suppliers that work with Cargill.
Satellite technology, like that used by The New York Times, brings a new level of transparency to deforestation. The technology enables anyone, including consumers, to track risks and eventually link them to the company buying the product, Nash told Supply Chain Dive.
The companies can also use this technology to track deforestation and hold their suppliers accountable. It's one of the methods used by Cargill, April Nelson, a spokesperson for Cargill, told Supply Chain Dive earlier this year.
Cargill announced an updated forest policy this year, and it plans to eliminate deforestation from its supply chain by 2020. It acknowledged that its soy supply chain, along with palm and cocoa, is subject to deforestation risk.
The investor letter asks the companies to release a "commodity-specific deforestation policy" with specific time commitments that cover the company's entire supply chain. It is also asking for a traceability commitment that would require the companies to track the percentage of soy currently traceable to its origin. The investors ask that these and other metrics be publicly disclosed.
It is not immediately clear what kind of repercussions companies might face if they fail to stick to the plan as outlined by the investors.
"This is the first step in engaging in a dialogue with these companies," Nash said.
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