Shareholder concern about deforestation speaks for itself. Four majority votes on Green Century proposals in the last three years – Bunge, 99 percent; Bloomin’ Brands, 76 percent; Procter & Gamble, 67.6 percent; and Home Depot, 64.6 percent – build upon dozens of no-deforestation agreements that shareholders have won and have helped curb climate change and preserve endangered species around the world.
In recent years, deforestation has become widely recognized by companies and governments alike as an urgent problem for both the climate and global biodiversity. According to the Intergovernmental Panel on Climate Change, agriculture, forestry and other land use, change is responsible for 23 percent of total net anthropogenic greenhouse gas emissions, nearly half of which are attributable to deforestation. Furthermore, some scientists say that we cannot limit warming to 1.5 degrees Celsius by the end of this century without dramatically reducing deforestation over the next decade.
A new report from the UN Framework Convention on Climate Change identified deforestation as a source of supply-chain-related cost impacts, demand-related revenue impacts and regulatory and reputational risks for companies. As emissions disclosures, robust climate targets and no-deforestation policies evolve into industry standards, companies are increasingly positioning themselves to address these risks.
But many companies, in Green Century’s view, have insufficient plans to meet this challenge with the speed and rigor it demands. To accelerate action and push companies to mitigate the risks posed by deforestation, Green Century filed proposals this shareholder season at Hormel Foods, Archer Daniels Midland (ADM), Bloomin’ Brands, Morgan Stanley, The Cheesecake Factory, KraftHeinz and more. The resolutions varied from requesting a report assessing deforestation risks to asking companies to issue 2025 no-deforestation commitments.
Many companies have committed to setting 1.5°C-aligned emissions targets with The Science Based Targets initiative (SBTi), which has set 2025 as the date by which companies must achieve deforestation-free supply chains in order to align with a 1.5°C scenario. Companies now have under three years to adjust their supply chains to eliminate deforestation, the biggest contributors to which are cattle, soy, palm oil, and wood products. (Horrifyingly, the first half of 2022 broke records for deforestation in the Brazilian Amazon, where land clearance for cattle production drives 90 percent of deforestation.) However, many companies that have submitted targets to SBTi or made a commitment to do so have yet to issue a no-deforestation policy or disclose plans to transition their supply chains.
Companies have responded variously to these proposals. Hormel Foods agreed to eliminate deforestation from its supply chains by 2025, Morgan Stanley strengthened standards for clients sourcing forest-risk commodities and ADM agreed to issue a commitment to rein in native vegetation conversion, of which deforestation is a subset. It remains to be seen how Bloomin’ Brands and others will respond, but we believe mounting pressure from investors, other stakeholders and our environment itself points to a broad consensus that companies have a responsibility to address these risks meaningfully, thoroughly and in time to mitigate the worst impacts of the climate and biodiversity crises pushing our planet to the brink.
Annie Sanders
Director of Shareholder Advocacy, Green Century Capital Management