Matt Piotrowski explains how the fires in the Amazon are increasing pressure on companies to revise and enforce their zero-deforestation policies.
High deforestation rates in Brazil and massive fires in the Amazon have put agricultural companies operating in the country and their investors in the spotlight. Agricultural supply chains are key drivers of deforestation, with cattle and soy playing major roles. With agricultural expansion and environmental regulations having been loosened in Brazil since 2012, current conditions point to the need for stricter execution of zero-deforestation commitments for actors along commodity supply chains, including producers, traders, FMCGs, and retailers. Companies are also under pressure to curb purchasing or producing agricultural commodities connected to legal deforestation.
Lack of meaningful government actions in recent years means the agricultural industry and international commodity supply chain actors have become even more critical in curbing deforestation. Companies have relied on Brazil’s Forest Code, which was updated in 2012, to guide their zero-deforestation policies, but the Code still allows for large areas of natural forests and other ecosystems to be deforested in the Cerrado. Moreover, Brazilian President Jair Bolsonaro favors agribusiness over environmental protection, reducing the country’s law enforcement and conservation efforts. Against the current backdrop, companies operating in Brazil are seeing more scrutiny about their role in deforestation, which could lead to increasing reputation, financial, and market access risks. Their investors and lenders are also seeing more pressure to engage with the companies. A new report from NGO Mighty Earth maps out which soy and meat companies are closely linked to the Amazon fires and deforestation in the Cerrado.
This is excerpted from Chain Reaction Research’s publication The Chain. To read more, click here.