Spot Market Purchases Allow Deforestation-Linked Palm Oil to Enter NDPE Supply Chains
The palm oil industry has seen considerable transformation in the last few
years, as suppliers that are not compliant with NDPE policies have been
increasingly excluded from supply chains. However, these gains are
undermined when the same suppliers enter supply chains via spot purchases.
Yet, little is known about the spot market. This paper seeks to provide
information on the market, how it operates, and highlight the risk it presents
to NDPE compliance efforts.
Deforestation for Agricultural Commodities a Driver of Fires in Brazil, Indonesia in 2019
Widespread fires in Brazilian tropical forests were at the center of media
attention in 2019. NGOs, politicians and celebrities called for action to stop
deforestation for soy and livestock, the main cause of the fires. Indonesia also
endured extensive blazes in 2019, often linked to deforestation for palm oil.
Forests in Brazil and Indonesia capture carbon, retaining vast amounts of
carbon dioxide and regulating global temperatures. Fires release that stored
CO2 back to the atmosphere, contributing to further climate change.
This report describes the main drivers of the fires in Brazil and Indonesia, the
actors involved, the political context, and the risks for investors.
NDPE Policies Cover 83% of Palm Oil Refineries; Implementation at 72%
Palm oil refiners are a strategic bottleneck in the global supply chain. Since 2014, the largest refiners have adopted No Deforestation, No Peat, No Exploitation (NDPE) policies, the strongest private instrument to cut the direct link between deforestation and palm oil. Refiners commit to NDPE policies that cover their plantations and the plantations of their third-party suppliers. This market mechanism functions best when the entire industry follows commitments. However, non-cooperating refiners continue to leak unsustainable palm oil into the market.
Socfin group is a Luxembourg-based holding which is involved in oil palm and rubber production in Asia and Africa, with about 400,000 hectares of concessions in ten countries. It is 39% owned by the French group Bolloré and 54% owned by the Belgian businessman Hubert Fabri. The objective of this report is to get a better overview of the Socfin group’s ownership and holding structure.
Financing Deforestation Increasingly Risky Due to Tightening Regulatory Frameworks
The trend to integrate sustainability factors into financial regulatory frameworks is creating compliance, legal and reputational risks for local banks and investors financing forest-risk commodities in tropical countries. International banks and investors exposed to these supply chains may also be affected. Based on public sources and interviews, this report analyses the integration of sustainability in financial regulation on the international level, as well as in the regulatory frameworks of five countries with tropical forests: Brazil, Colombia, Peru, Indonesia and Malaysia.
TIAA’s Farmland Funds Linked to Fires, Conflicts and Legacy Deforestation Risks in Brazil
This report analyses the sustainability and financial risks of the farmland investment funds of the Teachers Insurance and Annuity Association of America (TIAA, formerly TIAA-CREF) in Brazil. Such risks are most prevalent in Matopiba, Brazil’s newest soy frontier, consisting of part of the states of Maranhão, Tocantins, Piauí and Bahia. TIAA farmland investments operate through various companies, such as Radar and its subsidiaries, that acquire and manage properties. CRR’s sustainability analysis shows that deforestation and fires have taken place on TIAA’s farmland portfolio, enabling negative social impacts on local communities.
Feed and Livestock in Brazil, China, EU Consume Most Cerrado Soy
This paper maps players in the Matopiba (a region in the Brazilian Cerrado) soy supply chain, focusing on midstream crushing as well as compound feed and livestock sectors in key soy processing markets. Their soy consumption is connected to considerable deforestation risk.
A Review Of Sustainable Finance Reforms In Indonesia
This report, based on data from the Forests&Finance database, released by Rainforest Action Network, TuK Indonesia, WAHLI, Jikalahari and Profundo reviews the progress of Indonesia’s Sustainable Finance reforms over the past 5 years. It shows that while new standards have started to improve the requirements on banks to disclose Environmental, Social and Governance (ESG) risks in their portfolios, major loopholes remain. These problems are further compounded by lack of bank implementation on the obligations they do have.
The banks assessed failed to properly disclose - much less address - serious ESG risks identified in the operations of their major clients. Unreported risks included use of fire to clear land, labor violations, human rights violations, peatland development and deforestation. The report presents a suite of policy recommendations to close regulatory loopholes, improve bank risk management processes, and to increase transparency and accountability to the public and communities impacted by reckless bank financing.
Deforestation Not ‘an Immediate Priority’ for Walmart Despite Financial Risks
By revenue, Walmart is the largest company in the world, employing about 2.2
million people and serving over 265 million customers a week. Private-label
products sold by Walmart contain commodities that contribute to deforestation.
For the forest-risk commodities – palm oil, pulp and paper, soy, and beef – Walmart
has set zero net deforestation goals for 2020. Although Walmart encourages its
suppliers to address deforestation in their supply chains, the company does not
have a system in place to track and monitor the origin of these four commodities.
Oil Palm Growers Exposed to USD 0.4-5.9B in Social Compensation Risk
Oil palm plantation development and its effects on land clearing has likely
impacted areas of critical value to local communities. While palm growers have
made progress in quantifying and compensating loss for areas with
environmental value, they have made less headway regarding compensation
for clearing of land with social and cultural values. If palm growers cannot
effectively mitigate these risks and compensate for the losses, complaints and
conflicts with local communities are likely to ensue. In Indonesia, evidence
shows that growers experience substantial operational, stranded land, and
market access risks from social conflicts.
Palm Oil Biofuels Market May See Shake-Up in 2020, Heightening Leakage Risks
The expansion of the palm oil industry in the last ten years was partially in response
to the anticipated demand for biofuels worldwide. The expected EU biodiesel boom
did not materialize, resulting in a systemic oversupply of palm oil in Southeast Asia.
A number of recent policy initiatives may bring about significant shifts in the enduser markets of palm oil-based biodiesel starting January 1, 2020. The geographical
markets and the sectors with growing biodiesel demand are not traditionally known
for their strict sustainability demands, and therefore may pose new leakage market
JJF Holding Land-Grabbing Case Intensifies Soy Traders’ Exposure to Cerrado Deforestation
This report analyses deforestation risks linked to the “JJF Holding de Investimentos e Participações" land-grabbing case in Formosa do Rio Preto in the Matopiba region of the Cerrado biome (Brazil). The JJF Holding case, one of the largest land grabbing incidents in Brazil, is linked to land tenure insecurities that cover 366,000 hectares in one of the key Cerrado soyproducing areas. The land tenure insecurities expose soft-commodity traders like Bunge, ALZ and Cargill, to deforestation and financial risks
Procter & Gamble’s Deforestation Exposure May Affect Reputation
Procter & Gamble has a No Deforestation, No Peat, No Exploitation (NDPE) policy that covers all third-party suppliers, and it has committed to developing a traceable supply chain. P&G applies its responsible sourcing policy at the supplier group level but relies on intermediary traders to engage with non-compliant growers and ensure a clean supply chain. In July 2019, P&G changed its organization design to six Sector Business Units (SBUs). It has decentralized responsibility for supply chains across its new business units.
Future Smallholder Deforestation: Possible Palm Oil Risk
Independent palm oil smallholders in Indonesia are facing declining yields per hectare as their trees are aging. Financial and land tenure hurdles prevent effective financing of replanting, raising the risk of increasing deforestation in Southeast Asia after a period of declining forest loss. This report evaluates the financial and other hurdlesin Indonesia and investigates plans by governments and companies to offer solutions.
Workers’ Rights in Supermarkets Supply Chains: New evidence on the need for action.
As part of Oxfam Novib's Behind the Barcodes project, new case studies have been conducted into abuses in the production chains of tea from Assam in India and tropical fruit from Brazil. Profundo has found links between supermarkets from 6 countries and the plantations where abuses took place.