Companies Increase Ambition to Protect Biodiversity from Deforestation

30 January 2023 |Corporate interest in protecting biodiversity has accelerated considerably in the last five years, according to the latest Supply Change data.

Biodiversity is under serious threat from human activities like agriculture, pollution, and overexploitation. Because biodiversity underpins well-functioning ecosystems and provides essential services (“ecosystem services”) that human society relies on, such as crop pollination, rainfall patterns, soil fertility, and flood prevention, the loss of biodiversity is a serious threat to the global economy. Nonetheless, biodiversity has historically been a “silent crisis,” frequently overshadowed in political and corporate activities by comparatively serious threats like climate change.

However, the silent biodiversity crisis is starting to make some noise.

The United Nations’ Convention on Biological Diversity’s Fifteenth Conference of Parties’ (COP15) concluded on December 19 with governments striking a historic deal to protect thirty percent of Earth’s terrestrial and marine areas, restore thirty percent of degraded ecosystems, and reform environmentally harmful subsidies.

Companies, too, are increasingly acknowledging the role they play in driving biodiversity loss, and they are embarking on efforts to avoid, mitigate, minimize, and compensate for their negative impacts on biodiversity. Biodiversity loss and deforestation are closely linked issues; habitat loss is the most significant cause of species extinctions, and the conversion of tropical forests to produce forest-risk commodities, like cattle, palm oil, and soy, is the leading cause of terrestrial biodiversity loss globally. Addressing deforestation will be a crucial component of any larger biodiversity protection policy for companies that source and produce forest-risk commodities.

Over the past five years, Supply Change has observed an explosion in the number of companies aiming to protect biodiversity as part of their commitment to reduce or eliminate deforestation in their forest-risk commodity supply chains.[1] Data gathered in late 2021, featured in part one of Supply Change’s two-part report series published in 2022, show that over three-quarters (76 percent) of companies researched included a biodiversity protection statement in at least one commitment. 

This is a considerable jump from just five years ago. Supply Change data show that in 2018, only about half of these companies had biodiversity statements, and Supply Change’s 2017 annual report stated that only 37 percent of companies researched had a biodiversity statement.

Companies’ statements on protecting biodiversity are often general, but they occasionally provide specifics about the aspects of biodiversity they are most concerned with protecting and how they are implementing (or planning to implement) these protections, beyond preventing habitat destruction by tackling commodity-driven deforestation.

For example, out of 94 companies aspiring to protect biodiversity, about a third pledged to protect endangered species, and 18 percent pledged to avoid sourcing from or producing in protected or biodiversity priority areas. A handful of companies included language on protecting native ecosystems, providing funding or other support to conservation organizations, protecting ecosystem services, protecting intact landscapes, achieving net gain or no net loss of biodiversity, and reducing forest fragmentation.

The growing awareness of the seriousness and urgency of the risks from biodiversity loss to companies’ operations and profits may be the reason for this increase.

Biodiversity underpins natural systems, which provide ecosystem services that human society relies on. These services are often taken for granted, but are enormously valuable. They are worth roughly $130 trillion annually, which is more than 1.5 times the annual global GDP. Accordingly, the World Economic Forum has consistently ranked biodiversity loss among the top three biggest threats facing humanity in the next ten years, in terms of likelihood and severity of impact. Because they source agricultural and forestry products, the companies tracked by Supply Change are especially vulnerable to business impacts from biodiversity loss.

Lower yields in agricultural and forestry industries from degraded ecosystem services cause supply shortages, price fluctuations, and increased costs, both for companies directly producing agricultural and forestry commodities and companies that source these commodities to create products for end consumers. Companies may also have to contend with increasing costs from damaged transportation and other infrastructure from worsening natural disasters.

Consumer-facing (downstream) companies are especially vulnerable to reputational damage, often in the form of negative publicity from media and advocacy groups. Biodiversity loss is a powerful invoker of strong public sentiment; negative impacts to the cute and fuzzy faces of iconic species, like tigers or orangutans, tug on our collective heartstrings and can influence consumer and corporate customer buying practices. The human impact of companies’ activities on biodiversity may also undermine their efforts to protect human rights and wellbeing and invoke negative public sentiment; biodiversity loss is also detrimental for indigenous peoples and local communities, an issue that has received growing attention in recent years.

The growing threat of regulatory risk (e.g., increased costs of complying with government regulations related to biodiversity protection) and jeopardized access to investment capital may also be a motivating factor for companies to act on biodiversity. This enables them to identify and implement the most cost-effective strategy on their own timeline, before they are legally required to. The global agreement finalized at COP15 last month, for example, includes targets for companies to assess, monitor, and disclose the impacts of their operations and supply chains on biodiversity. Pressure to act may also come from other private sector actors, such as corporate customers and financial institutions with stricter biodiversity-related procurement or investment standards. For example, last month, a group of eleven investors launched a campaign called Nature Action 100, which will engage the 100 companies with the highest impact on nature to help them minimize their impacts and address biodiversity loss.

As companies increasingly broadcast their biodiversity protection intentions, various organizations have released tools and guidance documents to help companies measure and mitigate their impact on biodiversity. For example, in 2020, the Natural Capital Impact Group (a collaboration between the University of Cambridge’s Institute for Sustainability Leadership and several major corporations, including Kering, Mars, and Asda) released the Biodiversity Impact Metric guidance document, which provides guidance for companies on measuring biodiversity impacts and setting appropriate targets to reduce these impacts.

More guidance on measuring and managing biodiversity impacts is forthcoming. The Science-Based Targets Network (SBTN), which has been a major force in supporting the establishment of targets to reduce greenhouse gas emissions in companies’ operations and supply chains, is currently developing guidance for companies to set appropriate targets to reduce, eliminate, and even reverse biodiversity loss in their operations and supply chains. The SBTN’s guidance for measuring biodiversity impacts will likely be based on a combination of existing methodologies, such as the Species Threat Abatement and Restoration (STAR) metric and the land occupancy methodologies, designed to calculate baseline measurements and establish appropriate improvement targets that adhere to the mitigation hierarchy principles (i.e., avoiding and minimizing impacts on biodiversity are preferrable to restoring and offsetting biodiversity loss). Indicators will cover the connectivity and integrity of ecosystems, the percentage of species threatened with extinction, and the abundance of species.

But companies don’t have to wait for additional guidance on measuring and mitigating biodiversity impacts to make progress towards their biodiversity protection objectives. For many companies, especially those producing or sourcing forest-risk commodities, avoiding and minimizing habitat destruction in their operations and supply chains is guaranteed to be a major feature of any biodiversity protection strategy, and something that current and forthcoming guidance will undoubtedly flag as a high priority. Existing guidance, such as the Accountability Framework, which outlines best practices for establishing targets for deforestation and conversion-free supply chains, supply chain management, land management, and other deforestation-related policies and practices, can help companies get started on reducing biodiversity loss in their operations and supply chains.

Given the growing number and urgency of internal and external factors pushing companies to act to reduce their impacts on biodiversity, Supply Change expects that its ongoing and future research will continue to reveal even more companies taking steps to protect biodiversity, integrate biodiversity-specific targets with existing deforestation-focused strategies, and report additional implementation and impact information on their efforts to address biodiversity loss in their operations and supply chains.

For more information on our latest reporting, please see supplychange.org.

[1] Supply Change tracks corporate commitments that target reducing/eliminating deforestation from the production and sourcing of five commodities: cattle, cocoa, palm oil, soy, and timber and pulp.