How to assess and address supply chain risks

Collectively we’ve not been addressing the rapid rate of deforestation across tropical forests, and this has resulted in a number of serious social, environmental and economic consequences.

For example, the displacement of indigenous peoples and conversion of traditional lands without free, prior and informed consent or compensation has led in some cases to social exploitation such as slavery and other human rights abuses.

Environmentally, the widespread destruction of unique habitats has led to some species becoming critically endangered – such as orang-utan and Sumatran tiger. Forest degradation undermines the integrity of forest landscapes, leading to the loss of high conservation values and biodiversity. There are significant greenhouse gas emissions from the loss of high carbon stock forests but also from draining or destruction of peatland.

Illegal logging also means a loss of economic value, locally and nationally, through lost taxes and logging concession fees.  

Although logging is the most direct cause of deforestation, conversion of forests to agri-commodity production is also highly significant. 

Plantation timber, palm oil, soy and cattle production are currently the biggest drivers of tropical deforestation, and any company using these materials has to seek assurance that they are not contributing to deforestation. 

Deforestation is a simple word but there is a lack of widespread agreement on its technical definitions. We need a common language for deforestation, whether it’s dealing with palm oil or soy, whether it’s in Europe or in southeast Asia.  

Just identifying which land is suitable for conversion and which land should be protected is complex, for example. Historically, high conservation value (HCV) assessments were used to determine which land should be protected. But the thinking has now expanded to recognise the need to include above and below ground carbon. There is currently a lack of widely accepted definitions and thresholds.

In terms of corporate supply chains, unless a company has traceability back to a growing region that is not associated with deforestation, it should assume these commodities pose a deforestation risk that needs to be managed and mitigated.

Certification is the easiest way to mitigate deforestation risk, and schemes such as Forest Stewardship Council, the Roundtable on Sustainable Palm Oil, the Round Table for Responsible Soy and the Global Roundtable on Sustainable Beef all give some assurance of avoidance of deforestation, however not all are sufficiently demanding to meet market needs. We know that these schemes need to evolve and improve and it is important that the market and NGOs support their development. Alternative approaches are also useful but should be based on the principles of multistakeholder consultation and transparency to achieve the balanced and rigorous outcomes we need.

If a company buys substantial volumes of deforestation-risk commodities, they should work with suppliers to implement progressive policies on traceability and land use change and verify compliance.

Our knowledge about deforestation risk means we are very considered in the way we source deforestation risk commodities such as soy, palm oil or timber. We require high levels of assurance that our suppliers are managing these risks either via certification or other assurance systems (for example the Soy Amazon Moratorium).

We engage with producers, academics and civil society to understand the drivers of deforestation and the effectiveness of the solutions available to us and our suppliers.

We ask all our suppliers to report on their use of deforestation risk commodities: soy, palm oil, Brazilian beef and timber, and tell us how much they use, where it comes from, and whether it is certified or not. We risk assess the full value chain, not just plantations, forests and farms, in recognition that disreputable organisations will “launder” illegal production through the supply chain.

We have made public commitments to not buy soy, palm oil or beef associated with deforestation, and to only buy sustainably sourced timber. 

We use an expert third party company to carry out risk assessments based on the commitments and risk assessment criteria above, and report back to buyers, suppliers and the Plan A team on what progress is being made on Marks & Spencer’s commitments.

M&S works with industry partners such as the Retail Palm Oil and Soy Groups, and the Consumer Goods Forum, to introduce systems for market transformation and to advocate for change.

We sit on the board of the RSPO and engage directly and indirectly with the boards of the RTRS and FSC to ensure the development of market friendly systems and articulation of market demand within these forums. 

M&S has invested in capacity building programmes with producers in vulnerable regions. Improving productivity and increasing farm yield is a great way to reduce pressure on forests and we would like to see more such programmes being supported. 

We have also established partnerships with WWF in the Heart of Borneo project (now concluded) and with Cool Earth in the Peruvian Amazon to protect the world’s most vulnerable forests.

When you are selling a very obvious wood product, people accept the need for change. When wood is more distant – in paper products or packaging, for example – you can persuade people to see the challenges. But when you get to food commodities – cocoa, palm oil, coffee, soy – then it’s even further away from their consciousness.

There is therefore a real challenge explaining forest footprints – and simply to get companies to acknowledge that there are forests in their supply chains. It’s important companies fully acknowledge and take responsibility for the full breath of impact. Determining the scope of this is important – for example, a credible scope has to consider soy used indirectly in feed for livestock as well as in products, and prioritise palm kernel oil and derivative supply chains as much as palm oil. 

Yes. For the past ten years it has been the leading companies that have been dealing with the deforestation challenges. But now there is a shift towards engaging the vast majority of businesses. Having detailed discussions about deforestation definitions and solutions is challenging – but we all want to know what to do to solve the problems.

Few companies of any scale who operate in demanding markets (such as northern Europe, US and Australia/New Zealand) are not engaged and active. However the same cannot be said at the moment for smaller companies or those operating in less demanding markets.  

A certification scheme must be credible. If I am going to go to a great deal of effort to convince my colleagues about a scheme’s benefits then I don’t want it called into question by anyone. It needs to solve the problem.

Then, I look at ease of applicability and costs – can it be implemented swiftly and audited robustly. A scheme must be scalable and not niche.

One of the under-rated benefits of certification is its ability to get people with conflicting perspectives, priorities and agendas round the table and engaged in problem solving. Because of this, decision-making can be slow and cumbersome, but outputs have solid support and buy-in. 

If certification standards and systems are transparent and independently verified, trust will generally be high. On the other hand, when quality of implementation is variable, this can undermine the credibility of some certification claims. 

Certification continues to be a strong option for organisations with complex supply chains as it provides a route to end-to-end management of production and supply chain assurance.  

The biggest challenge currently for certification schemes is for them to become more dynamic and respond faster to change – in the market, science, or politics – whilst also demonstrating positive impacts.

By its nature “no deforestation” can be a narrow approach as it does not necessarily seek to address the full range of deforestation impacts, social as well as environmental. It can limit the opportunity for well-managed trade-offs in land use to make sure the highest value landscapes continue to be protected. 

A no deforestation approach generally involves partnerships with organisations who have expertise in forestry and commodity land use change, and capacity on the ground to support delivery.

The strength of such partnerships is their ability to move at pace and to actively support business to meet no-deforestation objectives. 

The lack of national, regional or local governance and an absence of reliable land tenure information are critical challenges. As a business we welcome good regulation that creates market certainty and a level playing field for everyone.

A holistic approach is important. Single commodity-based schemes cannot address landscape level problems on their own. Displacement of the problem from one commodity to another – eg soy conversion displaced by cattle – is a major challenge that is best addressed by political intervention.

National institutions need to take responsibility for protection of high conservation value forests so that when such areas are identified, conversion is prohibited, and such a ruling effectively enforced.

Dispute resolution can be notoriously challenging in the absence of land tenure data and recourse to legal process. Certification schemes should not be expected to fill institutional governance gaps. 

EUTR has been well thought through. It has compelled business for the first time to actively manage timber supply chains, not just timber traders but all businesses that buy or sell wood based products  While this is unlikely to have a short-term transformative effect, over time it will help gradually establish proof of legal sourcing as a market access issue.

An impact of the EUTR will be more widespread coverage of traceability systems or certification standards throughout the value chain, which should over time help eliminate illegally traded and harvested timber and timber products. 

There are always adverse impacts of any regulation. For EUTR, a notable one is a move away from wood towards other materials (often plastic) to avoid management obligations. Such rules also can lead to an avoidance of sourcing from poorly governed regions where confidence in documentation and assurance systems is weak. This is particularly regrettable as these regions are often those who are most in need of the economic benefits of well managed forestry. 

There are some limitations in the regulation as it currently stands, such as confusing definitions of what is in and out of scope, and we look forward to these being addressed as it evolves. The EU also has to make sure it is enforced consistently and robustly across all countries which is not currently the case.

I feel that the slow adoption of the EU’s FLEGT (forest law enforcement, governance and trade) licensing has been particularly problematic. It is not yet clear if FLEGT can achieve the change it has set out to deliver.