Supply chain actors have embarked on a process to level the playing field towards sustainability. But to what level? Where is the bar for sustainability set? In the case of deforestation and trade, the concept of zero deforestation has been appealing to many for its simplicity. However:
- Some stakeholders may oppose the concept, especially in places where strict forest protection is seen as a barrier to the realisation of local aspirations for agricultural development.
- In practice, the rigorous application of zero deforestation criteria at scale can be impractical with the data available.
In data-scarce environments, the efforts needed to address the last percentages of deforestation risk are exponential and may be a distraction from more effective action.
Setting performance threshold(s)
A ‘risk’ or ‘performance’ threshold provides a way to measure the sustainability of supply chains in a given jurisdiction and points to a pragmatic way forward by identifying where efforts can be prioritized to have a higher impact. To develop a risk threshold on commodity deforestation:
- Measure the current average commodity deforestation risk in hectares of deforestation per ton of product.
Example: in 2017, total soy production in Brazil was 114.6 million tonnes and 109,200 hectares of natural ecosystems were converted to new soy fields that year (Trase data). 0.95 hectares of natural ecosystems was converted per 1000 tonnes of soy (109,200 / 114,600 = 0.95). The deforestation risk for Brazil was 0.95. - Define the deforestation reduction target and risk threshold. The target level could be aligned to existing commitments: national forest cover targets, forest reference emissions levels, etc. Once the target is established, define the risk threshold that would determine whether a jurisdiction is considered at-risk of deforestation. If the aim is to reduce commodity-driven deforestation risk by 80%, the risk threshold should be set at 20%.
Example : 0.95 *20% = 0.19 hectares per 1000 tonnes - Check whether this threshold enables a high level of prioritisation of efforts by looking at subnational data.
Example: out of 2100 municipalities producing soy in Brazil, only 129 were found to be above the threshold of 0.19 hectares per 1000 tonnes. These municipalities concentrated 80% of the soy deforestation risk in Brazil that year. - Adjust and negotiate the final threshold with the key stakeholders. The threshold may be revised gradually over time.
A meaningful discussion on acceptable thresholds with related forest definitions cannot be disconnected from policy decisions. How are supply chain actors expected to act when doing business with commodities of ‘risky’ versus ‘non-risky’ origins as determined by the negotiated threshold? ‘Will they have an obligation of farm-level traceability combined with disclosure to an independent observer? Will they be refused market access or pay higher duties at export if they fail to do so?
Step 3 milestones
- Setting of at least one risk threshold for commodity deforestation, expressed in hectares of deforestation per ton of product.
- Depending on the context, setting of performance threshold(s) for other metrics of jurisdictional sustainability.
- Related stakeholder committee decisions on:
- Choice of sustainability indicators.
- Associated policy measures – in a normative transparency approach, at minimum, mandatory reporting or disclosure of supply chain data in high-risk places.
Identification of risky portions of the soy supply chain in Mato Grosso with a risk threshold of 75% (i.e., to reduce soy deforestation risks by 75%). EFI analysis based on Vasconcelos et al. (2020) and Trase data.
A risk-based approach enables a prioritisation of efforts. Subnational data analysis across multiple countries shows that generally more than 80% of the deforestation risks related to the production of a given commodity are concentrated in fewer than 10% of the production localities. Information on sub-national risks would allow a government agency or a supply chain ruling organisation to prioritise and sharpen their interventions in high-risk places and identify low-risk value chains even in high-risk jurisdictions. This can be accompanied by stricter requirements on reporting and disclosure about supply data for actors exposed to ‘risk’ above a certain threshold.
Positive metrics of jurisdictional sustainability
The emphasis on risks, such as deforestation risks, is not an attractive agenda for many actors that need to be involved.
Other sustainability aspects, like those related to smallholder living conditions for instance, can be associated in a more holistic, positive and eventually attractive, sustainability agenda.
A possible pitfall here is to expand to other sustainability criteria which cannot be measured objectively and for which data cannot be updated annually or gathered at the useful subnational level. Objective and regularly updated data is essential for demonstrating progress where it occurs, encouraging jurisdictional transitions towards sustainability, and capturing possible geographical displacement of the sustainability problems. See the Terpercaya initiative in Indonesia as an example of searching and finding stakeholder convergence around such suitable sustainability indicators.
Risk indicator: occurrence of land conflicts
Performance indicator: resolution of land conflicts
