Revenue at risk: why addressing deforestation is critical to business success

Up to US$906 billion in company turnover depends on commodities that drive the majority of tropical deforestation globally, says environmental non-profit CDP. Global companies—including Colgate Palmolive, L'Oréal, McDonald’s Corporation and Marks & Spencer—report in a new study released that, on average, nearly a quarter (24%) of their revenues depend upon four deforestation-linked commodities: cattle products, palm oil, soy and timber products. As much as US$906 billion in annual turnover could be at risk. The report by CDP reveals a unique market-wide snapshot of how vulnerable companies are to deforestation risks. The findings feature in CDP’s new report “Revenue at risk: Why addressing deforestation is critical to business success”, produced on behalf of 365 investors representing US$22 trillion. The report analyzes data disclosed by 187 companies this year on their deforestation risk management strategies. Two of the most important global commodity traders, Archer Daniels Midland and Bunge, are among the major firms who disclosed deforestation data for the first time through CDP. The report finds that despite the fact that a significant share of income is derived from commodities linked to deforestation, fewer than half (42%) of companies have evaluated how the availability or quality of these commodities will impact their growth strategy over the next five or more years. This suggests that companies are overlooking potential business risks linked to deforestation. Risks include impacts arising from the physical effects of climate change on the quality, availability and prices of commodities; tightening regulation; and brand damage from increasing media and civil society scrutiny of commodity-sourcing practices.