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20 October 2010




Sustainability certification
Legality verification & supply chain control
International trade



Corporations, conservation, and the green movement

The image of rainforests being torn down by giant bulldozers, felled by chainsaw-wielding loggers, and torched by large-scale developers has never been more poignant. Corporations have today replaced small-scale farmers as the prime drivers of deforestation, a shift that has critical implications for conservation.

Until recently deforestation has been driven mostly by poverty—poor people in developing countries clearing forests or depleting other natural resources as they struggle to feed their families. Government policies in the ’60s, ’70s, and ’80s had a multiplier effect, subsidizing agricultural expansion through low-interest loans, infrastructure projects, and ambitious colonization schemes, especially in the Amazon and Indonesia. But over the past two decades, this has changed in many countries due to rural depopulation, a decline in state-sponsored development projects, the rise of globalized financial markets, and a worldwide commodity boom. Deforestation, overfishing, and other forms of environmental degradation are now primarily the result of corporations feeding demand from international consumers. While industrial actors exploit resources more efficiently and cause widespread environmental damage, they also are more sensitive to pressure from consumers and environmental groups. Thus in recent years, it has become easier—and more ethical—for green groups to go after corporations than after poor farmers.

As counter-intuitive as it may seem, corporate consolidation—a trend since the 1990s—is also making it easier for green groups to go after companies. As Jason Clay, Senior Vice President of Market Transformation at WWF, noted in his July TED talk in Oxford, convincing leading companies to change the way they source commodities can have a substantial impact on global supply chains.

"100 companies control 25 percent of the trade of all 15 of the most significant commodities on the planet," he said. "We can get our arms around 100 companies."

"If these companies demand sustainable products, they'll pull 40-50 percent of production. Companies can push producers faster than consumers can."

But who pushes companies? Surprising as it may seem, environmental activists are having an out-sized role in changing corporate behavior.

For example, during the summer of 2009 Greenpeace released a report linking deforestation in the Amazon to major consumer products including fast-food hamburgers, Gucci handbags, and Nike shoes. The fallout was immediate—Brazil's cattle industry, which is the largest in the world and a dominant force in Brazilian politics—was brought to a standstill virtually overnight. Brazilian cattle giants saw their offices raided and loans suspended or revoked. They also faced stepped-up threats from the government—led by the public prosecutor of the state of Pará—and a sharp public rebuke from some of their biggest buyers including Walmart, Nike, and Timberland, who demanded greater accountability for their supply chains. Under pressure from their customers and the government, Brazilian cattle processors and traders fell into line, declaring new sourcing policies and moratoriums on deforestation. The hottest commodity in the Brazilian Amazon became credible supply-chain management, spawning a rush to develop certification systems and land registries for “responsible” ranches.

"The industry—from Nike and Adidas to the slaughter plants—is under pressure to have a clean supply chain," said John Carter, a rancher who runs Alianca da Terra, a Brazilian NGO that is developing a land registry to support a certification system for the cattle industry. "Greenpeace essentially created a federal mandate that everyone had to come into compliance via a land registry."

"Greenpeace changed the game. Environmental stewardship will become the standard of production once the economic incentives of certification—like low-interest loans and access to image-conscious buyers—are in place."

The push for reform is being led by big buyers. Walmart Brazil, the largest beef buyer in the country, and Grupo Pão de Açúcar, a big supermarket chain, have set up the first traceability system for beef, allowing customers with a cell phone or an Internet connection to track packaged meat back to its ranch of origin. Both companies plan to extend traceability to other timber and soy sourced from the Amazon to ensure that the production of these commodities doesn't come at the expense of rainforests.

But it’s not only the Amazon cattle industry that has been shocked into action by activist campaigns. Unilever, a consumer-products conglomerate that is the world’s largest corporate buyer of palm oil, was caught up in a scandal in 2008 when Greenpeace claimed the company’s supplier—ostensibly a “responsible” palm oil producer—was involved in forest destruction in Borneo. Hiring an independent investigator, Unilever learned that the palm oil supplier, Sinar Mas Agro Resources and Technology (SMART), was indeed clearing rainforests and carbon-dense peatlands. In December 2009 Unilever suspended buying from the company. Since then, Nestle, Kraft, Burger King, and General Mills have followed suit. Cargill, America's largest palm oil importer, is now pressuring SMART's parent company, Golden Agri Resources, to clean up its operations.

Another potent example comes from Madagascar, a treasure trove of biodiversity in the Indian Ocean. In the aftermath of a military coup more than a year ago, Madagascar’s rainforest parks have been besieged by illegal loggers targeting valuable rosewood and other hardwoods. The timber is usually transported by international carriers to Reunion and Mauritius, and then on to China where it is turned into furniture for export. Some of the wood ends up in Europe and the United States. Madagascar’s coup leaders are apparently complicit in the lucrative trade, making it difficult to address the issue on the ground. So the pressure point for rosewood trafficking—at least in the short term—is the foreign shipping companies. Confronted by tour operators whose business depends on national parks and wildlife, three companies immediately stopped trafficking in rosewood.

However Delmas, a French company, continued carrying rosewood for months, making it a clear target for environmentalists. When word leaked about an impending shipment scheduled for late December,, a web-based activist group run by Glen Barry, seized on the opportunity, bombarding the company and the French government with thousands of messages arguing that Delmas was undermining France’s negotiating position and facilitating the destruction of Madagascar’s national parks. The French government was included because it had taken a strong forest conservation position during climate talks in Copenhagen.

The campaign proved too much for Delmas, and a major rosewood shipment—worth $20-80 million to traders—was canceled. A few weeks later it emerged that Delmas had quit the rosewood business despite direct threats from coup leaders that it would be blacklisted if it didn’t resume the trade. A Delmas representative said it wasn’t worth the damage to the firm’s reputation to transport the illegally logged timber.

“It's really impressive that environmental activists have influenced a major corporation such as Delmas,” said Dr. William Laurance, a researcher at James Cook University in Australia, who has analyzed the transition from poverty-driven to enterprise-driven deforestation. “Many corporations are learning that it's bad business to engage in environmentally poor practices. Kudos to Delmas for changing their tack, and to Glen Barry and his colleagues for focusing attention on this critical issue.”

But while the campaign achieved its short-term objective of blocking the rosewood shipments, the subsequent response from traders reflects the difficulties of going after corporate transgressors. For example, after a consumer in Germany complained to authorities that Theodor Nagel, a major tropical timber importer based in Germany, was advertising “Madagascar rosewood” on its web site, the company replaced “Madagascar” with “Brazilian.” Furthermore, traders in Madagascar are reported to be looking now for more discreet ways to ship rosewood. They may be helped eventually by Chinese freighters, whose owners have fewer qualms about international criticism.

Theodor Nagel’s relabeling is but one example of how companies can counteract environmental campaigns. Greenwashing—or misrepresenting the environmental qualities of a product—is another common strategy.

“Every company engaged in damaging enterprises is likely to have a fancy Internet smokescreen of Flash-media PR about the environment and uplifting the world's poor,” said Rowan Moore Gerety, a journalist who reports on sustainability issues. “This is sold to us (the consumers) as transparency about the project, when in fact we have no information about its core, which is really a question of chemistry, economics, and trade.“

A prime example can be found in Sinar Mas Group, the conglomerate that controls SMART, and Asia Pulp & Paper (APP), a paper products brand that sources from several Indonesian companies and has long been targeted by green groups for its poor environmental record. Campaigns led by the Rainforest Action Network, Forest Ethics, Greenpeace, and WWF (a former partner), among others, led some of APP's most prominent buyers—among them Staples, Office Depot, Walmart, Woolworth, and Gucci Group—to cancel contracts with the company. In addition, the Forest Stewardship Council (FSC), the green standard for forest products, prevented APP from using its eco-label on its products. To stem the loss of customers, APP has embarked on a campaign to rebrand itself as a leader on sustainability. Its new web site features bird sounds and verdant forests while proclaiming its support for “economic, social, and environment sustainability.” The company also is running ads on CNN touting its green credentials.

APP maintains it operates within Indonesian law and is interested in the long-term sustainability of its operations. The company has also moved to protect some forest areas, announcing this month that it would set aside more than 15,000 hectares of Sumatran peat forest in a carbon conservation project, which it says will benefit local people.

"We are committed to the protection of high conservation value forests and critical peatlands, but forest sustainability in Indonesia relies heavily on sustainable communities as well," said Ian Lifshitz, Sustainability & Public Outreach Manager at APP. "We’re fortunate that community development is a product of that business and we do in fact view creating community opportunity as part of our mission. Carbon forest is one new option we can use with set-aside areas within our affiliates’ concession lands that merit conservation."

"This program was developed as means to provide more sustainable income for the indigenous community through the establishment of jobs for locals, [establishment of] eco tourism… [and] helping to develop eco-tourism or micro-financing.," he said of the carbon project. "Our goal is to use this as a pilot program and continue to make an investment in other local communities in the future."

But while APP's carbon project and messaging suggest a greener company with friendlier community relations, its hiring of a notorious lobbyist indicates the firm is still investing in another approach to dealing with criticism: greenwashing. APP and Sinar Mas have retained the services of Alan Oxley, a former Australian diplomat, who specializes in managing the images of forestry companies, including one of the most controversial logging companies in the world, Rimbunan Hijau, which environmentalists have long singled out for its damaging operations in Papua New Guinea, Malaysia, and Indonesia. Through his new NGO, World Growth International, and his consultancy, ITS Global, Oxley issues reports and press releases containing dubious claims about the underlying drivers of deforestation, the groups that are working to improve the well-being of the rural poor, and commodity-certification initiatives. Oxley has even used language to imply that Wangari Maathai, the 2004 Nobel Peace Prize winner for her tree-planting campaign in Africa, supports the large-scale conversion of tropical forests for industrial plantations. Maathai has not voiced support for such activities, which are against the spirit of her community-based Greenbelt Movement, and she has communicated that she does not support World Growth International.

Oxley's campaign has lately been parroted by a new U.S. group, the Consumer Alliance for Global Prosperity (CAGP). CAGP alleges "collusion" against Asian forestry companies among environmentalists, companies that have implemented eco-sourcing criteria for paper products (many of which are companies APP has lost as clients), and trade unions. CAGP denies any affiliation with World Growth International, yet uses the same mailing list (as does a new Nigeria-based think tank, the Initiative for Public Policy Analysis).

Oxley's campaigning extends into palm oil, which has seen its share of greenwashing, much to the detriment of responsible producers who have been tarnished by the conduct of a few bad actors. For all the virtues of palm oil as the world’s highest-yielding source of vegetable oil, expansion over the past 25 years has consumed vast tracts of forest across Indonesia and Malaysia. Analysis of remote-sensing data suggests that more than half the expansion since 1990 has occurred at the expense of natural forests. But instead of acknowledging this and addressing concerns head on, marketing bodies for the industry have tended to expend efforts on denial and greenwashing—efforts seemingly modeled after the tactics employed by the fossil fuel industry in the United States. The integrated marketing campaign includes web sites, blogs, think tanks, editorials, and advertisements. But the message conveyed has at times brought unwanted attention: placements have twice been banned for false claims by Britain's Advertising Standards Authority (ASA), a group that regulates advertising. One video placement used iguanas and hummingbirds — species found nowhere near Malaysia—to suggest that biodiversity thrives in plantations despite a large body of scientific studies showing that oil palm estates are biologically impoverished compared even with heavily logged forests. Dr. Yusof Basiron, CEO of the Malaysian Palm Oil Council, the government-backed marketing arm of the Malaysian palm oil industry, has gone so far as to claim that endangered orangutans benefit from living in proximity to oil palm plantations. Environmentalists scoff at the notion, maintaining that oil palm expansion is one of the greatest threats to orangutans.

The efforts illustrate the extent to which companies will work to mislead consumers. However, some members of industry realize that it will take more than deception to alleviate environmental concerns and are working to improve environmental performance through certification schemes that set standards for production and distribution. But these are dependent on consumer sophistication—an ability to distinguish between "good" and "bad" palm oil and timber, rather that making blanket conclusions about an entire commodity, and preference for “greener” products. In some markets—notably India and China but even the United States and Europe in some cases — there is little willingness among consumers to pay a premium for eco-friendly goods. So while some palm oil producers have thrown their weight behind a certification scheme devised by the Roundtable on Sustainable Palm Oil (RSPO), demand for certified sustainable palm oil has been slow to materialize. Until demand picked up in recent months, environmental groups like WWF—which supported RSPO—were under pressure to show producers that it is worth their while to bear the additional costs of greener palm oil. Consumer apathy could thus prove to be the biggest threat to greening the supply chain, and activist groups may increasingly find themselves having to call attention to companies that adopt environmentally friendly approaches to business.

But at the same time, environmental groups need to beware of overzealousness in their campaigns. Misrepresenting the evils of corporations or exaggerating the severity of environmental problems—conduct termed “blackwashing”—can risk undermining public confidence and support, doing long-term damage to their cause. Greenpeace, for one, has been criticized for championing theatrics over facts. But recent examples in Southeast Asia and Brazil show that when activist groups gets the facts right, and these resonate with consumers, the efforts can have a profound impact. Last summer’s Greenpeace report is a big reason why the Brazilian cattle industry may now be on the cusp of transitioning from being the world's largest single driver of deforestation to a critical component in helping slow climate change.


Assessing illegal logging

Chatham House is assessing the scale and effectiveness of the response to illegal logging and the related trade around the world. Full details of this work, including analysis and data, will be available online soon.