The not-for-profit Forest Footprint Disclosure Project (FFD) runs a disclosure process asking companies to reveal their approach to five key commodities most responsible for deforestation through land use change: timber (including paper and pulp), soya, palm oil, cattle products and biofuels.
FFD acts on behalf of 70 endorsing investors, managing over US$7trn in assets, which have acknowledged that traceability and sustainable supply are key business issues which affect the value and risk profile of our target companies.
Our role is also to help companies along the road to best practice and to assist them in communicating progress to investors. The FFD questionnaire is a useful tool for companies to assess their internal risk management and many disclosers have found data gathering and policy analysis to be worthwhile in improving practice. Disclosing companies receive a personal SWOT analysis report, benchmarking their performance to their sector and highlighting the risks or opportunities from their strategy.
Recent NGO campaigns such as the Greenpeace attack on Mattel, for its use of unsustainable Indonesian rainforest in its Barbie packaging, show that it is vital to understand where these commodities are sourced. Furthermore, companies that are actively engaged with sustainability and trying to implement best practice need to communicate progress to investors and wider society. Given the issues around security of supply for commodities, the disclosure process offers companies a chance to identify potential problems in a timely manner and to improve the resilience of their supply chain.
The timber sector has been an early leader in the FFD project, given its relatively long history of third-party certification and increasing legislative drivers. In 2011, 20 timber companies from 13 countries participated in the process, with Stora Enso and DLH leading the basic materials and industrials, and construction sectors respectively. There is increasing pressure from consumers, corporate customers and policy makers for companies to improve their practices, as certified sustainable products become mainstream in the market. As an early adopter of third-party certification, the timber industry should be exploiting its competitive advantage over other sectors which are late adopters.
This industry also faces huge challenges: how to increase the global supply of certified materials to keep pace with major customers’ new sustainability commitments; increasing competition between pulp and biomass, which is likely to intensify as European and global biomass targets stimulate demand; as well as preparing for the EU Timber Regulation, which requires greater transparency and more stability of feedstock choice. Overall there is a need to establish greater control over feedstocks, especially from Russia and the Far East, and greater engagement with smaller forest owners to encourage their involvement in group certification to grow the supply of certified material. FFD can assist with communicating companies’ solutions to their stakeholders and benchmarking of strategic responses.
While we appreciate it takes time and effort to analyse your business, the reputational, operational and regulatory risks in the timber industry are high and need addressing publicly. As climate change and a growing population put pressure on ecosystems, the legislative and market drivers are likely to increase further. FFD offers a chance to make your business more resilient to these changes and a stage on which to demonstrate your sustainability strategy. The opposite of a sustainable business today is simply an economically unsustainable business.
