Working with Walmart and Sysco on deforestation

Natalie Wasek is a shareholder advocacy manager for Seventh Generation Interfaith Coalition for Responsible Investment (SGI). Natalie recently spoke with Ceres about how SGI, a coalition of faith and values-driven investors, engages with companies on deforestation and climate change. What follows is a lightly edited Q&A.

This Q&A is part of Investors Talk Deforestation, a series of interviews with influential investors and partner organizations who supported the development of the Ceres Investor Guide to Deforestation and Climate Change. The guide aims to engage investors on deforestation emissions and other related risks across their portfolios and drive more corporate action on the issue.

Q: As a coalition of faith and values-driven institutional investors, SGI members view the management of their investments as a powerful catalyst for social change. Given this values-driven perspective, why does SGI find deforestation to be a particularly important issue to address?

A: We look at most issues through a human rights lens, as many of our members are religious institutions and are concerned with all of creation, which includes people and nature. We recognize that deforestation has large, wide-ranging impacts, from environment, climate change and biodiversity to human rights, land labor and indigenous peoples. All of these issues are important to SGI’s members.

Q: Have you found that certain companies respond to deforestation-related risks differently?

A: In the food sector, different types of companies respond to reputational and physical supply chain risks quite differently. Food manufacturers tend to be responsive to both reputational risks and physical supply chain risks that stem from deforestation — reputational because they depend on consumers’ habits and physical risks because manufacturers’ supply chains tend to be quite exposed to deforestation. Retail grocers and restaurants have been less inclined to react to reputational and physical supply chain risks. Because grocers have so many products, they are less exposed to reputational risks tethered to specific products and their supply chains are numerous and more diverse. In general, restaurants have been the slowest to respond to deforestation-related risks.

There are exceptions. Amongst grocers, Walmart has led with clearly articulated deforestation and climate change commitments, and amongst fast-food restaurants, McDonald’s has committed to eliminate deforestation from its supply chains. SGI has engaged with Walmart for years on no-deforestation policies for palm oil and, subsequently, beef. Together, we worked on understanding and minimizing risks, setting deforestation targets and reporting on deforestation and climate change commitments. We continue to work with Walmart to achieve existing targets, set more ambitious targets and implement deforestation policies across all of their commodities.

Q: SGI highlighted the importance of this figure from The Investor Guide to Deforestation and Climate Change. Why?

A: People often think renewable energy and energy efficiency are the most important climate change solutions, but this graphic clearly shows that nature-based climate change solutions — including forestry, agroforestry and agriculture — have immense potential. This is a surprise for many companies we work with. In our engagements with companies, we aim to elevate the role of forests as a climate change solution. We want to be sure that investors and companies recognize that eliminating deforestation from their supply chains is low-hanging fruit.

Q: How does SGI move companies toward deforestation goals? And can you provide an example?

A: SGI assesses where a company is with respect to net-zero deforestation policies and implementation compared to its competitors. To do this, we use processes and criteria described in part five of the Investor Guide. The criteria help ensure companies understand the risks and impacts related to their supply chains — risks including deforestation, climate change, human rights and water. As we learn more about deforestation, we continue to engage with companies to hasten progress toward deforestation goals. 

For example, SGI has had a long, rewarding engagement with Sysco. Sysco now understands and addresses risks associated with palm oil; it adopted a palm oil policy in 2016 and recently announced responsible sourcing commitments for beef, soy and paper/pulp. We continue to work with Sysco to strengthen its existing sustainable palm oil policies and to help expand its sustainability, climate change and deforestation policies to additional commodities. 

Q: What is most challenging for companies as they commit to no deforestation or net-zero deforestation?

A: Companies have varying amounts of access to and information about their supply chains. For example, most companies do not know exactly where or how their palm oil or soy is produced, so it is difficult for them to understand how and where to address deforestation. However, tools to increase traceability are coming online, and these tools are changing the landscape for palm oil and other forest commodities. When companies gain oversight of entire supply chains, they can map resources and trace supplies, allowing them to focus on hot spots and track progress toward no-deforestation commitments.

Q: What challenges do investors face when engaging companies on deforestation? And do you have any advice for investors just beginning to engage on this topic?

A: Deforestation issues involve many biomes, commodities and governance structures. Science is constantly progressing, and new information and benchmarking platforms are always being developed. Staying on top of all of this is a challenge. Investors need to invest time and energy to digest and understand the most recent information on deforestation. I recommend that investors new to deforestation join ongoing engagements with companies to learn companies’ perspectives on the issue and how investors work on this topic. And they should start by reading The Investor Guide to Deforestation and Climate Change. 

New investors also may find it challenging to get companies to speak specifically about deforestation, and this may be because companies are not familiar with deforestation-related actions. Companies typically have policies or priorities related to climate change or greenhouse gas emission reduction, which tend to be easier to speak about more broadly. Investors can address this by examining a company’s existing climate policies and targets first, and then engaging on the risks of deforestation within the framework of those existing initiatives. By recognizing that land use emissions compose a significant portion of Scope 3 emissions, investors will find that companies are interested in the potential impact of their work on deforestation.

Q: What additional issues related to deforestation are on the horizon?

A: We’ve talked about how science and policies around forestry and eliminating deforestation are advancing. Another important issue is how alternative food sources, such as non-meat protein sources, may affect deforestation. Consumers are driving this change in consumption habits, not restaurants. It is not yet clear how alternative food sources may compare in terms of sustainability, including how they would impact forests.

In our experience with palm, many companies researched exchanging palm oil for another oil, but they found that other vegetable oil sources were not necessarily more sustainable or more efficient than palm oil. Soybean or coconut oil would require 4 and 10 times more land, which would just shift the problem to other parts of the world. That was a surprise, and it underlined the importance of sustainability efforts in the palm industry. I look forward to more research and information about the efficiency and sustainability of alternative sources of food, including how and if they can help us meet zero deforestation goals.