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Event report

Global supply-chain transparency

Harnessing the power of data for a deforestation-free economy

A new approach to supply-chain sustainability

At the 22nd UNFCCC Conference of the Parties (COP22) in Marrakech in November 2016, experts in environmental policy, data analysis and commodity supply chains gathered to discuss how improving supply-chain transparency could help achieve deforestation-free trade. 

Hosted by the EU REDD Facility, the side event showed how supply-chain data analysis and visualisation platforms, such as the one launched at COP22 by the Transparency for Sustainable Economies (Trase) initiative, represent a step-change in efforts to make commodity supply chains more transparent. Using Trase as an example, participants discussed how major improvements in the transparency of commodity supply chains  can catalyse improvements in commodity production, procurement and investment, and in planning national development strategies.

The potential of ‘radical transparency’

Private-sector and government representatives agreed that new approaches to supply-chain transparency – ‘ radical transparency ’ – have the potential to bring about transformative change, with an unprecedented wealth of information on the links in supply chains and how supply chains affect deforestation in producing jurisdictions. Participants discussed how to bring about step changes in the capacity of supply-chain actors to meet zero deforestation and sustainability commitments. They examined incentives for encouraging governments in consumer and producer countries to cooperate. Tools such as the platforms launched by Trase to collect and analyse data and information can help purchasers to develop better sourcing strategies and governments to develop policies in the forestry sector and commodity trade.

The challenge of global deforestation

The international trade in commodities such as soy, palm oil and beef is valued at billions of dollars. These commodities trade along complex supply chains that often have adverse social and environmental impacts – especially in developing countries. Over the past decade, for example, agricultural expansion has caused two-thirds of tropical deforestation, which in turn has accelerated climate change and threatened the rights and livelihoods of indigenous peoples and communities that depend on forests. Consumers and markets around the world are demanding greater sustainability in producing and trading agricultural commodities.

Governments in consumer and producer countries have recently committed to reduce deforestation: in the New York Declaration on Forests (2014), the Amsterdam Declaration and the UNFCCC Paris Agreement (2015). Similarly, hundreds of companies have committed to achieving zero net deforestation in major supply chains by 2020 as part of the Consumer Goods Forum. There are, however, many challenges to achieving zero-deforestation commitments. Deforestation driven by commodity production has so far shown no signs of abating. Efforts to achieve sustainable supply chains are hindered by weak law enforcement, lack of land-use planning and insufficient monitoring.

While there has been significant progress in the availability and use of satellite imagery to monitor deforestation in recent years, commodity trade flows continue to be difficult to untangle and track. The routes commodities take and the actors involved are known for only a fraction of the global trade in commodities, such as for certified products. Information is not easily accessible nor compiled in useful ways. Thus, the many public and private-sector actors involved in trading, transforming or consuming such commodities are often not aware of the adverse effects and business risks associated with their activities.

There is an urgent need to better understand complex supply chain connections to stop deforestation associated with traded commodities, and to minimise and avoid the associated environmental and social risks. A clear understanding of where commodities originate, how they move around the globe and where they end up will help to identify strategic targets and entry points to achieve more sustainable global supply chains.

Trase side event panel during COP22

Trase side event panel during COP22

Source: EU REDD Facility

Trase side event panel during COP22

Source: EU REDD Facility

Halting deforestation: the role of the European Union

Anneli Pauli, Conseiller Hors Classe, Innovation and Competitiveness, European Commission Directorate General for Climate Action

 

The European Union (EU) has set an objective to halt global forest cover loss by 2030 at the latest, and to reduce gross tropical deforestation by at least 50% by 2020. The EU and several EU Member States have endorsed the 2014 New York Declaration on Forests. In 2015, several EU Member States signed the Amsterdam Declaration. This declaration recognises the need to eliminate deforestation related to trade in agricultural commodities and supports private and public sector initiatives to halt deforestation by no later than 2020. The EU is also conducting a feasibility study for a EU Action Plan on deforestation.

"New developments in commodity supply-chain transparency can become an information cornerstone for sustainable supply chains in both consumer and producer countries."

Information from systems that improve transparency plays an important role in informing government policies to make agricultural commodity supply chains more sustainable. New initiatives in supply-chain transparency, such as Trase, can play a transformative role by helping develop smarter policies for forests and for commodity trading between producer and consumer countries. A critical element in improving supply- chain sustainability is cooperation between actors. Countries and private- sector and civil society actors at both ends of supply chains need to work together.

Radical supply-chain transparency: the Trase initiative

Toby Gardner, Senior Research Fellow, Stockholm Environment Institute

 

Led by the Stockholm Environment Institute and the Global Canopy Programme, Trase is an online information and decision-support platform aimed at improving the transparency, clarity and accessibility of information on the commodity supply chains that drive tropical deforestation. Drawing on vast untapped sets of production, trade and customs data, Trase lays bare at scale the flows of globally-traded commodities, such as palm oil, soy, beef and timber, which are mainly responsible for tropical deforestation. Trase directly responds to the urgent need for a breakthrough in assessing and monitoring sustainability triggered by the ambitious commitments made by leaders across sectors to achieve deforestation-free supply chains by 2020.

Trase aspires to be the first open-access, supply-chain intelligence platform for sustainability that is capable of encompassing the total trade of a given commodity. It fills the gap between country-level analyses and commodity- specific traceability systems, providing both a comprehensive overview of the flows of a commodity from producer to consumer countries, and detailed information on specific actors, conditions and risks in particular supply chains.

"Trase will enable companies, financial institutions, governments and others to better understand and address the social and environmental impacts associated with their supply chains."

Mapping global trade flows draws mainly on information in customs declarations, bills of lading and official global trade data. Going forward, the plan is to enrich the platform with up-to-date data supplied by users, particularly in the private sector and government. Enabling users to provide data will ensure maximum coverage and robustness across sectors and geographies. Currently covering Brazilian soy, over the next five years Trase aims to cover over 70% of total production of major forest-risk commodities. From 2017, Trase will include all Latin American soy, Argentinian, Brazilian and Paraguayan beef, Brazilian timber and Indonesian palm oil. Coverage could expand further if customs authorities that do not currently release data publicly, such as the EU and many African countries, decide to make data public.

Exports of Brazilian soy from major exporting companies to consumer countries in 2015

Exports of Brazilian soy from major exporting companies to consumer countries in 2015

Source: Trase

Exports of Brazilian soy from major exporting companies to consumer countries in 2015

Source: Trase

How can companies achieve zero-deforestation commitments?

Lucas Urbano, PMO for Climate Strategy, Danone

 

One of the world’s largest dairy and packaged food companies, Danone has committed to eliminating deforestation from its supply chains by 2020. The company is a signatory of the New York Declaration on Forests as well as a member of the Consumer Goods Forum.

Radical supply-chain transparency brings both opportunities and challenges for consumer-facing companies.

For a company like Danone, transparency and better information about the impacts and conditions in jurisdictions where its supplies originate from are hugely important. Transparency is the first major step in eliminating deforestation from Danone’s value chains, because supply-chain complexity and opacity are barriers to action. Transparency initiatives such as Trase help Danone to understand who to convene and engage with in strategic supply chains. At the same time, transparency will make it impossible for companies to hide behind the complexity and opacity of supply chains.

"Trase can help us move away from the blame game, to start a practical discussion around issues and solutions."

Tools like Trase open supply chains to unprecedented, detailed scrutiny. The detail allows supply-chain actors to better identify and engage their partners. Without transparency, it is impossible for companies to enter into a dialogue with traders. Such diagnostics are key to constructive approaches, to working together and to developing strategies tailored to different source areas, thereby improving supply-chain sustainability.

Driving change on the consumer side

Marcel Beukeboom, Climate Envoy, the Netherlands

 

The Netherlands is a signatory of the Amsterdam Declaration, which aims to create a coalition of willing actors – producer and consumer countries, and private-sector actors – to stimulate partnerships around deforestation- free commodity trade. This open and growing coalition welcomes new partner countries. Consumer country governments have a range of policy options for reducing deforestation: policies that enable partnerships and stimulate debate, policies that provide subsidies and other incentives to promote positive behavioural change, and polices that regulate trade.

In the context of its Amsterdam Declaration commitment, the Dutch government has taken steps to monitor its impacts and performance – but these mainly focus on the consumer end of the value chain. Initiatives like Trase will provide a new level of detail and analysis, at unprecedented scale and coverage. Covering the entire trade flows of major agricultural commodities, Trase represents a step change in the ability of consumer countries to identify the specific regions of the world that provide the bulk of their imports. This information is vital for designing sustainable sourcing strategies and for identifying the key governmental and private-sector partners to deliver those strategies along supply chains. The information can also help to monitor and assess the effectiveness of targeted policy interventions, as well as overall policy coherence.

"Global supply-chain transparency will generate significant change, enabling countries to understand and act on information about the impacts of their trade."

Trase can help achieve a breakthrough in supply-chain sustainability and enable the development of a more level playing field. Through its growing ambition and blanket coverage, Trase can raise the bar for entire sectors, and identify gaps and critical areas preventing change that need to be addressed. Nonetheless, platforms like this should recognise that opening up data and providing greater transparency may not always stimulate action. Greater transparency may discourage some actors depending on how the information is presented. The focus should be on presenting data in a way that will attract sustainable investment.

Tapping the potential of jurisdictions

 Rosa Maria Vidal, Executive Director, Governors’ Climate and Forest Fund (GCFF)

 

The Governors’ Climate and Forest Fund (GCFF) works with a network of 35 jurisdictions in Brazil, Colombia, Indonesia, Ivory Coast, Mexico, Nigeria and Peru. The network represents 30% of the world’s tropical forests. The GCFF assists these jurisdictions to develop programmes for sustainable, low emissions rural development and reduced emissions from deforestation and land use. The jurisdictions are all involved in REDD+ implementation and are committed to improving sustainability in commodity production.

Both REDD+ implementation and work to improve the sustainability of commodity production are proving challenging for the 35 jurisdictions. Funding available under REDD+ has so far not matched expectations. To improve sustainability in producing agricultural commodities, jurisdictions need to understand the economic implications that a transition to improved standards involves, and how their trade position will be affected. This understanding depends on better information.

"Dialogue and partnerships between governments, producer companies and all stakeholders are needed, to ensure that solutions to deforestation challenges are identified and tackled together."

Addressing the challenges requires adequate data and information. In this sense, Trase and similar initiatives are essential for enabling more informed decision-making and for enabling a better understanding of trade links and economic implications. However, it would be a risk if data from Trase alone was used by companies to abandon areas that represent deforestation risks, without entering into a dialogue with the governments and producers in those jurisdictions. Such decision could in fact drive more deforestation, because of the impact on the local economies. Other risks include leakage, and impacts on smallholders. GCFF is involved in supporting jurisdictions to improve their monitoring capacities and information systems that provide information on forest governance plans, progress and achievements at jurisdictional level. Linking such information to Trase could help to achieve a better understanding of what is happening on the ground.

Legality in timber supply chains

Pedro Moura Costa, Founder and CEO, BVRio Environmental Exchange 

 

BVRio and Trase are piloting a programme to bring more transparency to Brazilian timber supply chains, to assess the causes of illegally harvested timber and to find solutions to minimise risks. Through the partnership, BVRio will upload data to the platform on the legal status of forest operations in Brazil. This will enable Trase to track legally and illegally harvested timber from sources to buyers at the end of supply chains.

The issue of legality in supply chains is rarely considered in transparency initiatives, but is vitally important. Legality is at the core of the EU FLEGT Action Plan to tackle illegal logging. The FLEGT initiative stimulates national legal frameworks that help actors and institutions like the European Union to engage with national governments on illegal logging. Legality is, though, more sensitive than other aspects of supply chains. Definitions of legality impinge on sovereignty when a definition is perceived to be imposed externally or inappropriate to national and local contexts.

BVRio Environmental Exchange in 2016 launched a Responsible Timber Exchange, a trading platform to assist traders and buyers of timber in sourcing legal or certified products from all over the world. The platform is integrated with BVRio’s Due Diligence and Risk Assessment tools, designed to assist traders and buyers of tropical timber in verifying the legality status of the products purchased and their supply chains. The system is based on big data analysis and conducts more than 2 billion crosschecks of data daily. Since their release in 2015, the tools were used by traders and environmental agencies worldwide to screen thousands of timber shipments.

"Compliance with local legislation is an essential requirement of any initiative to promote good land-use governance and, ultimately, to achieve zero deforestation supply chains."

The objective of this initiative is to facilitate the procurement of responsible timber products in an efficient, cost effective and secure way, increasing liquidity, supply and demand for this market segment and helping to promote transparency, legality and sustainability in the timber sector. The platform will be particularly useful to buyers and traders operating in Europe and the US, where they have to ensure compliance with the EU Timber Regulation and the US Lacey Act, reducing their exposure to illegal timber trade. By integrating this system with Trase, users will be able to visualise supply chains all the way from production points to country of consumption, and see whether these chains include illegal timber products.

Future challenges

Trase can help governments at both ends of commodity supply chains to turn policy aspirations into the concrete measures necessary to decouple deforestation from trade in major agricultural commodities. The range of public policy measures that could be deployed to tackle deforestation associated with commodity trading is wide. These include deforestation- free public procurement policies, policies that provide preferential market access for legal and sustainable products, and realigning aid and investment policies to sectors and regions that encourage the supply of deforestation-free commodities.

The European Forest Institute’s EU REDD Facility, a partner in the Trase initiative, is working to develop platform applications tailored to the needs of governments, trade and customs authorities so that they can use Trase to monitor forest-related risks and identify opportunities in commodity production and trade. Through Trase, the EU REDD Facility seeks to support governments to better understand and identify their information needs, and to develop decision-support capabilities for policies associated with forest-risk commodity trade. The information that will be available on Trase will support transparent, deforestation-free policies on commodity trade.

Key pillars for transparent, deforestation-free policies on commodity trade

  • Building strategic coalitions and public-private partnerships that work towards common standards in commodity production and trade
  • Analysing scenarios to inform designs and plans for procurement and investment policies
  • Scanning risks to sharpen monitoring and control functions, and to strengthen the implementation of existing policy instruments such as the Forest Law Enforcement, Governance and Trade (FLEGT) scheme to tackle illegal logging
  • Monitoring policy effectiveness and reporting progress towards political targets

For a more comprehensive summary, visit the EU REDD Facility blog post on how Trase can support government action

Stakeholder engagement and mediation are essential in implementing deforestation-free commitments at jurisdictional level. Tools such as Trase can be important as a way to engage stakeholders in clarifying and harmonising definitions and methodologies. Going forward, there is a need to build a community of stakeholders committed to developing radical transparency. Such transparency can inform deforestation-free policies in a way that satisfies the wide variety of trade partners across producer and consumer countries. The emergence of transparency tools such as Trase is an opportunity to nourish constructive dialogue to speed up the implementation of commitments.

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