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A new transparency pathway to decoupling commodity trade from deforestation

By Thomas Sembres



Global supply chains are notoriously complex and opaque, making it very difficult to address sustainability issues in mainstream markets – including deforestation, sustainable livelihoods, child labour and land grabbing.

In recent years, however, there’s been a surge of global supply chain transparency instruments, data and analysis to help company and government efforts to stop deforestation associated with commodity trade. These include:

  • online databases
  • dashboards
  • scorecards
  • traceability platforms
  • interactive maps
  • independent local monitoring initiatives

These advances in supply-chain transparency are transforming capacities to identify more systematically the greatest opportunities for action. For instance, subnational data analysis across major commodity producing countries in the tropics shows that the vast majority of deforestation linked to the production and trade of agricultural commodities occurs in a handful of places where the commodities are produced.

However, this is not where efforts to manage deforestation risks in commodity supply chains are systematically concentrated. 
 

Traditional approaches to tracking forest-risk commodities

Traditional approaches to tracing and verifying forest-risk commodities rarely penetrate a market far enough to be able to separate the bad from the good, at scale. The bad is often kept hidden in complex and opaque supply chains. Good practices like sustainable production don’t get the market visibility they deserve, and thus often fail to receive incentives from commodity markets to sustain their efforts.

The following are illustrations of the proportion of total world production covered by a sustainability certification scheme (green) versus the proportion that concentrates 80% of commodity-driven deforestation within four global supply chains (red). These are estimations made by EFI based on various sources.
 

Initial situation: efforts and risks disconnected

Share of the world production covered by a sustainability certification scheme (green) versus the proportion concentrating 80% of commodity-driven deforestation in four global supply chains (red) extrapolated from patterns of the largest producing tropical countries for each of these supply chains (Brazil, Indonesia, Argentina and Côte d’Ivoire).
 

This is a situation without prioritisation of efforts, with a high disconnect between areas concentrating the highest risks and voluntary certification and verification efforts.

Clearly, the data revolution alone is not enough. Many actors are overwhelmed with information or remain unable to seize the opportunities that it can provide. Increasingly, the most significant challenge is making data useful for specific policy purposes, based on shared understanding of trusted information.
 

A new approach: the Transparency Pathway

A new approach is possible: one that leverages transparency at both ends of major agricultural commodity supply chains, and that can turn policy aspirations into pragmatic measures to decouple deforestation and trade.

Our new Transparency Pathway offers a pragmatic method to shift commodity markets towards sustainability, by harnessing the potential of existing information and transparency instruments.
 

Transparency Pathway: Channelling efforts towards risks

In this situation, efforts are channelled towards risk areas through the Transparency Pathway, after agreeing on a risk-based mechanism with stricter requirements (e.g. mandatory third-party verification) for high-risk areas only. This also enables reducing the burden of proof on producers in low-risk areas.
 

Six steps for harnessing the power of data

The Transparency Pathway is a tested method that builds on our experience in supply chain transparency in various countries. In particular, it draws on our partnership with Trase, the first initiative to unlock subnational supply chain transparency at scale in tropical countries.

The method charts six pragmatic steps designed to make collaboration between public and private supply chain actors more impactful and inclusive, while reducing costs and gaining positive visibility in global commodity markets. Incremental information disclosure is used as a mechanism to reduce information asymmetry among actors, improve governance and support increased accountability.

The six steps are:

  1. Building trust by engaging stakeholders
  2. Measuring subnational commodity deforestation
  3. Assessing jurisdictional sustainability
  4. Tracking supply chains to jurisdictions
  5. Establishing a central point of information
  6. Independent monitoring

These steps are adaptable to the country and supply chain context, and the whole process can be applied to any measurable sustainability issue.
 

A jurisdictional approach

We have chosen to take a jurisdictional approach in the Transparency Pathway for several reasons:

  • Possibilities for balancing detail and scale.
    Jurisdictional approaches provide a middle ground between finer approaches that are impossible or too costly to implement at scale, in the absence or incompleteness of property-level data on deforestation, production and supply chain connections; and on the other hand, coarser scale approaches. These may be risk analysis at national level that cannot have the necessary finesse for targeted and proportionate interventions, ending up with much fewer levers for action. 
  • A strategy to include vulnerable actors.
    Traditional farm-level certification approaches tend to exclude the people with the greatest needs, such as small-scale farmers and indigenous communities. This is because they usually place the burden of proof on commodity producers. Small-scale producers rarely have the skills and resources needed to meet this burden of proof and obtain certification. Small-scale producers can also struggle to meet sustainability standards if their land is not zoned for legally planting crops, if administrative procedures are complex, or if official monitoring and law enforcement are not fairly or evenly directed. Only the government and local authorities can address these governance issues.
  • Recognition of government authority to control land use and supply chains.
    The advantage of involving local governments is that they often have the authority and legitimacy to implement sustainability policies – and sometimes, in decentralised systems, to issue regulations – that cover the entire land area under their control. They may also have the authority to monitor and enforce relevant laws and regulations. When their authority is limited, through their institutional connections and the involvement of the national administration, they can leverage regulatory changes at the necessary level. Adopting a jurisdictional approach in monitoring enables building on existing national information systems as much as possible.
  • A strategy to reduce the risk of leakage across supply chains and territories.
    Deforestation, water contamination, and child labour are among many challenges that unfortunately have a great capacity to shift across places and supply chains. These ‘leakage effects’ are a constant concern in efforts to reduce deforestation and forest degradation. Jurisdictional approaches allow for going beyond the inevitable fragmentation of other approaches that would focus on just one supply chain or group of actors in a territory. ‘Free riders’ or ‘poor performers’ don’t go unnoticed and peer pressure from other supply chain actors can help bring them on board. Leakage effects may still occur between jurisdictions, hence the interest in nesting a subnational jurisdictional approach within a national process. This is the approach taken in the Transparency Pathway, inspired by the Terpercaya experience in Indonesia.
     

A guide to decoupling commodity trade from deforestation

Governments, supply chain organisations and anyone convening a multi-stakeholder process to improve the sustainability, governance and reputation of a sector or supply chain will find the Transparency Pathway a practical guide for harnessing the transformative potential of data.

Its principles have been informed by several initiatives supporting the sustainability of commodity supply chains. These initiatives have facilitated constructive engagement among stakeholders, and made the Transparency Pathway a tested way to inform domestic policy making, investment decisions and commodity trade.

We invite you to explore the method further – take a look at the new Transparency Pathway website and don’t hesitate to get in touch for more information.

 


Thomas Sembres

Supply chain transparency and land-use planning

EU REDD Facility