Up to $906 billion in revenue is at risk because of deforestation, according to a report released by CDP, New York. This means there is a lot at stake. That’s why companies’ deforestation risk management activities and engagement across their supply chains is essential to meeting their future business needs and protecting long-term value.
In this report, “Revenue at risk: Why addressing deforestation is critical to business success,” CDP set out the risk of deforestation to companies, explore the opportunities available and see how engaging with supply chains can ensure future growth.
“Supply chains are like rows of dominoes—if unsustainable commodities enter the top of a supply chain, the effects will cascade throughout. Failing to address deforestation will have knock-on reputational impacts, manifesting themselves as consumer boycotts, community opposition and increased regulatory scrutiny. Business growth is at risk,” says Katie McCoy, head of forests, CDP.
Companies identified damage to their reputations as a common risk, resulting in a reduced demand for goods and services.
The impacts of climate change, which itself is fueled by deforestation, is leading to higher operating costs for companies. This, in turn, increases the challenges associated with sourcing or producing commodities.
Although 77% of reporting companies recognize at least one supply chain risk with the potential to generate a substantive change in business operations, revenue or expenditure, only 42% of companies have evaluated the availability or quality of forest-risk commodities over the medium-term. With such a large proportion of company revenues attached to these commodities, companies need to ensure they are planning for the long term to ensure the sustainable supply of these commodities in future.
Furthermore, 94% of manufacturers and retailers that work with their suppliers have identified supply chain-related opportunities vs. 35% of those that do not.
Supplier disclosure provides the building blocks for organizations to manage and reduce deforestation risk at scale.