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Article

25 Jun 2020

Author:
CDP

Chinese companies play crucial role in managing deforestation risks across palm oil value chains, CDP report finds

“Chinese companies urged to ramp up actions to decouple deforestation risks across the palm oil value chains”, 23 June 2020

… Exposure to deforestation risk is underestimated by companies that produce and source palm oil, and Chinese companies have a crucial role in adopting robust action to manage deforestation risks and improve transparency throughout the value chain, new research from global environmental non-profit CDP finds.

CDP’s new report “The Hidden Commodity: how China’s palm oil imports can help halt deforestation” is based on self-reported data from 146 companies that produce, source or use products made with palm oil, out of the 543 companies that responded to CDP’s Forests questionnaire in 2019.

Although 63% (92) of the 146 respondents… have identified forest-related risks within their business operations, only 25% (36) of all the responding companies have estimated the potential financial impacts totalling US$7.6 billion should the identified risks aren’t managed. That means the overall exposure to deforestation risk is grossly underestimated by companies within the sector.

CDP’s data also reveals that only around 18% (26) of companies producing and sourcing palm oil globally reported having an effective and comprehensive policy to ensure sustainable and ethical palm oil supply chains…

Of the 146 responding companies in the palm oil value chain, reputational and market risks (53%) remain most frequently cited, whereas only 17% (25) and 13% (19) of companies reported physical and regulatory risks respectively…

… With China’s clearly-stated environmental policy and the role of green financial system elevated, regulatory pressure will likely drive Chinese companies and investors to address both physical and transitional risks caused by climate change, including deforestation.

The growing awareness and demand from Chinese consumers also serves as a significant factor, as a recent survey showed that 88% considered the environmental impacts of the products as well as quality, and reputation of the company when making purchasing decisions.

Another key driver is the growing demand from investors for companies to adopt and implement sustainability policies…

As the impacts of commodity-driven deforestation proliferate from regional to global levels, there is increasing urgency for Chinese companies to start measuring and managing the full range of impacts and potential risks of their operations on forests, and to build resilience and sustainability into their business models…

[Also referred to AH Hyea Aromatics, Fujian Sunner Development, Sunner Development and Unilever]

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