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

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Article
23 July 2020

Chinese companies are under growing pressure from consumers, brands and investors to source palm oil more sustainably, expert says

Author: Morgan Gillespy and Reuters Events

“Why China is key in the battle against palm oil deforestation”, 21 July 2020

… A recent CDP report on the palm oil industry, The Hidden Commodity, focused on the unique role of China to transform this value chain and protect Asia’s tropical forests. While palm oil is used all over the world, China imports 7 million tons annually, and recent trends suggest it could soon overtake India as the top importer of palm oil globally…

A staggering 85% of the world’s palm oil, and almost 100% of China’s imports, is produced in just two countries: Indonesia and Malaysia. This has often been at the expense of clearing vital tropical rainforest…

… Companies producing or sourcing palm oil are facing increasing demands for sustainability, from customers, investors, consumers and policymakers…

Many international buyers (such as Carrefour and Firmenich SA) that source from China have made commitments to only buy palm oil products certified by the Roundtable on Sustainable Palm Oil (RSPO). If Chinese suppliers do not comply with these policies, they may see contracts terminated and business lost.

Investors are demanding action too. A group of 58 investors with $7.9 trillion in assets has signed a paper on Investor Expectations on Sustainable Palm Oil, which calls on companies to become RSPO members, adopt No-Deforestation, No Peat, No Exploitation (NDPE) policies, set time-bound plans, and regularly report on progress…

If unsustainable palm oil production continues to drive destruction of tropical forests, the ultimate result will be spiralling dangerous climate impacts and biodiversity loss. This poses many risks to business.

The shifts in market demand, consumer preferences and policy direction described above all contribute to significant reputational and regulatory risks to business if they do not take concerted action…

But too many companies are overlooking the physical risks. Companies producing and sourcing palm oil are exposed to physical risks caused by current and future climate change…

The opportunities to be gained, combined with the risks of inaction, make the business case for action on sustainable palm oil crystal-clear.

But that action can only happen when there is accountability, which requires transparent, standardised disclosure…

As the market shifts and the climate crisis intensifies, the time is now for full value-chain transformation to protect Asia’s vital forests. China is in a powerful position to lead the way.

[Also referred to Fujian Sunner Group, Unilever, Wilmar, ING bank and OCBC bank]

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Article
2 July 2020

Transparency is crucial if Chinese companies are to mitigate deforestation risks from supply chains, blogger says

Author: Zhang Yige, China Dialogue

“How to eliminate the deforestation risks of palm oil imported to China?”, 24 June 2020

… CDP’s [a non-profit working on environmental information transparency] new report, The Hidden Commodity: how China’s palm oil imports can help halt deforestation reveals that, globally 146 firms report they used palm oil directly in 2019, or that it was used in their supply chains. Of these, 63% (92 firms) identified forest-related risks with the potential to have a substantive financial or strategic impact on their business…  

Ranked by nation, China is the world’s second-largest importer and third-largest consumer of palm oil, and relies entirely on imports for its supply… Although China is a vast market, but in 2019, only 3 Chinese firms reported palm oil-related information, 2 of these identified forest-related risks.

… firms in the middle of the value chain could see market access risks due to buyers instituting zero-deforestation policies. For example, many international buyers of Chinese products containing palm oil (such as French supermarket group Carrefour) have put such policies in place and promised that by the end of 2020 they will only buy palm oil products certified as sustainable by the Roundtable on Sustainable Palm Oil (RSPO). If Chinese suppliers do not comply with these policies, they may see contracts terminated and business lost…

More than 70% of Chinese consumers already have an awareness of sustainable consumption, according to a 2017 survey by China Chain Store & Franchise Association. Meanwhile, investors are encouraging companies to implement sustainable development policies… Many financial advisors are already seeing investing in ESG funds as a Covid-19 recovery tool…

… China has issued a series of policies in recent years requiring companies to manage the environmental risks of their operations. That regulatory pressure is encouraging more and more Chinese firms to tackle the physical and transitional risks arising from climate change (as well as deforestation), and to improve transparency.

More transparency is crucial if companies are to manage and remove deforestation risks from their supply chains…

… China’s “Green Belt and Road” and the recent inclusion of certified sustainable palm oil in a new draft list of projects eligible for green bond could further close the gap between Chinese and international standards, and promote interaction between Chinese companies and producer-nation suppliers…

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Author: 张译戈, 中外对话

“如何消除进口棕榈油的毁林风险?”, 2020年6月24日

… 2019年,致力于环境信息披露的非营利组织CDP全球环境信息研究中心代表全球525家投资机构和14家采购机构,邀请世界各地的企业报告包括木材、棕榈油、牛制品、大豆和橡胶在内的森林风险商品的生产和消费相关信息。最终全球共有543家企业向CDP进行了报告。

CDP最新发布的报告《中国棕榈油进口如何帮助阻止森林砍伐》显示,2019年全球有146家公司向CDP报告在其直接业务和/或供应链中使用了棕榈油。在这146家中,63%的企业(92家)识别到可能对其业务产生实质性的财务或战略影响的森林相关风险…

中国是全球第二大棕榈油进口国和第三大消费国,棕榈油消费完全依赖进口… 但2019年,仅3家中国公司向CDP报告了棕榈油相关信息,其中2家识别到了森林相关风险…

…. 中游企业或因买家的零毁林政策而面临市场准入风险,例如,目前不少从中国采购棕榈油产品的国际买家(如家乐福)都采取了零毁林政策,并承诺到2020年采购100%经可持续棕榈油圆桌倡议组织(RSPO)认证的可持续棕榈油产品,如果中国的供应商不遵守买方政策或将面临合同中止和业务损失的商业风险…

中国连锁经营协会2017年发布的《中国可持续消费研究报告》发现,中国超过七成的消费者已具备一定程度的可持续消费意识。同时,投资者也在推动企业贯彻并践行可持续发展政策…不少财务顾问已将投资ESG基金视为一种新冠疫情后的复苏工具…

… 近些年来中国出台了一系列政策,要求相关公司管理其业务对环境的影响。来自监管的压力正促使越来越多的中国公司应对气候变化(包括森林砍伐)带来的物理风险和转型风险,并致力于改善环境信息披露。

改善环境信息披露是公司管理并消除棕榈油供应链中毁林风险的关键…

… 中国提出的“绿色一带一路”倡议,以及最近将可持续棕榈油贸易纳入新版《绿色债券支持项目目录》征求意见稿的举措等,将进一步弥合中国与国际标准的缺口,促进中国公司与生产国供应商之间的互动,从而采取行动消除生产中的毁林风险…

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Article
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Author: 張譯戈, 中外對話

“如何消除進口棕櫚油的毀林風險?”, 2020年6月24日

… 2019年,致力於環境信息披露的非營利組織CDP全球環境信息研究中心代表全球525家投資機構和14家採購機構,邀請世界各地的企業報告包括木材、棕櫚油、牛製品、大豆和橡膠在內的森林風險商品的生產和消費相關信息。最終全球共有543家企業向CDP進行了報告。

CDP最新發布的報告《中國棕櫚油進口如何幫助阻止森林砍伐》顯示,2019年全球有146家公司向CDP報告在其直接業務和/或供應鏈中使用了棕櫚油。在這146家中,63%的企業(92家)識別到可能對其業務產生實質性的財務或戰略影響的森林相關風險…

中國是全球第二大棕櫚油進口國和第三大消費國,棕櫚油消費完全依賴進口… 但2019年,僅3家中國公司向CDP報告了棕櫚油相關信息,其中2家識別到了森林相關風險…

…. 中游企業或因買家的零毀林政策而面臨市場准入風險,例如,目前不少從中國採購棕櫚油產品的國際買家(如家樂福)都採取了零毀林政策,並承諾到2020年採購100%經可持續棕櫚油圓桌倡議組織(RSPO)認證的可持續棕櫚油產品,如果中國的供應商不遵守買方政策或將面臨合同中止和業務損失的商業風險…

中國連鎖經營協會2017年發布的《中國可持續消費研究報告》發現,中國超過七成的消費者已具備一定程度的可持續消費意識。同時,投資者也在推動企業貫徹並踐行可持續發展政策…不少財務顧問已將投資ESG基金視為一種新冠疫情后的複蘇工具…

… 近些年來中國出台了一系列政策,要求相關公司管理其業務對環境的影響。來自監管的壓力正促使越來越多的中國公司應對氣候變化(包括森林砍伐)帶來的物理風險和轉型風險,並致力於改善環境信息披露。

改善環境信息披露是公司管理並消除棕櫚油供應鏈中毀林風險的關鍵…

… 中國提出的“綠色一帶一路”倡議,以及最近將可持續棕櫚油貿易納入新版《綠色債券支持項目目錄》徵求意見稿的舉措等,將進一步彌合中國與國際標準的缺口,促進中國公司與生產國供應商之間的互動,從而採取行動消除生產中的毀林風險…

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Article
25 June 2020

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

Author: CDP

“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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