March 20, 2021
The production of agricultural commodities such as beef cattle, soy, palm oil, or cocoa, drives around two-thirds of all deforestation in the tropics. Between 2001 and 2015, seven ‘forest-risk commodities’ replaced around 72 million hectares of forest globally - an area larger than the Iberian Peninsula. Companies who use these goods in their products have made ‘zero-deforestation commitments’ (ZDCs) to eliminate deforestation from their supply chains in response to NGO pressure. ZDCs therefore seek to convert consumer and civil society pressure, often in locations far from the sites of production, into behavior change that promotes conservation. In doing so, they aim to take advantage of the telecouplings inherent in commodity supply chains that link land use change to consumers across the world. However, ZDCs face a host of challenges, including the difficulty of reshaping opaque commodity markets into transparent and collaborative supplier relationships, tracing complex supply chains, as well as the continued existence of alternative ‘leakage’ markets for unsustainable products. As members of ETH Zurich’s Environmental Policy Lab, led by PI Professor Rachael Garrett, and with funding from the US and Swiss National Science Foundations as well as ETH’s World Food System Center, postdoc Dr. Janina Grabs and PhD candidate Sam Levy study how effective such attempts to govern telecoupled deforestation are in practice. In this blog post, we share some first insights from our work on the effectiveness of zero deforestation commitments in the Brazilian Amazon’s cattle sector and the Indonesian palm oil sector. The blog post summarises our work as presented in a webinar hosted by the GLP Telecoupling Research Working Group in December 2020.
Brazil, and in particular the Amazon region, has a long history of using zero-deforestation commitments to manage telecoupled deforestation, beginning in the soy sector in 2006 and spreading to the cattle sector in 2009. Collective agreements and individual company commitments are widespread in the soy and cattle sectors of Brazil and more than 85% of exported beef and 60% of exported soy are covered by a ZDC. Although cattle ranching has been linked to 80% of forest clearing in the Brazilian Amazon in the past, it is still unclear if the ZDCs implemented to govern cattle-driven deforestation in the region have been effective at changing this relationship.
A key barrier that is likely very important in reducing the effectiveness of ZDCs is the failure of commitments present in the Brazilian Amazon to capture the entire market, particularly in certain regions. There are two widespread ZDCs in the cattle sector of the Brazilian Amazon; the G4 Agreement signed between the four largest slaughterhouse companies in the Amazon and Greenpeace and TAC agreements, a Brazilian Public Prosecutor’s Office (MPF) led campaign to force cattle buying companies to be more sustainable. Collectively the two cattle agreements control the majority of the market, but their facilities are concentrated in some regions. In areas where the market share of ZDC companies is low, producers who wish to avoid ZDCs and continue deforesting land for cattle production can likely do so with little difficulty.
Understanding the true impacts of ZDCs requires an understanding of the actors in the sector, what kind of zero-deforestation policies they have and also their sourcing behavior - both the quantities sourced and the regions sourced from. Through the work of myself, Dr. Federico Cammelli and Professor Rachael Garrett in collaboration with the Gibbs’ Land Use and Environment Lab, we have been able to collect these data to determine the municipal market share of cattle ZDCs in the Brazilian Amazon over time. By using this estimate of ZDC market share as an explanatory variable in first-difference panel regressions, applied at the municipal scale across the key cattle producing states of the Brazilian Amazon, we are able to estimate quantitatively the impact of changes in the market share of ZDC companies on deforestation within the Amazon region. Our preliminary results suggest that where the market share of ZDC companies is higher, forests are better protected and deforestation is reduced. This suggests that although the telecouplings between consumers and producers have been successful at reducing deforestation in the Amazon, further work to strengthen these bonds and increase the pressure on non-committed cattle companies is required to eliminate deforestation from the Brazilian cattle sector.
In the palm oil sector, so-called “No Deforestation, No Peat, No Exploitation” policies have been in effect since around 2011. They now cover a large share of the market, with over three-quarters of the Southeast Asian refining capacity - the most highly concentrated part of the supply chain - covered by such commitments. Interviews with over 50 stakeholders collected in 2020 show that while significant progress has been made in mapping a previously inscrutable supply chain and reacting to the largest transgressions, companies are reaching the limits of their influence, while palm-driven deforestation continues at the margins and in the shadows. Interviewees agree that, in an impressively rapid change of norms, commitment to NDPE practices have become a new standard of doing business in the international palm oil market. Banks have come on board, high-profile cases of supply chain exclusion have shocked large growers into compliance, and technological advances in satellite-assisted monitoring further the perception that it is becoming more difficult to hide.
Yet, while large integrated palm oil companies have adjusted their own practices and deforestation on official palm oil concessions is trending down, deforestation outside of known concessions is increasing. The responsibility for such trends is alternatively attributed to smallholder farmers, absentee landowners, or even land speculators and investors who might be informally linked to larger companies. The continued opacity of on-the-ground land ownership, property boundaries, and actual land occupancy makes effective monitoring and compliance enforcement challenging. In addition, countervailing industrial policies by the Indonesian government, including expanding a biodiesel feed-in mandate and supporting the construction of more in-country refineries, have turned the local palm oil market from a buyers’ to a sellers’ market. This makes it more difficult for international companies to assert effective supply chain pressure, given that Indonesia is itself the largest consumer of domestic palm oil, absorbing one-third of internal production.
Hence, as international telecoupled deforestation might be decreasing, it is time to hone in on more locally driven feedbacks to initial telecoupling connections. These might require radically different governance approaches, including fostering a more fundamental change in local priorities as well as the identification of alternative development pathways. These insights also show that telecoupled drivers of the marketization of land and its use - for instance the EU and US biofuel policies which accelerated oil palm planting in Southeast Asia - are difficult to correct once unleashed, as agro-industrial development creates domestic interest groups and entrenched interests to protect industry in producing countries, including by boosting domestic markets.
There is compelling evidence that complex, telecoupled deforestation systems can be governed by policies such as ZDCs, but that there is still a long way to go to fully achieve this goal. From our two case studies, and the wider body of work on such policies, we see a number of cross-cutting insights that are important to acknowledge and address for improving such policies. First, it will always be possible for some actors to avoid the rules of ZDCs if full traceability of production down to the production base is not achieved. However, achieving this transparency without excluding the most vulnerable informal actors and smallholders is a hitherto unresolved challenge. Second, these policies can also be avoided due to the presence of potential buyers that lack a deforestation policy; it is only where the market share of all ZDC companies collectively is high that we expect a significant effect on deforestation. Indeed, without significant market penetration, including at local scales, opportunities will always exist for producers to avoid ZDCs. Third, under the scenario where ZDC companies do not control the entire local market, positive incentives for compliance are necessary to reduce the motivation of producers to avoid ZDC policies. Yet, incentive-setting in the supply chain for deforestation-free products is still widely underdeveloped, as actors disagree over who should burden such costs. Correctly targeting such incentives is furthermore difficult and risks reinforcing existing inequalities on the ground. Hence, ZDCs are a work in progress - but have still contributed to wide-reaching changes in how commodity supply chains work.