Facilitate sustainable trade and development policies

Commodity-driven deforestation and the 2030 goal

Commodity-driven deforestation is defined as permanent tree cover loss due to the expansion of agriculture, mining, or energy infrastructure. It is measured using estimates both including and excluding fire-related losses. In 2023, 3.7 to 4.5 million hectares (Mha) of forests were destroyed permanently to make room for commodity production, mostly agriculture. This is an increase of 4.7% compared to 2022. The estimate that includes fire-related loss (4.5 Mha) is a slight decrease compared to a 2018 to 2020 baseline; on the other hand, if fire-related losses are excluded (3.7 Mha), the 2023 value was 4.8% higher than the average loss in 2018 to 2020. Recent deforestation rates indicate that the world is unlikely to eliminate commodity-driven deforestation by 2025 or 2030.

Evidence suggests that establishing and expanding the coverage of protected areas and “other effective conservation measures” (OECMs) is one effective strategy to prevent the conversion and degradation of forests and other land ecosystems, and in doing so, advance forest, sustainable land use, biodiversity, and climate goals. By designating land for protection or conservation, governments help to prevent deforestation and degradation driven by the production of commodities such as beef, soy, and palm oil. These are some of the primary drivers of forest loss in the countries that are key to delivering on most of the world’s cost-effective, land-based mitigation potential. Multiple studies have found that lands designated as protected areas – such as national parks, wilderness areas, Indigenous reserves, or national monuments – consistently experience lower levels of deforestation and less greenhouse gas emissions. In addition to formally designated protected areas, land primarily managed for other uses but covered by OECMs can also support forest, biodiversity, and climate goals. 

As of August 2024, 17.5% of the world’s terrestrial ecosystems and inland waters lie within protected areas or are covered by OECMs.

The world’s forests and other land ecosystems are under continuous and increasing pressure from the unsustainable expansion of agricultural production, and other extractive activities such as mining and logging. While global data on moratoria is not yet available, case studies indicate that one effective way to safeguard these lands is to institute a moratorium on ecosystem conversions. For example, in 2006, a group of large soy traders agreed to avoid purchasing soybeans from areas of the Brazilian Amazon that were deforested after 2008. This was successful in preventing an estimated 18,000 km² of deforestation in Brazil from 2006 to 2016; although, roughly 4,100 km² of deforestation was displaced to nearby forested countries. In 2018, Indonesia also issued a moratorium on new palm oil concessions, and in 2019, it made another nationwide moratorium on new concessions in primary forests and peatlands permanent, both of which contributed to declines in forest from 2018 to 2021.

Natural and environmental crimes threaten the environment and undermine sustainable development, international security, and the rule of law. Such crimes can include illicit logging, mining, fishing, wildlife trade, or land conversion, all of which can be financial drivers for criminal organizations and terrorism. Environmental crimes are costly, amounting to about USD 280 billion in criminal gains and costing governments USD 30 billion in lost tax revenue yearly. Public and private institutions should implement Anti-Money Laundering (AML) and Know-Your-Customer (KYC) due-diligence regulatory frameworks to uncover and prevent unintended support of environmental crimes and activities.  

The Financial Action Task Force, an inter-governmental body, sets standards to prevent global money laundering and rates countries in terms of the effectiveness of their anti-money laundering systems. According to the Task Force’s 2024 assessment ratings, only 3% of countries have substantial levels of effectiveness to ensure that financial institutions are implementing preventative AML measures and reporting suspicious activities. No countries were shown to have high levels of effectiveness. Although the rating doesn’t specifically address natural resource infractions, countries that have financial institutions effectively applying AML measures are best placed to track environmental crimes.

Although most tropical primary forest loss occurs in just a handful of tropical forested countries, much of this loss is driven by the demand for internationally-traded agricultural commodities – including beef, soy, palm oil, cocoa, and products made with these commodities such as leather and chocolate – from wealthy countries. Embodied deforestation refers to the forest loss associated with the production and consumption of commodities. In 2017, for example, almost 1.3 million hectares (Mha) of deforestation were embodied in internationally-traded commodities. The countries with the highest levels of imported deforestation that year were China, India, and the United States, and they were responsible for importing a collective 0.49 Mha of embodied deforestation. Regulations in consumer countries are necessary to reduce trade-driven deforestation. 

The production of internationally-traded agricultural commodities – such as beef, soy, palm oil, and cocoa – that drives unsustainable agricultural expansion into primary forests is also a significant source of greenhouse gas (GHG) emissions. For example, in 2014, 34% of GHG emissions from deforestation were embodied in internationally-traded commodities. Embodied deforestation emissions are the greenhouse gas emissions that result from the forest loss associated with the production and consumption of commodities. Developed countries and emerging economies import the largest shares of embodied deforestation. Regulations in consumer countries are necessary to reduce emissions from deforestation.

The value of internationally-traded agricultural commodities with embodied degradation and conversion is a measure of how international demand drives unsustainable commodity production and associated deforestation. Embodied conversion or degradation value refers to the monetary value of the commodities whose production or consumption has embodied forest loss. Regulations in consumer countries are necessary to reduce trade-driven conversion or degradation. However, data is not yet available to support the measurement of this indicator, which may inhibit policy development. 

Much of the demand for the commodities that drive forest loss is from the world’s wealthiest countries. For example, China, the European Union (EU), India, the United Kingdom (UK), and the United States (U.S.) collectively accounted for over 70% of deforestation emissions embodied in international trade flows on average from 2010 to 2014. To reduce this demand, some governments are beginning to adopt trade policies to facilitate more sustainable commodity consumption. The EU, for example, recently adopted a regulation that requires companies to ensure that covered forest-risk commodities (soy, cattle, palm oil, cocoa, coffee, rubber, and wood along with specified derivatives) are produced without deforesting or degrading forests before they are allowed to sell them on the EU market. Similar legislation has been proposed in the U.S. and passed in the UK, for which secondary legislation specifying commodity scope and due diligence requirements is under development. 

Green public procurement (GPP) policies use the purchasing power of governments to drive more sustainable commodity consumption by generating demand for sustainably sourced products. Public procurement carries significant buying power as it accounts for the GDP of 12% of OECD countries and 14% of low-income countries. Governments increasingly use GPP policies as tools to meet their environmental, economic, and social objectives.  

As of 2021, 53% of countries had at least one GPP institutional arrangement in place (at differing levels of development), indicating much room for improvement. These arrangements included GPP practices incorporated in procurement law, standardized environmental criteria in certain procurement categories, GPP strategies or action plans, and the collection/reporting of GPP activities, among others. However, many countries that have implemented a form of GPP are not yet monitoring their procurement operations or reporting on them.

Globally, about one-third of food is lost or wasted. Reducing food loss and waste presents an opportunity to promote more sustainable commodity consumption by minimizing the “waste” of agricultural land, water, and other agricultural inputs and processes associated with greenhouse gas emissions, thereby reducing the pressure on agricultural systems to expand to meet growing demand. Governments can motivate efforts to reduce food loss and waste across supply chains through a variety of actions such as developing and implementing national strategies to reduce food loss and waste; providing funding to support the adoption of new technologies and practices; standardizing food date labeling on packaged food to reduce consumer confusion over food safety; changing laws to facilitate food donation and food waste diversion; and supporting education campaigns for farmers and consumers. 

The number of countries implementing large-scale policies or plans to reduce food loss and waste has increased substantially in recent years from countries representing 14% of the global population at the end of 2018 to countries representing 35% of the global population by the end of 2021.

Ruminant livestock such as cattle, sheep, and goats are particularly resource-intensive commodities to produce, requiring seven times as much land as poultry and pork and 20 times more than beans per gram of protein. Pasture expansion for beef production, in particular, drives over 40% of tropical deforestation. By contrast, ruminant livestock production on rangelands that are not encroaching upon forests provides livelihoods to millions of pastoralists, produces high-quality protein and micronutrients, and uses arid lands that could not otherwise produce crops. In addition to sustainably increasing ruminant meat productivity, moderating ruminant meat consumption will be essential for reducing agricultural land demand and reducing methane emissions while feeding more people.  

Dietary shifts to reduce ruminant meat toward plant-based foods are only relevant for high-consuming regions (primarily in the Americas, Europe, and Oceania)* where protein consumption is well above dietary requirements and alternative protein options are widely available. That said, in some regions with historically low meat consumption, rising consumption will also need to be moderated.

The FAOSTAT data indicates that after declining from a peak of 112 kilocalories per day in the 1990s, per capita ruminant meat consumption across high-consuming regions fluctuated in the following decades, then began a slight downward trend in 2014, reaching 105 kilocalories per day in 2021. This weighted average tracks consumption in high-consuming regions only. 

Companies that produce, sell, or trade forest-risk agricultural commodities and the financial institutions that invest in those companies can support sustainable production by committing to only source commodities that are verifiably produced without contributing to deforestation. However, the zero deforestation commitments of companies and the zero deforestation policies of financial institutions with the most exposure to and influence on tropical deforestation show considerable room for improvement. In 2022, USD 6.1 trillion went to the 350 companies with the highest exposure to tropical deforestation, including almost USD 530 billion invested in companies without a single zero deforestation commitment.

Global Canopy’s Forest 500 assessment evaluates the zero deforestation commitments of these companies and zero deforestation policies of the 150 financial institutions with the highest exposure to deforestation risks. For companies, the Forest 500 assessment provides a commitment strength score based on the extent to which companies’ commitments have critical components, such as whether they are time-bound, cover all sourcing regions and suppliers, and trace products to the point of production. For financial institutions, the Forest 500 assessment provides a policy strength score that is based on the extent to which financial institutions’ commitments and policies have critical components, such as whether they are time-bound, they apply to all financing, and clients or holdings are required to monitor their operations or suppliers. 

For the 350 companies assessed in 2023, the average commitment strength score was 31%, meaning that, on average, companies fulfilled 31% of Forest 500’s criteria for strong zero deforestation or zero conversion and traceability commitments. For the 150 financial institutions assessed in 2023, the average commitment strength score was 16%, meaning that, on average, financial institutions only fulfilled 16% of Forest 500’s criteria for strong deforestation and traceability-related commitments. Both scores show improvements since 2022, but the persistently low averages show that many companies and financial institutions are not keeping up with best practices for reducing deforestation and increasing traceability.

Companies that sell or trade agricultural commodities and products associated with forest loss have a crucial influence on production models. By committing to only source commodities that are verifiably produced without contributing to deforestation and adequately implementing and reporting on those commitments, they can significantly support sustainable production. Financial institutions that invest in those companies can help combat deforestation and promote sustainable commodity production by instituting commitments to eliminate deforestation in their portfolios and adequately implementing and reporting on those commitments. 

Global Canopy’s Forest 500 assessment scores how well the 350 companies as well as the 150 financial institutions with the highest exposure to deforestation risks implement and report on their commitments. For companies, this includes whether they are reporting volumes of product compliant with sustainability requirements and if their reporting is independently verified. For financial institutions, this considers whether they assess clients’ or holdings’ exposure prior to onboarding or if they require clients or holdings to report on their progress towards their commitments. 

The 350 companies assessed in 2023, fulfilled, on average, only 16.3% of Forest 500’s criteria for implementation and reporting on their zero deforestation commitments. For the 150 financial institutions assessed in 2023, financial institutions only fulfilled, on average, 8.4% of Forest 500’s criteria for implementation and reporting. While both scores show a slight improvement compared to 2022, they remain alarmingly low.  This shows that companies and financial institutions are not keeping up with best practices for reporting on and implementing deforestation-related commitments.

Mining for commodities such as gold and coal drives permanent tree cover loss and has increased in tropical rainforests in recent years. Globally, direct deforestation from extractive industries is minor, estimated to account for 1.3 and 3.3% of deforestation in tropical forests. However, extractive industries’ indirect impacts on forests and other natural ecosystems are estimated to be much larger than their direct impacts. Furthermore, mining-related direct deforestation is heavily concentrated in certain highly biodiverse biomes and countries, where the impact on ecosystem services and local communities is significant.  

Corporate transparency on forest risks remains very limited in the mining and extractives sectors. In 2023, there was a small increase in the number of companies reporting through CDP that have a policy to reduce or avoid biodiversity loss. However, 21% of reporting companies still have no such policy. In addition, the quality and effectiveness of these policies remain unclear due to a lack of specificity in their design.