Get Ready for Forest Footprint Disclosure

If you were wondering what the next step in corporate transparency is, you got an answer earlier this week. Companies all over the world have been working in the last couple of years with the Carbon Disclosure Project (CDP) to disclose, manage and eventually reduce their carbon footprint and later on their water footprint. Now, another project, the Forest Footprint Disclosure (FFD), is working similarly with companies on their impact on forests. This week they released their third annual report.

FFD is very similar to the CDP in its approach and vision. Initiated in 2008, it is a not-for-profit special project of the Global Canopy Foundation. FFD engages with companies to ask them to disclose their current understanding of their ‘forest footprint’ based on exposure to five key commodities that have the potential to be sourced from recently deforested land: soy, palm oil, timber, cattle products and biofuels.

Just like the CDP, FFD is backed by investors that help make FFD’s request taken more seriously by companies. So far FFD received an endorsement from 70 investors, managing $7 trillion in assets. It’s not close to the 551 institutional investors with a combined $71 trillion in assets that are backing the CDP, but it’s still impressive enough to receive attention and replies from companies. It’s also an indicator to the growing interest of investors in the ability of companies to adapt to a resource-constrained world.

Companies are starting to understand the need as well. In 2011, it was sent out to 357 international companies and 87 of them replied - an 11 percent rise compared to last year. Among the companies that didn’t reply you can find the usual suspects, like oil companies such as BP, Chevron, ExxonMobil, ConocoPhillips, Royal Dutch Shell, Total and Valero Energy, or Amazon that doesn’t like to disclose anything regarding its environmental impacts.

You can also find on the no-reply list companies that have some green credentials like Starbucks, McDonalds, Coca-Cola and Office Max. But the most surprising companies that said no are Patagonia and Stonyfield Farms, which are considered by many as green business leaders. My guess is that both companies believe they don’t need the FFD to address this issue effectively, yet I hope they will reconsider this approach next year and report on their forest footprint. After all, if they’re already working on it, why not show it?

On the other hand, new companies such as Johnson & Johnson, Tesco UK and Walt Disney reported to FFD for the first time. If you read some of the replies companies provided you'll understand why – a growing pressure from stakeholders such as customers and investors, as well as the awareness to the fact that forests provide important services to companies in terms of commodities and raw materials, and therefore destruction of these services will hurt not just mother earth, but also companies’ bottom line.

Nestlé, for example acknowledges the fact that “forests continue to be lost, primarily in the biodiversity-rich tropical zone, at rates that have remained largely static for the last 20 years.” The company explains that “our most significant influence on forests is through agricultural commodities and we are committed to ensuring that we and our suppliers are responsible stewards of the forests we source from. Our priorities in this respect are paper and board, timber, palm oil and soya.”

What does Nestlé do about it? “In furtherance of these commitments, we have developed Responsible Sourcing Guidelines for the different commodities as well as other measures to ensure responsible purchasing practices. Nestlé firmly believes that through such actions we will improve the sustainability of our raw materials and create shared value across the supply chain from local communities all the way through to consumers.”

Nestlé’s approach is a great example of the transition ecosystem services made from a concept that companies didn’t care much about to an important factor that is now evaluated in terms of risks and opportunities. It’s true that we’re talking about the companies that are responsible for the growing pressures on the ecosystems in the first place, but still, it’s important to know that (some of) these companies finally understand that they can no longer ignore the impacts of their activity.

Nestlé is not alone. The report acknowledges companies that show leadership in their sector, such as Nike (clothing accessories and footwear), Sainsbury (food and drug retailers), Kimberly-Clark (personal care and household goods), Nestlé and Unilever (food products and soft drinks), and others. Interestingly, half of the leaders are British companies. And this is only couple of weeks after the UK led the list of Corporate Knights’ Global 100 with 16 of the same companies on the list. This is certainly not a coincidence.

FFD is a voluntary reporting system and by no means is an alternative to regulation that will make sure that deforestation and land conversion would be minimized. Yet, as Jeffrey Hollender mentioned earlier this week in his talk at NYU, when there is no regulation, we need to look for entities that will create an alternative. In that sense, FFD creates an important tool that will help companies fill this role, helping them to benefit not just the forests, but also their own business.

[Image credit: Forest Footprint Disclosure]

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.