European and US companies need deforestation policies for Brazil-China leather trade

Christina MacFarquhar

Leather used for furniture and shoes may be linked to deforestation in Brazil, photo via Unsplash

This is the fifth in Global Canopy’s series on deforestation risk in the Brazil-China beef and leather trade. Read the first, second, third and fourth blogs on Medium.

Most of the 15 European and American companies that could best help reduce deforestation in the Brazil-China leather trade have no policy on deforestation risk in their leather supply chains.

This is the latest finding from Global Canopy’s ongoing study of beef and leather produced in Brazil and processed in China, Brazil’s biggest export market for these two commodities. The study identifies and assesses key ‘powerbroker’ companies who are exposed to Brazilian deforestation risk through these supply chains, and who could be most influential in reducing it.

We looked at the publicly-available policies, commitments and reports of the 15 companies we identified as the top potential powerbrokers in Europe and the US. All operate in the car, furniture and footwear industries — the main industries using exported Brazilian leather. They include well-known names such as BMW, La-Z-Boy and Nike.

In addition to being influential players within their industries, they are all linked to suppliers producing leather products in China. Most of them are customers of the companies we identified as the key leather processors and manufacturers in China, none of which was found to have a deforestation policy for beef or leather.

This means that if the 15 European and US-based companies engaged their suppliers in implementing strong forest policies, they could influence some of the most important processors and manufacturers in the Brazil-China leather trade — and have a significant positive impact on their awareness and action. They could also protect themselves from business risks, including risk to their reputations.

Cattle ranching for beef and leather production is the leading cause of deforestation and other native vegetation loss in Brazil.

Shoe companies lead the way, while car makers lag behind sofas

The results show that only five out of the 15 companies have policies on their websites that aim to address deforestation risk in their leather supply chains.

These include four footwear companies — Adidas, New Balance, Nike and VF Corporation — and one furniture company — IKEA. There is a notable absence of policies among the five car companies.

None of the policies is very strong. They all score less than 50 out of 100 points according to Global Canopy’s Forest 500 assessment, which rewards policies with features that make them more likely to be effective in addressing deforestation risk. But all contain numerous positive elements that could be supporting their implementation and sending important signals to the companies’ suppliers.

Policy strengths and weaknesses

For example, several include commitments to develop leather traceability systems, and in some cases these appear to apply to all of the company’s operations and suppliers around the world. Some also describe clear processes for checking which suppliers comply with their sourcing guidelines and engaging with those that don’t.

The four footwear companies all aim to ensure leather in their supply chains is not linked to deforestation in the Amazon biome, and they all publish lists of their suppliers.

But only one policy includes public reporting on progress in implementation, and none incorporates independent verification by third parties.

In addition, none of the footwear company policies appears to address deforestation outside of the Amazon, meaning that other important ecosystems threatened by cattle ranching, such as Brazil’s Cerrado savannah, are not covered.

If the information shared on these companies’ websites is a true reflection of their internal policies, the gaps mean that none can guarantee the removal of deforestation, or other ecosystem conversion, from their leather supply chain now or in the future.

Car companies and the drive for sustainability

The fact that no policies were found among the five car companies is significant. About 50% of Brazil’s leather exports (about 40% of all cattle leather produced in Brazil) is used in cars, making this an important industry when it comes to assessing deforestation risk.

So does the lack of policies mean the car companies are doing nothing? Not necessarily. Four of them — BMW, Daimler, Ford and Volkswagen — are part of the Drive Sustainably initiative, which set up the Raw Materials Observatoryin 2017 to “identify and address ethical, environmental, human and labour rights issues in the sourcing of raw materials”. Leather was identified as one of the priority raw materials to investigate.

A 2018 report by the initiative rated leather as having a strong association with environmental, social and governance issues, stating that “Brazil reportedly struggles with some forced and child labour issues and deforestation related to the leather industry”.

And there is some evidence of individual action. Volkswagen’s Porsche brand has a pilot leather traceability project. And the General Motors website states an intention to “increase the sustainability” of the leather it uses.

These initiatives indicate some awareness, but this has not yet been translated into visible, time-bound, individual commitments, suggesting a lack of urgency.

This is despite 2019 marking a decade after a major Greenpeace investigation highlighted Brazilian deforestation risk in the leather supply chains of 10 of these 15 companies, including all five car manufacturers.

An invitation to disclose

Another way for companies to communicate — and get support — on forest risk, is by sharing information via CDP’s annual forests questionnaire.

Fourteen of the 15 European and US-based companies we looked at have been invited to respond to CDP’s Forests questionnaire (DFS being the exception). So far only Adidas, BMW, Nike and VF Corporation have responded, and only Nike and VF Corporation did so in the last three years. VF Corporation has allowed its response to be made publicly available.

If the 15 companies were to develop, implement and disclose consistently on robust deforestation policies, they could set a trend among their suppliers and peers, providing a vital boost to efforts to address deforestation.

Tracing leather back to Brazil

For downstream companies such as these 15, understanding deforestation risk linked to cattle production, and tracing leather back to its source, can be difficult. Between the first ranch and the final retailer, there are often multiple stages of leather processing and manufacturing by numerous companies in different countries. And production in Brazil can involve complex factors such as land speculation and corruption.

But enough information is available for companies to carry out initial risk assessments and develop policies to set targets and start tackling the issue — as the five companies with policies are demonstrating.

In our next article, we’ll be heading back up the supply chain to look at the cattle processors in Brazil that are supplying beef and leather to companies highlighted throughout this series. We’ll also discuss the challenge of understanding the actual association of beef and leather supplies from a particular company with deforestation.

To read the rest of the series, click on the links below:

1. The Chinese industries importing Brazilian beef, leather — and deforestation risk

2. Tackling deforestation risk in Brazilian cattle exports: 20 key companies in China

3. Beef and leather companies in China silent on Brazilian deforestation

4. Fifteen European and US companies that could help cut deforestation risk from Brazil-China leather trade

Christina MacFarquhar is a researcher with Global Canopy.

This work was made possible thanks to funding from NICFI, as part of CDP’s Power of Procurement project, and DFID.

This blog is also published on Trase