Fifteen European and US companies that could help cut deforestation risk from Brazil-China leather trade
Christina MacFarquhar, Global Canopy
This is the fourth in Global Canopy’s series on deforestation risk in the Brazil-China beef and leather trade. Read the first, second and third blogs on Medium.
Top footwear, furniture and car companies headquartered in Europe and the United States of America (US) are at risk of contributing to deforestation in Brazil by making or selling products containing leather processed in China.
An ongoing study by Global Canopy identifies 15 key Europe and US-based companies that could play an important role in reducing deforestation linked to these three industries. They include major car manufacturers such as General Motors and Volkswagen, furniture retailers Ashley Furniture Industries and DFS, and footwear companies Adidas and Nike.
They are supplied by the three industries using most of China’s imports of Brazilian leather: the footwear, furniture and car interior manufacturing industries. China (including Hong Kong) is the world’s biggest importer of leather and beef from Brazil, where cattle ranching is the top direct driver of deforestation and other native vegetation loss. (We’ll talk about the actual association between beef and leather shipments and deforestation in Brazil in the final article in this series).
All 15 companies were found to source parts or products from suppliers that have major manufacturing operations in China and are known or likely to use Brazilian leather. The 15 companies also all have significant market shares within their industries and/or own top-selling brands.
This puts them at risk of being associated with Brazilian deforestation, exposing them to reputational, operational and regulatory risks. But it also makes them potential ‘powerbrokers’ within their industries, meaning that they could have a positive, galvanising influence on their peers and suppliers if they take action to address deforestation risk in their own leather supply chains.
Their role is particularly important given that none of the 11 key leather companies in China that supply the car, footwear and furniture industries and are exposed to Brazilian deforestation risk has a publicly available policy on deforestation. This implies that within these important supply chains there is a worrying lack of awareness, transparency and action on deforestation risk.
Links to China and Brazil
Most of the 15 Europe- and US-based companies are customers of the 11 key leather processors and manufacturers operating in China identified previously in this series.
For example, UK-based sofa retailer DFS and American department store retailer Macy’s both sell sofas made by HTL, one of the 11 key companies in China. HTL is China’s second biggest importer of Brazilian leather.
Car companies Daimler, General Motors, Ford and BMW, meanwhile, are major customers of US-based car seat manufacturer Lear Corporation, another of the 11 key companies. Lear’s subsidiary Eagle Ottawa imports Brazilian leather into China, where Lear has 21% of the Chinese market in car seat manufacturing.
And Nike, Adidas, and VF Corp (owner of brands including Timberland) are clients of a third key company in China, Yue Yuen Industrial Holdings Ltd. Yue Yuen is China’s biggest shoe manufacturer and imports Brazilian leather into China via subsidiaries.
Evidence of exports from China
Many of the 15 companies were confirmed, using trade data and other sources, to be shipping car seats, furniture or shoes from China to other countries.
For example, Beijing Benz, a joint venture between Germany’s Daimler and China’s BAIC Motor, exports Lear car seats from China to India for installation in Daimler’s Mercedes-Benz cars.
Adidas, also headquartered in Germany, exports leather shoes from China to Indonesia, Peru and the US, among other places. And Ashley Furniture, America’s biggest home furnishings company, ships furniture to countries ranging from Ecuador to Kazakhstan.
These insights highlight that many of these Europe- and US-based companies are exposed to deforestation risk from the Brazil-China leather trade not only in the regions in which they are headquartered, but throughout their global operations. China is itself also a key retail market for most of them.
This means that to remove deforestation risk from their supply chains, these companies need to take measures that apply to all the regions in which they operate, and to all their direct and indirect suppliers.
Power to drive change throughout the supply chain
Collectively, these 15 companies hold a lot of sway. Between them, the five car companies are the top car manufacturers globally, in Europe, and in the US — both by number of cars produced and by revenue. Adidas, New Balance, Nike, Skechers and VF Corp account for about 20% of global shoe sales.
And among the furniture retailers, IKEA is the world’s number one furniture company, Ashley Furniture Industries is America’s biggest home furnishings company; DFS is the UK’s second largest home furnishings company (after IKEA); La-Z-Boy is America’s third biggest seat and sofa company; and Macy’s is one of the world’s largest department store retailers.
Whether alone or as a group, these companies have the power to set major national and worldwide trends. These could include a trend towards addressing deforestation risk in the production of leather shoes, car seats and sofas.
But are they aware of the deforestation risk in their supply chains? And, if so, are they engaging with their upstream suppliers in China to address it?
Our next article will explore these questions by looking at the deforestation policies of these 15 Europe- and US-based companies.
The full list of the 15 companies in the Europe and the US, and reasons for their selection, can be downloaded here.
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
This work was made possible thanks to funding from NICFI, as part of CDP’s Power of Procurement project, and DFID.
