Prioritising sustainability in China’s soy supply chain

André Vasconcelos and Isabel Nepstad

On the road in China, photo: André Vasconcelos

This year is proving to be one of great uncertainty for China’s soy crushing and livestock industries. The trade tensions with the United States and the outbreak of African Swine Fever have both had significant consequences for the Chinese soy and livestock feed industries, affecting demand and profit margins.

Yet these challenges also shed light on new opportunities for facilitating China’s transition to a healthier and more sustainable economy — the backdrop for our recent China Soy Roadshow organised by Solidaridad and The Nature Conservancy to raise awareness around sustainability.

Chinese President Xi Jinping has emphasized the need to protect nature and biodiversity before economic development. He reiterated that “while China’s economy transitions from high-speed growth to high-quality development, business must prioritize long-term sustainability.”

China is the largest soy buyer in the world, importing 88 million tons in total in 2018. Most of this comes from tropical areas. Almost two thirds of Brazil’s soy exports were shipped to China in 2017.

For this reason, China has a critical role to play in the much-needed shift to decouple soy production from deforestation and habitat loss where it is produced. We wanted to meet with key players in the industry to explore these opportunities in person.

China Soy Roadshow

The Sustainable Soy Trade Platform (SSTP)’s China Soy Roadshow was organised to raise the awareness among the Chinese soy and livestock industries of deforestation and land conversion risks associated with its soy imports.

We met with representatives from the private sector, soy and meat association, government and researchers to introduce them to the Trase, Agroideal, and Global Forest Watch Pro tools and initiatives that could help them move towards more responsible procurement practices.

Trase for instance, can help buyers in China identify and assess the environmental risks that they may be exposed to, such as deforestation and related climate change emissions.

Using Trase data, we estimated that deforestation for soy in Brazil was responsible for 14.7 million tons of CO2 in 2017. Some 45% of this is estimated to be associated with China’s soy imports.

Fruitful discussions

Our hosts were very receptive to the potential of these tools, remarking on how much progress had been made in combining advanced technology and data to enable companies to better understand their risks and plan sustainable sourcing strategies.

The soy and meat industries are alert to the Chinese government’s emphasis on sustainability and biodiversity protection, and are also beginning to recognise the need for sustainability.

Meeting the Jiusan Group in Harbin, photo: Jiusan Group

Yongge Shi, President of Jiusan Group commented: “These are very good tools and we can use them in the future to ask and require our suppliers to buy from areas of no deforestation and land conversion. Any company should take responsibility for protecting forests and biodiversity”.

It was great to see such enthusiasm for the tools, and we hope we will see further interest and concrete follow ups, perhaps leading to a stronger Chinese voice on sustainability issues on the global stage.

Opportunities for progress

The ongoing trade tensions with the U.S. have led China to import more soy from South America, but African Swine Fever is expected to reduce pork production in China, potentially reducing soybean meal demand by up to 20%. These are affecting industry profits, as well as increasing prices for other meat products, including beef, lamb, and chicken.

The current situation is challenging, but it perhaps offers China an opportunity to reshape and reform the industry, with a view to strengthening the long-term sustainability of its procurement.

Some progress has already been made on advancing on sustainable soy. By working together with producers in South America, China can help address the sustainability challenges the world faces in the global soy supply chain.

André Vasconcelos is a researcher with Global Canopy who works on Trase and Isabel Nepstad is a programme manager with Solidaridad Network in China.