Tackling deforestation risk in Brazilian cattle exports: 20 key companies in China
This is the second in our series on deforestation risk in the Brazil-China beef and leather trade. Read the first blog here.
In a supermarket in Hong Kong, shoppers stream past aisles of vegetable oils, fruits and other groceries. Over at the meat section, various cuts of meat are available, some of which come from Brazilian cattle.
This is Kai Bo Supermarket, one of the biggest importers of Brazilian beef into China (including Hong Kong), and a major Hong Kong grocery retailer, with over 90 outlets.
A five-minute walk from Kai Bo’s door, shoppers compare sofas in a branch of KUKA Home. KUKA is one of China’s biggest home furnishing manufacturers and one of the world’s biggest leather sofa suppliers. And it manufactures sofas using Brazilian leather.
Kai Bo and KUKA have been identified by Global Canopy as being two of the 20 most important companies in China in the race to reduce deforestation caused by cattle ranching in Brazil.
China, including Hong Kong, imports more than a third of all beef and leather exports from Brazil, where cattle ranching is the leading cause of native vegetation clearance (see our previous article).
The 20 companies were selected through research into the use of imported Brazilian beef and leather in China. They were found to have the greatest potential influence within these supply chains based on their roles, volumes of imports, and market share.
This ongoing study follows on from Global Canopy’s Forest 500 initiative, which identifies and assesses the most important companies globally for addressing tropical deforestation. By taking a closer look at Brazilian beef and leather in China, the study provides new insights on key companies in this important trade relationship.
Besides Kai Bo and KUKA, the top 20 list also includes 11 companies that rank among the 15 biggest importers of Brazilian beef or leather into China, and are also involved in processing, manufacturing and selling beef or leather products in China. Examples include furniture manufacturer HTL, and meat processor and distributor Million Far East Ltd.
These companies, which have greater reach across the supply chain, were considered likely to have more influence over it than those with only one role, such as shipping or processing.
Five further companies that import smaller volumes of beef and leather were also included for this reason. These include China Resources National Corporation, one of the top 30 importers of Brazilian beef. China Resources National owns one of the largest grocery retail chains in China, CR Vanguard, meaning that it could exert influence back up the beef supply chain from an influential position within the grocery retail market.
Another of the smaller importers is US-based Lear Corporation, which has its Asian headquarters in Shanghai. Lear’s subsidiary Eagle Ottawa is a major global car leather supplier and one of the top 20 importers of Brazilian leather into China. Lear itself has more than 20% market share of the car seat making industry, both in China and globally, giving it considerable potential sway within that industry.
Finally, three other companies were selected due to being major actors within the key industries associated with Brazilian imports. These were WH Group, one of China’s top three meat processors; Belle International, the country’s biggest shoe manufacturer and retailer; and Adient PLC, an Irish car seat manufacturer with over 40% market share in China. They were found to be exposed to the risk of using significant amounts of Brazilian beef and leather due to their large market shares.
Together, these companies account for at least a quarter of all Brazilian beef imports and a fifth of all Brazilian leather imports into China.
Not only do they have the potential to help remove Brazilian deforestation from China’s beef and leather supply chains. Through their exposure to the risk of deforestation in their own supply chains, they also face business risks, such as reputational damage.
So how can companies in the list address these risks and help make beef and leather production in Brazil more sustainable?
The key steps companies can take are to assess their exposure to deforestation risk; adopt time-bound policies to address that risk; work with their suppliers to implement their policies; and report publicly on progress. (See page 11 of this report.) If influential companies in the supply chain take a lead in doing so, this could stimulate others to follow. However, this requires companies to recognise tropical deforestation as a risk and a priority.
Our next article in this series will explore the extent to which the policies of these 20 companies indicate an awareness of their exposure to deforestation risk and an intention to use their influence to help reduce it. Later on, we’ll also explore the foreign markets and clients served by some of the leather companies.
Then we’ll be heading back upstream to look at the producers and exporters in Brazil, links to land use change, and the work underway by Trase* to quantify the deforestation embedded in China’s beef imports. This will provide deeper insights on the exposure among companies in China to deforestation risk.
The full list of the top 20 companies in China, and reasons for their selection, can be downloaded here.
- Trase is a project developed in partnership between the Stockholm Environment Institute (SEI) and Global Canopy that seeks to transform our understanding of agricultural commodity supply chains by increasing transparency, revealing the links to environmental and social risks in tropical forest regions, and creating opportunities to improve the sustainability of how these commodities are produced, traded and consumed. For this article, beef importer ranks were obtained by processing data available from https://trase.earth.
Christina MacFarquhar is an Analyst in the Supply Chains Programme team at Global Canopy
This work was made possible thanks to funding from NICFI, as part of CDP’s Power of Procurement project, and DFID.
Originally published at medium.com on February 14, 2019.