Wednesday, February 10, 2010

Forest footprint disclosure

Last Wednesday, the Forest Footprint Disclosure (FDD) project unwrapped its first report in London. This new organisation, funded in part by the British government, aims to highlight the amount of forest destruction involved in big business. A "forest footprint" indicates the extent to which corporations are relying on unsustainable practices, such as rainforest destruction, to do business.

On the face of it, one might wonder why Fortune 500 companies would be willing to investigate, and then reveal, the extent to which the products they buy are from unsustainable, or even downright illegal, sources. And, true enough only 35 companies participated in the FFD this first year.

It turns out, though, that some companies are interested in doing this. One reason is the reputation risk that may come with their brand, whether it is Clarke's shoes, Dove or Kit Kat, companies have a great deal of money banked on a brand, and they know what damage can be done when the NGOs get nasty.

Another reason, partly related to this, is that dealing with unsustainable ways, or with practices that are likely to bring in bad PR (like cutting virgin rainforest), is also something that asset managers want to know. This sort of project helps investors identify how an organisation’s activities and supply chains contribute to deforestation, and how this links with their forest footprint and their value. FFD says it is backed by 34 financial institutions with $3.5 trillion in collective assets under management.

At the end of the day, companies need to know the provenance of the products they buy. They need to know whether what they sell is legal and sustainable. The issue of child labour harmed parts of the clothing industry, and so there is the possibility that rainforest destruction could become a similar kind of problem. Pictures of dead orangutans are powerful, and shareholders don't like it. It will be interesting to see what comes of this. Indices do affect companies. Access to Medicines index, I hear, is already leading companies to change their policies towards drug access.

On a final word, for now, on the FDD. It brought together some quite interesting people from both sides of the fence. From the corporate world and the green NGOs. This conversation, which I caught part of, was overheard...

Paper industry man: Why did you call for a 12-month moratorium on cutting forests?

Green NGO man: We didn't, we called for a 12-month moratorium on cutting virgin rainforest for paper?

Paper industry: But we don't cut virgin rainforest for paper.

Green NGO: What about [unclear name of place in Asia]?

Paper industry: That's degraded land.

Green NGO: We don't think so.

Paper industry: Well why don't I locate the satellite images so we can sit down and show you.

Green NGO: Fine, but you'll also need to look at where the concessions are.

Paper industry: Well we only take out what we call wood residues from these areas.

Green NGO: Well we call it virgin rainforest.