Seeing the wood for the trees in your supply chain

Earlier in 2020, the UK Department for Environment, Food & Rural Affairs announced plans for a potential crackdown on deforestation taking place in the supply chains of UK companies by launching a consultation on the proposed introduction of legislation mandating that large companies in the UK prove their supply chains are free from illegal deforestation. The consultation closed last month and the Government response is still awaited.

The move continued trends towards an increasingly 'hard law' driven approach in the ESG sphere and a more diversified understanding of the Environmental limb of ESG, which while still primarily focused on climate now very much includes nature (see developments around the TCFN) and biodiversity. 

One of the other trends we have seen in this space is the heightened backing of various proposals and initiatives by companies and financial institutions. 

Now, we have seen an investor coalition with EUR 1.8tn in assets under management call on their investees to take action to end deforestation in their supply chains and increased traceability. The investees of the 9 institutions behind the initiative will be asked going forward to publicly disclose their supplier lists for certain commodities presenting a high risk for deforestation. Those seen as being linked to cases of deforestation will be asked to mitigate their impacts and prevent them from recurring in the future. 

What the response will be, to both the UK consultation and this investor initiative, remains to be seen. What is clear though, amidst the numerous developments coming thick and fast in an ever-evolving ESG space, is that more players than ever appreciate the need for action and they are pushing for it to be taken in a much more concrete fashion.