The world’s global consumer goods companies, including Kraft Heinz, RBI and Tyson Foods, are off track to achieve sustainable consumption and production by 2030, and industry commitments to zero net deforestation by next year are now impossible, according to new research by CDP, the environmental non-profit and investment research provider.

The CDP Consumer Deforestation Report ‘No Wood for the Trees’ analyses 22 companies (3% of MSCI ACWI World*) according to scale and commodity use in the consumer goods sector, including Food Manufacturers, Personal & Household Goods Manufacturers and Fast Food Retailers. Due to their proximity to the consumer they face reputational risks from commodities linked to deforestation with potential risks to revenues. They also face operational risks from disruption in the supply chain, especially in Asia and South America.

Despite the net zero deforestation target for 2020 set by the Board of the Consumer Goods Forum, only eight companies were found to be deploying comprehensive forest and land-use management practices (including regenerative agriculture and soil management). This is at a time when changing consumer trends with a greater focus on transparency on sourcing, threatens traditional business supply chain models.

These global consumer-facing companies are particularly exposed to ‘soft commodities’ linked to deforestation, so called ‘Forest Risk Commodities’ (FRCs), with palm oil, soybean and cattle playing a major role in product formulation, whilst paper and pulp products are essential to product packaging and marketing. Even leading companies Nestle and Procter & Gamble have acknowledged that they will fall short of the 2020 deforestation goal. CDP’s research shows that just three companies achieved 100% certification in palm oil and just one in timber.

Whilst companies’ ambitious targets indicate they understand the need for action on deforestation, none are taking concrete steps to significantly reduce deforestation risk in their supply chains. European companies Nestle, Unilever and L’Oreal, with larger reported revenue and supply risks related to FRCs, focus on sustainable production innovations and have more robust governance of deforestation-related risks. But not all stakeholders are considering the hidden use of FRCs within their supply chains.

Companies like Tyson Foods and Restaurant Brands have indirect exposure to soymeal through animal ingredients and there is insufficient labelling for animal derivatives in consumer goods (including bovine). These FRCs represent as much as 30-40% of procurement costs for some companies and margins could be significantly impacted by price volatility or increased price differentials between certified and non-certified products.

Carole Ferguson, Head of Investor Research, CDP commented: “When it comes to deforestation and consumer goods, the go-to is palm oil. Revenue exposure due to palm oil can be significant. 45% of companies reported revenue dependencies of at least 20% on palm oil. But leading global consumer goods companies need to look closer at all the hidden risks they are running across their supply chains and scratch below the surface. As we approach our planetary boundaries much more needs to be done upstream. These companies are well placed in the value chain to act and fast. That starts with full and deep transparency of supply chains for companies to hold producers to account and provide consumers with full sourcing and product visibility.”

CDP’s League Table of companies in the consumer goods sector:

League Table rank Company League Table weighted rank Transition risks rank Physical risks rank Transition opportunities rank Climate governance & strategy rank
1 Danone 7.42 3 5 6 5
2 Nestle 7.44 8 6 5 3
3 L’Oreal 7.96 9 8 3 6
4 Unilever 8.05 20 4 1 1
5 Kellogg 8.10 10 7 9 2
6 Mars 8.24 13 2 2 8
7 Pepsi-Co 10.25 5 13 17 7
8 McDonalds 10.42 16 18 4 9
9 General Mills 10.45 12 12 10 10
10 Kao Corp 10.48 17 19 7 4
11 Fonterra 10.87 1 14 12 16
12 Reckitt Benckiser 10.99 7 9 16 12
13 Colgate Palmolive 10.99 6 3 20 11
14 Procter & Gamble 12.19 15 10 13 13
15 Campbell Soup 12.39 2 11 21 17
16 Mondelez 12.74 19 1 15 13
17 Yum! Brands 13.31 14 21 8 18
18 Estee Lauder 13.84 11 20 14 19
19 ConAgra 14.57 18 15 18 15
20 Kraft Heinz 14.77 4 17 22 22
21 Restaurant Brands 16.60 21 22 17 20
22 Tyson Foods 16.71 22 16 11 21
Weighting 35% 10% 25% 30%

Close to 90% of global palm oil production is concentrated in Southeast Asia in low lying land exposed to coastal flooding, which could jeopardize global supply and risk further deforestation inland. But substituting palm oil with other types of vegetable oil could inadvertently lead to further deforestation. Companies need to look at ways to eliminate deforestation from their supply chains through a combination of traceability, certification and engagement with all supply chain actors to mainstream sustainable agriculture practices.

The report finds that leaders in the sector, like Unilever, L’Oreal and Mars recognize these risks and are driving competitive advantage through product innovation and establishing sustainable agricultural practices direct with small holders. The report also shows significant developments in plant-based foods and a change in supply chain models that bring consumer goods manufacturers closer to the field. McDonalds performs significantly better than other fast food retailers Yum! Brands and Restaurant Brands by actively engaging with its suppliers and has robust risk management systems in place. Restaurant Brands, Tyson Foods and Kraft Heinz come bottom due to exposure to land-intensive cattle and weak performance on forest risk commodities disclosure.

Due to their position in the value chain, consumer goods companies face unique risks and opportunities resulting from their proximity to the consumer. From a risk perspective, they are highly exposed to changes in consumer preferences and reputational risks compared to upstream industrials. This proximity however, gives them the opportunity to engage directly with consumers and drive behavioral change to shape the markets into which they sell, ensuring the relevance and longevity of their brands.

Ling Sin Fai Lam, Senior Research Analyst at CDP and author of the report, said: “From plant-based meat alternatives to the move away from plastic in favor of paper-based packaging, consumer trends are impacting global supply chains and ultimately our forests. This report shows consumer goods companies’ responsibility does not stop at transparency and certification.”

“Smallholders manage 80 percent of the farmland in sub-Saharan Africa and Asia, and we are seeing companies actively looking at transformative innovations to shorten the supply chain, working directly on smallholder initiatives. With increasing pressure to feed a growing population and protect the planet, companies and their customers are looking beyond their headquarters to the field.”

Download the Executive Summary of the report (pdf)