Why 2015 Matters So Much for Corporate Sustainability Goals
Each year, the earth loses 6 million hectares of tropical rainforest, roughly the equivalent of Sri Lanka. Two-thirds of that harvest are used to meet demands for palm oil and wood products, as well as clearing land for soybean crops and cattle. As groups committed to saving that land have gained more attention in recent years, large companies that are buying most of those products to create food and other goods are making numerous public commitments of sustainability goals. Some of those might be made because the companies’ boards are truly concerned about the state of the environment. Others might be feeling a social pressure to conform to new sustainability initiatives. Either way, the commitments only count if they lead to actual progress.
Enter Supply Change, a new website powered by non-profit Forest Trends and other partners, including CDP and the World Wildlife Fund. The website, supply-change.org, tracks commitments that companies make in real time, and provides data on past pledges and benchmarks for future years. It’s in this sort of data that the website and Forest Trends highlight an important finding: 2015 is a huge year for testing how seriously companies are actually taking their initiatives.
The website has compiled public records of more than 300 sustainability commitments, from almost as many different companies. According to that data, and a report released from the website, at least 30% of those commitments were made in 2014, which nearly doubled promises made in 2013. What’s more, one-third of all commitments target 2015 for achievement. In essence, this year serves as a litmus test to see whether companies are just blowing smoke, or if they’re actually willing to voluntarily change their operations to make more sustainable business decisions. “The realization is that it’s one thing for companies to be making these commitments…but it’s another thing to actually develop and implement the strategies and policies needed in order to meet that commitment,” Stephen Donofrio told The Cheat Sheet. Donofrio is an advisor for Ecosystem Marketplace, a Forest Trends initiative, and is part of the team working to create Supply Change.
Together, the companies making these goals clear are worth an estimated $4 trillion, according to Forest Trends. About 60% of the pledges come from businesses in the food and beverage industries, including retailers and manufacturers. Seeing large retailers such as Walmart make environmental pledges is promising for the advocacy groups, because on average, one retailer commitment from a large company spurs an average of three additional commitments from suppliers upstream, such as manufacturers, traders, and processors.
The website, which Donofrio said many companies and investors are calling a tool, provides individual company profiles for businesses that have made public commitments toward sustainability. Johnson & Johnson, for example, has pledged to use only palm oils that are green certified by 2015. According to their self-reported targets, the company met that goal in 2014. However, the company has not reported any of its progress on using wood products that are 100% deforestation free by 2020. Though companies often invite the public to hold them accountable for these types of pledges, finding that data can prove difficult. According to the report, one-third of companies have reported their progress from 2013 benchmark goals, though have overall reported an average of 72% progress toward achievement, irrespective of their target date for completion. In short, companies are saying they’re making progress, but aren’t necessarily providing the data to show it.
One of the tough aspects of tracking these sorts of commitments is that they contain such a wide variety of factors. Some companies choose to focus on a commodity itself, such as palm oil. That product, which most people recognize simple as vegetable oil, is estimated by the WWF to be an ingredient in about half of the packaged goods in the grocery store. It goes by at least 20 names, including sodium laureth sulfate (in many shampoos), stearic acid, and octyl palmitate. It’s in numerous foods and products, including lipstick, ice cream, biodiesel, and chocolate, to name a few. The export value of palm oil products from around the world in 2012 and 2013 is estimated to be around $24.83 billion.
Other commitments can apply to all of a company’s brands, or just one or two of them. The scope can also just be in-house or branch out to suppliers. Of the promises, they can also range from achieving certain sustainability certifications to reducing the use of products, or as in the case with some trees, making sure to replace any trees that were cut down as a result of operations. “While Supply Change tracks commitments being made as far back as 2009, it’s a bit of the early days and it’s kind of the Wild West,” Donofrio said, but added that civil society groups such as the Consumer Goods Forum, commodity roundtables (such as the Leather Working Group and the Roundtable on Sustainable Palm Oil), and agreements like the UN Climate Summit’s New York Declaration on Forests are helping to give more guidance on definitions for commitments such as “zero deforestation” and what meeting those goals should look like.
One emerging trend, Donofrio said, is that as the commonly stated commitment target year of 2015 nears, companies are starting to shy away from making goals with specific target dates. But what is encouraging, he said, is that the research shows an increasing number of companies are making quantified targets toward sustainability. Companies aren’t just being vague and saying they’ll “work on reducing deforestation in their commodity production or sourcing” anymore. Instead, they’re identifying specific volumes or percentages relevant to their commitment, which could be something like “100% of palm oil sources will be RSPO certified by 2015.”
No matter the type, Supply Change tracks them all. Based on data they collected, 83% of companies with 2013 target goals had activities that were in line with those missions. In many cases, those companies had steeper learning curves than companies signing up with target goals aiming for 2015 and 2020. Many of the companies signing on with later goals also have more resources, as measured by market capitalization, to reach their goals. Companies with 2013 targets had an estimated average $18.2 billion market cap, compared to an average $37.5 billion market cap for companies with 2015 goals and an average $55.1 billion market cap for goals made for 2020.
Key indicators of performance
One of the most important elements on the company profiles found on the website are the “related activities” and “relevant assessments” sections, Donofrio said. Related activities shows each of the organizations that a company is involved with that are centered on sustainability and reaching those goals. Cargill, for example, is involved in 10 organizations. As the website loads more company profiles, it will be easier to see which companies are putting more staff and resources toward these initiatives. If a company isn’t as involved as some of their peers, it’s possible that sustainability isn’t as big of a priority, Donofrio said. In addition, Supply Change made it a point to be just an information resource, and doesn’t rank companies themselves. But under the assessments category, it shows how the company scored in relevant and credible assessments by other organizations.
Supply Change’s slogan, “Commitments that Count,” underscores the mission of the platform. By updating the company profiles as information becomes available, the public has one common place where it can check how many companies are actually moving toward the goals they claim are important. Actions speak louder than words, after all. It might have been enough to make a pledge to placate environmentally-conscious consumers in the past, but the time for accountability is apparently dawning, in the form of streamlined websites. Supply-change.org is in its beta phase, and therefore is still populating much of its data. But it’s safe to say that companies listed on it should be careful to ensure they’re meeting the goals they said they would. Otherwise, it’s going to become even more obvious that their promises were a lot of lip service, and not a lot of wholehearted effort.
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