* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.The cost of disasters is hurting business, CEO says - and it's time to do something
Paul Polman, Unilever’s CEO, said natural disasters – many linked to climate change – cost his multinational consumer-goods corporation $300 million annually, and that left unchecked “climate change has the potential to become a significant barrier to our growth.”
“Deforestation is not one of the great challenges in the fight against climate change, it is the most important and most immediate and most urgent challenge,” he told about 1,300 climate change negotiators, government ministers, scientists and other experts at the Global Landscapes Forum, which CIFOR organized in Lima on the sidelines of the annual climate change summit. “We’re not yet acting at either the speed or the scale that the problem demands, but we can win this battle.”
He called on governments to take a stronger hand in shaping policies and regulations to direct private-sector ambitions and further incentivize sustainable, zero-deforestation commodity supply chains.
“Whilst the private sector can undoubtedly disrupt markets, it is only with government policy that we can transform markets—and change the rules of the game for everyone,” Polman said.
Transcript of Paul Polman’s speech:
“Thanks for being here. Being here on a Sunday shows a real commitment to the cause. … This is my first time in the Global Landscapes Forum. But I promise that it won’t be my last. Because this is a very useful forum that you’re putting together.
“The issue of forests and agriculture and how we respond to them and hopefully prevent climate change are obviously of critical importance. Not just in the political negotiations, as many of you will be focused on, but also in global business. In fact, most of the CEOs are convinced or now know that their companies cannot prosper in a world of runaway climate change, and that’s increasingly becoming evident. They understand the need to work with political leaders together to address these challenges. Above all, these business leaders recognize that the cost of inaction is actually rapidly becoming greater than the cost of action.
“Now, for those of us in the food sector, like my company, we also know that climate change cannot be tackled without the fundamental change in the way in which agriculture, the world’s oldest and largest industry, is practiced. Commercial agriculture actually drove 71 percent of tropical deforestation in the last 12 years of this century, resulting in the loss of 130 million hectares of forest. In fact it contributes about 15 percent to global emissions—more than the entire transport sector. These are the inconvenient facts. But the reality is, there are others, too. The global population still has to grow above 9 billion people. Eighty percent more food will be needed to sustain this growth. And the starting point isn’t pretty either –over 800 million people going to bed hungry, not even knowing if they will wake up the next day.
“Yes, we do have to produce more food. Yes, we do have to protect the forests—and support the communities that depend on them. We cannot succeed in one of these challenges without succeeding in the other. But it can be done—and I see two clear things that we need to be doing to get there. One is to improve the smallholder farmer’s yield and income. Forty-five percent, for example, of Indonesian palm oil … land is actually cultivated by smallholder farmers. With the right support and partnership, they can actually nearly double their yield. That’s just palm oil alone. The other thing we can do, obviously, is restoring degraded land. This is one of the conclusions of the landmark report of the global commission of the climate and economy, of which I had the pleasure to be part, and I’m glad that [former Mexican President} Felipe [Calderon] is coming here at the end of the day.
“In fact in that report we argue that just 12 percent of the world’s degraded land, if we just took 12 percent and restored it, we could feed 200 million more people—and we could provide incomes for these people, to the tune of $35-$40 billion a year. Now, we can meet the demand without any further deforestation through these two approaches. Here in Latin America, we already find terrific examples of leadership. Take Brazil: The efforts that they have made make it the world leader, in some extent, in climate mitigation—recognizing that more needs to be done. But deforestation is down 70 percent since 2005, with increasing food production, actually, by half in the same time. Mexico has pioneered a payment system for ecosystem services, reducing the rate of its forest loss more than tenfold since the 1990s. And El Salvador has made great progress with reforestation.
“Undoubtedly, these successes—and many more—can be replicated across the world. And it matters enormously to Unilever that we do so. Natural disasters—we just see another one on television again playing out in front of our eyes in the Philippines—many directly linked to changing climate, cost us as a company already over $300 million a year. We see the rising input cost, the more volatile cost, water scarcity, reduced productivity in many parts of the agricultural supply chain—all linked directly to climate change. Left unchecked, climate change has the potential to become a significant barrier to our growth and that of nearly every other sector. That’s why there’s a strong business case for taking climate change out of the value chain—from the use of renewable energy for our factories to reducing food waste across the value chain.
“And it’s one of the reasons why we’re committed to sourcing 100 percent of our agricultural raw materials sustainably by the year 2020. For Unilever, sustainable agricultural sourcing includes removing deforestation from the entire supply chain. Our priority therefore is to conserve high-conservation-value forests—forests with high carbon stocks, tropical forests on peat soils—and to ensure that the net quantity, and quality and carbon density of these forests is maintained when there are land-use changes in the wider landscape. We’re implementing at the same time a responsible sourcing policy that we’re driving up the value chain to all of our suppliers, which requires free, prior and informed consent for developments involving indigenous people.
“And we’re putting a lot of effort into transparency and traceability at the same time. By the end of this year, all the palm oil sourced for our food business in Europe will be traceable to certified plantations. We’ve mapped about 1,800 of them as we talk. We’re also working with the World Resources Institute—I’ve not seen [WRI Director] Andrew [Steer] here—but we’re working with them to increase the transparency in our supply chain by enabling both us as well as our suppliers to use the Global Forest Watch platform. But we also need to work with others, because doing this alone is not enough. We need to use the size and scale of companies like ours to galvanize more significant transformations across the whole industry. And yes, this is happening. In 2010, the 400 companies of the Global Consumer Goods Forum—which have a combined revenue of over $3 trillion—pledged to eliminate deforestation from their supply chains and achieve zero net deforestation by 2020.
“Many companies, Unilever included, have followed up with detailed, time-bound plans to deliver this. As the signal from purchases has strengthened, we’ve seen movements, not surprisingly, from growers and traders as well. Many major companies like Wilmar, [indistinguishable] or Cargill have now committed to no-deforestation policies. These three palm oil traders alone account for about 60 percent of the world trade. So, close to a tipping point. Their actions will send an unequivocal signal to the rest of the market. Now the financial sector has equally responded by pledging to support sustainable commodity products. Investors are starting to use their leverage as well. But corporate commitments obviously tell only one part of the story.
“Just as important are the roles of government and civil society in all of this. To get to scale, we need to align business actions with public policy. One example of this is the tropical forest alliance we’ve put together, created with the governments of Norway, the Netherlands, the UK, the US, Indonesia, Liberia and dozens of NGOs. The goal of the tropical forest alliance is to remove deforestation from its entire supply chain whilst promoting economic as well as social development. It is setting up practical work programs in places like Indonesia, Colombia, and now West Africa. Another one that [UNDP Administrator] Helen [Clark] referred to is the New York Declaration on Forests, announced at the time of the climate summit in September in New York. Its pledge to halve deforestation by 2020, and end it entirely by 2030, and restore 350 hectares [sic] of degraded forests, is now endorsed by over 175 entities—countries, states, provinces, companies, indigenous leaders and NGOs, many undoubtedly here in the audience today.
“Helen has talked about a specific commitment, so I won’t go into that. But I would like to reflect on how government actions can support private-sector ambitions. Because whilst the private sector can undoubtedly disrupt markets, it is only with government policy that we can transform markets—and change the rules of the game for everyone. I ask tropical forest countries to implement the land-use reforms necessary to grow your economies without destroying the forests. These include clarifying concessions and ownerships. It requires improving transparency, protecting the customary land rights of forest communities and indigenous people. Strengthening the enforcement of forest laws and clamping down on illegal deforestation. And aligning, last but not least, all relevant policies from financing to infrastructure.
“But it’s not only national-level policy. It’s encouraging to see increasing cooperation between national governments and private sector at the same time. Such partnerships have the potential to deliver significant win-wins, guaranteed traceability for companies and increased investments for the states involved. This alignment of public and private incentives is one of the big wins within our grasp. And what is truly exciting is that just as we reach the tipping point of the private-sector commitments, in my opinion, we’re starting to work productively with forest communities and indigenous people as well. For too long, their lives and livelihoods have been a hidden and unaccountable-for cost of the expansion of commodity expansion that has benefited the rest of us.
“Organizations like [indistinguishable] the Amazon Basin or Amin [?] in Indonesia have played a big role in changing this, and I would like to pay tribute to their commitment and their tenacity. Now, developed countries have a role to play, too. They can strengthen the signals sent by the private sector for deforestation-free commodities, particularly through their procurement and trade policies. Very few actually do, although they account often for 40-50 percent of total purchases. Some countries have made good progress, but we need more ambition here and coherence. We need an end to perverse subsidies or incentives for damaging biofuels that drive forest destruction and threaten food security at the same time. And we need the international community to prioritize REDD+ by enabling large-scale, predictable and sustainable results-based financing for forest protection in a new climate agreement.
“Yes, we did see encouraging commitments in New York where countries came forward with new agreements to pay countries for reduced deforestation. As we look for ways to increase the ambition of the new climate agreement, I’m hopeful that here in Lima we can go well beyond what each country can do alone, and explore how much more is possible if we finally start to work together. Critically, we need to ensure that the level of ambition is high across the board and commensurate with the existing commitments to keep the warming below two degrees [Celsius]. Deforestation is not one of the great challenges in the fight against climate change, it is the most important and most immediate and most urgent challenge, in my opinion.
“We’re not yet acting at either the speed or the scale that the problem demands, but we can win this battle. I believe that we’ve never, ever been so forewarned to do something about it, but I also believe that we’ve never, ever been so fore-armed to do something about it. If we tackled deforestation in the right way, benefits will be far-reaching. Greater food security. Improved livelihoods for millions of smallholder farmers and indigenous people. And above all, a more stable climate. No doubt momentum is building, partnerships are forming, now is the moment to accelerate our progress as we tackle this challenge together. Thank you very much.