• environmental issue

Deforestation rates are dropping in Southeast Asia, but companies still need to ramp up ambition to halt nature-loss and irreversible damage

PRNewswire July 31, 2023
  • Globally, over 1,000 companies disclosed their progress on managing deforestation through CDP in 2022 – an increase of 300% since 2017, but only 35 of these companies were from Southeast Asia.
  • More than 60% of those companies are disclosing some kind of risk caused by deforestation and on average companies face losses of $330m due to risk exposure, the cost of dealing with this risk is a fraction at $17.4 million[1].
  • Around 90% of disclosing companies are not prepared for the transition to a deforestation-free future.
  • Asian companies outperformed other regions when setting deforestation policies, setting deforestation targets, traceability and focusing on ecosystem restoration.

SINGAPORE, July 31, 2023 /PRNewswire/ — The latest Global Forest Report from CDP, the world’s largest environmental disclosure platform, shows that a record of 1,043 companies disclosed through CDP’s forests questionnaire last year, representing a 300% increase over the past five years, a welcome sign that companies are beginning to recognize and disclose their impact on forests, although only 35 of these companies come from Southeast Asia. Despite an increase in companies recognizing the risks of deforestation  there is a lack of action against commitments leading to an increase in forest-related risks. Only about 1 in 10 companies disclosed sufficient action to stop deforestation.

The report finds that globally, companies are still not acting to mitigate the risks effectively and are risking nearly $80 billion in total as a result. From 10 companies in Southeast Asia alone, the total risk reported is $2.3 billion while the complete cost of responding to all identified risks, reported by 16 companies, was only US$223 million, CDP would argue the financial impact related to risk is vastly underreported.

The Southeast Asian region holds approximately 30% of the world’s coral reefs, one-third of the world’s mangroves[2], and nearly 15% of the world’s tropical forests[3], making the implications of not addressing deforestation huge, and the impact that will be felt in Southeast Asia will be catastrophic.

The government and policymakers in Southeast Asia have taken steps to show their commitment to net zero, in part by setting targets to reduce emissions coming from the forests and land use sectors, as well as  managing deforestations and seeking collaboration from non-state actors including private sectors. Some of the implemented initiatives include the enhancement of Nationally Determined Contribution (NDC), development of green taxonomy and disclosure requirement on ESG. The report supports this given Asian companies are considered more compliant with the law compared to companies from other regions.

Despite the progress being made, the challenges faced by companies sourcing commodities from Indonesia and their impact on biodiversity remain a concern. In 2022, there were 28 companies (increased from 21 in 2021) in Southeast Asia that disclosed through the forests questionnaire  takes the lead in this region, with 10 companies from Indonesia, while 7 companies are from Malaysia, 6 from Singapore, 4 from Thailand, 1 from the Philippines, and none from Vietnam.

Urgent action is needed to put an end to deforestation. The report outlines key actions companies must take including  conducting a comprehensive risk assessments, enhancing deforestation/conversion-free compliance, and disclosing their progress in achieving deforestation-free and conversion-free supply chains. CDP disclosure for corporates and the financial services sector allows for transparent reporting of progress against good practice frameworks and standards. 

John Leung, Director of Southeast Asia & Oceania said:

Southeast Asia is very much a confluence of nature and climate, and it is crucial to act quickly and with purpose as a region. The choices government and companies make in Indonesia and within other SEA countries can help prevent global catastrophic climate change and the irreversible loss of nature and habitats. 

This latest development is certainly very promising, and the region is heading to the right direction in their sustainability efforts. However, to achieve the global no-deforestation commitment by 2030, robust actions must be accelerated. Net-zero commitments will not be achieved without halting deforestation and land conversion. The report has shown that in Southeast Asia alone, the total risk reported is ten times the cost at US $2.3 billion versus US $223 million for complete response to all identified risks. 

More ambitious environmental action and disclosure is needed so we can get clearer picture on how to move towards a more sustainable future where both nature and people flourish in unison. We look forward for more companies in the region recognising the competitive advantage of taking the lead in environmental actions and strengthening their commitments to nature conservation.” 

Thomas Maddox, Global Director, Forests and Land Use, said:

“It was a record-breaking year for companies disclosing on their impacts on forests, which is encouraging for transparency. The results show companies are becoming ever more aware of the risks and opportunities addressing deforestation represents, but we continue to see a gap between commitments and tangible actions. Deforestation is not a requirement of commodity production. The eradication of deforestation from commodity supply chains makes economic and environmental sense but requires appropriate financial and policy incentives to prioritise action. Deforestation has no place in the net-zero, nature-positive world science and society are demanding. Achieving it is a matter of ‘when’, not ‘if’. Companies acting now will reap the benefits of the opportunities. Companies acting later will face the highest costs.”

Global Forest Report 2023 was released based on data from over 1000 companies, making it the most comprehensive, standardized dataset on corporate deforestation risk exposure and management. To read the full report here: https://www.cdp.net/en/reports/downloads/7182/ 

[1] Based on 269 companies reporting potential financial impact from forest-related risks and 342 companies reporting cost of responding to identified forest-related risks

[2] Loke, M. C. (2014). Sustainable Development of Southeast Asia’s Marine Ecosystems – Climate Change Challenges and Management Approaches. Chou2014Int._Conf._ Mar._Sci._Aquac.pdf (nus.edu.sg)

[3] Estoque. R., et al. (2019). The future of Southeast Asia’s forests. The future of Southeast Asia’s forests | Nature Communications

About CDP
CDP is a global non-profit that runs the world’s environmental disclosure system for companies, cities, states and regions. Founded in 2000 and working with more than 740 financial institutions with over $130 trillion in assets, CDP pioneered using capital markets and corporate procurement to motivate companies to disclose their environmental impacts, and to reduce greenhouse gas emissions, safeguard water resources and protect forests. Nearly 20,000 organizations around the world disclosed data through CDP in 2022, including more than 18,700 companies worth half of global market capitalization, and over 1,100 cities, states and regions. Fully TCFD aligned, CDP holds the largest environmental database in the world, and CDP scores are widely used to drive investment and procurement decisions towards a zero carbon, sustainable and resilient economy. CDP is a founding member of the Science Based Targets initiative, We Mean Business Coalition, The Investor Agenda and the Net Zero Asset Managers initiative. Visit cdp.net or follow us @CDP to find out more.

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