Bunge: Key Position in Cerrado State Puts Zero-Deforestation Commitment at Risk

The global agribusiness and food company Bunge is among the largest players in Brazil’s soy supply chain. It is the leading soy trader in Piauí, a state in the Brazil’s Cerrado biome. In Piauí, expansion of soy farms is associated with deforestation and other environmental and social impacts. Downstream companies have called to halt deforestation in the Cerrado biome. The Cerrado Manifesto, published by civil society groups and supported by 23 large consumer goods companies, urges supply chain actors to strengthen the implementation of their zero-deforestation commitments. Bunge continues to source from producers involved in legal deforestation, despite its commitment to achieve zero-deforestation supply chains between 2020-2025 and taking action to stimulate soy expansion into non-forested areas. Failure to meet its commitment could create reputational and market risks.

Key Findings

  • Bunge is the leading soy trader in Piauí. It has the largest storage and processing capacity in the state. Bunge’s market share is between 45 percent (Bunge’s own estimation) and 80 percent (market expert estimation). In 2017, it invested BRL 300 million (USD 90 million) to substantially increase its processing capacity in Piauí.
  • Piauí continues to see high rates of Cerrado deforestation. Between 2010 and 2017, 123,917 hectares (ha) of forest were cleared for soy cultivation expansion. In 2017 alone, 15,000 ha were deforested in Piauí.
  • Bunge has a public zero-deforestation commitment, and excludes suppliers that deforest illegally. However, it continues to source from legally deforested farms. SLC Agrícola and BrasilAgro, two of Bunge’s major soy suppliers, have legally deforested 19,683 ha of native vegetation in Piauí from 2011 to 2017. Both are confirmed Bunge suppliers.
  • Bunge faces reputational and market risks. A failure to meet its 2020-2025 target of deforestation-free supply chains would affect the company’s reputation. 23 consumer goods companies, who are likely customers of Bunge, have called for halting Cerrado deforestation. Seven out of 10 of Bunge’s most important providers of loans and credit facilities have deforestation policies in place.
  • Bunge can mitigate reputational risks if it stops sourcing deforestation-linked soybeans from Piauí. This would impact asset value equal to one percent of current market capitalization.
  • Should Bunge continue to source soybeans from Piauí undeterred, it risks a value loss equal to 22 percent of its market capitalization. This risk comes from Bunge’s estimated revenues from the 23 companies that support the Cerrado Manifesto.

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