International corporations and investors have called on major soy traders to agree to a cut-off date for sourcing soy in the Cerrado biome. Signatories to the Cerrado Manifesto, which include 160 companies and investors that have exposure to the soy market, asked the traders in a letter late last year to stop sourcing from converted lands after the 2020 cut-off date. They also pressured the traders to implement a robust traceability and monitoring system, based on Accountability Framework initiative (AFI) principles, to show that they are adhering to the cut-off date.
The Statement of Support (SoS) of the Cerrado Manifesto sent letters to ADM, Bunge, COFCO International, Glencore, Louis Dreyfuss, and Cargill. “SoS signatories are keen to continue to work in partnership with their soy trader partners but believe that the time has come to set these necessary milestones,” said the SoS. Signatories have initiated a public discussion with the traders. Filing resolutions by SoS members are also adding pressure. For instance, Green Century led a number of institutional investors with filing resolutions with ADM and Bunge, calling on them to enhance their policies and work with other actors in the Cerrado to curb deforestation risks.
Given that the traders are highly active in the biome and have outsized leverage in commodity markets, an agreement to a cut-off date could bring widespread changes and send strong signals to suppliers.
The traders, as members of the Soft Commodities Forum (SCF), said this summer that they were making “significant progress” on traceability to direct suppliers. However, Cerrado deforestation has risen to levels not seen since 2000. Traders have not signed the Cerrado Manifesto and their commitments do not cover legal deforestation. They have also been criticized for having target dates in their commitments that allow for too wide of a window for eliminating deforestation in their supply chains. For instance, COFCO has aimed for 2023, while Cargill has targeted 2030. Traders face both deforestation and wildfire risk exposure. The expansion of production to meet export market demand for Brazilian soy is exacerbating these risks. Chain Reaction Research’s analysis shows that soy traders in the Cerrado in 2020 saw a high number of fires in a 25-km vicinity of their silos, similar to levels seen 2019.
Besides investor and corporate pressure, the likelihood of stricter regulations and laws in the UK and EU could bring about market access risks for traders. The possibility of the EU-Mercosur trade deal falling apart over climate concerns is another example of this risk. Given traders’ market influence, they have been a target of NGO campaigns, activist investors, and consumer goods companies. Nestle, for instance, stopped buying soy from Cargill in Brazil, while Norwegian Grieg Seafood will not use proceeds from its green bond to buy from the trader. Other market players are meanwhile advancing quickly on commitments. For instance, this week, three Brazilian soy suppliers to the salmon industry, CJ Selecta, Caramuru, and Imcopa, announced commitments to a “100 percent deforestation and conversion free soybean value chain” with their cut-off date as August 2020. The three agreed to a monitoring, verification and reporting (MRV) system approved by NGOs.
The major traders could see more backlash from stakeholders if they continue to defer on agreeing to a specific cut-off date.