Major commodity trader Cargill, a privately held company based in the United States, recently updated its plans to eliminate deforestation in all of its agricultural supply chains by 2030. While the company’s aim to bolster its sustainability policies for soy is a positive development, it is unclear as to how the company will reach this goal, and at what pace. The company has given conflicting signals regarding its zero-deforestation policies, including a shifting timeline and levers for implementation. This ambiguity may heighten reputation and market access risks for the company. The company aims to publish its updated sustainable soy policy by June 15, 2019.

Cargill states that its soy supply chain in Latin America that “transforms our supply chain to be deforestation-free while protecting native vegetation beyond forests.”

Cargill’s timeline has been a source of contention for NGOs and other stakeholders. In 2014, Cargill, as a signatory to the New York Declaration on Forests (NYDF), pledged to eliminate deforestation by 2020, but its corporate policy aims for the 2030 deadline. The NYDF platform says that companies will “support and help meet the private-sector goal of eliminating deforestation from the production of agricultural commodities such as palm oil, soy, paper and beef products by no later than 2020, recognizing that many companies have even more ambitious targets.”

Environmental groups have repeatedly highlighted Cargill lagging on its 2020 commitments. Cargill has put policies in place aimed at producing deforestation-free palm oil by 2020, but the company lags with other commodities. The updated soy policy is vague on specifics about how quickly it will eliminate deforestation: Cargill aims to reduce deforestation in the “shortest time possible reconciling the production of soy with environmental, economic, and social interests.” The company’s 2030 deadline is also later than those of its main competitors.

Cargill’s forest policy establishes lofty goals, but provides insufficient detail about how they would be carried out. It is unclear if the company is referring to both legal and illegal deforestation, and its action plans do not provide detail about whether Cargill or its suppliers develops them. Cargill said that it has cut off soy suppliers that have violated its policy. Still, without more details about its action plans, stakeholders will not have clarity about how policies will be carried out. As CRR reported in April 2018, Cargill’s extended zero-deforestation timeframe and limited details about its soy policy leave room for it to purchase deforestation-linked supply. CRR wrote: “Its 2030 cut-off date and prioritization of tackling illegal deforestation allows producers to continue Cerrado deforestation,” adding that “opaque supplier relations may keep environmental and social risks” out of sight.

With Brazilian President Jair Bolsonaro in favor of agribusiness and looser environmental regulations, major traders that operate at pressure points along the commodity supply chains – such as ADM, Bunge, Cargill, Louis Dreyfus, Amaggi, and COFCO International – hold an outsized role in limiting deforestation along soft commodity supply chains in Brazil, particularly the Cerrado. Currently, some 70 downstream companies and 50 investors have signed onto the Cerrado Manifesto, which calls on soy producers and investors to commit to zero-deforestation programs. Still, investors continue to pressure agricultural companies to increase transparency and take more steps to limit deforestation. Downstream companies like Cargill are in danger of reputation and market access risks, along with the possibility of increasing cost of capital. CRR’s 2018 report on Cargill stated that USD 7-17 billion of its sales are linked to European signatories of the Cerrado Manifesto. Finally, privately-owned Cargill is mainly financed by bondholders with no significant deforestation policies, and in recent years, Cargill has paid down bank debt. Future loan deals with banks with deforestation policies may raise discussions around legal deforestation in valuable natural habitats entering Cargill’s soy supply.