Major agricultural commodity-producing countries are seeing environmental enforcement rollbacks amid the coronavirus pandemic. In Brazil and Southeast Asia, concerns about worker safety and limited resources have reduced environmental law enforcement, including the protection of forests and indigenous peoples. These developments increase exposure to deforestation risks for agricultural companies and their investors.
In Brazil, the country’s environmental agency IBAMA has cut back on sending workers into the field to monitor activity due to COVID-19 risks. Even before the COVID-19 outbreak, IBAMA was suffering from cutbacks and diminishing resources as President Bolsonaro’s administration reduced environmental enforcement, favoring agribusiness’ interests instead. Against this backdrop, deforestation rates in Brazil have risen sharply in the past 15 months and are expected to continue to increase this year. Early data for 2020 points to even higher levels this year, and the fire season is expected to start in June, which could be more severe than last year given less oversight from government officials.
In Southeast Asia, conservation efforts are also coming under threat as a result of governments diverting attention and resources away from forest protection to fighting the pandemic. Government officials are asking police officers and army workers to carry out emergency activities in cities. At the same time, government lockdowns have stalled NGO efforts to conduct forest protection work, putting forest communities at risk. Although some palm oil plantations in Indonesia and elsewhere in Southeast Asia have shut down due to COVID-19 concerns, most continue to operate. Worries about consumer demand and weak crude oil prices have caused palm oil prices to fall, which could cut into profits and reduce investments in monitoring and other sustainability initiatives.
Less environmental oversight will likely reduce pressure on companies to eliminate deforestation in their supply chains. “Companies may reduce investments in social and environmental standards due to contingencies and uncertainties of these times,” a Brazil-based climate consultant told CRR. Companies have been preoccupied with supply chain disruptions, changing demand patterns, volatile commodity prices, and worker safety that have resulted from the coronavirus. The food industry is seeing a shift from service to retail, making the primary focus on ensuring that food shortages do not occur.
However, companies can act as a critical line of defense against increased forest loss and can still take measures to eliminate deforestation in supply chains despite shifting priorities. With regulators cutting back on oversight, corporate diligence to remove deforestation-linked products from their supply could help determine the rate of deforestation in the months ahead as countries respond to COVID-19 and its economic fallout. Currently, mobile technology allows for companies to trace product movement and land-clearing from desktops. With radar monitoring, companies can remotely track developments in real-time as on-site evaluations are scaled back. Company officials can also hold virtual meetings with local offices, NGOs, and farmers to continue collaboration on sustainability efforts. However, not all activities can be monitored by satellites. On-the-ground researchers and journalists will be unable to access areas where deforestation is an issue due to lockdowns.
Investors meanwhile can pressure companies to step up their ESG standards during this time of less oversight from government authorities and overall industry volatility. For the industry, 2020 remains a pivotal year for companies to meet zero-deforestation commitments. Investors can encourage companies across supply chains – producers, traders, refiners, and downstream firms — to implement NDPE policies and disclose buyers and suppliers, monitor land clearing with satellite images and other tools that can be used remotely, and hold back on sourcing from high-risk areas where suppliers are engaged in deforestation or human rights abuses.