Call for Investors to Tackle Timber, Pulp Inertia
New report reveals continued lack of progress on zero deforestation and traceability reporting, evidencing the need for further pressure and engagement.
Customers and investors should exert greater influence over the tropical timber and pulp sectors, sustainable investment experts have said, in light of leading sector firms’ failure to reduce and report their exposure to deforestation risks.
Most of the world’s 100 largest tropical timber and pulp companies have made limited headway on deforestation and traceability targets and reporting, reflecting a continued lack of meaningful action on issues such as biodiversity loss, and Indigenous Peoples’ and local communities’ rights.
The findings form part of international conservation charity ZSL’s latest SPOTT assessment of a 100 timber and pulp producers, processors and traders on the public disclosure of ESG data related to their organisation, policies and practices.
ZSL scored companies on their commitments to and reporting of sustainable and ethical practices, finding an average of 24.1% – a significant decline from 37.1% in 2017, when the assessments began. The overall score remained low even when excluding data dating from pre-2019 – which marked the implementation of a stricter SPOTT scoring criteria – fluctuating from 20.9% in 2019 to 24.1% in 2024.
“We’re concerned by [these] findings, which underscore significant gaps in transparency and accountability within the tropical forestry and pulp and paper sectors,” said Vemund Osen, Senior Sustainability Analyst at Storebrand Asset Management. “Tropical forests are crucial for both climate stability and biodiversity, and exposure to deforestation causes material risks for companies and their shareholders.”
Osen qualified the persistent lack of progress highlighted by ZSL as “unacceptable”, especially as critical targets for halting commodity-driven deforestation are approaching – including through the EU Regulation on Deforestation-free products (EUDR) early next year.
The findings also underlined the importance of investors joining initiatives like the Finance Sector Deforestation Action (FSDA), Nature Action 100 and the UN Principles for Responsible Investments’ (PRI) Spring initiative – which all set clear expectations for companies to disclose and manage deforestation risks in a responsible manner, Osen added.
Tim Steinweg, the PRI’s Head of Stewardship for Nature who is leading the Spring initiative, said it was “disheartening” to see slow progress in key industries.
“Corporate transparency and reporting is the first step towards tangible sustainability outcomes, and this report is a reminder that there is more work to be done in an ever shorter amount of time,” he said. “Investors are increasingly aware not only of the impacts of deforestation on their ability to generate long-term returns, but of the role they can play in reversing global biodiversity loss – where aligned with fiduciary duty.”
Earlier this year, the PRI announced the first batch of 40 companies it would engage on key policy arenas through Spring – which included many businesses in the agriculture, food and consumer goods sector.
“We have seen small signs of progress, but the overwhelming story has been one of inertia,” said Sam Ross, ZSL’s Sustainable Business Project Analyst who led the SPOTT assessment. “Despite years of pressure and attempted engagement, our data shows many tropical forestry companies continue to fail in reporting even basic ESG data. Together, these top 100 companies manage forests almost the size of France – so their actions impact a significant area of the world’s forests.”
In addition, ZSL’s assessment showed that some of the world’s largest consumer goods manufacturers – including Nestlé, Mars, Hershey’s, PepsiCo, Colgate-Palmolive and Procter & Gamble – sourced pulp and paper for packaging from SPOTT-assessed companies. As such, the charity commended those companies for publicly disclosing their suppliers, encouraging other buyers in the sector to do the same.
Changing the narrative
In light of the findings evidenced through the SPOTT assessment, which marked a decade of ZLS’s efforts to advance public disclosure in soft commodity supply chains, the charity encouraged the sector and its investors to take action to modify the landscape.
Specifically, Ross called on both buyers and investors to take a “critical stance” and hold timber and pulp companies accountable to protect the planet’s “most vital ecosystems”.
“Given their significant market presence and influence through sourcing and investment decisions, buyers and financers must play a crucial role by requesting detailed data, demanding transparency, and pushing for accountability within the sector,” he said.
By doing so, Ross explained, investors can provide a layer of accountability that complements regulations such as the incoming EUDR – which will require companies importing to EU markets to conduct due diligence and demonstrate their products are deforestation-free, albeit without mandating public disclosure.
Recent findings from investment banking firm Jefferies showed that companies’ current readiness levels for the regulation globally justified “additional investor scrutiny”. Based on Bloomberg data, Jefferies found meaningful revenue dependency in Europe, exposure to at least one forest risk commodity, and potential gaps in forest risk commodity governance practices.
Meat producer Cranswick, tyre producer Nokian Renkaat, and meat processing and packaging group Hilton Food all had high revenue dependency on Europe – 97.8%, 76.5 and 61.6% respectively – and exposure to at least one forest risk commodity.
“[We] welcome this research from SPOTT, which sheds a light on the ongoing need for investor stewardship on these topics,” said Sonya Likhtman, Associate Director for Engagement at EOS – Federated Hermes’ stewardship service provider. “Timber and pulp companies are highly exposed to increasing regulatory, financial, physical and reputational risks. Through our engagement, we expect companies to accelerate efforts to address deforestation, biodiversity loss and human rights issues in their operations and supply chains.”
Investors, including the likes of Robeco, have previously leveraged ZSL SPOTT data to engage companies in the sector – urging them to set credible zero deforestation commitments, enhance disclosures and conduct robust biodiversity impact assessments.
“Investors should be worried about deforestation as it poses significant financially material reputational risks, supply chain disruptions and sustainability risks to companies,” said Peter van de Werf, Head of Active Ownership at Robeco. “
Need for government action
Although there has been a growing recognition in both the private and public sector of the value of forests in addressing the climate and biodiversity crises – notably in the COP26 pledge to “halt and reverse forest loss and land degradation by 2030” – actions to date have failed to match the level of urgency required to tackle the issue, ZSL argued.
“While over half of the companies have commitments to zero deforestation, evidence of implementation over the past eight years has been minimal,” the report noted. The percentage of firms monitoring deforestation within their operations barely rose from 13.6% in 2019 to 14.3% in 2024.
Despite covering just 6% of the Earth’s surface, tropical forests play a crucial role in regulating the climate and providing habitat for countless beings, ZSL highlighted. This includes critically endangered species such as Sumatran tigers, orangutans and African elephants – as well as the millions of people living in and around them, many of whom depend on forest resources for their survival.
“Investors’ involvement in collaborative engagement initiatives are important to elevate [their] voices in seeking to advance progress toward halting deforestation and encourage companies to drive real-economy change,” suggested Laura Moss-Bromage, who Planet Lead in the Church Commissioners’ Responsible Investment team. “However, it’s important to recognise that deforestation is a complex issue and that company action alone will not be sufficient – it will require the support of the right regulatory environment.”
As such, Moss-Bromage insisted, company engagement should be supplemented with policy engagement with governments – including through initiatives such as the Investor Policy Dialogue on Deforestation.
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