Assessing the power of companies in soy and cattle supply chains
High profile commitments to address deforestation, such as the New York Declaration on Forests, have led to a number of NGO platforms and scorecards designed to assess progress on how these commitments are being delivered. But while they provide valuable analysis of companies’ commitments, most do not look at the power and influence wielded by the companies involved.
While sustainability action by all companies is necessary, it is the bigger, more influential, or uniquely positioned companies that can more readily drive change.
Building on the work of the Forest 500, which identifies the most influential companies in the deforestation-economy, our new Company action on deforestation site explores to what degree the most powerful companies – best positioned to drive change – are addressing deforestation in their supply chain.
Assessing company power
To assess the relative influence of a company within a supply chain, we examine four elements of company power:
- financial size, as measured by total revenue;
- commodity-specific size, measured by the scale of soy and cattle volumes, capacity, or market share;
- supply chain role, measured by proximity to production as an indicator of the ability to change production practices, and the degree of vertical integration, and;
- the geographical scale of operations.
Company action on deforestation focuses on 137 companies operating in soy and cattle supply chains originating in South America. Companies were scored on these four indicators, and then ranked to have ‘high’, ‘medium’ and ‘low’ levels of power within either the soy or cattle supply chain.
Powerful leaders: still too many lagging
Analysis of the 137 soy and cattle companies highlight that some of the most powerful companies appear to be leading on action to address deforestation in their supply chain.
Of the 20 companies ranked as having the most power in the soy supply chain, five (Nestle, Amaggi, Unilever, ADM, and Bunge) also received the highest scores in the assessment for both the strength of their policies and their self-reported implementation progress.
Yet, none of these companies receive full points in our assessment, highlighting that there is still room for further improvements in both their policies and implementation efforts to promote more sustainable soy production.
In interpreting these results, it is important to note that our analyses are limited to self-reported data by companies and do not include any verification of company reported progress or measures of on-the-ground impacts of policies. Indeed Bunge was one of five companies fined by the Brazilian Authorities last month for activities linked to illegal deforestation in the Cerrado.
Eight of the most powerful soy companies received no points at all for their policies, or for their self-reported progress against those policies – Aceitera General Deheza S.A., Agrex do Brasil S.A., Hopefull Grain & Oil Group, Molinos Rio de la Plata S.A., Multigrain S.A., Shandong Xiangchi Group Co., The Kroger Co., and Wilmar International.
While it is encouraging to see that some of the most powerful companies are taking action on deforestation, the soy companies scored as having ‘medium’ levels of power, who account for more than half of all soy companies, show little to no action on deforestation.
These ‘medium’ powerbrokers make up the bulk of companies assessed, indicating that collectively they have a significant impact on soy supply chains. But more than half of these companies scored no points for their deforestation policies or report no progress against their policies.
Individually the medium powerbrokers may yield less influence over the supply chain, but collectively have the potential to drive significant change. The dearth of action by this group highlights an important opportunity for civil society organisations to engage with companies beyond the top players in the supply chain as a means to drive industry-wide change.
A better understanding of power
Analysing the power of companies is a difficult task, as power is a subjective and complex concept, not easily defined by a handful of quantitative indicators. Additionally, we are limited to the company data that is publicly available, which omits important factors such as commodity-specific revenue. But by capturing key indicators of leverage we can begin to develop a more nuanced understanding of company action on deforestation, which takes into account not only what they are doing, but how much they might achieve – giving us all a greater understanding of what is needed to move towards deforestation-free commodity supply chains.
Article by Eleanor Spencer, Researcher at Global Canopy