Step 3 of the OECD-FAO Guidance is about responding to the findings of risks of deforestation through reporting to designated senior management and designing and adopting a risk management plan. The plan should cover appropriate risk mitigation and prevention measures. Enterprises should ensure that risks are addressed, and that they are taking steps to tackle adverse impacts that have occurred.
OECD-FAO Business Handbook on Deforestation and Due Diligence in Agricultural Supply Chains
Step 3: Design and implement a strategy to respond to deforestation
Abstract
Figure 6. Design and implement a strategy to respond to deforestation
Strategic questions for enterprises
Designing the strategy
Do we have a strategy with clear actions to respond to the identified deforestation risks? How often do we need to update it?
What activities do we have the capacity to undertake in response to deforestation risks and impacts, and any forthcoming legislation?
How have we engaged with external stakeholders in developing our strategy?
How do we ensure that our strategy is up to date and working – e.g. through an annual review process, or collaboration with industry players?
To what extent can we work directly with producers? What assistance and support do they need (with special attention being paid to independent and contracted smallholders)?
Do we understand when we need to offer remedy (e.g. “cause” cases)? Have we considered the types of remedy that we could offer?
What steps can we take to innovate in our risk mitigation plans? Issues include the role of technology, cross-sector collaboration, engagement with governments at different stages of the supply chain, engagement with Indigenous Peoples and local communities.
Implementing the strategy
Who within our company is responsible and accountable for the implementation of this strategy? Have we identified people in each department who are responsible for doing their part to reduce the identified risk? How is the Board kept apprised of our actions?
Do we have an in-country or regional presence, or will we have to bring in a third party to implement activities on our behalf? How often do they report back on progress?
What steps can we take to increase overall leverage in the supply chain to change the business behaviour of suppliers and address root causes of deforestation (e.g. are we engaging with governments and organisations in producing countries, including OECD National Contact Points for RBC and FAO country focal points)?
To what extent do we need external partners to create impact on the ground?
How is the progress and impact of our risk mitigation strategy measured and rewarded?
Define and adopt a risk management plan
Having assessed the risk of association of the enterprise’s operations and supply chains with deforestation, the next stage is to cease causing harm or mitigate the risk and prevent future risks. All the related measures and processes should be defined in a risk management plan; separate plans may be necessary for different commodities or different sourcing areas.
Box 4 includes potential risk prevention measures which can help manage the risk of deforestation in the enterprise’s operations and supply chains, and companies should refer to the OECD-FAO Guidance for more detail.
Box 4. Risk prevention measures
Risk prevention measures available to enterprises will depend on their position in the supply chain and their capacity; some of the measures below are applicable mainly to producers and some to enterprises sourcing directly from producers.
Measures to improve transparency and the level of information available include:
Requiring more than one source of information on products (see Box 2 and Box 3)
Undertaking independent surveys or audits of source areas and/or business partners
Commissioning an independent audit of the enterprise’s due diligence system
Conducting audits of suppliers’ due diligence systems, focusing on their systems to identify and address deforestation risks
Reinforcing traceability or chain of custody systems and engaging with control points in key commodity chains
Empowering local community members to act as forest monitors
Using certification schemes (with careful evaluation of actual consideration of forest protection in the selected scheme)
Potentially sharing information on risks and risk mitigation strategies with other companies through industry associations or public-private platforms; this is likely to be of particular value to SMEs
Communicating regularly with OECD National Contact Points for RBC.
Measures to engage with suppliers include improving awareness, and offering assistance and incentives, especially for smallholder farmers, particularly those affected by any deforestation cut-off date the company is implementing or that is required by regulation.
Providing financial support, longer-term contracts
Responsible purchasing practices
Better payment terms
Access to forestry experts or due diligence experts
Capacity-building and training. Sometimes such support may be better delivered by local NGOs or other organisations.
The risk management plan should specify:
Timelines for developing each of the measures and processes to be adopted.
Resources to be mobilised, including budgetary (for travels, data procurement, traceability system, etc.) and human (forestry experts and legal experts, for example).
Roles and responsibilities within the enterprise for implementing the management measures (e.g. who on the Board could be a resource for responding to deforestation issues, participation of teams on procurement, regional heads of areas that include red flag locations, etc.?).
Procedures for consulting with affected stakeholders, including business partners, governments and affected communities and civil society in the countries of origin, to clarify concerns and agree on the strategy for mitigating risks and opportunities to feed into the deforestation policies and strategy of the company.
Monitoring systems for assessing the implementation of the plan and its impacts (including, for example, access to publicly available data/satellite monitoring of forests, indicators/ data points to collect from suppliers), and reporting processes to designated senior management.
Procedures to follow in cases of non-compliance by suppliers and follow-up plans such as awareness-raising, training on detection and reporting on deforestation.
Procedures to support producers, notably smallholders, with attention to gender and social inclusion.
Respond to adverse impacts – implement the risk management plan, monitor and track performance
How an enterprise responds to adverse impacts will depend on the extent to which it causes, contributes to or is directly linked to them. In the specific case of deforestation, it means the following:
If the enterprise has caused deforestation, it should cease the activities that cause deforestation, prevent further potential adverse impacts and provide remedy for actual adverse impacts it caused. This may entail suspending operations temporarily while undertaking measurable efforts to prevent any future adverse impacts, or suspending operations permanently if these impacts cannot be mitigated.
Where assessment and mapping exercises find that the enterprise has contributed to deforestation, it should cease and provide remedy with respect to its contribution and use its leverage over its business partners to mitigate any remaining adverse impacts. This may entail suspending operations temporarily. The enterprise should also take preventive measures to ensure that these adverse impacts do not recur.
If the enterprise has not contributed to deforestation, but an observed impact has nevertheless been directly linked to its operations, products or services through a business relationship, it should use its leverage to mitigate or prevent the adverse impact, for instance requesting changes in the investment plan to ensure that forests are preserved and sustainable production practices are encouraged. This may lead to disengaging from a business partner after failed attempts at mitigating risks or when risk mitigation is deemed to be not feasible or unacceptable.
Where it is possible, continue the relationship and demonstrate a realistic prospect of, or actual improvement over time, such an approach will often be preferable to disengagement. The enterprise should also take into account potential social, environmental and economic adverse impacts related to the decision to disengage. When deciding to disengage, enterprises should do so responsibly including by seeking meaningful consultation with relevant stakeholders in a timely manner and where possible, by taking reasonable and appropriate measures to prevent or mitigate adverse impacts related to their disengagement.
Factors that are relevant to determining the appropriate response include: the severity of the adverse impact, the enterprise’s ability to influence and/or build leverage over the business partner or other relevant actors (e.g. government), and how critical the business partner is to the enterprise (if it is critical, the enterprise should increase its efforts to change the partner’s behaviour; where is it less crucial, disengagement may be a better option). A wide range of measures are available to enterprises to mitigate the adverse impacts of deforestation, depending on the enterprise’s position in the supply chain. Where feasible they should encompass measures that achieve positive impacts on forests and the workers and communities who depend on them – what are sometimes termed “forest-positive” actions.
Responding to deforestation impacts and promoting forest-positive outcomes
Actions to protect and restore forests include:
Identifying areas of future risk to forests in or near the enterprise’s supply chains and engaging suppliers to take preventive action. This could include, for example, engaging with farmers to understand why deforestation may occur and what measures could be adopted to ensure it does not.
Investing in programmes that promote forest conservation and sustainable agricultural production practices, such as agroforestry and intercropping.
Supporting forest ecosystem restoration in areas of degraded forest, and the restoration and sustainable use of fallow or degraded land.
Choosing to buy from suppliers who are implementing forest-positive practices themselves, including conserving and restoring forests while promoting sustainable livelihoods.
Rewarding such suppliers by purchasing their goods at a premium, buying larger quantities or agreeing longer-term contracts.
Working with farmers, farmer cooperatives and local communities, who are central to managing forest conservation and restoration, could include:
Making and communicating explicit commitments to respecting the rights of Indigenous Peoples and local communities (See Annex B of the OECD-FAO Guidance: Engagement with Indigenous Peoples. (OECD-FAO, 2016[1]))
Gathering information on land tenure (both statutory and customary rights) within the enterprise’s operations and supply chains and those of its suppliers, and adopting measures to ensure they are not adversely affected by the enterprise’s operations.
Supporting innovation and capacity-building to improve agricultural productivity and diversified production systems including agroforestry and farm management systems in order to help reduce poverty and meet community food security needs without expansion into forests.
Providing support to farmers, particularly smallholders, in adopting agricultural innovation and sustainable, forest-positive techniques and technologies, so that incomes are strengthened, farms are more productive and resilient and forests are kept standing.
Paying farmers and farm organisations (such as co‑operatives and women’s producer organisations) fair prices for their products, with the aim of contributing to achieving living incomes – potentially linked to performance in reducing deforestation and forest degradation, adopting sustainable production techniques, and engaging in forest ecosystem restoration.
Supporting smallholder livelihood initiatives that deliver forest conservation and farmer resilience and inclusion, including through long-term contracts, responsible purchasing practices, strengthening organisational structures such as cooperatives, implementing traceability systems and financial support.
Encouraging and supporting local initiatives, involving farmers, local communities, Indigenous Peoples, women and other marginalised groups, local industry and government, to develop and implement local solutions.
Collaborating with local government to jointly foster enabling framework conditions for deforestation-free production, such as clarifying and recognising land rights and providing targeted support by agricultural extension officers.
Participating in or developing systems of payments for ecosystem services.
Supporting landscape and jurisdictional initiatives to help address the root causes of deforestation in particular regions could include:
Contributing to the development of forest-positive strategies across an entire landscape or jurisdiction – measures include improving land use planning, identifying no-go areas, strengthening forest monitoring by public authorities and/or local communities, helping companies avoid deforestation and manage conservation areas.
Helping to promote collaboration amongst the private sector within the landscape or jurisdiction, and with governments, communities, Indigenous Peoples and sources of financial support and investment.
Supporting local forest monitors and environmental defenders.
Supporting initiatives and stakeholders engaged in improving law enforcement.
Supporting and lobbying for improvements in the wider enabling environment, including, for example, greater supply chain transparency, traceability and monitoring systems; improvements in governance and law enforcement, particularly in human rights and land rights; and the wider provision of agricultural support, infrastructure and public services, with appropriate support from donors and national and local public entities.
Participating in the development of sustainable finance mechanisms for conservation and restoration initiatives that include social and environmental co-benefits, including improved biodiversity and more resilient livelihoods and respect for human rights.
Promoting and supporting international initiatives to reduce deforestation and scale up forest-positive action could include:
Encouraging and participating in the development of commodity roundtables, certification schemes and other multi-stakeholder initiatives.
Participating in appropriate industry initiatives, business associations and coalitions.
Supporting the development of reliable and accessible sources of data on deforestation rates and drivers, and examples of best forest-positive practice.
Contributing to the dissemination of information and knowledge on international initiatives, regulations and schemes, notably on processes linked to the REDD+ framework.
Suggestions for SMEs
All SMEs:
Designate someone in your company to lead and decide who should be involved in designing and implementing your strategy; ensure they have the sufficient resources, knowledge and support.
Tap into industry initiatives and association networks to learn how peers and other companies are addressing problems and if they have similar approaches that can guide your efforts.
Include deforestation targets and objectives as part of performance reviews and incentives for staff, to drive change.
Ensure that your identified risks feature in sales terms, procurement and contracting practices and in clauses in your agreements.
Identify the resources needed to implement the activities under your risk management plan.
Share your action plan with all your suppliers and ask your suppliers also to share it with partners in the supply chain with whom you may not have direct contact.
Explain to suppliers that may be identified in your prioritisation efforts that you will need to enhance co‑operation in reducing deforestation risk.
In addition, upstream SMEs can:
Consider including in your strategy actions to develop co‑operation with producers, smallholder farmers, Indigenous Peoples, local communities or other stakeholders in the supply chain, and communicate that strategy downstream.
Include requests on due diligence that customers ask for, to help shape your strategy.