The markets are watching: deforestation becomes a boardroom issue

In most cases, deforestation is driven by global demand for everyday commodities such as beef, soy, palm oil and paper. Changing the behaviour of major companies – and their consumers – is therefore crucial for tackling forest loss.

In this context, a recent survey of global corporate attitudes offers a glimmer of encouragement. The majority of investors, it suggests, are increasingly aware of both reputational damage and the risk of their assets becoming stranded.

The survey, conducted by financial services firm Hargreaves Lansdown, found that deforestation was the number one issue investors and shareholders didn’t want their investments exposed to. Seventy per cent cited it as a key concern – ahead of animal testing, tobacco and gambling.

‘Deforestation isn’t just an environmental issue – it’s a financial risk too,’ says Tara Irwin, senior environmental, social and governance analyst at Hargreaves Lansdown. ‘As forests disappear and climate change accelerates, key agricultural sectors are feeling the impact.’ She highlights cocoa production, which nearly tripled in value between 2020 and 2024, making it more valuable by weight than oil.

By the end of 2025, the European Union – the world’s largest single market – could require companies to prove that their products are fully decoupled from deforestation or forest degradation. The UK is currently developing similar regulations.

‘Companies that fall short could face fines and product bans and risk a public backlash from consumers,’ Irwin warns, noting that just one per cent of companies are thought to be on track for compliance. ‘For investors, the direction of travel is clear: companies ignoring deforestation risks could find themselves shut out of key markets. Supporting businesses that combat deforestation isn’t just a sustainable choice – it also reduces financial risks and protects the long-term value of your savings.’

Irwin points to Nestlé – the world’s largest coffee company – as an example of a business tackling deforestation risk head-on. The company is highly exposed to commodities such as cocoa, coffee and pulp and paper, all of which are linked to forest loss. Nestlé has developed a monitoring system that tracks smallholder suppliers and suspends those who fail to meet deforestation-free standards.

According to its own reporting, 93 per cent of Nestlé’s coffee supply is already deforestation-free. ‘The remaining seven per cent, representing around 59,000 tonnes, reflects data gaps rather than confirmed deforestation,’ Irwin says. ‘But it’s a clear area of focus for further improvement.’

Meanwhile, Unilever – the consumer goods giant – is exposed to a range of forest-risk commodities including palm oil, soy, tea and cocoa. Irwin highlights that a key part of Unilever’s strategy involves direct work with smallholder farmers in Indonesia and Malaysia to improve sustainability, traceability and livelihoods across its palm oil supply chain.\

By the end of 2023, she notes, 97 per cent of Unilever’s forest-linked commodities had been deforestation risk head-on. The company is highly exposed to commodities such as cocoa, coffee and pulp and paper, all of which are linked to forest loss. Nestlé has developed a monitoring system that tracks smallholder suppliers and suspends those who fail to meet deforestation-free standards. According to its own reporting, 93 per cent of Nestlé’s coffee supply is already deforestation-free. ‘The remaining seven per cent, representing around 59,000 tonnes, reflects data gaps rather than confirmed deforestation,’ Irwin says. ‘But it’s a clear area of focus for further improvement.’

Meanwhile, Unilever – the consumer goods giant – is exposed to a range of forest-risk commodities including palm oil, soy, tea and cocoa. Irwin highlights that a key part of Unilever’s strategy involves direct work with smallholder farmers in Indonesia and Malaysia to improve sustainability, traceability and livelihoods across its palm oil supply chain.

By the end of 2023, she notes, 97 per cent of Unilever’s forest-linked commodities had been independently verified as deforestation-free. In contrast, Irwin says that PepsiCo – the owner of Walkers crisps, Tropicana and Quaker – lags behind its competitors.

The company faces significant deforestation exposure through its use of palm oil, soy and paper packaging. PepsiCo has pledged to eliminate deforestation from its operations and supply chains by 2025, and to achieve conversion-free sourcing by 2030. But Irwin describes its progress as ‘slow and vague’.

PepsiCo has acknowledged challenges such as limited traceability to farm level, the lack of certified commodities in some markets, and broader systemic issues including poverty and unclear definitions.

‘While these barriers are real, other companies are already demonstrating that meaningful action is possible,’ Irwin argues. ‘Given PepsiCo’s critical exposure – particularly to palm oil-driven deforestation – and the high financial materiality of this risk, it must act with far greater urgency to protect forests, reputational value, and long- term shareholder returns.

Tags: palm oil, deforestation, soy, demand, UK, Beef, European Union