Impact of deforestation
The conversation surrounding deforestation and its impact on not just the environment, but businesses as well, has been ongoing for years. The matter has come to the fore yet again as many businesses are now realising that it is starting to affect their bottom line because customers are expecting and demanding more from the companies and brands that they interact with. Deforestation can be defined as the decrease in forest areas across the world that are lost for other objectives, such as agricultural purposes or mining activities.
Following the forging of the Paris Agreement on climate change, businesses across different sectors have been forced to critically examine their efforts in the fight against climate change. It is widely known that forests absorb approximately a third of human-caused carbon dioxide emissions. As such, the gradual destruction of forests is having a dire impact on global greenhouse emissions. Companies that operate in just about any industry, even beauty and fashion, have a role to play in the fight against climate change. According to reports, companies are creating a demand for the commodities that are responsible for the majority of forest loss, namely cattle products, timber products, palm oil and soy. Understanding that no industry or country operates in isolation, any changes to products on the market will have an impact on the USD and exchange rates because of international trade activity. Therefore, the approach to take on the matter needs to be well thought out and be a balanced act that continues to meet customer needs and demands, but in an environmentally-friendly way.
What customers expect from businesses
The whole world has seen and felt the impact of climate change, albeit to a lesser extent in some cases, which is why many people are banding together and calling for businesses to be more responsible in their operations. Customers are putting pressure on businesses to find more suitable alternatives that do not pose as much of a threat to the environment. Should businesses fail to do this, it is estimated that up to an approximated $906 billion in annual turnover may be at risk. While customers do have influence and the ability to guide suppliers and their operations, the true power lies in multi-national brands and their procurement budgets. They have a better chance of influencing companies to be more environmentally aware through clauses and terms and conditions that they can include in their procurement policies.
For example, they may choose to only work with businesses who can prove that they are aware of the impact of deforestation and climate change and are committed to fighting it. If businesses are held accountable and encouraged to be cognizant of how their operations are impacting the environment, there will be an increased chance of more responsible operations. In most cases, when businesses realise that something is starting to impact their bottom line, they are more likely to immediately act on it and resolve it, so as to ensure their continued operations. Therefore, businesses need to now critically asses their functions, particularly procurement and supply chain, and identify areas of improvement in this regard.