NRDC report highlights the impacts, risks, and opportunities for sustainably sourcing products

A new report from the National Resources Defense Council (NRDC) details the impact of US supermarkets and retailers when offering products that harm climate-critical forests, particularly as it relates to sustainability and climate trends. The report, Selling the World’s Forests, looks at three case studies – on tissue products, beef and soy, and wood products – and admonishes retailers that fail to adequately mitigate their exposure to items that put forests at risk.

Commodities like forest fiber toilet paper or illegally sourced wood products carry far-reaching risks beyond the forest degradation and Indigenous rights abuses inherent in their production. According to the authors, “this new report shows that the market is shifting, and investors, policymakers, and consumers alike are demanding that retailers take responsibility for their part in securing a livable future for our planet and curbing the mounting financial risk presented by a business-as-usual approach to forests.”

Some of the world’s largest consumer goods companies and retailers have all seen shareholder resolutions in recent years, many with support from some of the largest global asset managers, aimed at curbing the negative forest and climate impact of their supply chains.

Increased regulatory attention across the globe is heightening accountability for retailers as well. The European Union’s 2023 Deforestation Regulation (EUDR) bans imports of certain commodities that cause deforestation or that are illegally produced. In the US, state governments in Colorado, New York, and California have passed legislation to take advantage of their purchasing power and require state procurement contracts to more sustainable products.

Selling the World’s Forests urges retailers to avoid intentionally or inadvertently contributing to deforestation and associated human rights abuses in both their direct supply chains and the products they sell. For example, they advise adopting targets for reducing “forest-risk commodities” and requiring similar commitments from their suppliers.

Looking ahead

In addition to creating headlines, the topic of climate change is receiving increased attention from consumers and regulators alike. In turn, this has led to increased scrutiny towards companies touting their environmental credentials and initiatives. These new circumstances also present lucrative opportunities for consumer companies and retailers that prioritize and invest in actions related to environmental, social, and governance (ESG) – and particularly those that can appropriately inform customers of those actions.

Opportunities for growth

Consumers are expressing preference for environmentally and ethically sustainable products, and their purchasing decisions increasingly reflect these values. According to a 2023 study by McKinsey & Company and NielsenIQ, products making ESG-related claims now account for nearly half of all retail sales. Further, over the past five years, products making ESG-related claims achieved “disproportionate growth” over products that did not. The proliferation of products labeled “sustainable,” “eco-friendly,” “natural,” or other designations related to aspects of environmental and social responsibility suggests increasing demand from consumers, shareholders, and regulators that companies take responsibility for their social and planetary impacts.

Translating ESG initiatives into consumer demand

In addition to identifying and implementing ESG-related commitments, companies are encouraged to effectively communicate those initiatives to consumers. Otherwise, the costs of manufacturing and certifying products that make good on ESG-related claims may never be recouped. Likewise, companies are encouraged to remain aware that the price for unsubstantiated “greenwashing” is rising. Companies risk incurring both the reputational harm of eroding the trust of consumers and litigation from governmental agencies and class actions for advertising false sustainability claims that mislead consumers and threaten the planet.

To avoid such consequences, companies seeking to translate their ESG commitments into consumer demand for their products may consider reviewing their existing ESG materials and implement best practices, which could include:

• Ensuring your social responsibility and supply chain guidelines are up to date
• Auditing existing suppliers
• Reviewing product claims and ensuring their substantiation, and
• Reviewing marketing claims to ensure they are clear and provide appropriate context and qualifiers.

Companies that make meaningful commitments to instill environmental and social responsibility into their business practices may be best positioned to navigate this area of increased regulatory scrutiny and take advantage of new consumer demands. The result might not only be a greener balance sheet, but a greener planet as well.

For more information, please contact the authors.