1.What is a Forest Footprint?

A ‘forest footprint’ is the total amount of deforestation caused directly or indirectly by an individual, organisation or product.

Global demand for agricultural commodities is the primary driver of deforestation, as land is cleared to extract timber and produce beef, soy, palm oil and biofuels. These ‘forest risk commodities’ are the building blocks of millions of products traded globally and feature in the supply chains of countless companies.

2.What is the Forest Footprint Disclosure Project?

The Forest Footprint Disclosure Project is a new initiative, created to help investors identify the valuation risk caused by the forest footprint of their portfolios and also to help companies identify and manage the forest footprints in their supply chains.

3.What is the objective of the FFD Project?

By engaging with the financial and corporate communities the FFD aims to reduce the size of the global forest footprint and ensure that forest footprint evaluation is embedded into the working practices of the target sectors. The launch of the FFD Project marks the beginning of a process, enabling businesses to move from recognition of their forest footprint to complete management and measurement as soon as is achievable.

4.Why forest footprint in 2009?

International pressure is mounting to stop deforestation, which causes 18% of all greenhouse gas emissions – more than the global transport sector. Loss of ‘ecosystem services’ provided by forests is estimated to be costing the global economy $2-$5 trillion annually.

2009 is a critical year for forests. At its summit this December in Copenhagen, the UN Framework Convention on Climate Change is likely to include a mechanism to reduce emissions from deforestation and degradation (REDD) in the successor to the Kyoto Protocol. If agreed this will generate tens of billions of dollars annually to help reduce deforestation, and is likely to increase costs in businesses and supply chains with a forest footprint.

Other major financing initiatives to combat deforestation are also underway, including an ‘emergency package for tropical forests’ presented by HRH the Prince of Wales to 18 world leaders alongside May’s G20 meeting in London.

5.What financial risks are caused by deforestation?

Deforestation driven by commercial activities can create a valuation risk for companies and investment portfolios in three key ways:

– Regulatory Risk: new regulations or incentive schemes threatening supply of commodities and increasing costs
– Environmental Risk: direct impacts on commodity yields from loss of natural forest services and changes in climate and rainfall patterns
– Reputation Risk: Products from deforested land are increasingly unacceptable to consumers

6. How will the FFD Project achieve its objectives?

The FFD Project will be sending an investor-backed questionnaire to global companies in sectors which are dependent on ‘forest risk commodities’ or are directly involved in producing or trading them.

7. What are the advantages of disclosure?

By responding to the 2009 FFD Disclosure request companies will be declaring their intention to help improve management and mitigation of one of the major contributors to climate change and loss of the natural ecological services that support business. In combination these two factors represent the largest drivers of instability in the financial and corporate sectors long-term.

Through the process of answering the FFD Questionnaire companies will also be able to benchmark themselves and identify how and where deforestation can be reduced in their operations – whether directly or indirectly through their supply chain.

Having a coherent response to the deforestation issue will also improve sustainability, reputation and regulatory compliance. This in turn may help in terms of credit access, public and investor perception, investor confidence, and ultimately share value.

8.How does the FFD Project differ from the Carbon Disclosure Project (CDP)?

The FFD Project is clearly focused on deforestation related risks and requests associated information on company policy and management of operations, specifically regarding forestry. The CDP addresses climate change risks more widely - relating to greenhouse gas emissions, associated risks and opportunities, corporate governance and reduction strategies. The CDP therefore does not overlap directly with the FFD Project in its scope. However the CDP acts as an advisor to the FFD Project and is a member of its Steering Committee in order to maintain coherency between the two projects.

9. Do companies have to pay to disclose?

No. The FFD Project is managed and coordinated by the Global Canopy Foundation, a registered charity, and funding for the project is provided by charitable trusts and the UK Government’s Department for International Development (DFID). However, participating companies will have to prepare and submit their responses at their own expense.

10. What will happen to the results of the questionnaire?

Results will be disclosed to endorsing investors and also summarised in an annual disclosure report, the first of which will be published in January 2010. The report will identify companies that are best in class, those that have adopted innovative policy and practice to drive performance improvement, and those that declined the request to disclose their forest footprint.

As companies engage with and improve their management of these issues, the Forest Footprint Disclosure Project process will also evolve. It is the project’s aim eventually to be able to produce quantitative Forest Footprinting or impact data.

11. Which organisations are represented on the steering committee?

12. How is the project funded?

Funding for the FFD Project is provided by the UK Government Department for International Development, and the following charitable foundations: The Global Canopy Foundation, The Esmée Fairbairn Foundation, The David and Lucile Packard Foundation, The Waterloo Foundation, and the Rufford Maurice Laing Foundation.