Deforestation is increasing supply chain and climate risk for the timber sector. Anna Roberts, head of business development at digital identity platform iov42 explores how companies can address such challenges in the timber supply chain through the use of Distributed Ledger Technology.
With just eight years until the clock runs out on achieving the UN’s Sustainable Development Goals (SDGs), there has been an accelerated focus on how countries, businesses and individuals can collaborate to increase sustainability and reduce social and economic imbalances.
The recent EU legislation, which aims to achieve deforestation-free supply chains, is one of the most promising ways to achieve a number of fundamental SDGs. With the legislation currently having completed two steps out of three, it is on its way to becoming law.
Its main goal will be to minimise the EU’s impact on forest loss worldwide by banning market-specific commodities linked to deforestation – including soya, cocoa, palm oil, coffee and beef. This will be actioned through the implementation of supply chain due diligence obligations on companies that import and trade these products.
This is an opportunity for companies to implement authentic participation through digital traceability within complex global markets. Distributed Ledger Technology will play an active role in this, enabling legal enforcement of new regulations by providing indisputable trust, accountability and compliance across and between supply chains.
The supply chain challenges of deforestation
Deforestation issues continue to keep pace all around the world, but especially in the Amazon in Brazil. In the first half of 2022, deforestation was 80% greater than in the first half of 2018, withnew research finding that this equates to roughly 1,500 square miles – an area five times the size of New York City. On top of this fast-paced forestry activity, estimates suggest that roughly 90% of deforestation in Brazil is illegal.
Despite regulatory pressure (such as EUTR, EUDR and the US’s Lacey Act) as well as consumer demand for traceability and the commitments made at the COP26 Summit, illegal logging still accounts for 15-30% of all wood traded globally.
Additionally, 15% of human-caused greenhouse gas emissions come from deforestation. The complexity of international timber supply networks means that they are challenging to audit, leading to billions of pounds in losses from illegal activity and inefficient processes.
Corruption and exploitation among issues facing deforestation
In fact, there is an epidemic of issues throughout the supply chain which includes corruption, exploitation of weak regulations, missing audit chains, manipulation of data and misleading claims about deforestation and its impact on humans.
Much of these issues are the result of the fragmented nature of the industry, with few standard systems and widespread bureaucratic, manual processes that are often paper-based. This perpetuates a lack of visibility, accountability and trust in the industry that many are struggling to address fully.
Using technology to create deforestation supply chain solutions
Tackling these challenges in the timber supply chain not only takes the right technology but also a genuine determination to make the industry a more trusted and sustainable place.
With this foundation, Distributed Ledger Technology has the ability to change the industry for good by creating time-saving standardised data capture that can provide greater automation.
Furthermore, it can enable instant accessibility, allowing interested (and vetted) parties to take part in their own due diligence on a product’s history – all the way from the forest to the sawmill, to shipping, customs, manufacturing and finally to the customer.
Distributed Ledger Technology could increase deforestation accountability
Using this kind of technology is innovative not only because it increases the level of accountability of supply chain processes, but also due to its ability to join up science-based testing and certification from third party endorsers in one trusted system.
This allows companies to verify the true authenticity and sustainability of a product. The technology also makes it possible for businesses and governments to help combat issues such as long-held systems of child labour, prevent the destruction of habitats and improve the lives of local communities.
Undoubtedly, the evolution of EU legislation is only the beginning of a world shift to a more sustainable future, so businesses must do what they can to shift to pioneering technology that can help them both comply with incoming regulations and stay profitable. Nothing can do it better in the digital era where enabling bonds of trust, transparency and secure transactions are more important than ever.
