Deforestation Inc.: How ‘green’ firms prevent climate action

Original publication by Serdar Vardar and Pelin Ünker for dw.com on 1st March 2023

A new 9-month long cross-border investigation exposes the flaws of “green” forestry labels. Environmental auditors overlook harm by “sustainable” companies, hindering climate efforts.

“Deforestation Inc.”, a new investigation organized by the International Consortium of Investigative Journalists (ICIJ) and 39 media partners including DW, reveals how green certifiers are used to validate forest products linked to Indigenous rights abuses, illegal logging and unsustainable deforestation. 

Destruction of forests plays a key role in climate change. Scientists estimate that deforestation for agricultural or construction purposes is responsible for more than 10% of global greenhouse gas emissions. 

Certification bodies such as the Forest Stewardship Council (FSC) set the standards and guidelines for how forests should be managed responsibly. They claim the products they certify, such as wood, paper and palm oil, are sourced from responsibly managed forests. 

The aim, they say, “is to promote environmentally sound, socially beneficial and economically prosperous management of the world’s forests”.

But Deforestation Inc. has shown that all too often, this mission falls short of the mark.

Sustainable certifications, unimaginable damages

During the nine-month investigation, reporters traced loggers’ footprints across the world, speaking with hundreds of stakeholders and analyzing hundreds of documents in multiple languages. 

They found that at least 160 companies in Indonesia — one of the world’s biggest tropical wood exporters — have disregarded environmental regulations over the past decade. Violations range from operating under false permits and illegal logging to the destruction of habitat used by elephants and the critically endangered Sumatran tiger.  

Yet auditing firms responsible for vetting logging business seeking sustainability certification failed to report the violations. As a result, companies have kept their green labels, thereby misleading consumers. 

Similar irregularities came to light in Brazil. On its website, Mil Madeiras Preciosas, which makes timber products and manages more than half a million hectares of Amazon rainforest, claims it was “certified with flying colors”. This, despite having been fined 36 times for environmental infractions since 1998. 

Deforestation Inc.also found that 54 FSC-certified companies in Brazil have been fined millions of dollars for committing environmental infractions.

When ICIJ and partners approached the FSC for comment, the certifier said it was not aware of companies having been investigated and penalized. It said its standards “focus on forestry operations, and there may be many other environmental issues that are not covered”.

How and why do companies pay to be certified?

Although there is no legal requirement for companies to have FSC or other certification, doing so has almost become an industry standard for big companies seeking to show investors, shareholders and customers that their brand is committed to “environmental, social and governance” (ESG) guidelines.

ESG investment funds have grown rapidly in recent years, and companies looking to get into the market which may hit $53 trillion (€50 trillion) by 2025 show their commitment by paying auditors an annual fee for recognized certification. 

It is largely companies from the global north, where regulations are already much stricter, that pay the costly price for certifications. The uptake is lower in countries such as Indonesia or Brazil, where unsustainable deforestation is more widespread and the risks to auditors vetting operations are greater.  

“It’s not a playground,” Sao Paulo-based forestry auditor Marcos Planello, told ICIJ. “There are people with guns in the forest.” 

“We [auditors] just search for areas when a company wants to be certified voluntarily.” 

He says certification remains a valid way to reduce the risk of unsustainable forestry and human rights abuses, but adds that “if a company wants to do something wrong, they will be able to do it.”

How does the auditing process work?

Jonathan White, a lawyer at ClientEarth with expertise in corporate responsibility and climate risk, says the unregulated space that is environmental auditing creates an accountability problem.

“If those kinds of verification bodies are to fulfill a role that is kind of robust… they must apply skepticism and check claims made by companies. They must go behind the information that companies provide.”

Apart from annual administration fees, the FSC also relies on donations. FSC US, has received donations from global companies like Home Depot, Kimberly-Clark, Procter & Gamble, International Paper, all of which market their products as FSC-certified. The logo can be found stamped on a variety of everyday items, including notebooks, paper cups, furniture or even washing powders, among thousands of other products.

What do critics say?

Many NGOs that were part of the Forest Stewardship Council from early on have left — including Greenpeace International.

Simon Counsell helped establish the FSC but his growing frustration with the body led him to found FSC-watch.com, a platform where he and his team publish news related to the certifier’s activities.

He says there are “structural conflicts of interest” built into the system. The principal one being that forestry clients pay the auditors. 

“There is no oversight by FSC, there never has been. It is not a watchdog role that FSC has in this,” said Counsell. 

And because an auditor can inspect the same client for years, Counsell says “cozy” relationships have formed in the three decades since the FSC was established.

“The auditors briefly visit the sites and refill the same documents as last time. There is an interest in certifying companies and in not finding problems.”

As a growing number of brands have become willing to buy “green” labels over the years, more than a dozen such certification bodies and many affiliated programs have sprung up around the world ー each with its own label and sustainability criteria. But the FSC and the Programme for the Endorsement of Forest Certification (PEFC) remain influential. The two organizations say they have certified more than 474 million hectares of forest, which is greater than the size of India, as “sustainable”. 

What is the solution?

Counsell says there is “a race to the bottom in certification standards,” and that “the weaker the certifiers are, the better for the client.”

In a comment to the ICIJ, however, the PEFC said it had been recognized by the UN as a progress indicator towards the Sustainable Development Goals and the Biodiversity Agreement. And the FSC said as a voluntary tool, it “does not claim it can solely solve multi-layered problems such as deforestation.” 

But Counsell makes a case for the FSC secretariat allocating auditors to companies seeking certification. “They could structurally encourage competition for the strongest audits.” 

In a recent interview with German public broadcaster WDR, FSC Director General Kim Carstensen said in “an ideal world, governments would play a larger role for forest protection.”

The European Commission is now considering legislation to target greenwashingpractices. A leaked document proposes a system of independent verification, and penalties for companies that make unsupported environmental claims. A first official draft is expected later this month.

Whether that means auditors’ unsound practices will be considered as greenwashing and face penalties, remains uncertain.

Contributing reporters: Scilia Alecci, Agustin Armendariz, Jelena Cosic, Emilia Diaz-Struck, Miguel Fiandor, Karrie Kehoe, Brenda Medina, Delphine Reuter, Margot Williams (ICIJ), Anne-Laure Barral (Radio France), Allan de Abreu (Piauí), Attila Biro (Context), Petra Blum (WDR), Krisna Pradipta (Tempo), Stefan Melichar (Profil), Francisca Skoknic (LaBot), Kirsi Skön (YLE), Lina Verschwele (Der Spiegel).

Edited by: Tamsin Walker and Anke Rasper