Investor Primer on Non-Compliance Protocols: Ending Deforestation at the Source
Supplier non-compliance protocols are an essential part of a risk management plan for companies with exposure to commodities. Yet a lack of consensus on how to engage non-compliant suppliers has stalled many companies’ implementation of no-deforestation commitments. An absence of clear protocols to deal with non-compliance will continue to allow product produced on deforested land to enter global supply chains.
As a core component of ensuring sustainability standards, companies need to implement a monitoring and verification process to confirm that suppliers are compliant with no-deforestation policies, and then manage any non-compliance in their supply chains. It is vital that companies are able to demonstrate to investors and consumers that they can hold suppliers accountable for any failure to enforce policies. In order to efficiently resolve these issues and prevent reputational or financial loss, a company needs to implement a comprehensive plan on non-compliance — one that is publicly understood and that either brings suppliers back into compliance or removes them from the company’s supply chain. The following guide outlines key components of a supplier non-compliance protocol. Herein you will find questions to ask companies in dialogues concerning their non-compliance protocols; explanations of each component; and current best practices in non- compliance protocols.