P&G withdraws pledge to tackle forest degradation, drawing ire of green groups, investors

USA – American multinational consumer goods corporation, Procter & Gamble Company has revoked its pledge not to buy wood pulp from degraded forests from its corporate policy, a company executive disclosed to investors in a previously unreported July 18 briefing.

The change drew the ire of several P&G investors, who have conveyed disapproval of P&G for no longer including its statement to “prohibit forest degradation” from its 2022 Forrest Update.

Pulp products are often used for its Charmin toilet paper, Bounty paper towels, Puffs tissues and packaging. The wood products come from Latin America, Europe, Canada and US suppliers.

“In an era where companies are moving forward on climate risk,” the change marks a “step backward,” Leslie Samuelrich, president of P&G investor Green Century Funds, told Reuters.

Green Century, with more than US$1.1 billion in assets under management, counted P&G as among its largest holdings as of March 31 and led a shareholder proposal on the company’s forestry practices in 2020.

P&G in May updated its Forest Commodities Policy, removing language in a previous environmental pledge, made in 2021, that said it would not permit forest degradation — that is, activities that significantly harm drinking water, animal habitats or other important elements of forests.

Its new forestry policy could put it at odds with a European Union deforestation law coming into effect in about 18 months banning certain goods linked to deforestation and forest degradation. P&G said it will comply with the upcoming requirements.

“P&G recently streamlined its policies for forestry commodities like pulp after the United Nation’s Food and Agriculture Organization acknowledged that a widely applied definition of forest degradation is unavailable,” said Jack McAneny, P&G vice president for global sustainability, during the virtual briefing July 18.

BNP Paribas Asset Management, one of the company’s significant shareholders, asked why the no-degradation pledge was removed and what the implications are for P&G’s sourcing practices during the briefing, according to a source who was at the meeting.

“In light of these evolving definitions, as we consolidated our policies, we simplified the language,” added McAneny.

“Our ongoing efforts to keep forests as forests while continuing to serve consumers with superior-performing products, all of those efforts remain unchanged.”

But three environmental non-governmental organizations and three investors said that they believe there is broad agreement on what “forest degradation” is and what causes it, such as clear-cut logging in pristine forests, reports Reuters.

The Natural Resources Defense Council has said P&G’s wood pulp supply chain seems to degrade forests.

Tonia Elrod, P&G’s vice president for family care, which includes its towel and tissue products, said in a statement the company has a policy against deforestation and “rigorous compliance mechanisms in place.

Threats to ecosystems

Environmental non-profits and some shareholders have increased scrutiny on P&G’s sustainability policies since 2020 when a majority of its investors passed a non-binding resolution requesting that it assess how it could bolster efforts to eliminate deforestation and forest degradation in its supply chains.

In its new forestry policy, P&G, which also makes Tide detergent and Dawn dish soap, consolidates existing guidelines for paper packaging and palm oil, used throughout its portfolio of products.

Investors and environmental advocates, however, are pushing back. Gaurav Madan, forests and land campaigner with Friends of the Earth, said the company’s explanation for the change is “insufficient.”

The environmental advocacy group is working on drafting an open letter to investors calling attention to the changed policy, Madan said.

It plans to reach out to big shareholders including BlackRock, State Street, UBS and Legal & General, who have followed environmental concerns with the company’s forestry policy and pulp supply chain in the past, he said.

Most environmental groups agree that forest degradation leads to a loss of value in an ecosystem, such as the elimination of habitats for a threatened species, said Shelley Vinyard, a campaign director at the Natural Resources Defense Council (NRDC).

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