- Yet more evidence has emerged demonstrating the failure of the world’s largest beef companies to cut their ties to forest destruction. This time the accusations are coming not from journalists or activists, but from an important investor
- The blacklisting by the influential Norwegian wealth fund – its first relating to beef as a deforestation driver – could pave the way for similar action on other large beef and soy firms
Cattle on a deforested area of the Jamanxim National Forest in the Amazon state of Pará
In late December the Norwegian Government Pension Fund Global, the world’s largest sovereign fund, placed Brazilian multinational Marfrig under observation “due to risk that the company contributes to serious environmental damage.”
The fund, which at the close of 2020 owned 0.2 per cent of Marfrig’s shares, acted on a recommendation by its Council on Ethics.
Painstaking supply chain research commissioned by the Council found that between 2016 and 2019 Marfrig, the world’s second largest beef producer, with revenues exceeding $12 billion a year, had purchased cattle from embargoed farms throughout Brazil. ‘Embargoed’ farms are those where illegal deforestation has been uncovered by authorities. Strikingly, the Council identified embargoed properties in the supply chains of every single one of Marfrig’s slaughterhouses in Brazil, not only those within the Amazon region.
In addition to uncovering fresh evidence of dirty cattle in Marfrig's supply chains, the Council’s report was also damning in its assessment of the firm’s efforts to clean up. They state that Marfrig “has taken an extremely long time to react” as it is only beginning to implement systems to monitor its entire supply chain more than 12 years after promising to do so.
The timeline for achieving complete monitoring has also been criticised by the Council as “too long.” Marfrig doesn’t expect to have a more comprehensive view of its supply chains until 2025 for the Amazon and 2030 for the Cerrado, a heavily deforested savanna biome that has already lost over half its native vegetation. In fact, according to the Council Marfrig’s suppliers outside the Amazon are “hardly monitored” at the moment.
Even if the company implements the newly promised policies, it’s “unclear how Marfrig’s system will work in practice and how Marfrig will verify that the measures are working,” the Council said.
One of the Council’s main criticisms against the company reiterates
what Earthsight and several other organisations have said for years. Marfrig
and other meatpackers have been reluctant to adopt the necessary measures to
monitor their indirect suppliers, the farms that sell cattle to the ranches
that then supply the slaughterhouses.
A Marfrig slaughterhouse in Mato Grosso, Brazil.
This serious blind spot means that meatpackers are unable to
detect the environmental violations happening in these farms. The Council
concluded that the percentage of embargoed suppliers was more than double among
Marfrig’s indirect suppliers than its direct ones.
This is a worrying assessment considering Marfrig has around 5,500 direct suppliers in the Amazon but over 25,000 indirect ones. The company itself has admitted that over half its Amazon cattle come from indirect suppliers.
The Council acknowledges its study offers a conservative assessment of environmental abuses linked to Marfrig’s supply chains due to its focus on embargoed properties. Estimates indicate that less than one per cent of farms responsible for illegal deforestation in the Amazon are subsequently embargoed by Ibama, Brazil’s environmental enforcement agency.
Marfrig is one of Brazil’s three largest beef producers, exporting to markets around the world, including the US and Europe. The company has over a dozen slaughterhouses throughout the country but over three quarters of its cattle come from the Amazon and Cerrado.
Marfrig has been repeatedly exposed for links to illegal deforestation and other violations in its supply chains in the two biomes. A recent investigation uncovered connections between Marfrig’s slaughterhouses exporting beef to the European Union and farms encroaching on indigenous land.
Last year Earthsight revealed the risks for importers after a Marfrig slaughterhouse in the Amazon state of Rondonia had been cleared for exports to the US. Rondonia is a hotspot for illegal deforestation and the facility in question, Chupinguaia, has been linked to high levels of deforestation risk. The Council on Ethics’ recent study confirms this as it identified a number of Chupinguaia’s direct and indirect suppliers with embargoes.
The Norwegian fund’s decision, while stopping short of excluding Marfrig from its portfolio for now, is a potentially important step. Previous blacklistings by the fund of firms threatening forests through timber and oil palm production have helped trigger further action towards cleaning up those industries. The action on Marfrig is the first made by the Council relating to beef, by far the biggest driver of deforestation globally.
A key question now is whether the fund will extend its investigation to other risky firms in which it still has investments. It holds a significant stake, for example, in BRF, another large Brazilian meatpacker which has been found to be at high risk of association with deforestation through its purchases of cattle and soy for feeding pigs and poultry.
The action by one of the world’s largest funds is a stark reminder of the urgent need to address the key role played by investors in betting on and profiting from agribusinesses highly exposed to forest destruction. It highlights the need for bold government regulations that ensure accountability for the financial and commercial actors propping up the unsustainable operations of large commodity producers and traders.
