Thanksgiving is going to look a little different this year for orangutans in Indonesia... and for your investment portfolio. While that difference may not be immediately apparent to shoppers and chefs, these changes have the potential to redefine how corporations -- whose products appear at your neighborhood Safeway and on your holiday table - prioritize environmental sustainability in business.
If you serve chocolates or ice cream at dessert, buy fried foods, wash your tablecloth, shave or put on makeup before a party on Thursday, you will undoubtedly use palm oil. Palm oil is a ubiquitous ingredient present in 50 percent of the goods we buy, from toothpaste to body wash, lipstick to detergent, and cooking oil to ice cream.
Because it is free of trans fats, inexpensive and uses fewer acres of land to grow than some alternatives, demand for palm oil has increased dramatically in the last decade and with it, so have environmentally destructive growing and harvesting practices. Tens of millions of acres of rainforests have been destroyed to make way for palm plantations, threatening wildlife and negatively impacting the surrounding environment and exacerbating climate change. This destruction severely threatens species (such as the orangutan) and their habitats, puts human rights of the workers at risk, and has displaced indigenous people who depend on the land.
Companies who use palm oil are under more pressure to make their supply chains more environmentally sustainable, from customers, from environmental groups, and increasingly, from investors - which is where public pension funds come in. Over the past year, investors have led a game-changing shift in the way palm oil will be sourced by some of the largest food and consumer-goods companies in the world. Their goal is that, in the future, it will be 100 percent deforestation-free. This means the conservation of irreplaceable rainforests and endangered species, and safeguarding the future of those who depend on tropical forests for their livelihood.
Climate change, accelerated by deforestation, is already having a significant impact on companies -- the same companies public pension funds invest in and depend on for a reliable return. A 2012 study found that climate change is already costing us more than $1.2 trillion a year and reduced global GDP 1.6 percent within that same time period. And what you might not know is that palm oil is a leading driver of deforestation, which causes 15-20 percent of global greenhouse gas emissions according to the Environmental Protection Agency.
If we don't deal with climate change, and the practices in our supply chain contributing to it, we are threatening our capital markets, putting the profitability of our businesses at risk, negatively impacting our investments, threatening the retirement savings of millions of people, and jeopardizing our entire economy.
This year, the office of New York State Comptroller Thomas DiNapoli, which oversees the public pension funds for employees and retirees in the state, engaged with Safeway Inc., ConAgra, and Tyson Foods, to encourage deforestation-free sourcing, including a commitment to 100 percent Certified Sustainable Palm Oil (CSPO).
This holiday season, we're thankful that Safeway, where thousands of New Yorkers shop for groceries, is taking action on palm oil. The company has committed to a time-bound policy to ensure that all of its store-brand products contain palm oil that is deforestation-free and is produced without human rights violations. This commitment is an example of how investor action can create real changes and push companies towards operating their businesses more responsibly.
What's more, investing in companies that practice sustainability in their supply chains helps to ensure that the retirement funds of those who have served the state and cities of New York are being invested in companies that take the long view.
While some Americans might think that they won't personally feel significant effects of climate change, the reality is that the impacts of climate change will not just happen "over there," in places far removed from our daily lives. It affects the air we breathe, the food we eat and the savings we have worked our whole lives to build. Smart fiduciaries understand these risks and they have the power to change how companies do business.
By making changes to ensure the products we buy are more sustainable, we can protect against the risks deforestation and climate change pose to our future. Investors can move companies to commit to a more sustainable way of growing and harvesting palm oil, taking the first of many steps that will be needed to protect against climate change. We are thankful this year for New York State Comptroller's office for its leadership, and for the companies that are doing the right thing by sourcing deforestation-free palm oil.