Sadly, there is no shortage of choice for the title of Worst Company on Earth. A host of sweatshops surely qualify, as do any number of corrupt corporate kleptocracies, mismanaged monopolies, climate-action-obstructing fossil fuel companies, price-gouging pharmaceutical companies, weapons manufacturers…the list goes on.

The Washington, D.C.-based advocacy group Mighty Earth recently took a stab at identifying the ultimate bottom-feeder in environmental governance and decided to award the dubious honour to Cargill, the agri-food giant.

The rap sheet against Cargill, the U.S.’s largest privately owned company, is a long one. In the foreword to Mighty Earth’s 7,000-word report, former U.S. Democratic Congressman Henry Waxman writes: “The people who have been sickened or died from eating contaminated Cargill meat, the child laborers who grow the cocoa Cargill sells for the world’s chocolate, the Midwesterners who drink water polluted by Cargill, the Indigenous People displaced by vast deforestation to make way for Cargill’s animal feed, and the ordinary consumers who’ve paid more to put food on the dinner table because of Cargill’s financial malfeasance – all have felt the impact of this agribusiness giant. Their lives are worse for having come into contact with Cargill.”

The report is especially scathing in regard to Cargill’s role in vast deforestation in Brazil by farmers from whom it buys massive amounts of soybeans (which largely become livestock feed).

Nonetheless, the choice of Cargill is somewhat surprising. Environmental activists even lauded it in the past for agreeing to a moratorium on buying soybeans grown on land stripped of trees in the Amazon rainforest. Cargill received a Leadership in Environment award in 2015 from the Keystone Policy Center, a non-profit.

Cargill stoutly defends itself against Mighty Earth’s charges. It noted in a statement that it donated almost US$60 million to charities in 54 countries and has agreed to a zero-deforestation commitment over a period of time in its cocoa, palm oil and soybean supply chains.

“It’s hard to hear,” Ruth Kimmelshue, the company’s chief sustainability officer, told the New York Times. “It doesn’t feel very good.”

Indeed, some may argue that other companies have a stronger claim to be the world’s worst. But in an era when business people constantly pat each other on the back with awards for excellence, no matter how obscure the achievement, it’s not a bad idea to highlight at least some of those that fall short.

Heroes: Business Roundtable

In August 19, more than 180 of the U.S.’s most powerful businesses broke with a long tradition by pledging to serve not only their owners, but also workers, customers, suppliers and communities. The Business Roundtable, America’s most influential lobby group of corporate leaders, retreated from its longstanding position that corporations exist principally to serve their shareholders.

Yet even as they did so, there was no shortage of evidence that many of these companies – and others – remain squarely focused on maximizing profits and driving up the price of their shares.

On the very same day as the announcement, three tech giants – Amazon, Facebook and Google – vowed to fight a 3% “digital” tax that France imposed earlier this year to counter the companies’ unrelenting efforts to avoid paying their fair share of taxes. A week later, an Oklahoma judge ordered another Roundtable signatory, the pharmaceutical group Johnson & Johnson, to pay US$572 million for its role in causing the opioid crisis that, in his words, had “ravaged” the state.

These are hardly the signs one would expect of a more caring and inclusive business community.

Even so, the Roundtable’s statement signals a welcome break from the past. Its original 1997 mission statement declared, “The paramount duty of management and of boards of directors is to the corporation’s stockholders.” The interests of other stakeholders, like employees or local communities, were only “relevant as a derivative of the duty to stockholders.”

Now, says the Roundtable, “Each of our stakeholders is essential.” To its credit, the new approach recognizes that rising public anger over issues like executive pay (and, more broadly, income inequality), climate change and the opioid crisis has sullied the reputation of business. As Jamie Dimon, JPMorgan Chase’s CEO and Roundtable chair, put it, “the American dream is alive, but fraying.”

The question is how effective the Roundtable’s new approach will be. Corporate Knights has suggested following up on the statement of purpose with concrete commitments to carbon-zero business plans and paying a living wage, for starters. Without these kinds of concrete commitments, World Resources Institute’s Kevin Moss says the Roundtable’s new statement “shows 200 CEOs are stuck in yesteryear’s (corporate social responsibility).”

However true that may be, the Roundtable’s new approach at least enables society to hold businesses to a standard based on more than quarterly earnings and return on investment. Let the scrutiny – and the consequences that flow from it – begin.

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On January 1, 2019, Jair Bolsonaro began his tenure as the president of Brazil. In Bolsonaro’s first eight months in office, his administration has had a profound impact on Brazil’s forests and its Indigenous population, and critics now link Bolsonaro’s anti-environment policies and rhetoric with the wildfires affecting Brazil’s Amazon rainforest. But Bolsonaro is not the only one fuelling the fire as agro-businesses expand into forested regions, driven by global demand for Brazilian commodities. Consumer goods like beef and soy are largely to blame for the need to clear land. Thus, food producers sourcing ingredients in Brazil, financial industries and trading governments all have a role in addressing deforestation and human rights issues in Brazil.

Bolsonaro’s destructive policies

Less than a year in power, Bolsonaro’s impact on the environment and Indigenous peoples has been far-reaching. Deforestation levels in Brazil between July 1 and 22 of this year alone were 111% higher than they were in all of 2018. Over 120 pesticides were authorized in 2019 to date, some of which have been classified by the U.S. Environmental Protection Agency as “dangerous” or “extremely dangerous” for humans and the environment. All this occurred under the auspices of the Brazilian Ministry of Agriculture, whose powers have increased at the expense of the Ministry of Environment. The MoE and its anti-deforestation agency, Ibama, have suffered drastic budget cuts since Bolsonaro came into power, lessening their ability to identify and penalize instances of illegal deforestation. The new Minister of Environment, Ricardo Salles, dismissed environmental fines as ‘ideological’, leading civil servants in the Ministry to distance themselves from the minister in an open letter in April.

The Bolsonaro administration has also proposed transferring the protection of Indigenous rights to the Ministry of Agriculture again after congress voted against the initial proposal. Because of his strong ties to Brazil’s agribusiness, many are concerned the Minister of Agriculture will further subordinate Indigenous land rights to agricultural industry interests. During his campaign, Bolsonaro swore “to not demarcate another centimetre of Indigenous land” for protected status. Roughly 12% of Brazil’s lands are Indigenous lands, spread over 700 territories, of which about a third is waiting for official recognition.

Corporate deforestation pledges 

Bolsanaro’s reputation as “the most environmentally dangerous head of state in the world,” as The Economist recently put it, doesn’t just affect Brazil’s forests and Indigenous communities. International firms will want to keep a watchful eye on exactly how they’re doing business in Brazil. The Brazilian beef and soy industry has been singled out for fuelling many of the roughly 26,000 fires recorded in the Amazon this month, as land is typically cleared by farmers and ranchers to grow crops and raise cattle. Brazil is the largest beef exporter in the world with around 25% of the global beef market. In the last year, it has also surpassed the U,S. as the world’s largest exporter of soy (much of that soy is used as animal feed). As well, global demand for Brazil’s timber exports is contributing to the deforestation. Chances are high that firms taking advantage of less rigorous regulations may be doing so on disputed or demarcated Indigenous territories.

Despite Brazil’s regulatory rollbacks, countries and companies importing from Brazil have their own commitments on deforestation and human rights to uphold. Given the misalignment of these commitments with Brazil’s policies and practices, continuing to buy commodities from Brazil could prove to be contentious and pose reputational risks. In May 2019, several UK food retailers were named and shamed in the media for continuing to purchase products from Brazil’s JBS (the world’s largest meat processing company) despite the fact that investigations found the company was sourcing cattle from illegally deforested areas in the Amazon.

Over 50 of the world’s biggest companies (including Cargill, McDonald’s, Walmart, and Lloyds Banking Group) have pledged to halve deforestation in their supply chains by 2020 under the 2014 New York Declaration on Forests. This after a 2010 alliance on deforestation driven by the Consumer Goods Forum (CGF) saw 400 international companies pledge to zero net deforestation supply chains for palm oil, soy, beef and pulp and paper by 2020. American agri-giant Cargill, one of the largest exporters of Brazilian soy, has been heavily criticized for recently announcing that it would not meet its 2010 pledge. It’s also facing a backlash for backtracking on its commitment to a soy moratorium in Brazil’s Cerrado region – known as the world’s most biodiverse savanna.

Forest-related commitments in agricultural supply chains

Being implicated in the deforestation of Brazil’s traditional Indigenous lands could also put companies at odds with their public commitments on human rights, which are aligned with the interests of the UN’s Office of the High Commissioner for Human Rights (OHCHR). The 2007 UN Declaration on the Rights of Indigenous Peoples was seen as a landmark development for the OHCHR. Providing mechanisms for Indigenous peoples to provide free, prior, and informed consent for projects in the Brazilian Amazon may be a way forward for companies looking to ease current tensions. In April, an Ecuadorian court suspended government plans to auction off Indigenous Waorani territories for oil exploration stating that the government didn’t receive the tribe’s consent.

Role of the Financial Sector

Multinational corporations aren’t alone in their exposure to Brazil’s Amazon and Cerrado. Banks play a central role as an intermediary between the financial markets and the consumer goods sector, including food and agricultural companies. Boycotts of Brazilian beef and byproducts overseas could lead to longer loan payback terms and negatively impact banks’ credit portfolios. Similarly, if improvements to environmental standards take priority in EU-Mercosur trade negotiations, banks operating within Brazil will be under increased exposure to ESG integration against financials risks.

Sustainalytics looked at the financing policies of 13 of the biggest domestic and foreign banks in Brazil by assets (10 domestic, 3 foreign).  Only three of the Brazilian banks (Banco do Brasil, Caixa Econômica Federal, and Itaú Unibanco Holding S.A.) have general environmental and social guidelines that mention or address deforestation, Indigenous peoples or cattle ranching practices. Notably, none of the banks in our research sample has a standalone policy addressing Indigenous peoples and rights. The three foreign banks (Barclays PLC, BNP Paribas SA, and JPMorgan Chase & Co.) had policies addressing deforestation and soft commodities (i.e., cattle ranching, timber products, soy, etc.).

In the absence of stronger environmental protections from the Brazilian government, bank financing policies can be influential in ensuring borrowers respect international norms and standards. Poor or non-existent policies can exacerbate the deforestation practices fueling Brazil’s fires.  Domestic and foreign banks operating within Brazil can manage their exposure to reputational and other ESG risks by establishing or improving social and environmental lending policies for sensitive sectors like agriculture and soft commodities.

For instance, French international banking group BNP Paribas encourages its agricultural commodities producers to have their crops or plantations certified against Round Table on Responsible Soy, Better Cotton Initiative, Bonsucro or UTZ principles and standards by 2020. It encourages cattle farmers to have their production systems certified by 2020 against the Standards for Sustainable Cattle Production Systems by the Sustainable Agriculture Network.

Banks could also work with NGOs that monitor the environmental and social impacts of deforestation and set up ESG funds that exclude poor performers with respect to deforestation practices. They could also introduce or bolster requirements for consultation with Indigenous Peoples.

Altamira, Brazil. Photo by Victor Moriyama/Greenpeace.

Call for a regulatory crackdown by Europe

While the EU has enforced legislation on illegal timber, illegal fishing and conflict minerals, there is no regulation on agricultural goods linked to deforestation. As a major trading bloc and a significant consumer of agricultural products associated with global deforestation, the EU holds some responsibility and has an opportunity to drive change and set best practice standards.

The European Commission has received numerous requests from academics and stakeholder initiatives, such as the Amsterdam Declaration, calling for regulations requiring proof that goods placed in the EU market don’t contribute to either global deforestation or human rights abuses. A 2017 motion by the European Parliament called for regulation of the EU’s footprint on the world’s forests and highlighted the need for effective protection of Indigenous peoples rights and forest-dependent communities.

We all have a role in making sure Brazil’s rainforest is safeguarded well into the future. Governments can regulate beef, soy, timber and other imports linked to deforestation. The financial sector can leverage its role and influence companies to reduce deforestation and improve relationships with Indigenous peoples. It’s also incumbent on the consumer goods industry to uphold its voluntary commitments in the face of weakened regulations and protections. Much will depend on the willingness of the actors involved, be they cattle farmers, multinationals, consumers, banks or investors, to recognize the power they hold, and to act on it.

Jean-François Obregón is a Senior Associate, Insurance, Real Estate and Asset Management Research at Sustainalytics and based in Toronto.

Jessica Grant is an Associate, Consumer Goods Research at Sustainalytics and based in Amsterdam.

Thijs Huurdeman is an Associate, Consumer Goods Research at Sustainalytics and based in Amsterdam.

A version of this story first appeared on Sustainalytics.com.

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