Sustainability
Climate and environment
Soft Commodities
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Soft Commodities

Climate, nature and tropical deforestation

At NatWest Group, we view climate change, the continued significant global decline in nature and resource scarcity and their associated impacts as significant dangers to the livelihoods of our customers and society at large, both currently and in the years to come. Climate change and environmental degradation are inextricably linked, and each require immediate and significant action to avert potentially irreversible impacts.

Over 420 million ha of forest were lost to deforestation from 1990 to 2020; more than 90% of that loss took place in tropical areas.¹ Global land use change, principally deforestation contributes to 12-20% of global carbon emissions.² Whereas, if protected and restored it is estimated nature based solutions including afforestation could provide up to 37% of the greenhouse gas mitigation required before 2030 to stabilise warming to 2°C.³ As the Taskforce on Nature-related Financial Disclosures states “The future of all living things on our planet, and our future prosperity, depends on the resilience of nature."⁴

Background to Soft Commodities reporting at NatWest Group

Whilst, as a UK focused bank, we do not have significant lending exposure in countries with tropical rainforest,⁵ the UK is a significant consumer of commodities with links to deforestation. Many customers and suppliers in our value chain may have operations and indirect links that contribute to deforestation. Our partner World Wide Fund for Nature (WWF) 2020 report with Royal Society for the Protection of Birds (RSPB) identified an area equivalent to 88% of the total UK land area was required to supply the UK’s demand for just seven agricultural and forest risk commodities between 2016 and 2018⁶. As highlighted in the 2024 House of Commons Environmental Audit Committee report,⁷ the UK’s deforestation footprint per tonne of product consumed is high compared to most other countries. There is pending secondary legislation in the UK to the 2021 Environment Act⁸ as well as the EU Deforestation Regulation⁹ in the EU which may impact a number of our customers.

This reinforces the importance of our continued voluntary soft commodities reporting, which is integrated into our Environmental Social and Ethical risk acceptance criteria (ESE RAC). This builds on outputs from our participation in the ‘Soft Commodities’ Compact. Founded by Cambridge Institute for Sustainability Leadership (CISL), the compact concluded in 2020 with the report Banking Beyond Deforestation.¹⁰ NatWest Group has continued to report and use the framework established by the ‘Soft Commodities’ Compact in our approach to deforestation. Our soft commodities reporting targets customers that import or directly produce soya, palm oil, timber, pulp & paper, beef, leather, cocoa and rubber. For more information on associated topics, including our ESE policies that have been in place since 2011 and human rights, please see the associated topics section at the end of this page.

Process followed

The process involves finding the customers that are in scope, defined as operating in, or importing deforestation linked commodities from, tropical areas.

These in scope customers are checked against the appropriate certification and membership bodies. A limitation to this approach is that it relies on these bodies having up to date membership and certification lists as well as the certifications being consistent in their zero deforestation standards.

The Forest Stewardship Council (FSC) Timber, Pulp & Paper, Rubber

FSC is an international, non-governmental organisation. Our mission is to promote environmentally appropriate, socially beneficial, and economically viable management of the world's forests. Since its foundation in 1994, FSC has grown to become the world’s most respected and widespread forest certification system.

Roundtable For Sustainable Palm Oil (RSPO)

In response to the pressing global call for sustainably produced palm oil, the RSPO was formed in 2004 by founding members the World Wildlife Fund, the Malaysian Palm Oil Association (MPOA), Unilever, AAK, and Migros. Since then, it has developed a set of environmental and social criteria that companies must comply with to produce RSPO Certified Sustainable Palm Oil (CSPO). These measures help minimise the negative impact of palm oil production on the local environment, wildlife and communities.

Roundtable On Responsible Soy

Non-profit organisation promoting the growth of production, trade, and use of responsible soy. It cooperates with those in, and related to, the soy value chain, from production to consumption. Initiatives include a global platform for multi-stakeholder dialogue on responsible soy and the development, implementation and verification of a global certification standard.

Global Roundtable for Sustainable Beef (GRSB) Leather Working Group (LWG)

The GRSB mission is to advance, support, and communicate continuous improvement in sustainability of the global beef value chain through leadership, science, and multi-stakeholder engagement and collaboration. Members participate in national roundtables, project initiatives, working groups and councils.

LWG is a global multi-stakeholder community committed to building a sustainable future with responsible leather. It is a not-for-profit that drives best practices and positive social and environmental change.

Rainforest Alliance

The Rainforest Alliance is an international non-profit organization working at the intersection of business, agriculture, and forests to make responsible business the new normal. We are building an alliance to protect forests, improve the livelihoods of farmers and forest communities, promote their human rights, and help them mitigate and adapt to the climate crisis.

Important limitations

Soft commodities reporting is limited compared to other reporting that we undertake. It is a manual process and as such whilst effort is taken to include in scope customers there could be a number that have not been included.

This reporting is focused only on customers directly producing or importing specified soft commodities from tropical areas. It does not apply to other NatWest customers and suppliers whose value chains may cause, contribute or be directly linked to deforestation.

The process is reliant on the certificate and membership bodies having adequate controls and keeping membership lists and records up-to-date. NatWest has not investigated the veracity of these certificate issuers or membership bodies.

Results

Due to additional due diligence checks included from the initial scoping in 2023 (step 1 in the above chart), a higher number of customers were identified as being ‘in-scope’. These were located through scanning systems for customers potentially in scope but not captured by the ESE Forestry, Fisheries and Agribusiness risk acceptance criteria. The additional customers found through this enhanced due diligence activity were all conglomerates, having several business activities means that classification for relevant ESE sector policies is more complex. This year we located the highest number of in scope customers, at 44 this is an increase upon 34 that were located the previous reporting year. In addition, as a result of the comparatively small number of customers in some commodity sectors, even the change of a single customer can have a significant impact on the proportion certified or not certified. We are therefore reporting that for a number of commodities, particularly soya, the percentage of customers assessed that did not have certification increased (see table below of year-on-year results). We will continue to work with each customer to attain certification as this is likely to have the greatest positive impact in reducing deforestation, improving business models and reducing risks. Noting the deadline for attaining relevant certification within our ESE Risk Acceptance Criteria is 31 December 2024.

Download Soft Commodities 2023 (PDF 135KB)

Footnotes and references

1. (IPCC, 2022) Ometto, J.P., K. Kalaba, G.Z. Anshari, N. Chacón, A. Farrell, S.A. Halim, H. Neufeldt, and R. Sukumar, 2022: Cross-Chapter Paper 7: Tropical Forests. In: Climate Change 2022: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change Cambridge University Press, Cambridge, UK and New York, NY, USA, pp. 2369–2410, (https://www.ipcc.ch/report/ar6/wg2/chapter/ccp7/)

2. (Grantham Research Institute, 2023) What is the role of deforestation in climate change and how can 'Reducing Emissions from Deforestation and Degradation' (REDD+) help? London School of Economics (https://www.lse.ac.uk/granthaminstitute/explainers/whats-redd-and-will-it-help-tackle-climate-change/)

3. (IPCC, 2022) Climate Change 2022: Mitigation of Climate Change, Working Group III Report (https://www.ipcc.ch/report/ar6/wg3/)

4. (TNFD, 2023) Recommendations of the Taskforce on Nature-related Financial Disclosures ( https://tnfd.global/wp-content/uploads/2023/08/Recommendations_of_the_Taskforce_on_Nature-related_Financial_Disclosures_September_2023.pdf)

5. (NatWest, 2023) Who we are webpage (https://www.natwestgroup.com/who-we-are/about-natwest-group/worldwide-locations.html)

6. (WWF & RSPB 2020) Riskier Business: The UK’s overseas land footprint (https://www.wwf.org.uk/sites/default/files/2020-07/RiskierBusiness_July2020_V7_0.pdf)

7. (House of Commons Environmental Audit Committee, 2024) The UK’s contribution to tackling global deforestation (https://committees.parliament.uk/publications/42709/documents/212302/default/)

8. (UK Government, 2021) Tackling illegal deforestation in UK supply chains (https://www.gov.uk/government/consultations/tackling-illegal-deforestation-in-uk-supply-chains)

9. European Parliament, 2023) Parliament adopts new law to fight global deforestation. (https://www.europarl.europa.eu/news/en/press-room/20230414IPR80129/parliament-adopts-new-law-to-fight-global-deforestation)

10. (The University of Cambridge Institute for Sustainability Leadership, 2021) Banking beyond deforestation (https://www.cisl.cam.ac.uk/resources/sustainable-finance-publications/banking-beyond-deforestation)