Focus: P&G drops forest pledge, drawing ire of green groups, investors

Focus: P&G drops forest pledge, drawing ire of green groups, investors

Procter & Gamble (PG.N), a global consumer products maker, has removed its pledge to not purchase wood pulp from degraded forests from its corporate policy, according to a company executive who disclosed this information to investors during a briefing on July 18. This change has sparked criticism from several P&G investors. P&G, known for brands such as Charmin toilet paper, Bounty paper towels, and Puffs tissues, sources wood pulp from suppliers in Latin America, Europe, Canada, and the U.S.

Leslie Samuelrich, the president of P&G investor Green Century Funds, expressed disappointment with the change, stating that it represents a step backward at a time when companies should be taking action on climate risk. Green Century, which manages over $1.1 billion in assets, considers P&G as one of its largest holdings and led a shareholder proposal on the company’s forestry practices in 2020.

In May, P&G updated its Forest Commodities Policy, removing language from a previous environmental pledge made in 2021 that stated it would not allow forest degradation, which refers to activities that significantly harm drinking water, animal habitats, or other important elements of forests. This change in policy could potentially conflict with an upcoming European Union deforestation law that will ban certain goods linked to deforestation and forest degradation. P&G has stated that it will comply with the new requirements.

During a virtual briefing on July 18, Jack McAneny, P&G vice president for global sustainability, explained that the company streamlined its policies for forestry commodities like pulp after the United Nations’ Food and Agriculture Organization acknowledged the lack of a widely applied definition of forest degradation. BNP Paribas Asset Management, one of P&G’s significant shareholders, raised concerns about the removal of the no-degradation pledge and its implications for the company’s sourcing practices during the briefing.

McAneny clarified that the change in language was due to evolving definitions and that P&G’s efforts to preserve forests while providing high-quality products to consumers remain unchanged. However, three environmental non-governmental organizations and three investors believe that there is a broad consensus on what constitutes forest degradation and its causes, such as clear-cut logging in pristine forests. The Natural Resources Defense Council has expressed concerns about P&G’s wood pulp supply chain and its potential impact on forest degradation.

Tonia Elrod, P&G’s vice president for family care, which includes towel and tissue products, emphasized that the company has a policy against deforestation and robust compliance mechanisms in place. She stated that for every tree used in P&G’s paper products, at least two are regrown.

Environmental non-profits and some shareholders have been closely scrutinizing P&G’s sustainability policies since 2020 when a majority of investors passed a non-binding resolution requesting an assessment of efforts to eliminate deforestation and forest degradation in the company’s supply chains. In its new forestry policy, P&G consolidates existing guidelines for paper packaging and palm oil used in its products. However, investors and environmental advocates are pushing back, considering the company’s explanation for the change insufficient.

Friends of the Earth, an environmental advocacy group, is drafting an open letter to investors to draw attention to the revised policy. They plan to reach out to major shareholders, including BlackRock, State Street, UBS, and Legal & General, who have previously expressed concerns about P&G’s forestry policy and pulp supply chain.

Most environmental groups agree that forest degradation leads to a loss of value in ecosystems, such as the destruction of habitats for threatened species. The Natural Resources Defense Council filed a complaint with the U.S. Securities and Exchange Commission (SEC) last year, questioning the veracity of P&G’s claims to prohibit forest degradation and its potential impact on investors. The SEC has engaged with the NRDC regarding the complaint, and the environmental advocacy group presented its case to the regulator in May.

Peter van der Werf, head of engagement at Robeco, a significant P&G shareholder, expects the company to take steps to mitigate the negative impact of its business operations on climate change and biodiversity loss.

In conclusion, Procter & Gamble’s decision to remove its pledge against purchasing wood pulp from degraded forests has faced criticism from investors and environmental advocates. The company has defended its new forestry policy, stating that it remains committed to preserving forests and complying with upcoming regulations. However, concerns persist regarding the potential impact on ecosystems and the veracity of P&G’s claims.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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