The World’s Largest Food and Beverage Companies and Their Suppliers Must Do More to Create an Equitable and Sustainable Food System for All

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A new Oxfam report finds the world’s top food and beverage companies have improved global social and environmental policy commitments, but struggle to turn them into action on a local level.

PUBLISHED 03-17-21



March 16, 2021 /CSRwire/ – As COVID-19 exposes vulnerabilities in the global food system, a new Oxfam report highlights the power of the world’s top ten food and beverage companies to create more equitable and sustainable supply chains that can help lift millions of food producers out of poverty and fuel economies. The comprehensive report, “Shining a Spotlight” assesses how companies have delivered on commitments made during Oxfam’s Behind the Brands campaign to implement stronger sourcing policies that impact climate change, land rights and women’s empowerment. 

“Bold human and land rights commitments are a first step, but they are not reaching the very farmers and workers who are at once producing our food and struggling to stay afloat during a global pandemic and a climate in crisis,” said Helen Ripmeester, Oxfam America’s Associate Director of Inclusive Value Chains and Private Sector. “Greater supply chain transparency, stronger incentives for suppliers to comply with standards and better regulation and accountability, can bring us significantly closer to a more inclusive, equitable and sustainable food system.”

Oxfam’s Behind the Brands campaign which took place between 2013-2016 brought public pressure on the “Big 10”—Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez, Nestlé, PepsiCo, Unilever and Associated British Foods (ABF)—to improve their social and environmental policies. The new report analyzes how the companies have performed on their commitments specifically in Brazil, Ghana, Guatemala, India, and Malawi over the past five years. The report finds that while companies have taken actions at the global level, progress stalls in translating those approaches to countries and through supply chains to reach farmers and workers.

“We get peanuts or nothing in return. At times we don’t even have enough money for sowing season. We are just surviving,” says Pradeep, a sugar cane farmer in India who was interviewed for a related Oxfam study, the Human Cost of Sugar.

On climate change, companies have been adopting robust climate targets and begun tracking agricultural emissions within their own supply chains over the last few years. Given that the food sector accounts for about 25 percent of global greenhouse gas emissions and small scale farmers are increasingly being impacted by climate change, progress by these big actors is essential for ensuring a just transition in food systems to address the urgency of the climate crisis. But as the report finds, not all companies have kept pace with a 1.5°C global warming scenario and taking serious action on deforestation remains elusive.

On land rights, companies have made significant progress instituting policies at the headquarters level to protect communities at risk of losing their land to the production of sugar, palm and other ingredients. But implementation is uneven. Especially concerning is companies are rarely aware of where new, risky land acquisitions are taking place in their supply chains until it becomes a compliance issue. Knowing where their suppliers are acquiring land – before an investment happens – would allow companies to implement policies that protect farmers and communities most at risk.

On women’s economic empowerment, several companies have taken initial steps to foster gender equality and women’s economic inclusion specifically in the cocoa sector. Changes include new codes of conduct, parental leave practices, and social investment programs. However, they’re often limited to headquarters or specific branches and fail to extend through the supply chain to factory workers, suppliers, and farmers where gender inequalities are more pronounced.

“Amassing a common voice by cocoa farmers is one significant means to ensuring farmers take part in setting the agenda for sustainable cocoa production,” Sandra Kwabea SarkwahProject Officer with SEND Ghana. “The current Ghana Civil society Cocoa platform with support from Oxfam Ghana has created a new space for collective idea sharing among farmers and civil society organizations at various levels.”

Some promising instances of innovation outlined in the report involve companies testing new models on a small scale. For example, the Phata Cooperative in Malawi, demonstrated how smallholder farmers could combine their small family landholdings into large blocks in order to grow and sell sugar cane to Illovo Sugar Africa. A case study about the cooperative shows how farmers have been able to retain land rights and contribute to their own economic and development success.

Ultimately, as the report finds, in order for change to happen at scale, blockages must be addressed. This includes greater commitment to transparency that allows consumers and key stakeholders including farmers and communities affected by supply chains to understand which companies source from which suppliers and where. Companies also must provide the right incentives for suppliers, especially large-scale agribusinesses to comply with policy commitments and take up the agenda for a more resilient global food system.

“Buyers have tremendous power to engage with their suppliers and push for reform,” says Ana María Méndez, Director, Oxfam in Guatemala. “In Guatemala, three major food companies suspended sourcing with a palm oil company due to poor sustainability policies.  This motivated the company to make significant strides in awareness of workers’ rights, gender justice, and increased transparency, even though the palm oil sector has a long way to go.”

With the number of severely hungry people across the world expected to double to 270 million due to COVID-19, the need for systemic change is urgent. Small-scale farmers and workers deserve their fair share of the value they create and access to productive resources, including their own land. The only way forward is for companies to move further, faster on implementing their commitments, and to adopt more holistic business models that internalize social and environmental performance and good governance across supply chains.


Oxfam is a global organization working to end the injustice of poverty. We help people build better futures for themselves, hold the powerful accountable, and save lives in disasters. Our mission is to tackle the root causes of poverty and create lasting solutions. Join us:

Notes to editors

  • Shining a Spotlight: A critical assessment of food and beverage companies’ delivery of sustainability commitments is accompanied by the public release of four independent evaluations and the agribusiness scorecard.
  • The agribusiness scorecard assesses seven agribusinesses (Archer Daniels Midland (ADM), Barry Callebaut, Bunge, Cargill, Louis Dreyfus Company, Olam International and Wilmar International Limited) to gauge progress and highlight shortcomings across several themes. Despite the overall increases and some notable policy commitments, the scores remain low. The women, land and climate themes all saw the lowest average increases, indicating that pressure from customers has not moved the sector enough. And the divide between the top performers and those at the bottom is widening. Overall, the agribusiness sector continues to show a need for deeper policy commitments and implementation on key issues.
  • The four independent evaluations take an in-depth look at implementation efforts on: 
    • Gender equality in cocoa value chains, assessing the completion and assess the completion and quality of the companies’ gender assessments and the resulting action plans.
    • The UN Women’s Empowerment Principles, assessing the extent to which companies that have signed on to the WEPs are taking action to foster gender equality and women’s economic inclusion.
    • Land rights, assessing the extent to which companies have integrated provisions on land rights into their supplier requirements and provided support mechanisms to encourage supplies to become complaint.
    • Climate change, examining the adoption of science-based emission reduction targets and shifting supplier policies and practices.
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Oxfam is a global organization working to end the injustice of poverty. We help people build better futures for themselves, hold the powerful accountable, and save lives in disasters. Our mission is to tackle the root causes of poverty and create lasting solutions. Join us:

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Amplifying the role of media for a sustainable future

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Latest news Published on 03.03.2021

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Bioeconomy Capacity building MediaNetwork Training

A new online edition of the EFI Lookout Station’s Solution Hack for Journalists begins on 4 March, bringing together 16 journalists from all around the world.

The programme takes a unique approach where journalists are invited to discuss, engage and collaborate with experts and other journalists to identify the issues with today’s economic model and possible solution areas. The ultimate goal over the three online workshops is to explore the role journalists and media can play in making positive impacts on our planet.

Mentors include investigative reporter Alexandra Heal, BBC journalist Richard Fisher, El Tímpano founder Madeleine Bair, and Science Africa founder Otula Owuor. The programme will also see contributions by experts from EFI and Sitra, the Finnish Innovation Fund, as well as ThinkForest president Janez Potočnik.

The programme is the second Solution Hack collaboration between Sitra and EFI, following on from the Solution Hack for Journalists organised in Helsinki in 2019 which explored the Finnish model of sustainability, and also offered training on the Disruptive Design Method (DDM).

The training is part of a wider collaboration between Sitra and EFI, which also includes an online digital forum (in partnership also with CIFOR, ICRAF and the Circular Bioeconomy Alliance) on 19 March. The forum, Nature at the heart of a global circular bioeconomy, brings together investors, scientists, forestry, agroforestry and landscape experts, practitioners, community and business leaders and policy makers to explore what it will take to shift to a circular bioeconomic model that supports people and the planet, putting nature at the heart of how we operate.

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Explainer: Can satellite mapping really make agriculture more sustainable?

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Can images from space help us achieve greener ways of growing food?

On Cape Barren Island, Australia, a vegetation fire started along the coast.
On Cape Barren Island, Australia, a vegetation fire started along the coast. Image: Planet Labs, Inc.

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By Nick Measures Feb. 23, 2021

Can images from space help us achieve greener ways of growing food here on Earth? That’s the very real ambition behind precision agriculture, a new form of tech-driven farming which uses the data captured by satellites to help farmers grow more for less and maybe help make the food supply system more transparent in the process.  

Agriculture doesn’t have a good reputation when it comes to sustainability. The constant drive to feed an ever-growing global population making it a major cause of deforestation and climate change. But satellite mapping, using satellite images to build a composite map of the Earth’s surface, now offers a vital source of information that is allowing farmers to better monitor their fields, manage their crops and ultimately improve yields and efficiency.


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Satellite mapping is not a new technology. The first very blurry black and white satellite image of Earth was taken way back in 1959 by NASA’s Explorer 6, but in recent years the level of accuracy and breadth of coverage that the new breed of satellites can achieve has opened up a whole world of possibilities for satellite mapping.

“We’re capturing the entire earth’s landmass nearly every day at a resolution of about 3-5 metres per pixel,” explains Zara Khan, director of business development at Planet, a leading provider of geospatial data obtained via its constellation of around 200 active cubesat satellites.

It’s all connected, it just shows the ways that you can utilise this technology for different outcomes whether you are a grower, supplier, or a consumer.

Zara Khan, business development director, Planet

Agriculture has been quick to see the potential value of that level of high resolution, high coverage and high frequency data, offering as it does the chance to monitor a range of real-time factors such as growth rates, soil conditions, crop damage and water usage right down to an individual field level. 

As a result, satellite mapping has become a valuable tool for agronomists and farmers looking to practice precision agriculture, the principle of applying a range of technological innovations like remote sensing, cloud computing and artificial intelligence to help farmers to grow more for less.

By having a better idea of what’s happening in a specific field, farmers can now make more informed decisions on the correct course of action, which in turn, can lead to more sustainable farming practices. Whether that’s more targeted application of fertiliser to reduce the risk of polluting run off, early identification of irrigation issues to decrease water wastage, or using satellite mapping to help plot the most efficient route for a combine harvester, this imagery when combined with other datasets and additional analytical tools can help optimise inputs.

While the potential is far-reaching — this data covers the entire Earth after all — the biggest challenge currently being faced by the industry is getting the relevant information to enough end users (the farmers) and getting it to them in a way that is accessible and actionable.

Satellite imagery can definitely help in terms of instilling greater transparency and credibility when it comes to the fields of sustainability and potentially carbon offsetting.

That’s where a raft of third-party companies and organisations are working hard to take that satellite imagery and curate the content to make it relevant to a specific end user, whether they are a smallholder farmer looking for anomalies in their rice crops in Indonesia, or an Australian dairy farmer looking to better manage his pasture.

“The other key challenge is making sure the information gets across that last mile,” states Khan, citing examples where partner companies have had to localise the language used or converted key data into a pdf format so it can be more easily shared via mobile phone.

Companies are not just looking at how to use the data in the short term, but also exploring how the huge archive of historical satellite imagery can be analysed to produce forecasts. This is becoming increasingly possible thanks to the development of powerful super computers which can use machine learning to study the patterns and trends from satellite imagery from the last 10 years. The aim is to be able to use these forecasts to make more accurate predictions relating to potential crop yields or flag up issues such as droughts or disease before they occur. 

But satellite mapping doesn’t just have the potential to help growers farm more efficiently. With suppliers and consumers increasingly concerned with tracking where and how their food is grown there is also a potential for this data to play an important role in measuring issues around sustainability and best practice in the wider food supply chain.

Short of sending out inspectors to visit individual farms, it’s always been potentially difficult to check that farmers were really employing good practice when it came to how often they grazed their livestock or whether suppliers were really sourcing from farms that didn’t contribute to deforestation. 

But by utilising the same satellite mapping data used in the growing process, there may be a quicker and easier way to monitor whether farmers are doing what they claim and actually meeting the relevant rules and regulations.

Dairy farmers in the United States are an early example of this in practice, utilising satellite data typically employed to track pasture management and biomass usage to demonstrate that their cattle are grazing outdoors for the required periods of time to meet US Department of Agriculture (USDA) organic certification standards.

“It’s all connected, it just shows the ways that you can utilise this technology for different outcomes whether you are a grower, supplier, or a consumer,” says Khan.

Looking ahead, satellite mapping’s ability to record broad areas of land relatively cheaply and quickly might make it invaluable when it comes to measuring the impact of carbon farming – the idea of improving the health of soil on farms to enable it to remove more carbon dioxide from the atmosphere.

While there has been some debate about the efficacy of this approach, carbon farming is clearly an opportunity that’s being actively pursued in the US, under the USDA’s incoming head Tom Vilsack, and as a key part of the European Union’s post-2020 Common Agricultural Policy (CAP).

“Satellite imagery can definitely help in terms of instilling greater transparency and credibility when it comes to the fields of sustainability and potentially carbon offsetting. We are partnering with academia and governments to develop the evidence base for measuring regenerative practices,” concludes Planet’s Khan. “Because without that trust you risk the whole system.”

Satellite mapping alone does not have the answers for a more sustainable agricultural future, but when combined with other technological innovations it does have the potential to help answer a lot of the challenges currently being faced by farmers, consumers, suppliers and governments.

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Dasgupta Review: The need to live within the means of our planet

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report cover Dasgupta Review abridged version
The Dasgupta Review is an independent, global review on the Economics of Biodiversity led by Professor Sir Partha Dasgupta (Frank Ramsey Professor Emeritus, University of Cambridge). The Review was commissioned in 2019 by HM Treasury and has been supported by an Advisory Panel drawn from public policy, science, economics, finance and business. Source: UK Government

The Economics of Biodiversity: The Dasgupta Review was released February 1st after two years of extensive research. Overall, we are extremely pleased with the outcome. Published by the UK government, the report is a strong reference piece for grounding economics on an ecological foundation. It confirms the significance of ecological overshoot and helps build the bridge that links climate, biodiversity, and the human economy.

Overshoot is emphasized throughout

The Dasgupta Review is highly validating for those of us concerned with ecological overshoot. The carefully crafted report emphasizes this one critical point: Overshoot is not only driving down biodiversity, but also the human economy. It makes clear the need to stay within the regenerative capacity of the planet. And the implications are unambiguous: we measure the wrong things, and we undervalue nature.

This message speaks directly to the importance of Ecological Footprint and biocapacity accounting. The Review pushes this perspective more strongly than any other international report of its kind. It is even more powerful because it is issued by a finance ministry, and written by a respected economist, rather than a member of the environmental or science communities.

The Review recognizes that we are part of nature

The Review’s headline messages make particularly clear that moving out of overshoot is central to ecological health. It mentions repeatedly that humanity now uses the resources of 1.6 Earths, as calculated by the National Footprint and Biocapacity Accounts. Perhaps most crucially, it acknowledges that the economy is a subsystem of the biosphere. Here are some of the headlines:

“Our economies, livelihoods and well-being all depend on our most precious asset: Nature.”
“Ensure that our demands on Nature do not exceed its supply, and that we increase Nature’s supply relative to its current level.”
“Change our measures of economic success to guide us on a more sustainable path.”

A necessary shift in the biodiversity and climate conversation

For many of us, these messages seem obvious. However, they differ starkly from conventional biodiversity and climate discussions. The Review accepts the typically mentioned drivers of biodiversity loss: fragmentation and overuse of ecosystems, invasive species, pollution, and climate. It goes beyond the soft approaches of securing hotspots of conservation and seeking ways for human and non-human life to coexist in the same space. Going deeper, the Review acknowledges overshoot and that the ultimate pressure comes from this overarching, stark imbalance between human demand and what Earth can regenerate.

This recognition of the fundamental cause of biodiversity decline offers a big shift within the biodiversity debate. With very few exceptions, this clarity is seldom seen in the conventional environmental or academic literature on biodiversity. So, as obvious as it sounds to focus on overshoot, it is revolutionary for such an official document, especially as it was produced by a finance ministry.

Careful communication

The Review is sensitive to the reality that mainstream sustainability debates and economic development doctrines shy away from recognizing overshoot. As a result, the Dasgupta Review uses the term “overshoot” judiciously. It adheres to language that is methodologically neutral, and it avoids linking the discussion explicitly to earlier influential thinking like “Limits to Growth” (which was highly acclaimed, and still brutally–and mostly unfairly–attacked by economists). Even founding figures of ecological economics, like Herman Daly, are strategically left out.

The Dasgupta Review’s careful presentation to keep contrarians at bay is a crucial asset to the biodiversity-economy conversation. It gives it a far more robust grounding. After all, claims that the economy is a subsystem of the biosphere, and that the planet’s finite nature also contains humanity’s economic possibilities, has led to harsh and destructive pushback from mainstream economists and others over the last several decades. We are encouraged that there has not been visible pushback from the usual detractors. Even The Economist article aptly summarized and praised the report.

In sum, we applaud the Review and are hopeful that it will spur meaningful shifts in how the world discusses climate, biodiversity, and the human economy. Moreover, we are grateful to Prof. Dasgupta and his team for including Global Footprint Network in the process, soliciting our feedback, and including our data.

Dasgupta, P. 2021, The Economics of Biodiversity: The Dasgupta Review. (London: HM Treasury) (released February 1, 2021)

Image credit: UNEP via Twitter

Corporate reporting on the SDGs: what are the challenges and opportunities?

1 day ago·4 min read

By Camila Corradi Bracco, Senior Coordinator — Content Development & Program Delivery, GRI

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Since the launch of the Sustainable Development Goals (SDGs) in 2016, the role of the private sector in fulfilling the 2030 Agenda has been widely acknowledged, as set out under SDG 12. Yet to assess how companies are actually contributing towards these Global Goals, we need greater transparency on their impacts.

Over the past four years, GRI has championed the participation of companies in measuring their performance on the SDGs. As we look ahead to the Decade of Action needed to achieve the SDGs, it is clear that further progress will be needed, including doing more to increase private sector contributions.

Progress so far

At the end of 2020, a four-year Action Platform for Reporting on the SDGs, from GRI and UN Global Compact, concluded. This included a Corporate Action Group (CAG) that connected business representatives in a peer learning platform, which successfully helped companies define and improve their SDGs reporting.

Research on CAG participants revealed:

1. Increased clarity on how to engage with the SDGs from a business perspective

2. Improvements in how they measured SDGs performance

3. Better prioritization of the most relevant SDGs

4. More integration of the SDGs into business decision-making processes

However, the findings also indicate that many companies continue to face challenges with understanding and disclosing their SDGs contributions, with opportunities to make corporate reporting more relevant and effective.

Improving data quality and addressing gaps

Reporting on priorities at the SDG target level, within each of the overarching Goals, and linking them to the business strategy, is often missing. Overall, deeper connections between material topics with SDG targets and corporate priorities are needed. We also see there are opportunities to further explore the links between SDG priorities and the contributions of companies in the countries and jurisdictions where they operate.

Most importantly, corporate reporting on the SDGs often focuses on positive contributions that companies make to the SDGs, with a lack of transparency and accountability for negative impacts. This issue was also highlighted by KPMG research in December.

Reporting that has impact

Identifying SDG priorities throughout the value chain is a complex undertaking, as is demonstrating the cause-and-effect relationship between SDG contributions and business performance. Moreover, because of the interconnected and interdependent nature of the SDGs, companies need to identify and take account of synergies and trade-offs between positive and negative impacts.

Efforts to quantify impacts on the SDGs and contextualize them (for example, considering the social thresholds and planetary boundaries) needs strengthened.

That is why it is necessary to move beyond assessing activities and outputs, and focus on how to disclose outcomes and impacts.

This is crucial as it enables businesses to manage their performance and demonstrate accountability for their impacts.

Making reporting relevant to stakeholders

There is increasing interest from a wide range of stakeholders in business contribution to the SDGs, including how companies are aligning products, services and business strategy with the SDGs. Policy makers, investors, consumers, labor organizations and civil society all increasingly demand that companies show transparency through providing quality data and balanced reporting.

However, different stakeholders have different expectations and data requests. Steps business can take to provide more strategic and relevant information include:

· Providing aggregated or disaggregated information that allows stakeholders to assess their performance and contribution to the SDGs

· Setting long-term SDG-related performance targets, and regularly reporting on progress

· Clearly demonstrating how the business strategy aligns with the SDGs

Proactive communications on the issues that matter most — to both the company and stakeholders — is crucial.

Not only does provide the necessary information to assess corporate sustainability performance and impact, it also allow stakeholders to make decisions that contribute to the SDGs.

Driving business action through reporting

Inspired by the progress to date and the opportunities still to come, GRI is launching a Business Leadership Forum, to commence in March, on corporate reporting as a driver for achieving the SDGs.

The initiative will offer participating companies practical insights, focusing on how to raise the quality and strategic relevance of their SDG reporting.

The Forum is built around a series of online sessions that will bring together corporate reporters and representatives from key stakeholder groups — including the investment community, governments, regulators, members of the supply chain, civil society and academia.

The experiences of the past four years have shown that both businesses and stakeholders benefit from strategic and relevant SDG-related information. Sustainability reporting is an essential driver of the transformational change that is required to achieve the SDGs. As we look ahead to the Decade of Action and the pandemic recovery phase, the case for meaningful corporate reporting on the SDGs is more compelling than ever before.

Leadership Forums

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GRI’s Corporate Leadership Groups (CLGs) provide engagement and peer learning forums to help organizations address find solutions to improve their sustainability reporting.

Our CLGs bring experts together and focus on current issues and challenges, including responding to needs that are highlighted by Community members. See below for details of our latest CLGs. 

Transparency and reporting innovation

The GRI Community offers an exclusive opportunity to join Corporate Leadership Groups. These groups seek innovative solutions to challenges common to reporters, and encourage international discussions between leading reporting companies and experts.

The work undertaken in these groups helps forge tools and approaches to improve sustainability reporting practices globally. The Corporate Leadership Groups run over the course of two years and are charged separately. As with membership, the participation fee for a Corporate Leadership Group is based on a company’s revenue.

Business Leadership Forum – Driving Corporate Reporting for Achieving the SDGs

Collaboration between businesses and stakeholders is critical for driving action to deliver on the SDGs while building an inclusive and sustainable path to recovery after the pandemic.

This forum is designed to aid in leveraging the power of your corporate reporting by combining practical support and best practices for collaborating with stakeholders to achieve change. You can find more information here.

The program begins on 1 March 2021. Reserve your spot today or contact us for more information.

Business Leadership Forum on Circular Economy and Waste Reporting

Businesses are now beginning to see waste in a different light. Where it used to be a burden, it is now becoming a source of opportunity for obtaining materials.

If you are looking to explore how to measure and report on your company’s progress on waste prevention and circularity, join the GRI Business Leadership Forum on Circular Economy & Waste Reporting.

Between the fall of 2020 and Spring 2021, this online program will help you to better understand the GRI: 306 Waste Standard, and broader circularity trends and measurement methodologies, and exchange experiences with a range of different stakeholders.

You can find more information here.

Interested in joining?

For further information on our Corporate Leadership Groups, get in touch with Sabine Content, Director Corporate & Stakeholder Engagement.Contact Sabine

Topic Standard Project for Waste


The first globally applicable tool for reporters to communicate their waste impacts

Why waste

GRI 306: Waste 2020, which published in May 2020, introduces a stronger relationship between materials and waste by assisting reporters in identifying and managing their waste-related practices, and impacts, throughout their value chain.

The Standard changes how companies measure and understand waste, responding to global concerns about increases in waste generation and the impact on the environment, society and the economy. It encourages companies to prevent waste at source and unlock opportunities for circular business practices.

By including updated disclosures, circularity and waste prevention concepts, the Waste Standard reflects global best practices on waste management. The Waste Standard updates previous GRI disclosures on waste and is now freely available as part of the GRI Standards.

GRI 306: Waste 2020 is available now for download

About the project

Initiated by the GSSB in 2018, the aim of this project was to review and update the waste-related disclosures in GRI 306: Effluents and Waste 2016 and ensure that waste disclosures aligned with internationally-agreed best practice while reflecting recent developments in waste management and reporting.  

A multi-stakeholder working group was appointed by the GSSB in September 2018. An exposure draft was made available for a 75-day public comment period in the summer of 2019 which received over 50 submissions from organizations and individuals. All received comments were considered by the Waste Working Group and the GSSB. 

The project followed the GSSB Due Process Protocol, the implementation of which was overseen by the Due Process Oversight Committee.  

Basis for conclusions

A 75-day public comment period for the exposure draft of the Standard ran from 1 May to 15 July 2019. 

‘Basis for conclusions for GRI 306: Waste 2020’ provides a summary of the public comments received. It also provides a summary of how the GSSB responded to these comments in the finalization of the Standard.

Public feedback record – Public Comment Period 1 May – 15 July 2019

Basis for Conclusions– Public Comment Period  1 May – 15 July 2019

Want to know more

How the voluntary carbon market can help address climate change


December 17, 2020 | ArticleOpen interactive popupHow the voluntary carbon market can help address climate changeOpen interactive popupThe voluntary carbon market is gaining momentum and plays an increasingly important role in limiting global warming. Here’s how.


Open interactive popup Article (PDF-526KB)

As business leaders set increasingly ambitious commitments to reduce global greenhouse-gas (GHG) emissions, a market is developing that can help to achieve them by supplementing companies’ efforts to reduce their own emissions. This is the rapidly growing market for voluntary carbon credits.Sidebar

About the authors

Carbon credits (often referred to as “offsets”) have an important dual role to play in the battle against climate change. They enable companies to support decarbonization beyond their own carbon footprint, thus accelerating the broader transition to a lower-carbon future. They also help finance projects for removal of carbon dioxide from the atmosphere—delivering negative emissions, which will be needed to neutralize residual emissions that will persist even under the most optimistic scenarios for decarbonization. However, while the voluntary carbon credit market is currently experiencing significant momentum, it is still relatively small. The recently launched report by the Taskforce on Scaling Voluntary Carbon Markets aims to create a blueprint for solutions that could help overcome obstacles to its further growth. (For more about the Taskforce, which McKinsey supports as a knowledge partner, please read our article “Scaling voluntary carbon markets to help meet climate goals.”) This article will explain how carbon credits work and how they can help in the global effort to address climate change.

The dual role of voluntary carbon credits in addressing climate change

Criteria for carbon credits

A carbon credit is a certificate representing one metric ton of carbon dioxide equivalent that is either prevented from being emitted into the atmosphere (emissions avoidance/reduction) or removed from the atmosphere as the result of a carbon-reduction project. For a carbon-reduction project to generate carbon credits, it needs to demonstrate that the achieved emission reductions or carbon dioxide removals are real, measurable, permanent, additional, independently verified, and unique (see sidebar, “Criteria for carbon credits”). If a project meets these criteria—as specified by independent standards such as Gold Standard and Verified Carbon Standard (VCS)—credits can be issued. The impact of a carbon credit can only be claimed—that is, counted toward a climate commitment—once the credit has been retired (canceled in a registry), after which it can no longer be sold. A carbon credit is considered a “voluntary carbon credit” when it is bought and retired on a voluntary basis rather than as part of a process of compliance with legal obligations.

The proceeds from the sale of voluntary carbon credits enable the development of carbon-reduction projects across a wide array of project types. These include renewable energy; avoiding emissions from fossil-fuel based alternatives; natural climate solutions, such as reforestation, avoided deforestation, or agroforestry; energy efficiency; and resource recovery, such as avoiding methane emissions from landfills or wastewater facilities; among others.

While most of these project types including renewable energy, avoided deforestation, and resource recovery focus on avoiding carbon emissions, others, such as reforestation, focus on removing carbon dioxide from the atmosphere. This is a meaningful difference, illustrating the dual role voluntary carbon credits can play in addressing climate change:

  • In the short term, voluntary carbon credits from projects focused on emissions avoidance/reduction can help accelerate the transition to a decarbonized global economy, for example by driving investment into renewable energy, energy efficiency, and natural capital. Avoiding emissions is typically the most cost-efficient way to address atmospheric greenhouse gas concentrations.
  • In the medium to long term, voluntary carbon credits could play an important role in scaling up carbon dioxide removals (or negative emissions) needed to neutralize residual emissions1 that cannot be further reduced. In a recent analysis, we found that at least 5 gigatons of negative emissions will be needed annually to reach net-zero emissions by 2050. These could be realized through a combination of natural climate solutions such as reforestation (for example, sequestering carbon in trees) and nascent technology-based carbon capture, use, and storage solutions such as direct air capture with carbon storage (DACCS), and bioenergy with carbon capture and storage (BECCS). Voluntary carbon credits can help finance the scale-up of these solutions.

The role of voluntary carbon credits in corporate climate commitments


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A credible corporate climate commitment begins with setting an emissions reduction target that covers both a company’s direct and indirect greenhouse gas emissions: if a company does not already have an emissions baseline from which to set a target, creating one is a necessary first step.

Aligning such a target’s ambition level with the latest climate science is widely seen as best practice. In other words, the target needs to be in line with the level of decarbonization required to limit global warming to well below 2 degrees Celsius above preindustrial levels at a minimum—and ideally be in line with a 1.5-degree pathway, which scientists estimate would reduce the odds of initiating the most dangerous and irreversible effects of climate change. The Science Based Targets initiative has developed methodologies for setting such a target, which have been already adopted by more than 1,000 companies, including many leading multinationals. To achieve the required emissions reductions, companies can pull levers such as improving energy efficiency, transitioning to renewable energy, and addressing value chain emissions.Sidebar

Types of carbon targets

As a next step, a company may commit to a target that involves the use of voluntary carbon credits—either to compensate for emissions that it has not been able to eliminate yet or to neutralize residual emissions that cannot be further reduced due to prohibitive costs or technological limitations. These types of targets come with various designations (for example, carbon neutral, climate neutral, net-zero, carbon negative, climate positive) but they all typically involve a company supplementing reductions achieved within its own carbon footprint by financing reductions elsewhere through the purchase and retirement of voluntary carbon credits (see sidebar, “Types of carbon targets”). By offsetting its remaining emissions in this way, a company can claim it is mitigating its residual impact on the climate. Some, such as Microsoft, have gone further by setting aspirations to make a net-positive impact on the climate.

Scaling voluntary carbon markets to help meet climate goals

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