ICIJ Challenges Environmental Audits As Overlooking Deforestation

JurisdictionEuropean Union,United States,Federal
Law FirmCadwalader, Wickersham & Taft LLP
Subject MatterCorporate/Commercial Law, Environment, Corporate and Company Law, Environmental Law
AuthorMark Beardsworth, Kevin Roberts and Sharon Takhar
Published date27 March 2023

The International Consortium of Investigative Journalists (ICIJ) recently issued a report raising concerns that certain auditing firms had certified client companies' practices and products as sustainable while ignoring that these same companies were engaged in deforestation activities. The ICIJ analyzed the inspection records, environmental violation data and court filings of companies in 50 jurisdictions and found many were accused of environmental crimes or other wrongdoing by local communities and government agencies despite their products and practices being certified as "sustainable."

Certification organizations, such as the Forest Stewardship Council and the Roundtable on Sustainable Palm Oil, are private bodies that set standards and guidelines for how forests should be managed responsibly given their importance to the environment and that deforestation and forest degradation account for 8-10% of greenhouse gas emissions. Much attention has been focused on tropical forests of the Amazon as well as on Indonesia and Malaysia, where there is significant logging to produce palm oil. In Indonesia alone, the ICIJ claims that at least 160 organizations have disregarded environmental regulations over the past decade, including operating under false permits, and logging leading to the destruction of the habitats of endangered animals.

According to ICIJ, auditing firms that were engaged to carry out environmental audits of these organizations failed to flag these allegations of violations, thereby facilitating the ability of those companies to continue delivering commodities originating from potentially illegal deforestation practices. In one instance, a group of Canadian logging companies used what was labelled as a "sustainable" forest management plan to deforest indigenous land. The "sustainable" forest management plan was certified by a local auditor. In another example, a Brazilian wood products company that claimed to have been "certified with flying colors" had been fined 37 times since 1998 for environmental law violations.

Effective 2024, an EU Regulation on deforestation-free supply chains will require companies to show that the products they are selling within the territory do not come from forest destruction. In order to sell their products in the EU, companies will have to show their geographical origination, which in practice means providing the relevant GPS coordinates to prove the area has not been deforested. Enforcement authorities in the...

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