Deforestation as a Systemic Risk: The Case of Brazilian Bovine Leather

Tropical deforestation and forest degradation driven by agricultural commodity production remains one of the important sustainability challenges of our times. The responses to tropical deforestation so far have not managed to reverse global trends of forest loss, reigniting the discussion about more robust and systemic measures. The concept of deforestation risk is highly relevant for current debates about policy and trade, and likely to increase in importance in the context of the proposed EU Regulation on Deforestation-free Products and EU-Mercosur Trade Agreement. We argue that deforestation is a systemic risk that permeates through different economic sectors, including production, manufacturing, service and control sectors. International trade, investment and economic policies thus act as a systemic trap that cause the production sector to continue with nature’s destruction. This article seeks to more clearly define deforestation risk and uses the case of bovine leather from Brazil to illustrate how pressures for deforestation accumulate across economic sectors towards production, while deforestation risk is dispersed in an opposite trajectory. The article draws on multiple datasets and an extensive literature review. Included are quantitative data sources on annual slaughter, bovine hide/leather registry and annual deforestation, slaughterhouse and tannery locations. We argue that the EU banning unsustainable products from entry and putting incentives for more sustainable agricultural production in the tropics addresses deforestation risks that are currently visible and relatively easy to identify. These response mechanisms are conditioned upon traceability of deforestation risk across supply chains, which is prone to falsifications, leakage and laundry. Although proven to be essential, the proposed EU responses still miss out deeper leverage points to address the systemic drivers of deforestation coming from the manufacturing, service and control sectors that make production through deforestation profitable in the first place.