Creating an action agenda for sustainable commodities.
With global forest loss surging to 6.7 million hectares in 2024, the urgency to act to meet the 2030 goals set in the Kunming-Montreal Global Biodiversity Framework has never been greater. Whilst a five-times increase in wildfires was the biggest driver of forest loss last year, a major factor for deforestation continues to be the agricultural expansion of commodity production in high-deforestation sectors, such as wood, palm oil, and beef, which, if not made deforestation-free, will lead to the destruction of the critical ecosystems necessary for regulating rainfall, enriching soils, and mitigating temperature extremes. Ultimately, continuing to overlook the impacts of high-deforestation supply chains risks undermining long-term agricultural productivity, jeopardizing supply chain resilience, and increasing vulnerability to climate-related shocks.
In recent years there has been a greater effort from corporates, financial institutions, and the public sector to encourage and incentivize deforestation-free supply chains through both bold and ambitious targets, and incoming regulations. One notable development is the European Union Deforestation Regulation (EUDR), which will require companies trading high-deforestation commodities such as cattle, cocoa, coffee, palm oil, rubber, soy, and wood on the EU market to prove that the products sold are not linked to deforestation or forest degradation after December 2020. The regulation, set to apply from December 2025 for large operators and June 2026 for small enterprises, aims to shift global supply chains toward greater transparency and accountability.
Despite encouraging demand-side signals like EUDR, the barriers to deforestation-free supply chains are still deeply systemic and rooted in economic and financial imbalances. For example, at the local level, deforestation and land conversion often offer more immediate financial returns, making these harmful practices attractive to producers of all sizes in the short term. Furthermore, smallholders’ limited access to capital further restricts their ability to invest in the monitoring systems, certifications, and sustainable practices needed to align with corporate and investor expectations for deforestation-free supply chains, and locking them out of higher integrity markets and premium prices for deforestation-free commodities. Without targeted support and real incentives, the transition to sustainable production remains out of reach for many.
According to estimates, USD 210 billion will be required by 2030 to transition supply chains to deforestation-free practices (link to white paper required). However, with current financial flows, only approximately USD 35 billion is being deployed, primarily from public sector sources. For supply chains to become truly deforestation-free, incentives must be embedded at every level. This includes rewarding corporates hitting ambitious targets, to producers and smallholders implementing sustainable practices on the ground. Achieving this transformation requires coordinated global action, with governments, the private sector, and financial institutions working together to harmonize standards for land use and deforestation-free metrics. They must also develop financing and sourcing mechanisms, such as pre-investment platforms, and bridge the gap between commercial and development actors to enhance financial flows and incentives across the value chain. Strengthening and aligning national and international regulations with market needs, and improving smallholder access to markets through targeted support platforms are also critical steps toward making forest protection both practical and equitable.
Mobilizing finance to address systemic barriers such as limited infrastructure, high transition costs, and fragmented traceability can shift the underlying economics of land use. Strategic investments in solutions that support producer incentives, reduce risk, and enhance transparency will accelerate progress. Ultimately, aligning capital flows with sustainability objectives is key to reshaping commodity production systems and ensuring that forest conservation becomes a shared and economically viable priority across the entire value chain.
To highlight the importance of finance in reshaping incentives within deforestation-free supply chains, the Mobilising Finance for Forests (MFF) Program’s Learning, Convening and Influencing Platform has written the “Deforestation-free commodities: Investing in deforestation-free supply chains as a strategic imperative” white paper. Informed by a wide range of stakeholder interviews with those operating in high-deforestation risk supply chains and case studies of different financing models, the paper explores three core questions central to unlocking investment in deforestation-free agriculture: where the most urgent capital gaps exist within supply chains, what financial and structural barriers are currently limiting investment, and which financial instruments or investment models hold the greatest potential to drive scale and impact. These questions are essential to realigning financial incentives with environmental objectives, and could ultimately help to unlock scalable, system-wide change that supports both climate goals and sustainable development.
The MFF Program is delivered by FMO and funded by the government of the United Kingdom and the government of the Netherlands.