Facing Amazon Backlash, JBS Has a Five-Year Plan to Track Cattle
(Bloomberg) -- JBS SA, the world’s largest meat producer, is giving the world a response to the rising criticism over its approach to Amazon deforestation.
The beef company is developing a platform to monitor all its cattle suppliers in the Amazon, according to Chief Executive Officer Gilberto Tomazoni, who said it will take five years to put the new tracking system into place. The initiative addresses the main hurdle to halt deforestation linked to cattle: indirect suppliers.
“We’ll finally solve the issue of monitoring the suppliers of our suppliers,” Tomazoni said in a telephone interview.
JBS has said it doesn’t buy cattle in its direct supply chain from deforested areas in the Amazon, where it monitors 50,000 producers daily in an area that’s bigger than Germany. Over the past decade, the company blocked purchases from 9,000 ranchers due to non-compliant practices. Still, like all other Brazilian meat-packers, the company fails when it comes to tracking cattle throughout its supply chain. Indirect suppliers include farms where young animals are raised before being sold to larger operations that fatten the cattle and sell them to slaughterhouses.
The latest JBS move comes two months after its main Brazilian rival, Marfrig Global Foods SA, announced a five-year plan to implement its supply-tracking system for the Amazon.
The failure in tracking the whole supply chain along with harmful practices of some ranchers are seen as some of the main drivers for Amazon deforestation, which has been in then spotlight over the last year as images of the rainforest in flames sparked global outrage. In recent months, JBS was accused by Greenpeace, Amnesty International and The Bureau of Investigative Journalism of buying cattle raised in deforested areas. In July, Nordea Asset Management decided to divest from JBS over its Amazon approach.
JBS, along with Brazilian peers Marfrig and Minerva SA, pledged to end its links with Amazon deforestation in 2009, after a Greenpeace report. Over the past decade, beef companies developed systems to monitor all direct suppliers, but environmental groups say they have taken too long to monitor the indirect ones.
JBS is betting that its new platform will provide enough confidentiality to convince suppliers to allow the company to access documents that show transit moves for the animals, normally considered private information. Access to this documentation is key for meat companies to track cattle movement.
“We’ll signal to cattle suppliers that we have a deadline for that -- after 2025, being part of the platform will be a condition to sell cattle to JBS,” said Marcio Nappo, JBS’s sustainability director. The company expects to have the platform ready this year and start a monitoring pilot program in Mato Grosso state next year.
JBS shares have declined about 13% this year in Sao Paulo despite the company posting record profits. In addition to investor concerns over the Amazon, the company has also come under public scrutiny as its meat plants from the U.S. to Brazil and Australia saw outbreaks of Covid-19. Also, investors have been waiting for Brazil’s development bank sale of its 21% stake in JBS.
Still, Tomazoni said the Amazon announcement is not in response to the market.
“We are not looking to the audience to set the team’s organization. We look at the big picture, we want to build something real,” Tomazoni said. “Stock performance in the short term is not disturbing my sleep because we are doing everything to ensure the company’s sustainability in the long term.”
JBS’s plan to fight Amazon deforestation also involves supporting farms to come into compliance with Brazil’s environmental laws. The meat giant is also committed to providing assistance to farmers to raise productivity.
The company will create a fund to finance projects for the sustainable development of the region. The goal is to raise 1 billion reais ($182.7 million) through 2030, while JBS will invest 250 million reais over five years. For each contribution made by third parties to the fund, JBS will match the amount up to 500 million reais through 2030.
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