Beyond Deforestation Reductions: Public Disclosure, Land-Use Change and Commodity Sourcing

Abstract

Global commodity supply chains contribute significantly to environmental degradation and greenhouse gas emissions. Improving supply chain transparency can create public awareness and incentivise relevant actors to improve their ecological footprint. We exploited Brazil’s blacklisting policy in the Amazon, a public dis- closure mechanism that effectively reduced deforestation rates since 2008, to study the behavioural response of land users and commodity traders to the corresponding reputational risk exposure. Specifically, we combined remotely sensed land use data with spatio-temporally disaggregated soy trade statistics covering 15 years and 769 municipalities to measure the effect of blacklisting on land-use change, sourcing pat- terns, and trade destinations. We applied the Generalised Synthetic Control method to our panel data to find a drastic decrease in deforestation, matched by a similarly sized reduction in pasture expansion. At the same time, soy expansion increased significantly, but instead of expanding into natural forests, it mostly replaced existing pastures and other cropland. The additional soy production was exported predominantly to China, whereas exports to the EU stagnated.