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P&G faces ‘investor risk alert’ over alleged links to deforestation and forced labour

Campaign groups are backed by responsible investors in the US

Environmental campaign groups will issue an ‘investor risk alert’ for consumer goods giant Proctor and Gamble (P&G) today, backed by sustainability-focused investors. 

The alert seeks to warn investors about an alleged lack of action by P&G on deforestation and working conditions in its supply chains in Canada, Indonesia and Malaysia.  

Focusing on its palm oil and pulp sourcing, the alert highlights a string of problems with P&G’s supply chains, claiming there is “deforestation and human rights violations in their commodity production and processing operations”, including the use of forced labour. 

“The US Customs and Border Protection’s Office of Trade has been blocking shipments of palm oil from P&G’s largest palm oil supplier since September 2020 due to its use of forced labor,” says the alert, adding that supply chains for its toilet paper and paper towels are degrading climate-critical primary forests in Canada, damaging habitat for endangered species and harming the welfare of local and indigenous people.

Stand.earth, Friends of the Earth and Rainforest Action Network have been supported in the statement by ESG-focused asset managers Boston Common and First Affirmative Financial Network. 

Holly Testa, Shareholder Engagement Director at First Affirmative, said P&G must “adopt clear accountability mechanisms for its suppliers as well as stringent thresholds for suspending or terminating irresponsible suppliers.”

The alert encourages investors to engage with P&G over its use of controversial suppliers. If this is ineffective, investors should vote against board directors at its annual meeting in October, it says. 

The group also warns investors to “evaluate what level of risk P&G’s controversial supply chains present for the ESG screens”.

The environmental and social performance of businesses within company supply chains is becoming a target for regulators – particularly in Europe. The EU is pushing forward on plans to introduce sweeping rules around due diligence, potentially holding companies, investors and individuals accountable for abuses that take place within their value chains. Similar rules are emerging at national level in Germany and the Netherlands. 

At P&G’s last AGM, a shareholder resolution from Green Century Funds, asking the firm to eliminate deforestation and forest degradation from its supply chains, achieved two-thirds support. In P&G’s subsequent sustainability report, it said it “requires that 100% of the wood pulp we source is certified” and that 75% of its Family Care brands would be certified by 2022, reaching 100% by 2030.

However, the environmental groups said they have been “meeting with P&G executives for months” to outline actions needed to improve its supply chains and are unconvinced by current commitments.