Intensification of deforestation in tropical countries associated with commodities exports has spurred recent high-level commitments and agreements among governments and firms. These attempts of governance innovations show a current interest, particularly in high-income countries, in achieving deforestation-free flows. For instance, in November 2021, the European Commission launched a proposal for a regulation to attain deforestation-free products, which aims to end deforestation and forest degradation associated with international supply chains of key agricultural commodities consumed in Europe. In addition, there is currently a bill under discussion in the U.S. Congress (the U.S. Forest Act) that, if approved, will hold international suppliers of commodities to the American market accountable for illegal deforestation in the places where plantations are located. International trade of commodities associated with deforestation risks is of course shaped to a large extent by financial flows. In the UN Climate Change Conference in Glasgow, in 2021, leaders of 141 countries signed a declaration on forest and land use, committing, among other things, to “facilitate the alignment of financial flows with international goals to reverse forest loss and degradation” by 2030. Also in the Glasgow COP26, over 30 financial institutions, representing assets over US $ 4.5 trillion, committed to eliminating deforestation driven by production and exports of agricultural commodities from their investment and lending portfolios by 2025.

These new initiatives aiming to contribute to halting deforestation associated with international trade share some governance principles, like (a) making financial organizations and transnational corporations accountable for deforestation associated with their businesses, and (b) acknowledging that strategies to address forest loss and degradation require international coordination between governments, trading financial firms and civil society. They assume therefore that national legislations and enforcement mechanisms are not enough to achieve deforestation reduction goals. The configuration of such complex global coordination needs to create and put in place innovative governance settings and tools, which should include a combination of public regulation and private standards conditioning the socio-environmental performance of international supply chains. Filling this governance gap will definitively face significant challenges, along different dimensions.

On the one hand, governance innovations impacting global value chains of commodities that have historically driven deforestation might create new opportunities for effectively slowing down the expansion of the agricultural or extraction frontiers into forested and vulnerable landscapes, protected areas or indigenous lands. On the other hand, a number of unintended effects might arise, such as the exclusion of agricultural smallholders unable to comply with costly administrative requirements imposed by powerful players or leakage effects (shift of exports to importing countries with less stringent regulations).