Authors: Natasha Ferrari

Reputation Risks: How Climate Pressure is Reshaping the Forest, Land and Agriculture Sector

Heightened public awareness and growing urgency over climate change have increased reputation risks for the forest, land, and agriculture (FLAG) sector with increasing pressure to act. Companies are expected to become more transparent and proactive in addressing climate issues to avoid the reputational damage associated with environmental degradation and deforestation.

Despite deregulatory pressures and backlash against climate action increasing in some nations, companies operating in a global market in 2025 must still prioritize their climate-related reputation. International regulators continue to enforce climate risk laws and standards, while investors and consumers continue to demand transparency and accountability. The overarching trend and expectation are that climate change will continue to be a major factor companies must contend with. Falling short can harm reputation and market share.

Reputation is therefore becoming a key driver of value in the FLAG sector. Four reputational trends are now shaping its future: shareholder activism, stakeholder scrutiny, speed of information dissemination, and supply chain transparency. These trends present both risks and opportunities for companies and investors navigating the climate transition – the global shift toward a low-carbon economy driven by policy changes, technological innovation, and evolving market and consumer expectations.

Trend 1: Growing Shareholder Activism 

Investor activism is increasingly influencing corporate climate strategies. Shareholders are targeting vulnerabilities such as emissions-heavy supply chains, inadequate climate planning, and insufficient emissions tracking. Tools like resolutions, executive engagement, and public campaigns are being deployed to pressure companies into stronger climate action.

The results are evident. Companies like Wilmar International, Bunge, and Archer Daniels Midland have adopted zero-deforestation goals. Tyson Foods and Unilever are actively reducing supply chain emissions. These commitments highlight how investor pressure and reputational concerns are accelerating sustainable business practices.

Trend 2: Intensifying Stakeholder Scrutiny 

Stakeholders—from investors to NGOs to policymakers to consumers—are demanding accountability. Companies in emissions-heavy and consumer-facing sectors are under growing pressure to align their climate claims with measurable action. This scrutiny has exposed instances of greenwashing, where companies exaggerate or misrepresent their environmental performance.

The risks of falling short of these expectations are significant. Companies that mislead or underdeliver on climate goals face reputational damage, regulatory investigations, consumer backlash, and investor dissatisfaction. A notable example is Nestlé, which in 2020 failed to meet its emissions reduction target. The shortfall led to critical media coverage, pressure from investors, and a drop in its sustainability ratings—undermining its credibility as a climate-conscious brand. In 2024, JBS was sued by the New York Attorney General over misleading and unsubstantiated claims regarding its commitment to climate goals, including achievement of net zero emissions by 2040.

Despite potential risks the number of companies setting targets is growing. Globally, 1,208 of the largest 2,000 publicly traded companies in the world by revenue have committed to achieving net zero emissions by at least 2070. A PwC survey of 7,000 CDP disclosing companies found that 84 percent of companies are sticking with climate goals despite recent political resistance, and over one-third of companies are increasing the scale or speed of their targets. Last year, 22,700 companies disclosed their climate impacts and targets through CDP, an increase of eight percent over 2023 reporting.

Unilever, Danone, and Nestlé—experiencing a redemption from its 2020 struggles—are now among the leading FLAG sector companies for sustainability, according to prominent sustainability scoring systems including CDP, MSCI ESG, and ISS ESG. And companies benefit from meeting stakeholder sustainability expectations with products that make ESG claims receiving a higher average sales growth.

Source: Carbon Disclosure Project (CDP), Sustainalytics, MSCI ESG, ISS ESG, 2024

Trend 3: Rapid Information Dissemination  

In a hyper-connected world, information travels fast. Internet access and social media have empowered consumers to hold companies accountable, often in real time. Investigative journalism and viral content can quickly expose unsustainable practices, triggering public backlash.

The impact on financial performance can be immediate. High-profile cases, like Nestlé’s KitKat deforestation scandal or IOI Corporation’s Roundtable for Sustainable Palm Oil suspension, can lead to contract losses and stock declines. Studies show reputational issues can impact up to 30% of a company’s market value. In this environment, transparency and risk monitoring are essential.

Trend 4: Expanding Supply Chain Transparency 

Supply chain transparency has become a hallmark of climate leadership. Companies that proactively disclose environmental impacts, enforce sustainable sourcing, and embrace clear reporting standards are earning trust and brand loyalty. Unilever and Danone, for instance, regularly report progress toward net-zero goals and promote regenerative agriculture among suppliers.

Technology is raising the stakes. Satellite imagery and advanced monitoring tools enhance traceability and empower watchdogs to uncover misconduct. JBS faced backlash and divestment from 22 asset managers overseeing $272 billion after links to Amazon deforestation. In contrast, Unilever’s sustainable sourcing drove growth for its brands like Lipton and Ben & Jerry’s. These Unilever brands grew significantly faster than the rest of the business and drove most of its 2020 growth, showing how ethical sourcing can align with strong commercial performance.

Reputation Risks and Financial Exposure 

FLAG sector companies tied to deforestation-linked commodities face heightened reputational risk. Viral exposure of environmental harm can provoke backlash from the public, regulators, and investors. Ignoring sustainability concerns may destabilize business operations.

Technological advances have empowered NGOs and third parties to scrutinize supply chains more closely. Companies without credible monitoring and product tracing systems risk falling behind climate leaders, losing consumer trust, and missing out on premium markets and long-term profitability.

Reputation, Opportunity, and Financial Upside  

Companies that lead on sustainability gain a competitive edge. Transparent supply chains and emissions reductions help differentiate brands and attract ESG-focused investors. Staying ahead of regulatory changes also reduces compliance risks and enhances resilience.

Digital platforms offer a powerful channel to communicate sustainability progress. Firms that do this effectively build consumer trust, manage reputational risk, and create brand value.

Strategic Steps to Mitigate Reputation Risks 

To navigate these reputational challenges, companies and investors must act strategically:

• Investors should channel capital into climate-aligned sectors and include shareholder activists in sustainability planning to enhance risk management.
• Companies must enforce traceability and responsible sourcing while supporting zero-deforestation initiatives. Robust reporting and proactive engagement with suppliers can reduce risk exposure.
• Both should explore high-integrity carbon and biodiversity markets to strengthen sustainability credentials and diversify revenue.
• Communication is key. Leveraging digital platforms to share credible progress can strengthen brand reputation and secure a competitive advantage.

By taking these actions, businesses and investors can mitigate climate-related reputational risks and position themselves for long-term success in the evolving climate economy.