Markets Institute: Understanding Illegality

Illegal Deforestation Commodities

Illegal activity in commodity production, processing, and trade is an issue with significant social, economic, and environmental risks. No person, country, ecosystem, or product is immune.

Defined as when a product or raw material is produced in a way that breaks the laws, policies, and regulations of the country of origin, illegality poses a risk to the environment, governments, traders, retailers, brands and consumers.

WWF research suggests that from 5% to 50% of globally traded food commodities, such as shrimp, beef, and palm oil, may be produced illegally according to existing laws in the country of origin.

For companies alone, it presents significant reputational, legal, and business risk. In fact, the financial costs of illegality are huge and largely undocumented, with figures ranging from $40 billion to $600 billion per year.

From a conservation standpoint, illegality is jeopardizing our ability to meet the growing need for more food and soft commodities. It's linked to deforestation, biodiversity loss, resource degradation and depletion, diminished water quality, and overfishing.

That is why the Markets Institute at WWF is exploring how best to engage the issue of illegality in the production of food and soft commodities.

Despite its impacts, there has been no systematic effort to understand and address illegality. It's time to change that, starting with a precompetitive process to understand the magnitude of this issue, close knowledge gaps, document what has worked and what hasn't, and gain an overall better understanding of its impacts.

To that end, The Markets Institute at WWF is dedicated to convening relevant stakeholders to collaboratively work toward understanding and solving this critical issue.

Through collaboration, research, and planning, we can eventually eliminate the social, economic, and environmental risks of illegality.

Only through knowledge can we keep up with the speed of life.

What is Illegality and Where Does it Occur Across the Supply Chain?

Illegality is a major driver of deforestation, biodiversity loss, resource degradation and depletion, among other things. It can take place at any stage along the supply chain – from when production begins until a final product hits the shelves. And, just like illegality affects all types of food and soft commodities, no region or country is immune.

Click the various types of illegality to learn what can occur along different stages of the supply chain, and explore some recent examples of the social, economic, and environmental impacts of this critically important issue.

  • Corruption
  • Fraud
  • Labor Violations
  • Resource Rights
  • Other Laws

Resource rights, including legal concessions: Producer does not have right to harvest, catch or produce in area where production is occurring.

Example: Estimates of the extent of illegal, unreported and unregulated (IUU) seafood by country/region reveal that from 13% to 31% of reported catches worldwide are IUU, and over 50% in some regions.

Read more at Time »

Labor rights: The producer uses slave or bonded labor, employs people who are not legally allowed to work or are underage, or otherwise violates employees' rights.

Example: A recent survey of West African cacao production found that 2.1 million children had been engaged in inappropriate forms of child labor in Ivory Coast and Ghana combined—a 21% increase over the previous five years.

Read more at Fortune »

Other laws (Health/Safety Violations, Lacking/Exceeding Permit, Packaging, Smuggling, Tax Evasions, Theft): Producer does not meet other legal requirements, such as ignoring legislation (e.g. using illegal inputs, transships to another country, doesn't pay taxes, etc.).

Example: In Brazil up to 90% of beef production is from ranches that have not complied with the country's Forest Code.

Read more at Rolling Stone »

Fraud: Deliberate dilution or substitution of either illegally obtained or falsely marked/identified products.

Example: Estimates are that 80-85% of all oil labeled extra virgin in Italy is adulterated.

Read more at Forbes »

Corruption: Producer bribes or otherwise subverts the system to produce products illegally or to enter his/her product into existing trade flows.

Example: Interpol has estimated that corruption in the forestry sector is costing governments worldwide some $30 billion in revenue.

Read more at DW »