Corporate Social Responsibility

Warning on unchecked adoption of biofuels

Co-operative Insurance (CIS) has warned that long-term shareholder value may be at risk in companies that are ploughing into biofuels without considering potential environmental and social dangers. The CIS supports the use of biofuels, but is concerned that the current rate of growth could backfire on companies unless sustainability criteria are built into supply chains.

Biofuels are made by producing ethanol from maize, sugar cane or other plant matter, and its production is heavily supported by governments eager to reduce their reliance on oil and provide additional income to farmers. However, said the CIS, the land required to grow biofuels is so large that it could cause serious environmental problems if not managed properly - leading, for instance, to deforestation or a rise in global food prices.

Sam Lacey, CIS responsible shareholding analyst, said: "The current growth of the industry is happening without paying attention to long-term impacts. It must be pushed in a more sustainable directed and complemented by fuel efficiency measures and reducing our use of fossil fuels".

The CIS has released a report containing recommendations on how companies can mitigate these risks. Among its recommendations are that companies conduct stakeholder consultation prior to converting land to grow biofuels, and incorporate sustainability criteria into decision making processes.

June 2007