Environmental Impacts From Material Sourcing

The Impaakt Team

10 min Read Time | March 21st 2023

Key Takeaways

When rating the value, consider the absolute impact described - that is, the direct impact the company had on the land and its ecosystem, rather than other conjunctures linked to them or to the company.

When rating the severity of a company’s impact, take into consideration aspects such as the ha of land disturbed, the environmental sensitivity of the area impacted and the time it takes to rehabilitate the land.

The environmental impacts from material sourcing are externalities caused by companies' processes. Therefore, this topic should be evaluated and rater with the company's Core Business Analysis (CBI) as a starting point.

How do industrial activities degrade land and ecosystems?

Industries source unprocessed materials like wood, fibres, minerals, and metals to manufacture their products. The sourcing of these materials can result in adverse environmental impacts, including deforestation, soil degradation, and biodiversity loss.

At Impaakt, we capture the related impacts through the topic of Environmental Impacts from Material Sourcing.

👉Note: Impact topics are a set of social and environmental impacts identified by the Impaakt Team to provide an additional layer of complex insight into measuring current impact. They range from general themes like Greenhouse Gas emissions and Job Creation to industry-specific topics such as Gentrification and Water Pollution. Check our Frameworks section for more information.
The main impacts of material sourcing include:

Land use 👨‍🌾

Overall, land use contributes to the loss of ecological productivity. Degraded lands are unable to provide key ecosystem services like temperature and water regulation, as well as supporting biodiversity.

Eutrophication and desertification

Water-intensive processes, like agriculture, contribute to water scarcity and desertification. Moreover, the use of fertilizers pollutes water bodies with nutrients, a process called eutrophication. Ultimately, eutrophication contributes to zones with extreme hypoxia, or dead zones, where fish mortality increases.

Deforestation 🌲

Deforestation, “the intentional clearing of forested land”, is mainly driven by mining, agriculture and energy infrastructure. Deforestation has cascading effects on ecosystems, affecting their balance and resilience.

SDG 15 Life on Land


✅ SDG Choice: SDG 15 seeks to conserve, restore and sustainably use terrestrial ecosystems, particularly forests, wetlands, mountains and drylands in line with international agreements. Addressing the environmental impacts from material sourcing relate to this goal.

✅ Category: environmental impacts are caused by companies’ processes (i.e. how they run their business), rather than their products (i.e. what they sell).

✅ Investment Leaders Group (ILG) Theme: Healthy Ecosystems.

Sources: 1 | 2

Get familiar with the 5 steps to get started as an Impaakt rater

Before building skills for a specific topic, make sure to read our Knowledge Center: Rating for Impaakt. This resource outlines the 5 steps necessary to get started as a rater and provides key information about our metrics. By going through this guide, you will ensure that you are well-informed to provide accurate ratings on any given topic.

How to rate the topic:


To assess the value of a company’s impact, think about the absolute impact the issues raised by the topic have.

This dimension is linked to the impact treated and not specifically to the company. As such, the value rating should hold some consistency across industries.

When deciding your rating on the value, ask yourself: How negative do you consider impacts related to material sourcing, like deforestation, eutrophication, and land use to be?

Is the impact related to land use or deforestation? Are there multiple impacts described in the note?

👉Important: Deforestation is considered to have a more severe impact on biodiversity than land degradation. This is because it has a direct and immediate impact on habitat loss, it is harder to reverse, and it results in larger losses to biodiversity.


Severity is directly related to the company’s impact. To rate the severity of the company’s impact consider its Scale, Scope, and Irremediability.


Under Scale, we evaluate the complexity and profundity of the impact described.

When deciding the scale, answer the following questions:

How profound is the impact?

  • How significant/drastically has the impact of the company on the environment been?
  • Is the land deforested significantly affecting ecological productivity?
  • Has the company’s operations directly contributed to desertification or dead zones?

👉Tip: This dimension is linked to the place where the company is operating and the effects its sourcing has caused in the specific ecosystems. The scale of a company involved in deforestation is greater if this happened in a highly vulnerable and biodiversity-rich area, for instance.


Under Scope, we aim to capture the range or extent of the company’s impact.

When deciding the scope, answer the following questions:

How vast is the company’s impact?

  • Is the amount of land deforested or used vast (many) or small (few)?
  • How much land did the company use to source its materials?

👉Tip: This dimension is directly linked to the quantifiable information in the analysis.


Under Irremediability, we evaluate the impact of the company over time.

When deciding the irremediability, answer the following questions:

How long-lasting is the impact described?

  • How long will it take for the land deforested to grow back?
  • How permanent is the company’s impact?

👉Tip: This dimension is linked to the characteristics of the impact described. How permanent is land degradation or deforestation, for example?

Key Statistics:

  • The estimated land use for companies on the Impaakt platform ranges from 200 ha to around 215 Mn ha

  • Nearly 5 billion hectares are classified as “agricultural areas” by the FAO. Land degradation affects 34% of the agricultural land (1.6 billion ha).

  • Every year, 6 Mn ha of land are deforested, 95% of which is in the tropics

  • 70% of freshwater withdrawals are used for agriculture. In all, agriculture uses 2.76 trillion m3 of water yearly

  • 78% of eutrophication is caused by agriculture.

Rating tips by experienced raters

Draw maximum benefits from "Environmental Impacts from Material Sourcing" with these helpful tips from our community:

  1. Reading the analysis more than once helps focus on key elements for a thorough rating, as well as relying on the data points for a helpful summary.

  2. In some cases, it’s not easy to rate the impact solely from the note, peer group comparisons are a great way of contextualising the company’s impact. However, remember the analysis is the basis of the rating

  3. Asking for peer opinions on Slack also helps to provide context and is a great way to learn and develop as a rater.

  4. Researching the topic on your own is a great way to gain knowledge and put the topic into perspective.


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