The Green Development Oil Newsletter – Issue 23, September 2012

Greenpeace intensify campaign against small-scale farmers

Both Greenpeace and WWF have recently reiterated demands that small-scale farmers achieve certification under the RSPO. However adopting NGO demands would render farmers uncompetitive due to high costs of achieving certification. This appears to be of little concern to campaigners with an agenda to halt the palm oil industry.

Small-scale growers are important producers in the palm oil supply chain, responsible for a significant proportion of palm oil production. In Indonesia for example, approximately 35% of national production comes from smallholders.

NGOs have little case to demand these farmers pursue certification. Certification is a mechanism for demonstrating compliance with standards above and beyond benchmark environmental requirements. RSPO was established as a voluntary system to enable producers to demonstrate their production systems complied with a set of sustainability standards which are above the norm.

It was not established to dictate baseline sustainability standards to the palm oil industry. They are set by the Government and dictated in law.

It is widely acknowledged that certification – initially Quality Management Standards under ISO 9000 management system, which morphed into the ISO 14001 Environmental Management Standard – can only work on large-scale systems. The costs are high and only affordable by large businesses.

When RSPO was established, it was represented by NGOs as a voluntary system to enable producers to show they are applying superior sustainability standards. Now NGOs are using the voluntary sustainability standard to override government policies and rules.

If RSPO is applied to small-scale farmers, the cost of compliance would render them uncompetitive and destroy the poverty eradication intention of government policy on palm oil.

RSPO has integrated into its standards mechanisms to certify these smallholders. However certification is still too expensive for most farmers. When they have managed to achieve certification, it is usually because large upstream processors or donors cover the costs. This is not a sustainable arrangement for small-scale palm oil growers that wish to remain autonomous.

Recently a senior WWF representative commented that joint ventures could be used to assist communities growing palm oil. But NGOs are yet to provide details on how they suppose small-scale farmers can independently afford the costs of certification.

Outside funding can be better spent. A recent study conducted by Australian Government’s international agricultural research institute (ACIAR) indicates that small-scale palm oil growers in PNG receive significant socio-economic benefits, and constitute a PNG “success story”. However, the authors comment that one of the major problems is improving farmers’ yields, which are well below the yields of industrial estates.

Improving farmers’ yields requires more investment in training, technical capacity and technology. These should be the focus of outside investment. Certification may assist, but it is not the goal. Investment should be focussed on improving farmers’ livelihood, not auditing their activities against standards demanded by rich world NGOs.

Claims of orang-utan deaths “preposterous”

UK based NGO, Nature Alert, recently claimed that 300 orang-utans were killed over the past eight years in the Lower Kinabatangan Wildlife Sanctuary (LKWS) purportedly due to the expansion of oil palm industry. But the claims are inaccurate according to the head of a leading Malaysian based French NGO working for orang-utan conservation, Dr Marc Ancrenaz.

Ancrenaz reportedly called the claims “preposterous”. Acknowledging these claims of mass orang-utan killings are inaccurate and sensational, Ancrenaz commented that “if 300 orang-utans had been illegally killed in oil palm plantations, we would know it.” Ancrenaz has been monitoring orang-utan populations throughout Sabah for over 12 years.

In Australia, activists have sponsored a tour by Dr Ian Singleton – Director of Conservation for PanEco, a Swiss based foundation that established the Sumatran Orangutan Conservation Programme (SOCP) where Singleton is a also a Director.

The speaking tour promotes fundraising to create a sanctuary for four orang-utans that cannot be re-integrated into the wild: Dek Nong – an orang-utan with an undiagnosed arthritic condition; Gober – blinded by cataracts and removed from a crop plantation at the request of villagers; Leuser – a male orang-utan blinded after being shot by an air rifle; and Tila – a female orang-utan infected with hepatitis B virus.

This is ultimately an animal rights issue – the mistreatment of ‘pet’ orang-utans, and the need for human intervention to assist orang-utans that cannot be reintroduced into the wild. But the campaign flows inexorably from animal rights to an attack on the palm oil industry. The campaign organisers recently accompanied an Australian reporter on a tour of Indonesia who documented the plight of several suffering orang-utans reportedly taken from the wild to be kept as pets. The report flashes forward to a palm oil plantation. The connection between mistreated pet orang-utans and palm oil production is assumed.

Similar campaign tactics have received media attention in the US, following Dr Ian Singleton tour of several US zoos. The campaign is geared to deliberately generate anti-palm oil sentiment in the US and Australia.

The palm oil industry has rules and regulations established by national governments. It operates on lands zoned for economic purposes, and has several well established conservation programs.

The issues presented by campaigners relate to the illegal pet trade, and require reforming attitudes of local communities towards orang-utans. Blaming the palm oil industry is an easy tactic for campaigners.

WWFs plan to shackle RSPO growers

The RSPO is currently undertaking a review of their ‘Principles and Criteria for Sustainable Palm oil Production’. Growers and millers must demonstrate compliance with this standard in order to achieve certified under the RSPO system.

The RSPO has recently publicised the first round of stakeholder consultations under the review. NGOs dominated this process. Their submissions indicate the direction that NGOs are dragging the standards towards.

Western NGOs including WWF, Union of Concerned Scientists and Greenpeace, are attempting to ‘ratchet up’ the RSPO standard. If the RSPO adopts their demands, they will risk the economic viability of sustainable palm oil under the RSPO framework.

The review is being managed by a steering group appointed by the RSPO Executive Board, including WWF International, Unilever, grower representatives and RSPO Secretary General and Technical Director.

WWF propose that RSPO require growers to reporting on greenhouse gas emissions (GhG) and produce time bound plans to reduce emissions. They also proposed that the RSPO commit producers to a zero-net change in carbon stocks when establishing new plantations.

WWF have also proposed Chain of Custody (CoC) certification should be adopted by RSPO. According to WWF “all members [i.e. plantations and millers] should have CoC procedures to insure the legality of their FFB sourcing.”

This is spurious. CoC in sustainability certification was developed to deal with illegal forestry. There has never been a serious suggestion that legality is a problem in palm oil. Expect that WWF will simply use CoC as another tool to pressure growers to accept WWFs preferred policies, as has been the case in forestry.

NGOs are also demanding greater restrictions on plantations established on peat; and additional criteria to integrate EU-RED directive requirements into the standard. These demands are driven by NGOs and businesses in the developed world with little consideration of the needs of developing country operators.

When the RSPO was first established, there was little indication that WWF would pressure members to adopt measures like these.

RSPO General Assembly: continued discontent from growers?

The 2012 RSPO General Assembly will take place in late October in Singapore. The organisation is yet to publish proposed resolutions for the General Assembly, but if the previous meeting is anything to go by, growers will use the General Assembly as an opportunity to loudly voice their grievances.

The previous General Assembly held in March 2012, saw a number of growers speak out against what they consider bias decision making mechanisms within the RSPO. A number of resolutions were put forward by growers from Malaysia and Indonesia that were ultimately quashed at the General Assembly.

The previous General Assembly passed four resolutions, voted against seven, while two others were withdrawn.

According to an RSPO member representative interviewed in Malaysian media, all resolutions proposed by the oil palm growers group were shot down.

Some of these defeated resolutions aimed to affect the powers of the Executive Board, for instance by resolving to separate executive and non-executive functions in accordance with ‘best institutional governance’, and adding an additional seat for transnational companies on the Board.

In other words, growers are becoming increasingly alarmed at the powers concentrated in the Executive Board of the RSPO. According to RSPO bylaws the Executive Board may adopt “all policies and procedures necessary for the management of its activities…” The Executive Board – not the General Assembly – has the ability to adopt national standards, guidance documents, and amend the Principles and Criteria (i.e. the RSPO standard).

The developments indicate that growers do not believe they are sufficiently represented by the body, even though they are the stakeholders most materially affected by RSPO policies. In effect, growers can only nominate four representatives out of the 16 Board members.  Another four seats are reserved for NGO representatives, and two seats each for processors & traders, consumer goods manufacturers, and retailers & investors.

One grower reportedly commented at the time, “… our resolutions reflected the increasing discontentment among oil palm growers over the unbalanced structure in the governance and management of the RSPO”.

Resolutions for the upcoming General Assembly have not yet been published, but growers are again expected to seek improvements to the organisation’s decision making mechanisms by improving representation and institutional arrangements. Certainly it appears that growers are getting restless with an organisational arrangement where they have little power to affect decisions that materially impact their operations.

Palm oil in Africa: Herakles distances itself from RSPO

American financer – Herakles Capital – has distanced itself from the RSPO by withdrawing its application for membership. The application was withdrawn following complaints by environmental groups about the company’s proposed $350 million palm oil project in Cameroon. Herakles has been attacked by Greenpeace and WWF Cameroon, and appears to have realized the business risk involved in RSPO membership.

Herakles had initially indicated it would pursue certification under the RSPO for its proposed development of approximately 60,000 hectares of palm oil plantations in Cameroon. However this commitment is being questioned after the company informed the RSPO that they have withdrawn their membership.

The company’s sudden withdrawal follows an internal RSPO complaints process, where a number of NGOs -including WWF Cameroon – accused the company of violating RSPO principles governing the development of new plantings. The complaint further accused the company of violating national laws and regulations; establishing plantations in a “biodiversity hotspot”; disrupting the landscapes and migration routes of protected species; and negatively impacting subsistence farming lands of local communities. At the time of Herakles’ application withdrawal, the RSPO complaints panel was recommending further investigation of allegations made against the company.

In a letter from Herakles Senior Vice President to the RSPO, the company implies the reason it withdrew its membership application is due to the protracted application process, largely being drawn out by the NGO initiated grievance process. The company claims it remains committed to sustainable development, and will continue to follow RSPO guidelines. The letter signifies the project developer’s frustration with the RSPO process. Herakles acknowledges that through its development it is “addressing a dire humanitarian need in the Republic of the Cameroon”. Such concerns presumably do not interest environmental NGOs attempting to stall the development.

Pressure on Herakles appears to be part of a wider NGO campaign attacking the palm oil industry in Africa. Greenpeace recently vilified palm oil in a report on the industry in Africa, specifically accusing Herakles for ‘land grabbing’ and failing to meet sustainability requirements.

Greenpeace continue to peddle inaccurate accusations to stymie development of the palm oil industry throughout the continent. They recently claimed in a press release that “the expansion of the plantations intensifies deforestation, food insecurity and rural poverty.”

Greenpeace’s exaggerated claims of deforestation have been shown as consistently inaccurate. According to the Herakles, the plantations in question are to be developed on lands designated as secondary forests “logged and farmed repeatedly in the past”.

One of Africa’s best opportunities for rapid economic development and ensuring adequate food supplies is to industrialise the agricultural sectors to increase productivity and harvest yields. This requires smallholders to shift from low-yield substance farming to high value agricultural commodities plantations such palm oil. Greenpeace is ideologically opposed to industrialised agriculture production systems.

Greenpeace have also attacked the industry for attracting foreign investment in Africa. They have invoked xenophobic sentiment, claiming foreign firms are involved in ‘land grabs’. This is a technique also used by Greenpeace in Asia. Foreign investment is necessary to fund large scale agricultural production in developing countries. Much of it comes from South East Asia. It provides development opportunities for local populations.

The RSPO recently launched a road show as part of their expansion strategy in Africa. Currently Africa is a marginal palm oil producer, but due to land availability and suitable climatic conditions it appears that there is potential to increase production.

European producers allege Indonesian biofuel dumping

European biodiesel producers have lodged a formal complaint with the European Commission, claiming that millions of tons of Argentine and Indonesian biodiesel are being dumped on the EU market.  Indonesian trade ministry officials have responded by reportedly asking EU regulators to clarify allegations that the country is dumping biodiesel products into the European market. According to media reports, Indonesia is prepared to fight the complaint if necessary.

The complaint was made by the European Biodiesel Board (EBB), which represents 75 producers and approximately 80% of European biofuels output. The EBB said the EU had experienced a surge in Argentine and Indonesian imports that lead to several bankruptcies, and has forcing European producers to sell below cost and reduce annual production.

Imports from Indonesia and Argentina combined reportedly rose to 2.5 million tonnes in 2011, from low levels in 2008. These imports allegedly make up more than 90 percent of imports into the EU.

This ‘surge’ in Indonesian imports may be not as significant as the EBB claims. Indonesian imports only make up a small proportion of European biodiesel consumption. Total European biodiesel consumption in 2012 reached 13 800 million litres. European producers accounted for most of this, supplying 10,850 million litres in the same year. The remaining 3 070 million litres was imported.

The USDA estimates that Indonesia exported 1225 million tons biodiesel in 2011. Even if all exports went to European markets, Indonesia would make up a small proportion of European biodiesel consumption – less the 10%. The European biodiesel market has grown rapidly, with European consumption approximately doubling over the last five years. This has placed strains on European producers to supply the market. Europe is a net importer of biodiesel, exporting less than 1% of total production in 2011. Given the rapid market growth, and the small quantity of Indonesian imports, it is highly unlikely that Indonesian trade is harming European producers.

Instead the complaint appears to be driven by protectionist agricultural producers. By far the most significant feedstock for European produced biodiesel is rapeseed oil. European rapeseed producers – traditionally accustomed to government policies to protect their competitiveness – are wary of Indonesian palm oil products. Rapeseed growers are already being outperformed by more competitive Indonesian palm oil in the vegetable oils market. They are now looking to restrict Indonesian biodiesels imports produced from palm oil feedstock.

Palm oil CEOs: Industry challenged by “smear campaign”

An interview with Malaysian palm oil industry leaders highlighted one of the biggest challenges to the palm oil industry and its positive impact in poverty alleviation and driving economic development: a global ‘smear campaign”.

Speaking to the The Star, United Plantations Bhd vice-chairman Datuk Carl Bek-Nielsen commented that “from an international perspective, the smear campaign against palm oil is one [big challenge] that must be addressed as we must engage and actively participate to help create a more balanced approach.” Bek-Nielsen pointed to France, where he commented that 44% of the population have a negative perception of palm oil.

Malaysian Palm Oil Council (MPOC) chief executive officer Tan Sri Dr Yusof Basiron stated that 11% of the country’s total export revenue last year came from palm oil. According to Basiron, this revenue flowed down to rural populations in the form of higher disposable income, as purchasing power in palm oil is largely vested in farmers, middlemen and dealers: “These townships are booming with new facilities, thanks to the purchasing power of the people”, according to Basiron.

IOI Group executive director Datuk Lee Yeow Chor pointed out that “generally the smallholders or the plantation owners earn more money at the upstream level than those further down the value chain, which is very rare if you look across all the other sectors.”

Bek-Nielsen commentated that palm oil employs more than 500,000 people, with much of the commodity production driven by small-scale farmers. According to Bek-Nielsen, Malaysian industry is made up of approximately 30% smallholders and 40% in Indonesia, “however, in Africa the industry is 80% driven by smallholders. So it has a huge importance in stabilising local communities’ cash flow.”

In Malaysia there are over one hundred-thousand small-scale farmers operating within the Felda palm oil scheme alone. Felda Global Ventures Holdings Bhd group CEO Datuk Sabri Ahmad noted the significance of palm oil in providing an income to these households which is relatively high compared with the national average.

These benefits look to increase, as global food demand is expected to increase with forecast population growth. According to Bek-Nielsen, “we must recognise that we live in a world that has a population of seven billion people. By 2050, the forecast is that it will reach 9.3 billion. This means there will be 2.3 billion more mouths to feed compared to today. At the same time, there are 900 million people who fall into the category of being chronically malnourished. That’s 900 million people plus 2.3 billion people to feed.”

Growing demand can best be met by expansion of the palm oil industry. According to Yusuf, projected global demand will require an additional six million tonnes of vegetable oil. Palm oil is the least resource intensive and therefore most sustainable option: “To produce six million tonnes of oil from soya at a yield of half a tonne per hectare we would need additional 12 million new hectares of land every year. Instead with oil palm supplying 50% of the additional yearly demand, for three million tonnes of oil to be produced at four tonnes per hectare we would only need very little land at about 750,000ha.”

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