The Green Development Oil Newsletter – Issue 31, May 2013

RSPO adopts standard, internal fissures loom

The Roundtable on Sustainable Palm Oil (RSPO) officially approved a revised standard during an extraordinary meeting held in April. The new standard (see April newsletter, ‘RSPO calls EGA to tightening standards for growers’) includes a number of requirements which increase onerous burdens on palm oil growers.

Growers have expressed discontent with the new RSPO standard. A number of growers associations have raised concerns that the new RSPO will decrease their economic viability, and further the agenda of NGOs operating within the certification organisation by crippling rather than supporting the sustainable palm oil industry.

The Sarawak Oil Palm Plantation Owners’ Association (SOPPOA) asked “[where is] the justice and fairness in such a scenario? Why are oil palm growers subjected to more checks and controls than other crop farmers around the world while contributing to producing cheap and sustainable palm oil for the world?”

The Malaysian Palm Oil Association (MPOA), an industry association representing a number of Malaysian palm oil plantation companies was similarly aggrieved. The organisation has reportedly considered pulling out of the RSPO by the end of the year.  Indonesian growers, represented by GAPKI have already done just that.

Without support from farmers who produce certified palm oil, it is unclear how the RSPO will function. Farmers have already criticised the system for applying pressure on growers to achieve certification, despite lagging demand for certified supply. Around half of all RSPO certified palm oil remains unsold.

RSPO officials appear to have ignored this risk to the organisation. Statements by RSPO President, Jan Kees Vis, indicate the RSPO will press ahead with even more stringent and economically damaging ‘sustainability’ requirements.

Vis recently told reporters that palm oil growers should take note of efforts to introduce ‘zero net deforestation’ requirements into the standards. Vis commented that “we [the RSPO] will need to think through what will be our position on this.”

Zero net deforestation is a WWF demand which in this context conflicts with a conventional view of ‘sustainability’ that balances economic, social and environmental considerations. In Malaysia for example, sustainable agricultural development may require some forest conversion, done through a regulated zoning system managed by relevant authorities. Malaysia still preserves widespread forest cover – about 60% of the total land area is still forested – but requires some regulated land clearing in order to develop strong industrial and agricultural sectors, in the same way Western countries have managed their forest resources to achieve economic development.

Sustainability requires science-based management of forest resources, not impositions of blanket political restrictions such as ‘zero net deforestation’.

Vis’ comments came as WWF, one of the RSPO’s staunchest supporters and widely regarded as the surrogate of the RSPO system, stated in a press release that the RSPO has “failed
to
accept
strong, tough
and
clear
performance
standards”, although it voted for the measure.

It is standard practice of WWF to continuously tighten sustainability standards. Accordingly, WWF are “now 
inviting 
progressive
companies 
along 
the 
whole
 oil 
palm 
supply chain who
 share 
our 
belief
 that 
the 
industry 
can 
show
 leadership 
in
 sustainability 
to discuss with 
us 
how 
to 
make 
these
 commitments
 and actions 
a
reality.” Their offer to “discuss” sounds ominous.

There is another factor. Businesses now have alternatives to the RSPO which verify sustainability. These competitors are likely to further decrease demand for the RSPO’s services.  A relative newcomer – Tropical Forest Trust – is offering to ‘audit’ palm oil producers to ensure sustainability. They appear to have backing from Greenpeace. The heads of TFT and WWF recently threw verbal punches at one another.  As well, Malaysia is progressing in their efforts to develop a sustainability scheme (MSPO). Uptake of the new Indonesian sustainability scheme (ISPO) is also reportedly gaining momentum.

Protectionist/NGO campaign in Europe ‘greenmailing’ business

NGOs continue to ‘greenmail’ food manufacturers and retailers in Western Europe, threatening that if they procure products they don’t approve – such as palm oil in some instances – they will be ‘red-listed’ and publically vilified. Meanwhile, their ‘approved’ products offer no better sustainability outcomes. The campaign is directly related to efforts by domestic growers to improve their competitiveness against cheaper Asian vegetable oil imports.

French biscuit manufacturer, St Michel, recently implemented a ‘zero palm oil’ commitment, following actions in France that have seen intensified lobbying against the palm oil industry. St Michel has said that it is replacing all palm oil with locally sourced butter and rapeseed oil, in a statement that points to the protectionist nature of the campaign.

The campaign is disingenuous on a number of levels – palm oil is a healthy natural vegetable oil. St Michel will likely replace it with less healthy, more expensive domestically produced substitutes.

Ferrero also recently made commitments to source only RSPO-certified palm oil, following a ‘promotional’ tour to Europe by the RSPO CEO. The tour coincided with the intensified anti-palm oil campaign, where one environmental NGO claimed to receive approximately 100 000 signatures on a French anti-palm oil petition.

It is likely that the RSPO – and the NGOs that pressure manufactures to commit to using certified supply or abstain from using palm oil all together – will see a push back. This has already occurred in Belgium and Switzerland.

Swizz think tank – Liberales Institut launched a new report outlining the risks inherent in the green protectionist campaign being run in Europe. Author and economic professor, Christian Hoffmann, claimed that that protectionist measures against palm oil were being imposed under the guise of environmental stewardship, but in fact threaten poverty alleviation efforts in developing countries, with little environmental benefit.

The report criticizes anti-palm oil campaigners in Switzerland, and directly addressing the positive health and environmental benefits of palm oil.

The campaign has also outraged African palm oil producing countries. Mahamadou Sinte from CEDAH, based in emerging palm oil producing country Burkina Faso, published an editorial piece in Swiss paper L’Agefi. According to Sinte, the RSPO has called for “labeling of palm oil under the guise of ‘transparency’… [but] Unfortunately, these ideas come from environmentalists who oppose the production of palm oil and are part of the campaign against palm oil.”

According to Sinte, “RSPO Secretary General, would be more useful in his public statements [if] he promised to correct the many myths about palm oil, rather than helping to promote a “labeling” campaign against it.”

In Belgium factually incorrect comments by Senators and environmental campaigners have been critiqued by health experts.

UK government joins pressure group to harm agri development

The UK government officially joined a new initiative which is likely to require companies to commit to standards which will harm economic development in the third-world.  The UK recently joined the Tropical Forest Alliance, an organization that lobbies members not to purchase products from cleared forest land, raising the possibility that agricultural commodity producers in developing countries will face trade discrimination despite complying with national sustainability requirements.

The government’s participation also raises questions about the UK’s seriousness in addressing poverty through trade.

In 2012, World Growth published a study assessing the impacts of the UK’s ‘anti-development’ aid policies on the poor.  It found that in 2010, a UK Parliamentary Inquiry into Global Food Security had criticized the responsible agency for neglecting agriculture in their aid budget despite its proven ability to reduce poverty and provide food security. This had resulted in “stagnation in agricultural productivity with the average growth in cereal yields falling from 6% to 1.5% in the developing world”.

The UK’s latest announcement provides little assurance that the UK has digested or rectified its shortcomings.

The TFA claims to work as a “public-private partnership with the goal of reducing the tropical deforestation associated with key global commodities, such as soy, beef, palm oil, and pulp and paper.”

The Alliance leverages the power of Western markets and multinational businesses to impose their standards on small farmers and low income commodity producers. Membership commits companies to “provide a market for commodities that are sourced so as to reduce tropical deforestation”, and “work with suppliers to develop tropical deforestation-free sources for the commodities which they are purchasing.”

The reality for many developing countries is that there is not enough productive land to encourage commodity production in sectors such as agriculture, which are widely regarded as one of the best means to achieve economic development on a national level.  Low income commodity producers require affordable land, which in turn requires that countries allocate sufficient land banks to industrial purposes, and foster open and efficient land markets.

A number of developing countries, especially in South East Asia, still preserve vast forest cover. It is unreasonable to expect these countries to forego economic opportunities by preserving these forests in their entirety.

According to a UK press release, the TFA was set up by the Consumer Goods Forum (CGF), and the US government. The CGF has worked with WWF to lock consumer goods manufacturers into including WWF standards into procurement policies. This appears to be an extension of the WWF agenda to decrease competitive industries such as palm oil which could raise living standards for low income farmers in Asia and Africa. The USAID has reportedly invited Norway and the Netherlands to also join the new group.

European biofuel policy discourse perpetuates protectionist agenda

Several European policy think-tanks have intensified attacks on the biofuel industry, in particular against imported biodiesel products with the potential to reduce emissions and decrease European dependence of fossil fuels.

A Swedish group has suggested that EU policy should discriminate against biofuels produced outside of the EU, by implementing bilateral agreements which lock producer countries into complying with Western environmental and legality standards.

They have championed a model promoted by the EU as part of wider timber import regulations, known a Forest Law Enforcement Governance and Trade (FLEGT). Under this model, producer countries and the EU ‘negotiate’ a Voluntary Partnership Agreement’ (VPA) that obligates the producer to meet EU standards. In reality, there is little voluntary action. Producer countries have been pressured into negotiating these VPA’s under threat that their products will be denied market access in Europe.

Despite finalising these agreements, no VPAs are fully operational. The FLEGT model, and its substantial operational delays, has harmed production and economic development in producer countries. Its failures should see it disbanded, not rolled out to other commodities.

It appears that UK think tank, Chatham House, is attempting to build support for exactly this. Chatham House recently held a workshop on ‘deforestation-related commodity supply chains’, purportedly presenting policy options for halting trade in “illegally” produced commodities such as preferential tariffs, trade prohibition legislation (similar to the US Lacey Act or the European Union’s Timber Regulations), as well as VPA type agreements.

WTO rules generally restrict measures which discriminate against ‘like’ products, such as preferential tariffs and protectionist legislation.

Accusation that palm oil is illegally produced cannot be substantiated. The claims have in the past been drummed up in environmental campaigns driven by NGOs who oppose industrial agriculture in tropical forested countries. In palm oil producing countries such as Malaysia, agricultural lands that are cleared for cultivation are done so in compliance with national legislation. There may be some issues with ‘illegal’ land clearing in South East Asia, but the literature suggests these incidences are usually associated with poor subsistence farmers and/or complex, insecure and overlapping tenure arrangements which drive isolated ‘illegal’ forest clearance.

Palm oil production on the other hand requires capital and infrastructure, and is therefore normally produced by companies with a record of legality compliance, and small farmers who are often supported by government endorsed schemes, former aid projects, local mills and/or adjoining plantations. There is no basis to suggest widespread illegal forest clearance within the South East Asian palm oil industry.

This EU policy discourse also plays into the hands of domestic biofuel producers who are keen to protect their own, less competitive and less sustainable industry from cheap and sustainable imports of biodiesel like that derived from palm oil. Scientists have shown that palm oil-based biodiesel has greater greenhouse gas savings than domestically grown rapeseed, and has GHG emissions saving value for transportation biodiesel of between 38.5 and 41% that of conventional fossil fuels.

But the science has been largely ignored by European policy group-think. ‘Environmental’ institute, the IISD, inadvertently summed up the real campaign by objecting that “real beneficiaries of EU biofuel support policies may not be the EU biofuels industry. The benefits of the EU government support to biofuels are increasingly captured by non-EU suppliers rather than the EU farmers.” It is unclear what relevance this has, when the goal of policy is to encourage substitution from polluting fossil fuels to sustainable and renewable energy sources such as biofuels. That is, unless protecting domestic interests are more important than achieving environmental outputs.

CSPO certificate trading further harm low-income growers

Several consumer goods companies have recently highlighted their own ‘sustainability achievements’ relating to palm oil procurement. However these ‘achievements’ have little to do with meeting procurement targets in any traditional sense. The result is to shift the cost burden onto low-income commodity producers who already operate sustainably, but are now being pressure to produce certified supply without any real market for the expensive product.

Unilever – one of the largest global consumer goods companies – recently published a sustainability progress report outlining the company’s efforts in meeting sustainability targets. Unilever has already committed to source all palm oil from certified sustainable sources by 2015, as part of the company’s 2010 ‘sustainable living plan’.

The company wavered on this by changing the commitment deadline from 2015 to 2020. Last month, Unilever announced they had in fact already met the commitment to source 100% certified palm oil.

Their progress report shows they have met this commitment not by increasing their usage of certified palm oil significantly, but rather by purchasing ‘offset certificates’ which allow them to make sustainability claims. Under this ‘offset’ system, a company may purchase certificates and claim they utilise the corresponding quality of certified palm oil, without physically sourcing certified supply. This is convenient for manufacturers because it allows them to make sustainability claims without segregating supply chains at significant costs.

Interestingly, in 2008 Unilever committed to implementing fully traceable supply chains in Europe by 2012. Their recent progress report makes no mention of this commitment, nor progress towards it.

Unilever now claim that 100% of their current palm oil supply is certified. In reality only 3% of the palm oil they use comes from certified sources. The rest is ‘offset’ using certificates.

Nestle similarly conceded last month that most of the certified palm oil they source is actually in the form of certificates, rather than tangible supply. Nestle claim to source 80% of their palm oil from sustainable sources, but the vast majority is ‘procured’ through purchasing offset certificates.

Offset certificates minimise the cost for manufacturers of meeting difficult procurement pledges made several years ago. Instead, these costs are often passed on to those who are least able to afford them. Producers and growers are being pressured to meet onerous requirements for certification, so that they can supply manufactures with certificates. Meanwhile there is little demand for their certified palm oil, with around half of all certified palm oil remaining unsold.

But despite all the hype, offset certificates are unlikely to have significant impact on the environment or sustainability. Malaysian palm oil growers meet national sustainability standards, regardless of compliance with private and NGO sector certification regimes.

The system ultimately decreases the viability of palm oil growers and producers who are expected to pick up the cost of achieving certification, even if there is little demand for their product. Growers receive little financial return when manufacturers purchase their offset certificate, while achieving certification can raise their costs to a point where they are no longer viable without external support.

The RSPO takes a large part of any potential price premium on certificate sales. In 2011, this accounted for around half the RSPO’s annual budget, which may explain why the RSPO is happy to keep the certificate trading travesty in play.

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