Two rival systems for preventing palm oil deforestation might just become the co-authors of a global success story

After uprooting crops and destroying houses, they came back and planted oil palm. Mapping of the Liberian farmers’ land never occurred, and neither was there any consultation. Local unrest followed, with the development couched as environmentally destructive land grabs on one side and vital economic development on the other.

Speaking in early 2013 to Agence France Presse in the Liberian capital Monrovia, local resident Benedict Smarts voiced his opposition to a process that had apparently dispossessed villagers without warning. “We are not against development – but we want to be heard, we want respect – we want those people to listen to us.”

The story has the hallmark of big companies bullying small stakeholders. Malaysian palm oil giants Sime Darby and Golden Veroleum Liberia – ultimately owned by Indonesia’s Golden Agri-Resources, the second largest palm oil producer on the planet – are the main companies involved.  

With the eyes of the world on the tiny west African state, and amid mounting international and local NGO pressure, Sime Darby suspended operations, as long ago as October 2011.

Apparently more reluctant to act, Golden Veroleum eventually commissioned an independent report into its stakeholder engagement from forestry non-profit group Tropical Forest Trust (better known as TFT). Completed in February 2013, the report highlights several areas where the company has fallen seriously short in its dealings with local communities.

It finds that ancestral cemeteries had been damaged, farms cleared without consent and drinking water polluted. The company has since pledged to meet the report’s recommendations for improvements in its communication, compensation and education engagement with local communities. And after making such a commitment, Golden Veroleum will be under intense pressure to meet it.

RSPO pressure

Local Liberian reports highlight the impact of pressure on Sime Darby from the Roundtable on Sustainable Palm Oil (RSPO), the multistakeholder organisation formed in 2004 to implement standards for sustainable palm oil production.

Speaking to Ethical Corporation, Leela Barrock, Sime Darby’s group head of communications and corporate affairs, says the company “values greatly” the RSPO’s role as “an independent industry regulator”. Barrock says that since suspending operations in Liberia in 2011, Sime Darby has been working on a new and revised process of free, informed, prior consent (FIPC) for communities affected or potentially affected by the company’s operations.

The company has a concession from the Liberian government to develop 220,000 hectares of land into palm oil and rubber plantations, but has so far only developed 5,000 hectares. Barrock says Sime Darby will only expand at the pace its new consultation process allows. “We are committed to our FIPC process. This will dictate how much and how quickly we can develop the land.”  

While avenues of recourse, for example through the RSPO, are undoubtedly a good thing, their availability to largely poor, rural communities is, clearly, limited. For starters, the RSPO has very low uptake in general on the African continent. Away from Liberia, of 17 palm oil land deals in the Congo Basinrecently documented by the Rainforest Foundation UK, for example, just two committed to meeting RSPO standards, with one of them since deciding to drop its application.

Limited reach

RSPO certification remains, for now, limited to a handful of big plantations. These companies generally perform relatively well in their sustainability policies. But only a quarter of the RSPO’s grower members are certified “sustainable”, and supermarkets and the wider food industry are only slowly inching towards certified sustainable palm oil.

Especially troubling, critics say, is the fact that an RSPO member company can still clear natural tropical forests, including areas of high carbon stock, provided that these forests have previously been slightly degraded by logging. In 2012 the Union of Concerned Scientists stated in an open letter, “palm oil cannot be considered sustainable without also having greenhouse gas standards”.

Consequently, the cutting down of carbon-rich secondary forests and peatland is not squarely tackled – a failing that prompted Nestlé in 2010 to announce a no-deforestation policy based on using carbon as a proxy for delineating levels of forest degradation.

Two years on, the new methodology has proven its effectiveness, most notably in the vast plantation fields of Golden Agri-Resources, Golden Veroleum’s parent. Backed by Greenpeace and implemented by TFT, which was recruited by Nestlé to provide ground-level confirmation, the new approach potentially creates a lower cost, open-source multi-stakeholder model focused squarely on deforestation linked to supply chain traceability.

“The key element is to know where the oil comes from, first,” says Bastien Sachet, TFT’s director of business development. “Once you build the traceability then you can go upstream and look at a plantation of a smallholder, or whoever is the supplier, and assess whether they are actively converting forests.”

Both RSPO and TFT are working to scale up their competing models. The first, premised on certification, has had nearly a decade to prove its worth. The second aims to drive environmental and social qualities down the supply chain based on a competitive company values approach.

No deforestation

So what of Nestlé’s pledge? “The approach we are taking is, first of all, to make it part of the sourcing strategy that we have,” says Duncan Pollard, director of stakeholder engagement in sustainability at Nestlé. “We take ownership of that and start from the point of view of wanting to know where supplies come from.”

He adds: “It’s unfortunate if people think that by doing that we’re undermining the RSPO. Not at all. But we have to recognise the limitations of what the RSPO can accomplish.”

For starters, certification schemes fly in the face of demographic trends. When the RSPO began in the early 2000s, Europe and North America accounted for 50% of the palm oil market. Now, says Pollard, it’s about a third of that. Leverage from the west – where the push for certification has traditionally come – is actually diminishing.

Secondly, because of the costs and difficulty of segregation, many brands simply abandon the effort altogether, or buy “book-and-claim” Green Palm certificates alongside untraceable oil. Green Palm certificates, named after the company managing the system for the RSPO, are a much cheaper option enabling retailers or manufacturers to purchase palm oil from an established supplier, along with a certificate for each tonne of palm oil being used. The drawback is that a company using book-and-claim may still be using oil that comes from unacceptable sources, and may therefore still be supporting producers that are not acting responsibly.

“The problem with [palm oil] certificationis it links together a few willing buyers with a few willing suppliers,” says Pollard. “There’s a whole chunk in the middle who view this with little interest, or who don’t want to do it because their business model is based on opacity and not transparency.”

Land use change

By hiring TFT to work on the ground, Pollard says, Nestlé is engaging in a new conversation whose entry point is focused on land use change, the main drive of deforestation.

“High carbon standard is a methodology by which you take a satellite image and try to stratify forest in various classes of density,” explains TFT’s Bastien Sachet. “Then you go in the field and measure the trees plot by plot to see if the satellite images are true or not. You use formulas to calculate the amount of carbon there is, look at how the forest functions in terms of ecology, and then engage with governments, NGOs and companies to try to agree on an acceptable threshold.”

In Indonesia, TFT brokered a deal with Golden Agri that reached a 35-tonnes-per-hectare threshold deemed acceptable to all parties, Sachet says. New Britain Palm Oil is now testing a similar approach in Papua New Guinea.

“With Nestlé we have mapped all the countries they are sourcing from,” Sachet adds, “and what we find is always a handful of refineries and processors of crude palm oil who are making the ingredients.”

Use the leverage of big companies such as Nestlé – and Unilever – to bear down on these players and very soon supply chain transparency and standards will improve, Pollard says.

The key is to do away with the segregation approach, where refiners isolate what is already certified and potentially exclude those plantations and smallholders committed to no deforestation but unable to obtain certification.

Analysts say it’s a system that hinges on the effectiveness of faster and more cost-effective satellite monitoring systems. Other environmental campaigners, not TFT, may have to fill that role, given TFT’s contractual relationship with the companies under surveillance.

“These sources are acceptable because of traceability,” Sachet says. “You know where they come from and, second, you make sure there is no deforestation.”

Next steps in Liberia

In the battle over Africa’s forests, the existence of an alternative to roundtable certification has environmentalists cautiously optimistic yet divided in their assessment of just what might be accomplished. In Liberia, community consultation is improving thanks, in part, to the intervention of the RSPO.

To its credit, the Liberian government has prepared a new law that recognises the forest tenure rights of local people – a key inflection point for ensuring direct negotiations with communities. Nowhere in the law, however, is there an attempt to establish set-asides for secondary high carbon stock forests, let alone protections for primary forests.

This has placed TFT in the odd position of being both a trusted independent mediator and implementer of the “no deforestation” policy crafted for Golden Agri-Resources.

Simon Counsell, director of Rainforest Foundation UK, says: “While, on the one hand, I can agree with TFT wanting to push things forward, on the other hand what I don’t want is for TFT to become the unilateral arbiters.”

Thus far, TFT has been largely critical of Golden Veroleum, as the recently released report confirms. “It is too early to say what our role will be with Golden Veroleum Liberia, but if we are involved we will actively work to make sure the FCP [forest conservation policy] is implemented,” Sachet says.

The problem may well be moving out of Liberia. Further north in the Congo Basin, roughly 270,000 hectares of forest are now in the process of being flattened, according o the Rainforest Foundation UK. Upwards of half a million hectares are slated for clearance over the next two years. Of this total, only 70,000 hectares will be RSPO certified – a standard which may provide set-asides for high conservation value areas but will do nothing to stop bulldozers from tearing up secondary forests estimated to contain 160 tonnes of carbon per hectare.

“The problem is in the law,” says Counsell, “and this is the case right across the Congo region.”

Anybody who is living there has absolutely no legal rights whatsoever because national governments own all forest land and believe that on that basis they are absolutely free to dispose of land to whom they like and whenever they like. And they do so regardless of whatever costs there might be to local communities, Counsell argues.

To that end, Liberia – with its new land policy law – may be a test case of what can and cannot be achieved elsewhere in the continent. Proper land tenure regulations, strong no-deforestation policies where appropriate, and roundtable forums, can then, conceivably, begin to develop sustainable palm oil supply.

RSPO: reaching critical mass?

RSPO secretary-general Darrel Webber and others in the organisation say that if palm oil production does scale up in Africa, it will be done in a sustainable manner.

Asked how he can ensure that, Webber points to growing RSPO membership and sustainable palm oil consumption.

As to how fast the change towards sustainability will come, Webber predicts a turning point in 2015, the date many RSPO members have set for switching to 100% certified sustainable palm oil. The target of 9m certified tonnes on the market – about 16% of global consumption – would require a doubling from present figures. The proportion of the market shift in Europe and North America will need to be much greater, with a smaller percentage shift coming from China and India. “That will signal you are on your way to mass acceptance,” Webber says.

He believes awareness is on the cusp of exponential growth, citing decisions by the Belgian and Dutch governments to switch to 100% certified palm. It remains the case, though, Webber says, that nearly half of all certified palm production now goes without a buyer.

No wonder, then, Webber is pushing for a unified front: under this scenario, once critical mass is reached, prices will drop and more uptake of certified palm will be possible.

But at what cost, ask critics, if high carbon forest continues to be chopped down by RSPO members?

The RSPO has, in fact, commissioned a two-year study on greenhouse gas emissions, but Webber says he has not brought it to the table for discussion because of the competitive atmosphere such proposals would engender among his membership.

“We want to be a mass programme, and that’s the only way to get transformation in the region and divert from business-as-usual,” Webber says.

Asked whether Nestlé, an RSPO member, and TFT, which pulled out in 2012, were helping to advance supply chain sustainability, Webber has a clear view. “Stewardship involves taking the lead, but also taking active action to bring the masses with you. That is stewardship,” Webber says. “It’s not taking the lead and running away with the torch.”

RSPO – fast facts

Established in 2002 as informal cooperation on production and usage of sustainable palm oil, in a relatively short time the RSPO has grown to more than 1,000 members representing all links along the palm oil supply chain.

Certification requires some of the largest plantation companies to set aside significant areas for conservation, sometimes through consultation with the NGO members of the RSPO. It explicitly forbids development of new plantations on primary forest or forest with high natural values but fails to specify precise criteria for making these determinations.

A framework for verification is said to have improved its monitoring and complaints provisions. Certified palm oil, though slow to start in 2008 with the first shipments to Europe brought into Rotterdam, has since grown considerably, most recently with the sign-up of McDonald’s and other major US companies.

Key players in RSPO include Unilever, as one of the world’s largest palm oil consumers, and WWF, which has led among NGO groups since it began developing its “strategic action on palm oil and soy” in the late 1990s. Indonesia and Malaysia, which account for 90% of production, often stand in opposition to more progressive elements inside the coalition.

At present there are threeoptions for companies looking to switch to sustainable palm oil:

  • Segregated – the most expensive, but guarantees the oil is untainted.
  • Mass-balance – mixing certified and conventional under RSPO supervision.  
  • Offset, which accounts for 72% of all certified oil sales, in which Green Palm certificates can be traded for $2 each plus a further $2 brokerage and administrative fee. All of the certificate value goes to certified palm growers.

Bulldozers silenced 

No deforestation? “We can do it, and here’s evidence,” says Scott Poynton, quickly rattling off the names of giant companies – Nestlé, Golden Agri-Resources and Asia Pulp & Paper (APP) – to prove his point. All have hired TFT, of which Poynton is founder and director. All now have no-deforestation policies in place, and Poynton believes others will soon follow. “So come on guys,” he adds. “Get real. Man up!”

That said, Poynton concedes that verifying sustainable palm oil is difficult. It requires companies go down the furthest reaches of their supply chains, though there are key links with processors and traders through which economies of scale can be reached.

Big companies all buy from these giant middlemen, rather than directly from plantations. In an ideal world, plantations and mills would be certified as sustainable, and the oil they produce would be shipped separately. But this is expensive, so there is no large-scale segregation of supply: if plantations produce oil certified as sustainable, it gets mixed in with the rest.

The alternative, to take on no-deforestation policies, gets around the problem of segregation through a field-based method for measuring carbon content that now has a two-year track record and the recent, if tentative, backing of Greenpeace.

“We are not an auditing company,” Poynton stresses. “There’s no standard and no certification …  It’s about working with Greenpeace and the companies to identify different categories of forest.”

Poynton draws a diagram with six levels of vegetation, spanning old and young scrubland, through grasslands and into low, medium and high-density forests. Point to “old scrub” he says: “Above that we protect and below that it’s just scrub and we’re going to clear it.”

The no-deforestation policy has the promise of bringing about a dramatic and immediate decrease in deforestation. Many now are watching to see how it unfolds.



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