HCS 101 PART 2: SPOM

In our last piece we analysed High Carbon Stock as it is understood by two key stakeholders in the palm oil debate: the European Commission, and NGOs such as Greenpeace.

This week we examine the alternative approach to HCS that was backed by a large number of industry players, particularly from Malaysia.

After the High Carbon Stock Approach (HCSA) was first announced by Golden Agri Resources (GAR) and The Forest Trust (TFT), and Greenpeace, concerns were raised by other parts of the industry.

NGO groups taking up campaigns against any company that didn’t sign up to the HCSA rules added to that concern.

The concern was simple: the high carbon threshold – 35 tC/ha, and later, any vegetation above scrub, including young regenerating forest  — for many suppliers was simply too low, particularly for small-to-medium operators in Malaysia. These operators were abiding by national and local laws and operating on land that had been earmarked for agricultural development, while other forest areas had been set aside for protection. The question was this: why should these operators be penalised?

As a result in late 2013, the Sustainable Palm Oil Manifesto (SPOM) emerged.

The key difference between SPOM and HCSA was that the former sought greater clarity on a broader, macroeconomic policy context, not just whether a particular threshold was met.

This was of particular significance to Malaysia and Malaysian companies. The FELDA model, which first emerged in the 1960s, depended greatly on smallholder farmers via a nucleus estate model.

Delivering social and economic benefits to these farmers is very much a part of palm oil’s social license in Malaysia. It is quite distinct from the vast estates and land banks controlled by Indonesian conglomerates; the high dependencies between smallholders and large companies are simply not there.

When the SPOM High Carbon Stock Study (HCSS) emerged, there were clear and explicit references to the social and economic benefits that could be delivered by oil palm development.

The study was led by Sir Jonathan Porritt, a former director of Friends of the Earth and a celebrated environmentalist. The study included Columbia University’s Ruth DeFries, a leading ecologist, and Professor Hans Joosten, a leading peat specialist. It was independent, had no set agenda and asked complicated questions.  Just as important as the questions around carbon stock were those of risk and opportunity cost.

The typical HCSS scenarios were as follows:

  • If a high carbon stock threshold is too low, at what point does this act as a disincentive to investment – therefore preventing the establishment of an oil palm plantation, and robbing local communities of economic opportunities?
  • If investment is forfeited and land is left undeveloped, will that simply leave the land open to mismanagement and unplanned deforestation, similar to scenarios in Indonesia?
  • Will over-regulation of oil palm encourage the development of other crops or land uses, which are less regulated?
  • At what point does implementing a HCS threshold impinge upon the native and customary rights of local communities?
  • Is it possible for HCS to deter investment to the point where it has a negative impact on farmer incomes and/or food security?
  • This last question was closely examined in a Nigerian context by this consultant as part of a Nigerian case study. The key observations were that:
  • many investments in agriculture in developing countries have a high degree of risk. HCS can add to that risk, rather than mitigate it;
  • investment in agriculture in developing countries need spurs to investment, not hindrances.

 

At the end of the SPOM study, the key conclusion was this:

Neither the HCS Approach nor the HCS+ methodology completely prevents deforestation (as in ‘zero deforestation’), but they both aim to reduce it significantly. HCS+ ensures no deforestation of HCV and HCS (as defined in this study) forests. Experience over the last 20 years has taught us that no amount of high-level declarations will protect forests on the ground unless and until local people and communities can see that their own economic interests and historic entitlements are better served through forests being set aside and protected for the long-term rather than cut down for short-term gain. We maintain that some level of responsible development, coupled with a strong role for both companies and local communities in the protection and management of set aside forests is the best way to ensure the long-term protection of tropical forests in many countries.

The study also recommended that a threshold of 75 tC/ha be used. By this stage, the High Carbon Stock approach had dispensed with the 35 tC/ha number.

But the SPOM study did three things that the HCSA study did not. First, it recommended converging the approaches. Second, it examined development in a national context and didn’t imagine oil palm developments to be operating in a vacuum. Third, it gave clear priority to non-environmental benefits – and therefore to smallholders and communities.

This last element is worth examining further.

The genesis of HCSA was the combination of large plantation companies and large NGOs. Both want an easily implementable solution that will have a degree of credibility with palm oil buyers in Western markets.

A sustainability director at a Western confectionery manufacturer may understand that ‘it’s complicated’, but that answer doesn’t cut it in the middle of a consumer campaign or a social media attack. Unfortunately, ‘it’s complicated’ is the only right answer when it comes to sustainability.

After the two studies were released, a convergence process was eventually undertaken. This concluded at the end of November 2016. The first result was an agreement between the proponents of the two different approaches. But the second result has been the development of a HCSA-HCV assessment methodology, which is now likely to be incorporated into RSPO. This methodology has largely been defined by HCSA, not SPOM, and it will be voted on at the next Roundtable in November. It will apply to new plantings from 2018.

Lobbying to have this voted in to RSPO has well and truly begun. For those who can remember, it’s not unlike the introduction of New Planting Procedures (NPP) in 2010. This created a massive divide between buyers/processors and producers. Larger plantation companies supplying European markets sided with their introduction. It was the NPP that eventually saw GAPKI – Indonesia’s body for palm producers – leave the RSPO.

The standards that palm producers and buyers adhere to isn’t  per se a bad thing or a good thing; it’s a business decision. The bigger question is whether or how a new HCS might be incorporated into EU regulations, and how this will contribute to palm oil being deemed ‘high risk’. This question is what we will examine in our next blog.

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