Palm Oil Monitor – Weekly Update 18th July 2018

FTAs and Palm Oil Sustainability

The completion of the RED negotiations means that NGOs are having to move on to other targets in the palm oil debate.

One of the first is the EU’s proposed trade agreements with ASEAN countries.

FERN, a Dutch NGO that has consistently lobbied on forestry and commodities for more than two decades, is now pointing towards the EU-Indonesia FTA as a means of ensuring sustainability for palm oil products going into the EU.

FERN writes:

This could be done by setting up of a binding roadmap on palm oil that would determine measurable objectives, such as improving governance around the allocation of land for palm oil plantations as well as clarifying and securing community tenure rights of forest communities and indigenous peoples. National authorities would need to set up a transparent and inclusive process with Indonesian stakeholders, including civil society organisations, to come up with meaningful solutions.

While this is potentially ambitious and admirable goal for a FTA, it demonstrates a general misunderstanding of both Indonesia and FTAs.

What FERN is calling for here for Indonesia is reform of the relationships between the national, provincial and local-level governments as well as wholesale land reform, both of which would need to take place at the constitutional level. In other words, FERN seems to think that Indonesian national politicians would stake considerable political capital on wholesale reforms that would take power away from provincial and local authorities, just for the sake of a FTA with Europe.  That’s wishful thinking.

When the Suharto dictatorship fell in 1998, the reformasi period that followed rested heavily upon decentralising the concentrating of power that was held in Jakarta. This had some unintended consequences, particularly around forestry. But it made for a more inclusive and decentralised system of government and gave Indonesia’s 300-plus ethnic groups spread over 17,000 islands greater autonomy and made it the largest democracy in East Asia.

FERN is implying that autonomy is less important than the EU’s sustainability criteria for biofuels.

If European NGOs – or other groups – plan to weigh in on the future of political reforms in Indonesia, they should read their history first.

Indonesia effectively called off its negotiations with the EU until the planned palm oil ban under the EU’s RED was resolved. Palm oil is a priority for ASEAN exporters, and no trade agreements will be signed without better market access for palm oil. Now the planned inclusion by Brussels of ILUC & HCS criteria into RED potentially threaten this market access, once again.


What the Nestlé Suspension Means

Last week we gave an overview of the RSPO’s European Roundtable (EURT). One thing we didn’t mention was that Nestlé had found itself in the surprising position of being suspended from RSPO. The original suspension occurred three weeks ago, before Nestlé was reinstated this Monday 16th July. The breach of the rules was simple: first, it didn’t file its annual report; second, it didn’t pay its membership; third, it has had a fundamental difference in opinion on what sustainable palm oil actually is: Nestlé had considered that maintaining traceability and a commitment to TFT-style commitments was more important than being 100 per cent certified to RSPO. However, after a three-week suspension, Nestlé has now committed to a new action plan to achieve 100 percent RSPO-certified sustainable palm oil by 2023.

There was a difference of opinion on sustainability; such a difference of opinion may also occur in the process of choosing sustainability systems. For example, Starbucks developed its own sustainability standard instead of choosing to use one from external organisations.

But the response to Nestlé’s suspension was quite remarkable. At last count, just two organisations stated that they would suspend sales of Nestle products: two zoos, one in Melbourne, Australia and one in Chester, England.

There is an interesting comparison to be drawn, here. Compare this rather tepid reaction to previously-witnessed responses when major Indonesian or Malaysian palm producers were suspended by RSPO. A major purchaser, e.g. Nestlé or Unilever, will threaten cancelling contracts or do so immediately. This will be complemented by an NGO campaign calling on all businesses to cease dealing with the producer. This isn’t hypothetical: it occurs all of the time. If there were equity, then major purchasers of Nestle’s palm oil products – such as RSPO members like Tesco – would have refused to stock Nestlé products (just as they had refused to deal with Asian producers who were condemned by RSPO). This did not happen, however.

If there were equity, then Greenpeace would have launched a boycott against Nestlé – as they have done with Asian producers in the past. This also didn’t happen.

This is not to make any assumption about Nestlé’s guilt or otherwise.

The question, rather, is about the double standard that would appear to exist, dependent on whether the accused is a Western multinational or an Asian producer.

One explanation is that this demonstrates the sheer lack of leverage palm producers have within an organisation like RSPO. This isn’t that different to agricultural commodities around the world; more often than not producers are price takers. Policy and product specifications aren’t that different.

The specific case of Nestlé and RSPO has now, apparently, been resolved. However, the broader questions remain. Will palm oil producers begin to ask questions about this apparent differential treatment?


ISCC Takes the RED to Task

ISCC, the International Sustainability and Carbon Certification scheme, has weighed in on the post-RED negotiation environment.

Gernot Klepper, ISCC’s chair, has written in Eco Business on the negative ramifications of the current parlous state of the EU’s sustainability criteria.

Klepper is particularly concerned that the EU’s ongoing tinkering with the sustainability criteria will have perverse outcomes that work against the original ambitions of the RED, i.e. reducing emissions.

He notes:

Palm oil producers specialising in exporting to the European biodiesel market will be most hurt.  … these are the producers who have been certified according to the RED and are more sustainable than their competitors supplying to other markets … It sends a clear signal to producers that a more sustainable production is not honoured by the EU.Sustainability certification has had a widespread positive impact by putting social and ecologic aspects higher on the agenda of companies, thus inducing technical progress in processes for lowering the greenhouse gas footprint, increasing awareness about social conditions, and at the end promoting investment for modernising the palm oil value chain.

This kind of clear thinking on sustainability will most likely be lost on EU lawmakers and policymakers. The RED started as a way of propping up oilseed producers as the EU’s quota system ended. The use of imported feedstocks was not envisaged by policymakers. Any perverse outcomes from changes to the system are unlikely to faze them now.