RSPO GA Preview
The RSPO Roundtable and General Assembly takes place this week in Kota Kinabalu. Although much of the outreach and public activity takes place at the Roundtable meeting, the General Assembly is where the more substantial decisions are made via proposed resolutions. The revised Principles and Criteria are the most significant item on the agenda, but there are others worth noting, as well as specifics within the revised P&Cs.
- Third-party supplier lists: A resolution to have RSPO members that are procuring palm oil to publish all suppliers into their supply chain. This will provide greater transparency in supply chains.
- Discouraging member withdrawal: This aims to prevent companies selling down their stakes in a subsidiary once it is subject to a RSPO complaint. Although there is some logic to this, it is also the precise opposite of everything that the divestment movement is aiming to achieve.
- Extending the smallholder initiative group: The work around smallholders and smallholder inclusion remains – unsurprisingly – incomplete; this aims to continue this work.
- Delinking auditors from companies: This aims to have the payment link between companies and auditors severed. Several NGOs see this as a problem. However, the solution arguably lies in RSPO’s governance structure itself. RSPO and Accreditation Services International (ASI) have a services and license agreement. This means the governing body (RSPO) has an exclusive relationship with the accreditation body, and not an arms’ length separation. Most other industries – from food safety auditing to automobiles – have no problems with the ‘user pays’ model. This is arguably because accreditors (i.e. International Accreditation Forum members) are completely separate from standard developers (ISO and national standards bodies).
- Revised P&C – No Deforestation, No Peat: The Deforestation Working Group within RSPO has put forward new criteria for high carbon stock. In short, the new criteria will prevent any new plantings on areas assessed as ‘high carbon stock’ after the meeting. The crucial factor here is the assessment methodology, which is the HCSA Toolkit (largely written by the HCSA Steering Committee) and the HCS-HCV Assessment Manual (written by Proforest). It’s worth remembering that HCS under these definitions covers most – if not all – forest types, including young regenerating forest. There is one caveat here, and that’s for local groups and indigenous groups in high forest cover countries, i.e. countries with greater than 60 per cent of forest cover, but less than 1 per cent oil palm cover. In addition, there is a new prohibition on planting on peat of any depth.
- Revised P&C – Labour: -The labour requirements in the revised P&C are much more prescriptive and require greater levels of record keeping and compliance by members (see below).
Will these resolutions and revisions be approved? Different members have different interests. The RSPO’s larger members have no problem pushing up compliance levels; they are easily able to absorb the costs. Smaller operators will be more resistant. The prohibitions on forest clearing and peat will prevent any new expansions, which might be problematic for smaller players.
The RSPO Board of Governors is neutral or undecided on many of the proposals; the revised P&Cs is a clear exception.
Corley: Does RSPO have a future?
Dr RHV Corley – arguably the most knowledgeable plant physiologist in the world when it comes to oil palm – has asked whether RSPO has a future. Now it needs to be made clear that Corley is an unavowed supporter of RSPO. But he raises three points about where certification is headed in the future. He writes:
“The profusion of different standards seems likely to undermine the RSPO. Thus we have MSPO and ISPO introducing more grower-friendly versions of the original RSPO P&C, while RSPO Next and the POIG aim to raise standards.
One must wonder for how long major plantation companies will accept the limitations on new developments imposed by RSPO Next and the POIG, when certified oil constitutes such a small percentage of total palm oil sales.
The limitations on development risk destroying the historic role that oil palm cultivation has played in poverty alleviation throughout the humid tropics. It must be recognised that agricultural expansion is the only viable route to economic development in some countries.”
Corley argues that the continued path of certification will only mean that RSPO will become more of a niche product. For this he considers NGOs and food manufacturers to be largely responsible via their push for higher standards rather than broader inclusion.
The solution, as he sees it, is greater uptake. The strongest point he makes is as follows:
“Perhaps members who are users should be obliged to put forward, and be audited against, time-bound plans to move to 100% certified oil, just as producers are audited on time-bound plans for all their production to be certified. Some members have published plans, but these have been voluntary, and are not a requirement of RSPO membership.”
It’s a pity this wasn’t something advanced in 2018 for the GA; perhaps NGOs, producers and purchasers could push for this in 2019.
CGF: An Own-Goal on Labour
In the lead-up to the RT, the Consumer Goods Forum (CGF) published a report on labour issues within the palm oil supply chain. The report is the result of the CGF’s Social Committee, which is headed up by Unilever and Marks and Spencer.
The report itself contains very little in the way of on-ground knowledge; it is largely a desk survey informed by a large number of ‘grey literature’ reports on alleged labour problems within the palm oil supply chain. Many of these reports were put forward when US labour organisations were lobbying against Malaysia’s inclusion in the Trans Pacific Partnership in 2014 and 2015. It also draws on some stakeholder consultations. But the study limitations are mentioned in the report itself, almost as a footnote. The key weaknesses are:
- Lack of overview of labor recruitment processes from the home locations of migrant workers to palm estates;
- Lack of analysis of the internal human and labor rights management systems that the company, palm oil companies, and plantations have. While some overview of companies’ programs is publicly available in their respective annual reports, no independent third party review of their program is available.
In other words, the researchers did not assess how migrant workers are recruited, and nor how they are managed. But it also doesn’t address the drivers of undocumented migration to countries like Malaysia, where economic opportunities are better than in many countries in the region.
And before European companies get righteous about their labour record, note the following from the Financial Times:
“Fairwork Belgium, an organisation that helps to protect [undocumented workers] from exploitative employers, is contacted by hundreds of undocumented workers every year, many of them Brazilians and Moroccans. Jan Knockaert, co-ordinator at Fairwork, says he has even handled cases for construction workers who helped to build the EU’s headquarters. “Undocumented workers have been involved in building the new European Council building and the crèche of the European Parliament, as well as cleaning the [Belgian] Palais de Justice,” he says.”
It’s a fair assumption that the report was published to generate support for revised labour principles and criteria under the RSPO. This isn’t unreasonable, but it is very risky. Whether CGF likes it or not, this document will now be used by any number of anti-palm oil campaigners to smear the industry – and the commodity more broadly. And those campaigners don’t care whether palm oil is RSPO-certified or not.
KPK, PT SMART and HCS: A rocky road ahead?
There were several news reports last week that Sinar Mas’ palm oil arm – PT SMART/Golden-Agri — is under investigation by Indonesia’s anti-corruption agency (KPK) , following the arrest of a number of its staff, including a director.
The big question: Is this going to present a problem for SMART’s role in other forums?
SMART has been one of the leading members of the High Carbon Stock Steering Group, and has been instrumental alongside Greenpeace in generating support for the initiative. The HCS Group has a strongly worded ‘zero tolerance’ anti-corruption policy in place, which states that it applies to staff, contractors “or any other person or persons associated with us (including third parties)”, among others.
The investigation and arrest follows a number of policy developments that have impacted the HCS Group’s other leading sponsor, Asia Pulp and Paper, also part of the Sinar Mas Group. In May, Greenpeace stated it was tearing up its ‘non-campaign’ understanding with APP after accusations of widespread peat clearances were levelled against the company. In August, the Forest Stewardship Council (the timber and paper equivalent of RSPO) also said it was halting its process to have APP readmitted to the organisation based on the same information.
Could it also present a problem with its RSPO membership?
RSPO P&Cs require companies to have policies and audit controls in place to prevent corruption. This may be questionable now given that the alleged bribery was undertaken at such a high level.
But the bigger problem now lies with the HCS Group. In the past three months, the group’s most prominent companies have come under fire publicly for alleged environmental and/or governance problems.
Neither the HCS Group nor Greenpeace have made any statements on the KPK investigation.
Greenpeace has never hesitated in piling on when it comes to environmental accusations against companies. Is corruption less important? Questions, questions.
WWF says consumers confused on palm, then adds to the confusion
In the lead up to the Annual Roundtable Conference of Sustainable Palm Oil 16 (RT 16), WWF is placing a greater emphasis on consumer demand. It’s calling on brands to do more, particularly in light of gaps in RSPO uptake in Europe. It also says “consumers are confused” about conflicting messages on palm oil.
WWF is only adding to that confusion.
Last week they released their ‘Living Planet’ report for 2018. The report is best described as a stocktake of habitat and biodiversity. The paper is a distilled summary of the work of conservation biologists around the world. Some of the numbers reported are alarming, for example, a 60 per cent decline in species numbers around the global since 1970.
However, like an addiction, WWF singles out palm oil – and very subtly. There is a full page picture for the opening of “Chapter 2: The threats and pressures wiping out our world”. The image choice is of an oil palm plantation in Malaysia. A full-page splash on consumption habits calls out the use of palm oil in supermarket products.
No wonder consumers are confused.
TPP Ratification: Will Malaysia join?
The CPTPP (Comprehensive and Progressive Trans Pacific Partnership) Agreement will come into force before the end of the year. The Agreement has been triggered by ratification of six member countries, the last of which was Australia. The remaining five signatories will need to submit their own ratification instruments for the agreement to apply.
As we’ve pointed out before, the CPTPP could provide some benefits for palm oil exporters – the most significant of which in CPTPP (by far) is Malaysia.
Earlier this year, Moodys Research stated:
“Malaysia will prove the biggest winner from the revised agreement, because the deal will provide export access into new markets, including Canada, Peru and Mexico; benefiting palm oil, rubber and electronics exporters.”
Tariffs on palm oil going to Canada and Mexico will fall, which will likely see increased demand in both countries.
Our understanding is that the Malaysian government is reviewing its position on the CPTPP. It will weigh up any positive and negative impacts across all sectors — not just palm oil.
Colombia joins the effort to oppose EU’s RED
Governments in palm oil exporting countries appear prepared to step up their activity against the European Union’s revised Renewable Energy Directive (RED).
Malaysian Deputy Minister of Primary Industries Datuk Seri Shamsul Iskandar Mohd Akin announced last week that Colombia is prepared to join with Malaysia and Indonesia in facing off with the EU.
The Deputy Minister stated that the government has approved a significant budget — RM23.4 million — for campaign activities. This was in the lead up to a CPOPC meeting scheduled for early November.
At the same time, Indonesian trade director Tri Purnajaya issued a statement underlining the significance of palm oil to the Sustainable Development Goals (SDGs) in Indonesia. First, as the country’s largest export commodity, second as a renewable energy source, and third, as a source of employment.
Referring to the revised RED, Pak Tri stated, “The Ministry of Foreign Affairs will not remain idle facing the barrage of attacks faced by the national palm oil industry.”
UK puts out post-Brexit feelers to ASEAN
The UK is upping its trade diplomacy in the ASEAN region in advance of its exit from the European Union. UK Secretary of State for Trade Liam Fox met Indonesia’s Minister for Trade Development Enggar Lukita on the sidelines of the China International Import Expo in Shanghai. The two ministers declared their general opposition to ongoing US-China trade tensions.
George Hollingbery, the UK’s Trade Deputy is likely to meet with Malaysia’s Trade Minister Darrell Leiking. Both ASEAN countries will seek to expand their exports of commodities to the UK, particularly palm oil. The UK for its part has been emphasising military and government procurement programs in its trade push into the Asia-Pacific region.
Will it be possible for both countries to see eye to eye? The UK imports around 40 per cent of its palm oil from Papua New Guinea, specifically from New Britain Palm Oil (NBPOL), a division of Sime Darby. NBPOL established a segregated supply chain and refinery going into the UK market. The remainder of the trade is from Indonesia and Malaysia. Both countries will be seeking better trading conditions with the UK, but also guarantees that the UK Government will not impose regulatory barriers to palm oil.
Unlike much of Continental Europe the UK doesn’t have a significant oilseed producing sector attempting to erect trade barriers – it just has a very vocal green sector, which could undermine the UK’s trade push if it rubs up against the future palm oil trade.
Indonesia EU negotiations
The EU-Indonesia trade agreement negotiations continued in October; the European Commission has released an update for stakeholders on negotiation progress. However, the update contained very little and is best described as ‘diplomatic’. There is little doubt that the negotiations have been tainted somewhat by the EU’s aggressive stance on palm oil in the Renewable Energy Directive, particularly the bloc’s refusal to accommodate Indonesia’s notification requests in the WTO.
The round followed an announcement in mid-October that Malaysia and the EU will sign a PCA (Partnership and Cooperation Agreement) in January. PCAs are the prerequisite for broader trade agreements. The contain very little that is specific; they are generally principles-based, with a view to greater levels of cooperation. They don’t prevent trade disputes; the EU-Indonesia PCA was signed in 2014 and FTA negotiations began in 2016. Disputes between the EU and Indonesia – particularly over palm oil – have continued unabated since then.