The Flawed Logic of the Palm-Poverty-Certification Narrative 

A new paper released in the lead-up to this year’s RSPO Roundtable was publicised in international press with one basic hook: palm oil certification has not delivered promised social and economic benefits.

The paper is well researched enough, with a developed methodology. But if this sounds familiar, it’s because it is. Exactly 12 months ago, a paper that followed nearly the same reasoning and methodology was released – also in the lead-up to the RSPO meeting.

In both cases, the papers have used socio-ecological indicators as their primary reasoning for the claim: palm oil – and palm oil certification – does not reduce poverty or improve livelihoods.

But let’s be clear from the start: the very premise of this argument is specious at best.

As we pointed out last year, an example of a negative socioecological indicator is if a family takes on an external employee as part of farming operations.

The aggregation of these types of indicators puts conventional socio-economic indicators – such as household income – well into the background.

In case anyone needed reminding, here is some basic background data on palm oil and livelihoods.

  • Dartmouth and ANU researchers have found that growth in the palm oil sector lifted up to 2.6 million rural Indonesians from poverty this century. The median expansion led to 2.7 percentage points faster poverty reduction and 4 percent faster consumption growth.
  • Financial returns to land for palm oil are ten times higher than other crops such as rice, and returns to labour were around 20 times higher.
  • Researchers have also noted: “Farmers were able to send their children to high school and university, and an increasing number of natives came back to their villages as public servants, most often primary school teachers.”
  • In palm cultivating areas, contributions to household income are high, around 70 per cent. The mean percentage contribution to total income from oil palm agriculture in one study was around 77 per cent. This is similar to other earlier estimates of 63 per cent and 63 to 78 per cent.

The reason that the narrative around palm oil and certification not delivering socioeconomic outcomes is wrong is that it ignores the baseline: palm oil on its own – without certification – already delivers significant economic benefits.

There is a certain danger in this narrative. As we’ve pointed out over the past few months, the UK government is in the process of introducing a due diligence scheme for imported commodities, including palm oil.

One of the key mechanisms for this due diligence proposal – which will assess the legality of commodity production – is sustainability certification schemes, including ISPO.

What this debate does not need is the simple claim that certification and palm oil increase poverty in rural communities in Indonesia. Apart from being incorrect, there’s a simple counterfactual: if oil palm is so bad for rural livelihoods in Indonesia and across the world, why do literally millions farmers insist on growing it?

We should also ask how this study will be interpreted and deployed by anti-palm groups.

These campaign groups will use it to undermine certification. And worse, they will ignore the fact that certification costs money and significantly reduces the income of smallholder groups.

There is even the possibility that this could undermine certification even further. If – as researchers say – certification does not improve livelihoods, then why purchase it at all?

It’s really time for the anti-palm oil crowd, and those that seek to criticise RSPO for the sake of criticism, give it a rest.

Speaking of CSPO…

Readers are likely aware that RSPO this year switched to a virtual format for the Roundtable. This included an extension of the General Assembly into a virtual format.

The striking impact of this has been that the resolutions associated with this year’s meetings are quite procedural. The fact that the event has been small appears to have made RSPO a much smaller target.

Is this a good thing? Quite possibly. RSPO by its very nature should be a B2B proposition; but the profile of palm oil – and opposition to it in European markets – has made it a large target. It has been a much larger target than certification systems such as FSC (forest products) and RTRS (soybean).

Nonetheless, the various attacks on palm oil over the past month, from Mighty Earth, Greenpeace and others, have clearly been geared towards the Roundtable – but with little success.

What Does RCEP Mean for Palm Oil?

The largest regional story over the past week has been the signing of the Regional Comprehensive Economic Partnership (RCEP) agreement. The trade agreement includes all ASEAN countries, as well as Japan, Korea and China, plus Australia and New Zealand.

Palm oil already had good market access with all RCEP members outside of ASEAN. The agreements between ASEAN and Japan, China and Korea had reduced tariffs to zero for crude palm oil and for palm kernel oil.

But probably the largest disappointment in the agreement was within ASEAN. We’ve pointed out before that the major problem with markets such as Thailand is the imposition of ceiling prices for retail and floor prices for FFBs in the Thai market; added to that is that palm oil is considered a sensitive agricultural product, which means that the zero percent tariffs on palm oil are effectively meaningless.

The other major disappointment was the withdrawal of India from the agreement. One thing that both Indonesia and Malaysia were seeking was a reduction in tariffs for their CPO exports to India – one of the world’s three largest palm oil export markets.

So, what does RCEP mean for palm oil? On the surface, not much. But what the agreement will do is deepen economic integration, particularly between ASEAN countries and those in North Asia. This isn’t exactly a great headline, but it is something that palm producers can look to well into the future.  

ICYMI: Palm Oil Monitor in Food Navigator

In last week’s Food Navigator, co-host of Palm Oil Monitor, Khalil Hegarty, weighs in on the US Customs and Border Protection (CBP) announcing earlier this year that it had placed a detention order on palm oil and related products from Malaysia’s government-linked FGV Holdings Berhad, believed to be using forced labour to get its palm oil.

Whilst environmental and sustainability issues are what the EU has been using to attack the palm oil sector, the US is much more concerned with labour issues and failure to resolve this could well escalate further when US President-elect Joe Biden comes into office next year.

You can read the Food Navigator story here.