Labor, Abuse and Palm Oil

The major story of last week was the international press coverage of labor and abuse  issues on palm plantations. As we’ve pointed out – not just over the past few weeks but over the past few years – labor-related matters are going to become a significant issue for the industry going forward.

Why is this the case?

When labor issues first emerged around 2015, it was primarily directed at Malaysia. Astute labor observers were aware that the issue was not just around labor on palm plantations, but labor in Malaysia more broadly. The unregulated nature of migrant labor markets left the country open to abuse and exploitation.

The situation now is similar. Is the abuse of women taking place on plantations to do with the commodity itself, or is it to do with the nature of plantation industries in Southeast Asia?

This is the more complex question that needs to be answered and – to AP’s credit – the journalists go some way to answering.

How the story is used by palm oil’s detractors is a different matter. Over the next year or more, we will be able to see clearly which actors in the palm oil debate that are interested in solving these important challenges, and which actors will simply use it as another reason to block palm oil imports.

CDP: Living in a Carbon Bubble

The Carbon Disclosure Project last week issued a report arguing that brands using palm oil face around USD10 billion in unmitigated risk because of their use of palm oil that is either untraceable or could be linked to deforestation or forest destruction.

The key difference in the report compared with those in the past is that it is only linked to Indonesia, and not to any other geographical region.

The methodology of the report is fairly straightforward; it’s effectively a survey of companies and their commitments on palm oil sourcing.  The USD10 billion comes from an estimate put forward by companies as potential brand damage that could emerge as a result of reputational risks – to brands – or lost sales.

But the report does come across as being overly speculative; arguably the best case study in potential reputational damage occurred when Greenpeace launched a significant campaign against Nestle’s Kit Kat in 2009. Nestle – as a very risk averse company – changed its practices significantly, but there was no measurable or significant impact on the company regarding lost sales.

The recommendations put forward by CDP are ultimately pedestrian: companies should implement better traceability and engage with suppliers on the ground, and make a bigger commitment to certification.

It’s worth noting that Nestle – one of the world’s largest FMCG companies and arguably the most risk averse – still doesn’t have full traceability for its palm kernel oil supply. If Nestle is ‘slow’ in this regard, what does it say about the actual critical nature of the risks?

At the same time, Nestle’s ‘caving’ to Western NGOs and anti-palm oil campaigns also can have a reputational impact in Indonesia.

And this indicates an inherent Western bias here: the risks are ultimately in Western markets. More specifically, they are in Europe. Are these really the only markets that matter?

Has Mighty Earth Gone Quiet?

Palm Oil Monitor’s look into the operations of NGOs funded by the Norwegian government has prompted a new question: Have the NGOs gone quiet?

Our examination was originally prompted after discovering filings by US lobbyist Henry Waxman’s , Mighty Earth. Mighty Earth was being funded by the Norwegian Government to conduct activity in the US against palm oil.

In ordinary circumstances, Waxman and Mighty would be making regular filings with the US Government – any group that is paid by a foreign government or associated body must declare its interests to US authorities.

But those regular filings have stopped.

As previously mentioned, in a letter seen by POM, Norwegian Ambassador Vegard Kaale aimed to distance the Norwegian government from active anti-Indonesian palm oil campaigns stating, “The fact that the report has received Norwegian financial support does not mean we agree with or take any responsibility for its conclusions.”

The question is whether the Norwegian Government has stopped supporting Waxman-managed projects against palm oil, or whether the Norwegian programs for 2021 have been decided yet.

But we’ve also noticed that the Centre for International Policy – a Waxman partner – is now reporting that it has been working on a number of programs for NORAD that have been putting Indonesian companies under scrutiny in the region for the past few years.

This follows a review of Waxman that was undertaken by Swedish Development Advisers, at the behest of NORAD.

Moving Forward…

As claimed by the Norwegian Ambassador himself, “Our partnership appears to be on the right track …” For a Norwegian-Indonesian partnership to continue growing, government funding for anti-palm oil campaigns must cease, as it directly undermines the relationship itself.

We’ll be interested to see what Norway does going forward. Norway has been a strong development partner for Indonesia, particularly when it comes to the nexus of development and carbon emissions.

Our question remains, is Norway serious about maintaining a cooperative partnership with Indonesia? How Norway proceeds in 2021 – and their ongoing of groups that have raised the ire of the industry and politicians alike – could further define the bilateral relationship.