The EU’s Deforestation Regulation: Rifts Emerge

The EU’s consultation for its ‘Deforestation Regulation’ closed on December 10, and it’s already apparent that rifts are emerging between developed and developing countries in the approach that should be taken toward deforestation.

A quick recap: the Deforestation Regulation is the eventual set of EU rules as a result of EU policy proposals to ‘step up’ action on restoring and protecting the world’s forests. This is the result of a process that has been in train for nearly a decade.

NGOs such as WWF and Greenpeace have been trumpeting the fact that more than 1 million submissions were received for the consultation. Submissions from NGOs have generally been broad, many are formed letters generated from email campaigns and are calling on the EU to simply include everything: conversion of not just forests but also other landscapes; human rights concerns; and extension into trade agreements.

But underlining this in many cases has been tacit support for the EU to unilaterally develop its own set of sustainability criteria, rather than opting for a legality-based due diligence scheme or using existing certification schemes.

This has prompted a quite cold response from the Indonesian palm oil industry, which has been very public in its splitting from groups such as the Tropical Forest Alliance (TFA).

The Indonesian Palm Oil Association (GAPKI) has written – and published –  a letter to TFA that opposes what they claim is a consensus position amongst stakeholders. The letter states:

“TFA recommends moving well beyond a legality standard and into a sustainability framework [and] dismisses voluntary and mandatory certification, which are arguably the best and ‘market ready’ tools”.

TFA has generally had significant support from Indonesian stakeholders, with a government representative sitting on the organisation’s steering committee.

So what explains this split?

It helps to look at the TFA’s funding and mandate. TFA is financed to the tune of USD11 million by the governments of Norway, the UK, Netherlands and Germany. There are clearly European interests – rather than exporter interests – at work.

For many of those countries, the combination of stopping deforestation at all costs, and protecting local European agricultural industries is key.

Similarly, a TFA seminar last month – which was supposed to focus on deforestation from all commodities – only mentioned palm oil in any detail. Why not beef? Why not soy? Both have much larger deforestation footprints than palm oil.

As has often been the case, palm oil has been far ahead of other commodities in terms of sustainability commitments and certification systems. Similarly, Indonesia’s agreement with the EU on timber legality is unique. But rather than acknowledging and parsing the gains into a new agreement, TFA appears to want to start all over again. This may wash for TFA’s EU funders, but it’s clearly not washing with the world’s producers.

Labour: Is Enough Being Done?

The palm oil and labour issue continues to rear its head with reports emerging in Malaysian media that FGV – the company subject to complaints to US Customs and Border Protection – has been in contact with the US regulatory body.

News reports state that CBP research has “identified 11 International Labour Organisation (ILO) indicators of forced labour in FGV’s practices.”

Initially FGV stated that it would appoint a third-party audit process to undertake an audit of its labour practices, but it appears to have walked this back and will instead appoint an ‘Independent Advisory Panel.’

However, in Malaysian parliament on December 14, Malaysian economy minister Mustapa Mohamed stated that an independent audit may be FGV’s only solution. He stated: “the CBP informed FGV that it would consider a petition for the WRO (Withhold Release Order) cancellation along with information or reports resulting from an audit by a reliable third-party audit firm, and not in favour of any party.”

This will make a third-party audit absolutely crucial.

As Palm Oil Monitor has stated before, engagement with US authorities – not just from companies but also at the diplomatic level – is absolutely vital for firms exporting to the US. This will be particularly acute as the Biden administration takes office.

… Because the Labour Issue Will Get Bigger

For US watchers, it’s worth observing that Samantha Power – activist, former US Ambassador to the UN and author – is being considered as the Biden appointment to USAID. Power was a key figure in the last days of the Obama administration.

But this matters to palm oil for two other key reasons.

First, Power is on the board of trustees for the Ford Foundation. Ford has been a key supporter of the Climate and Land Use Alliance, which has been arguably the largest supporter of anti-palm oil programs in Indonesia, including being one of the major donors for the Rainforest Action Network. Ford has been directing around USD3.5 million annually on palm oil programs.

Second, USAID has been the financial supporter of Liberty Shared’s programs on palm oil, which resulted in the NGO submitting a petition to US Customs and Border Protection on Sime Darby early in 2020, and was followed in September with a major critique of labour practices in Malaysia’s industry. This petition was followed by a major press story in Associated Press that brought the spotlight firmly on Malaysia.

This has placed the industry – particularly Malaysia – firmly on the backfoot.

The arrival of Power means one thing: greater scrutiny on labour in the plantation industry in Malaysia and Indonesia from the US at official levels.

As stated above, diplomatic engagement going forward will be absolutely vital.