WWF Lobbies DEFRA, Undermines Indonesia

WWF appears to have gone out of its way to discredit Indonesia Sustainable Palm Oil (ISPO) certification in a new report. The report – ‘Due Negligence’ – is an attempt to lobby and influence UK DEFRA into making its forest due diligence standard based on arbitrary sustainability criteria rather than legality principles.

The report argues that a due diligence system introduced by the UK should include additional requirements on all ecosystems (not only forests), as well as human rights requirements, moving well beyond legality requirements – but without paying any adherence to sustainable development goals.  

The report is – like many NGO reports – a worst-case scenario imagining of what might happen, i.e. if the UK doesn’t implement these measures, then there will be dire consequences. This is a big stretch and deliberately overplays the significance of the UK in global vegetable oil markets, compared with behemoths in the US, China, India and the EU.  

On ISPO, the report argues that:

“Although ISPO certification can provide an indication of whether legality has been met, it does not give any indication of whether this was given to a management unit that had been or is currently deforesting or that has adopted a zero deforestation commitment in its supply chain.”

While this is indeed the case, the ISPO standard is not an instrument for making corporate commitments. This is particularly the case for Indonesia’s 2.6 million smallholder farmers that now will be required to adopt ISPO certification during a five-year phase-in period.

The report also correctly states that purchasing companies could potentially move away from deforestation areas that are high risk, but that:

“moving away from high deforestation risk areas would mean removing a market for smallholder producers for whom it is a critical livelihood – approximately 40% of Indonesia’s palm oil is produced by smallholders.” 

WWF appears to have either wilfully or negligently ignored the fact that ISPO will in time apply to these smallholders, and that ISPO certification is arguably the best chance for Indonesian smallholders to participate in global value chains and international markets. That WWF either isn’t aware of this, or that it has chosen to omit it, speaks volumes to WWF’s ignorance of the importance of ISPO to Indonesia’s sustainability ambitions, as well as its approach to both Indonesia’s smallholders and to Indonesian agriculture more broadly.

When WWF last lobbied on due diligence in Europe it also appeared to be turning its back on RSPO, a standard that it had a key role in developing. Similarly in this report it is disparaging of RSPO in its current state. Here’s what we don’t understand: if WWF thinks RSPO is utterly inadequate as a due diligence tool, why has it spent nearly two decades backing it?

One thing the report gets correct – but downplays – is that the footprint of palm oil is significantly lower than most of the other commodities it refers to, such as beef, soy, timber. For example, palm has a footprint roughly 12 per cent of that of timber, 20 per cent of pulp and paper, 25 per cent beef and leather, around 60 per cent in relation to soy, and around the same as cocoa.

But we’ve also noticed that some other commodities are missing, such as coffee, which has a similar land use footprint to cocoa, and of which the UK is a large importer. Perhaps it’s time the UK woke up.

EU JRC: Will EU environmental measures boost palm oil?

The European Union’s Farm to Fork strategy is likely to place additional cost burdens on EU agriculture and increase demand for imported commodities, according to the EU’s Joint Research Centre (JRC).

Among these is oilseeds, which would be expected to see a more than 10 per cent drop in output. The JRC report states:

“EU oilseed imports would increase significantly, driven by a substitution of domestically produced oilseeds with imported ones. As EU oilseed production decreases more rapidly than demand due to the direct impact of targets, imported oilseed get a higher share in the market balance.”

The modelling used by the JRC would indicate that most of the imported oilseeds come from Canada, the US and elsewhere. However, this is generally only in relation to demand for seeds and oilcakes themselves, as opposed to demand for vegetable oil – which isn’t part of the modelling exercise.

There’s a reason for this, and it’s because the only reason rapeseed has become popular in the EU as a vegetable oil at all is because of its existence as a fodder (i.e. non-food) crop. It is a less suitable choice for food use when compared with palm, olive or sunflower oils.

It stands to reason, then, that demand for imported vegetable oils would also rise significantly, as EU oilseed crop output falls.

What does this mean for palm oil?

This is potentially a windfall for palm oil exports to Europe. As we’ve pointed out before, the smaller environmentally-oriented constraints placed on European farmers have occasionally played havoc with yields and output.

But it is also a double-edged sword. Brussels tends not to wind back regulations once they have been put in place. A current example is the Carbon Border Adjustment Mechanism (CBAM), which is a proposed carbon tariff on imports of products (such as steel and cement). This has been introduced to offset the higher prices European manufacturers have to pay because of the EU’s Emissions Trading System (ETS).

So, rather than improve competitiveness or reduce costs of EU farmers, it’s more likely that Brussels will attempt to hobble the competition. This is not unlike the EU ban on palm oil under the Renewable Energy Directive. The RED was originally supposed to provide a price support and advantage for European farmers, but once this support was also used for more competitive imports, the European response was to hobble those imports.

This is the pattern of Brussels: rather than unwind a bad policy, it is more likely to double down.

European Reforestation: Another case for SEA agriculture

Staying on Europe, a new study from researchers at the Swiss Federal Institute of Technology has indicated that around 14.4 per cent of European territory is suitable for reforestation. This is significantly larger than the 0.7 per cent target being pushed by the EU’s own reforestation strategy.

The EU’s current forest cover is around 37 per cent of its total land area, compared with just over 50 per cent for Indonesia, almost 60 per cent for Malaysia and around 64 per cent for Brazil. Indonesia also has relatively high areas of forest per capita compared with some EU countries, at around 4km2 per person, compared with around 1.5km2 in Germany.

Is such a high reforestation number feasible for the EU?

According to researchers the numbers were safeguarded for required area for food and fibre. But around 39 per cent of the EU’s land area is used for farming, more than its forest cover. Around 4 per cent of this area is used for wine production – hardly something that is essential for food security.

What’s also noticeable is that agricultural productivity growth – measured on a total factor productivity basis – in Indonesia has been increasing at a rate on par with countries like Germany and France, and well ahead of countries like Italy and Spain. Similarly, productivity growth for Asia has outstripped that in Europe. Further, Indonesia’s status as an emerging economy means that its productivity gains will increase significantly while those in Europe are likely to level out or, in the case of Italy, possibly fall as they struggle with labour shortages.

Neither the JRC report nor the EU’s productivity trends bode well for European agriculture. But blocking cheaper better imports is not a sensible path forward.