RSPO Smallholder Standard: Consultation Closing
RSPO’s third round of consultations for its smallholder standard is about to close – on June 8. The consultation represents the end of another stage of what has been a particularly long road in the implementation of its smallholder strategy.
Since its inception, RSPO had a difficult relationship with smallholders. This is not unique; it reflects two tensions present in implementing any environmental standard. Smallholders generally operate with lower standards and have the slimmest margins; higher standards cost money and erode margins if there is no price premium. The other tension is between increasing breadth of uptake to include smallholders without sacrificing stringency or integrity.
In 2005, RSPO introduced the Taskforce on Smallholders (TFS), which later evolved into TFS 2 and the Working Group on Smallholder Finance in 2010. The latter had limited success in having smallholders adopt RSPO standards.
The most recent strategic iteration — the Smallholder Strategy – was introduced in 2015. This was a broader recognition that an ad hoc approach to smallholders simply wasn’t working.
So, why did it take nearly 10 years for RSPO to get it together on smallholders, and why the push for completion now?
In our view there are three reasons.
First is that demand growth for RSPO is flattening as demand for vegetable oils in Europe flattens. The standard was completed at what is best described as a complex time for RSPO. The introduction of the ‘no deforestation’ requirements in the standard means there is greater scrutiny on the standard and a bar to new entrants. Supply growth has to come from somewhere, and the only way for RSPO to increase its revenue base is to increase certified volumes.
Second, and this is related to the above, some mills in Indonesia in particular are looking to certify more of their supply chain – including smallholders. As has been pointed out many times before, Western procurement standards have a habit of excluding smallholders from supply chains. This was particularly the case for Unilever in Indonesia.
Third, Malaysia has introduced a mandatory MSPO standard for smallholders, for which the government is providing financial support for certification and audits. Similarly, ISPO, although not as well resourced, provides Indonesian smallholders an alternative with a lower level of compliance. Purchasers in European markets may view a smallholder with MSPO certification as meeting sustainability procurement requirements. It would be difficult to argue with from a broader sustainability perspective.
Pressure has grown for RSPO to take a more inclusive approach to smallholders from all sectors. But it has been these most recent commercial pushes – particularly the prospect of being crowded out by other standards – that appear to have given it the final shove.
The completion of the smallholder standard is well overdue, but very welcome. It will provide a certification pathway for farmers supplying major mills selling into Europe in particular.
This is, however, provided that the standard does not get shot down by overzealous NGOs within the RSPO membership. At last year’s Roundtable there were numerous objections to any loosening of standards for smallholders. But here’s the problem: if it’s not accessible, it won’t get used. This is something for those contributing to the consultation to keep in mind.
FAO: Oilseeds Outlook 2020
The United Nations Food and Agriculture Organization (UN FAO) has issued its oilseeds outlook for the next financial year, and there are some highlights for palm growers.
But the front-and-centre question for many growers is whether the US-China trade spat will provide any relief from low prices.
When the US and China engaged in their first round of tit-for-tat tariffs, there were some analysts that argued palm could gain – if soybean demand fell in China for crushing, palm oil could take up the slack.
This didn’t eventuate. The lack of demand for soybean in China brought down vegetable oil prices across the board as inventories were depleted.
There is some concern this will happen again. The current round of tariffs hasn’t done a lot for prices – though there have been some gains over the past week – but the FAO paints an interesting picture for oils, particularly palm. Here’s their take:
Stimulated by low international prices, global oils/fats consumption is forecast to expand by about 4–4.5 percent year-on-year. Growth is expected to be driven by palm oil and, to a lesser extent, soybean oil, resulting in palm oil further increasing its share in total oils/fats uptake.
Meanwhile, rapeseed oil consumption could fall on the back of reduced availabilities. As a group, developing nations in Asia would continue to drive the expansion in global oils/fats uptake. While consumption growth could decelerate in China, mirroring slower economic growth, stable growth is envisaged in India. At the same time, a marked acceleration in uptake is expected in Indonesia, which could account for one-third of global consumption growth. Sizeable gains are also anticipated in Brazil and the United States of America, whereas consumption may contract in the EU.
In other words, the production-utilisation gap for oils and fats appears to be narrowing right now. This is a good sign for farmers.
Beef is getting the palm treatment, but there’s a catch
European NGOs have launched a campaign against EU supermarket chains for using beef from Brazil’s JBS, the world’s largest beef producer. According to ‘Illegal Deforestation Monitor’:
Sainsbury’s, Asda, Lidl and Carrefour are among the international brands potentially fuelling illegal deforestation in Brazil’s cattle industry as they continue to stock corned beef from a firm implicated in numerous environmental and human rights abuses.
This will all sound very familiar to those in the palm oil industry. And to some, not a moment too soon. The industry has gone to great lengths to point out that the deforestation footprint of livestock is around 10 times that of palm oil.
But there’s a catch. Campaigners appear to be using the JBS story to push greater levels of regulation on imports of forest risk commodities across the board.
A long history of examples such as this one has led campaigners and parliamentarians across Europe to conclude that the only way to prevent EU consumers from unwittingly contributing to overseas deforestation – including illegal deforestation – is through government regulation. An EU law already exists which requires importers of timber to ensure their wood is legally sourced, and there are growing calls for similar legislation to be enacted for other ‘forest risk commodities’ like beef.
So, although this would be an opportune moment for the palm oil industry to pile on to an anti-beef campaign, the goal here is more regulation for beef, soy, palm – and anything else that gets imported to the European Union. And for those who are keeping track, this campaign has been supported by the UK’s aid agency.
Demarty: WTO reform necessary to prevent ‘law of jungle’
Jean-Luc Demarty, Director General of the European Commission’s Trade Directorate, has told reporters that a WTO reform should be a priority for the next European Parliament and Commission:
The major issue in trade policy for the next Commission just at the beginning of its mandate, and also for the new European Parliament, is not necessarily swiftly developing new agreements … but preserving the WTO system and reforming it … If we are not able to do it, the stakes will be enormous … The status quo is not sustainable … If there is no reform to the WTO system, in particular on the rulebook and subsidies, the WTO system will be no longer relevant … It would become the law of the jungle.
To anyone outside of Brussels, this might seem strange. The EU is often more than happy to push and flaunt WTO rules to their absolute limit. The RED is a perfect example. But for the EU, the WTO is a bureaucratic and legalistic system that provides adjudication when it pushes the limits: it is the bloc’s shield in trade matters.
If that shield falls apart – and it is currently being threatened by the China-US trade spat and potential bilateral resolution – then the EU may find itself subject to any number of unadjudicated retaliatory actions, which will be particularly damaging for an economy like Germany.
Adding to this, the nature of the EU agreements means that trade policy is handled out of Brussels; this generally means that trade actions must be negotiated among the EU members before action can be taken. This makes nimble and agile action – similar to US unilateralism – particularly difficult.
If the EU wants to get greater buy-in from the ASEAN region, it should probably consider being a more reliable trading partner.
EU recyclables are now Malaysia’s problem
POM does not often heap praise upon Greenpeace, but the NGO’s most recent advocacy efforts have highlighted the glaring hypocrisy in the EU’s management of environmental waste.
Since China introduced a ban on the importation of recyclable waste last year, there has been a flood of exports of post-consumer recyclables from the EU to Southeast Asian countries, such as Malaysia, Thailand and Vietnam. Some countries have introduced stricter import licensing measures, though their effectiveness is yet to be seen.
The resultant problem – unmanaged piles of European rubbish in semi-urban areas – is a health and environmental problem.
It also underlines that much of European sustainability policy can be considered virtue signalling with no positive outcome. Very few Westerners know – or care — that recyclables are simply exported. Or that banning palm oil has a negative impact on Indonesian and Malaysian farmers …
There are a couple of signals here.
First, Europeans don’t want to pay. European companies and consumers have little appetite for a premium on CSPO. They also don’t want to pay to manage their own recycling and waste problems.
Second, Europeans think environmental problems don’t need managing in Southeast Asia if they create them. Deforestation for food production and exports is a big problem for Europeans, apparently. But burning piles of exported European recyclables near major urban areas in Kuala Lumpur, Hanoï and Bangkok? Not Europe’s problem.