Friday, May 31, 2013

A new era in Malaysia plantation CSR?

There was apparently a few seconds of "stunned silence" at Genting Plantation's recent earnings call. The group announced a RM35 million charity contribution to Yayasan Gemilang 1 Malaysia. This amount was almost half of its 1Q2013 core net profit; comprising a RM31 million contribution from its plantation arm and RM4 million from its property arm. Such a large donation is remarkable and noteworthy. The foundation is said to be involved in efforts to eradicate poverty and promote education, arts and sports.

There were few other details on the nature of the foundation that received such a large contribution. A google for "Yayasan Gemilang 1 Malaysia" finds no significant results (other than 3 news items related to Genting Plantation's announcement), not even a website (see image below). No doubt more information will emerge, especially if other Malaysian plantation groups or corporates in other sectors made similar substantive donations.



Our preliminary and unverified queries find that Yayasan Gemilang 1 Malaysia is not directly linked to 1MDB, the Malaysian sovereign wealth fund that has the "1 Malaysia" moniker. 1MDB also has its own foundation that does charity work. It would be interesting to know if the personages involved in Yayasan Gemilang 1 Malaysia are in any way related to those at 1MDB though?

"1 Malaysia" is part of a campaign coined by consultants and used by the Najib administration to promote racial togetherness in Malaysia. It has been used to brand a series of health clinics and shops linked to socio-economic programs of PM Najib. We are not sure if the Registrar of Societies or Registrar of Companies would permit just any body to register an entity using the "1 Malaysia" branding.



Friday, May 17, 2013

WWF vs Greenpeace?



WWF says that using CSPO (RSPO) is no longer good enough: "WWF has encouraged responsible producers to add their own criteria to those required by the RSPO, including immediate public reporting of GHG emissions, exclusion of peat soils for new oil palm developments, an end to the use of certain pesticides, and only buying fresh fruit bunches from known sources...." source: http://www.foodnavigator.com/Financial-Industry/Using-certified-sustainable-palm-oil-no-longer-good-enough-says-WWF

Khor Reports comment: 

While endorsing the RSPO's latest revised standard or its principles & criteria, the key founder of the RSPO ups the ante on growers to do more. WWF seems to find that the RSPO has not done enough. It asks for a category of "responsible producers" to step-up to a new "WWF RSPO plus" standard that offers immediate (instead of 2017) compliance with GHG emission public reporting (presumably with a carbon threshold or ceiling for new land development), ban on any peatland usage, tightening on pesticides use and excluding "unknown" sources for FFB. This is an interesting move by the pro-business environmental NGO giant. 

Earlier, we witnessed an amazing and atypical "yes" vote by palm oil growers in support of future tightening measures. They were especially concerned about the GHG emission reporting (and implied carbon threshold / ceiling). The grower's yes vote was quite at odds with industry concerns and even with the MPOA reportedly mulling a pullout from RSPO sometime later this year. Perhaps we need more time to understand the industry's tactics; and see how the grower's trade negotiation grand strategy plays out.  

It is likely that the usually business-friendly WWF feels pressured to do more; given sourcing facilitator The Forest Trust (TFT) and Greenpeace's successful move with Golden Agri / Sinar Mas to implement a 35 tonnes carbon per hectare new land development ceiling. This is quite expansion-unfriendly, as the carbon threshold or ceiling will stop the palm oil giant from even clearing "mature scrub land." Yes, we are well beyond talking about primary or even secondary forests; the new issue is about allowing degraded scrub land to grow back into degraded forest and then secondary forest etc. Palm oil growers might want to consider setting up reforestation or reafforestation units.

Based on some studies in Kalimantan, this could result in reducing usable area for a nucleus plantation down to 40% (excluding 20% for plasma smallholders) from a previous 60-65% usability i.e. a 20%-age point drop in plantable area? We have been long of the view that the Nestle-TFT-GAR/Sinar Mas deal would set a serious precedent. The appearance of Greenpeace in the GAR/Sinar Mas degraded land concession study was an eye-opener. 

Now, it seems that the big international pressure groups are duking it out over who is in the driver's seat, for setting sustainability standards for the global palm oil industry.
 
While RSPO growers will no doubt be scrambling to iron out the crucial definitions (e.g. "low carbon stock area") to be used in the new national interpretation of the 2013 RSPO P&Cs, they will have to mull over WWF's call for more. Look out for global buyers endorsing the pressure group's call for the new "WWF RSPO plus" standard that is significantly shy of a carbon threshold/ceiling? Or might some join Nestle to push even further for the low carbon ceiling of the "TFT-Greenpeace RSPO plus" version?

Let's step back a bit. We looked up the issue in the academic sector and this contestation and scramble over sustainability standards may be termed "global environmental politics." This is nothing less than an international trade negotiation that is centred on a commodity. In putting together free trade agreements, we see trade bureaucrats from different countries engaging in complex and detailed negotiations. In this case, we have representatives from international pressure groups and representatives from some plantation companies as trade negotiators.

Tuesday, May 7, 2013

Khor Reports' Palm Oil #2 newsletter: Carbon thresholds, biodiesel & more

KHOR REPORTS' PALM OIL MAY/JUN 2013, ISSUE 2: The Carbon Conundrum: Carbon thresholds on deforestation & peat? Palm producers push for biodiesel mandates. Natural: Red palm oil and the organic frontier. Fat standards & fat targets.Chocolate campaigns & Norway’s realignment.

View our newsletter here: http://tinyurl.com/cyyc3ek

Contents:
Indonesia's 100,000 ha ceiling? 
East Malaysia factors. 
Frontiers grow organic.
EU transfat and Australia SAFA cuts target. 

Natural claims for red palm oil.
US & UK choc campaigns.
Norway repositions. 

Ferrero fights back.
The carbon conundrum: deforestation & peat, Indonesia’s
moratorium and detecting deforestation.
Malaysia producers push for biodiesel.
Key vegetable oils. 

Weather outlook. 
CPO technical view. 
Price charts.