Palm traceability sector (update 3a): GAR/Sinar Mas back in NGO focus, TFT suspends Golden Agri takes (and hours later a new chief sustainability officer is appointed for the plantation giant - Agus Purnomo)

21 May 2015: TFT suspends Golden Agri takes (and hours later a new chief sustainability officer is appointed for the plantation giant - Agus Purnomo)
 
Key issues and questions arising from Golden Agri / PT Smart's present situation:

• Despite innovative industry attempts to promote traceability as a more inclusive solution (versus RSPO which struggles to include small producers and independent smallholders) while heightening key pledges such as "no deforestation, no peat and no exploitation," recent events raise the question of whether producers can live up to promises ("hastily made" according to many key industry players). 
• Is palm oil entering a renewed phase of boycott risks? At the SIIA Singapore Dialogue, several IPOP members sat on a panel where Wilmar made a public pledge that it would (if told by other IPOP members) stop buying from any "errant suppliers" who were unable to make the necessary upgrade moves (and if it found such, it would stop buying; tell its fellows and request they would do likewise). Other panelists suggested more focus on constructively working with suppliers for improvement rather than boycott. If agreed, the IPOP "supplier boycott" proposal should give some teeth to the group. But it seems that IPOP members are not clear of the boycott risk themselves; with Golden Agri, a lead member itself now facing RSPO censure and TFT suspension.
• Many industry players regard the shift to TFT B2B traceability as part of a processor-trader led move to find a more business-ready solution (that now seeks to shift the centre of gravity to refinery "supply sheds"; away from the RSPO mill and supply base P&C and RSPO's relatively costly physical supply chain SCCS outlook). The palm oil supply chain has since the mid 2000s been spending time and effort via NGO service providers, auditors and their newly established sustainability teams.
• Industry watchers have been concerned about how widely known implementation gaps among the top highly rated traceable plantation groups will be treated by the broader NGO sector. Clearly, business life is hardly straight forward and the current issues suggest that there is no place for over-confidence and complacency while using new solutions. It seems we are entering a "third wave" where social issues and implementation will be primary - but have the big plantation groups put in enough resourcing to upgrade their implementation efforts to their pledges?  

Some background on IPOP group here: Tuesday, October 7, 2014 Indonesia Palm Oil Pledge (IPOP) http://khorreports-palmoil.blogspot.com/2014/10/indonesia-palm-oil-pledge.html. At the SIIA dialogue we had a useful chat with a Catapult Campaigns staffers who confirmed their key role in the New York Declaration and IPOP. On the risk of large dominant players establishing boycotts on smaller suppliers (raising question on economic interest suppression), there was no answer. A key consideration is on campaign advocacy efficiency and impact.

News link:

Golden Agri takes another hit as sustainability guru suspends its membership by Philip Jacobson May 20, 2015; The charity that Indonesia's Golden Agri-Resources has enlisted to devise and implement its zero-deforestation and community-engagement commitments suspended its cooperation with the palm oil giant yesterday, following "several breaches" of the policies they had designed together, according to The Forest Trust (TFT), which helps companies run responsible supply chains. A few hours after TFT announced the suspension, Singapore-listed Golden Agri said in a statement that its chief sustainability officer, Peter Heng, had resigned "to pursue new career opportunities." His replacement is Agus Purnomo, who has headed one of Golden Agri's Indonesian subsidiaries, Sinar Mas Agro Resources and Technology (Smart). Smart's own subsidiary, Kartika Prima Cipta, became the subject of a formal complaint against its operations last year after Golden Agri filed to expand its plantations in 18 of its subsidiaries including Kartika Prima, despite evidence that Kartika Prima had taken community land without residents' informed consent, failed to properly conduct a high-conservation value (HCV) assessment and more. The grievance was lodged by the Forest Peoples Programme (FPP), a UK-based NGO, with the Roundtable on Sustainable Palm Oil (RSPO), the industry's largest voluntary certification scheme. Though TFT was vague in its announcement, the suspension is almost certainly a response to what is apparently seen as Golden Agri and Smart's lackluster handling of the RSPO complaint, which takes on additional importance because Kartika Prima is piloting Golden Agri's sustainability commitments. The RSPO upheld the complaint in March and earlier this month prohibited Golden Agri from "acquiring or developing any new areas" pending its resolution.... Read more: http://news.mongabay.com/2015/0520-jacobson-tft-suspends-golden-agri.html#ixzz3aj9U4zFv


16 May 2015: It's not plain sailing for plantations who've gone in with the "second wave" of heightened "three nos" on peat, deforestation and exploitation

It's not plain sailing for plantations who've gone in with the "second wave" of heightened "three nos" on peat, deforestation and exploitation. Sector risk is of a "third wave" of rather tough to resolve social issues, which may be heightened due to the HCS / high carbon stock regimes coming into play.

The Roundtable on Sustainable Palm Oil (RSPO) has prohibited Golden Agri-Resources (GAR), one of its most prominent members, from "acquiring or developing any new areas" pending the resolution of a formal complaint against the palm oil giant in Indonesia's West Kalimantan province.  The decision by the RSPO, the world's largest voluntary certification scheme for palm oil, is a stern directive from an organization that has been criticized for failing to take action against companies that flout its standards....  Read more: http://news.mongabay.com/2015/0508-jacobson-rspo-complaint-gar-fpp.html#ixzz3a19AYBFj<<a%20href=>">http://news.mongabay.com/2015/0508-jacobson-rspo-complaint-gar-fpp.html#ixzz3a19AYBFj

16 Jan 2014:

Khor Reports comment: Plantation partnership deals with some NGOs does not preclude good implementation and monitoring by other NGOs. GAR/Sinar Mas had faced boycotts and enlisted TFT-Greenpeace to help (Wilmar is now also signed up on TFT-Greenpeace HCS Approach and other principles). Now, plantation planners should prepare for larger set-aside areas for their new plantings.

The latest news on GAR from a study by Forest Peoples Program / FPP (see news links) highlights some problems of high carbon stock (HCS)/social implementations of the new policies of TFT-Greenpeace for GAR. GAR said, “We thank FPP for their additional findings which have assisted our own full field audit of PT KPC, conducted in partnership with The Forest Trust.” Separately, APRIL and RGE are under pressure from Greenpeace.
News: http://www.eco-business.com/news/golden-agri-april-under-fresh-scrutiny-unsustainable-practices/ 

ESG / socially responsible investing (update 1a): RGE/APRIL and Roger Federer-Credit Suisse, Singapore Urges SEA Lenders to Better Screen Palm Oil Investment, Conservation International and Hollywood stars

Environmental and social governance or socially responsible investing is becoming an increasingly important topic as NGO advocacy campaigning on this steps up. We attended a recent talk in Singapore. Not surprisingly as the financial center for Southeast Asia, it was a core topic.

Read here: Singapore Dialogue (update 1a): SIIA / Simon Tay dialogue in Singapore centered on palm oil sustainability, Indonesia extends moratorium, ASEAN banks under WWF spotlight http://khorreports-palmoil.blogspot.com/2015/05/attended-siia-simon-tay-dialogue-in.html

Key recent reports include:

• WWF: ASEAN regional banks and investors behind on Environmental, Social and Governance standards Posted on 13 May 2015; Singapore – A WWF report finds an alarming gap between regional ASEAN financial institutions and the environmental, social and governance (ESG) standards adopted by their international counterparts. 
• TUK-Profundo report on top 25 tycoon-owned Indonesia palm oil groups and their financiers.

 ..............

20 May 2015: Singapore Urges SEA Lenders to Better Screen Palm Oil Investment; Roger Federer-Credit Suisse answer on RGE/APRIL funding query and it's also important to note that USA NGOs have become more active in the soft commodity sector of Southeast Asia with notable Conservation International campaign with Hollywood stars as spokespersons.

Singapore Urges SEA Lenders to Better Screen Palm Oil Investment By Erwida Maulia on 09:07 pm May 17, 2015; Singapore. The Singaporean government has called on financial institutions operating in Southeast Asia to exercise caution in funneling funds to palm oil producers, saying scrutiny on the sector continues to intensify with recurring problems in transboundary haze. Banks have acted as an important source of capital for the region’s palm oil industry, Singapore’s Minister for the Environment and Water Resources Vivian Balakrishnan said last week. Citing a 2010 report by BankTrack, he said lenders provided an estimated 24 percent of the total financing needed for the sector globally, with more than $50 billion invested in the Malaysian and Indonesian palm oil sectors alone during the decade prior to the release of the study. “The number has grown significantly since then. And this includes local sources of capital from within Indonesia and Malaysia,” Balakrishnan said in a keynote speech during the second annual Singapore Dialogue on Sustainable World Resources held last Wednesday. With the recurring issue of transboundary haze, he added, calls have intensified for companies and individuals “all the way down” the supply chain to be held accountable for deforestation — the main culprit behind recurring forest fires in Indonesia and haze affecting neighbors Singapore and Malaysia. “Due to the environmental scrutiny and the campaigns by environmental NGOs, banks have now also become part of the watch list,” the minister said. “And my plea to you, therefore, is please pay attention to this and remember the questions will be asked not only of the companies involved, but also of the financiers and the banks behind the industry.” Balakrishnan added that lenders and other financial institutions are now expected to be more responsible in conducting background checks on palm oil companies. It is not enough to merely see whether their clients would be able to pay their loans and interest rates, he said. How the companies derive their resources, their methods of production, the environmental, social and even political risks they face all must be assessed before banks decide whether they should invest in the business. “These [steps] have to become part and parcel of standard due diligence,” Balakrishnan said.......
http://thejakartaglobe.beritasatu.com/news/singapore-urges-sea-lenders-implement-eco-friendly-policies/

Roger Federer encourages rainforest campaigners 19.05.2015; Tennis star asks Credit Suisse to review the bank’s business relationship with Indonesian pulp and paper group RGE/APRIL (BASEL, SWITZERLAND / PULAU PADANG, RIAU, INDONESIA) Tennis star Roger Federer is calling on Credit Suisse, the Swiss bank, to review their business relationship with RGE/APRIL, an Indonesian pulp and paper group that is responsible for the wide-spread clearcutting of rainforests in the Indonesian province of Riau (Sumatra). Federer was approached last month by Isnadi Esman and Woro Supartinah, two Indonesian activists who had travelled to Switzerland to protest against a 50 million Euro loan granted by Credit Suisse to RGE/APRIL.  “I have learnt about your letter to me, outlining the difficult rainforest situation in Riau”, Federer writes to the Indonesian campaigners. “I take your concerns seriously. In response to your letter and as ambassador for Credit Suisse, I would like to emphasize that I will advocate for and have complete trust that they analyse such issues thoroughly, evaluate all options and that their decisions are well thought out.” The tennis star continues: “Additionally, I encourage you to continue the ongoing dialogue with Credit Suisse in order to minimize any sustainability issues and increase the common understanding.” On 24 April 2015, Isnadi and Woro informed Credit Suisse’s top management on RGE/APRIL’s conduct in Riau at the bank’s annual general meeting in Zurich. The bank’s Chief Risk Officer, Joachim Oechslin, promised to personally vet every potential future transaction with the Indonesian group. RGE/APRIL has been accused of illegal logging, peatland clearing and numerous human rights violations in their operations in Riau. Credit Suisse, together with a number of Chinese banks, are the Indonesian group’s main financial backers.

 http://www.bmf.ch/en/news/roger-federer-encourages-rainforest-campaigners

Conservation International. US NGO with Hollywood stars. Published on 5 Oct 2014: Julia Roberts, Harrison Ford, Kevin Spacey, Edward Norton, Penélope Cruz, Robert Redford and Ian Somerhalder all join forces to give nature a voice. Watch the films and take action at http://natureisspeaking.org Youtube vids here: https://www.youtube.com/results?search_query=conservation+international

• Nature Is Speaking – Edward Norton is The Soil | Conservation International (CI) by ConservationDotOrg 317,373 views 1:26
• Nature Is Speaking – Penélope Cruz is Water | Conservation International (CI)   by ConservationDotOrg  208,102 views 1:29 
• Nature Is Speaking – Kevin Spacey is The Rainforest | Conservation International (CI)   by ConservationDotOrg  405,505 views 1:46 
• Nature Is Speaking – Harrison Ford is The Ocean | Conservation International (CI)   by ConservationDotOrg  550,312 views 2:04 
• Nature Is Speaking – Lupita Nyong'o is Flower | Conservation International (CI)   by ConservationDotOrg  439,588 views 1:36 
• Nature Is Speaking – Robert Redford is The Redwood | Conservation International (CI)   by ConservationDotOrg  145,790 views
• Nature Is Speaking – Ian Somerhalder is Coral Reef | Conservation International (CI)   by ConservationDotOrg  285,954 views 1:37 
• Nature Is Speaking – Julia Roberts is Mother Nature | Conservation International (CI)   by ConservationDotOrg  1,380,592 views 1:59 
• Nature Is Speaking: Tang Wei is Flower - 大自然在說話:湯唯聲演「花」| 保護國際基金會 (CI)   by ConservationDotOrg  5,727 views

HCS vs HCS vs HCS?: Greenpeace led HCS Approach toolkit approved; Greenpeace promotes its HCS Approach as a "tested and leading methodology"

The HCS approach is getting rather contested and confusing as companies straddle different areas.  One is led by Greenpeace is the HCS Approach (apparently done largely by the NGO via pilot study with Golden Agri Resouces and possibly with a handful of other corporate sector players). Another (still ongoing) is via the Sustainable Palm Oil Manifesto Group (SPOM) led by academics and think tankers. At the RSPO, the equivalent is the GHG emission reductions policy in its New Plantings Procedure (we're not sure who vetted the parameters in its calculator).


19 April 2015: Greenpeace led HCS Approach toolkit approved in April

Palm oil companies, NGOs endorse new deforestation-limiting toolkit by  Morgan Erickson-Davis April 06, 2015; Forests not only house many of the world's species, but also much of its carbon. Now, a toolkit has been developed by a group of companies and organizations with the aim of helping other companies and NGOs identify High Carbon Stock (HCS) forests. The toolkit was endorsed last week by major NGOs and plantation companies in Singapore.... http://news.mongabay.com/2015/0406-mrn-morgan-new-toolkit-tells-companies-where-they-should-not-clear.html#ixzz3XiaxE0ls
HCS Approach toolkit here: http://highcarbonstock.org/the-hcs-approach-toolkit/

12 December 2014: Greenpeace promotes HCS Approach as a "tested and leading methodology"

Jokowi's Call for Ecological Reform Reaches Palm Oil Firms; Jakarta Globe  - ‎Dec 9, 2014‎;  "Following last week's strong pro-peatlands and forests commitment by newly inaugurated President Joko Widodo, two of the world's largest palm oil producers and traders have announced policies to address the criticism of deforestation in their supply ...The High Carbon Stock Approach, (Greenpeace) the global environmental group argues, is a tested tool that identifies degraded areas suitable for plantation development and forest areas that merit protection to maintain and enhance carbon, biodiversity and social values.... It is being overseen and further refined by the multi-stakeholder High Carbon Stock Approach Steering Group, which involves international non-governmental organizations including Greenpeace as well as palm oil producers Cargill, Agropalma, Wilmar, New Britain Palm Oil, Daabon and Golden Agri Resources, and one of the world’s largest pulp and paper companies Asia Pulp & Paper (APP)...... Both Musim Mas and KLK are part of the Malaysia-based Sustainable Palm Oil Manifesto (SPOM), an industry initiative that has commissioned further carbon study. In their new policies, the companies say they will adopt the outcomes of that study after 2015...."; http://thejakartaglobe.beritasatu.com/news/jokowis-call-for-eco-reform-reaches-palm-oil-firms/

Palm sustainability news

Fibre production drives deforestation in Indonesia - Study debunks belief that palm-oil plantations are main culprit by Natasha Gilbert, 21 July 2014; http://www.nature.com/news/fibre-production-drives-deforestation-in-indonesia-1.15589#%2Fb1; "....Palm-oil plantations are generally though to be the main driver of deforestation in Indonesia, which is home to the world’s third-largest tropical forest and has the highest rate of forest loss. But fibre plantations — where species such as Acacia mangium are grown for use in pulp and paper production — now seem to be the main culprit.
Of the 14.7 million hectares of forest destroyed between 2000 and 2010, 12.8% was removed for fibre plantations, 12.5% for logging and 6.8% for palm-oil plantations; the remainder was removed for mixed concessions and mining1. All told, 45% of forest loss during the period occurred on land leased to industry. “Palm-oil agriculture has borne the brunt of the blame for causing deforestation in Indonesia,” says Lian Pin Koh, a conservation ecologist at the University of Adelaide...."

The world’s largest palm oil players commit to funding High Carbon Stock Study, Kuala Lumpur, 30 July 2014 - "The world’s largest palm oil players are jointly funding a comprehensive 12-month study that will:

• clearly define what constitutes a High Carbon Stock (HCS) forest;
• provide practical guidance on how to delineate HCS forests on the ground; and
• establish thresholds for HCS that take account of regional socio-economic conditions and opportunities.

Malaysian companies IOI Corporation Berhad, Kuala Lumpur Kepong Berhad and Sime Darby Plantation, Indonesia’s Asian Agri and Musim Mas Group, and global agribusiness groups Cargill and Wilmar International, are funding the study and have committed to adopt the study’s findings in all their operations and supply chains..... The HCS study is a key component of the Sustainable Palm Oil Manifesto, which was signed by oil palm growers Sime Darby Plantation, IOI Corporation Berhad, Kuala Lumpur Kepong Berhad, Musim Mas Group, and Asian Agri, as well as global palm oil trader Apical and global agribusiness group Cargill. The Manifesto includes a commitment to no deforestation, creating traceable and transparent supply chains, and protecting peat areas, while ensuring economic and social benefits for the local people and communities where oil palm is grown.... To oversee this Study, a Steering Committee has been set up, independently co-chaired by Sir Jonathon Porritt, and Chief Research Scientist from Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO), Dr John Raison......"

Some critique of the Manifesto group here by RAN:

http://www.ran.org/new_palm_oil_talk_and_log_initiative_a_step_backward_for_responsible_supply_chains

Palm oil productions threatens African apes by Maanvi Singh · NPR ·  Jul 11, 2014; http://www.mprnews.org/story/2014/07/12/palm-oil-productions-threatens-african-apes; ".....Now it seems palm oil production in Africa is picking up, too. And the new farms there are threatening great ape populations in West and Central Africa, according to a study published Thursday in the journal Current Biology.... "Africa seems to be the new frontier," says Serge Wich, a primate biologist at Liverpool John Moores University and the lead author of the report. Sixty percent of African oil palm concessions — or land that's been set aside for the development of oil plantations — overlaps with the ape habitats...."

Will other Asian consumer giants follow as Kao goes forest-friendly? GreenpeaceGreenpeace challenges Asian consumer companies such as India’s Godrej and ITC and China’s Liby and Nice to make similar commitments as the Japanese beauty products maker commits to forest-friendly policy; http://www.eco-business.com/news/will-other-asian-consumer-giants-follow-kao-goes-forest-friendly/

Sustainability news links - Nespresso sustainability, BBC complaint, Greenpeace losses

University of Michigan MBA students win competition to inject sustainability into coffee production - video; "The 2014 Nespresso Sustainability MBA challenge, which aims to find new ways to inject sustainability and shared value into the coffee industry, saw 70 MBA schools worldwide take part. Students from Yale School of Management were one of two runners-up, recognised for their strategy to combine the goals for carbon reduction of both Nespresso and coffee producing country Costa Rica." http://www.theguardian.com/sustainable-business/video/university-michigan-mba-nespresso-sustainability-challenge-2014-coffee-video

Common sense prevails as BBC upholds Today programme climate complaint. BBC's Editorial Complaints Unit concludes interview with Lord Lawson and Professor Sir Brian Hoskins on climate change and floods broke guidelines on due accuracy; http://www.theguardian.com/environment/blog/2014/jun/26/commonsense-prevails-as-bbc-upholds-today-programme-climate-complaint; " Lawson made inaccurate and misleading statements about the science of climate change as he had done so in previous appearances on its programmes.
Furthermore, he was no doubt invited to participate in the interview on Today because he rejects the scientific evidence and chairs a campaign group for climate change ‘sceptics’, the Global Warming Policy Foundation...."

Greenpeace losses: leaked documents reveal extent of financial disarray; Emails and meeting notes show group’s finance department has a long history of problems in its handling of the £58m budget,
The Guardian, Monday 23 June 2014 10.09 BST; "The handling of Greenpeace International’s £58m budget has been in disarray for years, with its financial team beset by personnel problems and a lack of rigorous processes, leading to errors, substandard work and a souring of relationships between its Amsterdam headquarters and offices around the world, documents leaked to the Guardian show.
Coming after it emerged that a staffer had lost £3m on the foreign exchange market by betting mistakenly on a weak euro, the documents show that the group’s financial department has faced a series of problems, and that its board is troubled by the lack of controls and lapses that allowed one person to lose so much money.... Greenpeace, which prides itself on being largely funded by relatively small individual donations, apologised to supporters for the loss, claiming that the “serious error of judgment” was the result of a single staff member “acting beyond the limits of their authority and without following proper procedures”. But the documents show that internally the group is worried about the organisational failings that allowed it to happen....The leaked material seems to show disquiet over a continuing major restructuring, aimed at moving staff from Greenpeace International’s base in Amsterdam to national offices across the world to fulfil Naidoo’s goal of better tackling environmental problems in the global south. “This [2014] will be a testing year for all of us,” the strategy document warns....Gerald Steinberg, president of NGO Monitor, which seeks to make NGOs more transparent and accountable, said he saw parallels with the financial problems Amnesty International had experienced in recent years. “The extent of it [the financial problems] was not something I expected [at Greenpeace]. But it’s part of the fact that NGOs keep things very much within the organisation; there’s no culture of accountability. They call on governments to be accountable but they lack this in so many ways, so in that sense it’s not a surprise.”... http://www.theguardian.com/environment/2014/jun/23/greenpeace-losses-financial-disarray

To target Greenpeace's flying director is to miss the point, It's easy to set green against green, but the charity's problems run wider and deeper than one person's travel plans, The Guardian, Wednesday 25 June 2014; http://www.theguardian.com/commentisfree/2014/jun/25/greenpeace-flying-director-green-charity

Sustainable palm oil - RSPO vs Greenpeace, Greenpeace targets, French nutrition policy, Club of Rome

On the recent RSPO meeting in Europe, interesting excerpts include the following, and we put contextual comments in blue:

the (palm oil) sector needs "violent endangerment" to keep the debate going

Marks & Spencer's sustainable development manager Fiona Wheatley: "food businesses and consumers didn't understand the impact emerging economics could fact if pressures to source 100% sustainable palm oil built too quickly... (RSPO) has created a lifeline between partners who have had not contact before... some companies and brands (are looking) for alternative partnerships[1]...  we need to make sure we have a stronger standard... we sometimes need those different opinions and a bit of violent endangerment to keep things moving... and aspirations high..." - this seems to refer to the RSPO vs TFT-Greenpeace competition over market share in sustainability programs. This has even resulted in RSPO issuing an open letter to ask TFT to collaborate with them. It is interesting that a duopoly in non-Europe biofuel certification is not thought well of and the monopolistic approach is preferred (different from what is seen in soy sustainability). Here RSPO's call for TFT collaboration: http://www.rspo.org/file/tft/TFT_RSPO_open_letter_FINAL.pdf  and Mongabay talks about it here: http://news.mongabay.com/2014/0527-rspo-tft.html.

Cynthia Ong of Land Empowerment Animals and People: "pressures from western (NGOs) such as Greenpeace, were frustrating producers in Malaysia and Indonesia... communities say they want to plant oil palm because it will put food on their tables and the best option we can present them is RSPO certification - ditto

Pat Vendetti, Greenpeace senior forest campaigner: "our focus is on ending deforestation and not tearing down the palm oil industry and the RSPO... another myth is there's a neo-colonial plot.. it's too convenient an excuse for the Malaysian government to trot out...we need to change the mind-set of the Malaysian government..." - sustainability is widely viewed from industry as a non-tariff barrier and it has raised such concerns that the WTO is trying to define "private standards" and that the UN is also looking it; as they note that these typically end up disadvantaging small and marginal producers.

Puvan Selvanathan, UN global compact head of sustainable agriculture (former Sime Darby): "all of the energy we put into debate.. could be better spent looking for a solution.. the message of doing a good thing is being lost in the heat and the emotion. It's a tough sell to have one group of people to tell you how to live your life..."  - in palm oil sustainability, the approach has been driven more by corporate to NGO negotiations (this differs from soy, where there is more government and industry association mediation, on the buy as well as the sell side). Although it is labelled as multi-stakeholder, there are some gaps: a) government is not involved, resulting in problematic differences in the private standard versus regulations and laws; and b) practitioners tell us that actual workings of working groups is that a handful of companies may represent the industry but with few updates to all fellow members, resulting in surprise new major policy administrative changes. Specialists reckon that NGOs set more dedicated resources to these negotiations than does the palm oil industry. Also, some point to the tendency that controversial topics (that growers disfavor) are escalated until they end up offered for General Assembly voting (where voting numbers and blocs are against growers); giving a sense of powerlessness to the minority growers who bear the cost of compliance. Notwithstanding these concerns, lead palm oil industry companies, especially those based in Malaysia and Singapore are leading the push for sustainable certification via RSPO or the new TFT non-certification program.

Robert Hoster, Cargill Refined Oils Europe trading director: "the whole chain needed to be involved in sustainable palm oil from the start.. we need to make sure we make sustainability more affordable.. we need to ensure its cost effective to grow..."  - this might refer to the approach taken by private standards to engage with corporations in order to effect faster change and the problem of the low level engagements with government. This is starting to worry politicians as sustainability is reaching the stage that large private standards and their commercial partners are pointing toward supply-chain shifts that may marginalize and/or bring complicated and costly certification to smallholders and farmers with small estates; note Australia beef worries here, http://khorreports-palmoil.blogspot.com/2014/05/politicians-worry-about-wwf-roundtables.html. Clearly they are an important voting base. We also heard earlier in the year that proposals by a smallholder certifying "technical NGO" to introduce loans to Indonesian palm smallholders (so that they can pay for the certification process and more?) has raised concerns among policy makers there. Cost of certification is a prime concern for small producers where it weighs heavier. For example, the RSPO costing for group smallholder includes some fees of US$10,000 periodically. It would be useful for the cost-benefit for smallholders to be reviewed independently.

 News link: http://www.foodnavigator.com/Market-Trends/Palm-oil-debate-in-quotes


Greenpeace indicates its latest strategy and targets here, http://www.theguardian.com/sustainable-business/deforestation-palm-oil-more-greenwash-greenpeace - Annisa Rahmawati is a forest campaigner at Greenpeace Southeast Asia: "Business as usual cannot continue - Greenpeace is deeply concerned that well-known players in the RSPO are pretending membership alone confers a glow of sustainability. It is waiting to see what public action the RSPO will take on the cases raised with it and how it will strengthen its standards.... In the meantime, Greenpeace demands prominent RSPO members including IOI, KLK, Musim Mas, RGE group and Sime Darby to stop the bulldozers and urgently implement a no deforestation policy. It will continue to push more palm oil consumers such as Kao (the Japanese personal care company behind brands such as John Frieda and Bioré) and others to clean up their supply chains.... To reach this tipping point has not been easy. Some elements want to portray the shift to responsible palm as an attack on the palm oil industry itself, as a call to boycott palm oil or a form or "green protectionism". To them, Greenpeace says this: don't ignore the crisis – don't ignore the fact that Sumatra is burning and Papua's pristine forests are disappearing. Recognise there is a problem, and choose to be part of the solution. Palm oil can be grown responsibly, and must make a genuine contribution to Indonesia's development."


At the same time, new proposals on French nutrition policy worries palm oil interests: "two French politicians, Senator Yves Daudigny and Senator Catherine Deroche, which is set to pose a major threat to Malaysia’s top commodity export in Europe, according to palm oil industry market observers.... Both Daudigny and Deroche had presented a report to the French Senate calling for an introduction of “behavioural” taxes on food and beverages deemed dangerous to the public health in France.... Nutella is a chocolate and hazelnut spread made by Italian company Ferrero that is extremely popular in France, which accounts for 26% (about 100 million jars) of the product’s world consumption.... However, thanks to the quick action and successful engagements by the Malaysian government and palm oil industry players, the Nutella tax proposal was gunned down in December 2012.... So this year, Daudigny is trying a new attempt to champion his cause by roping in Deroche to propose that all taxes of vegetable oils in France be “harmonised”.... http://www.thestar.com.my/Business/Business-News/2014/06/07/Another-antipalm-oil-drive-French-politicians-calling-for-new-taxes-on-food-and-beverages-deemed-dan/


On the big picture, it's interesting to see this:  Scientists vindicate 'Limits to Growth' – urge investment in 'circular economy'; http://www.theguardian.com/environment/earth-insight/2014/jun/04/scientists-limits-to-growth-vindicated-investment-transition-circular-economy

Khor Report's Palm Oil Jan/Feb 2014, Issue 6 (now on public release)

Click here to view full newsletter, pdf: https://tinyurl.com/nqaseng

Earlier, we had released some of the draft articles in this blog. Click on the links below in contents listing! Do check out our feature story on South Asia!


KHOR REPORTS' PALM OIL JAN/FEB 2014, ISSUE 6:
South Asia’s need, 11 million tonne predominance of imported palm oil
Feature: South Asia competition, tariff impacts & local India palm oil. Non-dairy ice cream.
Wilmar-Unilever supply-chain jolt, biodiesel stuttering start
Sustainability: TFT-Greenpeace principles lead
Science: remote-sensing & extreme transparency
Spreads narrow, PO exports to dip & demand shift?

Contents:
Editorial - New challenge for the supply chain
3 briefing Indonesia tepid tender. Malaysia Bangladesh worker deal. US transfats demise.
4 science Remote-sensing technology uses.
5 sustainability Wilmar’s strong pledges
6-7 feature South Asia. Non-dairy ice cream.
8 prices & data Key vegetable oils. Weather outlook. CPO technical view. Price charts.

Peatlands in Malaysia and Indonesia - map and info sources

Khor Reports: The TFT-CA-Wilmar new policy is generating big questions on the palm oil supply chain impacts in peatland zones. For convenience of Khor Reports readers, we have collated below some useful resources on the topic. A slew of reports are emerging from equity analysts as several listed plantation companies are highlighted as impacted in Sarawak, Malaysia; The Edge Malaysia reports http://www.theedgemalaysia.com/business-news/275623-highlight-pressure-on-sarawak-planters.html. In addition to Sarawak, there are also significant peatland zones in Sumatra and Kalimantan. The reaction and impacts on Indonesia plantations will emerge in due course. It is notable that the Norway-funded Indonesia moratorium has been extended and the moratorium zones are distributed and interspersed with plantation concession zones. NGOs such as Greenpeace have complained that the moratorium does not cover enough area (see Greenpeace links below; Greenpeace is associate of TFT in high carbon stocks policies for Golden-Agri Resourcs / Sinar Mas). Various studies by Miettinen et al. have informed ILUC parameters that is expected to impact market acceptance for biofuels from Malaysia and Indonesia.

 

source: APFP website, accessed 18 Feb 2014

ASEAN Peatland Forests Project (APFP)
Overview Map of Peatlands in Southeast Asia (SEA); http://www.peat-portal.net/index.cfm?&menuid=62; Peatland hectarage: Malaysia 2.6 million, Indonesia 20.7 million (map above)
Malaysia, http://www.peat-portal.net/index.cfm?&menuid=81&parentid=67
Indonesia, http://www.peat-portal.net/index.cfm?&menuid=125&parentid=68

"Two decades of destruction in Southeast Asia’s peat swamp forests," by Jukka Miettinen*, Chenghua Shi, and Soo Chin Liew in Front Ecol Environ 2012; 10(3): 124–128, doi:10.1890/100236 (published online 14 Apr 2011).

source: Miettinen et al., 2012
note: 1 sq km = 100 hectares

Wetlands International: different options available to palm oil; http://www.wetlands.org/WatchRead/Currentpublications/tabid/56/mod/1570/articleType/ArticleView/articleId/3553/Poster-Palm-oil-and-Peat.aspx
Wetlands International: Central Kalimantan Peatland Project; Action Duration: Dec 2005 Until Nov 2008;  Donor: Ministry of Foreign Affairs, Netherlands; with video on peat restoration project; http://www.wetlands.org/Whatwedo/Actions/tabid/2661/mod/601/articleType/ArticleView/articleId/7/Central-Kalimantan-Peatland-Project.aspx

Greenpeace: Indonesia's Forest and Peatlands; Legally protected areas, proposed moratorium areas, and forests and peatlands at risk, http://www.greenpeace.org/international/en/publications/reports/Indonesias-Forests-and-Peatlands/
Greenpeace: Indonesia's Forest and Peatlands Map Source, http://www.greenpeace.org/international/en/publications/reports/Indonesias-Forest-and-Peatlands-Map-Source/

Source: Greenpeace website, accessed 18 Feb 2014  

Editorial: New challenge for the supply chain

From Khor Reports's Palm Oil Newsletter #6 Jan/Feb 2014

Editorial: New challenge for the supply chain

Wilmar, the largest trader of palm oil in the world, has come out to change its supply chain promise, signing a deal to secure its position supplying to Unilever. The Anglo-Dutch consumer goods behemoth, ranked #2 in the world after Nestle, had weeks earlier promised to accelerate its sustainability push. Unilever has taken a lead in promoting the principle of sustainability in its materials sourcing via a top role at the RSPO from its inception nearly 10 years ago. For Unilever’s efforts to reduce environmental damage, Dutchman "Polman is the first CEO of a major multinational company to receive the Duke of Edinburgh conservation award since it began in 1970," Bloomberg reported 3 Dec 2013. Wilmar has faced NGO grumblings for not practicing sustainable sourcing for its third-party purchases (which is many times bigger than its own internal production) and over its sale of troubled assets. With its new promise, the giant trader is challenged to rationalize its supply chain. How will Wilmar achieve this without downsizing its business? In general, traceability with high level promises is tougher for large traders with complex supply chains. Industry talk in recent weeks has centered on top producers being asked to sign on to a new RSPO++ manifesto (characterized by multiple additional criteria), building on TFT-Greenpeace principles (they have become de facto new leaders of palm oil sustainability, seizing power from the WWF-driven RSPO). If the key palm oil producers accede, it could be business-as-usual for Wilmar but its cost structure may shift. Its promises can be fulfilled by tough action by its trade partners. Thus, we await information from other industry players on the manner of their support of Wilmar-Unilever.

Questions of impact abound. Could this bring on faster unit cost convergence for large-scale corporate SE Asia palm oil vs Brazil soybean oil? For the industry at large, policy makers should be concerned with: a) how a traceable, no-peat, no deforestation, GHG-reducing palm oil supply chain will look like; b) who will be the winners and the losers; and c) how the transition will be effected, and with what effort to mitigate the impact on the losers. Politics may even be a factor given the size of the smallholder sector, rural development programs and promises. How will the new TFT-Greenpeace-driven principles be operationalized? Khor Report thinks that each palm oil mill will need to be supply-chain risk categorized. Could this segment different production zones with discounting factors? Will a November 1995 baseline apply and will high carbon stock measurement become essential? In this regard, the Golden Agri/Sinar Mas pilot done by TFT-Greenpeace is important. What requirements will Africa face even as it remains a net importer for years and has great hopes for rural development?

Various tropical and other commodities face pressures from an ascendant and increasingly well-funded international green movement. The key to its penetration is in promoting new global voluntary standards that have strong staying power. In taking on technical consulting roles NGOs can become self-funding and perpetuating in these sectors. In relative terms, the corporate sector has been scrabbling for footing amidst this structural change, while the independent and smallholder sectors are adrift with little voice. The largest plantation companies (especially those with European assets and market exposure) have been moving ahead. The swing from WWF to TFT-Greenpeace leadership in sustainability is happening just as developed markets think twice about biofuels policies and bumper oilseed crops are anticipated. The falling price ceiling of vegetable oil substitutes is crushing the palm oil price discount differential while big growers (i) face a new cost component at newly acquired estates via the RSPO compensation procedure (in “staged implementation” with a launch target of Nov 2014) and (ii) plan how to step up to the TFT-Wilmar demands. This new cost and opportunity cost intensive phase of the sustainability push proves its strategic importance on the entire palm oil supply-chain, if ever there were any doubt.

Look out for Khor Reports' Palm Oil Newsletter #6, Jan/Feb 2014! This article is a sneak preview article from this issue (delayed in publication process)

"RSPO+9", new TFT / Climate Advisers-led policies for Wilmar

New  The Forest Trust or TFT / Climate Advisers-led policies for Wilmar include these nine (9) substantive policies, which adds on to existing RSPO commitments, hence we can call it "RSPO+9" for now:

(i) non-use of peat land of any depth;
(ii) likely 35 tonnes carbon per hectare ceiling for land development;
(iii) progressive GHG reductions;
(iv) restoration and enrichment of forest and peatlands (similar to RSPO HCV compensation?);
(v) no forced labour,
(vi) 60-hour work week with 1 day off inclusive of overtime,
(vii) 3.8 square meters / 32 square feet of individual living space,
(viii) trade unions and collective bargaining;
(ix) grievance procedure where advisers and stakeholders have a say in banning suppliers.

Khor Reports blog exclusive comment: The independent advisers to Wilmar are TFT of Switzerland and Climate Advisers of the USA. TFT-Greenpeace was instrumental in putting forth the high carbon stocks ceiling principle for Golden-Agri / Sinar Mas which ran into severe NGO campaigning. This resulted in various global buyers suspending palm oil purchases from the large Singapore-based Indonesian conglomerate. Wilmar did not run into such market problems, although it was obviously facing increasingly negative comments about its "problematic" third-party purchases and land deals in the international news and NGO websites. It is notable and interesting that Wilmar also chooses to be led by the strong principles of TFT-Greenpeace. Presumably, Wilmar (also Singapore-based but with operations globally; and large plantation area in Sarawak and Indonesia and a very big refinery market share in China) expects good outcomes from adopting the approach of Golden-Agri and doing much more to boot. Climate Advisers is a relative newcomer to setting market access policy for palm oil. Palm oil companies, mostly owned by Southeast Asian entrepreneurs, have been quite readily accepting NGO-led standards on a voluntary basis. Palm oil is one of the 15 global (mostly tropical) commodities targeted by the WWF, which focuses on the very largest companies to push for more rapid change. However, WWF's Roundtable on Sustainable Palm Oil (RSPO), now finds itself superseded by the new RSPO+9 effort led by TFT-Greenpeace principles.

Look out of Khor Reports' Palm Oil Newsletter #6, Jan/Feb 2014 for more! This is a sneak preview of our review of Wilmar's bold move. Many ask how they will implement this while NGOs say that this is "just the beginning..."

Unilever - Wilmar push for supply chain change

Wilmar the largest trader of palm oil in the world has come out to change its supply chain promise, signing a deal to secure its position supplying to Unilever. The Anglo-Dutch consumer goods behemoth, ranked #2 in the world after Nestle, has in recent years taken a lead in promoting the principle of sustainability in its materials sourcing. Unilever has helped lead the RSPO from its inception nearly 10 years ago. Its CEO recently received a special award: the 2013 World Wildlife Fund Duke of Edinburgh Conservation Medal for Unilever’s efforts to reduce environmental damage. Dutchman, "Polman is the first CEO of a major multinational company to receive the Duke of Edinburgh conservation award since it began in 1970," Bloomberg reported. 

Wilmar has long faced grumblings from the NGO sector for not practicing sustainable sourcing for its third-party purchases, which are overwhelmingly bigger than its own internal production area. With it's new promise, the giant trader now faces the challenge of rationalizing its supply-chain. The question is this: how will Wilmar achieve this without downsizing its business? In principle, traceability with high level promises is not easy to achieve for large traders with complex supply chains. Industry talk in recent weeks has been about the top 15-20 producers being asked to sign on to a new RSPO+++ manifesto, most probably using the TFT/Greenpeace principles; this being the new leader in palm oil sustainability ahead of the RSPO. If the key palm oil producers accede, one can assume that Wilmar will be "home and dry" without having to make much of a change in its business size and its costing. Wilmar's promises can be fulfilled by tough and possibly cost-raising action on the part of its suppliers. Thus, we should await future announcements from the palm oil industry players. In what manner will they all come out in support of Unilever-Wilmar's promises? 

For producers moving fast into such a high grade sustainability push, could this bring on the faster convergence of unit costing fro large-scale corporate SE Asia palm oil vs Brazil soybean oil? For the rest of the palm oil industry (those ranking below the top #15-20), the supply-chain change they face may be significant. Industry policy makers should be concerned at how a traceable, no-peat, no deforestation palm oil supply chain will look like.

Khor Report thinks that this could mean that each palm oil mill in the region will need to be supply-chain risk categorized for the new Unilever-Wilmar protocol. This could segment SE Asia into different market production zones with resulting discount/premium regions. Could there be negative implications for the independent sector (i.e. non-integrated and non-large producer)? How will the new protocol be operationalized? Will a November 1995 baseline apply and will high carbon stock measurement be made to effect a palm oil mill sustainability risk categorization exercise? In this regard, the Golden Agri/Sinar Mas pilot done by TFT/Greenpeace will be instructive. What requirements will new regions such as Africa face?

The questions are only starting. We will need to better understand the Unilever-Wilmar protocol by way of what the large producers come up with in this potentially market shifting move in the palm oil supply-chain. Other commodities too are facing new pressures from an ascendant and increasingly well-funded green movement that is also playing a bigger consulting role (in a highly important and potentially self-funding and self-perpetuating shift). In relative terms, the corporate sector has been scrabbling for footing while the independent and smallholder sectors are adrift. What is notable in the palm oil industry is the new apparent side-lining of the WWF, often reckoned as a realistic NGO, while the TFT/Greenpeace duo may emerge as key supply-chain policy maker.

News source: http://www.bloomberg.com/news/2013-12-05/palm-oil-leader-wilmar-bans-deforestation-in-sustainability-push.html ; “We can produce palm oil in a way that protects forests, clean air and local communities, all while contributing to development and prosperity in palm oil growing regions,” Chief Executive Officer Kuok Khoon Hong said in the statement. “There is a strong and rapidly growing demand for traceable, deforestation-free palm oil, and we intend to meet it as a core element of our growth strategy.” 5 December 2013.

Choices available for sustainable palm oil credentials

At the recent PORAM Annual Forum, Khor Reports spoke on the topic of sustainability certification options.

The outlook for the certification for sustainable palm oil is getting a lot more complex. It appears that stakeholders are wrestling for control over the palm oil policy agenda, after it was so readily snapped up by the Roundtable on Sustainable Palm Oil (RSPO) and its key movers in the last few years.  The RSPO is the palm oil industry’s current super-standard and by some measures it is probably the most successful voluntary standard in agriculture product certification. However, the RSPO has some issues: a) its exclusive approach makes it de facto regressive as it set out to focus on the largest corporations, b) it has large gaps with policy in producer countries, c) its first-mover monopoly has been dissipating to the ISCC whose stronger commercial grounding is a contrast to the RSPO’s relatively disappointing low premium and supply glut; d) there are significant worries that the RSPO will be pressured to raise its standards by non-member NGOs; and e) it proposes large financial compensation charges on grower members – this could amount to USD billions and it might open them to national and international lawsuits. This is from the perspective of palm oil industry players. From the viewpoint of other NGOs, it is not doing enough. And here, we see the new combination of The Forest Trust and Greenpeace coming in to usurp the RSPO's prime position while relying on it i.e. launching RSPO+ efforts. TFT/Greenpeace worked to great effect in causing GAR/Sinar Mas to adopt strict standards including no planting on peat and using a 35 tonnes carbon per hectare ceiling for new land development in a pilot project. We can expect the TFT/Greenpeace program to be marketed to more companies, both buyers and plantations.

In light of such trends, it is no surprise that there are clear signs that big grower and buyer members of the RSPO have been setting up various alternatives. Some may worry about a trajectory of excessive demands and so they seek to hedge their bets. Others may be seeking better alignment for multi-product supply-chains. Some want to show they can do more than RSPO e.g. Ferrero working with TFT/Greenpeace standards. Whatever the reason, key stakeholders have been actively pushing for new certification options which may better retain industry control. Will this dilute the impact of RSPO’s perilous promotion of trade restrictions? Thus, we see the introduction of state-initiated and supra-national facilitated schemes. These could gain market share if voluntary standards are impaired by poor alignment at the structural or policy level e.g. many voluntary conservation areas are untenable. Palm oil industry certification could be quickly moving toward the complexity seen in other sectors such as forestry and soy. How will NGOs react to such a shift? The palm oil industry will need to ensure good practices and maintain buyer acceptance. The grower segment and key supply-chain choke-points are under pressure, and they will need to put in additional resources for advocacy and negotiation on market access and more.

Bottom-line: Under sustainability, the supply-chain model has to be short and simple. Big and complex won't work well under traceability requirements.

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.