Palm oil is much in the news again early in 2018, with headlines appearing such as:
From the second link, here’s the context as they see it: “On April 4 last year, the EU Parliament made a resolution to introduce a single certification scheme for palm oil entering the EU market and phase out the use of palm oil based biodiesel by the end of 2020. On Oct 23 last year, Industry, Research & Energy Committee (ITRE) endorsed the move and this was followed by support by the Parliament’s Environmental Committee (ENVI) on Nov 28.
There seem to be a couple of concerns from the Asian side. First, any biofuels exclusion policy in the EU, secondly, what any ban might mean for other uses of palm oil, in of course, food and cosmetics.
From the European side, there have been mutterings about some retailers trying to get out of palm oil altogether, whilst others I’ve spoken to point out that availability, cost and impacts of alternatives on land use mean that’s extremely difficult, if not impossible, for a company of any size.
Here’s some things I’ve heard recently, which I’ve framed as six questions we face now in early 2018, 1000 days away from the deadline (more or less)
ONE: Will the 2020 Zero Deforestation Commitments made by consumer goods firms be met by 2020?
Comment: The answer, with perhaps the odd exception somewhere, seems to be No, whilst definitions are often still unclear.
TWO: Which commitments made, have actually made a difference, and how do companies talk about them?
Comment: It’s hard to find a positive headline when you miss a big target, but some achievements WILL be noteworthy. How companies talk about these will be important, particularly as definitions such as “zero net” are technical minefields, once you get down into the weeds.
THREE: What does this mean for hot button issues like palm oil in USA or Europe? Will there be a serious attempt to shift away? What are the economics?
Comment: We don’t know yet, obviously. But the ongoing war of words on palm oil is not helping. Whilst the economics (and practicalities of alternatives to palm kernel derivatives) are not supportive, that doesn’t stop campaigns, consumer concerns and changes in policies such as those around biofuels.
FOUR: How should companies tackle the lack of expertise on the ground, in forests, communities and plantations, and can better stakeholder relations help?
Comment: This is tricky, given that companies have under-invested in the area, largely pushed the onus onto suppliers, who have also under-invested, and brands have often refused to pay premiums for better palm oil. On the NGO and ‘implementer’ side, companies often tell me there is a huge lack of on the ground capacity to help implement programmes and policies, even when the money is there. This is perhaps the most important question, in the long term, alongside the problems of the institutional operating environment.
FIVE: What will the campaigning NGOs do as the missing of these targets starts to become obvious? Support, or campaign?
Comment: I believe some are undecided, but we know what the default option usually is for them. My bet would be that the leaders will take a beating when 2020 looms on the horizon, even in advance of the deadline (even presuming the 2020 deadline is 31st December 2020 rather than 1 January 2020!) Once the members of the Accountability Framework become more active and consistent, their combined work may have a significant impact.
SIX: What about the backlash?
I’m hearing that the Indonesian and Thai governments are looking to collaborate on threatening trade barriers to the EU over issues such as palm oil (see above) and that a crackdown on campaigning NGOs is looming as actors in places such as Indonesia tire of what they see as hypocritical demands from ‘the West’. How this all plays out will be key for how governments engage, particularly using existing mechanisms (Voluntary Partnership Agreements, ‘Yellow Cards’ on human rights, etc)
My own views, based on recent conversations with key players, would be that:
- Progress has been made by companies in the last 10 years, but it is still very variable in terms of proactive action on the ground. So no doubt there is a LOT more work to do.
- With regard to the companies who have done the most, they are getting to the limits of what a supply chain approach can deliver. There is much excitement about jurisdictional approaches, but these have their huge challenges as well, so we need a degree of realism injecting into proceedings. Institutional environment challenges, largely untackled, remain severe. (By this I mean police, courts, justice system in general and overall attitudes to law enforcement. For a report I wrote on how business can contribute here, take a look at this series of case studies and analysis)
- The influence of European and North American FMCG companies to drive a fundamental change has diminished since 2010. Even leaving aside the well-worn mantra about India and China, the rise of Pakistan, Bangladesh, Indonesia, Malaysia, Philippines as markets for palm oil, results in a very different market dynamic.
- Linked to the above two points, we may be heading for a two tier market with no leverage over the laggards – NGOs do not seem to have much appetite or strategy for focusing upon companies other than European/North American ones, which continues to reinforce the two tier market and reduces their (NGO) influence. This will only be reinforced as we get to the point when the leaders have cleaned up their supply chains and can demonstrate 0% deforestation.
- The (almost exclusive) focus upon companies in the last 5 years has left a gap in approaches to Governments. Groups such as TFA 2020 are making headway in narrowing this, but there is a very long way to go, given the institutional barriers and economics/nationalist concerns that come up quickly in many countries.
- There is little co-ordinated attempt to tackle other forms of deforestation (infrastructure, mining etc), and the role of the finance sector. We do our best at our Innovation Forum events, but it’s a struggle. Not long ago, one forward-thinking FMCG firm had to subsidise event participation from a number of mid-ranking analysts at big banks, just to get them in the room. They said they thought the conference was brilliant, and we never heard from them again.
Overall, it’s perhaps time for a reset of the thinking on how we as a ‘community’, working in sustainable business, view deforestation and what we need to focus upon. This is not an attempt to deflect attention from consumer goods companies, but it is an attempt to ask a legitimate question if we should continue with more of the same, or if the changed circumstances listed above warrant a new emphasis or even direction post 2020.
Having this discussion, and aiming to get some consensus would be a debate worth entering now, 1000 days from the 2020 commitment.
At Innovation Forum, we’re committed to playing a part here, and we’ll be doing so twice this year at our off-the-record business/NGO/policymaker conferences in Washington, D.C. on April 18-19 and later in the year in London on 6-7 November. Contact us to get involved. (tobias DOT webb AT innovation-forum.co.uk)
Lots of articles and podcast interviews and webinars on these topics are at: https://innovation-forum.co.uk
(Readers, please note this addition on 02/02/18: Some of the above should have been attributed to Duncan Pollard at Nestle, but at the time I wasn’t aware of this. The full text of his views can be found as a new post here)
04/02/18: Here’s some other recent debate around this issue, where Darrel Webber of RSPO and I discussed the challenges and solutions:
And here are the follow up comments I had, posted as new blog posts:
Our forthcoming events
- How business can tackle modern slavery and forced labour – 7-8 March 2018 – London
- How business can make smallholder supply chains resilient – 13-14 March 2018 – London
- Can innovation and technology make agriculture sustainable? – 5-6 April 2018 – Washington DC
- How business can tackle deforestation – 18-19 April 2018 – Washington DC