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Unintended Consequences of Leading

Are new consumer pressures on supermarkets exacerbating problems for farmers in the developing world?  Gerard Davies explores unintended consequences for corporates trying to lead.

 

Caption: Business looks uncertain for farmer Chira Phongat Picture: Christina/Alamy

SHOULD FARMER PHONGAT be worried?  Business might look bleak for the 43-year-old entrepreneur and her 500 neighbours, following the decision by a supermarket chain to eliminate palm oil from its products.

Chira Phongat, who owns a plantation in the Thai province of Krabi, was the first independent small farmer worldwide — along with her community — to receive a new eco-label for sustainable palm oil.  Through the German Agency for International Cooperation (GIZ), they were trained to cultivate their land ‘sustainably’. Six years’ intensive work later, smallholders around the world have received training and funding and the badge of the Roundtable on Sustainable Palm Oil (RSPO), the world’s largest voluntary certification scheme, and accepted by industry as a seal of approval. Iceland’s announcement that it will cut palm oil from its supply chain undercuts this work.

Today’s consumers and activists demand greater transparency and commitment to climate change and biodiversity issues. Even amidst this clamour however, the announcement by the frozen food specialist might seem to many to ignore the work done by local farms. Widely pilloried for destroying forests and threatening species with extinction, the palm oil industry has invested billions over the last few years in cleaning up its act.

Many of the biggest consumer companies in the world — including Tesco and Unilever, and traders Cargill and ADM — have promised to end their role in deforestation by 2020.  Leaders are due to gather this June in Paris, France, and Cali, Colombia, to explore what’s working, what needs to change and how to meet those commitments.

Meanwhile, demand for palm oil has been booming.  The cheap and mass-produced ingredient is renowned for its versatility and appears in more than half of all supermarket products, from bread, pastry, biscuits, cereal and chocolate to soap, detergent and lipstick.  The RSPO is a not-for-profit, multi-stakeholder organisation that works to advance the production and use of palm oil that is responsible to people as well as the planet.  The  challenge faced by the supermarkets and its customers is understanding the wisdom or otherwise of a blanket ban.

Millions of people around the world now depend on palm oil for their livelihood — some 16m in Indonesia alone. So any outright ban, while supporting climate change targets, could have a devastating effect on the workers.  As of mid-2016, smallholder farmers produce 40% of the worldwide crop, but continue to suffer from lower yields.  So the RSPO is certifying more smallholders to produce more oil from less land and to access new markets.  This allows them to increase income and reduce the threat to forests and biodiversity.

But opposition to palm tree production is soaring on the internet, with hostile social media Likes and Shares mounting up, emitting an acrid cloud of  criticism.  This April, the publication of a press release on Iceland’s company website suggested that the retailer has run out of patience.  Iceland sees its problem in its supply chain, which has become so complex that only a small percentage of the palm oil used to make its products comes from an officially approved ‘sustainable’ source.

There are also growing challenges from NGOs determined to protect the rainforest felled for large-scale palm oil plantations. Greenpeace claims suppliers to some of the subscribers to the certification scheme are ignoring their commitments.  John Sauven, Greenpeace UK’s Executive Director said: “This decision [of Iceland] is a direct response to the palm oil industry’s failure to clean up its act.”

Greenpeace claims suppliers to some of the subscribers to the certification scheme are flaunting their commitments.  John Sauven, Greenpeace UK’s Executive Director said: “This decision is a direct response to the palm oil industry’s failure to clean up its act.”

Jobs versus Climate

In fact, the journey to a sustainable commodity is rather more complex than simply cleaning up.  It’s a sophisticated change process designed to gain consensus across private, public and third sectors, while supporting the Paris Climate Agreement as well as all the UN Sustainable Development Goals.

While many consumers are rightly concerned about climate change, the RSPO and its supporters — including the UN Development Programme and the World Wide Fund For Nature (WWF) — take a far broader view, placing action on deforestation within the context of enabling local growth. These stakeholders are seeking a systemic win, one that recognises the need to lift people out of poverty, poor health, education and inequality — issues that are intertwined, and sometimes in apparent conflict, with climate change and the rest of the 17 goals.

In Indonesia alone, 146 football pitches of rainforest are lost every hour.  The palm-trees that take their place absorb relatively little carbon dioxide compared to the native species.  In 2014, the country had the fourth largest greenhouse gas emissions in the world, mostly as a result of felling its forests, many of which grow in carbon-rich peat.

The RSPO has used a framework known as a Theory of Change to improve monitoring & evaluation systems and better articulate, manage, and measure progress towards this vision, provide insights into its effectiveness, and assess its long-term impact.

Meanwhile, Greenpeace International continues its own monitoring activities.  Its latest claim is that a supplier to RSPO members is still destroying rainforests in Indonesia.  Video and images gathered by the environmental campaign group appear to show the clearance of 4,000 hectares in an area protected by the Indonesian government in response to devastating forest fires in 2015.

Indonesia is losing 146 football pitches of trees each hour. Picture Credit: Alain Compost / WWF

Palm oil is also used in biodiesel and widely touted as a source of renewable fuel.  With demand projected to double by 2050, its popularity is set to wreak further havoc on the environment.  In Indonesia and Malaysia, where expanding palm oil and wood pulp plantations are the biggest driver of deforestation, wildlife species are threatened with extinction.  In spite of global efforts, recent studies have shown that the Bornean population of orangutan more than halved between 1999 and 2015, with possibly only 70,000 extant.  Iceland’s new boss visited earlier this year to see for himself the impact of deforestation. https://youtu.be/XSt35-ALIuI

“Until Iceland can guarantee palm oil is not causing rainforest destruction, we are simply saying ‘no to palm oil’,” said Richard Walker, Iceland managing director, after his visit. “We don’t believe there is such a thing as verifiably ‘sustainable’ palm oil available in the mass market.”

European demands

Europe is the leading market for sustainable palm oil and a lobby group, Faces of Palm Oil was set up following a 2016 recommendation by the EU Commission to ban energy from palm oil as part of revised targets for renewable energy, under the Renewable Energy Directive (RED). The European Parliament is expected to back a ban by 2021.  Walker’s move has added fuel to the fire of already antagonised palm oil interests in southeast Asia.

Iceland says its decision was taken to show the food industry that it is possible to reduce demand for palm oil while seeking solutions that do not destroy the world’s rainforest. Alternative ingredients will vary depending on individual product requirements, meaning that there will be a mix of oils and fats involved. These will include sunflower oil, rapeseed oil and butter.

But the lobby group claims palm oil is more efficient than any other oilseed, using less fertiliser and pesticide, and less land than both rapeseed and sunflower oils.   Palm oil accounts for 93,000 jobs within the European Union and contributes 6.4bn euro to EU GDP, and 1.2bn euro in tax revenues to EU Governments, they declare.

Farmer Phongat and the millions depending on palm oil for work and wellbeing, will be hoping that the leaders from business, governments and NGOs can all find consensus this summer as they meet in France, Colombia, Belgium — and Iceland.

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