Cleaning up the oil palm industry’s supply chains must go beyond environmental impact to the workforce. Fair working conditions and better lives for smallholders must be front and centre, say industry leaders.
By Hannah Koh
Wednesday 12 April 2017
The debate surrounding the palm oil sector’s sustainability is moving from the environment to focusing on social issues, say industry practitioners at a conference in Singapore last week.
Rashyid Redza Anwarudin, vice-president and head of sustainability reporting and social performance at Malaysian plantation owner and palm oil giant Sime Darby commented: “What we’ve seen in the last three years is a shift from an interest in the palm oil sector’s environmental issues to social issues. There is more interest in how Sime Darby is performing in human rights, sexual harassment and management of foreign workers.”
Noting a similar increase in pressure over social and labour issues, Wilmar International’s general manager – group sustainability, Perpetua George, credited it to the progress made in environmental conservation.
She said that while deforestation was a relatively well understood issue, labour exploitation was “undefined” by comparison.
“Social and labour issues are gaining prominence now because we have made strides in the oil palm industry with regards to deforestation and better planning,” commented George. She added that labour issues are a growing global concern, especially in industries that involve rural areas, poverty and unskilled labour, such as palm oil.
George went on to announce that Wilmar, the world’s biggest palm oil producer, has joined forces with fair labour non-profit organisation Verite to find scalable solutions to address labour abuses in its supply chain.
This comes after the Singapore-listed company became the subject of a hard-hitting Amnesty International report highlighting Dickensian working conditions at two of its subsidiaries and three suppliers.
Both speakers gave their comments on a panel discussion at the fourth Singapore Dialogue on Sustainable World Resources conference last week.
Organised by think tank Singapore Institute of International Affairs (SIIA), the conference was attended by Malaysia’s Minister of Natural Resources, Wan Junaidi Bin Tuanku Jaafar, and Singapore’s Minister for the Environment and Water Resources, Masagos Zulkifli.
The governor of South Sumatra, Alex Noerdin, was also in attendance and stole headlines with his bold promise that there would be no haze from South Sumatra this year.
“The dry season this year will be longer compared with 2015, but I guarantee there is no fire, no haze, anymore,” he said to applause from the 300-strong audience. Indonesia’s fire and haze crisis of 2015 saw widespread fires across the country, costing billions of dollars’ worth in damages, health problems and livelihoods in the country and its neighbours such as Malaysia and Singapore.
A check on Global Forest Watch Fires’ fire-mapping tool, however, shows there were five hotspots in South Sumatra over the last 48 hours at press time. Hotspots on a map indicate areas where temperatures are higher than normal, and have been used to identify forest or plantation fires.
Noerdin’s pledge is in line with Indonesian president Joko “Jokowi” Widodo’s tough stance on the haze. In the aftermath of the 2015 air pollution crisis, Jokowi pledged to eradicate the problem within three years.
Panellists at the event agreed that Indonesia has made headway in tackling the haze problem by enforcing strict legislation against companies linked to slash-and-burn practices, issuing a moratorium on cultivating carbon-rich peatland and establishing a Peatland Restoration Agency to restore some 2 million hectares (ha) of the country’s scorched peatlands.
Every smallholder counts
To prevent the return of the haze, palm oil firms in Malaysia and Indonesia have to ensure that the smallholder farmers who work the land are on board with sustainability practices, though certification is not necessarily the only way forward, said panellists.
Accounting for 40 per cent of global palm oil production, smallholder farms are usually run by families with planted oil palm area of less than 50 ha, according to industry group Roundtable on Sustainable Palm Oil.
Smallholders are often blamed for the slash-and-burn practices that result in the haze, and Lee Chen Chen, director of policy programmes, SIIA, pointed out that smallholders usually have the least access to resources, technology and finance.
Denys Collin Munang, chief international business officer of Malaysia’s Felda Global Ventures Holdings, said that considering the significant costs of meeting sustainability standards, it made more sense for smallholders to focus on adopting basic sustainable agricultural practices first rather than pursue certification. Felda is the world’s third largest oil palm estate operator.
He added that current levels of demand for sustainable palm oil were not strong enough to incentivise smallholders. “While the industry provides 12 million tonnes of certified sustainable palm oil a year, only 8 million was actually purchased as certified palm oil. The rest was sold as ordinary palm oil.”
Echoing this sentiment was Kelvin Tio, managing director of Indonesian palm oil giant Asian Agri, who said: “We strongly believe we can only drive smallholders to sustainability when they have achieved a certain level of livelihood.”
Plasma or schemed smallholders – farmers with contracts with larger plantations and mills – are usually more likely to adopt sustainability standards, said Tio. “But we need to be mindful that there are still 3.8 million ha of plantation farmed by independent smallholders, and it’s not logical to force the same standards of sustainability on them.”
Felda’s Denys also took issue with the European Union’s ruling that all palm oil imported from 2020 must be certified sustainable.
Oil palm cultivation makes up only 5.5 per cent of the 260 million hectares ha of agricultural land used to grow edible oils around the world, he pointed out, before suggesting: “Why does Europe not pass a ruling to require other edible oils to be sustainability compliant to get into Europe?”
But Satya Tripathi, chief executive of Tropical Landscapes Finance Facility, called such comparisons a “false dichotomy”.
“Talking about X commodity versus Y commodity is sad. Everything we consume has to be sustainable,” he said on the same panel, a comment that was met with generous applause.
Finance as a catalyst?
Singapore’s Minister for the Environment and Water Resources, Masagos Zulkifli, highlighted in his keynote that the finance sector can be used as a lever for change.
“If private capital can be directed to projects that take environmental factors into account, projects that engage in unsustainable business practices will be starved of credit. This will help to gradually shift the business landscape towards more sustainable practices,” he said.
To build an understanding of what sustainable financing could look like, SIIA is collaborating with the United Nations Environment Programme and local regulator the Monetary Authority of Singapore (MAS) in a new initiative on green finance.
Announced during the conference, it includes the release of a report in November that details recommendations on how the finance sector can improve and that could provide a foundation for more sustainability-related rules.
Said SIIA’s Lee: “MAS may consider codifying the final recommendations into regulations – at the very least we are hoping that this report is the first step in the right direction for sustainable finance.”
The Singapore-based think tank also unveiled the executive summary of its special report, “Peatland Management and Rehabilitation in Southeast Asia: Moving from Conflict to Collaboration”, which was written following a regional workshop on peatland management in Jakarta last October.
The report examines current approaches to managing peatlands in Southeast Asia, and highlights potential areas of collaboration for companies, governments and civil society organisations. Commenting on Indonesia’s progress in this area, Lee said she is “cautiously optimistic”.
“However, we also recognise that much remains to be done in terms of enforcement of regulations, education, and creating a long-term shift in opinion in terms of how peatland should be used.”