Do the right thing

Blog, 01 June 2015

With 45-years global experience of developing socially responsible, ecologically sound and profitable supply chains, Netherlands-based Solidaridad is an established voice within the palm oil debate. Marieke Leegwater, Solidaridad’s Programme Manager for Palm Oil discusses the pros and cons of this pervasive commodity.

For Solidaridad, palm oil is a fact of life. It is the highest yielding vegetable oil on the planet, and at present, it is the most profitable crop to plant. Demand for vegetable oil is growing, particularly in China, Pakistan, India and Indonesia where wealth is increasing. And palm oil is here to stay; so let’s try to do it right. But what does ‘right’ mean?

‘Right’ means that the benefits of growing palm oil are shared between those who live on the land and those who gain the profits from it. So once a palm oil investment has been made we like to see the returns from it go to local communities. We also like to see negative external effects internalised in their [investors’] costs. What we don’t like to see is the destruction of rainforest for oil palm plantations, but rather a certification of existing areas of cultivation and increasing of yields there.

Companies can become responsible by buying RSPO-certified volume and investing in, and abiding by, the RSPO complaints mechanism; and/or they can try to stimulate improvement of the system by themselves. But we believe the corporate sector cannot change it all by itself. The public sector and governments need to take responsibility as well. They need to make sure there is good land use planning and an enabling environment that facilitates investments so that large, populated tracts of land are not given out via concession agreements without creating compensation schemes.

Everybody producing and buying palm oil has a role to play, as well as those facilitating production. Investment banks have a role to play and governments giving out concession agreements have a role to play. NGOs have to be inspirational and act as advocates of change, as well as innovate new solutions, and then share these examples. Why do I think this? The sector is complex. The product is in many end-use products and is so dominant in the countries where it is grown that we need to have all hands on deck to make change.

The volume of palm oil that is not sustainably produced and sourced is growing faster than the volume that is produced and sourced sustainably. The odds are against us. So what do we do?

We need to work with governments to increase their share of responsibility for sector transformation. At Solidaridad we are trying to do that. One of the avenues we are working on is how can we make sure Asian markets have the potential for sustainably produced palm oil. We are not yet sure what shape or form this can take, because it is a price sensitive market. But we are trying to investigate what we can do with Chinese buyers, with Indonesian market players, the Indonesian government and West African governments. It won’t be easy – more time and resources and dedication are needed up to 2020.

This year is a crucial year. Many companies have set commitments until 2015. Many of these commitments have been realised. But we realise that with these commitments we have only made a start on getting the impact we wanted to achieve when these commitments were initially made. At first, we thought making these commitments would actually help reduce deforestation and land conflicts. We now realise that having set-up RSPO, despite being a wonderful mechanism, it is pulling the top volume of the market up, namely those that were near to certification anyway. So we need to find other ways beyond RSPO, to use RSPO’s mechanism, but to drive it further.

There is no silver bullet. I believe we need to keep pushing and pulling from the industry side. We need to create demand. We need to make sure that not only the European, and North American or Japanese or Australian markets convert, but China and India, et al also need to start demand for significant volume, somehow.

Firstly, there is a need to get the supply chain connected. Large multinationals, such as Unilever and Carrefour, are transforming their full volumes and all their joint ventures and subsidiaries. But somehow you need to make sure that the mills you buy from have programmes to convert their whole supply bases – and not only their associated smallholders or their nucleus but also all independent farmers that they buy from – so that these farmers are taken along in our drive for better practices.

Next, I believe that governments need to be inspired to raise the bar in terms of governance standards, i.e. setting minimum standards.

In Indonesia, for example, you have Indonesia Sustainable Palm Oil, but that's not well-implemented yet, so helping the Indonesian government to actually implement ISPO, and make sure that's a credible system, would also help tremendously. And in Africa I think we need to help governments to make sure that they can actually facilitate growing palm oil in a better way, so that its benefits are shared.

Palm oil has many, many applications. It is an easy to use, flexible product. And it is cheap, because the production costs are relatively low. But its most positive trait is you can grow enormous volumes of it with relatively little land. To feed the whole of Europe with oil palm, you would need to cultivate an area the size of Austria. But if you wanted to use rapeseed oil or soya, you would need an area the size of the UK or France. Palm oil yields are four, five, six times higher than other oils.

It is also a very efficient crop. Growing it uses fewer chemicals than those needed to grow rapeseed or soya, and it leaves the soil relatively intact. You can grow it cycle after cycle and it does not deplete the soil. If it is done well it is a great crop to grow.

The problem is, palm oil is often grown on tracts of land that are so big that the environment gets squeezed, leaving no opportunity for biodiversity to thrive. But you could say the same about potatoes in the Netherlands. Potatoes are great. But if we were to plant the whole of the Netherlands full of potatoes, that would not be so great. For Solidaridad, doing the right thing is about having a sense of proportion as well as a sense of fairness and equality.

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