Strengthening business integrity to improve compliance with the RSPO standards

RSPO has been working together with the Center for International Private Enterprise (CIPE) to promote transparency and accountability in the palm oil business in Indonesia. Since 2019, CIPE has been providing training to RSPO members to enhance their awareness of topics such as business integrity and shadow companies. This capacity building training is not only targeting grower companies, but also civil society organisations (CSOs) and RSPO’s intermediary partners.

The training aims to help RSPO promote its Code of Conduct and ensure that their members comply with the RSPO standards. It is also to strengthen the capacity of RSPO’s intermediary members, in order to monitor the implementation of RSPO’s framework, and to better collaborate to improve the performance of the palm oil industry.

According to RSPO’s former Indonesia Country Director and new Director of Assurance, Tiur Rumondang, “The collaboration between RSPO and CIPE is our effort to provide guidance to members, especially on the topic of business integrity. This approach is considered one of the critical steps to increase the capacity of RSPO members in complying with the provisions stipulated in the legal standards to promote good governance, and also as a collective approach to counter negative views on the Indonesian palm oil industry. It is also related to Resolution 6D, which was endorsed at the RSPO General Assembly in 2018.”

A sustainable, competitive, and resilient palm oil sector ensures the long-term viability of the entire supply chain and shared benefits of the private sector and the livelihoods of communities where oil palm is grown.

The 2018 RSPO Principles and Criteria (P&C) aims to drive ethical business behaviour, build trust and transparency with stakeholders to ensure strong and healthy relationships. Criterion 1.1 of the standard focuses on the requirement for RSPO members, through their unit of certification, to commit to ethical conduct in all business operations and transactions, and it has to be translated into a strategic policy. The policy should include as a minimum:

• Respect for fair conduct of business;

• Prohibition of all forms of corruption, bribery, and fraudulent use of funds and resources; and

• Proper disclosure of information in accordance with applicable regulations and accepted industry practices.

The policy should be set within the framework of the United Nations Convention Against Corruption, in particular Article 12.

In many natural resource-based industries, including palm oil, shadow companies are seen as vehicles for large money laundering crimes. Shadow companies usually make use of laws on confidentiality and corporate service providers to avoid liabilities, such as taxes.

Indonesia’s palm oil sector has a chronic weakness in environmental, labour, and corruption compliance. The CIPE uses its integrated compliance approach to extensively engage stakeholders in the palm oil supply chain to analyse stakeholders’ needs. Using the resultant findings, the CIPE designed a series of programmes in the sector on Indonesia’s regulatory environment and partnered with the Indonesian Government’s Corruption Eradication Commission (KPK) to improve how the government responds to corruption challenges.

According to Frank Brown, Director, Anti-Corruption & Governance Center at CIPE, “RSPO’s standards have been adopted by businesses, accounting for 17% of the world’s actual palm oil production. Even big banks use the standard when assessing risk. It is evident that businesses, both big and small, can develop a voluntary standard, and when aided by the market’s aversion to risk and law enforcement’s readiness to investigate, it becomes a powerful agent for changing corporate cultures.”