market demand for sustainable raw materials

The Hague, December 9, 2014 Market Demand for Sustainable Raw Materials slide 1

Market Demand for Sustainable Raw Materials

The Case of Sustainable Palm Oil

Five Parts

I. Consumer Markets drive Sustainability of Commodity Production

II. Retailers and Consumer Goods Companies set Global Sustainability Standards in Cooperation with NGOs

III. RSPO has set the Global Standard for Sustainable Palm Oil, trusted by Consumer Markets

IV. Private sector standards, such as RSPO, contribute to the protection of land-related human rights

V. Implementation of RSPO and Similar Standards calls for Active Government Involvement


Part I

Consumer Markets drive Sustainability of Commodity

Production


Large Food Companies aim for Market Transformation


Emotions and Brands (1): animal welfare


Emotions and Brands (2): labour conditions


Emotions and Brands (3): forests/biodiversity


Video + Questions

• Greenpeace Video: have a break – have a Kitkat

• Question. What do you think? (write 1, 2 or 3 on a piece of paper): 1. Greenpeace is completely wrong. The video is

based on distorted information and no understanding of the real situation in Indonesia.

2. Greenpeace does have a point, but is exaggerating/distorting the message so that it is hardly convincing.

3. On the whole, Greenpeace is right. Nestlé (and its consumers) do contribute to rainforest destruction and the extinction of the Orang Utan.


NGOs are Most Trusted Institution


Companies restore Market Trust through Partnerships with NGOs


Part II

Retailers and Consumer Goods Companies set Global Standards

in Cooperation with NGOs



The Emergence of Private Sector Sustainability Standards

• Sustainable Commodities – forest/timber: FSC – fish: MSC – palm oil: RSPO – etc.

• Social Compliance – SA8000 – ETI, BSCI, etc.

• Standards are – voluntary – private sector initiatives – often (not always) with

multi-stakeholder participation


Historical Context

Part III

RSPO has set the Global Standard for Sustainable Palm Oil, trusted

by Consumer Markets


Palm Oil: the Issues

• Biodiversity/Deforestation issues triggered the discussion on ‘sustainable palm oil’ – Loss of high value tropical rainforests – Illegal timber production/trade – Palm oil as a focus for WWF:

• WWF’s strategic action plan on Palm Oil and Soy (see September 2002 presentation by Thomas Vellacott WWF, next slides)

• Unique opportunity to link consumer products/emotions with forest conversion issues

• NGOs criticised private sector and were seeking constructive cooperation. Central role for WWF.

• Private Sector “First Movers” played a decisive role: – Migros supermarkets Switzerland (own standard, with WWF) – Unilever – own set of criteria, to be used as ‘open source’

• Human Rights Issues were added later – actively brought in by social NGOs from Europe/Indonesia, as they became

part of the multi-stakeholder structure – central issue: FPIC on plantation development.

• Climate Change – Oil Palm on Peat Soils – only seriously included recently + subsidence of soils


The Forest Conversion Process

From Presentation by Thomas Vellacott / WWF,

London, Sept. 20, 2002

Plantations and soy cultivation are

key drivers of forest conversion

PROCESS OF FOREST CONVERSION



WWF‘s expectations vis-à-vis

market actors

• Recognise the importance of forest conversion and the

role of palm oil and soy

• Develop ecological and social standards regarding palm

oil and soy production (jointly with other market actors,

with producers and with NGOs)

• Work with producers, NGOs and with each other to

implement standards by adapting business practices

(e.g. sustainable sourcing, sustainable investing)

• Promote socially and ecologically viable landscape

development processes in producing regions



GOAL

Satisfy growing demand for palm oil, without

destroying high conservation value forests, violating

human rights, etc.

Define broadly supported sustainability principles,

criteria and set up a certification system. Assure that

certification is feasible for mainstream producers.

Example RSPO: Problem, Stakeholders, Process


Palm Oil: RSPO governance

Washington, April 27, 2010 Bank Conference 2010: ACQ8 - Standards & Contracts

slide 20

RSPO board: G(1+1+1+1), P(2), M(2), R(2), F(2),

NGO(2+2)

RSPO secretariat

growers:

M = Malaysia

I = Indonesia

R = Rest of the World

S = Smallholders

NGOs:

E = Environmental NGOs

S = Social NGOs

RSPO association

annual Roundtable Meeting

constituencies

growers

M, I, R,

S

manu-

facturers

pro-

cessors retailers

NGOs

E, S

financial

players

RSPO today – some figures

• Members

– 1791 members

• RSPO Certified Oil Palm plantations

– 2.59 million ha

• RSPO Certified Palm Oil

– 11.2 million tons = 18% of world market


RSPO: principles

1. Commitment to transparency 2. Compliance with applicable laws and

regulations 3. Commitment to long-term economic

and financial viability 4. Use of appropriate best practice by

growers and millers. 5. Environmental responsibility and

conservation of natural resources and biodiversity.

6. Responsible consideration of employees and of individuals and communities affected by growers and mills.

7. Responsible development of new plantings

8. Commitment to continuous improvement in key areas of activity


Part IV

Private Sector Standards, such as RSPO, contribute to the protection

of land-related human rights


Land Issues in Voluntary Standards (Commodities)


slide 24

RSPO Criteria (on land rights)

• Principle 2: Compliance with Applicable Law and Regulations – 2.2 The right to use the land is demonstrated, and is

not legitimately contested by local people who can demonstrate that they have legal, customary or user rights.

– 2.3. Use of the land for oil palm does not diminish the legal, customary or user rights of other users without their free, prior and informed consent.

• Principle 6: Responsible Consideration of Employees and of Individuals and Communities Affected by Growers and Millers – 6.3 There is a mutually agreed and documented system

for dealing with complaints and grievances, which is implemented and accepted by all affected parties.

– 6.4 Any negotiations concerning compensation for loss of legal or customary rights are dealt with through a documented system that enables indigenous peoples, local communities and other stakeholders to express their views through their own representative institutions.


slide 25

Principle 7: Responsible Development of New Plantings

• 7.1 A comprehensive and participatory independent social and environmental impact assessment is untertaken …

• 7.2 Soil surveys and topographic information are used … • 7.3 New plantings since November 2005 have not replaced

primary forest or any ara required to maintain or enhance one or more High Conservation Values

• 7.4 Extensive planting on ste.ep terrain and/or marginal and fragile soils, including peat, is avoided.

• 7.5 No new plantings are established on local peoples’ land where it can be demonstrated that there are legal, customary or user rights, without their free prior and informed consent … …

• 7.6 Where it can be demonstrated that local peoples have legal, customary or other rights, they are compensated for any agreed land acquisitions … …

• 7.7 No use of fire … • 7.8 New plantation developments are designed to minimise net

greenhouse gas emissions.


Questions

• The RSPO standard contains strong criteria on land-related human rights, including the FPIC (free prior and informed consent. Is it right and effective to make such human rights issues part of a privately set standard (applied to Indonesian oil palm plantations)?

• Question. What do you think? (write 1, 2 or 3 on a piece of paper):

1. It is neither right nor effective. Only the Indonesian government can decide on formal and informal land use and land ownership rights. This is not something the RSPO standard should do.

2. The RSPO standard in itself cannot solve conflicts over land rights, but it can be a welcome complement to Indonesian policy/legislation and drive plantation company behaviour into the right direction.

3. The RSPO standard and associated procedures provide mechanisms for dealing with land-related conflicts that Indonesian law and state institutions unfornately cannot provide today.


Case: RSPO and Palm Oil land conflicts (Malaysia)

• In 2010 FoE and Grassroots reported serious violations RSPO criteria by IOI in Indonesia and Malaysia – RSPO Code of Conduct 2.3 (transparent

engagement) – RSPO 4.2.4a on non-certified holdings

• Grievance Procedure was the result – Mediation to produce results in 2012 – IOI’s all new certifications on hold

(2012) – Mediation Process stalled after 2012

• Advice to Communities(2012) – expert financed by Stichting Doen

• IOI prepares new steps in court • Situation still unresolved today.

Washington,April 26, 2012 commodities that respect land rights .... slide 28

IOI-Pelita Case in “Conflict or Consent)


Many More Palm Oil Disputes Awaiting Solution


Commodity Standards do have Impacts on the Ground

• Land issues become prominent (long) after rather than during certification – not only because of deficiencies in certification but

also because of the communities’ fear to openly defend their rights.

– This creates considerable risks to certified companies

• Access to remedies strengthens the positive impact of standards/certification systems – they may (temporarily) fill in the gap in public

governance

– but their success may create unmanageable demand for mediation

Washington,April 26, 2012 commodities that respect land rights .... slide 31

Part V

Implementation of RSPO and Similar Standards calls for Active

Government Involvement


Three Interrelated Questions

1. Will commodity sustainability standards defined by private sector companies and NGOs in consumer markets (such as RSPO) lead to global market transformation?

2. Will private governance provide effective mechanisms for resolving conflicts around land-use, including biodiversity, climate and human rights issues?

3. What will/should be the role of national governments in future implementation of sustainable commodity standards?


Practice: Limited Market Transformation

• Market transformation on the basis of voluntary private sector standards beyond 20-25% is unlikely.

• Such standards – are not an alternative to

public regulation,

– but at best a first step towards more effective regulation.


How Effective for Dealing with Land Use Issues?

• Saving High Conservation Forests – Implementation crucially dependent on effective

national policies and effective implementation on all administrative levels

– RSPO, FSC etc. are important drivers, but do not present the solution

• Securing Formal and Informal Land Rights – Implementation crucially dependent on functioning

legal systems, documentation of formal and informal rights, etc.

– RSPO, FSC have put the issues on the agenda but cannot provide the capacities and the authority needed.


Private Standards as a Short-Cut


1. International Negotiation / UN level

2. Legislation in consumer country

4. Market-based governance

3. Legislation in producer country

Time consuming, blocked by North-South conflict

No tangible outcomes

In WTO/GATT context more obstacles than opportunities

Generally not an (easy) option

Generally no business case for producers

Generally not promising

Good multi-stakeholder endorsed standards within short time span, but limited market conversion

For the time being, the only real option, but not the final solution.

Implementing standards in legislation of prod. and cons. countries

Implementing in Consumer Country Policy/Legislation/Regulation

• EU Biofuels regulation: recognition of existing schemes in the context of certifying sustainable biofuels including: – Bonsucro, RTRS, RSB, – RSPO. – more on this in this conference

• Supporting development projects – sustainability criteria set by

development finance institutions (national, IFC, etc.)

– also referring to privately set standards (e.g. on food security, human rights).


EU Recognition of Private Certification Schemes


Implementing in Producer Country Policy/Regulation/Legislation

• Implementing privately set sustainability criteria = in the interest of major exporting countries – creating institutional conditions for

implementation, e.g. land rights/food security issues in FSC, RSPO

– implementing (parts of) standards in national legislation

• Partnerships in producing countries – Government – Standard initiatives – Producer – Consumer country governments

• Dutch/Indonesian, Malaysian partnerships on palm oil, aquaculture, etc.

• Voluntary Partnership Agreements under FLEGT

– Implementation partnerships along the entire supply chain (partly with development aid money): e.g. IDH Sustainable Trade Initiative with public, private players, incl. NGOs.


ISPO and MSPO are Not the Solution

• Indonesia and Malaysia have set their own national ‘sustainable palm oil’ standards/certification: – ISPO Indonesia, legally binding – MSPO Malaysia

• They can be a welcome complement to existing legislation and proliferation of best practice.

• However, they cannot replace RSPO: – as they do not have the required multi-stakeholder

buy-in – are not being trusted by either NGOs or companies

in major consumer markets and their organisations.


Dutch Government rejects MTCS


Questions

• Questions:

1. How do you see the role of Indonesia government in promoting sustainable agriculture, notably sustainable palm oil production?

2. What role do you see for market based standards such as RSPO, if any?

3. What role could Indonesian foreign policy play in the promotion of supply chains for sustainable commodities?


Summarising

I. Consumer Markets drive Sustainability of Commodity Production

II. Retailers and Consumer Goods Companies set Global Sustainability Standards in Cooperation with NGOs

III. RSPO has set the Global Standard for Sustainable Palm Oil, trusted by Consumer Markets

IV. Private sector standards, such as RSPO, contribute to the protection of land-related human rights

V. Implementation of RSPO and Similar Standards calls for Active Government Involvement


References

• Richard Edelman, Edelman Trust Barometer 2012 – Executive Summary, downloaded from http://edelmaneditions.com/wp-content/uploads/2012/01/Final-Brochure-1.16.pdf

• Marcus Colchester, Sophie Chao (eds.), Conflict or Consent – The Palm Oil Sector at the Crossroads, Forest Peoples Programme/Sawit Watch/Transformasi untuk Keadilan Indonesia, 2013, downloaded from http://www.forestpeoples.org/sites/fpp/files/publication/2013/11/conflict-or-consentenglishlowres.pdf

• Reinier de Man, Private Sector Driven Sustainability Standards, How can they Promote Sustainability in Third States?, in: Wybe Th. Douma, Steffen van der Velde (eds.), EU environmental norms and third countries: the EU as a role model?, CLEER Working Papers 2013/5. Download at http://www.rdeman.nl/site/download/2013-cleer-rdm.pdf

• Reinier de Man, Agricultural Commodities that Respect Land Rights and Food Security - How to Include Land Governance Issues in Sustainable Commodity Standards, paper presented at the 2012 World Bank Conference on Land and Poverty, Washington, April 23-26, 2012. Download at http://www.rdeman.nl/site/download/2012-04_World_Bank_paper_RdM.pdf

• Reinier de Man, Land Issues in Voluntary Standards for Investments in Agriculture, a discussion paper, The World Bank Annual Bank Conference on Land Policy and Administration, Washington, April 26 and 27, 2010. Download at http://www.rdeman.nl/site/download/2010%20World_Bank_deMan.pdf

• RSPO, Principles and Criteria for the Production of Sustainable Palm Oil, RSPO 2013, downloaded from http://www.rspo.org/resources/key-documents/certification/rspo-principles-and-criteria


http://edelmaneditions.com/wp-content/uploads/2012/01/Final-Brochure-1.16.pdf







http://www.forestpeoples.org/sites/fpp/files/publication/2013/11/conflict-or-consentenglishlowres.pdf





http://www.rdeman.nl/site/download/2013-cleer-rdm.pdf





http://www.rdeman.nl/site/download/2012-04_World_Bank_paper_RdM.pdf



http://www.rdeman.nl/site/download/2010 World_Bank_deMan.pdf

http://www.rspo.org/resources/key-documents/certification/rspo-principles-and-criteria










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