- The Indonesian Palm Oil Pledge (IPOP) was a sustainability commitment signed by Indonesia’s biggest palm oil refiners in 2014.
- Dave McLaughlin, the World Wildlife Fund’s acting senior vice president for sustainable food, argues that the Indonesian and Malaysian governments must do more to promote sustainability in an industry plagued by environmental destruction and illegal practices.
- This post is a commentary — the views expressed are those of the author.
Regardless of how conservationists and businesses feel about the effectiveness of the Indonesian Palm Oil Pledge (IPOP), its recent demise illustrates how government imposes a serious obstacle to meaningful change in the palm oil industry: the inability and in some cases, unwillingness, of local and national authorities to protect forests, workers, and communities.
Over the past several years, we have seen positive changes and initiatives emerge in the palm oil sector. Global brands and major oil producers have committed to eliminate deforestation, to stop draining peat swamps and burning peat forests, and to protect workers’ and communities’ rights. The industry is pushing stronger standards and certifications through such efforts as the Palm Oil Innovation Group and the Roundtable on Sustainable Palm Oil’s RSPO NEXT.
Despite this progress, however, deforestation in Indonesia and Malaysia — together responsible for about 85% of the world’s palm oil — persists. Last summer, thousands of fires cleared the way for more oil palm plantations in Indonesia, daily emitting as much greenhouse gas as the entire U.S. economy. For all its efforts, the private sector alone cannot protect forests, peatlands, and basic human rights without stronger government regulation and enforcement.
In response to the efforts by individual companies and industry coalitions, the governments of Indonesia and Malaysia have been communicating mixed messages. On the one hand, the government of Indonesia has extended its moratorium on new palm oil developments on peat and even established an agency to restore degraded peat area. Both Indonesia and Malaysia have introduced national certifications schemes in an attempt to eliminate the worst practices within their industries.
On the other hand, these governments have also started to push back against the progressive parts of an industry that they perceive as changing too quickly and too radically. They created an alternative to IPOP that did not strive for deforestation-free palm oil. As Reuters reported last October, Indonesia’s chief natural resources minister Rizal Ramli told his parliament: “This is an example of how to fight for our sovereignty. We are the biggest palm oil producer. Why [should] the consumers from the developed countries set the standard for us as they want?”
Of significant concern, the Indonesian government threatened IPOP signatories with antitrust action, leading ultimately to the coerced withdrawal of major palm oil companies from IPOP in July.
Ultimately, it is unclear whether Indonesia and Malaysia envision a robust palm oil sector without deforestation. What is clear, however, is that the absence of governance has created an environment in which the industry’s worst performers can gain significant financial advantage over their conscientious competitors. According to the recent Eyes on the Forest report, “No One is Safe,” even national parks are being overrun by palm oil and the government has done nothing. Palm oil buyers are seeing this behavior and setting their business strategies accordingly. Unless this changes, global brands will shift out of the palm oil market altogether. This is starting to play out in the U.S. and parts of the European market where some companies are choosing to substitute palm oil with other edible oils. Even the French parliament considered an additional tax on palm oil.
The answer is not more nationalistic criticism of responsible industry players that are committed to improved practices. Neither is the answer to stifle innovation. Rather, governments should create a level playing field where unsustainable practices are eliminated and every company is able to act responsibly without penalty.
Indonesian and Malaysian authorities have stated that they are interested in stabilizing palm oil prices, which have been in freefall for years. Since its peak in February 2011, the price of a metric ton of palm oil dropped from $1,248 to $483 in September 2015 — a decline of more than 60%. By enabling unchecked deforestation and expansion, however, they only serve to keep downward pressure on palm oil prices.
A new, jurisdictional approach is starting to take shape in places like the Malaysian state of Sabah and the Indonesian province of Central Kalimantan. There, the governments are working together with key stakeholders to implement their pledge that all palm oil produced there must meet RSPO certification standards, galvanizing both large multinational plantation owners and smallholders. WWF applauds these authorities and is hopeful that these efforts are successful.
Yet much more needs to be done. WWF urges the industry to involve government in a transparent dialogue to shed light on the governance issues that hinder their own efforts to improve as well as threaten the sustainability and long-term viability of the palm oil industry as a whole, and ultimately seek solutions. Access to markets is increasingly becoming an issue.
WWF also urges Indonesian and Malaysian authorities to join the NGOs, IPOP signatories, the Indonesian Chamber of Commerce, the Tropical Forest Alliance (of which Indonesia is a member) and the national and global food leaders from plantation to plate that have all committed to make deforestation-free palm oil. By exercising strong governance, they can work together to improve the performance and reputation of palm oil production, preserve their vital natural resources, and protect workers and communities.