Palm oil: how to balance development for smallholders and carbon

Nathalie Rasmussen By Nathalie Rasmussen, Head of Business Conduct Engagement at GES

With the COP21 getting a lot of attention and carbon being on top of everyone’s agenda, GES has just met with palm oil producers and traders in Malaysia and Singapore as a part of GES’ Palm Oil Engagement. We visited straight after the Roundtable for Sustainable Palm Oil (RSPO) 13th annual conference in Kuala Lumpur, where around 800 participants from palm oil growers, buyers, traders, NGOs and governments discussed high carbon stock, RSPO certifications, freedom of association, supply chain and not least the haze.

The recent haze in Singapore and Malaysia, which is caused by the burning of forest in Sumatra (Indonesia) and has blown across the Strait of Malacca, as happens every year, has been particularly bad this year, probably because of the El Niño drought. In 2014, Singapore even adopted the so-called “Haze Act” which gives Singaporeans the possibility to sue companies that are responsible for the damage people suffer due to the haze. The tension between Singapore and Indonesia has risen after stores in Singapore in October 2015 took products produced by APP (Asia Pulp and Paper, a subsidiary of the Indonesian conglomerate Sinar Mas group) off the shelves claiming that the company had violated the Haze Act, which has extraterritorial jurisdiction. Indonesia in turn has asked companies to retract their ‘no deforestation’ commitments in an attempt to protect smallholders that supply to these companies, who Indonesia fears would suffer from not being able to develop the land. This affects several Malaysian and Singaporean companies involved in palm oil, such as Wilmar, GAR and Sime Darby.

In the palm oil industry, the carbon discussion mostly revolves around the question of how to calculate the high carbon stock (HCS) in the areas companies want to clear in order to grow oil palms and if/how to balance the development for the local people with CO2 emissions. Peatlands, which are very carbon rich, are especially problematic when converted into farmland, as the process intensifies greenhouse gas emissions. In Indonesia and Malaysia, the largest producers of palm oil, it is illegal to clear peatlands. The problem with the high carbon stock, or HCS, calculations is that there does not seem to be consensus on the methodology and two different types have been developed: one developed by palm oil producers with TFT called the High Carbon Stock Approach and another by palm oil producers and buyers that have joined the Sustainable Palm Oil Manifesto (SPOM). Even though the different actors have explained the pros and cons and aspects of their respective methodologies, it is difficult to assess which is more appropriate. Indisputably, palm oil producers and buyers are facing a number of issues and need to reach agreement with different stakeholders, including smallholders, in order to find a sustainable solution.  GES will follow the discussions closely and continues to engage with companies to ensure compliance with international standards regarding both social and environmental aspects.

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