How your company can get serious about responsible palm oil
A wave of companies, from Procter & Gamble to Cargill, has committed to sourcing responsibly produced palm oil; yet problems persist in their supply chains. Forests and peatlands continue to disappear at an astounding rate and workers rights and land rights remain under threat.
How then do companies address this implementation gap, and ensure that their commitments do more than sit on a shelf? How do they guard against reputational risk and potential supply chain disruptions as consumers and investors increasingly seek greater accountability? And how do stakeholders ensure that responsible palm oil commitments improve the livelihoods of smallholder farmers and plantation workers, reduce greenhouse gas emissions and strengthen indigenous and community land rights?
Improved transparency and supply chain visibility are key ingredients. To help on that front, a diverse group of 18 nonprofit organizations and investor groups from Rainforest Action Network, to CDP, to Global Forest Watch, to Zoological Society of London, to Oxfam, came together to develop common reporting guidance for companies on their responsible palm oil pledges. Our perspectives differ, but all agreed that we could create more consistency and clarity by collaborating than each of us could on our own.
The guidance, which is not a separate scorecard or survey, is intended to inform companies about what they should be reporting on, as well as provide a framework for supply chain engagement about challenges in the palm oil sector. Investors will find the disclosure useful.
Here is a sample of what’s included and why it matters:
Supply chain transparency
Transparency and mapping enable companies and their stakeholders to understand where issues are occurring. Supplier names; plantations, mills and concessions maps; and traceability levels are vital information that can help stakeholders improve practices on the ground.
Some companies are already taking meaningful, if incremental, steps forward. Olam is the most recent of many traders to list top suppliers, and downstream brands such as Nestlé, Mars and Kellogg (PDF) already have done so. Many growers, processors and traders publicly map their mills and are beginning to submit concession maps to the Roundtable for Sustainable Palm Oil's New Planting Procedure, and plan to do so through the High Carbon Stock Approach (HCSA).
Companies are encouraged to refer to the Free and Fair Labor Principles (PDF) to inform their reporting on labor issues, and to focus on a few risk indicators, specifically: temporary workers (including any imbalances by gender); union representation; document retention; and recruitment fees.
A current practice worth highlighting is R.E.A. Holdings’ (PDF) reporting on the percentage of women in its workforce, broken down by casual vs. permanent. This disclosure can help shed light on whether women are more frequently hired as casual workers.
Many of the palm oil industry’s most significant impacts occur in new land development. Companies need to demonstrate that development does not take place without the Free, Prior and Informed Consent (FPIC) of local communities, nor with the clearing of forests and peatlands. The reporting guidance lays out expectations for clear procedures regarding land expansion as well as evidence of compliance. For the latter, companies are encouraged to submit maps of expansion areas for third party assessment through the HCSA, and to ask their suppliers to do the same.
Growers, processors and traders are expected to have transparent mechanisms for responding to grievances from landowners and community members that arise both within their own operations and from third party suppliers. Such transparency can demonstrate that the grievance mechanism is accessible to all stakeholders in a supply chain, and that the company is addressing grievances in a timely manner and taking the appropriate assessment, remedy and enforcement actions. Cargill, Wilmar (PDF) and Musim Mas already have grievance mechanisms in place and report on their responses.
Different roles across the supply chain
Recognizing that a "one size fits all" approach will not work across the industry, the guidance provides tailored recommendations for different supply chain segments.
For example, manufacturers are encouraged to report on their own activities as well as the direct performance of their suppliers. Some already are moving in this direction. Mondelez (PDF) expects suppliers to have a grievance and due diligence procedure in place, to report on community consultation and FPIC, and to map and risk assess all owned mills and concessions on Global Forest Watch. For retailers, the guidance focuses on reporting related to traders and importers in their supply chain, but less on traceability.
Creating enabling conditions through public policies and enforcement mechanisms for responsible palm oil production and sourcing is critical. The guidance recommends that companies disclose how they are engaging government or certification bodies, supporting jurisdictional approaches, and other collaborative activities.
Transparency, like traceability, cannot alone solve the enormous on-the-ground challenges that companies face in realizing their responsible palm oil goals. But neither can these challenges be solved without the enhanced visibility that fosters shared understanding and builds accountability. All the organizations behind this guidance hope that it will help stakeholders to understand company implementation plans and accountability systems so that they can zero in on the gaps and help make responsible palm oil a reality.