Study on the environmental impact

of palm oil consumption and on

existing sustainability standards
For European Commission, DG Environment

(Study contract No.: 07.0201/2016/743217/ETU/ENV.F3)

Final Report and Appendices

Written by Mark Barthel, Steve Jennings, Will Schreiber, Richard Sheane and Sam Royston (3Keel
LLP) and James Fry, Yu Leng Khor, Julian McGill (LMC International Ltd. (February – 2018)
 Study on the environmental impact of palm oil consumption and
on existing sustainability standards

Report prepared by:

2017 EUR EN
 Study on the environmental impact
of palm oil consumption and on
existing sustainability standards

Final Report

2017 EUR EN
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PDF ISBN 978-92-79-80226-3 doi:10.2779/530244 KH-02-18-208-EN-N

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Table of contents

1. ABSTRACT ........................................................................................................................... 13

2. EXECUTIVE SUMMARY ............................................................................................... 14

3. GLOSSARY ........................................................................................................................... 31

4. STUDY BACKGROUND AND INTRODUCTION............................................ 35

5. STUDY METHODOLOGY ............................................................................................. 37

5.1. Structure ...................................................................................................................................... 37

5.2. Coverage ...................................................................................................................................... 37

5.3. Conclusions ................................................................................................................................. 38

6. INTRODUCTION TO THE OIL PALM AND ITS PRODUCTS ............... 39

7. ENVIRONMENTAL, SOCIAL IMPACTS AND MARKET ASPECTS OF

PALM OIL ...................................................................................................................................... 48

7.1. Environmental impacts ......................................................................................................... 48

7.1.1. Deforestation .......................................................................................................................... 48
7.1.2. Biodiversity loss ................................................................................................................... 53
7.1.3. Peat land conversion ......................................................................................................... 56
7.1.4. Greenhouse gas emissions ............................................................................................. 60
7.1.5. Use of fire and its impacts .............................................................................................. 65
7.1.6. Air pollution ............................................................................................................................. 67
7.1.7. Water pollution ..................................................................................................................... 69
7.1.8. Impact of changes in commodities prices on deforestation and
peatland drainage ................................................................................................................................. 71

7.2. Social Impacts ........................................................................................................................... 76

7.2.1. Land use rights ...................................................................................................................... 76
7.2.2. Smallholders ........................................................................................................................... 79
7.2.3. Forced and Child labour ................................................................................................... 85
7.2.4. Terms and conditions of labour ................................................................................... 87

7.3. Economic issues and economic sustainability of palm oil production .......... 88
7.3.1. Micro-economic case studies on income and wealth distribution .......... 88
7.3.2. Incomes and poverty ......................................................................................................... 89
7.3.3. Wealth distribution ............................................................................................................. 91
7.3.4. Malaysia’s FELDA scheme ............................................................................................... 91
7.3.5. Indonesia smallholder and corporate-led growth ............................................ 92
7.3.6. Nigeria dominant smallholder sector contrasts with Liberia’s plans .... 93
7.3.7. Conclusions on wealth distribution in smallholder schemes ..................... 94
7.3.8. Including Socio-economic Considerations in the High Carbon Stock
(HCS+) Study ........................................................................................................................................... 95
7.3.9. Plantation employment in Malaysia .......................................................................... 96

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 7.3.10. The Indonesian plantation sector and its employment ............................ 100
7.3.11. Worker incomes in the palm oil sector vs. traditional incomes .......... 102
7.3.12. Input-output analysis and multipliers for oil palm ..................................... 102
7.3.13. Historical costs, palm oil prices vs. production costs ................................ 103

7.4. Analysis of palm oil statistics, trade flows, trends and end users of palm
oil, including comparison with other vegetable oils ......................................................... 104
7.4.1. Supply and demand of major palm oil producers ........................................... 104
7.4.2. Vegetable oil supply and demand forecasts ...................................................... 106

7.5. Current forecasts for vegetable oils world market & projected evolution
of end uses ............................................................................................................................................ 109

8. CERTIFICATION SCHEMES, LEGISLATION AND VOLUNTARY

INITIATIVES ............................................................................................................................111

8.1. Analysis of existing palm oil sustainability certification systems ................. 111
8.1.1. Description of certification schemes relevant to oil palm ......................... 113
8.1.2. Comparison of RSPO, ISCC, ISPO and MSPO ..................................................... 123

8.2. Supply and demand of certified oil palm products ............................................... 131
8.2.1. Certification of palm products by country and end-use .............................. 131
8.2.2. Demand for products and types of certification .............................................. 136
8.2.3. RSPO premia, costs & margins .................................................................................. 136

8.3. Analysis of palm oil certification systems and EU/UN environmental

objectives ............................................................................................................................................... 142
8.3.1. Review of policy instruments and analysis of principal objectives ...... 142
8.3.2. Analysis between certification schemes and EU/UN policy objectives152

8.4. Evaluation of existing legislation and enforcement regimes (or lack

thereof) of direct interest to oil palm cultivation, production and trade in major
producing countries .......................................................................................................................... 168
8.4.1. Case Study Countries ....................................................................................................... 168
8.4.2. The influence of government legislation on sustainable production .. 168
8.4.3. The reality of the legal framework governing sustainability ................... 169
8.4.4. Regulatory context............................................................................................................ 169
8.4.5. Laws and regulations – a brief review .................................................................. 172
8.4.6. Case studies .......................................................................................................................... 173
8.4.7. Enforcement of regulations ......................................................................................... 182

8.5. Analysis of aspects of RSPO Standards left to national jurisdictions; and

summary and analysis of existing initiatives relating to palm oil in the EU,
individual EU Member States, India & China ........................................................................ 189
8.5.1. RSPO National Interpretations .................................................................................. 189
8.5.2. Implementation questions ........................................................................................... 191
8.5.3. Jurisdictional approaches ............................................................................................. 193
8.5.4. Outlook ..................................................................................................................................... 195
8.5.5. Sustainability initiatives at destination markets ............................................ 195
8.5.6. Conclusions............................................................................................................................ 204

8.6. Review of voluntary initiatives and commitments relating to palm oil in

the public and private sectors ..................................................................................................... 206
8.6.1. Introduction .......................................................................................................................... 206
8.6.2. Methods ................................................................................................................................... 207
8.6.3. Public and private sector, NGO and collective voluntary initiatives

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 and commitments ................................................................................................................................ 209
8.6.4. Studies on the progress being made in voluntary initiatives and
commitments ......................................................................................................................................... 225
8.6.5. Palm-free initiatives ......................................................................................................... 231
8.6.6. Challenges and barriers ................................................................................................. 232
8.6.7. Ways forward ....................................................................................................................... 234
8.6.8. Summary and conclusions ............................................................................................ 236

9. SUMMARY, CONCLUSIONS, KEY FINDINGS AND INSIGHTS .....239

9.1. Summary, conclusions, key findings and insights ................................................ 239

9.2. The economics and agronomics of oil palm cultivation and palm oil
production .............................................................................................................................................. 239

9.3. The environmental impacts of oil palm cultivation and palm oil production240
9.3.1. Deforestation ........................................................................................................................ 240
9.3.2. Biodiversity loss ................................................................................................................. 242
9.3.3. Peatland conversion ......................................................................................................... 243
9.3.4. Greenhouse gas emissions ........................................................................................... 243
9.3.5. The use of fire and its impacts ................................................................................... 245
9.3.6. Air pollution and haze ..................................................................................................... 245
9.3.7. Water pollution ................................................................................................................... 246

9.4. The economic and social impacts of oil palm cultivation and palm oil
production .............................................................................................................................................. 246
9.4.1. The effect of oil palm on smallholders’ livelihoods, income and
wellbeing .................................................................................................................................................. 246
9.4.2. Land use rights .................................................................................................................... 247
9.4.3. Forced or child labour ..................................................................................................... 248
9.4.4. Terms and conditions of labour ................................................................................. 249

9.5. The role and potential of existing palm oil sustainability certification
schemes .................................................................................................................................................. 250
9.5.1. Certification process of the four schemes ........................................................... 250
9.5.2. Analysis of palm oil certification systems and the environmental
objectives in selected EU and UN policy instruments .................................................... 252
9.5.3. Extent of up-take of certified sustainable palm oil........................................ 253
9.5.4. Margins for CSPO and costs of certification ....................................................... 254

9.6. Analysis of existing legislation and enforcement regimes in major

producing countries .......................................................................................................................... 254
9.6.1. Extent of existing legislation ...................................................................................... 254
9.6.2. Enforcement of existing legislation ........................................................................ 255

9.7. The review of voluntary initiatives and commitments relating to palm oil257

9.8. General conclusions and considerations .................................................................... 260

Table of tables
Table 1: Summary of certification processes within four palm oil certification schemes ..22

Table 2: Summary of provisions within schemes against environmental and social

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themes................................................................................................................24

Table 3 RSPO and ISCC market uptake of certified palm oil, 2015 ..............................25

Table 4: Overview of legislation in the six case study countries ..................................28

Table 5: Information quality assessment for oil palm cultivation as a major driver of
deforestation .......................................................................................................53

Table 6: Information quality assessment for oil palm cultivation as a significant cause of
biodiversity loss ...................................................................................................56

Table 7: Land cover distribution in the peatlands of Peninsular Malaysia, Sumatra and
Borneo in 2015 (‘000 hectares), adapted from Miettinen et al. (2016) and others ........59

Table 8: Information quality assessment for oil palm cultivation contributes towards
environmental problems associated with peatland conversion. ...................................60

Table 9: Information quality assessment for greenhouse gas emissions from conversion
of various vegetation types to oil palm plantations ....................................................62

Table 10: Information quality assessment for greenhouse gas emissions from mills and
plantation activities...............................................................................................63

Table 11: Information quality for the carbon payback time of palm oil biofuels on original
vegetation type ....................................................................................................65

Table 12: Information quality assessment for the contribution of palm oil cultivation to
forest fires ...........................................................................................................67

Table 13: Information quality assessment for the impact of transboundary haze on
health and economic activity in Southeast Asia ........................................................69

Table 14: Information quality assessment for the evidence that oil palm cultivation and
milling causes significant water pollution .................................................................71

Table 15: Information quality assessment for evidence that oil palm has expanded on to
lands traditionally used by indigenous and local people in Indonesia. ..........................79

Table 16: Modes of oil palm production (after Cramb & McCarthy, 2016) .....................80

Table 17: Returns on oil palm cultivation for smallholders expressed in terms of land and
their labour inputs compared to other crops in Bungo District, Indonesia, 2007-9 (after
Feintrenie et al., 2010) .........................................................................................81

Table 18: Comparison of smallholder and estate yields of fresh fruit bunches in Malaysia
and Indonesia ......................................................................................................82

Table 19: Information quality assessment for smallholders receiving a decent income
from oil palm cultivation ........................................................................................85

Table 20: Information quality assessment for the presence of widespread forced and
child labour within the palm oil sector .....................................................................86

Table 21: Information quality assessment for the terms and conditions of labour for oil
palm estate workers being below norms ..................................................................88

Table 22: Positive and negative implications of oil palm on income and wealth

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distribution ..........................................................................................................89

Table 23: Smallholder income indicators for Indonesia and Malaysia ...........................89

Table 24: Estimated monthly income sources for 4 ha oil palm settler (RM), Khor et al.
(2015) ................................................................................................................91

Table 25: Information quality assessment for improved income from oil palm cultivation94

Table 26: Information quality assessment for rising income inequality from oil palm
cultivation ...........................................................................................................94

Table 27: Planted areas of mature oil palm by sector, Indonesia (hectares) ............... 100

Table 28: Palm oil output by sector, Indonesia (tonnes) .......................................... 101

Table 29: Yields of CPO per hectare, by sector, Indonesia, tonnes per mature hectare 101

Table 30: Direct employment in the Indonesian palm sector .................................... 101

Table 31: Comparison of incomes in two West African examples and two Indonesian
examples, US$ per day ....................................................................................... 102

Table 32: World forecast of vegetable oil demand by end use (million tonnes) ........... 110

Table 33: World forecasts of demand for major vegetable oils (million tonnes) ........... 110

Table 34: Architecture of sustainability certification ................................................ 111

Table 35: RSPO at a glance ................................................................................. 115

Table 36: ISCC at a glance .................................................................................. 117

Table 37: ISPO at a glance .................................................................................. 120

Table 38: MSPO at a glance ................................................................................. 122

Table 39: Summary of coverage of environmental themes in the standards of the main
palm oil certification schemes .............................................................................. 129

Table 40: Summary of coverage of social themes within the standards underlying the
main palm oil certification schemes....................................................................... 130

Table 41: Market uptake or RSPO and ISCC certified palm oil in 2015 ....................... 131

Table 42: EU food sector volume (2010-2014) and RSPO indicators for the Netherlands
and selected companies, 2014 ............................................................................. 134

Table 43: Various end-uses and RSPO certification indicators for key companies, 2014135

Table 44: RSPO cost and premia indicators ($ per tonne), 2015 ............................... 139

Table 45: Summary of identified policy instruments and abbreviations ...................... 144

Table 46: Summary of key policy objectives by policy instrument ............................. 148

Table 47: Comparison of EU-RED criteria on deforestation and the requirements of the
RSPO, ISCC, ISPO and MSPO standards ................................................................ 153

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Table 48: Summary table of the analysis of the RSPO standard and environmental
objectives of assessed EU/UN and regional policy instruments.................................. 159

Table 49: Summary table of the analysis of the RSPO standard and social objectives of
assessed EU/UN and regional policy instruments .................................................... 160

Table 50: Summary table of the analysis of the ISCC (EU) standard and environmental
objectives of assessed EU/UN and regional policy instruments.................................. 161

Table 51: Summary table of the analysis of the ISCC (EU) standard and social objectives
of assessed EU/UN and regional policy instruments ................................................. 162

Table 52: Summary table of the analysis of the ISPO standard and environmental
objectives of assessed EU/UN and regional policy instruments.................................. 163

Table 53: Summary table of the analysis of the ISPO standard and social objectives of
assessed EU/UN and regional policy instruments .................................................... 164

Table 54: Summary table of the analysis of the MSPO standard and environmental
objectives of assessed EU/UN and regional policy instruments.................................. 165

Table 55: Summary table of the analysis of the MSPO standard and social objectives of
assessed EU/UN and regional policy instruments .................................................... 166

Table 56: Case study countries’ oil palm areas in 2016 (in hectares) ......................... 168

Table 57: Overview of legislation in the six case study countries .............................. 172

Table 58: Preliminary country rating by sustainability theme.................................... 183

Table 59: World Bank Governance Rankings for the six case study countries ............. 186

Table 60: Transparency International Corruption Ratings for the six case study countries187

Table 61: National Indicators added to the RSPO P&C 2013 ..................................... 190

Table 62: National adoption of the RSPO’s P&Cs and the number of laws governing the
behaviour of the oil palm sector ........................................................................... 191

Table 63: The Consumer Goods Forum Zero Net Deforestation By 2020 Commitment . 210

Table 64: Defining zero net deforestation .............................................................. 211

Table 65: Consumer Goods Forum Zero Net Deforestation Commitment .................... 211

Table 66: Overview of the Tropical Forest Alliance 2020 .......................................... 214

Table 67: Overview of the New York Declaration on Forests (NYDF) .......................... 216

Table 68: Highlights from the New York Declaration on Forests 2016 Progress Report . 217

Table 69: Overview of the Sustainable Palm Oil Manifesto (SPOM) ............................ 218

Table 70: European national voluntary initiatives for sustainable palm oil use ............ 221

Table 71: Case study on the use of Production, Protection and Inclusion (PPI) Compacts
as landscape scale approaches to forest protection ................................................. 222

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Table 72: Summary of key findings from the 2017 Supply Change report .................. 225

Table 73: Highest number of companies and commitments by group initiative ........... 226

Table 74: Number of organisations participating in different palm-oil-related voluntary

initiatives, as reported in 2016 Supply Change report ............................................. 227

Table 75: Summary of the key findings from the FERN Company Promises report....... 228

Table 76: Summary of the key findings from the 2016 WWF Palm Oil Buyers Scorecard230

Table 77: Summary of certification processes within four palm oil certification schemes251

Table 78: Summary of provisions within standards against environmental and social
themes. ............................................................................................................ 252

Table 79: RSPO and ISCC market uptake of certified palm oil, 2015 ......................... 253

Table 80: Overview of legislation in the six case study countries .............................. 254

Table of figures
Figure 1: Typology of the main forms of voluntary initiative .......................................27

Figure 2: Area suitable for planting oil palm .............................................................39

Figure 3: Share of oil palm area (a) and growth in area under oil palm (b) ..................40

Figure 4: Interrelation of smallholders and plantation companies ................................41

Figure 5: Flow diagram of FFB processing ................................................................42

Figure 6: End uses of different PKO and CPO fractions...............................................45

Figure 7: Indicative share of labour in total costs by oil crops ....................................46

Figure 8: Current and forecasted (2080) forest areas vulnerable to deforestation from oil
palm ...................................................................................................................50

Figure 9: Greenhouse gas payback time for biodiesel from oil palm plantations converted
from different vegetation types. .............................................................................64

Figure 10: Malaysian demand for germinated seeds vs. the local CPO price .................73

Figure 11: Indonesian demand for oil palm seeds vs. the local CPO price .....................73

Figure 12: Net change in oil palm areas and land use conversion – Indonesia ..............75

Figure 13: Net change in change in oil palm areas and land use conversion - Malaysia ..75

Figure 14: National Felda settlers’ average net monthly income (1979-2004), adapted
from Lee and Bahrin (2006) ...................................................................................90

Figure 15: Composition of welfare gains per tonne of CPO produced by two plantations

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(numbered 1 and 2) in West Africa, Indonesia and Malaysia ......................................95

Figure 16: Employment by job category on Malaysian plantations, 2012......................97

Figure 17: Nationality of workers on Malaysian plantations, 2012 ...............................98

Figure 18: Shares of foreign workers in different tasks, Total Malaysia, 2012 ............. 100

Figure 19: World average CPO production costs, ex-mill, versus prices, US$ per tonne 103

Figure 20: Palm oil production by country .............................................................. 104

Figure 21: Share of world palm oil production by country Share of world palm oil
production by country ......................................................................................... 104

Figure 22: Palm oil consumption by country ........................................................... 105

Figure 23: Share of world palm oil consumption by country ..................................... 105

Figure 24: Palm oil exports by country .................................................................. 105

Figure 25: Share of world palm oil exports by country ............................................. 105

Figure 26: Palm oil imports by country .................................................................. 105

Figure 27: Share of world palm oil imports by country ............................................ 105

Figure 28: Forecast of food oil consumption by type of oil for major markets ............. 108

Figure 29: Growth in global demand for vegetable oils, 1974/75-2016/17 ................. 109

Figure 30: Summary of certification processes within four palm oil certification schemes125

Figure 31: Summary of provisions within standards against environmental and social
themes. ............................................................................................................ 126

Figure 32: RSPO Supply Chain Certified facilities, 2015 ........................................... 132

Figure 33: RSPO B&C Credits: CSPO and CSPKO (on-market trades) premia .............. 141

Figure 34: Schematic summary of policy instrument interactions .............................. 151

Figure 35: Dutch food industry sustainable palm oil demand .................................... 199

Figure 36: Dutch food industry sustainable palm oil progression ............................... 200

Figure 37: RSPO Supply Chain Certified (SCC) facilities, 2015 .................................. 202

Figure 38: typology of the main forms of voluntary initiative .................................... 209

Figure 39: Five-step process from high-level individual and collective commitments to
actions that lead to deforestation-free supply chains ............................................... 213

Figure 40: The growth in planted areas in Indonesia, by sector ................................ 256

Figure 41: typology of the main forms of voluntary initiative .................................... 258

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1. Abstract

This report reviews environmental, social and economic aspects of palm oil production
and consumption, and evaluates existing palm oil sustainability initiatives.

There is clear evidence that the expansion of oil palm cultivation has resulted in
deforestation, biodiversity loss, and net greenhouse gas (GHG) emissions. Oil palm has in
some instances expanded onto land traditionally used by indigenous and local
communities. Labour abuses, including child and forced labour, are reported on a regular
basis, but the evidence on how commonplace such practices are remains incomplete.

Oil palm cultivation often provides a higher income for smallholders than other
livelihoods, and thus contributes to the development of rural economies and to the
overall economy of producing countries through its linkages. These economic benefits
must be set against potential conflicts and the loss of ecosystem benefits, such as non-
timber forest products.

These environmental and social impacts are not exclusive to oil palm. They would apply
in differing degrees to other crops planted on the same land. Furthermore, other sources
of vegetable oils, among which the most important is soybeans, occupy much larger
areas per tonne of oil produced, and have their own environmental and social impacts.
Among certification schemes, the ISCC (EU) certification system generally addresses the
environmental objectives of a range of EU and UN policies, principally because of its
stringent definition of High Carbon Stock forests. The RSPO certification system
addresses to the largest extent policy objectives relating to human, land, and labour
rights. The current ISPO standard least addresses the policy objectives under
consideration in this study, with limited protection for forest, and MSPO occupies an
intermediate position. The governance and transparency of those four schemes, hence
their level of independence vis-à-vis relevant interest groups, also vary.

Although most producer countries have introduced environmental and social regulations
relating to palm oil, enforcement is often selective, incomplete or ineffective.

Europe remains the leading market for sustainably sourced palm oil, but progress on the
growing number of voluntary initiatives and commitments has been slow. There is limited
penetration of sustainable palm oil in India and China.

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2. Executive summary

The objectives of this study are to:

1. Broaden the knowledge base on the environmental, social and economic aspects
of oil palm production and palm oil consumption, trade flows in palm kernel oil
(PKO), and actions undertaken by economic operators, EU governments and third
parties (in particular India and China) focusing on palm oil.
2. Analyse existing sustainability standards and schemes (including RSPO, ISPO and
MSPO), evaluate their completeness (especially concerning biodiversity and
carbon aspects) and map such schemes and how they relate to the environmental
objectives in relevant EU and international policy instruments.
3. Summarise and examine existing initiatives at the EU level and in EU Member
States, as well as in India and China, concerning sustainable production and
consumption of palm oil.

We start with an overview of the economics and agronomics of the oil palm. We then
look at each of the issues above in turn.

1. Overview of the economics and agronomics of the oil palm

A detailed description of the economics and agronomics of the oil palm is provided in
Section 4. For the purpose of this summary, however, we will briefly outline the most
important fundamentals of the oil palm.

Palm oil today is by far the most important source of vegetable oil in the world, having
overtaken soybean-oil in 2006. Rapeseed oil and sunflower oil are in third and fourth
place, respectively. The world is reliant on palm oil to satisfy growing global
demand for vegetable oil (see Section 7.4.1). Because of its high yield per hectare,
the land area requirement for palm oil is lower than that of competing crops. To increase
vegetable oil production by the same amount by relying on competing oilseeds instead of
oil palm will require 5-8 times larger areas of land.

The oil palm grows predominantly within a 5-10o belt from the Equator. Indonesia and
Malaysia dominate with close to 90% of world output. Growing area, though much more
modest, has also expanded in West Africa and Central America. Indonesia and Malaysia
will remain the major producers for the foreseeable future. As a result, while more
countries are expected to play an increasingly important role in the future,
discussion of the oil palm in this study cannot disregard the key role of
Indonesia and Malaysia as the most visible examples of the impact of oil palm
development.

The Indonesian Association of Palm Oil Producers (GAPKI) projects a 50% increase in
output between 2014 and 2025, in part due to the growing maturity of young estates,
while the FAO predicts a doubling of vegetable oils consumption between 2010 and 2050.

Oil palm is a very productive crop, with yields of oil per hectare per annum that are much
greater than for other oil crops. The high yield of the oil palm means palm oil
requires less area than competing oil crops and makes it a very attractive
source of income for smallholder farmers, with the added attraction that it is
harvested year round, thereby smoothing the incomes of farmers over the year.

The production of oil palm is split between plantations and small holders, and plantations
are required to include land for smallholders in many countries. The contribution to palm
oil production from smallholders differs depending on the country. In South East Asia,

2. Executive summary
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roughly 60% of the palm oil comes from the larger plantation companies (privately
owned estates) and 40% from smallholders.

Oil palms produce fresh fruit bunches (FFB) which are harvested at intervals that are
ideally 7 to 10 days in duration throughout the 20-25 years of the economic life of the
palm after the oil palms reach the age of 3-4 years. As there has been limited success in
mechanisation to date, oil palm cultivation and harvesting is very labour intensive, which
is a major financial disadvantage. To deal with the high labour requirement of the
oil palm, plantations often rely on large amounts of migrant labour (see Section
7.3.8).

The relationship between plantations and smallholders is built on the fact that the FFB
produced from these smallholders’ plantations is processed in company mills alongside
the FFB produced from the company’s plantation. The FFB deteriorate quickly after
harvesting (typically within 24 hours), which limits the distance they can be
transported. In addition, the company may provide smallholders with technical support
and subsidised inputs, such as fertiliser, as high and consistent fertiliser
applications are required to maintain yields once harvesting commences.

In order to maximise the oil extraction rate and ensure optimum oil quality, stringent
plantation management, strict harvesting standards and efficient processing of the fresh
fruit bunches (FFB) are critical. The complexity of the supply chain necessitates
close co-operation between smallholders, plantations, mills and intermediaries.
Traceability remains challenging from the farm to the mill.

The oil palm produces two chemically distinct oils - crude palm oil (CPO) and palm kernel
oil (PKO):

 Palm kernel oil (PKO) is the primary feedstock for the production of natural fatty
alcohols, which are widely processed into products such as shampoos and liquid
detergents. In addition, palm kernel oil is used in specialist food applications.
 Crude palm oil (CPO) is transformed into a variety of different products, including
biodiesel, refined palm oil for frying and specialist usage in confectionary, baking
and spreads.

The versatility of palm kernel oil and palm oil means that they are found in a
vast variety of different consumer products.

Importantly palm oil does not require artificial hardening, via hydrogenation, for use as a
food in hard fat applications. Since hydrogenation creates trans-fats, which are
considered unhealthy and have stringent incorporation limits in many markets, palm oil is
widely used as a naturally hard fat in food products. Therefore, palm oil is currently
important in the production of confectionery, snack foods and many baked
goods in countries, particularly in markets where products are required to be
trans-fat free.

India is the largest consumer of palm oil almost all of which is imported. Among high-
income consumer markets, only the EU (ranked third) and the US (ranked tenth) appear
in the top ten palm oil consumers. All high-income countries together consume one sixth
of world palm oil output. The remaining five sixths are consumed by middle and low
income countries. Asia alone consumes two thirds of the world’s palm oil supply. The
bulk of palm oil consumption and consumption growth is likely to occur in the
developing world (see Section 7.4.1).

2. Environmental, economic & social impacts of the oil palm

a) Environmental impacts

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There is a high degree of confidence that the expansion of palm oil cultivation has
resulted in deforestation, particularly in Indonesia and Malaysia (see Section
7.1.1). Estimates for the proportion of deforestation caused by the expansion of oil palm
cultivation in Indonesia range from 11% (between 2000 and 2010) to a maximum of
16% (between 1990 and 2005).1 2

The total area under oil palm in Indonesia and Malaysia has increased from 2.6 million
hectares in 1990 to over 15 million hectares in 2014 (of which just over 10 million
hectares was in Indonesia) roughly 40% of which was farmed by smallholders. Two-
thirds of the forest area converted to oil palm plantations is estimated to be caused by
3
global trade in palm oil. The EU alone was estimated to be responsible for 0.9 million
hectares of embodied deforestation through its imports of palm oil between 1980 and
4
2000.

Remote sensing studies of a subset of plantations in 20 countries suggests that around

45% of oil palm plantations in Southeast Asia came from areas that were forests in 1989.
In other regions, the planting on forested areas appears to have been lower – at 31% in
South America, 7% in Africa and 2% in Central America.5

Globally, an estimated 234 million hectares of available land is suitable for palm oil
cultivation, a significant proportion of which is in the Amazon. 6 This estimate excludes
intact forest landscapes, high carbon stock forest, conservation hotspots and protected
areas.

A central concern over deforestation is the extent to which it leads to biodiversity loss
(see Section 7.1.2). It is well established and uncontested that the conversion of
tropical forest to agriculture, plantations and other land uses causes a
significant loss of species, and particularly forest specialist species.7 Importantly, this
loss of species occurs whether or not the forest converted to plantations has been
previously logged. This is because selectively logged forest typically retains a significant
proportion of the biodiversity of unlogged, primary tropical forest.

1
Abood, S. A., Lee, J. S. H., Burivalova, Z., Garcia‐Ulloa, J., and Koh, L.P. 'Relative
contributions of the logging, fiber, oil palm, and mining industries to forest loss in Indonesia'.
Conservation Letters 8 (2015), 58-67.
Personal communication from the EU delegation in Indonesia suggests that 55% of overall tree
2

cover loss within Indonesia between 2000-2015 occurred within legal concessions, of which
approximately 1.5 million hectares (one third of the total) was contributed by palm oil. The
remaining 45% of tree cover loss took place outside legal concessions.
3
Henders, S., Persson, U.M. & Kastner, T. (2015). 'Trading forests: land-use change and carbon
emissions embodied in production and exports of forest-risk commodities'. Environmental
Research Letters 10/12 (2015), 125012.
4
Cuypers, D., Geerken, T., Gorissen, L., Lust, A., Peters, G., Karstensen, J., Prieler, S., Fisher,
G., Hizsnyik, E. and van Velthuizen, H. ‘The impact of EU consumption on deforestation:
Comprehensive analysis of the impact of EU consumption on deforestation’. European Union
Technical Report - 2013 - 063 (2013).
5
Vijay V., Pimm S.L., Jenkins C.N., Smith S.J. 'The Impacts of Oil Palm on Recent Deforestation
and Biodiversity Loss'. PLoS ONE 11/7 (2017), 1-19.
6
Pirker, J., Mosnier, A., Kraxner, F., Havlík, P and Obersteiner, M. ’What are the limits to oil
palm expansion?’ Global Environmental Change, 40 (2016) 73–81.
7
Brook, B.W., Sodhi N.S., Ng P.K.L. ‘Catastrophic extinctions follow deforestation in Singapore'.
Nature 424 (2003), 420–423.

2. Executive summary
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The cultivation of palm oil through peat land conversion (see Section 7.1.3) is of
particular concern. Peat swamp forest is a critically endangered category of habitat
characterised by deep layers of peat soil and highly acidic water. Malaysia, Indonesia and
Papua New Guinea support some of the most extensive tropical peatlands in the world,
covering around 27.1 million hectares.8

The development of peat land can have a disproportionate impact on biodiversity and
greenhouse gas emissions:

 Few species are confined to peat swamp forests but they nonetheless provide
habitat for a large number of globally threatened species, which are threatened by
the conversion of peat land.

 Peat soil contains large quantities of carbon and plays a major role in carbon
sequestration. In addition, draining of peat land results in carbon dioxide
emissions and drained peat is highly flammable, potentially releasing carbon
dioxide.

The largest oil palm growing regions (Peninsular Malaysia, Borneo and Sumatra) are
estimated to have had 14.7 million hectares of peat land. Reliable estimates of peatland
conversion suggest that 3.1 million hectares of former peatland were covered by palm oil
plantations by 2015, equivalent to 21% of the original area of peat in the region.9
Expanding palm oil cultivation, has contributed towards the environmental
problems of peat swamp deforestation, drainage and fires, with concomitant
impacts on biodiversity and greenhouse gas emissions. However, there is
insufficient information to assess the likelihood of significant future expansion of oil palm
cultivation onto peatlands, and hence whether its contribution to global greenhouse gas
emissions is likely to grow.

There is also concern over greenhouse gas emissions from palm oil cultivation (see
Section 7.1.4). Greenhouse gas emissions derive from two main sources: (a) land use
change and (b) plantation and mill activities. Land use change is by far the most
significant of these, and there is consistent and rigorous evidence that
converting forests to palm oil plantations results in net greenhouse gas
emissions. For example, unlogged Asian tropical forests store up to 400 tonnes of
carbon per hectare above ground,10 and the oxidation of peat soil carbon stock of up to
1,550 tonnes per hectare would be added to emissions from the oxidisation of drained
peat soil. By comparison, a fully mature oil palm plantation only stores around 91 tonnes
per hectare. In addition, clearing forest with fire is estimated to result in additional
emissions of between 207 to 650 tonnes of carbon per hectare. 11 However, when oil

8
Hooijer, A., Silvius, M., Wösten, H. and Page, S. ‘PEAT-CO2, Assessment of CO2 emissions
from drained peatlands in SE Asia’. Delft Hydraulics report Q3943 (2006), Delft, Netherlands.
9
Miettinen, J., Shi, C., and Liew, S.C. Land cover distribution in the peatlands of Peninsular
Malaysia, Sumatra and Borneo in 2015 with changes since 1990' Global Ecology and
Conservation, Volume 6, (2016), Pp 67–78.
10
Murdiyarso, D., M. van Noordwijk, M., Wasrin, U.R., Tomich, T.P. and A. N. Gillison.
‘Environmental benefits and sustainable land use options in the Jambi transect, Sumatra’.
Journal of Vegetation Science 13 (2002), 429–438.
11
Germer J. and Sauerborn, J. ‘Estimation of the impact of oil palm plantation establishment on
greenhouse gas balance’. Environment Development and Sustainability 10 (2007), 619-716.

2. Executive summary
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palm is planted on grassland or scrubland, there can be a net uptake of carbon
dioxide.

Greenhouse gas emissions occur from mill and plantation activities, and especially from
Palm Oil Mill Effluent (POME), a liquid waste from the initial processing of fresh fruit
bunches. POME is treated in a series of anaerobic and aerobic digestion ponds to make it
safe for release into watercourses. Methane emissions from POME are the second
largest source of GHG emissions from oil palm production after land use
change.12 Methane capture is increasingly practised as a fuel for boilers and power
generation, with government support in many cases.

Smaller sources of greenhouse gas emissions from oil palm cultivation are nitrous oxide
(N2O), released due to the use of nitrogen fertiliser, and carbon dioxide emissions from
direct burning of fossil fuel is more limited: consumption at the mill stage is low, at 0-2%
of total GHG emissions.

While oil palm plantations create carbon emissions, they can potentially contribute to a
reduction in greenhouse gas emissions through palm-based biofuel and the use
of palm biomass to power boilers, thereby replacing use of fossil fuels. The amount of
time it takes to reach a net-reduction in greenhouse gas emissions is commonly
expressed as a ‘payback time’ but this varies dramatically depending on the original land-
use:

 Degraded grasslands can yield net carbon savings within a decade of conversion
13
or less.
 Forested land is unlikely to achieve a net carbon gain for at least 30 years and
14
may take up to 120 years.
 Peat land is likely to require several hundred years before there is a net carbon
15
gain depending on the depth of the peat.
 Land cleared by fire will also increase the time taken to reach a net carbon gain
by an estimated 18 years.16

It should be noted that the sustainability criteria of the EU Renewable Energy Directive
(EU RED) exclude biofuels derived from previously forested land from counting towards
the renewable energy targets – and related incentives.

The use of fire (see Section 7.1.5) to clear forests for agriculture expansion, in
particular in Kalimantan and Sumatra, are a major source of greenhouse gas emissions.
Burning is particularly severe during the droughts associated with El Niño, and drained
peat land represents a particular fire hazard. The 2015 fires in Indonesia caused
emissions of between 1.6217 and 1.7518 billion tonnes of CO2 equivalent and effectively

12
Chase, L.D.C., and Henson, I.E.. ‘A detailed greenhouse gas budget for palm oil production’.
International Journal of Agricultural Sustainability 8 (2010) 199-214.
13
Danielsen et al. (2008), op. cit.
14
Gibbs, H.K., Johnston, M., Foley, J.A., Holloway, T., Monfreda, C., Ramankutty, N., and Zaks,
D. ‘Carbon payback times for crop-based biofuel expansion in the tropics: the effects of
changing yield and technology’. Environmental Research Letters 3 (2008), 034001 (10pp).
15
Fargione et al. (2008), op. cit.
16
Danielsen et al. (2008), op. cit.
17
Chamorro, A., Minnemeyer, S., and Sargent, S. Exploring Indonesia's Long and Complicated
History of Forest Fires. World Resources Institute, February 16, 2017

2. Executive summary
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tripled Indonesia’s greenhouse gas emissions for that year. Approximately 19% of the
19
land burned in Indonesia in 2015, and 16.6% of fires between 2012-15 in Sumatra and
Kalimantan, occurred within oil palm concessions. There is significant uncertainty in the
attribution of fires to oil palm growers, as the methods used do not account for fires that
have been started by communities living within or nearby concession boundaries.20

In addition, fires started in order to clear land for agriculture, especially on peat lands
have resulted in trans-boundary air pollution, including haze (see Section 7.1.6).
Haze pollution is an occasional but sometimes severe problem in Southeast Asia. The
health effects of haze include potential in utero deaths, respiratory ailments and
exacerbation of existing heart and lung conditions. Severe haze in 2015, lasting three
months, resulted in an estimated 100,300 excess deaths across Indonesia, Malaysia and
Singapore.21

Finally, the dominance of palm cultivation and milling in some landscapes means that
watershed-scale pollution of surface and ground water can occur (see Section
7.1.7). The major risks are during the clearing and establishment phase of plantations
(especially sedimentation); discharge of palm oil mill effluent (POME); and the release of
agrichemicals through run-off and leaching. However, the available evidence is that oil
palm cultivation and milling does not necessarily cause water pollution outside national or
international guidelines.

b) Economic and social impact

The economic and social impacts of palm oil are complex and contradictory. Oil palm
cultivation has improved incomes for many rural people, including smallholder
farmers, and supported the development of rural economies and the economies
of producer countries overall. It has also often been associated with social
concerns, the most important of which are land use rights, forced and child
labour, and issues relating to the terms and conditions of labour, (such as wages,
health and safety and gender discrimination).

Smallholders are usually defined as family-based enterprises cultivating up to 50 ha of oil

palm, but more commonly 2-4 hectares. In Indonesia and Malaysia, smallholders account
for roughly 40% of the total area of planted oil palm and as much as 33% of the output,
due to lower yields, on average. There is significant variation in the way that smallholder
oil palm cultivation is organised. One of the most successful schemes for organizing
smallholders is Malaysia’s Federal Land Development Authority (FELDA). The FELDA
project began in 1956 as a resettlement scheme for landless peasants. FELDA was able
to settle 122,000 families between 1959 and 1990, developing about 470,000 hectares
(ha).22 Over five decades, the FELDA scheme succeeded in raising smallholder household

http://www.wri.org/blog/2017/02/exploring-indonesias-long-and-complicated-history-forest-
fires
18
World Bank (2016), op. cit.
19
Recalculated from figure on page 1 of World Bank (2016), ibid.
20
Gaveau et al. (2014), op. cit.
21
Koplitz, S.N., Mickley, L.J., Marlier, M.E., Buonocore, J.J., Kim, P.S., Liu, T., Sulprizio, M.P.,
DeFries, R.S., Jacob, D.J., Schwartz, J., Pongsiri, M. and Myers, S.S. ‘Public health impacts of
the severe haze in Equatorial Asia in September–October 2015: demonstration of a new
framework for informing fire management strategies to reduce downwind smoke exposure’.
Environmental Research Letters, 11 (2016), 094023.
22
Khor, Yuleng (2016), Socio-economic parameters for peat restoration policy makers
[presentation], 15th International Peat Congress (Kuching: 17 Aug. 2016).

2. Executive summary
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incomes considerably above the national poverty line, prompting some observers to
characterise it as ‘one of the most successful land settlement organisations in the
world’.23 Other notable examples include the corporate-led development of smallholder
schemes in Indonesia.

There is evidence that the incomes of smallholder oil palm farmers are often
significantly higher than those of farmers with similarly sized rice and rubber
holdings (see Section 7.2.2). However, yields – and therefore revenue - obtained by
smallholders often depend on the assistance they receive in terms of higher-yielding
planting materials, credit, fertiliser and technical advice. Achieving these gains is also
dependent on families being able to manage income in the 3-4 years before harvests
arrive, and managing their relationship with mills in their debt repayments and in the
transmission of product prices to farmers24.

Benefits can also emerge for people employed by plantations, especially where
alternative local sources of income are scarce. In addition, there are benefits as a result
of multiplier effects for other sectors of the economy (see Section 7.3.12). However,
there are many situations where benefits have been made at the expense of less
powerful social groups, such as indigenous peoples, small and insecure farmers and
women, who tend to lose out financially and in job opportunities, for example, where
labour contracts make it difficult to balance the requirements of a regular full-time job
against social and cultural norms25.

There are limited official data on the incidence of forced and child labour within the
palm sector.26 NGO and press reports of child and forced labour surface sporadically,
largely from Indonesia and Malaysia 27 28 29 30 (see Section 7.2.3). There is insufficient
information to conclude with a high degree of confidence how widespread these practices
are.

23
Sutton, K. (1989), Malaysia's FELDA (Federal Land Development Authority) land settlement
model in time and space, Geoforum, Volume 20, Issue 3, 1989, Pages 339-354.
24
In addition, studies by SOMO, the International Union for the Conservation of Nature, are
undertaking more comprehensive cost-benefit analysis of developing oil palm for the rural
poor in South-East Asia. Early findings showed varied and nuanced results depending on the
extents to which their rights are defined and enforced, and traditional livelihoods/subsistence
depended on foregone ecosystem services.
25
Santika, T., Wilson, K,, Budiharta S., Law, E., Struebig, M., Tun M.P, Ancrenaz, M, & Meijaard,
E. (2017) ‘Does palm alleviate rural poverty? A landscape-scale multidimensional assessment’,
Personal communication from EU Delegation in Indonesia.
26
UNICEF 'Palm Oil and Children in Indonesia'. United Nations Children's Fund (2016)
27
World Vision ‘Forced, child and trafficked labour in the palm oil industry’. World Vision
Australia (2012).
28
Skinner, E.B. ‘Indonesia's Palm Oil Industry Rife With Human-Rights Abuses: The hidden
human toll of the palm oil boom’. Bloomberg Business Week, 2013).
https://www.bloomberg.com/news/articles/2013-07-18/indonesias-palm-oil-industry-rife-
with-human-rights-abuses
29
Al-Mahmood, S.Z. (2015), 'Palm-Oil Migrant Workers Tell of Abuses on Malaysian Plantations',
The Wall Street Journal (26 Jul. 2015), https://www.wsj.com/articles/palm-oil-migrant-
workers-tell-of-abuses-on-malaysian-plantations-1437933321, accessed 1 Feb. 2017.
30
Amnesty International (2016), The Great Palm Oil Scandal: Labour Abuses Behind Big Brand
Names (London: Amnesty International, 7 Dec. 2016),
https://www.amnesty.org/en/documents/asa21/5184/2016/en/, accessed 1 Feb. 2017.

2. Executive summary
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Outside of forced or child labour there may also be issues with the terms and
conditions of legal labour (see Section 7.2.4). These cover a broad range of working
conditions, including hours worked, wages, productivity targets, leave, health and safety
and the right to assembly. The very high reliance on migrant workers once again is a
cause for concern as they can be afforded less protection on labour rights issues than
nationals.

Reports of poor labour rights have surfaced from the RSPO certification system,31 32 and
from NGO reports suggest that such practices may be widespread. A recent Amnesty
International report into five plantations in Indonesia found that workers were paid below
the legal minimum wage, potential breaches of regulations on overtime pay, insufficient
training on use of hazardous chemicals and inconsistent use of safety equipment and the
potential exclusion of women from permanent employment. 33 It has also been reported
that some labourers are kept as casual labourers for extended periods (years), without
the terms and conditions to which permanent employees are entitled 34.

Oil palm expansion has been accompanied by disputes over land rights (see Section
7.2.1). The creation of large-scale plantations has, in some instances, resulted in local
and indigenous peoples losing their customary land, and along with it, part of their
traditional livelihoods and cultural reference. This has been particularly acute in
Indonesia and has sometimes escalated into conflict and occasionally violence. For
example, in West Kalimantan, land rights was the most common cause of conflict
between local communities, including indigenous Dayak groups, and plantation
companies, responsible for 53 of 119 (45%) recorded conflicts between 1999 and 2009. 35

This underlines the importance of legalisation, registration, mapping and tenure,

entitlement processes, many of which have been continuing for years. Such processes
make very slow progress depending on their scale (estimated 1.7-4 million smallholders
in Indonesia), the capacities and good will of local authorities.

Many of the environmental and social impacts highlighted in this study exist in differing
degrees if a similar analysis were made for the cultivation of other similar commodities
and are not inherent exclusively to palm oil. Furthermore, other sources of vegetable oils,
among which the most important is soybeans, occupy much larger areas per tonne of oil,
and have their own environmental and social impacts (see Appendix 5).

In its response to the April 2017 European Parliament Resolution on Palm Oil and
Deforestation, the European Commission underlined concrete regulatory measures (such
as adopting a single unified definition of ‘deforestation-free’) and EU action on the issue
of deforestation should go beyond palm oil, "looking at all drivers of deforestation".

3. The role and potential of existing palm oil sustainability certification

schemes (see Section 8.1).

31
EIA. Who Watches the Watchmen? Auditors and the Breakdown of Oversight in the RSPO.
Environmental Investigation Agency (2015), London.
32
Lord, S., and Durham, K. Analysis of RSPO certification and surveillance audit reports across
Indonesia, Malaysia and the Rest of the World. Global Sustainability Associates (2014),
Singapore.
33
Amnesty International. The Great Palm Oil Scandal: Labour Abuses Behind Big Brand Names,
Amnesty International (2016), London.
34
International Labour Rights Forum & Sawit Watch (2013) op. cit.
35
Levang et al. (2016), îbid

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There are four main oil palm sustainability certification schemes:
 The Roundtable on Sustainable Palm Oil (RSPO) established in 2004 is a
voluntary scheme developed through a multi-stakeholder partnership. It was the
first scheme specific to oil palm. It remains the most prominent global scheme in
the sector with a membership of 3,413 organisations. The RSPO has developed a
set of more stringent ‘add on’ requirements to its Principles and Criteria, referred
to as RSPO NEXT, as well as a second set of ‘add-ons’, RSPO–RED, that are
compliant with EU Renewable Energy Directive (RED). However, market uptake of
RSPO NEXT and RSPO-RED has thus far been minimal.
 The International Sustainability and Carbon Certification (ISCC) was
created in 2010 and has developed a standard that is consistent with the
requirements of the EU Renewable Energy Directive (Directive 2009/28/EC) for
biofuel feedstock.
 The Indonesian Sustainable Palm Oil (ISPO) scheme was launched by the
Indonesian Government in 2011. The standard is based on existing Indonesian
regulations that pertain to palm oil cultivation and processing and is mandatory
for Indonesian companies producing and/or processing palm oil. It is being
revised but the timing, nature and extent of the changes could not be confirmed
at the time of writing this study.
 The Malaysian Sustainable Palm Oil (MSPO) scheme was started as a
voluntary standard in 2015 aiming to help small and medium-sized Malaysian
growers to operate sustainably.
It should be noted that while RSPO and ISCC are voluntary industry standards, ISPO is a
government-led mandatory national scheme. According to the Malaysian government,
MSPO will also become mandatory by the end of 2019. The difference in the approaches
has significant implications that should be also considered. While the standards of
voluntary schemes may be more ambitious, their reach is limited to those operators that
agree to meet the standards. By contrast, mandatory national schemes are applicable to
the entire sector and have the potential to contribute to raising the bar across the
industry. However, their level of ambition as shown by the analysis does not always
match the standard of voluntary schemes.

a) Certification process and coverage of the scheme (see Section 8.1.1.5)

There are significant differences in the processes underpinning certification as well as the
requirements of the schemes. Table 1 below summarises the certification process in the
four schemes.
Table 1: Summary of certification processes within four palm oil certification
schemes
Standard

Certification scheme element RSPO ISCC ISPO MSPO

Certification Who: independent 3rd Party

How: audit
How often: annual surveillance
Who decides: certification body
Accreditation Fully independent accreditation
Complaints Documented procedures available
Transparency Audit reports publicly available
Claims Supply chain verification
Note: Dark shading indicates that the process reaches best practice, with the greatest restrictions on activities;
pale shading indicates absence of the process; mid-shade implies an intermediate state.

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All four schemes rely on third party, independent audits to verify compliance with the
standards, and surveillance audits are repeated annually. The RSPO, ISCC and MSPO
have independent accreditation of the certification bodies who decide whether a
certificate is granted or not, and the same schemes provide a degree of transparency
through making documents on audits and complaints publicly available. The ISPO system
has less robust and transparent procedures on these elements, but like the ISCC and
RSPO, has supply chain verification mechanisms. MSPO is currently in the process of
developing similar supply chain verification procedures.

Alongside differences in the certification processes, there are differences in the coverage
of key issues within the four schemes, as Table 2 demonstrates.
The four schemes differ markedly regarding deforestation. The ISCC excludes
production from primary forest, and forests of high biodiversity value (Criterion 1.1), and
degraded forest (Criterion 1.3). Degraded forest is defined conservatively, with a high
proportion of logged forest included in the restriction. The RSPO scheme has the less
exacting requirement that forest clearance is legal, but primary forest and High
Conservation forest are not to be cleared for oil palm cultivation.36 The ISPO scheme
permits forest clearance provided it is within land zoned for agriculture; is allowed under
the environmental impact assessment; and the government has granted the necessary
permits. The MSPO scheme is broadly similar to ISPO, but with additional requirements
on Environmentally Sensitive Areas and areas with high biodiversity value.
The ISCC scheme has requirements that restrict peat land conversion and
greenhouse gas emissions to a greater degree than the other schemes, while
conserving biodiversity. The RSPO scheme contains the next most restrictive
requirements on all aspects except biodiversity conservation and greenhouse gas
emissions, on which issues the MSPO scheme has similar requirements.
The ISCC, RSPO and MSPO have similar degrees of restriction on the use of fire for land
clearance.
Regarding air pollution (other than GHG), the RSPO and MSPO schemes have the
greatest restrictions for plantation and mill operators.
The MSPO has the most comprehensive requirements regarding water pollution while
the other three schemes have broadly similar requirements.
The RSPO scheme provides some of the most restrictive requirements on social issues,
such as land use rights, forced labour, child labour, the terms and condition of
employment, treatment of smallholders, and the rights and wellbeing of people
affected by plantations. The other schemes have variable but generally less restrictive
requirements for social issues.
However, it should be noted that all of these certification systems undertake periodic
revision of their process requirements and standards. In particular, there is significant
investment in revising the ISPO, which could result in significant changes to that scheme.

36
‘High Conservation Value’ was first articulated in the Forest Stewardship Council’s Principles
and Criteria to define and maintain the world’s most important forests for biodiversity,
ecosystem services, culture and society. The notion has been extended to include other, non-
forest ecosystems, and within other sectors, such as oil palm.

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Table 2: Summary of provisions within schemes against environmental and
social themes
Standard

Theme RSPO ISCC ISPO MSPO

Deforestation
Biodiversity
Peat land conversion
GHG emissions
Burning
Air pollution
Water pollution
Rights & Wellbeing
Land use rights
Treatment of smallholders
Forced and Child labour
Terms and conditions of labour

Note: Dark shading indicates that the standard provides the greatest restrictions on activities; pale shading
indicates the fewest restrictions; mid-shade indicates an intermediate state.

Analysis against EU and UN policy objectives (see Section 8.2)

The report provides a first-order analysis of how certification schemes relate to selected
EU and UN policy objectives that were identified in consultation with the European
Commission (see Section 8.3.2).
No single certification scheme fully addresses all of the EU and UN policy instruments
identified and used as a framework in this study. It should be noted that this does not
mean that any of the schemes assessed are ‘poor’: none of them were designed to
address the suite of EU and UN policy instruments assessed (although the ISCC scheme
was developed around the EU RED sustainability criteria), and divergence between the
content of the schemes and the objectives of these instruments is therefore not
surprising.

In general terms:
 The ISCC addresses a larger share of the environmental objectives of EU
and UN instruments than the other standards. This is largely a result of the
restriction on converting land with high carbon stock, and the clear and
conservative definition of high carbon stock within the scheme, which prohibits
conversion of all but the most highly degraded secondary forest. This resulted in a
strong match with policy objectives on deforestation and greenhouse gas
emissions from land use change in particular.
 The RSPO overall addresses a larger share of the social objectives of EU
and UN instruments than the other schemes. The RSPO scheme has broader
and more tightly defined requirements on rights and wellbeing, land rights, terms
and conditions of labour and responsibilities towards smallholders than the other
schemes.
 The ISPO scheme generally addresses less EU and UN instruments than either
RSPO or ISCC schemes, with the MSPO scheme intermediate.

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 b) Extent of up-take of certified sustainable palm oil (see Section 9.5.3)

The global market for certified sustainable palm oil (CSPO) is broadly divided into two
segments:

1. The use of CSPO in biodiesel. This is dominated by the International Sustainability

and Carbon Certification (ISCC).

2. CSPO for non-energy uses such as food, oleochemicals, home & personal care
(HPC) and animal feed are dominated by the Roundtable for Sustainable Palm Oil
(RSPO).

Together these two schemes account for the vast majority of CSPO, estimated to be over
97% in 2016. Error! Reference source not found. shows the volumes of CSPO sold
hrough RSPO and ISCC.

 The annual supply of RSPO Certified Sustainable Palm Oil (CSPO) is around 12.8
million tonnes. Sales of RSPO CSPO however, were only around 6 million tonnes.
 ISCC certification covers almost 9 million tonnes. Only around half of total ISCC
CSPO was bought as such (4.2 million tonnes).

Around half of CSPO therefore was sold as RSPO or ISCC certified, with the remainder
bought as conventional palm oil. Some producers opt for certification under both
schemes, thereby inflating the total, and the combined uptake is closer to supply-
demand balance than implied by this statistic. There is also a growing practice by users
of buying palm products from certified producers, but not registering the transaction via
RSPO, to avoid the transaction costs. However, it is clear that supply still exceeds the
aggregate demand for certified material.

Table 3 RSPO and ISCC market uptake of certified palm oil, 2015
Number of Estimated Estimated % take-up
mills capacity, sales, '000
'000 tonnes tonnes
RSPO 327 12,890 6,183 48%
ISCC 226 8,814 4,250 48%

RSPO does not provide trade data for destination markets. However, a review of the key
RSPO buyers in the CGM segment reveals the dominance of the global brand names and
some of regional companies. Based on these major buyers, we estimate that 48% of
their overall tonnage is sold in developing or emerging markets. Europe is the leading
region for sustainable palm oil use. However, pledges by some EU member states to
achieve 100% CSPO usage have a target date of 2020; therefore, it is not yet possible to
assess whether they will be met in full. CSPO still represents less than half of non-
energy uses of palm oil in Europe and the market is declining.

In terms of attainment of general RSPO certification, the food sectors that were most
advanced were bakery, dairy/non-dairy and the slowest was fried foods. The home and
personal care (HPC) and cosmetics sectors appear to lag behind the food sector in their
use of CSPO.

If ISCC CSPO volumes are added to RSPO ISCC, then even for the leading German and
UK markets, tonnages indicate certified ratios in the region of 61-63%. Even in the most
advanced markets therefore a third of palm oil is still entirely uncertified.

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Uptake of CSPO in developing markets remains very low, possibly due to the extra costs
associated with certification in price sensitive markets. Pledges in China and India are
limited to global brand names such as Unilever and McDonald’s. There are very few RSPO
certified facilities in these markets, particularly in India.

c) Margins for CSPO and costs of certification (see Section 9.5.4)

The oversupply of CSPO results in a basic RSPO premium that is in the region of $2 per
tonne. RSPO compliance costs for CSPO are usually higher than the premium. For
plantations they are around $5 per tonne (ex-mill) and small producers’ between $8-12
per tonne (ex-mill).

Higher premia are available for suppliers of segregated palm oil and downstream
specialist products (such as palm kernel oil, oleochemicals and surfactants). However,
these are usually the preserve of larger integrated companies.

The cost of certification depends on the stringency of principles and criteria, as well as
the thoroughness of certification processes. It also depends on the level at which
certification is delivered, e.g., the new ISPO standard in development pays due attention
to "group certification", which is the possibility for villages, cooperatives or districts to be
certified as a whole, on behalf of individual farmers within their boundaries. The
accountability, economic leverage and cost-per-unit of those area-based schemes could
be better than usual operator-based certification practices.

4. Voluntary initiatives and commitments relating to palm oil (see Section

8.6)

Alongside the four main certification schemes, there are an increasing number of public,
NGO and private-sector-driven initiatives and commitments relating to different aspects
of palm oil sustainability. These more recent commitments have differed from past
sustainability policies both in the topics emphasised by them and in the range of different
organisations and sectors involved. While NGO campaigns have targeted major oil palm
traders, they have also extended to their third-party suppliers for the first time.
Figure 1 provides a categorisation of the main types of voluntary initiatives: group
initiatives, individual initiatives, initiatives targeting finance and investment support and
supporting platforms designed to assess compliance.

2. Executive summary
2017 EUR 26 EN
 •e.g. CGF, NYDF, •e.g. Unilever,
TFA 2020, INPOP, Nestle, M&S,
ESPO, EPOA, Ferrero, Danone
ESPOAG, FONAP,
FASPO, etc.

Group Individual
Initiatives Initiatives

Finance &
Supporting
investment
platforms
support
•e.g. WRI Global •e.g. IDH PPI
Forest Watch, ZSL Compacts; UN
SPOTT REDD+; LFTLF

Figure 1: Typology of the main forms of voluntary initiative

Key: CGF (Consumer Goods Forum Zero Net Deforestation By 2020 Commitment; NYDF (New York Forest
Declaration); TFA 2020 (Tropical Forest Alliance 2020); INPOP (Indonesia Palm Oil Platform); ESPO (European
Sustainable Palm Oil); EPOA (European Palm Oil Alliance), ESPOAG (European Sustainable Palm Oil Advocacy
Group), FONAP (Forum on Sustainable Palm Oil), FASPO (French Alliance for Sustainable Palm Oil), M&S (Marks
and Spencer); WRI (World Resources Institute); ZSL SPOTT (Zoological Society of London, Sustainable Palm Oil
Transparency Toolkit); PPI Compacts (Production, Protection & Inclusion Compacts); UN REDD+ (UN
Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing
Countries); LFTLF (Landscape Fund for Tropical Landscapes and Forests).

Existing reviews of the progress being made under this range of individual and group
initiatives suggest that: 37 38 39

 Reporting of progress on voluntary commitments relating to forest risk

commodities is on the rise, with palm oil leading the way;
 Commitments made on sustainable palm oil are embracing landscape-scale
thinking, more restrictive or specific criteria on protecting HCV and HCS land and
improvements in supply chain traceability and transparency;
 The food and farming sector dominates the commitments ‘landscape’;
 The nature of commitments is evolving, initially focusing on deforestation and
then including reducing biodiversity loss, GHG emissions, improving water
stewardship and support for smallholders;
 The number of commitments made across the supply chain varies, with
producers, processors and traders making the most, followed by manufacturers
and retailers;
 Collective action spurs individual action and the number of organisations involved
in group initiatives is generally growing over time;

37
Donofrio, S, et al – Supply Change: Tracking Corporate Commitments to Deforestation-Free
Supply Chains, (Forest Trends, 2017).
38
Brack, D. & Gregory, M. - Company Promises – How businesses are meeting commitments to
end deforestation (FERN, March 2017).
39
The Palm Oil Buyers Scorecard – Measuring the Progress of Palm Oil Buyers (WWF, 2016).

2. Executive summary
2017 EUR 27 EN
  Certification systems play an important role in CSPO take-up but are generally not
seen as the only long-term solution for the entire supply chain, partly since they
can be flawed in some areas and remain expensive for smallholders to adopt;
 Companies are investing in their palm oil supply chains, especially smallholders,
but are also prepared to drop suppliers that don’t comply with their commitments;
 The cost of voluntary commitments can be high, with retailers citing annual costs
of implementation of £250,000 and producers (investing heavily in on-the-ground
improvements) spending up to USD200 million over three years;
 Progress is being made but not by all companies, even in a market characterised
by over supply of CSPO;
 Companies have used Book and Claim systems to meet their commitments in the
past but are moving towards either their own sourcing guidelines or greater use of
mass balance and source segregated systems;
 European and North American companies are far more advanced than their Asian
counterparts.

There remain significant challenges to the achievement and collective impact of voluntary
commitments, most notably: lack of engagement in major consumer countries such as
India and China, cost of implementation, supply chain complexity, traceability and
transparency of supply, weaknesses and lack of inclusion in land use planning (resulting
in land disputes), lack of legal and geographical clarity around concession boundaries and
protected areas and a lack of experienced people to conduct complex FPIC processes and
certification audits (particularly those audits involving national interpretations of
standards).

That said, a growing number of voluntary initiatives are attempting to overcome some of
these historical barriers to progress: these include the growth of financial, data reporting
and geo-spatial platforms; more investment in, and building better relationships with,
suppliers (including smallholders); a growing number of public/private partnerships to
improve the designation, protection and communication of protected areas and
concession boundaries; the use of private and public procurement policies to drive
further demand for CSPO; and the emergence of landscape-scale thinking or
jurisdictional approaches to address the multiple drivers of deforestation and biodiversity
loss.

5. Evaluation of existing legislation and enforcement regimes in major

producing countries (see Section 8.4)

Outside of certification systems and direct commitments by companies, governments

have also increasingly introduced legislation, which affects the sustainability of the oil
palm. In the case of national mandatory schemes such as ISPO, there is a degree of
overlap. We first look at the coverage of the legislation and then examine enforcement
issues.

a) Extent of existing legislation

Table 4 summarises the main laws by topic in a selection of case study countries. Some
of these laws may benefit the oil palm plantations. The most obvious of these is the
introduction of mandatory biodiesel blending in Indonesia, Malaysia, Brazil and Colombia.
This list is based upon the documentation of existing laws, and does not take into
account the enforcement of these laws, which is reviewed in Section 8.4.
Table 4: Overview of legislation in the six case study countries
Indonesia Malaysia Brazil Colombia Gabon Liberia

Deforestation

2. Executive summary
2017 EUR 28 EN
 Indonesia Malaysia Brazil Colombia Gabon Liberia
Biodiversity loss

Land use change

(LUC)
Reducing
carbon Biofuel
emissions
Mills and plantations

Burning

Peatland conversion

Water and pollution

Haze
Air pollution
Others

Indigenous people

Smallholders

Forced and child labour

Terms and Health & safety

conditions of
labour Wages & others

Anti-corruption and money laundering

Fair pricing

Land ownership/use permit

Licensing for palm oil estate and mill

1. Source: LMC International analysis based on RSPO data. Note: A shaded box indicates that there is
domestic legislation dealing with that topic.

As Table 4 shows, a large number of laws and regulations exist, dealing with most of the
topics related to sustainability. The table also reveals that there are some areas that
have not yet come under legislation. In some cases this may be because countries
benefit from structural elements, which make certain sustainability issues less noticeable.
For example, for deforestation both Colombia and Brazil have the advantage of having
large areas of pasture to develop, while Malaysia has benefited from a more highly
urbanised population than Indonesia, making it easier to control deforestation.

Nonetheless it is clear that there are some areas that are covered in a limited manner in
individual countries:

 Very few countries have legislation specifically related to forest degradation. In

a few cases this issue is captured in other legislation, notably for Brazil and
Colombia where planting is only permitted on degraded land.
 It is noteworthy that only two countries make specific reference to Land Use
Change (Indonesia and Gabon).
 Only in Indonesia, Malaysia and Liberia does legislation aim to reduce carbon
emissions from mills and plantations.

2. Executive summary
2017 EUR 29 EN
  In a similar vein, burning does not appear to be a priority for legislation in Brazil,
Gabon and Liberia and neither is air pollution more broadly.

The table demonstrates that most countries have sought to introduce regulations.
However, in many cases they are not adequately enforced. In the next section we
highlight some of the major enforcement issues.

b) Enforcement of existing legislation

Difficulties enforcing legislation can be the result of systemic corruption, a lack of political
will, limited capacity, insufficient resources, and bureaucratic inertia. Often the
bureaucratic inertia is compounded by factors such as decentralisation, which makes it
difficult to enforce national laws. The complexity of the legal system can work in the
favour of established plantations, which have more resources to tackle these issues. The
overarching historical problem of land rights allocation also re-emerges frequently.

There are a number of enforcement issues worth highlighting owing to their severity or
potential impact:

 In Indonesia there is concern that the moratorium over developing forest and
peat land may be weakening, despite high-level government support for the
policy. To enforce the moratorium, record fines have been meted out on agro
forestry companies for illegal forest clearing and fires (including on peatlands) 40,
but payment of these high fines is said to still be pending. New ministries have
been created to improve enforcement but decentralisation and overlapping
governance structures make it difficult for them to act.
 In Brazil while measures to ensure environmental sustainability, strong worker
rights and transparency are enforced, the political crisis has led to a reduction in
budget allocated to enforcement activities and an increase in deforestation in the
recent past.
 In Colombia there is concern that the expansion of oil palm in the past was
frequently, though not exclusively, accompanied by violence and displacement.

40
Jong, Hans Nicholas (2016), 'Landmark court ruling expected to serve as deterrent'. The
Jakarta Post, 18 Nov 2016, http://www.thejakartapost.com/news/2016/11/18/landmark-
court-ruling-expected-to-serve-as-deterrent.html, accessed 21 June 2017.

2. Executive summary
2017 EUR 30 EN
3. Glossary

$: US Dollars, unless otherwise stated.

ACOP: RSPO’s Annual Communication on Progress.

B&C: Book & Claim system whereby a buyer buys a certificate equivalent to a volume of
certified palm oil, palm kernel oil or palm kernel expeller. The value of the certificate is
transferred to a certified producer but there is no trading of physical products between
the two parties. For RSPO certified products, GreenPalm was the trading platform for
these paper credits until the end of 2016, and this has now shifted to a consolidated
trading platform, RSPO PalmTrace (traceability system cum market place), and
GreenPalm certificates are now called RSPO Credits.

CB: Certification Body the organisation responsible for verifying compliance with a
standard.

CGM: Consumer Goods Manufacturer.

Commercial Agriculture. The producer (a corporate or an individual) is farming with

intent to sell some or all of the production and participating in commerce. This can be
contrasted with subsistence agriculture.

CPO: Crude palm oil. Vegetable oil produced from the fleshy mesocarp of the fruit of the
oil palm. It is naturally semi-solid at room temperature with a melting point between
33ºC and 39ºC. It does not require artificial hardening, via hydrogenation, for use as a
food in hard fat applications, e.g., baking and in spreads.

CPKO: Crude Palm Kernel Oil is obtained by crushing Palm Kernels. The oil composition
is very different from that of CPO. It includes a high proportion of lauric fatty acids, the
only other major source of which is coconut oil. Its composition makes it the primary
feedstock for the production of natural fatty alcohols, which are widely processed into
products such as shampoos and liquid detergents.

CPOPC: The Council of Palm oil Producing Countries was established by the
Governments of Indonesia and Malaysia in November 2015. One of its stated goals is to
harmonize sustainability standards.

CSPK: RSPO’s Certified Sustainable Palm Kernels.

CSPO: Certified Sustainable Palm Oil.

CSPKO: RSPO’s Certified Sustainable Palm Kernel Oil. The RSPO allows a 45%
conversion rate from CSPK. Most producers use this rate, as it is higher than most actual
palm kernel oil yields. CSPKO credits is RSPO CSPKO production supported via the B&C
Credits system. CSPKO-MB and CSPKO-SG are RSPO CSPKO physically traded via the
mass balance and segregated chain of custody options.

Deforestation: Conversion of forested land to other land uses. See definition of forest,
below.

DM: Developed market.

EM: Emerging market.

3. Glossary
2017 EUR 31 EN
Equator Principles: A risk management framework, adopted by financial institutions,
for determining, assessing and managing environmental and social risk in project
financing.

ESG: Environmental, Social and Governance criteria are considerations that are
commonly used to assess investments, in addition to financial return.

Estate management. The operations of a commercial plantation estate managed for

good agricultural practices and sustainability.

FFB: Fresh Fruit Bunch are the bunches of fruits harvested by hand from the oil palm. A
single bunch weighs up to 50kg and can contain up to 1,500 individual fruits.

FPIC: Free prior and informed consent. It is the principle that a community has the right
to give or withhold its consent to proposed projects that may affect the lands they
customarily own, occupy or otherwise use.

Forest: The United Nations Food and Agriculture Organisation defines forest as ‘land
spanning more than 0.5 hectares with trees higher than 5 meters and a canopy cover of
more than 10 percent, or trees able to reach these thresholds in situ. It does not include
land that is predominantly under agricultural or urban land use.’

FSC: The Forest Stewardship Council, which was the first sustainability certification
system, focusing on forest products. The certification process and standards of
subsequent sustainability certification systems, such as the RSPO, are heavily based on
the FSC.

GHG: Greenhouse gases that absorb and emit radiation within the thermal infrared
range. This process is the cause of the greenhouse effect, which leads to global warming
or climate change. Many policies strive to contain the rise in global temperature by
limiting and reducing greenhouse gas net emissions. Refer to HCS.

GP: GreenPalm was the sole authorised trading platform for the trading of RSPO credits
linked to the production of sustainable palm oil, palm kernel oil and palm kernel expeller
certified under RSPO Principles & Criteria until end 2016. Users could trade the credits
on-line or off-line (reporting transactions to GreenPalm). The new system to trade RSPO
Credits is called RSPO PalmTrace. Also refer to B&C.

HGU: The Hak Guna Usaha is a vital final stage in the allocation of land rights in
Indonesia that can be granted only on state-owned land, and only for the purposes of
agriculture, fisheries, or animal husbandry.

HCS: High Carbon Stock. This refers to areas such as peat lands of forested areas that
contain large amounts of carbon, the conversion of which to agricultural land uses
releasing significant quantities of greenhouse gases. Defined in various ways by different
organisations and standards. Also refer to LUC.

HCV: High Conservation Values. A policy instrument that seeks the identification and
maintenance of biological, ecological, social or cultural values of outstanding significance
or critical importance.

HPC: Home & Personal Care is a major non-food end-use sector for palm products.

ILUC: Indirect land Use Change. While biofuels are important in helping countries meet
their GHG reduction targets, biofuel production typically takes place on cropland which
was previously used for other agriculture such as growing food or feed. Since this
agricultural production is still necessary, it may be partly displaced to previously non-
3. Glossary
2017 EUR 32 EN
cropland such as grasslands and forests. This process is known as indirect land use
change 41.

Inti-Indonesia. According to Indonesian plantation law, plantation companies are

required to enter a partnership with the farmers in the local community. This partnership
is defined as a plasma scheme. The plantation area that is owned and operated by the
plantation company is defined as inti in Indonesian and in English it is nucleus.

IP: Identity Preserved. Chain of custody mechanism in which sustainable palm oil from a
single identifiable certified source (one palm oil mill) is kept separate from other palm oil
throughout the supply chain. This is more exacting than SG.

IS: Independent smallholder.

ISCC: International Sustainability & Carbon Certification is a certification system for

sustainability based mostly on greenhouse gas emissions. Within the oil palm sector, it is
used to ensure the sustainability of biofuels derived from palm oil.

ISPO: Indonesian Sustainable Palm Oil is a mandatory national palm oil certification
programme in Indonesia.

Izin Lokasi. A Plantation Business Licence required in Indonesia. It is a written business

licence issued by the relevant authority and must be obtained by a company engaged in
the plantation business that is integrated with business of processing plantation crops.

LUC: Land Use Change. Particularly used with regard to climate change, in the context of
oil palm it refers to the difference in carbon sequestration between the palm oil
plantation and the land use it replaces.

MB: A Mass Balance chain of custody or supply chain system allows sustainable certified
palm oil to be mixed with non-certified palm oil, with the proportion of certified going in
to a production or aggregation process claimed at the end. Mass balance does not allow
physical traceability of palm oil.

MSPO: Malaysian Sustainable Palm Oil. Introduced as a voluntary palm oil certification
system, but now changed to a mandatory requirement by 2018-2019.

NCR: Native Customary Rights set special land rights for indigenous local peoples in
Sarawak and other jurisdictions.

NPP: RSPO’s New Planting Procedures require growers to make public their oil palm
estate development plans before proceeding to work the site. HCV assessment, social
impact analysis, carbon assessment (to minimise GHG emissions), avoidance of peat land
(and peat drainage studies for replanting), and obtaining Free Prior and Informed
Consent (FPIC) of local peoples are main components and principles of this exercise.

NGO: Non-governmental organization.

OEM: Original Equipment Manufacturer - companies that manufacture products for third-
parties: an original equipment manufacturer, or OEM, makes products that are bought by
another company and sold under the purchasing company's brand name. OEM refers to
the company that originally manufactured the product.

41
http://ec.europa.eu/energy/en/topics/renewable-energy/biofuels/land-use-change

3. Glossary
2017 EUR 33 EN
Oleochemicals: These are fatty acids and fatty alcohols produced by splitting RBD PKO,
CPKO and RBD palm stearin, in particular, into their individual fatty acids, and then
processing the acids into fatty alcohols, mainly used in liquid detergents and personal
care products, including shampoos.

Peatland: this is land where the underlying soil is peat. The International Peatland
Society states: 'Peat is a heterogeneous mixture of more or less decomposed plant
(humus) material that has accumulated in a water-saturated environment and in the
absence of oxygen...Peat is sedentarily accumulated material consisting of at least 30%
(dry mass) of dead organic material.' In practice, the definitions and hence maps of
peatland vary between authorities, and are contested. Drainage of peatlands for
agriculture, including oil palm cultivation, causes the peat to oxidize, resulting in
significant greenhouse gas emissions. The original vegetation of deep peatland is peat
swamp forest.

P&C: Principles and Criteria of a standard

PK: Palm kernel. The edible seed of the oil palm fruit, which is processed to produce
palm kernel oil.

PKO: Palm kernel oil. The oil produced from crushing of palm kernels.

PMF: Palm mid-fractions. A co-production from the fractionation of palm kernel stearin
used as a confectionery fat.

Refined Palm Oil. Nearly all Crude Palm Oil (CPO) is refined, bleached and deodorised
for subsequent use. Refined palm oil is usually fractionated into a two fractions, a more
liquid one (olein), favoured in deep frying, and a harder faction (stearin) favoured for
baking and in margarine, for example.

RSPO: The Roundtable on Sustainable Palm Oil is a multi-stakeholder organization that

has developed a popular voluntary certification scheme for sustainable palm oil.

TFT: The Forest Trust is an organization that offers traceability systems (customised for
processors and plantation groups) that track sustainable (certified or otherwise) palm oil
along the entire supply chain.

SCC and SCCS: Supply chain certification and supply chain certification standards. This is
the process of verifying the provenance of sustainably certified material.

SG: A segregated chain of custody or supply chain system allows sustainable palm oil to
be kept separate from conventional palm oil throughout the entire supply chain. This is
more exacting than MB, but less exacting than IP.

3. Glossary
2017 EUR 34 EN
4. Study background and introduction

The European Commission's DG Environment commissioned this study in December

2016, as part of the Commission’s wider work on understanding the impacts of EU
consumption of agricultural commodities on deforestation. The study is to inform work on
global deforestation, including in relation to a feasibility study on an EU Action Plan on
deforestation, which is scheduled to be finalized in 2017. That study will include an
assessment of different policy options and will be used as an input for future
consideration by the Commission of possible new initiatives being introduced to help
address global deforestation and forest degradation. As such, this study on palm oil will
complement the broader deforestation feasibility study (which is set at a higher level and
covers a wider range of agricultural commodities); and its focus is largely analytical.

The policy context for this palm oil study is the 2008 European Commission
Communication on Deforestation, which set out the EU's response to the challenge of
climate change and called for a halt to global forest cover loss by 2030 at the latest and
for a reduction in gross tropical deforestation of at least 50% by 2020 from current
levels. This was followed in 2013 by the publication of a comprehensive study to assess
the impact of EU consumption on forest loss at a global scale. This study introduced the
concept of ‘embodied’ deforestation.

More recently, on 17 March a report from the European Parliament on palm oil and
deforestation of tropical rainforests was published 42, raising the level of political interest
in the topic. The European Parliament adopted a non-legislative resolution, based on this
report, during its plenary session on 4 April 201743.

This resolution called for a clampdown on imports of unsustainable palm oil; and for the
European Commission to take measures to phase out the use of vegetable oils that drive
deforestation, including palm oil, as a component of biofuels, preferably by 2020. It also
advocated the creation of a single certification scheme to guarantee that only sustainably
produced palm oil enters the EU market. In its formal reply to this Resolution, the
European Commission stressed the need for a balanced approach to the matter and
focused on the importance of working together with producing countries, the private
sector and other stakeholders. Furthermore, it pointed at the possible shortcomings of
certain restrictive proposals and recalled the importance of ensuring consistency with the
rules of the World Trade Organisation (WTO), in particular non-discrimination.

The EU does not have a specific policy on palm oil. More information on EU and UN
policies which are not product-specific but may also be relevant for a discussion on the
environmental and socio-economic impacts of oil palm cultivation, palm oil production
and consumption; and their associated impacts and benefits can be found in this report.

As such, this palm oil study aims to provide a clear picture of the economic,
environmental and social impacts – positive and negative – that are associated with oil
palm cultivation, production and consumption; and the role and potential of existing palm
oil sustainability certification schemes, legislative and regulatory regimes and voluntary
initiatives in improving the sustainability performance of palm oil.

42
Report on palm oil and deforestation of rainforests – European Parliament, Committee on
Environment, Public Health and Food Safety (2016/2222 (INI)) dated 17 March 2017.
43
MEPs call for clampdown on imports of unsustainable palm oil and use in biofuel - European
Parliament Press Release, 4 April 2017.

4. Study background and introduction

2017 EUR 35 EN
This study will also summarise considerations regarding the pace and scale of change
needed to meet existing EU policy objectives; and on how to reconcile the current
differences and factors driving producer and consumer behaviour (noting that there is
currently an imbalance between sustainable palm oil supply and demand and that new
ways of driving demand will need to be found).

4. Study background and introduction

2017 EUR 36 EN
5. Study Methodology

The study comprises a comprehensive examination of the issues relating to palm oil. The
study looks at sustainability in a broad manner, encompassing the traditional concerns
over the environmental impact of oil palm, such as deforestation, and social dislocation,
such as land disputes, but also the socio-economic benefits accruing from development.

Taking such a comprehensive view of sustainability provides a particular challenge, as it

recognises that the decision on whether or not to develop oil palm often involves the
need to find a balanced approach that supports economic development at the same time
as protecting the environment and the rights of local communities, workers and
indigenous peoples.

The central challenge is that the values involved in ensuring such a balanced approach
are incommensurable. This means there is not always a common, uncontested unit of
measurement. In other words there is no clear way in which to reflect the often not
easily quantifiable or non-monetary value of the environment and ecosystem services
against the utilitarian value of additional income to smallholder farmers. The Stern
Review, for example, had to deal with this issue when it attempted to provide a cost-
benefit analysis of tackling climate change, whilst natural capital accounting seeks to
reconcile the multiple uses of the landscape with the protection of natural resources and
ecosystem services.

Decisions involving incommensurable values are intractable; there is no single basis on

which the decision can be made. This problem provides three main methodological
challenges:
1. Establishing a clear narrative structure is difficult, as our coverage flows across a
variety of different topics, which are usually situated in their own context and
cannot be easily compared.
2. In a related manner, ensuring comprehensive coverage is a challenge as issues
are often restricted to certain disciplines.
3. Providing objective conclusions regarding the outcomes of our analysis requires a
nuanced approach, given the different value systems and assumptions of the
different disciplines.

We will now describe how we dealt with each challenge.

5.1. Structure

To ensure that the document is manageable as well as comprehensive the report has
been split into a series of discrete sub-tasks. It is very difficult to avoid some overlap,
but these sub-tasks provide a helpful structure with which to navigate the text. In
addition, they allow readers to establish where the different parts of the subject have
been dealt with.

5.2. Coverage

To ensure that our coverage is comprehensive we have taken a broad view on the type of
studies, sources and approaches permissible:
 Cited studies are, with few exceptions, ones published since 2000, and indeed
the majority of cited studies are published after 2011 (see Appendix 1 for further
details). Work published up to November 2017 is included.
 For the sections on social and environmental issues in particular, we have
preferentially used peer-reviewed literature, using other sources only when
peer-reviewed work was not available.

4. Study methodology
2017 EUR 37 EN
 We have taken an inter-disciplinary approach, combining literature from
development studies, economics, ecology and a number of other disciplines. This is
necessary to ensure that we present all sides of the argument.
 We have allowed our scope of inquiry to include non-peer-reviewed information,
such as annual reports, media articles and websites. This was necessary to ensure
that we are covering topics that have only just emerged and not had time to pass
through editing, peer review and academic publication.

We have also relied on expert interviews. While they come with their own biases,
industry experts provide an additional technical understanding of the topic which
otherwise cannot be achieved, such as understanding how sustainability certification
works in practice rather than theory.
 We have not shied away from using case studies where we view them as the most
useful means of understanding a topic. While a narrative is the most basic approach
to analysis, for topics that have competing values it remains the best way of
ensuring that we are capturing the full range of issues.
 At the same time, we have used a quantitative approach where appropriate. This
is clearly particularly the case for historical production, yield and trade data.
 We supplement publicly available data with company data. While these have a
smaller sample size, they have proved invaluable in supplementing publicly
available data for regions or topics that are not well covered (such as plantation
wages in West Africa).

5.3. Conclusions

While in most cases academic work can be situated in a single discipline, as we have
taken a broader approach, which combines different disciplines, sources and value
judgements, we face different challenges when developing our conclusions. This is
particularly the case as we are, by necessity, using information which has not passed
peer review.

In order to provide a value judgement, which is not situated within a single discipline, in
this study we have developed a Research Quality Assurance Framework that helps
us to quality assure and rank the underpinning data and research information used
during the course of the study.

The Research Quality Assurance Framework provides the reader with a summary of the
likely value of the information. This leaves the reader with more autonomy in terms of
their interpretation than they would usually be allowed. This is deliberate and in line with
the original aim of the report.

More information on the Research Quality Assurance Framework can be found at of this
report. Where sections of the report rely heavily on socio-economic and market and other
forms of data and information (e.g. population data, market analysis and stakeholder
interviews) rather than published studies, we have sought to provide an indication of the
data used and its credibility and robustness. A summary of data and information sources
for these sections can be found at Appendix 2. Wherever possible, we have sought to
use the most up-to-date references available.

Finally, we conducted an expert validation workshop, in which the preliminary findings of

the study were shared with a range of experts from producer and consumer countries,
and their knowledge, skills and expertise drawn upon in order to improve the evidence
presented in the study. A summary of this workshop can be found in Appendix 14.

4. Study methodology
2017 EUR 38 EN
6. Introduction to the oil palm and its products

What is palm oil?

Palm oil is produced from the fruit (fresh fruit bunches (FFB) of the oil palm. A single
bunch weighs up to 50kg and can contain up to 1,500 individual fruits. Fruits are
processed to produce two types of oil:

1. Crude Palm Oil (CPO) from the fibrous mesocarp around the outside of the fruits
and;
2. Crude Palm Kernel Oil (CPKO) from the kernels at the centre of the fruits.

Although both oils originate from the same fruit, palm kernel oil is chemically and
nutritionally distinct from palm oil.

Where is the oil palm grown?

The oil palm grows predominantly within the 5-10o belt from the Equator. This tends to
be where the monsoon is relatively weak, and rainfall in the most suitable growing areas
averages close to 200 mm per month. The further an area is from the Equator and the
more marked the distinction between the rainy and dry seasons, the lower the yields
tend to be. Figure 2 shows all the regions suitable for the oil palm cultivation and
highlights those regions, which are considered most suited. The most important variable
is climatic, with topography also playing a role.

Figure 2: Area suitable for planting oil palm

Source: Pirker et al (2016), p. 7644

Figure 3 demonstrates which countries currently have the largest share of oil palm area.
Indonesia and Malaysia dominate with close to 90% of world output. Expansion within
South East Asia is focused on Kalimantan. Growth has also occurred in West Africa and
Central America. However, in the case of West Africa expansion has been very slow.

For a detailed discussion of the production of palm oil by country see Section 7.4.1.

44
Pirker J., Mosnier A., Kraxner F., Havlik P. and Obersteiner M., ‘What are the limits to oil palm
expansion?’, Global Environmental Change, 40, (2016), 73-81

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Figure 3: Share of oil palm area (a) and growth in area under oil palm (b)

Notes: (a) Per cent of UN FAO reported total global oil palm harvested area in 2013. (b) Per cent changes in
FAO reported oil palm harvested area by country from 2003–2013.

Source: Vijay et al. (2016)45

Who grows oil palm?

The production of oil palm is split between plantations and smallholders. In many
countries it is a requirement that plantation companies develop a proportion of their land
for smallholders. For example, in Indonesia plantation law stipulates that plantation
companies are required to enter into partnerships with farmers and local communities
around the plantation (who are known as plasma in Indonesian).
The relationship between plantations and smallholders exists because the FFB
produced from these smallholders’ land is processed in company mills alongside
the FFB produced from the company’s plantations. In addition, the company
may provide smallholders with better seedlings, technical support and
subsidised inputs, such as fertiliser and pesticides, whose large applications are
required to maintain yields once harvesting commences.
The share of smallholders differs depending on the country. In South East Asia roughly
60% of the palm oil comes from the larger plantation companies (privately owned
estates) and 40% from smallholders.

45
Vijay V., Pimm S.L., Jenkins C. and Smith S.J., ‘The Impacts of Oil Palm on Recent
Deforestation and Biodiversity Loss’, Accessed 05/07/2017,
https://doi.org/10.1371/journal.pone.0159668

6. Introduction to palm oil and its products

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An important distinction therefore needs to be made between labourers on the
plantation, who do not own their own plots, and smallholders who have their own plots

but also often work for the plantations. This is discussed in Section 7.3.
Figure 4: Interrelation of smallholders and plantation companies
Source: Pacheco et al (2017)46

How is oil palm grown?

Both smallholders and plantations should follow the same process for establishing and
maintaining an oil palm plantation. In practice, smallholders often suffer from poorer
management and lower capital availability and consequently their yields tend to be lower.

Establishing the plantation

Plantation development starts with land clearing and the establishment of a nursery. In
the nursery the oil palm seeds are carefully selected and germinated under controlled
conditions.

The germinated seeds are transferred into polybags and grown out of doors in nurseries
for the next 12-15 months before planting in the field. Healthy, well-selected seedlings
are a pre-condition for early and sustained high yields. In most cases granular multi-
nutrient compound fertilisers are the preferred nutrient source for seedlings in the
nursery.

The newly planted palm takes around three years to yield its first crop, and yields build
to a peak eight years after planting and remain close to this peak for ten years. Oil palm
can continue to be economically productive for many years, but agronomists recommend
replanting after 25 years, by which age the palms become too tall for easy harvesting
and yields start to decline.

Maintenance

46
Pacheco P., Gnych S., Demawan A., Komarudin H. and Okarda B. ‘The palm oil global value
chain: Implications for economic growth and social and environmental sustainability’, Working
Paper 220, CIFOR 2017.

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Nutrient uptake by the young oil palm is low during the first year, when the plant is very
small, but increases steeply between years one and three (when harvesting commences)
and stabilises at a high level around years five to six. High and consistent fertiliser
applications are required to maintain yields.

To maintain good fertiliser response and high yields in older palms, selective thinning of
palms is often necessary. In addition, constant attention to improving the soil,
suppressing weeds, reducing water-logging and limiting erosion are required. This is
particularly important to avoid nitrogen deficiency.

Pest management is also important, though in South East Asia oil palm is fortunate that
there are fewer natural pests, as the crop is not native to the region. Some plantations
have introduced the barn owl as a natural solution to rats that feed on the loose oil palm
fruits that lie on the ground. The Rhinoceros beetle is a serious pest of both oil palm and
coconut, which can be managed by destroying breeding sites and trapping the adults.

Finally there are a number of diseases that can severely damage production.

 Fusarium wilt, a soil born pathogen, is one of the most destructive diseases of oil
palm in Africa, causing severe losses in some areas.
 Bud rot disease (BRD) is caused by a complex of fungal organisms and its
development is regulated by interactions between the plant, pathogens, and the
environment. Bud rot is a big problem on oil palm plantations in South America
where it affects fresh fruit bunch yields, as well as the quality of the oil in that
continent.
 Ganoderma Basal Stem Rot (BSR) disease is an incurable oil palm disease, caused
by the bracket fungus Ganoderma. It is lethal, and has been known for more than
50 years in South East Asia.

Harvesting

The oil palm produces fresh fruit bunches (FFB) which are harvested at intervals that are
ideally 7 to 10 days in duration throughout the economic life of the palm. In order to
maximise the oil extraction rate and ensure optimum oil quality, stringent harvesting
standards are practised (including paying particular attention to the ripeness of fruits, the
implementation of regular harvesting rounds and handling the fruits with minimum
bruising).

Harvesting oil palm is very labour intensive. The harvesters are skilled workers, able to
manipulate long poles with sharp knives at the end. The collection process can either be
manual, using wheelbarrows or buffaloes/oxen or mechanised by using a mechanical
buffalo (a small tractor). If the availability of skilled labour is inadequate, the plantation
might not be able to maintain harvesting rounds as short as 7-10 days. However, there is
a cost. In order to maximise oil yields per hectare, it is important to harvest FFB at the
right time. Otherwise, the FFB delivered to the mill could be under- or over-ripe, leading
to a reduced oil extraction rate.

How is palm oil processed?

Palm oil is notable for the complexity of its processing. Figure 5 shows a
schematic version of the steps involved in processing the fresh fruit bunches (FFB)
harvested from the oil palm.
Figure 5: Flow diagram of FFB processing

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 Fresh Fruit
Bunches (FFB)

Milling

Crude Palm Oil (CPO) Palm Kernel

Refining Palm Kernel Meal Crushing

RBD Palm Oil Crude Palm Kernel Oil

Refining
Fractionation
RBD Palm Kernel Oil

Fractionation

RBD Palm RBD Palm RBD Palm RBD Palm

Olein Stearin Kernel Oil Kernel Stearin

Food Industry Methyl Ester Oleochemicals

Biodiesel Fatty Acid Fatty Alcohol

Source: LMC International

Milling

After harvesting, the heavy fresh fruit bunches (FFB) are transported to a mill. The FFB
deteriorate quickly after harvesting, and are typically processed within 24 hours. This
limits the distance they can be transported. Most mills receive FFB from a mixture of
their own estates and outside smallholders and estates.

In the conventional milling process, the FFB is sterilised and the fruit stripped off. The
loose fruits are then pressed to extract the CPO. The kernels are separated from the
outer fibrous mesocarp. They are transported to a separate PK crushing plant, which may
process PK from as many as 30 mills.

We will first look at how the CPO is processed before returning to look at the palm
kernels.

Processing the CPO

Refining
Almost all vegetable oils in the world are refined to remove undesirable by-products or
impurities and to improve their taste, smell and appearance. However, there are major
differences between the refining process for seed oils (such as soybean, rapeseed or
sunflower oil) and pulp oils (such as palm oil and olive oil).

The reason for this is that seed oils are less sensitive to spoilage than crude palm oil.
With the advent of large scale palm oil refining in Malaysia in the 1970s, new physical
6. Introduction to palm oil and its products
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refining technologies that do not use chemicals to neutralise the FFA (free fatty acid) and
that use distillation at high temperature and low vacuum to remove the FFA.

Fractionation
After refining, to purify and bleach the oil, fractionation separates oil into liquid and solid
fractions. Palm oil is fractionated into liquid (olein) and solid (stearin) components.

Palm olein is the liquid fraction obtained by the fractionation of palm oil after
crystallisation at controlled temperatures. The physical characteristics of palm olein differ
from those of palm oil. It has a lower melting point than palm oil itself and so is fully
liquid in warm climate.

Palm stearin is the hard fraction obtained by fractionation of palm oil after crystallisation
at controlled temperatures. It is therefore a co-product of palm olein. It is nearly always
traded at a discount to palm oil and palm olein, making it a cost effective ingredient in
several applications.

In addition to palm olein and stearin, there are many other more specialised fractions.
These include double fractionated palm olein (known as superolein) with a lower melting
point than olein and palm mid-fractions (whose melting point lies between those of olein
and stearin).

Processing the palm kernels

Crushing of the palm kernels produces palm kernel oil (PKO). Alongside the PKO it also
produces a fibrous residue after the extraction of the oil called palm kernel meal, which is
used as animal feed.

As with CPO, this PKO can then be refined and further fractionated.
 Palm kernel olein is the liquid component of palm kernel oil obtained from
fractionation.
 Palm kernel stearin is the more solid fraction of palm kernel oil after fractionating
the oil.

End Uses
 As the above section on processing demonstrated, what is commonly referred to
as palm oil encompasses two chemically distinct oils (palm oil and palm kernel
oil), as well as a variety of different fractions. As a result, the oil palm’s products
have a very wide variety of different potential end-uses, including as a feedstock
for biodiesel, in food and chemical manufacturing, which are summarised in Figure
6.
 Palm olein is widely used as cooking oil. It is popular due to its resistance to
oxidation and the formation of breakdown products at frying temperatures and for
the longer shelf life of the finished products it is used in, notably snack foods and
instant noodles. It also blends well with other popular vegetable oils that are
traditionally used in many parts of the world.
 The physical characteristics of palm stearin differ significantly from those of palm
oil and it is available in a wider range of melting points and iodine values. Palm
stearin is a very useful source of fully natural hard fat component for products
such as shortening and pastry and bakery margarines. It is also a major
ingredient for the production of fatty acids.
 Where pourability and clarity are issues for olein, notably in temperate countries,
superolein can be used as a frying oil and cooking oil, usually in blends with seed
oils.

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  Palm mid-fraction is commonly used as a highly versatile natural ingredient in the
manufacture of tub margarine and as a replacement for cocoa butter in chocolate.

Figure 6: End uses of different PKO and CPO fractions

NUTRACEUTICALS

OILS AND FATS FOOD SOLUTIONS

OLEOCHEMICALS

NON-FOOD OILS AND FATS USES

Source: LMC International

The oil composition of palm kernel oil is very different from that of palm oil. Palm kernel
oil is used as a specialist food ingredient and as a raw material for oleochemicals.
 Palm kernel oil, palm kernel olein and palm kernel stearin find uses in margarine,
confectionery, coffee whiteners, biscuit cream and coating fats; and in these uses
they require little or no further processing. There is a growing trend to use palm
kernel oil products as an ingredient in the production of non-hydrogenated trans-
fat free margarine.
 Palm kernel oil is also used in the manufacture of oleochemicals, such as fatty
acids and alcohols, which are important intermediate feedstocks for the
manufacture of products such as detergents, shampoos and other personal care
products in a liquid or cream form.
 Palm kernel stearin is widely used to substitute for the more expensive cocoa
butter in many of its traditional applications. In some instances, particularly when
hydrogenated, palm kernel stearin exhibits performance superior to that of cocoa
butter in chocolates in tropical climates.

Substitution of different oils

There are large degrees of substitution between different vegetable oils, which makes it
difficult to establish at any given point which vegetable oil is being used for which end-
use. In addition, the complexity of the value chain makes it hard to establish exactly
what volumes of palm oil are processed into which product. There are, however, some
restrictions on the substitutability of different oils:

 The high proportion of lauric fatty acid in palm kernel oil makes it the primary
feedstock for the production of natural fatty alcohols, which are widely processed
into products such as shampoos and liquid detergents.

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  As CPO is naturally semi solid at room temperature with a melting point that lies
between 33ºC and 39ºC, it does not require artificial hardening, via
hydrogenation, for use as a food in hard fat applications, including baking and in
spreads. Since hydrogenation creates trans-fats, which are considered unhealthy
and have stringent incorporation limits in many markets, such as Denmark and
the US, palm oil is widely used as a naturally hard fat in food products and is
indispensable in the production of baked goods.

While it is difficult to establish with an certainty the split between different end-uses for
palm and palm kernel oils, based on LMC market reports we estimate that in 2015-16
8% was used for oleo-chemicals, a further 15% was used in biofuels and the remainder
was consumed in food end use sectors.

The economics of the oil palm

In the main oil palm areas of South East Asia, palms are harvested every day of the
year, which makes oil palm an attractive source of income for farmers. It is a very
productive crop, with yields of oil per hectare per annum that are very much greater than
for other oil crops. This is its major financial attraction to producers. Its financial
disadvantage is its labour intensity.

The absence so far of cost-competitive systems of mechanical harvesting makes oil palm
heavily dependent on labour inputs, and labour costs represent a much greater share of
its production costs than for other major oil crops, such as soy beans, rapeseed and
sunflower (
Figure 7).
Figure 7: Indicative share of labour in total costs by oil crops

60%

50%

40%

30%

20%

10%

0%
Coconut Palm Rapeseed Soybean Sunflowerseed

Source: LMC International

The overall production costs of palm oil per tonne are inevitably affected by yield: the
higher the yields of FFB and CPO, the lower the associated production costs, other things
being equal. In Southeast Asia, potential FFB yields per hectare under ideal conditions in
southern Thailand are 16-22 tonnes per hectare, which is relatively far from the Equator
and has a long distinct dry season. Its yields compare with a typical potential of 22-26
tonnes in Central Sumatra, Indonesia; 24-28 tonnes in Peninsular Malaysia and Sarawak,

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Malaysia; and 26-32 tonnes in Sabah, Malaysia, as well as North Sumatra and northern
Central Kalimantan, Indonesia.47

47
A.H. Ling, Ganling, Sandakan, Sabah, Malaysia, Personal communication.

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7. Environmental, social impacts and market aspects of palm oil

Given the broad scope of environmental, social and market aspects relating to palm oil,
we have broken it down into more manageable sub-tasks. The environmental impacts
include deforestation; biodiversity loss (partly from forest degradation); peat land
conversion; greenhouse gas emissions from land use change, the use of palm oil as a
feedstock for biodiesel, mills and other plantation activities; the use of fire and its
impacts; air pollution (including haze), and water pollution. The main social impacts are
land use rights; smallholders (including livelihoods, income and wellbeing); forced and
child labour; and terms and conditions of labour (including wages and health and safety).
The sections on market information include analysis of incomes and wealth distribution,
and illustrate how markets have developed differently in Indonesia, Malaysia and a
selection of other producer countries.

Readers should also refer to the introduction to the production and processing of oil palm
products in Section 4 above, and the Glossary of the terms in Section 3.

7.1. Environmental impacts

7.1.1. Deforestation

Indonesia and Malaysia alone have increased the area cultivated for oil palm from 2.6
million hectares in 1990 to over 15 million hectares in 2014 (with Indonesia counting for
just over 10 million hectares).48 This expansion has resulted in oil palm being considered
a major contributor to tropical deforestation.49,50,51,52

48
Cramb, R, and McCarthy, J.F. ‘Characterising Oil Palm Production in Indonesia and Malaysia’,
in Cramb, R, and McCarthy, J.F., eds., The Oil Palm Complex (Singapore, 2016) pp.27-77.
49
Casson, A. ‘The Hesitant Boom: Indonesia’s Oil Palm Sub-Sector in an Era of Economic Crisis
and Political Change’. CIFOR Occasional Paper 29 (2000).
50
Gibbs, H.K., Ruesch, A.S., F. Achard, F., Clayton, M.K., Holmgren, P., Ramankutty, N. and
Foley, J. A. (2010). ‘Tropical forests were the primary sources of new agricultural land in the
1980s and 1990s’. Proceedings of the National Academy of Science 107 (2010), 16732–
16737.
51
Dieter Cuypers, D., Geerken, T., Gorissen, L., Lust, A., Peters, G., Karstensen, J., Prieler, S.,
Fisher, G., Hizsnyik, E. and van Velthuizen, H. ‘The impact of EU consumption on
deforestation: Comprehensive analysis of the impact of EU consumption on deforestation’.
European Union Technical Report - 2013 - 063 (2013).
52
Boucher, D., Elias, P., Lininger, K., May-Tobin, C., Roquemore, S. & Saxon, E. The root of the
problem: what’s driving tropical deforestation today? The Union of Concerned Scientists
(2011).

7. Task 1: Environmental impacts and market information

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Figure 8 depicts areas vulnerable to potential deforestation caused by oil palm out to
2080. This is based on an assessment of the areas that are outside IUCN I and II
protected areas, and in which oil palm could be planted. The map demonstrates that the
areas most under threat from deforestation are Borneo, Indonesian Papua, Papua New
Guinea, parts of Central America and large swathes of West Africa and South America.

7. Task 1: Environmental impacts and market information

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Figure 8: Current and forecasted (2080) forest areas vulnerable to
deforestation from oil palm

Source: Vijay et al. (2016)53

The most recent peer-reviewed scientific evidence of the relationship between

deforestation and palm oil expansion consider land use change up to 201554 and the
following section considers evidence up to that date. Readers interested in deforestation
statistics should also note that global datasets on overall deforestation rates – though
without analysis of its causes and hence not directly relevant to palm oil – are
available.55 56

53
Vijay V., Pimm S.L., Jenkins C. & Smith S.J. (2016). ‘The Impacts of Oil Palm on Recent
Deforestation and Biodiversity Loss’, Accessed 05/07/2017,
https://doi.org/10.1371/journal.pone.0159668
54
Austin, K.G., Mosnier, A., Pirker, J., , McCallum, I., Fritz, S., & Kasibhatla, P.S. (2017).
Shifting patterns of oil palm driven deforestation in Indonesia and implications for zero-
deforestation commitments. Land Use Policy, 41-48
55
Food and Agriculture Organisation of the United Nations (2016). Global Forest Resources
Assessment 2015 How are the world’s forests changing? Second edition.
http://www.fao.org/forest-resources-assessment/en/
56
http://data.globalforestwatch.org/

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Estimates for the proportion of deforestation caused by the expansion of palm oil
cultivation in Indonesia range from 11% (between 2000 and 2010) 57 to a maximum of
16% (between 1990 and 2005).58 These estimates include both direct deforestation
(where forest is replaced by oil palm) and indirect deforestation (where oil palm replaces
other land uses, which relocate to a forest area). A recent estimate suggests that the
area of forest replaced by palm oil in Indonesia remained almost constant between the
periods 2005-2010 and 2010-2015.59

Several lines of research have sought to establish the strength of the direct link between
the expansion of oil palm cultivation and deforestation. Remote sensing studies of a
subset of plantations in 20 countries showed that 45% of oil palm plantations in
Southeast Asia came from areas that were forests in 1989.60 For Indonesia and Malaysia,
the estimates were 54% and 40% respectively. There were large regional differences;
with 31% of South American plantations studied having been forest in 1989 (including
39% in Brazil and 0% in Colombia), but only 2% in Central America and 7% in Africa. A
study of Latin America gave similar results for that region: 79% of oil palm expansion
was estimated to have occurred on lands that had already been under some production
system (predominantly cattle ranching), while 21% came from land that had previously
had forest cover. The areas of forest conversion were concentrated in the Amazon
regions of Peru, Ecuador and Brazil. 61

The estimate by Vijay et al. (2016)62 for Southeast Asia is remarkably similar to an
earlier estimate for Indonesia and Malaysia, which was based on industry data and which
suggested that 48% of oil palm plantation area present in 2002 in the two countries had
been established on converted forest.63 The same author provides additional rationale
based on official statistics that this is likely to be an underestimate. A later study using
similar data estimated that 55-59% of Malaysia’s and at least 56% of Indonesia’s palm
oil expansion between 1990 and 2005 could be attributed to forest conversion, with the
remaining expansion on pre-existing croplands.64 An estimate from the earlier period of
1980-2000 gave higher figures: that intact (60%) and disturbed forests (30%) were the
sources of ∼90% of new plantations between 1980 and 2000 in South East Asia, but
those estimates include other plantation crops (e.g. rubber), as well as oil palm.65

57
Abood, S. A., Lee, J. S. H., Burivalova, Z., Garcia‐Ulloa, J., and Koh, L.P. 'Relative
contributions of the logging, fiber, oil palm, and mining industries to forest loss in Indonesia'.
Conservation Letters 8 (2015), 58-67.
58
Fitzherbert et al., (2008). Op. cit.
59
Austin, K.G., Mosnier, A., Pirker, J., McCallum, I., Fritz, S., & Kasibhatla, P.S. (2017). Shifting
patterns of oil palm driven deforestation in Indonesia and implications for zero-deforestation
commitments. Land Use Policy, 41-48
60
Vijay V., Pimm S.L., Jenkins C.N., & Smith S.J. 'The Impacts of Oil Palm on Recent
Deforestation and Biodiversity Loss'. PLoS ONE 11/7 (2017), 1-19.
61
Furumo, P.R. & Aide, T.M. (2017). Characterizing commercial oil palm expansion in Latin
America: land use change and trade. Environmental Research Letters. 12, 024008
62
Vijay et al. 2016). Op. cit.
63
Wakker, E. Greasy palms: The social and ecological impacts of large-scale oil palm plantation
development in Southeast Asia. Friends of the Earth (London, 2005).
64
Koh, L.P. & Ghazoul, J. 'Spatially explicit scenario analysis for reconciling agricultural
expansion, forest protection, and carbon conservation in Indonesia'. Proceedings of the
National Academy of Science, 107/24 (2010), 11140–11144.
65
Gibbs, H.K., Ruesch, A.S., F. Achard, F., Clayton, M.K., Holmgren, P., Ramankutty, N. & Foley,
J. A. (2010). ‘Tropical forests were the primary sources of new agricultural land in the 1980s
and 1990s’. Proceedings of the National Academy of Science 107 (2010), 16732–16737.

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Future expansion of palm oil cultivation may result in different deforestation patterns to
those seen in the past. A large proportion of the suitable oil palm planting area in
Malaysia is now utilised, meaning that further deforestation is likely to be focused on
Sarawak, where the provincial government is promoting plantation expansion,66 whilst
also promoting the ‘Heart of Borneo’ initiative that aims to protect significant areas of
forest. The proposed further doubling of palm oil output in Indonesia67 could theoretically
be achieved without further loss of forestland and without compromising rice
production,68 but it remains to be seen whether such a course will be followed.

Higher palm oil yields per hectare could reduce the pressure to expand palm areas to
meet demand growth. There is a strong desire to increase yields on existing palm areas,
but world average yields have not risen since 2005. This might be because expansion has
occurred in marginal areas, or because of the difficulties in recruiting workers to perform
the main field tasks, but translating the planting of improved varieties into higher
average recorded yields on the ground is not proving an easy task.

In Thailand, official data69 indicate that the total area under oil palm grew from 412,000
to 693,000 hectares from 2005 to 2014, while the area under rubber expanded from
2,041,000 to 3,504,000 hectares, and the national forest area fell from 15,712,000 to
15,343,000 hectares. Some of the land planted to oil palm was converted from rubber,
with planting subsidies, while rubber plantings were encouraged further north, in regions
which were not suitable for oil palm cultivation, with the benefit of planting subsidies.
There are no large oil palm plantations in Thailand; the average farm size in the southern
region producing 85-90% of the country’s palm oil is 3.2 hectares 70.

Globally, an estimated 234 million hectares of suitable and available land are available
for palm oil cultivation, a significant proportion of which is in the Amazon. 71 In Brazil,
initiatives from the federal government to restrict oil palm expansion to already
deforested areas (the Sustainable Palm Oil Production Program and the Agro-Ecological
Zoning of Oil Palm in Deforested Areas of the Amazon) have apparently had some initial
72
success in reducing the environmental impacts of palm oil expansion. Similarly, in
Thailand, most (but not all) of the expansion of oil palm cultivation in recent decades has
73
been on previously abandoned agricultural land. However, in countries such as

66
Cramb, R. ‘The Political Economy of Large Scale Palm Oil development in Sarawak’, in Cramb,
R, and McCarthy, J.F., eds., The Oil Palm Complex (Singapore, 2016) 189-246.
67
Jakarta Post (December 2, 2009) 18 million hectares of land for palm oil. Jakarta Post.
http://www.thejakartapost.com/news/2009/12/02/indonesia-allocates-18- million-hectares-
land-palm-oil.html
68
Koh, L.P. & Ghazoul, J. 'Spatially explicit scenario analysis for reconciling agricultural
expansion, forest protection, and carbon conservation in Indonesia'. Proceedings of the
National Academy of Science, 107/24 (2010), 11140–11144.
69
Annual data from the series of Agricultural Statistics of Thailand, Office of Agricultural
Economics, Bangkok. Thailand.
70
Ibid.
71
Pirker, J., Mosnier, A., Kraxner, F., Havlík, P and Obersteiner, M. ’What are the limits to oil
palm expansion?’ Global Environmental Change, 40 (2016) 73–81.
72
Brandão, F. and Schoneveld, G. 'The state of oil palm development in the Brazilian Amazon:
Trends, value chain dynamics and business models.' Centre for International Forestry
Research Working Paper 198. CIFOR (2015), Bogor, Indonesia.
73
Dallinger, J. 'Oil palm development in Thailand: economic, social and environmental
considerations.' In Colchester, M. and Chao, S. Oil Palm Expansion in South East Asia: Trends
and Implications for Local Communities and Indigenous Peoples. (Forest People's Programme
and SawitWatch (2011), Moreton-in-Marsh, UK and Bogor, Indonesia.

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Cameroon, much of the appropriate land for oil palm cultivation is still forested and there
74
is therefore a risk that expansion of oil palm cultivation will lead to deforestation.

Two-thirds of the forest area converted to palm oil plantations is estimated to be

embodied in global trade in palm oil.75 The EU alone was estimated to be responsible for
0.9 million hectares of embodied deforestation through its imports of palm oil between
1980 and 2000.76

In summary, we conclude that whilst there are other drivers of deforestation in producer
regions, there is a high degree of confidence that the expansion of oil palm cultivation
has resulted in significant deforestation in Indonesia and Malaysia in particular77. This is a
consistent finding of several appropriate, rigorous studies, ( Table 5). Global trade,
including EU imports, appears to drive a significant proportion of this deforestation.
Estimates of conversion of natural vegetation types other than forest are limited.

This conclusion must be set against the environmental implications of alternative means
of meeting the growth in world demand for vegetable oils. The expansion of soybean
cultivation in South America is the main alternative source of large tonnages of vegetable
oil, but on average eight hectares of soybeans produce the same amount of vegetable oil
as one hectare of oil palm, worldwide (see Appendix 5 and Section 7.4.2).

Table 5: Information quality assessment for oil palm cultivation as a major

driver of deforestation78
Topic Number of studies Appropriateness Rigour Consistency Overall score

Deforestation 9 0.8 0.8 1.0 0.9

7.1.2. Biodiversity loss

The world is facing an unprecedented rate of species extinctions, driven by human

activities.79 The major cause of this extinction is commercial agriculture. 80,81 The lowland

74
Hoyle, D. and Levang, P. Oil Palm Development in Cameroon. Ad hoc working paper, WWF
(2012).
75
Henders, S., Persson, U.M. & Kastner, T. (2015). 'Trading forests: land-use change and carbon
emissions embodied in production and exports of forest-risk commodities'. Environmental
Research Letters 10/12 (2015), 125012.
76
Cuypers, D., Geerken, T., Gorissen, L., Lust, A., Peters, G., Karstensen, J., Prieler, S., Fisher,
G., Hizsnyik, E. and van Velthuizen, H. ‘The impact of EU consumption on deforestation:
Comprehensive analysis of the impact of EU consumption on deforestation’. European Union
Technical Report - 2013 - 063 (2013).
77
Self-evidently, future increases in palm oil production may have different patterns and the
extent to which they will continue to be associated with deforestation is unknown
78
Based on assessment of Casson (2000), op. cit.; Wakker (2005), op. cit.; Fitzherbert et al.
(2008), op. cit.; Koh & Wilcove (2008), op. cit.; Gibbs et al. (2010), op. cit.; Aboud et al.
(2015), op. cit.; Henders et al. (2015), op. cit.; and Vijay et al. (2016), op. cit..
79
De Vos, J.M., Joppa, L.N., Gittleman, J.L., Stephens, P.R., and Pimm, S.L. ‘Estimating the
normal background rate of species extinction’. Conservation Biology, 29/2 (2014), 452–462.
80
Rudel, T.K., Defries R., Asner G.P., and Laurance, W.F. ‘Changing drivers of deforestation and
new opportunities for conservation’. Conservation Biology 23/6 (2009), 1396-405.

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tropics, which is the cultivation area of the oil palm,82 contain the most species rich
forests on earth.83 Those of Southeast Asia are amongst the most biodiverse of all,
contain high levels of endemism84 and include charismatic and endangered fauna, such
as orang-utan, Asian elephant, Sumatran tiger, birds of paradise, and three species of
rhinoceros. Indonesia, for example, covers just 1.3% of the globe's land surface, yet its
forests are home to around 10% of all species of flowering plants, 17% of all species of
birds, 12% of all species of mammals, 16% of all species of reptiles, and 16% of all
species of amphibians.85

Conversion of forest to other land uses and degradation of forest reduces the extent and
quality of habitat, thus causing a loss of biodiversity. In the previous section, we
established the evidence that the expansion of palm oil has resulted in the conversion of
millions of hectares of forest to plantation. The remaining critical question is whether
these conversions are likely to have had a significant impact on biodiversity, in other
words whether the assertion that “oil-palm agriculture is the greatest immediate threat
to biodiversity in Southeast Asia (and a growing threat elsewhere)” is justified. 86

It is well established and uncontested that the conversion of tropical forest to agriculture,
plantations and other land uses causes a significant loss of species.87 It is estimated that
Southeast Asia may lose three quarters of its original forests by 2100, and as a result up
to 42% of its biodiversity.88

Loss of species occurs whether or not the forest converted to plantations has been
previously logged, because selectively logged forest typically retains a significant
proportion of the biodiversity of unlogged, primary tropical forest. 89,90,91 This is a point

81
Boucher, D., Elias, P., Lininger, K., May-Tobin, C., Roquemore, S. & Saxon, E. The root of the
problem: what’s driving tropical deforestation today? The Union of Concerned Scientists
(2011), USA.
82
Corley, R.H.V. and Tinker P.B. (eds.) The Oil Palm (Oxford, 2003).
83
Whitmore, T.C., Introduction to Tropical Rain Forests (Oxford, 1998).
84
Whitmore, T.C., Tropical Rain Forests of the Far East (Oxford, 1988).
85
Collins, N., Sayer, J.A. and Whitmore, T.C. The Conservation Atlas of Tropical Forests: Asia
and the Pacific. International Union for the Conservation of Nature (IUCN) (London, 1991).
86
Wilcove, D.S and Koh, L.P. ‘Addressing the threats to biodiversity from oil-palm agriculture’.
Biodiversity and Conservation 19 (2010), 99-1007.
87
Brook, B.W., Sodhi N.S., Ng P.K.L. ‘Catastrophic extinctions follow deforestation in Singapore'.
Nature 424 (2003), 420–423.
88
Sodhi, N.S., Koh L.P., Brook B.W., Ng P.K.L. ‘Southeast Asian biodiversity: an impending
disaster’. Trends in Ecology and Evolution 19 (2004), 654–660.
89
Barlow, J., Gardner T.A., Araujo I.S., Ávila-Pires, T.C., Bonaldo, A.B., Costa, J.E., Esposito,
M.C., Ferreira, L.V., Hawes, J., Hernandez, M.I.M., Hoogmoed, M.S., Leite, R.N., Lo-Man-
Hung, N.F., Malcolm, J.R., Martins, M.B., Mestre, L.A.M., Miranda-Santos, R., Nunes-Gutjahr,
A.L., Overal, W.L., Parry, L., Peters, S.L., Ribeiro-Junior, M.A., da Silva, M.N.F., da Silva
Motta, C., and Peres, C. A. ‘Quantifying the biodiversity value of tropical primary, secondary
and plantation forests’. Proceedings of the National Academy of Science 104 (2007), 18555–
18560.
90
Gardner, T.A., Ribeiro-Junior, M.A., Barlow, J., Avila-Pires, T.C.S., Hoogmoed M.S., and Peres
C.A. ‘The value of primary, secondary, and plantation forests for a neotropical herpetofauna’.
Conservation Biology 21 (2007), 775–787.
91
Putz, F.E., Zuidema, P.A., Synnott, T., Pena-Claros, M., Pinard, M.A., Sheil, D., Vanclay, J.K.,
Sist, P., Gourlet-Fleury, S., Griscom, B., Palmer, J. and Zagt, R. ‘Sustaining conservation
values in selectively logged tropical forests: the attained and the attainable’. Conservation
Letters 5 (2012), 296–303.

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worth reiterating: previously selectively logged tropical forests harbour significant
biodiversity that is imperilled by conversion to other land uses.

Specific studies comparing the biodiversity within palm oil plantations to that of logged or
unlogged forest have given similar results to these general patterns. The diversity of
birds,92,93,94,95 butterflies,96 mammals,97,98 and fungus99 within oil palm plantations is a
fraction of that within forest. Forest specialist species are particularly vulnerable. For
example, Malaysian forests that were selectively logged at least 30 years ago contained
only 73–75% of the 159 species of extant primary forest birds, but rural habitats
dominated by oil palm plantations had only 28–32% of these primary forest species.100

The RSPO certification standard includes provision for conserving biodiversity within
plantation companies’ land holdings, including retaining patches of forest. Forest patches
within plantations were found to have an abundance of rare bird species that was 60
times lower than in contiguous forest, but that was far higher than oil palm plantations
where the abundance of rare bird species was 200 times lower than in large forest
areas.101

In summary, there is high confidence that the conversion of forest – primary or

selectively logged – to oil palm cultivation causes a significant loss of biodiversity, with
forest specialist species particularly affected. This is the consistent finding of a large body
of rigorous research that examines conversion of tropical forest in general, as well as
specific comparisons of the diversity of a range of taxonomic groups within oil palm
plantations compared with logged or unlogged forest (Table 6).

92
Danielsen, F. and Heegaard, M. 'Impact of logging and plantation development on species
diversity: a case study from Sumatra'. Management of tropical forests. University of Oslo,
Centre for Development & the Environment; SUM Occasional Paper, 1/95 (Oslo, 1995).
93
Peh, K.S.-H., de Jong, J., Sodhi, N.S., Lim, S.L.-H and Yap, C.A.-M. Lowland rainforest
avifauna and human disturbance: persistence of primary forest birds in selectively logged
forests and mixed-rural habitats of southern Peninsular Malaysia. Biological Conservation 123
(2005) 489–505.
94
Peh, K.S.-H., Sodhi N.S., de Jong J., Sekercioglu C.H., Yap C.A.-M., Lim S.L.-H. Conservation
value of degraded habitats for forest birds in southern Peninsular Malaysia. Diversity and
Distributions 12 (2006) 572–581.
95
Edwards, D.P., Hodgson, J.A., Hamer, K.C., Mitchell, S.L., Ahmad, A.H., Cornell, S.J., and
Wilcove, D.S. ‘Wildlife-friendly oil palm plantations fail to protect biodiversity effectively’.
Conservation Letters 3 (2010) 236–242.
96
Koh & Wilcove (2008). Op. cit.
97
Danielsen, F. & Heegaard, M. (1995). Op. cit.
98
Laidlaw, R.K. 'A Comparison between Populations of Primates, Squirrels, Three Shrews and
other Mammals inhabiting Virgin, Logged, Fragmented and Plantation Forests in Malaysia'.
Conservation, Management and Development of Forest Resources. Proceedings of the
Malaysia-United Kingdom Programme Workshop, 21 – 24 October 1996. Forest Research
Institute Malaysia (Kuala Lumpur, 1998).
99
Kerfahi, D., Tripathi, B.M., Lee, J., Edwards, D.P. and Adams, J.M. ‘The Impact of Selective-
Logging and Forest Clearance for Oil Palm on Fungal Communities in Borneo’ PLoS ONE 9/11
(2014): e111525.
100
Peh, K.S.-H. et al. (2005). Op. cit.
101
Edwards, D.P. et al. (2010). Op. cit.

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Table 6: Information quality assessment for oil palm cultivation as a significant
cause of biodiversity loss102
Topic Number of Appropriateness Rigour Consistency Overall
studies score

Biodiversity 7 1.0 0.8 1.0 0.9

loss

7.1.3. Peat land conversion

Malaysia, Indonesia and Papua New Guinea support some of the most extensive tropical
peatlands in the world, covering around 27.1 million hectares.103 Only 36% of the
historical peat swamp forest area in the region remains, with only 9% currently in
designated protected areas,104 and the majority of the remaining areas are now
degraded.105 Other large areas of tropical peat swamp forest occur in the Congo Basin.106

Peat swamp forest vegetation is a critically endangered category of forested wetland

characterised by deep layers of peat soil (histosols) and highly acidic water. Apart from
some fish, few species are confined to peat swamp forests but they nonetheless provide
habitat for a large number of globally threatened species. 107 Peat contains a high
proportion of carbon, and the major role that Indo-Malayan peatlands play in carbon
sequestration is well established.108 Once drained, decomposing organic matter by
oxidation results in carbon dioxide emissions, and drained peat is highly flammable: once
alight, peat fires can burn for months or even years. The cultivation of palm oil on
peatlands therefore presents a specific case of several environmental themes, especially
deforestation, biodiversity, burning, and greenhouse gas emissions from land use
change.

The degree to which conversion of peat lands to cultivation exacerbates these

environmental issues is partly dependent on the depth of peat. Peat thickness in
Indonesia (Sumatra, Kalimantan and Papua) ranges from less than 1 metre to over 12
metres, with 42% of the peatland area being two metres deep, with similar depth
distributions assumed for other parts of the region.109 However, there does not appear to
a body of research describing oil palm planted by peat depth.

102
Based on assessment of Danielsen and Heegaard (1995), op. cit.; Laidlaw (1998), op. cit.;
Peh et al., (2005), op. cit.; Peh et al., (2006), op. cit.; Koh & Wilcove (2008), op. cit.;
Edwards et al. (2010), op. cit.; and Kefahi et al. (2014).
103
Hooijer, A., Silvius, M., Wösten, H. and Page, S. ‘PEAT-CO2, Assessment of CO2 emissions
from drained peatlands in SE Asia’. Delft Hydraulics report Q3943 (2006), Delft, Netherlands.
104
Posa, et al., (2011). Op. cit.
105
Yule, C.M. ‘Loss of biodiversity and ecosystem functioning in Indo-Malayan peat swamp
forests’. Biodiversity and Conservation (2010) 19:393–409.
106
Dargie, G.C., Lewis, S.L., Lawson, I.T., Mitchard, E.T.A., Page, S.E., Bocko, Y.E., & Ifo, S.A.
Age, extent and carbon storage of the central Congo Basin peatland complex. Nature 542, 86–
90 (2017).
107
Posa, et al., (2011). Op. cit.
108
Page et al. (2006). Op. cit.
109
Hooijer et al. (2006). Op. cit.

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An estimated 10% of the oil palm cultivated in Peninsular Malaysia, Borneo and Sumatra
in 2000 was on peat land.110 The estimated area of oil palm cultivation on peat (880,000
hectares) is equivalent to 6% of the 14.7 million hectares of peatland in the area, and
38% of the total area of cleared peatland. However, there is significant variation in the
proportion of peatland converted to oil palm cultivation in different parts of the region.
For example, analysis of official land use data in Peninsular Malaysia showed that
222,000 hectares of oil palm was on peatlands by 2006, which is equivalent to 9.5% of
the total oil palm area, and over one third of the total area of peat. 111 112 This was an
increase of over 18,000 hectares (or 3% of total peatlands) from 2002. Another study
estimated a smaller area of 207,458 hectares of oil palm in Peninsular Malaysia, 21,405
hectares in Sabah, and 437,174 hectares in Sarawak. 113 27% of peatlands in Peninsular
Malaysia, Sumatra and Borneo (i.e. virtually the entire oil palm area in Indonesia and
Malaysia) were covered by industrial plantations in 2015, of which 73% (3.1 million
hectares) was oil palm.114 Future oil palm development is likely to encroach more
extensively on peatlands, even though it has been considered historically as marginal
land for cultivation,115 and drainage of peatlands for cultivation can cause subsidence and
that in turn increases the risk that land becomes unsuitable for cultivation due to
flooding.116 An enumeration of the extent and current land use of peat lands based on
Miettinen et al (2016)117 is summarised in Table 7.

This land-use change also contributed to the loss of ≈140 million tonnes of aboveground
biomass carbon, and annual emissions of ≈4.6 million tonnes of below ground carbon
from peat oxidation.118 Between 1997 and 2006, peatland fires in the Indo-Malayan
region are estimated to have caused average yearly carbon dioxide emissions of 1,400
million tonnes, with 90% of this originating in Indonesia, mostly from Riau Province,
Sumatra.119 This is equivalent to almost 8% of global emissions from fossil fuel burning.
When emissions from oxidisation of drained peat (600 million tonnes per year) and
deforestation are included, approximately 3,750–5,400 tonnes of carbon dioxide will be
emitted for each hectare of peatland converted to oil palm over the next 25 years. 120
Danielsen et al. (2008) estimated that it would take over 600 years for the carbon
emissions saved through use of biofuel to compensate for the carbon lost through
conversion of peat swamp forest, whether for oil palm or other crops.

110
Koh, L.P., Miettinen, J., Liew, S.C., and Ghazoul, J. 'Remotely sensed evidence of tropical
peatland conversion to oil palm'. Proceedings of the National Academy of Science 108/12
(2011) 5127–5132.
111
Wetlands International. A Quick Scan of Peatlands in Malaysia. Malaysia 2010.
112
Wahid et al (2010) reported 207,458 ha of oil palm on peat in Peninsular Malaysia in 2009.
113
Wahid O., Nordiana A.A., Tarmizi A.M., Haniff M.H., & Kushairi A.D. (2010) Mapping of oil
palm cultivation in peatland in Malaysia. MPOB information series. MPOB TT no. 473
114
Miettinen, J., Shi, C., and Liew, S.C. Land cover distribution in the peatlands of Peninsular
Malaysia, Sumatra and Borneo in 2015 with changes since 1990' Global Ecology and
Conservation, Volume 6, (2016), Pp 67–78.
115
Koh et al. (2011). Op. cit.
116
Uda, S.K., Hein, L. & Sumarga, E. Wetlands Ecol Manage (2017).
https://doi.org/10.1007/s11273-017-9544-0
117
Miettinen et al.(2016). Op. cit.
118
Koh et al. (2011). Ibid.
119
Hooijer et al. (2006), Op. cit.
120
Yule (2010), Op. cit.

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Koh et al. (2011) also estimated that the observed conversion of peat swamp forest to oil
palm plantation could have resulted in the loss of 1% of Borneo’s biodiversity, 3.4% in
Sumatra, and 12.1% in Peninsular Malaysia.

On October 23, 2015, Indonesian President Joko Widodo announced a moratorium on

new peatland concessions and a cancellation of existing concessions that have not been
developed, thereby halting the legal conversion of peatland and peat swamp forests into
agricultural land. The impact of this moratorium can already be seen in the slowdown in
the area growth in Indonesia in 2016 and 2017 (Figure 11 in Section 7.1.8), which
occurred despite the increase in the local palm oil price, which has usually been linked
with an expansion in new plantings.

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 Table 7: Land cover distribution in the peatlands of Peninsular Malaysia, Sumatra and Borneo in 2015
(‘000 hectares), adapted from Miettinen et al. (2016) and others
Pristine Degraded Secondary Others Small- Industrial Total Industrial Ind. oil Peat depth Note on
PSF PSF forest to ferns/ holder plantation oil palm palm, % of indicators, % peat depth
low shrub area Total of Total
Peninsular 41 152 892 69 267 279 892 276 31% 17% <1.5m For West
Malaysia Johor
Sarawak 8 383 1,449 27 141 725 1,449 718 50% 5.9% <1.5m For Sarawak
Sabah 3 43 191 9 26 66 191 66 35%
Total Malaysia 579 2,532 105 434 1,071 2,532 1,060 42%
52
Brunei 82 19 123 5 3 0 123 - 0%
Riau 295 686 4,062 151 1,502 1,210 4,062 591 15% 44% <2m 1990 data
Jambi 72 100 672 10 241 178 672 115 17% 42% <2m
South Sumatra 11 77 1,457 47 272 618 1,457 209 14% 96% <2m
Total Sumatra 436 957 7,230 241 2,393 2,405 7,230 1,316 18% 53% <2m For 8
Provinces
(1990)
West Kalimantan 69 766 1,752 117 198 352 1,752 309 18%
Central 327 1,058 3,042 158 304 244 3,042 244 8% 50% < 2m
Kalimantan
South - 8 303 5 144 83 303 77 25%
Kalimantan
East Kalimantan 30 178 684 98 35 131 684 101 15%
Total 426 2,010 5,782 378 681 810 5,782 731 13%
Kalimantan
Total study 996 3,564 2,581 729 3,510 4,286 15,667 3,106 20%
area
% of total 6% 23% 16% 5% 22% 27% 100% 20%
Notes: PSF: peat swamp forest. Others: Water, seasonal water, mangrove, urban, clearance areas.
Industrial Oil Palm is a sub-set of Industrial plantation. Shallow peat versus deep peat information is only readily available for certain areas. Refer to Wetlands International
(2010) for Malaysia and Wahyunto et al. (2008) for Indonesia. Please refer to sources for details about the accuracy of estimates.

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In summary, peatlands in Indonesia and Malaysia are threatened, and their conversion to
other land uses has disproportionate impacts on biodiversity and greenhouse gas
emissions. There is consistent evidence (Table 8121) that expanding palm oil cultivation
contributes towards the environmental problems of peat swamp deforestation, the
resulting biodiversity loss and carbon emissions. There is insufficient information to
assess the likelihood of significant future expansion of oil palm cultivation onto peatlands,
and hence whether its contribution to global greenhouse gas emissions is likely to grow.

Table 8: Information quality assessment for oil palm cultivation contributes

towards environmental problems associated with peatland conversion.
Topic Number of Appropriateness Rigour Consistency Overall
studies score
Peatland 8 1.0 0.8 1.0 0.9
conversion

7.1.4. Greenhouse gas emissions

Greenhouse gas emissions from palm oil cultivation and initial processing derive from two
main sources: land use change (with additional emissions if fire is used to clear land for
cultivation), and plantation and mill activities. Additional consideration is given to the
consequences of emissions from these sources when palm oil is used as a feedstock for
biofuel, because biofuel use has been promoted as an emissions reduction measure.

Land use change

The largest determinant of oil palm cultivation’s contribution to greenhouse gas

emissions through land use change (LUC) is the difference in carbon sequestration
between the palm oil plantation and the land use it replaces. 122

Tropical forests store around 46% of the world’s living terrestrial carbon,123 and 25% of
total net global carbon emissions may stem from deforestation. 124

Unlogged forest Asian tropical forests store up to 400 tonnes of carbon per hectare above
ground, with additional carbon stored in mineral soils as yet poorly quantified. 125 This is
up to four times the amount of aboveground carbon of a fully mature oil palm plantation
(91 tonnes per hectare). If forest vegetation were cleared with fire, compounds that have
a net greenhouse effect equal to 207 tonnes per hectare of carbon would be emitted,
although some estimates are considerably higher (around 650 tonnes carbon dioxide

121
Based on an assessment of Wetlands International (2011), op. cit.; Koh et al. (2011), op. cit.;
Hooijer et al. (2006), op. cit.; Danielsen et al. (2008), op. cit.; Yule (2010), op. cit.; and Koh
et al. (2011), op. cit.; Miettien et al, (2016), op. cit.., Hein et al. (2017). Op. cit.
122
Chase, L.D.C., and Henson, I.E.. ‘A detailed greenhouse gas budget for palm oil production’.
International Journal of Agricultural Sustainability 8 (2010) 199-214.
123
Soepadmo, E. ‘Tropical rain forests as carbon sinks’. Chemosphere 27 (1993), 1025–1039.
124
Skutsch, M., Bird, N., Trines, E., Dutschke, M., Frumhoff, P., de Jong, B., van Laake, P.,
Masera, O., and Murdiyarso, D. ‘Clearing the way for reducing emissions from tropical
deforestation’. Journal of Environmental Science and Policy 10 (2007), 322–334.
125
Lucey, J., Hill, J. van der Meer, P., Reynolds, G. & Agus, F. (2014). Change in carbon stocks
arising from land-use conversion to oil palm plantations: A science-for-policy paper for the Oil
Palm Research-Policy Partnership Network. Available at: www.sensorproject.net/outputs

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equivalent per hectare).126 A recent review of the evidence concluded that there was high
confidence in the evidence for large net greenhouse gas emissions from forest
conversion.127

If the original habitat were peat swamp forest, then a soil carbon stock as high as 1,550
tonnes per hectare would be added to emissions from the oxidisation of drained peat
soil,128 or a total of 1,300 tonnes carbon dioxide equivalents during the first 25-year cycle
of oil palm growth (depending on peat depth and characteristics and drainage regime).129
Lucey et al. (2014) concluded that there was high confidence in the evidence for very
high carbon loss from peat swamp forest conversion.130

In practice, a large proportion of forest converted to oil palm plantations is logged forest,
grassland, or land previously used for agriculture. The standing carbon stock of these
vegetation types has been reported as between 187-361 tonnes per hectare.131

Oil palm plantation established on grassland will replace the released carbon within
approximately 10 years, as grassland has an above ground carbon stock that has been
estimated at less than that of a mature oil palm plantation: 39 tonnes per hectare. 132
This suggests that oil palm plantations established on grassland would result in the net
removal of about 135 tonnes carbon dioxide per hectare from the atmosphere over a 25-
year period.133 Lucey et al. (2014) concluded that there was high confidence in the
evidence that converting grassland to oil palm would result in no carbon loss, and may in
fact result in some carbon capture.134 Similarly, establishing oil palm plantations on
scrublands is likely to result in net carbon sequestration (Lucey et al., 2014).135

A complete life-cycle carbon model, based on palms grown in established plantations,

estimates that growing and refining each metric ton of crude palm oil (CPO) produces the
equivalent of 0.86 metric ton of carbon dioxide.136

In summary, there is consistent and rigorous evidence that converting forests to palm oil
plantations results in net greenhouse gas emissions (Table 9)137. Emissions are extremely
high if the forest being converted is peat swamp forest, high from unlogged forest on
mineral soils, and variable from selectively logged forest. Conversion of grasslands,
however, can see a net uptake of carbon dioxide. These findings are wholly consistent

126
Germer J. and Sauerborn, J. ‘Estimation of the impact of oil palm plantation establishment on
greenhouse gas balance’. Environment Development and Sustainability 10 (2007), 619-716.
127
Lucey et al. (2014), op. cit.
128
Hooijer et al. (2006), op. cit.
129
Germer and Sauerborm (2007), op. cit.
130
Lucey et al. (2014), op. cit.
131
Morel, 2009, cited in Klaarenbeeksingel, F.W. ‘Greenhouse Gas Emissions from Palm Oil
Production: Literature review and proposals from the RSPO Working Group on Greenhouse
Gases’. Final report, 9 October 2009.
132
Murdiyarso et al. (2002), op. cit.
133
Germer and Sauerborm (2007), op. cit.
134
Lucey et al. (2014), op. cit.
135
Lucey et al. (2014), ibid
136
Chase and Henson (2010), op. cit.
137
Based on an assessment of Murdiyarso et al. (2002), op. cit.; Hooijer et al. (2006), op. cit.;
Germer & Sauerborn (2007), op. cit.; Danielsen et al. (2008), op. cit.; and Chase & Henson
(2010), op. cit.

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with a recent review of the evidence.138 Appendix 3 further reviews published
consequential life cycle analyses.

Table 9: Information quality assessment for greenhouse gas emissions from

conversion of various vegetation types to oil palm plantations
Topic Number of Appropriateness Rigour Consistency Overall
studies score

GHG emissions 5 1.0 0.9 1.0 1.0

(LUC)

Mills and other plantation activities

In addition to land use change, greenhouse gas emissions from palm oil production
include those from treatment of palm oil mill effluent (POME), fertiliser use, energy
inputs to mills, and fossil fuel use for vehicles, machinery and power generation during
day-to-day activities. Of these, the first two are likely to produce the highest
emissions.139

POME, a liquid waste from the initial processing of fresh fruit bunches, has to be treated
in a series of anaerobic and aerobic digestion ponds to make it safe for release into
watercourses. Methane emissions from the anaerobic treatment are a major concern due
to the global warming potential of methane (CH 4) 34 times that of carbon dioxide over a
100-year period. Methane emissions from POME are the second largest source of GHG
emissions from oil palm production after land use change 140. Emissions from treatment
ponds reach 1,043 kg per day per pond.141 A growing number of mills now capture the
methane emitted during anaerobic digestion of POME, either for flaring, as a boiler fuel or
for electricity generation. Significant efforts are underway in Malaysia to install biogas
plants in new and existing mills under the Economic Transformation Programme 142. Using
the methane in mill boilers results in substantial reductions in carbon dioxide emissions
and releases biomass to return as organic matter to fields or as fuel for boilers.143

A further potential source of greenhouse gas emissions from oil palm cultivation is
nitrous oxide (N2O), released due to the use of nitrogen fertiliser (including the use of
nitrogen fixing cover crops), which has a global warming potential of 298 relative to
carbon dioxide. Nitrous oxide emissions from palms using fertiliser have been estimated
at 4.4 kg N2O-N per hectare per year, although the authors recognise significant

138
Lucey et al. (2014), op. cit.
139
Acton, J. and Hewit, N. Greenhouse gas and volatile organic compound emissions from oil
palm: A science-for-policy paper by the SEnSOR programme (2016). Available from:
http://www.sensorproject.net/outputs
140
Chase, L.D.C., and Henson, I.E.. ‘A detailed greenhouse gas budget for palm oil production’.
International Journal of Agricultural Sustainability 8 (2010) 199-214.
141
Yacob, S., Hassan, M. A., Shirai, Y., Wakisaka, M. & Subash, S. 'Baseline study of methane
emission from anaerobic ponds of palm oil mill effluent treatment'. Science of the Total
Environment, 366 (2005), 187 -196.
142
Loh, S.K., Nasrin, A.B., Mohamad Azri, S., Nurul Adela, S.B., Muzzammil, N., Daryl Jay, T.,
Stasha Eleanor, R.A., Lim, W.S., Choo, Y.M., & Kaltschmitt M. (2017). ‘First Report on
Malaysia’s experiences and development in biogas capture and utilization from palm oil mill
effluent under the Economic Transformation Programme: Current and future perspectives.’
Renewable and Sustainable Energy Reviews, 74, 1257-1274.
143
Chase & Henson (2010), op. cit.

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uncertainty with this result.144 A more recent study estimated nitrous oxide emissions at
19–22 kg N2O-N per hectare, with decreasing emissions as plantations matured. 145

Mills meet much of their power requirements through the combustion of oil palm crop
residues.146 In a pilot study with nine RSPO members, fossil fuel consumption at the mill
stage was low, at 0-2% of total GHG emissions.147 Carbon dioxide is also emitted from oil
palm estates through fossil fuel combustion (i.e., vehicle and machinery use, power
generation) during estate maintenance (0.06 tonnes CO2 equivalent per hectare per
year) and harvesting (2.27 tonnes CO2 equivalent per hectare per year.148

In summary, while land use change is in many cases likely to be the largest source of
greenhouse gas emissions associated with palm oil production and processing, plantation
management and mill operations result in greenhouse gas emissions regardless of
previous land use.149 However, there is limited empirical evidence and significant
uncertainty around greenhouse gas emissions from estate management ( Table 10150),
which suggests that further research is required to quantify methane and nitrous oxide
emissions from oil palm cultivation in particular.

Table 10: Information quality assessment for greenhouse gas emissions from
mills and plantation activities
Topic Number Appropriateness Rigour Consistency Overall score
of studies

GHG emissions (mills 4 0.7 0.7 N/A N/A

& plantations)

Note: As the cited papers are estimating different parameters, no consistency score is given and hence
no overall score for information quality.

Use of palm oil as biofuel feedstock

144
Fowler, D., Nemitz, E., Misztal, P., Di Marco, C., Skiba, U., Ryder, J., Helfter, C., Cape, J. N.,
Owen, S., Dorsey, J., Gallagher, M. W., Coyle, M., Phillips, G., Davison, B., Langford, B.,
MacKenzie, R., Muller, J., Siong, J., Dari - Salisburgo, C., Di Carlo, P., Aruffo, E., Giammaria,
F., Pyle, J. A. & Hewitt, C. N. 'Effects of land use on surface –atmosphere exchanges of trace
gases and energy in Borneo: comparing fluxes over oil palm plantations and a rainforest'.
Philosophical transactions of the Royal Society of London. Series B, Biological sciences, 366
(2011), 3196 -3209.
145
Kusin, F.M., Akhir, N.I.M., Mohamat-Yusuff F., and Awang, M. ‘Nitrous oxide emission from
nitrogen fertiliser application in oil palm plantation of different stages’. International Journal of
Global Warming, 9/4 (2016). 629-541.
146
Hosseini, S. E. & Wahid, M . A. 'Utilization of palm solid residue as a source of renewable and
sustainable energy in Malaysia'. Renewable and Sustainable Energy Reviews, 40 (2014), 621 -
632.
147
Bessou, C., Chase, L. D. C., Henson, I. E., Abdul -Manan, A. F. N., Milà i Canals, L., Agus, F.,
Sharma, M. & Chin, M. 'Pilot application of PalmGHG, the Roundtable on Sustainable Palm Oil
greenhouse gas calculator for oil palm products'. Journal of Cleaner Production, 73 (2014),
136 -145.
148
Chase & Henson (2010), op. cit.
149
Chase & Henson (2010), ibid
150
Based on an analysis of Chase & Henson (2010), ibid.; Fowlser et al. (2011), op. cit.; Bessou
et al. (2014), op. cit.; and Kusin et al. (2016).

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Biofuel can replace use of fossil fuels, and hence potentially contribute to a net reduction
in greenhouse gas emissions. This occurs not only through the production of biodiesel,
but from the direct use of vegetable oils and palm biomass in boilers for power
generation. This is commonly expressed as a ‘payback time’, that is, the time taken for
the greenhouse gas emissions saved through using a renewable source (in this case palm
oil) rather than fossil fuels to equal the carbon emissions from production of the biofuel.

Estimates of the payback time from biofuels produced by plantations on converted

forestland are far from uniform, at 39 years,151 30-120 years,152 75 years,153 and 86
years154, see Figure 9. This increases by 18 years if the forest was cleared by fire, 155
which was a frequent practice in Indonesia. If the original habitat was peat land,
recapture of the emitted carbon would take 692 years, 156 between 420-840 years
depending on the depth of the peat, 157 or 918 years.158 In addition, this does not take
into account the indirect land use effect of switching area between different crops.

If the original habitat were degraded grassland, the plantation would have compensated
for emissions within 10 years159 or fewer,160 because palm oil plantations can increase
ecosystem carbon storage compared with degraded grassland and scrublands, while
simultaneously offsetting fossil carbon emissions.
Figure 9: Greenhouse gas payback time for biodiesel from oil palm plantations
converted from different vegetation types.

Peatswamp forest
Previous vegetation

Forest

Grassland

0 200 400 600 800 1000

Payback time (years)

Note: Bars indicate the maximum and minimum estimates from the literature.

151
Souza, S.P. de, Pacca, S. Márcio Turra de Ávila, M.T. de, Borges, J.L.B. ‘Greenhouse gas
emissions and energy balance of palm oil biofuel’. Renewable Energy 35/11 (2010), 2552–
2561.
152
Gibbs, H.K., Johnston, M., Foley, J.A., Holloway, T., Monfreda, C., Ramankutty, N., and Zaks,
D. ‘Carbon payback times for crop-based biofuel expansion in the tropics: the effects of
changing yield and technology’. Environmental Research Letters 3 (2008), 034001 (10pp).
153
Danielsen et al. (2008), op. cit.
154
Fargione, J., Hill, J., Tilman, D., Polasky, S. & Hawthorne, P. 'Land clearing and the biofuel
carbon debt'. Science, 319 (2008), 1235 -1238.
155
Danielsen et al. (2008), op. cit.
156
Danielsen et al. (2008), Ibid.
157
Fargione et al. (2008), op. cit.
158
Gibbs et al. (2008), op. cit.
159
Danielsen et al. (2008), op. cit.
160
Gibbs et al. (2008), op. cit.

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Note that the EU Renewable Energy Directive (EU RED) sustainability criteria do not allow
biofuels that are produced from areas that used to be forest or peatlands that were
further drained to count towards EU RED targets.

In summary, the length of time taken for palm oil based biofuels to result in carbon
reductions is highly dependent on the previous land use of the plantations. Only
vegetation types such as degraded grassland yield net carbon savings within a decade of
conversion. Biofuels derived from palm oil grown on land that was previously forested are
unlikely to achieve a net carbon gain for at least 30 years (and probably far longer) and
the payback period from peat land is likely to run to several hundred years. These
findings are consistent across a small number of studies (Table 11).161

Table 11: Information quality for the carbon payback time of palm oil biofuels
on original vegetation type
Topic Number of Appropriateness Rigour Consistency Overall
studies score

GHG emissions 4 1.0 1.0 1.0 1.0

(biofuels)

7.1.5. Use of fire and its impacts

Fire is considered a cheap and effective method to clear and maintain land for
agricultural and plantation development, especially in Kalimantan and Sumatra. 162
However, the practice of burning damages biodiversity, reduces carbon storage, and can
severely degrade regional air quality.

Burning takes place annually, peaking in droughts associated with El Niño, when fuel
sources become more flammable. Drained peat land represents a particular fire hazard: it
is highly flammable and once alight peat fires can burn for months or even years.

This can result in globally significant greenhouse gas emissions. Global greenhouse gas
emissions from vegetation fires were 2,000 million tonnes of carbon per year between
1997 and 2009, 10% of which were from equatorial Asia. This share rose to 40% in
1997, an El Niño year, mostly due to fires in Indonesia.163 Fires in peat forest in 1997
were particularly severe, releasing between 810 and 2,570 million tonnes of carbon into
the atmosphere, equivalent to 13–40% of the average annual global carbon emissions
from fossil fuels.164 Similarly, the El Niño event of 2015 was associated with over
100,000 manmade fires that burned 2.6 million hectares of Indonesian land between

161
Danielsen et al. (2008), op. cit.; Gibbs et al. (2008), op. cit.; Fargione et al. (2008), op. cit.;
and Souza et al. (2010), op. cit.
162
Marlier, M. E., DeFries, R.S., Kim, P.S., Koplitz, S.N., Jacob, D.J., Mickley, L.J. and Myers, S.S.
'Fire emissions and regional air quality impacts from fires in oil palm, timber, and logging
concessions in Indonesia'. Environmental Research Letters 10 (2015), 085005.
163
van der Werf, G.R., Randerson, J.T., Giglio, L., Collatz, G. J., Mu, M., Kasibhatla, P. S., Morton,
D. C., DeFries, R. S., Jin, Y., and van Leeuwen, T.T. ‘Global fire emissions and the contribution
of deforestation, savanna, forest, agricultural, and peat fires (1997–2009)’. Atmospheric
Chemistry and Physics, 10 (2010), 11707–11735.
164
Page, S.E., Siegert, F., Rieley, J.O., Boehm, H-D. V, Jaya, A. and Limin, S. 'The amount of
carbon released from peat and forest forest in Indonesia during 1997'. Nature 420 (2002), 61–
65.

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June and October,165. 33% of the total area burned was peat land. These 2015 fires in
Indonesia caused emissions of between 1.62166 and 1.75167 billion tonnes of CO 2
equivalent and effectively tripled Indonesia’s greenhouse gas emissions for that year.

In addition to carbon emissions, burning results in significant transboundary air pollution

and regional health impacts, even in non-drought years.168 This is assessed in the section
on haze. The remainder of the present section will focus on evidence for the role of palm
oil cultivation in burning, and the instruments employed to reduce it.

Analysis of the extent to which oil palm cultivation is responsible for burning is not
available for all countries where oil palm is cultivated. There are several smaller-scale
studies using different methods that together provide an indication of the degree to
which oil palm cultivation is responsible for fires. Approximately 19% of the land burned
in Indonesia in 2015,169 and 16.6% of fires between 2012-15 in Sumatra and
Kalimantan, occurred within oil palm concessions.170 Most fires and related greenhouse
gas emissions between 2003 and 2013 in Sumatra and Kalimantan occurred outside
concessions, but oil palm plantations were a greater source than timber plantation or
logging concessions in Kalimantan and second to timber plantations in Sumatra. 171 There
is significant uncertainty in attribution of fires to concession-owning companies, as the
methods used do not account fully for fires that have been started by communities living
within concession boundaries.172

The health and environmental issues associated with burning have given rise to several
regulatory and voluntary initiatives. At a regional level, the 1999 Association of
Southeast Asian Nations’ (ASEAN) Policy on Zero Burning and the 2002 ASEAN
Agreement on Transboundary Haze Pollution have to date failed to stop the fires. In
2015, President Widodo of Indonesia instructed government agencies to revoke the
permits of any palm oil companies involved in the burning of forests and urged the arrest
of those responsible. In 2014, the Singapore Parliament passed the Transboundary Haze
Pollution Act (THPA), allowing fines to be imposed on companies that cause or contribute
to transboundary haze pollution in Singapore. 173 On a voluntary level, Criterion 5.5 of the

165
World Bank ‘The Cost of Fire An Economic Analysis of Indonesia’s 2015 Fire Crisis’. Indonesia
Sustainable Landscapes Knowledge Note: 1. The World Bank Group (2016), Jakarta.
166
Chamorro, A., Minnemeyer, S., and Sargent, S. Exploring Indonesia's Long and Complicated
History of Forest Fires. World Resources Institute, February 16, 2017
http://www.wri.org/blog/2017/02/exploring-indonesias-long-and-complicated-history-forest-
fires
167
World Bank (2016), op. cit.
168
Gaveau, D.L.A., Salim, M.A., Hergoualc’h, K., Locatelli, B., Sloan, S., Wooster, M., Marlier,
M.E., Molidena, E., Yaen, H., DeFries, R., Verchot, L., Murdiyarso, D., Nasi, R., Holmgren, P.,
and Sheil, D. ‘Major atmospheric emissions from peat fires in Southeast Asia during non-
drought years: evidence from the 2013 Sumatran fires’. Scientific Reports 4 (2014), 1-7.
169
Recalculated from figure on page 1 of World Bank (2016), op. cit.
170
Cattau, M.E., Marlier, M.E., and DeFries, R. 'Effectiveness of Roundtable on Sustainable Palm
Oil (RSPO) for reducing fires on oil palm concessions in Indonesia from 2012 to 2015'.
Environmental Research Letters 11 (2016), 105007.
171
Marlier et al. (2015), op. cit.
172
Gaveau et al. (2014), op. cit.
173
Lee, J.S.H., Jaafar, Z., Tan, A.K.J., Carrasco, L.R., Ewing, J.J., Bickford, D.P., Webb, E.L. and
Koh, L.P. ‘Toward clearer skies: challenges in regulating transboundary haze in Southeast
Asia’. Environmental Science and Policy 55 (2016), 87–95.

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RSPO Principles and Criteria174 forbids burning as a means of land clearance, other than
in those situations specified in the ASEAN Policy on Zero Burning. This appears to have
had some success in reducing the incidence of fires in wetter periods, but none during
droughts.175 Carbon payments are considered unlikely to be an effective mechanism for
promoting zero burning approaches, as they only match the value of the agriculture,
including oil palm cultivation, that is enabled by burning on peat soils.176,177

In summary, fires used to clear forest in Kalimantan and Sumatra (and particularly peat
lands) for agriculture are a major source of greenhouse gas emissions and air pollution.
Oil palm cultivation could be responsible for perhaps 16-19% (and 52% in Sumatra in
2013) of these fires, although there is significant uncertainty due to the small number of
rigorous studies available and the methodology used to attribute fires (Table 12).178

Table 12: Information quality assessment for the contribution of palm oil
cultivation to forest fires
Topic Number of Appropriateness Rigour Consistency Overall score
studies

Burning 3 0.6 0.7 1.0 0.7

7.1.6. Air pollution

Haze

Haze pollution has been an occasional but sometimes severe problem in Southeast Asia
over the past 20 years.179 Haze pollution consists of airborne particles, including fine
(PM2.5) and ultrafine (PM10) particles generated from fires. The principal source of haze in
Southeast Asia is fires started in order to clear land for agriculture, especially on peat
lands, with Sumatra and Kalimantan the main source locations.180,181

The 1997 haze event was the first to elicit widespread public attention. Hospital
admissions in Singapore for haze-related conditions rose by 30% in that year.182

174
RSPO ‘Principles And Criteria For The Production Of Sustainable Palm Oil’. The Roundtable on
Sustainable Palm Oil (2013), Kuala Lumpur.
175
Cattau et al. (2016), op. cit.
176
Gaveau et al. (2014), op. cit.
177
Chisholm, R.A., Wijedasa, L.S. and Swinfield, T. ‘The need for long-term remedies for
Indonesia’s forest fires’. Conservation Biology 30 (2016), 5–6.
178
Based on an assessment of Marlier et al. (2015), op. cit.; Cattau et al. (2016), op. cit.; and
World Bank (2016), op. cit.
179
Gaveau et al. (2014), op. cit..
180
Sastry, N. ‘Forest fires, air pollution, and mortality in Southeast Asia’. Demography 39 (2002),
1–23.
181
Reddington, C., Yoshioka, M., Balasubramanian, R., Ridley, D., Toh, Y., Arnold, S. and
Spracklen, D. ‘Contribution of vegetation and peat fires to particulate air pollution in Southeast
Asia’. Environmental Research Letters, 9 (2014), 094006.
182
Emmanuel, S.C. ‘Impact to lung health of haze from forest fires: the Singapore experience.’
Respirology 5 (2000), 175–82.

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Extensive fires in 2015 drove the longest haze event on record, lasting three months. 183
The health effects of haze include potential in utero deaths,184 respiratory ailments and
exacerbation of existing heart and lung conditions.185186187 Haze in 2015 resulted in an
estimated 100,300 excess deaths across Indonesia, Malaysia and Singapore. 188

Other economic impacts include disruption to transport and tourism. 189190 The economic
impacts are felt most strongly in Indonesia and neighbouring Singapore and Malaysia,
but can also extend to Vietnam, Thailand and the Philippines.191192193 The economic
impact of haze pollution have been estimated at US$ 643.5 million per year in
Singapore,194 US$91 million per year in Malaysia195 and regional costs of US$760 million
in 1997 and 1998 combined.196 The disparities between these valuations reflect variation
in the severity of events, as well as the different accounting methods used.

In summary, there is a body of evidence (Table 13197) that transboundary haze

pollution, causes economic and health damage in Southeast Asia. Forest fires, especially
those on peat lands, which are started to clear land for agriculture are the main cause of
haze. Oil palm cultivation contributes to these fires, but the proportion that can be
attributed to palm oil is not known with certainty (see previous section).

183
Lin, Y., Wijedasa, L.S. and Chisholm R A. ‘Singapore’s willingness to pay for mitigation of
transboundary forest-fire haze from Indonesia’. Environmental Research Letters 12 (2017),
024017.
184
Jayachandran, S. ‘Air Quality and Early-Life Mortality During Indonesia's Massive Wildfires in
1997’ California Center for Population Research, On-Line Working Paper Series, University of
California (2005), USA.
185
Emmanuel (2000), op. cit..
186
Kunii, O., Kanagawa, S., Yajima, I., Hisamatsu, Y., Yamamura, S., Amagai, T. and Ismail,
I.T.S. ‘The 1997 haze disaster in Indonesia: its air quality and health effects’. Archives of
Environmental Health: An International Journal 57 (2002), 16–22.
187
Sastry (2002), op. cit..
188
Koplitz, S.N., Mickley, L.J., Marlier, M.E., Buonocore, J.J., Kim, P.S., Liu, T., Sulprizio, M.P.,
DeFries, R.S., Jacob, D.J., Schwartz, J., Pongsiri, M. and Myers, S.S. ‘Public health impacts of
the severe haze in Equatorial Asia in September–October 2015: demonstration of a new
framework for informing fire management strategies to reduce downwind smoke exposure’.
Environmental Research Letters, 11 (2016), 094023.
189
Lee, J.S.H., Jaafar, Z., Tan, A.K.J., Carrasco, L.R., Ewing, J.J., Bickford, D.P., Webb, E.L. and
Koh, L.P. ‘Toward clearer skies: challenges in regulating transboundary haze in Southeast
Asia’. Environmental Science and Policy 55 (2016), 87–95.
190
Lin et al., (2017), op. cit.
191
Chisholm, R.A., Wijedasa, L.S. and Swinfield, T. ‘The need for long-term remedies for
Indonesia’s forest fires’. Conservation Biology 30 (2016), 5–6.
192
Lee et al., (2016), op. cit.
193
Lin et al., (2017), op. cit.
194
Lin et al., (2017), ibid.
195
Othman, J., Sahani, M., Mahmud, M., Sheikh Ahmad, M.K. ‘Transboundary smoke haze
pollution in Malaysia: inpatient health impacts and economic valuation’. Environmental
Pollution, 189 (2014), 194–201.
196
Tacconi, L. Fires in Indonesia: Causes, Costs and Policy Implications. Center for International
Forestry Research (2003), Bogor, Indonesia.
197
Based on assessment of Emmanuel (2000), op. cit.; Kunii et al. (2002) op. cit.; Sastry (2002),
op. cit.; Tacconi (2003), op. cit.; Jayachandran (2005), op. cit.; Othman et al. (2014), op.
cit.; Koplitz et al. (2016), op. cit.; and Lin et al., (2017), op. cit.;

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Table 13: Information quality assessment for the impact of transboundary haze
on health and economic activity in Southeast Asia
Topic Number of Appropriateness Rigour Consistency Overall score
studies

Air pollution 8 1.0 0.8 1.0 0.9

(haze)

Other air pollution

Empty fruit bunches, waste fibres and shells are commonly burnt to provide the power
requirements for mills. This can result in the emission of particulate matter, nitrogen and
sulphur oxides, unburned hydrocarbons, carbon volatile organic compounds and
polycyclic aromatic hydrocarbons.198 Emissions from mills in Malaysia in the 1980s were
within legal limits,199 but there is scant modern research on the extent of pollution
emitted by mills.

7.1.7. Water pollution

Major risks of water pollution may occur during the clearing and establishment phase of
plantations (especially sedimentation); discharge of palm oil mill effluent (POME); and
release of agrichemicals through run-off and leaching.

Sedimentation of water bodies is considered a particular risk during the clearing and
establishment phases of plantation management, when the soil is largely uncovered. 200
201
However, streams draining palm plantations later in their development have been
shown to have hydrological, physical, and biochemical alterations that differ from those
draining forest.202 For example, palm plantations in West Kalimantan had sediment
concentrations that are on occasions hundreds of times above those in streams draining
forest.203

POME has high acidity, and high biological oxygen demand (BOD) and chemical oxygen
demand (COD). When discharged into waterways it can contaminate drinking water and
be harmful to aquatic life through acidity or eutrophication (where excessive nutrients

198
Hosseini & Wahid (2014), op. cit.
199
Yaccob, M., Rahman, K.A., and Yusef, R.M. 'Air Pollution Control in Palm Oil Mill Industry in
Malaysia'. Presented at the Symposium on Environmental Perspectives towards the Year 2000
and Beyond, Bangkok, Thailand, 1989. Available at
http://eprints.utm.my/3932/1/SKMBT_60007061915393.pdf
200
Goh, K. J., Härdter, R., and Fairhurst, T. 'Fertilizing for maximum return'. In Oil Palm:
Management for Large and Sustainable Yields (T. Fairhurst and R. Hardter, Eds.), pp. 279–
306. Potash & Phosphate Institute/Potash & Phosphate Institute of Canada and International
Potash Institute (PPI/PPIC and IPI), 2003, Singapore.
201
Lord, S. and Clay, J. Environmental Impacts of Oil Palm – Practical Considerations in Defining
Sustainability for Impacts on the Air, Land and Water. New Britain Palm Oil (n.d.). Available at
http://www.nbpol.com.pg/wp-
content/uploads/downloads/2011/02/EnvironmentalImpactOfOilPalm.pdf
202
Carlson, K.M., Curran, L.M., Ponette-González, A.G., Ratnasari, D., Ruspita, Lisnawati, N.,
Purwanto, Y., Brauman, K.A., Raymond, P.A. ‘Influence of watershed-climate interactions on
stream temperature, sediment yield, and metabolism along a land use intensity gradient in
Indonesian Borneo’. Journal of Geophysical Research: Biogeosciences 119 (2014), 1110–1128.
203
Carlson et al. (2014) ibid.

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result in over-abundant algal growth). Most mills treat POME before discharge, in
digestion ponds or with methane capture. Producer countries typically have legislation
pertaining to standards of discharge,204 which is implemented with some success in
Malaysia,205 but with less in Indonesia.206

Fertiliser is typically applied to the base of oil palms once or twice per year. Significant
nutrient losses into groundwater or surface water are expected from palm oil
plantations,207 caused by run-off and erosion (particularly when the soil is exposed at
clearing and planting stages, and by the die-back of ground cover vegetation due to low
light levels near the ground) and leaching (exacerbated in coarse-textured soils in the
humid tropics where rainfall exceeds evapotranspiration). Reviews of studies conducted
in Malaysia in the 1980s and 1990s concluded that losses of nutrients to run-off and
erosion are higher than those lost to leaching. 2.0-15.6% of the nitrogen fertiliser applied
to palms is lost to run-off and 0.5-6.2% to erosion.208 209 For potassium the combined
losses range from zero to 15.4%. Nitrogen losses to leaching are 1.0-4.8% of the applied
fertiliser, rising to 10.9-26.5% in immature plantations, with equivalent potassium losses
2.7% and 10.0%.

Although oil palm plantations lose nutrients to the environment, measured groundwater
concentrations of leached ammonium, nitrate and potassium did not exceed World Health
Organisation quality standards in one of the few studies that have measured them. 210
There appears to be little research into the effect of nutrient loss from palm oil
plantations into surface water bodies,211 although rivers in agricultural landscapes (i.e.,
including oil palm) in Malaysia have been shown to be slightly polluted with ammonium,
nitrate and extremely contaminated with phosphate. 212

In summary, the dominance of palm cultivation and milling in some landscapes means
that watershed-scale impacts on surface and ground water could occur. These impacts
include sedimentation caused by soil erosion, high acidity and oxygen demand, and
release of nutrients. The limited available evidence of impacts on ground or surface water

204
Wu, T.Y., Mohammad, A.W., Jahim, J.M., and Anuar, N. ‘Pollution control technologies for the
treatment of palm oil mill effluent (POME) through end-of-pipe processes’. Journal of
Environmental Management, 91 (2010) 1467e1490.
205
Igwe, J.C. and Onyegbado, C.C. ‘A Review of Palm Oil Mill Effluent (Pome) Water Treatment’.
Global Journal of Environmental Research, 1/2 (2007): 54-62.
206
McCarthy, J., and Zen, Z. ‘Regulating the Oil Palm Boom: Assessing the Effectiveness of
Environmental Governance Approaches to Agro-industrial Pollution in Indonesia’. Law & Policy,
32 (2010): 153–179.
207
Goh et al. (2003) op. cit.
208
Comte, I., Colin, F., Whalen, J.K., Grünberger, O. and Caliman, J-P. ‘Agricultural Practices in
Oil Palm Plantations and Their Impact on Hydrological Changes, Nutrient Fluxes and Water
Quality in Indonesia: A Review’. Advances in Agronomy, 116 (2012), 71-124.
209
Pardon, L., Bessou C., Nelson, P. N., Dubos, B., Ollivier, J., Marichal, R., Caliman, J. -P. &
Gabrielle, B. ‘Key unknowns in nitrogen budget for oil palm plantations. A review.’ Agronomy
for Sustainable Development (2016), 36:20.
210
Ah Tung, P.G., Yusoff, M.K., Majid, N.M., Joo, G.K., and Huang, G.H. ‘Effect of N and K
fertilisers on nutrient leaching and groundwater quality under mature oil palm in Sabah during
the monsoon period’. American Journal of Applied Science, 6 (2009), 1788–1799.
211
Carlson et al. (2014) op. cit.
212
Al-Badaii, F. Shuhaimi-Othman, M., and Gasim, M.B. ‘Water Quality Assessment of the
Semenyih River, Selangor, Malaysia’. Journal of Chemistry 2013 (2013), Article ID 871056, 10
pages.

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2017 EUR 70 EN
in Malaysia and Indonesia (Table 14213), implies that oil palm cultivation and milling does
cause water pollution, but also that it is not necessarily outside national or international
guidelines.

Table 14: Information quality assessment for the evidence that oil palm
cultivation and milling causes significant water pollution
Topic Number of Appropriateness Rigour Consistency Overall score
studies

Water 4 0.8 0.7 0.5 0.7

pollution

7.1.8. Impact of changes in commodities prices on deforestation and

peatland drainage

The growth in oil palm areas is driven by the crude palm oil (CPO) price. In
order to understand the growth of oil palm on area formerly under peat we look
at two main studies. The first is Gunarso et al (2013), which was commissioned
by the RSPO. Importantly this study includes a data supplement (with land use
change data for forest and peat conversion up to 2010). We combine that
analysis with data from analysis of more recent peat conversion by Miettinen et
al (2016) 214.

213
Based on an assessment of Igwe & Onyegbado (2007), op. cit.; Ah Tung et al. (2009), op.
cit.; Al-Badaii et al. (2013), op. cit.; and Carlson et al. (2014) op. cit.;
214
Miettinen, Jukka, Chenghua Shi, Soo Chin Liew (2016), 'Land cover distribution in the
peatlands of Peninsular Malaysia, Sumatra and Borneo in 2015 with changes since 1990'
Global Ecology and Conservation, Volume 6, April 2016, Pages 67–78,
http://dx.doi.org/10.1016/j.gecco.2016.02.004.

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Figure 10 illustrates the rapid feedback from CPO prices to the demand for seeds for
planting in Malaysia as a whole, using official data on germinated oil palm seed sales for
planting.
Corresponding Indonesian data in Figure 11, obtained through enquiries to all the
individual seed companies, demonstrates that, as with Malaysia, the most important
single influence upon the purchase of oil palm seeds for planting is the local price of CPO.
The subsequent increase in planted areas should be accurate, as long as companies have
the legal right to develop the land. If land rights are unclear when seeds are bought, area
figures will be less precise.

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Figure 10: Malaysian demand for germinated seeds vs. the local CPO price
90 3,600
Germinated oil palm seed sales, millions

80 3,200

70 2,800

Local C PO price, Ringgits per tonne

60 2,400

50 2,000

40 1,600

30 1,200

20 800

10 400

0 0
1990 1995 2000 2005 2010 2015

Germinated oil palm seed sales, millions Local CPO price, Ringgits per tonne

Sources: Bursa Malaysia Derivatives (for prices) and Malaysian Palm Oil Board (for seed sales).

Figure 11: Indonesian demand for oil palm seeds vs. the local CPO price

200 1,000
Indonesian CPO price, US$/tonne

160 800
Millions of germinated seeds

120 600

80 400

40 200

0 0
1988 1992 1996 2000 2004 2008 2012 2016
Seed supply in Indonesia CPO price

Sources: PT Kharisma Pemasaran Bersama Nusantara (for prices) and private seed companies.

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Figure 12 and
Figure 13 plot the changes in oil palm areas in Indonesia and Malaysia, respectively,
using five-year averages to give a picture of the average growth in each period. The blue
lines track the total growth in oil palm areas 215216. The dotted brown lines depict annual
oil palm area growth in Indonesia (LMC data) and Malaysia (MPOB).
The lines follow broadly parallel paths, but there is considerable inter-annual variation.
The estimates of changes in land use differ as a result of differences in methodology and
interpretation. It is not unusual for land area estimates to vary by 10% and estimates of
annual change to vary by 60% between different satellite imagery studies 217.

Alongside the total area under oil palm, the figure shows the expansion that occurred on
to peat in the orange line, based on data from Gunarso et al (2013) and Miettinen et al.
In addition, in both diagrams stacked areas are used to indicate the split between
different types of land from 1990 to 2010 based on the data from Gunarso et al (2013).
In each case the more detailed data for each of the two countries distinguishes between
land that was formerly swamp, agricultural and other degraded land, agro-forest or
forest.218

215
For 1990-2010 the area data are from Gunarso, Petrus, Manjela Eko Hartoyo, Fahmuddin
Agus, Timothy J. Killeen (2013), Palm oil and Land Use Change in Indonesia, Malaysia, and
Papua New Guinea, Roundtable on Sustainable Palm Oil, November 2013 and Supplement
(data table) http://www.rspo.org/key-documents/supplementary-materials, accessed 21 Mar.
2017.
216
For 2010-2015 the data are from Miettinen, Jukka, Chenghua Shi, Soo Chin Liew (2016), 'Land
cover distribution in the peatlands of Peninsular Malaysia, Sumatra and Borneo in 2015 with
changes since 1990' Global Ecology and Conservation, Volume 6, April 2016, Pages 67–78,
http://dx.doi.org/10.1016/j.gecco.2016.02.004.
217
Gunarso et al. (2013), Op. cit..
218
[1a] Gunarso et al. (2013) for 1990-2010 from land category analysis.
[1a] This includes data for upland forest and mangroves, excluding swamp forest (peat) and
agroforestry & plantations. Oil Palm (OP) from agroforest & plantation; Timber, mixed tree
crop & crop plantations. OP from agriculture, degraded & other; Agriculture, shrub &
grassland, bare soil & other. OP from swamp; Swamp forest and open swamp. OP on peat.
[1b] Gunarso et al. (2013) uses a separate analysis using an existing data set providing maps for
peat soils. The spatial distribution and extent of peat soils was obtained from Wetlands
International for Indonesia and from a Harmonised World Soil Map for Malaysia.
[2] Miettinen et al. (2016) for 2010-2015 oil palm on peat data
[3] For 2010-2015 oil palm area, MPOB data for Malaysia and LMC estimates for Indonesia.

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Figure 12: Net change in oil palm areas and land use conversion – Indonesia219

Figure 13: Net change in change in oil palm areas and land use conversion -
Malaysia220

The main conclusions to be drawn from the five and ten-year averaged data221 are:

219
Ibid.
220
Ibid.
221
Land use change is often presented on this basis, with lack of data on annual changes.

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  On rising palm oil prices during the period from 2000 to 2010, oil palm plantings
stepped up from the region of 300,000 hectares per year to 500,000 in Indonesia.
 In Malaysia, there was a step up and then step back down to annual average area
developed to oil palm at about 150,000 hectares per year. (Note: in Malaysia,
unlike Indonesia, a large area of oil palms is over 25 years old. This area is due to
be replanted, and the official data on newly planted areas will include these
replanted areas.)
 Indonesia saw a significant rise in oil palm planting on land previously classified as
peat, forest, swamp and agriculture in 2005-2010, when prices were higher than
in the previous five-year period. Data for 2010-2015 are needed for more
complete observations.
 In the period from 1990 to 2010, Malaysia saw a reduction in conversion from
forest, but a step up, and subsequent step down, particularly of conversion from
agriculture, degraded and other land and to a less marked degree from conversion
of agroforestry. Conversion from peat appeared to have remained quite high (the
graphs present peat land as a whole without sub-types). As with Indonesia,
detailed data for 2010-2015 are needed for more complete observations.

Overall, while one can see a link between palm oil prices and new plantings, it is hard to
discern a clear link between the palm oil price and oil palm conversion from peatland.

7.2. Social Impacts

The social impacts of palm oil production are complex, and almost certainly apply more
generally to other forms of agricultural development in the same economies. Oil palm
cultivation has provided livelihoods for many rural people, including smallholders, but has
also often been associated with social concerns, the most important of which are land use
rights, forced and child labour, and issues relating to the terms and conditions of labour,
such as wages, health and safety and gender discrimination. These are the core issues
that will be assessed in the next sections.

7.2.1. Land use rights

In some cases, oil palm expansion, as with mining and logging earlier, has been
accompanied by disputes over land rights, in which the creation of large-scale plantations
has resulted in local and indigenous peoples losing their customary land, and along with,
it part of their traditional livelihoods and cultural reference. This has been documented in
Indonesia,222 223 224 225 226 and to a lesser extent in Malaysia,227 228 Papua New Guinea,229

222
Siscawati, M. 'The Case of Indonesia: Under Soeharto's Shadow'. In The bitter fruit of oil
palm: dispossession and deforestation. World Rainforest Movement (2001), UK.
223
Colchester, M. and Jiwan, N. Ghosts on our own land: Indonesian oil palm smallholders and
the Roundtable on Sustainable Palm Oil. Forest People’s Programme & Sawit Watch (2006),
Moreton-in-Marsh, UK and Bogor, Indonesia.
224
Colchester, M., Jiwan, N., Andiko, Sirait, M., Firdaus, A.Y., Surambo, A., and Pane, H.
Promised Land: Palm Oil and Land Acquisition in Indonesia: Implications for local communities
and indigenous peoples. Forest People’s Programme, Sawit Watch, HuMa and World
Agroforestry Centre (2007), Moreton-in-Marsh, UK and Bogor, Indonesia.
225
Marti, S. Loosing ground: the human rights implications of palm oil plantation expansion in
Indonesia. Friends of the Earh & Sawit Watch (2008), London and Bogor.
226
Colchester, Marcus and Sophie Chao (Eds.) (2013) Conflict or Consent? The Oil Palm Sector at
a Crossroads, Forest Peoples Programme, Moreton-in-Marsh
227
Dayang Norwana, A.A.B., Kunjappan, R., Chin, M., Schoneveld, G., Potter, L. and Andriani, R.
'The local impacts of oil palm expansion in Malaysia: An assessment based on a case study in
Sabah State'. Working Paper 78. CIFOR (2011), Bogor, Indonesia.

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Cambodia,230 the Philippines,231 Nigeria,232 Liberia,233 Cameroon,234 and Colombia.235,236
These disputes are in fact disagreements about how rural development is carried out
rather than about oil palm per se.237

Indonesia’s National Land Bureau of Indonesia estimated that around half of the
country’s 8,000 land conflicts are within the oil palm sector in 2012.238 The sequence of
events follows a general pattern. The government sees its role as ‘opening up’ land for
development239 and grants concession licences to companies for oil palm development.
Due to differences between the national and customary tenure systems, many licences
are located on land owned or claimed by local and/or indigenous groups, although their
use rights are rarely formally identified. Use rights between the company and local
communities are therefore unclear, ambiguous or competing.240 Depending on the nature
of the licence, a proportion of the land is returned to community members to manage,
or, increasingly communities become shareholders in part of the land. 241

Under Indonesian law, indigenous peoples and local communities are typically entitled to
compensation for land passed over to a plantation company, following a negotiation

228
Chao, S. 'Malaysia: the Murut struggle against palm oil, for land and life'. The Ecologist (12th
December 2016). Available at:
http://www.theecologist.org/campaigning/2988442/malaysia_the_murut_struggle_against_pal
m_oil_for_land_and_life.html
229
Numapo, J. Commission Of Inquiry Into The Special Agriculture And Business Lease (SABL).
Chief Commissioner Port Moresby 24th June, 2013, Papua New Guinea.
230
Sokhannaro, H.E.P, 'Oil palm development in Cambodia.' In Colchester, M. and Chao, S. Oil
Palm Expansion in South East Asia: Trends and Implications for Local Communities and
Indigenous Peoples. (Forest People's Programme and SawitWatch (2011), Moreton-in-Marsh,
UK and Bogor, Indonesia.
231
Harbinson, R. Broken Promises: Communities in Philippine island take on palm oil companies.
Mongabay (23 October 2015).
232
Friends of the Earth. Exploitation and empty promises: Wilmar's Nigerian land grab. Friends of
the Earth (2016), USA and Nigeria.
233
RAN. Conflict Palm Oil in Practice: Exposing KLK’s role in Rainforest Destruction,
Land Grabbing and Child Labor. Rainforest Action Networm (2014), San Francisco.
234
Christopher Fon Achobang, C.F., Nguiffo, S. & Schwartz, B. ‘SG Sustainable Oils Cameroon PLC
(SGSOC) in South West Cameroon’. Chapter 15 in Colchester, Marcus and Sophie Chao (Eds.)
(2013) Conflict or Consent? The Oil Palm Sector at a Crossroads, Forest Peoples Programme,
Moreton-in-Marsh, UK
235
Miroff, N. 'In Colombia, a palm oil boom with roots in conflict.' The Washington Post
(December 30, 2014).
236
Van Dorp, M., Kuijpers, K., Abdala Y.S., & Roa, P.A. (2015). Reconquering and dispossession
in the Altillanura The case of Poligrow. SOMO and INEPAZ, Amsterdam.
237
Levang, P., Riva, W.F., Orth, M.G. ‘Oil palm plantations and conflict in Indonesia: evidence
from West Kalimantan’ in Cramb, R, and McCarthy, J.F., eds, The Oil Palm Complex
(Singapore, 2016), 283-300.
238
Badan Pertanahan Nasional (National Land Bureau, Indonesian Government): presentation to
RSPO 2012
239
Cramb & McCarthy (2016), op. cit.
240
Casson (2000) op. cit.
241
Cramb & McCarthy (2016), op. cit.

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aimed at achieving agreement. However, compensation may be perceived to be
inadequate, leave some individuals out, or may not be forthcoming.242 243

Grievances on legality of land acquisition and the perceived fairness of compensation can
sometimes escalate to conflict and occasionally violence. For example, in West
Kalimantan, land rights was the most common cause of conflict between local
communities, including indigenous Dayak groups, and plantation companies, responsible
for 53 of 119 (45%) recorded conflicts between 1999 and 2009. 244 Although accurate
figures for the total number of land rights issues associated with oil palm plantations are
not available, an indication can be given by the report that in January 2008, Sawit Watch
(an Indonesian NGO specialising in palm related social issues) was monitoring 513 active
conflicts between local communities and companies, involving 135 companies,245 and
that all 81 palm oil companies in South Sumatra in 1998 had land disputes with local
communities.246

Malaysia has a less complicated regulatory environment than Indonesia. The clearing of
protected land requires the forest to be “degazetted” and the clearing sanctioned by the
relevant state’s government. While the Federal Government has strong control over
Peninsular Malaysia’s 11 state governments, the states on Borneo (Sabah and Sarawak)
are more independent. This is particularly true of policy on forestry, land allocation
forestry and agriculture; thus there are regional differences in regulations and
enforcement. The most controversial aspect of land use concerns the application of
Native Customary Land Rights (known as NCR) in Sarawak. Local tribes have long been
considered to have rights over both their farmland and primary forest on communal land,
with a sizeable proportion on deep peat soils. A Federal court ruled in 2016 that their
rights did not apply to primary forest, putting the State government under pressure to
change the Land Code to permit the development of such primary forest.247 Forty of the
more than one hundred land rights cases in the courts of Sarawak reportedly concerned
the palm oil sector.248

Since oil palm is the most popular crop after the clearance of this primary forest, there
are fears that the political importance of NCR for local tribes will allow Sarawak to sustain
rapid growth in its oil palm areas, exceeding 100,000 hectares per annum in 2010-2016,
much of it in environmentally sensitive areas.

The RSPO Principles and Criteria include criteria that cover compliance with the law
including respect for customary law, a demonstrable right to use the land, absence of
legitimate land conflicts, and no diminution or loss of customary rights without free, prior

242
Colchester et al. (2007), op. cit.
243
Levang et al. (2016), op. cit.
244
Levang et al. (2016), ibid
245
Marti (2008), op. cit.
246
Kartodihardjo, H. & Supriono, A, ‘The Impact of Sectoral Development on Natural Forest
Conversion and Degradation: The Case of Timber and Tree Crop Plantations in Indonesia’.
CIFOR Occasional Paper No. 26(E), Centre for International Forestry Research (2000), Bogor,
Indonesia.
247
Davidson, Desmond (2017), 'Sarawak native rights defender wants change to Land Code
now”, The Malaysian Insight, 13 July 2017.
248
Colchester, Marcus, Wee Aik Pang, Wong Meng Chuo and Thomas Jalong (2007) Land is Life:
Land Rights and Palm Oil Development in Sarawak. Forest Peoples Programme and
SawitWatch, Bogor.

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and informed consent (FPIC).249 However, there are allegations that even within RSPO
certified plantations these rules are broken, and that communities can lose their
customary land use rights without FPIC.250

Land rights issues are complex. Colchester et al.251 warn against a simplistic apportioning
of blame to companies for disputes: ‘many oil palm companies operating in Indonesia
have acquired land by doubtful means and many have not adhered to legal requirements
or procedures, as much due to lax administration by government officials as to poor
performance or dishonesty on the part of the companies themselves.’ It is also true that
individuals within communities can be complicit in exacerbating land rights issues, by, for
example, making personal settlements that go against the interests of others in the
community.252

In summary, there is strong evidence that oil palm has expanded on to land traditionally
used by indigenous peoples and local communities, and in particular in Indonesia (

Table 15253). This can result in grievances that sometimes escalate into conflict, and
occasionally violence between plantation companies and local people. It should be noted
that most of the evidence is in the form of individual case studies.

Table 15: Information quality assessment for evidence that oil palm has
expanded on to lands traditionally used by indigenous and local people in
Indonesia.
Topic Number of Appropriateness Rigour Consistency Overall score
studies

Land use rights 18 0.7 0.6 0.9 0.7

7.2.2. Smallholders

Smallholders are taken here to mean family-based enterprises cultivating up to 50

hectares of oil palm (the definition used by the Roundtable on Sustainable Palm Oil). In
Indonesia and Malaysia, smallholders account for 40% of the total area of planted oil
palm and as much as 33% of the output. In West Africa, smallholders produce up to 90%
of the palm oil for domestic and regional markets. There is significant variation in the
way that smallholder oil palm cultivation is organised (Table 16). For many smallholders,
oil palm is one of several sources of livelihoods.

249
RSPO ‘Principles And Criteria For The Production Of Sustainable Palm Oil’. The Roundtable on
Sustainable Palm Oil (2013), Kuala Lumpur.
250
EIA (2015). Who Watches the Watchmen. Auditors and the Breakdown of Oversight in the
RSPO. Environmental Investigation Agency (2015), London.
251
Colchester et al. (2007), op. cit.
252
Levang et al. (2016), op. cit.
253
Based on an assessment of Kartodihardjo & Supriono (2000), op. cit.; Siskawati (2001), op.
cit.; Colchester et al. (2007), op. cit.; Marti (2008), op. cit.; Numapo (2013), op. cit.; Dayang
Norwana et al. (2011), op. cit.; RAN (2014), op. cit.; EIA (2015), op. cit.; Chao (2016), op.
cit.; Friends of the Earth (2016), op. cit.; Harbison (2016), op. cit.; Levang et al. (2016).

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Table 16: Modes of oil palm production (after Cramb & McCarthy, 2016) 254
Mode of Variants Where found
production
Estates Private and/or state-owned Malaysia
National and/or foreign company Indonesia
State land (with or without customary land claims)
Managed Resettlement schemes for landless/land poor or in situ Malaysia
smallholder schemes for existing landholders
schemes Landholders manage own lots or agency manages whole
scheme on an estate basis
Large-scale or small scale schemes (mini-estates)
Nucleus estate and Private or state-owned plantation company as nucleus Indonesia
smallholder (providing mill and other infrastructure)
schemes “Plasma” smallholders comprising settlers and/or local
(customary) landholders (70% of land)
Smallholder cooperatives dealing directly with plantation
company (70% of land)
Joint-venture Customary land is consolidated in a trust held by a Malaysia
schemes government agency which forms a joint-venture company
with a private investor (Sarawak model)
Customary landlords issued with command title,
conditional on development by a private or state-owned
plantation company (Sabah model)
Partnership schemes whereby company develops and Indonesia
manages 20% of land for farmers and pays “rent” on
basis of land contributed (Indonesia model)
Assisted Smallholders given planting grants (subsidized inputs) Malaysia
smallholders and technical advice
Smallholder groups linked to input supplies, credit,
technical advice, fruit bulking facility, and processor
Independent Self-managed and self-funded (may receive some inputs Malaysia
smallholders on short-term credit but many unable to afford inputs)
Indonesia,
Smallholders who have graduated from NES schemes and
have become independent

Managed smallholders

Malaysia’s FELDA scheme is the largest and most successful example of managed
smallholders. FELDA began opening up land for settlers in 1960, using a model that relies
upon developing state land for landless settlers or the land poor, or development of a
consolidated block of land for existing landholders, each of whom contribute a portion of
their land to the scheme. FELDA was able to settle 122,000 families between 1959 and
1990, developing about 470,000 hectares (ha) of settler smallholdings and 340,142 ha of
commercial plantations255 in Pahang, Johor, and Negeri Sembilan (comprising 80% of
Felda settler areas) and other Peninsular Malaysia states. Title to land is only given to
farmers once they have repaid the debts incurred to finance the costs of agricultural
inputs; it takes most settlers on existing schemes at least of 15 years to do so.

254
Cramb & McCarthy (2016), op. cit.
255
Khor, Yuleng (2016), Socio-economic parameters for peat restoration policy makers
[presentation], 15th International Peat Congress (Kuching: 17 Aug. 2016).

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The income obtained by FELDA smallholders is considerable, and is generally higher than
that from alternative crops.

Nucleus Estate and Smallholder schemes

An equally important, long lasting, model is Indonesia’s Nucleus Estate and Smallholder
(NES) model. A central estate and mill provide services to smallholders, who were often
migrants. The central estate typically helps to convert the land to oil palm, provides a
market for smallholders’ palm crop, and may support smallholders with technical advice
and inputs. Establishment costs and input costs are repaid by the smallholders over time.

In later variants, smallholders had to form a cooperative to manage the land and receive
credit. The aim was to allocate 70% of the land to smallholders with 30% retained by the
estate, but the quality of land allocated to smallholders and the competence of the
company to support smallholders were variable, and so the outcomes of NES schemes
also varied.256

Nonetheless, NES schemes can be far more profitable for smallholders than alternatives,
especially when labour requirements are taken into account (
Table 17). They raised the incomes of over 500,000 farmers,257 but it is reported that
some smallholders remain in persistent debt to the nucleus company, 258 and that
incomes can be lower than other alternatives. 259 Some early NES schemes resulted in
smallholders having insufficient land and time to feed their families. Practices such as
intercropping, land allocation to smallholder food crops, and flexible labour schemes,
were introduced as a result.260

Table 17: Returns on oil palm cultivation for smallholders expressed in terms of
land and their labour inputs compared to other crops in Bungo District,
Indonesia, 2007-9 (after Feintrenie et al., 2010)261
Crop Return on land (€/ha) Return on labour (€/man-day)

Oil Palm 2,100 36

Clonal Rubber 1,600 17

Agroforestry rubber 1,300 21

Paddy rice 200 1.7

256
Zen, Z., Barlow, C., Gondowaristo, R. and McCarthy, J.F ‘Interventions to Promote Smallholder
Oil Palm and Socio-economic Improvement in Indonesia’ in Cramb, R, and McCarthy, J.F., eds,
The Oil Palm Complex (Singapore, 2016), 78-108.
257
Zen, Z., Barlow, C. and Gondowarsito, R. ‘Oil palm in Indonesian socioeconomic improvement:
a review of options’. Working Paper in Trade and Economics 11 (2005). Research School of
Pacific and Asian Studies, Australian National University.
258
Colchester et al. (2007), op. cit.
259
Wakker (2005), op. cit.
260
Vermeulen, S. and Goad, N. ‘Towards better practice in smallholder palm oil production’
Natural Resource Issues Series No. 5. International Institute for Environment and
Development (2006). London, UK.
261
Feintrenie, L., W. K. Chong, and P. Levang.. ‘Why do farmers prefer oil palm? Lessons learnt
from Bungo district, Indonesia’. Small-scale Forestry 9/3 (2010), 379–396.

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Assisted smallholders

In Malaysia, various government agencies have assisted smallholders with planting

grants, inputs (especially seedlings), and technical advice. The best known of these is the
Malaysian Palm Oil Board (MPOB), which provides technical advice to members of
farmer’s organisations, and arranges a mechanism with fertiliser companies and mills for
farmers to receive credit. These assisted smallholders improved their yields and incomes
significantly.262 Indonesian agencies, by contrast, do comparatively little for smallholders.

Independent smallholders

In parts of Indonesia and Malaysia where road and mill infrastructure are in place,
independent smallholders have invested their capital and labour in cultivating oil palm.
The yield obtained by independent smallholders is often lower than that of estates of
other types of smallholders, with this difference being particularly marked where inferior
planting stock is used (Table 18). Independent cultivation of oil palm has nonetheless
often generated increased incomes for smallholders. Independent smallholders in
Indonesia in 2002-05 were reported to gain a net return of US$422 per hectare per year
if they had high yielding palms or US$163 per hectare per year for low yielding ones. 263

Outside Indonesia and Malaysia, independent smallholders are often the norm. For
example, most of Thailand’s oil palm production is by independent smallholders. 264 In
West Africa, independent smallholders have traditionally produced palm oil for domestic
markets. With the expansion of estates in this region some smallholder outgrower
schemes are emerging, but these still represent only a minority of growers. 265

Table 18: Comparison of smallholder and estate yields of fresh fruit bunches in
Malaysia266 and Indonesia267
Mode of Yield (tonnes % of maximum Notes
production per hectare) estate yield

Estates 21 100% Malaysia and Indonesia

Managed 19 90% Malaysia (FELDA, etc.)

smallholder
schemes
Nucleus estate and 19 90% Indonesia (NES)
smallholder
schemes

262
Cramb & McCarthy (2016), op. cit.
263
Vermeulen & Goad (2006), op. cit. (recalculated from Zen et al., 2005).
264
Dallinger, J. 'Oil palm development in Thailand: economic, social and environmental
considerations.' In Colchester, M. and Chao, S. Oil Palm Expansion in South East Asia: Trends
and Implications for Local Communities and Indigenous Peoples. (Forest People's Programme
and SawitWatch (2011), Moreton-in-Marsh, UK and Bogor, Indonesia.
265
Hoyle, D. and Levang, P. Oil Palm Development in Cameroon. Ad hoc working paper, WWF
(2012).
266
Ismail, A., Simeh, M.A. and Noor, M.M. ‘The production cost of oil palm fresh fruit bunches:
the case of independent smallholders in Johor’. Oil Palm Industry Economic Journal 3/1
(2003): 1-7.
267
Zen et al. (2005), op. cit.

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 Mode of Yield (tonnes % of maximum Notes
production per hectare) estate yield

Independent 10-17 47%-80% Malaysia: 16 tonnes per hectare

Indonesia: 10-17 tonnes per hectare
largely dependent on whether
improved planting stock is used

The introduction of joint venture models of plantation development in Malaysia and

Indonesia has led to local people receiving a lower proportion of the land allocation (from
70% to 20% in Indonesia), with that land being managed by the estate company and the
communities receiving a share of the profits 268. This represents a significant shift, with
local people now becoming shareholders, rather than smallholders.

Whilst many households benefit, there is also significant complexity in the social and
economic outcomes of palm oil expansion. Secure land tenure, the availability of
livelihoods to tide smallholders over the 3-5 years when crops mature, and the extent of
debt are amongst the factors that can lead to positive outcomes for smallholders. On the
other hand, Zen et al. (2015) showed in Indonesia that existing socio-economic divisions
and related power structure can be exacerbated as poorer households sell their plots to
those households who have greater access to capital.269 This serves to increase the
number of landless labourers, often women, with very limited livelihood options, whose
wage and labour conditions in the plantations may be undermined as a result (Li
2015).270

In summary, smallholders play a significant role in the oil palm sector in Malaysia,
Indonesia and elsewhere. There is diversity in the ways that smallholders are organised,
from highly managed schemes to independent smallholders. The yields obtained by
smallholders are variable; the highest yields are linked to the support that smallholders
receive in terms of planting stock, credit, fertiliser and technical advice. Overall, there is
reasonable confidence (

268
Cramb, & McCarthy (2016), op. cit.
269
Zen, Z., McCarthy, J., Chalil, D., Sitorus, H., Shahputra, M. A. (2015). High Carbon Stock
(HCS) and the socio-economics of palm oil: Towards improving the sustainability of the palm
oil sector in Indonesia. Consulting Study 14 of the High Carbon Stock Science Study.
270
Li, T.M. (2015) Social Impacts of Palm Oil in Indonesia: a gendered perspective from West
Kalimantan, CIFOR, Bogor

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Table 19) that where the right conditions are in place, oil palm cultivation can and does
provide a decent and often higher income than alternatives.271 However, this is not
always the case, and particularly for poorer households and those unable to cope with
debt.272

271
Ismail, A. et al., (2003), op. cit.; Zen, Z., et al., (2005), op. cit.; Vermeulen and Goad, 2006,
op. cit.; and Feintrenie et al., 2010; op. cit.
272
Wakker (2005), op. cit.; Colchester et al., 2007, op. cit.; Vermeulen and Goad, 2006, op.
cit..., Zen et al, (2015) op. cit; Li (2015) op. cit.

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Table 19: Information quality assessment for smallholders receiving a decent income
from oil palm cultivation
Topic Number of Appropriateness Rigour Consistency Overall score
studies

Smallholders 8 0.8 0.8 0.5 0.7

7.2.3. Forced and Child labour

Forced labour is any work or service that is exacted from a person under the threat of
penalty, and for which that person has not offered himself or herself voluntarily. The
International Labour Organisation has two principal international conventions covering
forced labour: the Forced Labour Convention No. 29 and the Abolition of Forced Labour
Convention No. 159. These conventions are included within the eight ‘Fundamental
Conventions’ of the ILO:273 those that are regarded as fundamental to the rights of
human beings at work, irrespective of the level of development of a country.

The term ‘child labour’ is defined by the International Labour Organisation Convention
No.182 as ‘work that deprives children of their childhood, their potential and their
dignity, and that is harmful to physical and mental development.’ This Convention is one
274
of the ILO’s Fundamental conventions.

There is limited official data on the incidence of forced and child labour within the palm
sector in major producing countries. The ILO and UN Agencies often rely on secondary
sources. The United Nations Children’s Fund notes ”there are limited available statistics
on the prevalence of child labour in the palm oil sector in Indonesia”.275

The US Department of Department of Labor’s List of Goods Produced by Child Labor or

Forced Labor includes palm oil produced in Malaysia (both forced and child labour 276),
Indonesia (child labour) and Sierra Leone (child labour).277 NGO and press reports of
child and forced labour surface sporadically,278 279 280 and in December 2016, Amnesty
International published the results of an investigation into Wilmar, the world’s largest
processor of palm oil, finding serious human rights abuses in the plantations of Wilmar

273
ILO 'The International Labour Organisation's Fundamental Conventions'. ILO (2003), Geneva,
Switzerland.
274
ILO (2003). ibid.
275
UNICEF 'Palm Oil and Children in Indonesia'. United Nations Children's Fund (2016)
276
The US Department of Labor’s conclusion is disputed by the Government of Malaysia: see
https://www.mpic.gov.my/mpic/index.php/en/media-release/21-kenyataan-akhbar-tahun-
2014/415-response-to-allegations-of-child-labour-and-forced-labour-in-the-oil-palm-industry-
by-us-department-of-labor-report-2014
277
Bureau of International Labor Affairs. List of Goods Produced by Child Labor or Forced Labor.
US Department of Department of Labor (2014), USA.
278
World Vision ‘Forced, child and trafficked labour in the palm oil industry’. World Vision
Australia (2012).
279
Skinner, E.B. ‘Indonesia's Palm Oil Industry Rife With Human-Rights Abuses: The hidden
human toll of the palm oil boom’. Bloomberg Business Week, 2013).
https://www.bloomberg.com/news/articles/2013-07-18/indonesias-palm-oil-industry-rife-
with-human-rights-abuses
280
Al-Mahmood, S.Z. (2015), 'Palm-Oil Migrant Workers Tell of Abuses on Malaysian Plantations',
The Wall Street Journal (26 Jul. 2015), https://www.wsj.com/articles/palm-oil-migrant-
workers-tell-of-abuses-on-malaysian-plantations-1437933321, accessed 1 Feb. 2017.

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and its suppliers.281 These included forced labour and child labour, gender discrimination,
exploitative and dangerous working practices that put the health of workers at risk.

It is less straightforward to estimate how common child and forced labour might be
within the sector. An analysis of ninety-seven RSPO audits282 revealed three major non-
conformities, one minor non-conformity and three observations against the RSPO
Standard’s criterion against child labour (Criterion 6.7)283. Companies seeking RSPO
certification may not be representative of the sector as a whole, but it is nonetheless
instructive that 7% had some degree of issue with child labour and 3% a serious one.
Forced and child labour has also been reported from RSPO certified plantations by
independent researchers.284 The labour profile of the sector in Southeast Asia creates an
underlying vulnerability to exploitation,285 with an estimated 2.5 million international or
internal migrant labourers in Southeast Asia (largely Indonesian, but also Bangladeshi,
Filipino, Thai, etc.), which includes both legal and illegal migrants. 286 In general, migrant
workers are unlikely to raise grievances with their employers or authorities, especially if
they are undocumented, they could lose their only source of income, and face
imprisonment and deportation.

In summary, incidences of forced and child labour in palm oil plantations have been
reported in some producer countries. The reports tend to relate to individual or a small
number of plantations, companies or geographical areas and are not sector wide. They
range from press reports to meticulous interviews. Whilst noting that systematic
information on forced and child labour can be extremely difficult to obtain, and that the
incidence of these practices therefore tends to be under-reported, there is insufficient
information to conclude with a high degree confidence how widespread these practices
are (Table 20287).

Table 20: Information quality assessment for the presence of widespread forced and
child labour within the palm oil sector
Topic Number of Appropriateness Rigour Consistency Overall score
studies

Forced & Child 8 0.6 0.6 0.8 0.7

Labour

281
Amnesty International (2016), The Great Palm Oil Scandal: Labour Abuses Behind Big Brand
Names (London: Amnesty International, 7 Dec. 2016),
https://www.amnesty.org/en/documents/asa21/5184/2016/en/, accessed 1 Feb. 2017.
282
Lord & Durham (2013), op. cit.
283
Note that up until 2013, the RSPO Principles and Criteria did not contain a criterion specifically
concerning forced labour.
284
International Labour Rights Forum & Sawit Watch. Empty Assurances: RSPO Labor Case
Studies. International Labour Rights Forum & Sawit Watch (2013), Washington D.C. & Bogor.
285
Sanderson, S. ‘Malaysian Oil Palm and Indonesian Labour Migration: A Perspective from
Sarawak’, in Cramb, R, and McCarthy, J.F., eds., The Oil Palm Complex (Singapore, 2016),
378-408.
286
Cramb, & McCarthy (2016), op. cit.
287
Based on an assessment of Lord & Durham (2013), op. cit.; World Vision (2010), op. cit.;
Skinner (2013), op. cit.; International Labour Rights Forum & Sawit Watch (2013), op. cit.;
Bureau of International Labor Affairs (2014), op. cit.; Al-Mahmood (2015), op. cit.; Sanderson
(2016), op. cit.; and Amnestry International (2016), op. cit.

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7.2.4. Terms and conditions of labour

The terms and conditions of labour (‘working conditions’) cover a broad range of issues,
including hours worked, wages, leave, health and safety and the right to assembly.

An estimated two-thirds of palm oil workers in Malaysia and Indonesia, over 2.5 million
people, are internal or international migrants288. The international migrants are
principally Indonesian, but also include migrants from Bangladesh, the Philippines,
Thailand and Myanmar. Migrant workers, and particularly those who are unregistered,
typically have less legal protection on labour rights issues than nationals.

Migrant workers have been crucial to the development of oil palm estates in Malaysia and
Indonesia and the managed smallholder schemes in Malaysia, in large part because they
are cheap: Indonesian oil palm workers in Malaysia reportedly receive only two thirds of
the wage of a Malaysian, and just one third if they are unregistered.289 There is however
evidence that "casual workers" (children, wives, neighbours, migrants, hired by company
employees themselves or by intermediaries in order to reach productivity targets set by
companies) do not enjoy the same level of protection as contracted agents, and remain
largely tolerated, in good part due to the lack of regulatory controls and enforcement.290

An analysis of where auditors reported non-compliance with the RSPO Principles and
Criteria291 provides some indication of the frequency of issues with terms and conditions
of labour. The two RSPO Principles at the time of this study that covered aspects of the
terms and conditions of labour were Principle 4 (use of appropriate best practices by
growers and millers) and Principle 6 (responsible consideration of employees and of
individuals and communities affected by growers and mills). Within these Principles, the
relevant criteria include Criteria 4.7-4.8 (covering occupational health and safety and
training) and Criteria 6.5-6.9 (covering pay and conditions, the right to free assembly,
child labour, discrimination and sexual harassment).

These criteria attracted a total of 63 major non-compliance cases (an average of 0.65 per
management unit). Major non-compliances are generally understood to require corrective
action within 60 days for a management unit to be issued with an RSPO certificate. In
addition, 132 minor non-compliances (1.4 per management unit) and 148 observations
(1.5 per management unit) were also recorded. Although companies seeking RSPO
certification may not be representative of the sector as a whole – in general certification
tends to attract already well-performing companies – it is therefore instructive that
auditors often reported issues about terms and conditions of labour.

A recent Amnesty International report found a system of wage payment that is based on
complex targets and deductions that are applied without explanation or documentation
that resulted in pay below the legal minimum wage in all five of the plantations in
Indonesia they investigated.292 The same investigation revealed potential breaches of
regulations on overtime pay, insufficient training on use of hazardous chemicals and

288
Cramb, R, and McCarthy, J.F. ‘Characterising Oil Palm Production in Indonesia and Malaysia’,
in Cramb, R, and McCarthy, J.F., eds., The Oil Palm Complex (Singapore, 2016) 27-77.
289
Cramb, R, and McCarthy, J.F. (2016) ibid.
290
Personal Communication, EU Delegation Jakarta
291
Lord, S., and Durham, K. Analysis of RSPO certification and surveillance audit reports across
Indonesia, Malaysia and the Rest of the World. Global Sustainability Associates (2014),
Singapore.
292
Amnesty International. The Great Palm Oil Scandal: Labour Abuses Behind Big Brand Names,
Amnesty International (2016), London.

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inconsistent use of safety equipment (also reported elsewhere 293), and in two of the
companies, potential exclusion of women from permanent employment. Three of the five
companies investigated had RSPO certification. In Malaysia, following complaints, ASI,
the organisation that accredits RSPO certifiers, found pay below the minimum and
insufficient leave at an RSPO certified FELDA estate.294 In Indonesia, it has been reported
that some labourers have been kept as causal labourers for extended periods (years),
without the terms and conditions to which permanent employees are entitled 295.

In summary, evidence from analysis of RSPO audits and NGO investigations suggests
that there is medium confidence that issues with terms and conditions of oil palm
plantation workers are reasonably widespread in Indonesia and Malaysia (Table 21296).
Issues identified include wages, gender discrimination, exposure to unsafe working
practices and insufficient leave entitlements. Most of this evidence comes from Malaysia
and Indonesia. While it is unlikely to be representative, these are also issues that are
likely to be under-reported.

Table 21: Information quality assessment for the terms and conditions of labour
for oil palm estate workers being below norms
Topic Number of Appropriateness Rigour Consistency Overall score
studies

Terms & Conditions 4 0.7 0.6 1.0 0.8

of Labour

7.3. Economic issues and economic sustainability of palm oil

production

7.3.1. Micro-economic case studies on income and wealth distribution

The key conclusions of the economic and broader welfare issues of income and wealth
distribution among people and companies working within the oil palm sector are as
follows. First, overall oil palm is more profitable than other crops, and this has been good
for income levels, but the nature of the crop (high capital cost and the need to process
immediately) means that it favours wealthier farmers and large processors. Second,
there are issues revealed by case studies that are separate from the economics of the
crop (poor labour laws and corruption). Third, smallholder systems have helped to
alleviate poverty, e.g., through the FELDA scheme in Malaysia and corporate-led
development of smallholder schemes in Indonesia.

Table 22 below summarises the most important positive and negative effects on income
growth and inequality from oil palm cultivation.

293
International Labour Rights Forum & Sawit Watch. Empty Assurances: RSPO Labor Case
Studies. International Labour Rights Forum & Sawit Watch (2013), Washington D.C. & Bogor.
294
EIA. Who Watches the Watchmen? Auditors and the Breakdown of Oversight in the RSPO.
Environmental Investigation Agency (2015), London.
295
International Labour Rights Forum & Sawit Watch (2013) op. cit.
296
Studies included: International Labour Rights Forum & Sawit Watch (2013) op. cit.. EIA
(2013), op. cit.; Lord and Durham (2014), op. cit.; and Amnesty International (2016), op. cit.

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Table 22: Positive and negative implications of oil palm on income and wealth
distribution

Positive Negative

Oil palm is labour intensive, providing large Oil palm growers are highly dependent on
amounts of employment. external processors due to the need to process
the fruit from the palms within 24 hours.

Oil palm has consistently been more profitable Oil palm has high capital costs for entry (the
than competing crops. costs of waiting 3-4 years for the first income).
This is a barrier to poorer farmers.
Oil palm is a cash crop providing revenue for Monoculture oil palm farming can create over-
schooling and medical care. dependence on one crop with volatile prices.
Oil palm plantations require large workforces, Labours conditions and workers’ rights have
giving work to those without their own farms. been violated on some plantations.

7.3.2. Incomes and poverty

There are no major data sets allowing for a strong statistical analysis. In addition, it is
difficult to generalise as there are different farming systems in different regions. Here we
focus on case studies to understand the potential impact of the oil palm on incomes.

Smallholder income estimates by Khor (2016)297 compare a Malaysian Felda

smallholder with 4 hectares of oil palm with that of an Indonesian smallholder
(Riau Province), typically with 2 hectares. Table 23 compares smallholder
incomes, indicating how land area (2 or 4 hectares) and yields affect oil palm
income, and the importance of other income in the picture. It also shows that
even with a 50% yield or fire-damage that palm oil was likely to provide better
income than the minimum wage in Riau. In Malaysia, larger oil palm areas
(4 ha) and full yields generated income over 2.5 times more than minimum
wages298.

Figure 14 uses the FELDA smallholder example to show how income varies with CPO price
(brown line) and variance in income outcome for different oil palm holding sizes. Pre-
settlement family income (for settlers emplaced, up to 1979) was RM 200 (yellow line).
The income improvement has been close to double even in periods of low CPO prices
(later 1980s) and sometimes over five times higher (during the mid-1980s).

Table 23: Smallholder income indicators for Indonesia and Malaysia

Smallholder income Indonesia, Riau with Malaysia, Felda with
indicators - 2 ha oil palm (OP) 4 ha OP
benchmarks
Full yield, Half yield, Riau peat Full yield,
2016 2016 site, 2011# 2016
Income from oil palm $ per year 1,767 884 723 5,400
Other income 1,402 1,402 1,285 2,070

297
Khor, Yuleng (2016), Socio-economic parameters for peat restoration policy makers
[presentation], LM International Ltd, 15th International Peat Congress (Kuching: 17 Aug.
2016).
298
Khor, Yuleng (2016), Op. cit.

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Estimated income - 3,169 2,285 2,008 7,470
annual
Estimated income -$ per month 264 190 167 623
monthly
Minimum wage, 160 160 225
$/mth
Income vs. 2 ha 100% 72% 30%## 236%
at full yield

Note: #Assumes "fair prices" or benchmark price achieved. CPO price $600 per tonne for 2016 indicator.
CPO price indicator for 2010-2011 $750 per tonne.
#Adapted from Mizuno and Masuda’s (2016) 2010-2011 Riau site survey. Benchmark for 2 ha oil
palm and other income is estimated at $264/month.
##30% of benchmark for its year.

Figure 14: National Felda settlers’ average net monthly income (1979-2004)299
2,500
Monthly income, C PO price (RM)

2,000

1,500

1,000

500

0
1979 1984 1989 1994 1999 2004
Oil palm, 4.1 ha
Oil palm, 4.9 ha
Oil palm, 5.7 ha
Nominal crude palm oil price (RM, year average)
Pre-1979, 85% had income sub RM200 pre-settlement

Note: 4.1 ha Feld1a settler earns 9.3x CPO price, 4.9 ha holding earns 9.5x and 5.7 ha holding earns
12.4x CPO price.
Source: Settler smallholding data from Lee and Bahrin (2006, p.37), Malaysia CPO price from MPOB300.

The World Bank Group Framework and IFC Strategy for Engagement in the Palm Oil
Sector301, reported under the heading of Poverty Reduction: “The recent rapid expansion
of oil palm activity in Indonesia is associated with significant poverty reduction. For
example, in 2005 and 2008, reported national headcount poverty rates in Indonesia were
roughly equal at 15.7 and 15.4 percent, while districts with increases in palm oil
production saw significant poverty declines over the same period (World Bank Staff

299
Lee, Boon Thong and Shamsul Bahrin (2006). Felda’s fifty years: land pioneers to investors
(Kuala Lumpur:FELDA).
300
Malaysian Palm Oil Board (MPOB) website, http://www.mpob.gov.my/, accessed 3 Jun. 2015.
301
The World Bank Group Framework and IFC Strategy for Engagement in the Palm Oil Sector
(2011)

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Estimates).” 302 It found at the district level, that a 1 percent increase in the hectares in
oil palm production contribute to a reduction of between 0.15 to 0.25 percentage points
of those in poverty; with larger poverty-reduction in areas that expanded oil palm
production by 50 percent or more (especially if it is increased smallholder activity rather
than private and state-owned enterprises) and where poor households are concentrated
in agriculture.

7.3.3. Wealth distribution

The potential effect of oil palm on incomes and wealth distribution is very complicated. In
addition, to understanding the effect of oil palm plantations on income and inequality it is
often necessary to situate the debate within a broader understanding of workers’ rights
and governance issues (see Section 7.2).

The complexity and nuances of these issues means that the topic is best illuminated from
a micro-economic perspective via case studies. As a result, we present here selected
case studies about oil palm projects in different countries under different types of
ownership.

7.3.4. Malaysia’s FELDA scheme

We start by reviewing the quintessential smallholder palm oil success story of the Federal
Land Development Authority (FELDA) scheme for organised settlers. The FELDA project
began in 1956 as a resettlement scheme for landless peasants. Over five decades, the
FELDA scheme succeeded in raising smallholder household incomes considerably above
the national poverty line, prompting some observers to characterise it as ‘one of the
most successful land settlement organisations in the world’303. From the settler and
institutional perspectives, the primary goal of FELDA, which was poverty eradication and
raising incomes by resettling landless peasants, was a major success.

Table 24 demonstrates how FELDA oil palm settler incomes have improved
substantially304 and how primary incomes fluctuate with CPO prices.

Table 24: Estimated monthly income sources for 4 ha oil palm settler (RM), Khor
et al. (2015)305
1986 1998 2005 2014
Net income from CPO 220 2,325 492 1,800
Income from other sources 166 767 702 673
Total 386 3,092 1,193 2,473
Note: In 1986 the net monthly income for a 4ha oil palm plot was RM376; gross income was RM750 (net
income plus typical monthly obligation amount), for 50% net income margin in year when the CPO
price was relatively low. There may have been top-ups and/or loan deferment. Most settlers joining
Felda had monthly incomes below RM200 (1979 data for all settlers). Malaysia’s minimum monthly
wage was RM800 in 2014.
Sources: Monthly settler costs in 1986 from Bahrin and Lee (1986)306, in 1998 from Bukit Wa Ha scheme in
Kota Tinggi, Johor (Wong 2000)307,, in 2005 from Lee and Bahrin (2006, p.43)308,, and 2014 costs
and returns from Barlow (2015)309.

302
World Bank (2011), Ibid.
303
Sutton, K. (1989), Malaysia's FELDA (Federal Land Development Authority) land settlement
model in time and space, Geoforum, Volume 20, Issue 3, 1989, Pages 339-354.
304
Most settlers joining Felda had monthly incomes below RM200 (1979 data for all settlers).
Malaysia minimum monthly wage was RM800 in 2014.
305
Khor, et al. (2015)., Op. cit.

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For other income, the FELDA target is for secondary income of 20-30% as are added
incentives including investment returns from private equity investment in the Koperasi
Permodalan FELDA (co-owner of FELDA corporations involved in transportation, palm oil
milling and other downstream activities).

7.3.5. Indonesia smallholder and corporate-led growth

Reviewing the wealth and land distribution of the palm oil sector in Indonesia, Kasryno
310
(2015) writes: “[The] oil palm farming system (is) a major vehicle for rural socio-
economic development. This has been done largely through outgrower schemes, where
farmers transfer a portion of their land to a palm oil company for inclusion in an estate
plantation (referred as nucleus estate).” describing the policy shift from smallholder to
private sector-led expansion. From 1977, in a more structured approach the first Nucleus
Estate and Smallholder Project (NES) was an Indonesian Government - foreign donor
scheme and “the second major agricultural intervention in Indonesia, following on from
311
the rice intensification program” . This involved resettling locals from areas surrounding
the project with 3-4.4 ha each (2 ha for oil palm, 0.8- 1.9 ha for food crops, plus 0.2–0.5
ha for home gardens). There were different smallholder (plasma) to estate (nucleus)
areas for different schemes; with World Bank’s NES IV (1980 start) having 75% plasma-
25% nucleus, and an ADB financed scheme financed at 64 to 36% respectively. From
1980, it was further adjusted down to 60 to 40%. Newer schemes came to focus on
transmigration of landless peoples from Java and Eastern Indonesia, instead of local
peoples. With economic decentralization and greater regional autonomy from 1999, a
new “partnership model” (Pola Kemitraan) offered smallholders only 20% of the total
area developed. Although owned by the smallholder, the plasma areas has been
increasingly developed and managed directly by the estate, where the smallholder does
not actively participate but receives a monthly payment.

In Indonesia, the situation was influenced by post-Asian Financial Crisis policy reforms
for economic liberalisation and regional decentralisation driven by the IMF and the World
Bank. This ended policies reserving a large share of land development for smallholders. A
larger share of new oil palm development areas was available to private companies
(80%, up from 40% and below earlier), and regulations on forests were eased.

A further factor promoting land development was the interests of local government. Palm
oil tax and duty revenues hardly reach local government coffers (oil and gas, forestry
and mining revenues are better distributed), and official taxes and tax incentives for

306
Bahrin, Shamsul and Lee, Boon Thong (1988). FELDA, 3 decades of evolution (Kuala Lumpur:
FELDA).
307
Wong, Siew Tow (2000). Felda and Settler Development: A Socioeconomic Study of Felda
Bukit Wa Ha, Kota Tinggi, Johor. [Academic exercise].( Kuala Lumpur: Universiti Malaya).
308
Lee and Bahrin (2006), Op. cit.
309
Barlow, Colin (2015b), ‘Malaysian Agriculture In Transition: Felda Settler Schemes and Felda
Global Ventures: An Outside Appraisal’ [Presentation], Seminar at IKMAS (Institute of
Malaysian and International Studies), UKM (National University of Malaysia). 16 Apr. 2015.
310
Kasryno, Faisal (2015), The Economic Impacts of Palm Oil in Indonesia, Consulting Paper 15,
The High Carbon Stock Science Study 2015 (December 2015),
http://www.simedarbyplantation.com/sustainability/high-carbon-stock, accessed 7 Feb. 2017.
311
Kasryno, Faisal (2015), Ibid.

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Indonesia’s palm industry promote land expansion312, since local government may rely
significantly on revenues arising from land development, which is under their control.

The situation is similar in Malaysia where state governments also rely on revenue from
land conversions and sales of state land.

Despite the shift away from a high smallholder share in new developments, Indonesia
smallholder oil palm areas (some converted from other crops due to the significantly
313
higher returns for oil palm than from rice, rubber and maize in 1980-2013 ) grew
strongly alongside private estates. Smallholders expanded to reach 3.77 million ha
(41.6% of the total palm oil area) by 2012, with 4.62 million ha of private estates
(50.9%), while state-owned plantations owned the remaining 7.5%.

7.3.6. Nigeria dominant smallholder sector contrasts with Liberia’s

plans

In their review of oil palm, Ayodele et al. (2015 314), find that it has been of socio-
economic benefit to Nigerian smallholders: “The results for incomes per hectare in ex-
post studies are broadly consistent. They place the incomes from average sized farms in
Nigeria (1.5 hectare) at the level of average incomes for the country as a whole and
higher than rural incomes generally.” Pointing to independent oil palm smallholder
farming having a poverty alleviation role despite a low yields, and is optimistic of a
positive role for investors (private estates have under 4% of the palm area) 315 316 to
enhance productivity and lower costs for the benefit of 4 million smallholders who
operate on wild groves, supplying local markets via traders and small-scale processors.
What Ayodele et al.317 note of Nigeria may ring true for many other palm oil regions: that
“extensive community consultation” have achieved better results, but ”there will always
be levels of dissatisfaction …constructive management of these conflicts is essential.”

Typical gains for smallholders from engagement with plantations include access to higher
yielding planting materials, fertiliser, material inputs and technical support. For instance,
Olam reports on its large-scale oil palm project in Gabon, its efforts to secure land
tenure, supply improved planting materials, and its training of environmental and social
teams.318 Atkinson (2015)319 reviews the historic and recent (post-conflict) issues of
large-scale plantation development in Liberia where some 15-22% of total planted area

312
Falconer, Angela, Tina Mafira, and Guntur Sutiyono (2015), Improving Land Productivity
through Fiscal Policy: Early Insights on Taxation in the palm oil supply chain, A CPI Report,
December 2015, https://climatepolicyinitiative.org/wp-content/uploads/2015/12/Full-Report-
English-Early-Insights-on-Taxation-in-the-Palm-Oil-Supply-Chain.pdf, accessed 2 Feb. 2017.
313
Kasryno, Faisal (2015), Op. cit., p.10-11.
314
Ayodele et al. (2015, Ibid, p.33).
315
Oil Palm Area in Nigeria, 2004: Wild grove 2,300,000 hectares, Smallholder 117,625, Estate
96,465, Total 2,514,090 hectares. Source: Raw Materials Research and Development Council
(Ibid, p. 20).
316
The authors write of two private estates with outgrower schemes that offer opportunity for
employment and better farmer training (Ibid, p. 33).
317
Ayodele et al. (2015), Ibid. p.5.
318
Interview by LMC International Ltd, 6 Mar. 2017.
319
Atkinson, Philippa (2015), Palm oil in Liberia: Missed opportunities and second chances,
Consulting Study 17, The High Carbon Stock Science Study 2015 (December 2015),
http://www.simedarbyplantation.com/sustainability/high-carbon-stock, accessed 10 Feb.
2017.

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expected to be set aside for smallholder out-grower development. There were major
delays and hurdles to launching palm oil projects, due to investor versus local people’s
conflicts relating to land and economic distribution. Concession agreements, lasting up to
65 years, were granted covering a total of over 700,000 hectares. She notes special
problems with ‘their most important (concessions) clause (which is the obligation on the
part of the government to provide land to the companies that is ‘free of encumbrances’.
This clause singularly failed to take account of the complex existing customary and
private land claims across the vast areas concerned, and has been the source of many
subsequent problems. Moreover, “While the three major companies are all members of
the Roundtable on Sustainable Palm Oil (RSPO), some of its core regulations were
implemented either insufficiently or badly.” 320

7.3.7. Conclusions on wealth distribution in smallholder schemes

Smallholders farming oil palm can expect higher incomes than those with similar rice and
rubber holdings. Smallholders in Indonesia, even with a half yielding 2 hectares or a fire-
damaged site in Riau, would do better than minimum wage with hope for better incomes.
For Malaysia, the larger palm areas generated incomes over 2.5 times higher than
minimum wages. Other sources of income are important for most smallholders.
Smallholders need help from corporate plantations for extension services and access to
higher-yielding planting materials. In the case of Nigeria, some advocate such assistance
to improve output and incomes in its dominant-smallholder (underinvested) palm oil
sector. It is not anticipated that the high-investment cost large scale Felda model can be
undertaken today under a state-led development approach.
The nature of the crop (high capital cost and the need to process immediately) also
means that it favours wealthier farmers and large processors. Some wealth distribution
indicators suggest wide disparities at a national level.

In summary, we may conclude that there is a good degree of confidence that the expansion
of oil palm cultivation has improved incomes and yet contributed to wealth inequality (see
Table 25 and Table 26 below).

Table 25: Information quality assessment for improved income from oil palm
cultivation321

Topic Number of Appropriateness Rigour Consistency Overall score

studies

Income 16 0.8 0.7 0.7 0.7

Table 26: Information quality assessment for rising income inequality from oil
palm cultivation322

Topic Number of Appropriateness Rigour Consistency Overall score

studies

320
Atkinson, Philippa (2015), Ibid., p.11-13.
321
From Cramb and McCarthy (Editors) (2016), Falconer et al. (2015), Feintrenie et al. (2010),
Gibson (2017), Grieg-Gran (2008), Kasryno (2015), Khor et al. (2015), Ryan et al. (2016),
Sinaga (2013), Susila (2004), Mizuno and Masuda (2016), Zen et al. (2005) and others.
322
From Gibson (2017), Falconer et al. (2015), Hanafiah (2017), Purnomo (2017), Mizuno and
Masuda (2016), WALHI Riau et al. (2016), Winters (2012) and others.

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Income/Wealth 8 0.6 0.6 0.9 0.7
inequality

7.3.8. Including Socio-economic Considerations in the High Carbon

Stock (HCS+) Study
One approach to evaluating the socio-economic impact of oil palm developments uses
traditional welfare economics theory. This attributes a greater benefit to increasing by $1
the daily income of a poor person by $1 than that from raising the income of a richer
person. Layard, Mayraz and Nickell,323 using data from over 50 countries from 1972 to
2005, estimate the best way to compare the welfare gains (“marginal utility”) from
raising incomes for different beneficiaries. Applying their results, an extra $1 for
someone on a daily income of only $1 has 8 times the welfare benefit of an extra $1 for
someone earning $5. Their estimate of total utility (U) at an income per day of Y is given
by:

 0.26   0.26 
Y  1 Y  1
U U 
, which yields a marginal utility of income of
 0.26  0.26
1.26 1.26
dU / dY  Y  dU / dY  Y  .

As an illustration of this approach, in Figure

Figure 15: Composition of welfare
15 we compare the welfare gains per tonne
gains per tonne of CPO produced by
of CPO for two projects in each of three
two plantations (numbered 1 and 2) in
countries, Indonesia, Malaysia and one in
West Africa, Indonesia and Malaysia
West Africa. These welfare gains are
divided between workers, input suppliers, 180
the government (via taxes), and the estate 160
owners. It will come as no surprise that the
U tility gain per tonne of C PO

140
biggest welfare gains are received by West
120
African workers, whose alternative sources
of income are very limited. 100

80
In summary, it is possible to incorporate
60
socio-economic aspects into an evaluation
40
of the overall impact of oil palm
development. Inter-personal utility 20

comparisons have been developed to 0

permit such comparisons, attributing much 1 2 1 2 1 2

higher welfare gains to income increases West Africa Indonesia Malaysia

for very low income residents than from Workers Distribution Government Estate Owners
raising incomes for people on higher
incomes. The ratio is 8 to 1 for an identical
increase in income for someone on $1 a
day vs. someone on $5 a day.

323
Richard Layard, Guy Mayraz, Stephen J. Nickell, The marginal utility of income - revised
version, SOEP (Socio-Economic Panel) papers on Multidisciplinary Panel Data Research,
Deutsches Institut für Wirtschaftsforschung, Berlin April 2008. Available from:
http://www.diw.de/soeppapers.

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7.3.9. Plantation employment in Malaysia

For Malaysia (based on 2014 data) the share of the labour force employed in the
plantation sector is 5.2%. By comparison, based on the most recent data from 2016
around 1.5% of the labour force in Indonesia is employed in the oil palm industry.

Figure 16 below demonstrates that the vast majority of workers on plantations are
working in the field. The plantation sector provides a large number of jobs for
manual labourers, but proportionately relatively few managerial or executive
level jobs. This is not surprising given the labour-intensive nature of the crop
and relatively limited success at mechanisation to date.

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Figure 17 lists the origins of the workers. Indonesian workers are crucial. The sector is a
heavy user of migrant labour, most of them generating remittances to its neighbouring
country. Yet it creates potential issues with exploitation and migrant worker rights (see
Section 7.2).

Figure 16: Employment by job category on Malaysian plantations, 2012

Other Field Executives, 8,884
Workers, 61,463

Staff, 23,821

General Mandore,
11,854

Harvesting
Field Workers, Mandore, 11,852
147,307

Harvester &
C ollectors,
168,300

Sources: Malaysian Departments of Labour and Immigration.

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Figure 17: Nationality of workers on Malaysian plantations, 2012
Myanmar, 2,491 Others, 820
Philippines, 3,689
Nepal, 4,754
Pakistan, 6,510

Bangladesh,
13,669

India, 19,392
Indonesian,
281,019

Malaysian,
101,137

Sources: Malaysian Departments of Labour and Immigration.

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Figure 18 below describes the share of different tasks performed by foreign workers on
plantations in Malaysia.

Foreign workers are critically important in the most physically demanding field task,
harvesting, which is almost entirely dependent on foreign (in practice, Indonesian)
workers, accounts for the highest share of employment by role. General field workers,
come next in both absolute numbers and in their dependence on migrant foreign
workers.

The foreign workers hold very few executive or management positions. This is partly the
result of the labour laws in Malaysia, which require foreign plantation workers to return
home after five years, with an interval before they may apply to return. There is,
therefore, no incentive for plantations to give much training to their foreign employees.

The estimates shown here have a number of drawbacks. They do not include (illegal)
foreign workers without permits. The wives of foreign workers who themselves have
permits, are not provided with work permits (apart from in Sabah), yet they often work
on estates and are not recorded in official statistics. Finally, smallholders with less than
10 hectares cannot get a legal work permit for foreign workers. Their foreign worker
numbers are therefore certain to be unrecorded. As a result, the Malaysian employment
data are likely to underestimate the actual dependence of the plantation sector on
foreign employees.

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Figure 18: Shares of foreign workers in different tasks, Total Malaysia, 2012

Total 76.7%

Harvester & Collectors 92.9%

Field Workers 80.9%

Other Field Workers 68.6%

Harvesting Mandore 59.5%

General Mandore 41.1%

Executives 17.8%

Staff 4.9%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Share of foreign workers by job, Total Malaysia

Sources: Malaysian Departments of Labour and Immigration.

7.3.10. The Indonesian plantation sector and its employment

Area under oil palm in Indonesia is split between smallholders, estates and government
area. In this section we review the trends between these three sectors – this is important
as they have different structures resulting in different employment opportunities:

Table 27 shows the planted area of mature oil palm area by sector in Indonesia. It
highlights the rapid growth in area under oil palm, with the total nearly trebling from
2000 to 2015. The growth was relatively evenly split between smallholdings and estates,
with the government estates’ area growing only a small amount. The share of oil palm
area under smallholdings rose, moving from around a third to close to two-fifths of the
total area.

Table 27: Planted areas of mature oil palm by sector, Indonesia (hectares)
Smallholdings Government Estates Sum
2000 800,199 489,752 1,303,551 2,593,502
2001 1,077,565 520,288 1,498,022 3,095,875
2002 1,253,820 540,790 1,619,754 3,414,364
2003 1,288,861 547,338 1,667,270 3,503,469
2004 1,561,324 523,932 1,805,853 3,891,109
2005 1,706,433 548,789 1,968,141 4,223,363
2006 1,821,964 580,836 2,283,907 4,686,707
2007 2,021,555 528,002 2,426,185 4,975,742
2008 2,115,942 529,348 2,576,483 5,221,773
2009 2,216,872 532,793 2,579,661 5,329,326
2010 2,309,507 542,788 2,591,190 5,443,485
2011 2,728,937 553,985 3,377,016 6,659,938
2012 2,739,749 555,102 3,409,634 6,704,485
2013 3,227,043 590,852 4,191,868 8,009,763
2014 3,372,069 607,371 4,405,836 8,385,276
2015 3,752,480 678,378 4,561,966 8,992,824
Source: Directorate General of Estates, Direktorat Jenderal Perkebunan, annual reports.

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Table 28: Palm oil output by sector, Indonesia (tonnes)
Smallholdings Government Estates Sum
2000 1,905,653 1,460,954 3,633,901 7,000,508
2001 2,798,032 1,519,289 4,079,151 8,396,472
2002 3,426,740 1,607,734 4,587,871 9,622,345
2003 3,517,324 1,750,651 5,172,859 10,440,834
2004 3,847,157 1,617,706 5,365,526 10,830,389
2005 4,500,769 1,449,254 5,911,592 11,861,615
2006 5,783,088 2,313,729 9,254,031 17,350,848
2007 6,358,389 2,117,035 9,189,301 17,664,725
2008 6,923,042 1,938,134 8,678,612 17,539,788
2009 7,517,716 2,005,880 9,800,697 19,324,293
2010 8,458,709 1,890,503 11,608,907 21,958,119
2011 8,797,924 2,045,562 12,253,055 23,096,541
2012 9,197,728 2,133,007 14,684,783 26,015,518
2013 10,010,728 2,144,651 15,626,625 27,782,004
2014 10,205,395 2,229,336 16,843,459 29,278,190
2015 10,572,791 2,346,822 18,195,402 31,115,015
Source: Directorate General of Estates, Direktorat Jenderal Perkebunan, annual reports.

However, Table 28 reveals that the estate sector remained the dominant producer,
accounting for close to 60% of palm oil output. The smallholders’ share of output
increased but not as dramatically as their share of the area. This is due to the much
lower yields on smallholder area, as demonstrated in
Table 29.
Table 29 translates these trends into their impact on employment. In 2000-2015 the oil
palm sector added 1.2 million jobs. Of these the majority of around 670,000 jobs were
added on smallholder areas. By contrast the estate sector added approximately 540,000
jobs. Around 30,000 jobs were also added in the government sector.
Table 29: Yields of CPO per hectare, by sector, Indonesia, tonnes per mature
hectare
Smallholdings Government Estates National
2000 1.63 2.48 1.51 1.68
2001 1.79 2.49 1.60 1.78
2002 1.89 2.55 1.75 1.90
2003 1.90 2.64 1.87 1.98
2004 1.73 2.67 2.18 2.05
2005 1.91 2.74 2.30 2.17
2006 2.27 3.37 2.76 2.63
2007 2.31 3.49 2.70 2.61
2008 2.40 3.21 2.24 2.38
2009 2.46 3.18 2.34 2.45
2010 2.50 2.99 2.66 2.62
2011 2.34 3.02 2.69 2.57
2012 2.22 3.12 3.09 2.72
2013 2.30 2.95 2.90 2.65
2014 2.31 3.06 3.01 2.72
2015 2.33 3.15 3.04 2.76

Source: Directorate General of Estates, Direktorat Jenderal Perkebunan, annual reports.

Table 30: Direct employment in the Indonesian palm sector

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 Smallholdings Government Estates Sum
2000 233,352 102,922 360,479 696,753
2001 312,206 106,741 381,369 800,315
2002 361,685 110,524 394,060 866,269
2003 370,879 115,991 414,954 901,823
2004 444,068 106,026 368,778 918,872
2005 471,379 92,724 385,060 949,164
2006 509,914 120,300 503,687 1,133,901
2007 550,434 106,093 511,262 1,167,790
2008 576,380 105,519 581,848 1,263,746
2009 612,283 110,340 627,205 1,349,828
2010 677,451 110,516 654,993 1,442,960
2011 750,496 118,716 684,295 1,553,507
2012 827,524 119,565 712,780 1,659,869
2013 871,217 127,359 807,175 1,805,752
2014 884,473 127,579 840,512 1,852,564
2015 907,080 130,181 897,147 1,934,409

Source: Directorate General of Estates, Direktorat Jenderal Perkebunan, annual reports.

Note: Employment per hectare is set at 0.2 years for smallholders; 0.175 for government estates; 0.15
for private estates.

7.3.11. Worker incomes in the palm oil sector vs. traditional incomes

Table 31 uses data gathered from a number of different plantation groups and
anonymised as part of the High Carbon Stock Study to show the relative income for
plantation workers and how much they earned prior to joining the plantation. The table
reveals that the wages are much higher for plantation workers, though the differential is
higher in Indonesia than West Africa. This is because plantation work is relatively highly
skilled and therefore does command a premium. The lower West African ratio is because
the workers on the plantation have not yet been fully trained and are therefore often
shadowing Indonesian workers as they learn the ropes.

Table 31: Comparison of incomes in two West African examples and two
Indonesian examples, US$ per day
West African example 1 2 Indonesian example 1 2
Prior income 1.00 2.00 Prior income 0.91 0.91
Minimum plantation wage 5.35 5.35 Minimum plantation wage 6.90 8.76
plus fringe benefits 6.49 6.61 Plus fringe benefits 9.57 11.19

Source: Data provided by plantation companies during the High Carbon Stock Study.

7.3.12. Input-output analysis and multipliers for oil palm

In order to understand the value of the oil palm to the economy, we should look not only
at the direct value of the sector, but also the indirect value, income and employment the
sector creates (in economics these are known as the multiplier effect).

Input-output analysis for the Malaysian economy demonstrates that the ‘oils and fats’
sector has the highest output multiplier. When oils and fats production increases by
1,000 Ringgits, this adds 2,760 ringgits to GDP.

This is because the sector includes downstream processing: from basic refining to the
production of speciality fats. Oil palm estates have a much higher than average income
and employment multipliers, by virtue of their labour intensity.

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Input-output analysis for Indonesia reveals a lower output multiplier for oils and fats than
Malaysia’s, but higher income and employment multipliers. There are two potential
causes of this interesting divergence. The first is that the lower wages in Indonesia lead
some companies to substitute labour for capital. The second is that there is excessive
processing capacity in Indonesia as a result of investment incentives, raising the relative
share of labour in output.

In summary, the oil palm industry, by virtue of its high labour intensity, is among the top
agricultural sectors in both its income and employment multipliers. Downstream oils and
fats industries are the best performing sector in terms of output multipliers, thanks to its
direct link to the upstream plantation and milling activities.

This explains the economic importance of palm oil to governments in developing

countries, who also eye foreign exchange earnings from commodities that offer a
comparative advantage in the global economy, as well as supporting national policies to
improve education and health. The Government of Indonesia also notes that its palm oil
industry also indirectly supports another 12 million people largely in the rural areas, and
generates US$20 billion a year in export earnings. The use of biodiesel within its
mandatory B20 policy saves around $2 billion of foreign exchange spending on fuel oil
imports; provided tax revenue of around $72.4 million in 2016, added value from palm
oil downstream industry of around $329.7 million, and reduced diesel consumption by
about 40 million barrels (112,000 barrels a day).

7.3.13. Historical costs, palm oil prices vs. production costs

Figure 19 below plots the production cost of CPO against the price since 2000. We have
also calculated the ratio of the price and production cost. The diagram reveals that,
broadly speaking, the price has followed production costs. The diagram also indicates
that the oil palm industry’s average ex-mill production costs worldwide, after subtracting
revenues from sales as palm kernel as a credit, are consistently below the price of palm
oil, which explains the continual desire for expansion in the sector.

Figure 19: World average CPO production costs, ex-mill, vs. prices, US$ per
tonne

1,200 480%

1,000 400%
US$ per tonne, 2015 prices

800 320%

600 240%

400 160%

200 80%

0 0%
2000 2003 2006 2009 2012 2015
Production cost Malaysian CPO price Price/Cost

Sources: Bursa Malaysia Derivatives and LMC production costs reports.

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7.4. Analysis of palm oil statistics, trade flows, trends and end
users of palm oil, including comparison with other vegetable
oils

7.4.1. Supply and demand of major palm oil producers

In this section we present the global picture of palm oil production, consumption and
trade, identifying the major producers and consumers. In Appendix 4 we review the
demand and supply balances for the major countries producing or consuming palm oil
and palm kernel oil over the past decade to understand the relative size of their markets
and the trends in their output.

The dominance of South East Asian countries in world production is very clear. The
distribution of palm oil consumption is more evenly shared among the leading countries
and regions. India and Indonesia are the two largest users, though some Indonesian
demand is processed into higher value products for export. Among high-income
consumer markets, only the EU (ranked third) and the US (ranked tenth) appear in the
top ten consumers. All high-income countries together consume one sixth of world palm
oil output. The remaining five sixths are consumed by middle and low-income countries.
Asia alone consumes exactly two thirds of the world’s palm oil supply.

Figure 20 and Figure 21 illustrate the production of palm oil by country 324, with
the largest at the bottom.
Figure 22 and
Figure 23 are the counterparts for palm oil consumption325. The other major consumers
(not shown) are in West Africa (most notably Nigeria and Ghana), South East Asia (the
Philippines and Myanmar), East Africa (Kenya) and Russia.

Figure 20: Palm oil production by Figure 21: Share of world palm oil
country production by country Share of world
palm oil production by country
C umulative s hare of world C PO output

60 100%
M illion tonnes of palm oil

40

50%

20

0%
0
2000 2003 2006 2009 2012 2015
2000 2003 2006 2009 2012 2015
Rest of World West Africa (excl. Nigeria)
Rest of World West Africa (excl. Nigeria) Ecuador Papua New G uinea
Ecuador Papua New G uinea Brazil Colombia
Brazil Colombia Nigeria Thailand
Nigeria Thailand Malaysia Indonesia
Malaysia Indonesia

324
The data are drawn from the USDA PSD database, https://apps.fas.usda.gov/psdonline
325
Op. cit.

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 Figure 22: Palm oil consumption by Figure 23: Share of world palm oil
country consumption by country

60 100%

C umulative s hare of palm oil demand

50 80%
M illion tonnes of palm oil

40
60%

30
40%
20

20%
10

0 0%
2000 2003 2006 2009 2012 2015 2000 2003 2006 2009 2012 2015

India Indonesia EU India Indonesia EU

China Malaysia Pakistan China Malaysia Pakistan
Thailand Bangladesh Egypt Thailand Bangladesh Egypt
US Rest of World US Rest of World

Figure 24: Palm oil exports by country Figure 25: Share of world palm oil
exports by country
C umulative s hare of palm oil exports

50 100%
M illion tonnes of palm oil

40 80%

30 60%

20 40%

20%
10

0%
0
2000 2003 2006 2009 2012 2015
2000 2003 2006 2009 2012 2015
Indonesia Malaysia
Indonesia Malaysia
Papua New G uinea Guatemala Papua New G uinea Guatemala
Colombia Ecuador Colombia Ecuador
Honduras Cote d'Ivoire Honduras Cote d'Ivoire
Costa Rica Thailand Costa Rica Thailand
Rest of World Rest of World

Figure 26: Palm oil imports by country Figure 27: Share of world palm oil
50
imports by country
45 100%
Million tonnes of palm oil

40 90%
35 80%
Cumulative share of palm oil imports

30 70%
25 60%
20 50%
15 40%
10 30%
5 20%
0 10%
2000 2003 2006 2009 2012 2015 0%
Rest of world Burma
Philippines Russia 2000 2003 2006 2009 2012 2015
Egypt US Rest of world Burma
Bangladesh Pakistan Philippines Russia
China EU Egypt US
Bangladesh Pakistan

Sources: Figures 20-27 United States Department of Agriculture

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(Note that there are many countries round the world that are palm oil producers, consumers, exporters and
importers. The countries mentioned by name in the diagrams are the most important individual countries and
regions in each case. All the other countries on the world are grouped together as “Rest of World” in the
diagrams).

Figure 24 and Figure 25 depict the concentration of world palm oil exports 326 in the
hands of the two South East Asian countries, with Indonesia overtaking Malaysia in
recent years. Figure 26 and Figure 27 are the corresponding diagrams for palm oil
imports327, which are shared much more evenly among a large number of countries.
7.4.2. Vegetable oil supply and demand forecasts

Figure 28 depicts the consumption of the different vegetable oils in the main consuming
countries with forecasts to 2030. The figure reveals some interesting differences in the
type of vegetable oils being consumed:

• The US consumes predominantly soybean oil, with rapid growth in palm oil. The
reason for the large consumption of soybean oil is the large domestic production
and crushing of soybeans. However, the discovery of the dangers of trans-fatty
acids has reduced the use of hydrogenated soybean oil. This has created a growing
market for palm oil.
• The EU divides its consumption between soybeans, rapeseed, sunflower and palm
oil. Rapeseed and sunflower are produced locally (with sunflower augmented by
supplies from the Ukraine). Palm oil has found increasing uses in the EU in
biodiesel.
• Japanese consumers focus on rapeseed oil, as they view it as a superior oil.
Soybean oil consumption has been declining along with soybean crushing in Japan.
In its place there have been some increased imports of palm oil.
• China relies on rapeseed oil, from domestically grown rapeseeds, and soybean oil,
from imported soybeans. Palm oil use is also significant in end-uses such as instant
noodle production and catering.
• India has a small feed sector supplied with the meal from crushing oilseeds.
Instead, end-users rely heavily on palm oil for their oil needs. As the cheapest oil,
palm oil is also well suited as consumers are on very low incomes and are very
price sensitive.
• By contrast, Brazil, which is one of the largest soybean producers in the world and
has a large domestic crushing sector, can rely almost entirely on soybean oil to
meet its vegetable oil needs.

One of the important facts of the vegetable oil market is that different vegetable oils are
to a large extent interchangeable. Some consumers prefer specific oils, but in general the
vegetable oil preferred in a country is a result of availability and relative prices. Oils
produced locally, whether from crushing domestic or imported crops, are used first to
meet demand, noting that these are not subject to import tariffs. The remainder is met
from imports of oils, the cheapest of which is usually palm oil. This cheapness is because,
as a crop harvested every day and processed immediately after harvest, palm oil is
produced daily and has to price itself into the market to keep oil shipped daily and
prevent the stocks of CPO in mill tanks from overflowing.

326
Op. cit.
327
Op. cit.

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As a result, the outlook for vegetable oil consumption is predominantly driven by supply
factors. Figure 29 shows the production of the main vegetable oils since 1975. Until
around 2006, soybean oil was the primary vegetable oil in the world (See Appendix 5
for more information under soybean and other annual crops). Since then palm oil has
become the most important vegetable oil. Neither of these sources of vegetable oil reacts
to short-term demand signals. In the case of soybean oil this is because it is produced as
a co-product from crushing soybeans for meal. For palm oil production it is the result of
planting decisions made four years earlier (as it takes four years for the oil palm to start
yielding). Our projections of consumption by country in Figure 28 therefore are related to
the availability of vegetable oils.

In Appendix 5, we also analyse the areas implied by projections of oil crop output to
2026. First, the impact of extrapolating past trends in oil crop areas, assuming the
continuation of past growth rates in demand and yields, is depicted. On past trends, 73
million hectares of oil crops would be added between 2013 and 2026; 42 million
would be soybeans, 21 million rapeseed, 13 million palm and 4 million
sunflower.

We then considered the implications for the areas needed to be brought into cultivation
at actual 2013 yields to meet rising oil demand if no increase occurred in the palm
area, keeping it at 19 million hectares, rather than 31 million on trend. If all the
forgone palm oil were replaced with soybean oil, the most likely replacement,
an additional 98 million hectares of soybeans would be needed, on top of the 42
million simply following trend. This implies a world soybean area of 257 million
hectares in 2025, up from 117 million in 2014.

The high yield of oil palm per hectare means that the area requirement is lower than that
of competing crops. To increase vegetable oil production by the same amount, therefore,
by relying on competing oilseeds (the most important of which is soybeans) instead of oil
palm will require 5-8 times larger areas of land.

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Figure 28: Forecast of food oil consumption by type of oil for major markets
USA EU Japan
2.8 8 4.5 1,400

4.0
Food oils exc luding s oybean oil

2.4 7 1,200

Soybean oil food c ons umption

3.5
2.0 6 1,000
(million tonnes )

3.0

(million tonnes )

M illion tonnes
800
1.6 5 2.5

'0 0 0 tonnes
2.0 600
1.2 4
1.5
400
0.8 3
1.0
200
0.4 2 0.5

0.0 0
0.0 1 1980 1990 2000 2010 2020 2030
1980 1990 2000 2010 2020 2030
1980 1990 2000 2010 2020 2030
Rapeseed Sunflower Soybean Rapeseed Sunflower Soybean
Rapeseed Sunflower Palm O il Palm Kernel Palm Oil Groundnut Palm Kernel Palm Oil Groundnut
Cottonseed Soybean Cottonseed Copra Cottonseed Copra

China India Brazil

21 22 4.5
20
4.0
18
18
3.5
15 16
14 3.0

M illion tonnes
M illion tonnes
M illion tonnes

12 12
2.5
10
9 2.0
8

6 6 1.5
4 1.0
3 2
0.5
0
0
1980 1990 2000 2010 2020 2030 0.0
1980 1990 2000 2010 2020 2030
Rapeseed Sunflower Soybean 1985 1994 2003 2012 2021 2030
Rapeseed Sunflower Soybean
Palm Kernel Palm O il Groundnut Sunflower Soybean Palm O il
Palm Oil Groundnut Cottonseed
Copra Cottonseed Copra Groundnut Cottonseed

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Figure 29: Growth in global demand for vegetable oils, 1974/75-2016/17
70

60 Average Annual Growth 1975-

2016:
Palm Oil = 8.1%
50 Palm Kernel Oil = 7.5%
Rapeseed Oil = 6.1%
Soybean Oil = 4.4%
Million tonnes

Sunflower Oil = 3.0%

40

30

20

10

0
1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015

Palm Oil Palm Kernel Oil Rapeseed Oil Soybean Oil Sunflower Oil

7.5. Current forecasts for vegetable oils world market & projected
evolution of end uses

In this section we present our forecasts of vegetable oil demand by major end use (Table
32) and supply by major crop (Table 33).

In terms of vegetable oil demand we distinguish between three main drivers:

1. Food use is determined by income and population growth. Income is the strongest
determinant of per capita consumption.
2. Biofuel demand is driven by the evolution of policy, which determines the share of
biodiesel being blended and diesel consumption, which is determined by income
growth and crude oil prices. (Higher household income levels are leading
consumers to drive more, as do lower crude oil prices, increasing fuel demand).
3. Other uses, such as oleochemicals, are also determined by income with
consumption growing rapidly at low levels of income and then plateauing.

The summary in Table 32 is for the world, built up from country-level projections. Food
use will be the largest driver of demand, unlike the past decade in which biodiesel led
demand growth for vegetable oil. The more modest outlook for biodiesel reflects the
waning political support for biofuels in Europe and the US, as well as the lower crude oil
price. Other uses like oleochemicals will grow the most rapidly, but from a small base.

Though oils have some functional differences, they are broadly interchangeable. As a
result, we forecast total vegetable oil demand. We then determine which vegetable oil
will meet that demand. The forecasts in Table 33 are derived as follows:

Soybean oil is a co-product of meal demand, which is related to meat demand. The
consumption of meat is a function of dietary changes related to income and population
growth. Improvements in feed conversion ratios or differences in the type of meat being
consumed also affect the outlook for meal demand.
7. Task 1: Environmental impacts and market information
2017 EUR 109 EN
The area planted to oil palm is determined by the feedback from CPO prices to plantings.
In the long run the availability of land for planting on a sustainable basis will determine
the growth in output, since yield growth is low (there has been no underlying increase in
yields in Southeast Asia since 2007) and with a perennial crop cannot change quickly.

Coconut oil output is constrained by minimal yield and area growth. Production of palm
kernel oil, as a by-product, will grow in line with the expansion in oil palm.

Demand that cannot be met by these sources will be met by sunflower or rapeseed oil,
both of which are annual crops that can respond rapidly to vegetable oil price signals.

Table 33 forecasts the demand of vegetable oil, including stock changes, by crop to 2050.

Table 32: World forecast of vegetable oil demand by end use (million tonnes)

2015 2016 2017 2020 2030 2040 2050

Food 136.8 141.9 146.7 158.7 199.0 248.1 309.4
Policy-Driven Biofuels 25.0 29.6 31.3 38.3 41.2 44.6 48.2
Other Industrial 11.6 12.0 12.4 13.5 18.4 22.6 27.8
Total 173.5 183.5 190.3 210.6 258.5 315.2 385.3

Table 33: World forecasts of demand for major vegetable oils (million tonnes)

2015 2016 2020 2030 2040 2050

Soybean 48.0 51.7 59.9 74.3 91.5 113.0
Sunflower seed 14.1 15.1 17.4 19.0 20.6 22.4
Rapeseed 27.2 28.1 30.4 37.5 46.1 56.7
Coconut 3.3 3.2 3.5 3.8 4.0 4.3
Palm Oil 58.6 59.9 69.5 89.6 113.3 142.2
Palm Kernel Oil 7.2 6.8 7.8 10.0 12.7 15.9
Total incl others 173.5 183.5 210.6 258.5 315.2 385.3

7. Task 1: Environmental impacts and market information

2017 EUR 110 EN
8. Certification schemes, legislation and voluntary initiatives

8.1. Analysis of existing palm oil sustainability certification systems

This section provides a description and analysis of oil palm sustainability certification
schemes, focusing on the four most widely used schemes: the Roundtable on Sustainable
Palm Oil (RSPO), the International Sustainability and Carbon Certification (ISCC), the
Indonesian Sustainable Palm Oil (ISPO) scheme and the Malaysian Sustainable Palm Oil
(MSPO) scheme. Other certification schemes that are relevant to the palm oil sector are
also discussed.
The section takes a systems approach, describing and then comparing a selection of key
elements of these certification schemes (see Table 34): the standard, the certification
process, measures to build credibility (accreditation, complaints procedures and
transparency) and claims (chain of custody and labelling). It also includes evidence on
the effectiveness of the systems, where that exists.
Analysis of the schemes focuses on how each scheme addresses the environmental and
social sub-themes more prominent in the debate and literature on palm oil (i.e. those
included in Section 7).

Table 34: Architecture of sustainability certification

Although the precise details vary from scheme to scheme, the basic system for most
sustainability certification is as described below328. This is a system of rules, processes,
and separation of powers that are all designed to promote consistency of approach and
minimise the risk of poor practice.329

The standard: These are documents that set out the requirements which must be met
by the plantation and against which certification assessments are made.

The certification process: includes the processes of confirming that the requirements
of the standard have been met by the entity seeking certification, and ensuring
confidence in that decision.

Assessments follow requirements established by the schemes organisation and

certification body. Auditors must collect objective evidence that a company’s plans are
adequate, that they are implemented and (where the standard specifies performance)
that the outcome meets the requirements of the standard. This evidence is collected
through a visit to the company, with documents scrutinised, the plantation examined,
and managers, workers, local people, and other stakeholders interviewed. A decision is
then made whether the requirements of the standard have been met in full, whether it
has been largely met with only minor corrective actions required, or whether the
company’s performance has major deficiencies that must be corrected before it can be
certified.

All of the main sustainability schemes, including FSC, RSPO and RTRS, specify that the
certification body is independent of the company being assessed: known as ‘third party
independent audits’. Certification bodies must also fulfil general requirements of

328
Based on: Nussbaum, R., Jennings S., & Garforth M. ‘Assessing Forest Certification Schemes:
A Practical Guide.’ ProForest (2002), UK.
329
See for example the ISEAL Code of Good Practice for Assuring Compliance with Social and
Environmental Standards, http://www.isealalliance.org/online-
community/resources/assurance-code-version-10

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Table 34: Architecture of sustainability certification
impartiality, a quality management system, and requirements on the conditions for
granting certificates, as described by the International Organisation for Standardisation
(ISO). The competence of the personnel conducting the audits is also covered by these
guides: a team leader that is adequately trained; and a team with the combined
expertise to assess all aspects of the standard, and who are able to interpret the
standard being assessed.

The accreditation process: one way to build confidence in certification is the process
of accreditation or ‘certifying the certifier’, in which an independent organisation provides
assurance that a certification body is competent. Accreditation bodies also have
requirements defined by ISO, including the organisation of the accreditation body, and
the way in which they carry out accreditation.

Complaints procedure: A second mechanism for building confidence in certification is

having a complaints procedure that gives third parties a response to concerns about a
certification decision. ISO guidelines specify that certification bodies should have
procedures to resolve complaints, appeals and disputes.

Transparency: The third mechanism for building confidence is transparency. This is

ensured by allowing interested parties direct access to non-confidential information
about the process and results of certification assessments. This usually involves making
public available information on the certification body, consultation with stakeholders, and
providing a summary of the audit findings.

Traceability and Claims: If claims will be made on the products coming from certified
companies, then mechanisms to control the claims are also required. The type of claim
depends on the level of traceability of the palm oil, of which there are four basic
options:330
 Identity preserved (where the provenance of the certified palm oil is known to the
purchaser);
 Segregated (certified palm oil is kept segregated from non-certified, however the
plantation of origin may be unknown to the purchaser as a result of multiple
transportation, bulking and processing stages);
 Mass balance (certified and uncertified palm oil are mixed, with the proportion of
certified palm oil entering a process known, therefore a purchaser has on average
that proportion of certified palm oil);
 Book and claim (the purchaser buys certificates corresponding to a volume of
certified palm oil produced and redeems the value of the certificate to a certified
producer, but buys oil on the open market).
Certification schemes may include mechanisms to verify traceability (identity preserved,
segregated and mass balance) that are, in the more rigorous certification schemes,
verified by independent third parties (certification bodies). The rules governing the
labelling of those products are set out by the standards body.

ISEAL Alliance (2016). Chain of custody models and definitions A reference document for
330

sustainability standards systems, and to complement ISEAL’s Sustainability Claims Good

Practice Guide Version 1.0, September 2016

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2017 EUR 112 EN
8.1.1. Description of certification schemes relevant to oil palm

8.1.1.1. The Roundtable on Sustainable Palm Oil (RSPO)

The first scheme specific to oil palm, the RSPO, was formally established in 2004 (Table
35).331 It remains the most prominent global scheme in the sector, being the favoured
certification scheme for uses other than biofuel (see Section 8.2).

The RSPO was catalysed by WWF and major companies, including Unilever, and was
established as a multi-stakeholder organisation, with a membership of 3,413
332
organisations in mid-2017 . The board includes representatives from growers, traders,
manufacturers and retailers, social and environmental NGOs, banks and investors.

The RSPO certification scheme contains all of the major elements required by ISO, and
built upon lessons from the Forest Stewardship Council (FSC), such as verification of
compliance with the standard through third party, independent audits. The auditors
compile a report that is used as the basis for a decision by the certification body on
whether the plantation or processing plant, such as a mill, should be awarded a
certificate. RSPO requires full compliance with all criteria in order to be certified, or an
approved time-bound plan for addressing minor non-compliances. Surveillance audit
visits are conducted annually.

Confidence in the process is given by a number of elements. Certification bodies must be

accredited by Accreditation Services International (ASI). Accreditation is given on the
basis of compliance with rules specifying the competence of audit teams, and the
systems and processes used by the certification body to make decisions. Other
mechanisms for increasing faith in the system include making summaries of audit reports
publicly available, and providing a complaints and grievance procedure that allows public
tracking of progress.

Four options for tracing certified palm oil are allowed under RSPO rules: identity
preserved, segregated, mass balance and book & claim. Different product claims are
allowed by RSPO rules, depending on the traceability option is used. The RSPO principles
and criteria include detailed environmental and social requirements (see Appendix 6).
These Principles and Criteria (P&C) include and go beyond compliance with applicable
laws and regulations. In general, the RSPO P&C are regarded as being clearly explained,
with indicators, guidance, and a thorough treatment of social issues, but the criteria
concerning deforestation and peatland development leave a degree of flexibility and
ambiguity.333 Certified plantation companies with a mill have a mandatory time bound
plan whereby all incoming fresh fruit bunches need to come from certified sources within
three years. This distinguishes RSPO from other voluntary schemes.

In addition, the RSPO has developed a set of more stringent ‘add on’ criteria, referred to
as RSPO NEXT. This provides independent, third party verification of a company’s actions
beyond the current P&C, including zero deforestation, zero burning, zero planting on
peat, reductions in GHG emissions, respect for human rights and transparency. Uptake of
RSPO NEXT has thus far been minimal. The RSPO has developed a further ‘add on’ to its

331
Roundtable on Sustainable Oil Palm. ‘About’. June 2017. http://www.rspo.org/about/about
332
Roundtable on Sustainable Oil Palm. ‘Impacts’. Accessed 26 June 2017.
http://www.rspo.org/about/impacts
333
Yaap, B. & Paoli, G. ‘A Comparison of Leading Palm Oil Certification Standards Applied in
Indonesia’. Daemeter, 2014.

8. Task 2: Certification standards, legislation and voluntary initiatives

2017 EUR 113 EN
Principles and Criteria designed to be consistent with the EU Renewable Energy Directive,
RSPO-RED.334

Since its inception, the RSPO has seen a slow but steady uptake, which now certifies
roughly 20% of the total global palm oil supply (See Section 8.2). However, only around
half of that figure is sold as certified,335 with the rest sold onto the general market due to
limited demand for certified material from major consumer countries such as India and
China. Few smallholders are RSPO certified, due to the high cost, high level of technical
achievement needed for compliance and limited opportunity to gain a premium. There
are suggestions that productivity benefits could accrue to smallholders who operate
sustainably,336 and the RSPO has created a smallholder fund (financed from 10% of the
revenue generated by trading CSPO), and a strategy to complement certification for
smallholders.337

Despite the coverage of its standard, with a system designed to allow for robust
decisions, and its penetration of the world market, the RSPO has faced a number of
criticisms (see Section 8.1.2.3).

334
RSPO (2012). ‘RSPO-RED Requirements for compliance with the EU Renewable Energy
Directive requirements’. Version 4 – 10 February 2012 (final version). Last accessed on 24
October 2017 from https://www.rspo.org/key-documents/certification/rspo-red
335
Roundtable on Sustainable Oil Palm. ‘Impacts’. Accessed 26 June 2017.
http://www.rspo.org/about/impacts
336
Molenaar, J.W., Meri Persch-Orth. M., Lord, S. Taylor, C., & Harms, J. (2013). Diagnostic study
on indonesian oil palm smallholders Developing a better understanding of their performance
and potential. IFC
337
RSPO (2017). RSPO Smallholder Strategy: Objectives, Outputs and Implementation. RSPO.

8. Task 2: Certification standards, legislation and voluntary initiatives

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Table 35: RSPO at a glance
Theme Characteristics
Overview Date initiated: 2004
Coverage: Global
Motivation: Initiated by WWF and leading supply chain companies in response to concerns in
western countries over environmental and social practices in the sector
Oversight: Board has representatives from growers, supply chain actors, environmental and
social NGOs
Mandatory or voluntary: Voluntary
Market penetration: 21% of global market
Standards Principles and Criteria: 8 Principles and 43 criteria
Additional standards: RSPO NEXT, RSPO-RED
Certification Verification mechanism: 3rd party independent audits, annual surveillance
process Corrective action Within 60 days
Certificate: Certificate issued by accredited certification body
Accreditation: Certification bodies accredited by Accreditation Services International (ASI)
Transparency: Public summaries of audit reports available on websites of accredited certification
bodies
Complaints/grievance procedure: Yes, with status of complaints publicly available on RSPO website
Supply chain Identity Preserved Segregated Mass balance Book & Claim
   
Further information http://www.rspo.org/about

2017 EUR 115 EN

8. Task 2: Certification standards, legislation and voluntary initiatives
 8.1.1.2. International Sustainability and Carbon Certification (ISCC)

The EU Renewable Energy Directive (Directive 2009/28/EC) (EU RED) establishes

sustainability criteria for biofuel feedstocks (including biodiesel derived from palm oil).
While crop-based biofuels can be placed on the EU market irrespective of these
sustainability criteria, only those that meet the criteria can account towards the EU
renewable energy targets and be eligible for the related fiscal incentives. The ISCC
certification system responded to this by creating a standard based on the sustainability
criteria of the EU RED, the ISCC EU standard (Table 36). The scheme covers 6-7% of
world palm oil supply, with producers who are part of the largest palm oil conglomerates
in Malaysia and Indonesia forming the majority of certificate holders. 338 The ISCC system
is not specific to palm oil, nor to biofuel.

The certification system includes independent, third party auditing and accreditation. The
system includes an ‘Integrity Programme’ to independently monitor the performance of
certification bodies and certified companies.

Under the ISCC system, only a subset of specified criteria must be met for certification.
These include the sustainability criteria set out in the EU-RED. ISCC divides its criteria
into ‘major’ and ‘minor’ musts, where all major and at least 60% of minor musts shall be
met to achieve certification. This makes it difficult to draw any conclusions about the
impact of the ISCC certification system on the ground, when compared with other
schemes that require all criteria to be met in order for certification to be granted.339 The
ISCC system also recognises material that has been certified by other schemes, so long
as these schemes are officially recognised by the European Union under the RED,
including RSPO-RED.

The ISCC certification criteria fall into three categories, requirements: for sustainability;
concerning GHG emission savings; and for traceability and the methodology for mass
balance calculations. More information on the ISCC’s Principles can be found at
Appendix 6. The ISCC EU standard is used as the reference point for all subsequent
analyses in this document.

338
Pacheco P, Gnych S, Dermawan A, Komarudin H and Okarda B. 2017. ‘The palm oil global
value chain: Implications for economic growth and social and environmental sustainability’.
Working Paper 220. Bogor, Indonesia: CIFOR
339
Yaap, B. & Paoli, G. ‘A Comparison of Leading Palm Oil Certification Standards Applied in
Indonesia’. Daemeter, 2014.

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8. Task 2: Certification standards, legislation and voluntary initiatives
 Table 36: ISCC at a glance
Theme Characteristics
Overview Date initiated: 2010
Coverage: Global (but aligned specifically with the EU Renewable Energy Directive) and
covering other markets used mostly in biodiesel.
Motivation: The ISCC was created to provide an internationally oriented, practical and
transparent system for the certification of biomass, biofuel and all processing
steps and supply chains up to final markets for biomass, biofuel, food, feed, and
industrial use
Oversight: ISCC is a multi-stakeholder initiative governed by an association of around 90
members
Mandatory or voluntary: Voluntary
Market penetration: 6-7% of global palm oil production
Standards Principles and Criteria: 6 principles and 45 criteria, with land use and GHG principles based on the EU
Additional standards: Renewable Energy Directive
ISCC Plus (for biofuels outside EU), ISCC Non-GMO (GMO free feed and food)
Certification Verification mechanism: 3rd party independent audits, annual surveillance. Additional independent audits
process to monitor certification body and certified company performance.
Corrective action Within 40 days
Certificate: Certificate issued by accredited certification body
Accreditation: Certification bodies accredited by American National Standards Institute (ANSI).
Transparency: Audit reports available on ISCC website as from 16 October 2017
Complaints/grievance procedure: Yes, but no requirement for process to be publicly available
Supply chain Identity Preserved Segregated Mass balance Book & Claim
   No
Further information https://www.iscc-system.org/

2017 EUR 117 EN

8. Task 2: Certification standards, legislation and voluntary initiatives
 8.1.1.3. Indonesian Sustainable Palm Oil

The Indonesian Government launched its Indonesian Sustainable Palm Oil (ISPO) scheme
in 2011 (Table 37). More information on the ISPO’s Principles can be found at Appendix
6.

ISPO is mandatory for companies producing and/or processing palm oil, except for
smallholders and for plantation companies producing palm oil for renewable energy. The
standard was introduced to ensure the adherence of oil palm plantations to government
laws and policies, demonstrate that adherence to Indonesian regulations could deliver
sustainable production, and support the Indonesian Government’s commitment to reduce
national GHG emissions.

The standard is based on existing Indonesian regulations that pertain to palm oil
cultivation and processing. Certification includes independent, third party verification.
There is less separation of decision-making and transparency than in the certification
systems discussed above: certification bodies are appointed by the ISPO Commission as
the scope of the national accreditation body (the Indonesian Accreditation Committee,
KAN) does not yet include sustainability, and there is no requirement for summary audit
reports to be publicly available.

Currently, 543 companies hold ISPO certificates,340 and it has been argued that the
initiative has failed to reassure consumers, NGOs and foreign governments of its
effectiveness in reducing negative environmental and social impacts. At present,
coverage remains limited. In December 2017, 16.7% of Indonesian production was
approved as complying with the ISPO standard.

To address these concerns and perceived weaknesses, the position in December 2017
was that significant political commitment is being put into revising the ISPO scheme.
These include the ISPO Strengthening Team, under the Coordinating Ministry of
Economic Affairs (CMoEA), aiming at a Presidential Decree to repeal the current
Ministerial Decree on ISPO for late 2017/early 2018. In addition, the Forum Kelapa Sawit
Berkelanjutan Indonesia (FoKSBI), a multi-stakeholder forum led by the Indonesian
government and facilitated by UNDP, aims to increase the coordination, sustainability
and efficiency of the palm oil sector, including developing a National Action Plan. These
processes are expected to result in significant revisions to the ISPO standard and
certification processes that may address some of the weaknesses that have been
identified by stakeholders. Although it is not possible to know what changes will occur at
the time of writing, some of the innovations being considered include:

 The certification of aggregated entities the (villages, cooperatives of even

districts) to be certified as a whole, on behalf of individual farmers within their
boundaries;
 The scheme becoming mandatory to all producers;
 A new principle and criteria on transparency and supply chains; including as
regards access to information for independent monitoring;
 A revised governance structure inspired by the FLEGT multi-stakeholder,
consultative process;

340
ISPO ‘Sertifikasi’. Last accessed 29 June 2017 at http://www.ispo-
org.or.id/index.php?option=com_content&view=article&id=79&Itemid=225&lang=ina

2017 EUR 118 EN

8. Task 2: Certification standards, legislation and voluntary initiatives
  A clarification of defining "deforestation", possibly informed by parallel progress of
the national REDD+341 policy as regards the National Forest Monitoring System
and Reference Levels.

Finally, there have been attempts to find common ground between public and private
schemes. A recent joint study between ISPO and RSPO identifies significant scope for
alignment, particularly in the auditing process, whilst also highlighting some key
differences in the treatment and definition of High Conservation Value (HCV) areas within
concessions, and the rules for developing new plantations.342 It is not clear what steps
will be taken by the two parties in order to promote greater alignment.

341
http://redd.unfccc.int/files/frel_submission_by__indonesia_final.pdf
342
Ministry of Agriculture, Roundtable on Sustainable Oil Palm, Indonesian Sustainable Palm Oil,
Mutuagung Lestari and United Nations Development Programme. ‘Joint study on the similarities
and differences on the ISPO and the RSPO certification systems.’ RSPO, ISPO, UNDP (2015),
Bogor, Indonesia.

2017 EUR 119 EN

8. Task 2: Certification standards, legislation and voluntary initiatives
 Table 37: ISPO at a glance
Theme Characteristics
Overview Date initiated: 2011
Coverage: Indonesia
Motivation: Designed to ensure that all Indonesian oil palm growers, not just those exporting
to foreign markets, conform to higher agricultural standards
Oversight: Indonesian Ministry of Agriculture, ISPO Commission
Mandatory or voluntary: Mandatory for companies producing and/or processing crops. Voluntary for
smallholders, and for plantation companies producing palm oil for renewable
energy
Market penetration: 16.7% of Indonesian palm production, a slight increase on ISPO certified
production of 4.85 million tonnes of CPO in mid-2015
Standard Principles and Criteria: 7 principles & 28 criteria for plantations, covering Indonesian laws and
regulations
Additional standards: Standards for integrated plantation and mills; integrated plantation and mills
producing biofuels; plasma smallholdings; and independent smallholdings.
Certification Verification mechanism: 3rd party independent audits, annual surveillance
process Corrective action ISPO is based on existing legislation, so if there is non-compliance there will be
sanctions determined directly by the judiciary
Certificate: Decision made by ISPO Commission, certificate issued by certification body
Accreditation: Certification bodies accredited by national accreditation body and approved by the
ISPO Commission (see above)
Transparency: Audit reports not publicly available
Complaints/grievance procedure: Yes, but no requirement for process to be publicly available
Supply chain Identity Preserved Segregated Mass balance Book & Claim
No   
Further information http://ispo-org.or.id/index.php?lang=ina

2017 EUR 120 EN

8. Task 2: Certification standards, legislation and voluntary initiatives

 8.1.1.4. Malaysian Sustainable Palm Oil

The Malaysian Sustainable Palm Oil (MSPO) scheme was introduced in 2013 and formally
launched in 2015 for Malaysia as a whole (Table 38). Originally a voluntary scheme, it is
expected to become mandatory by the end of 2019. However, Sabah's state government
has announced its intention to become fully RSPO certified by 2025, six years later than
the MSPO target. MSPO aims to help all of the country’s growers operate sustainably.
More information on the MSPO’s Principles can be found at Appendix 6.

The MSPO standard is split into four parts: universal: for smallholders; for palm
plantations and organised (supported) smallholders; and for palm oil mills. The indicators
for each user group vary, although the general principles are the same throughout.
These are organised around seven principles that cover: commitment to MSPO,
transparency, compliance with laws, social responsibility, environmental protection, best
management practices and new plantings. MSPO requires that internal audit procedures
and results are documented and evaluated, in order to implement necessary corrective
action through continuous improvement action plans.

At the end of November 2017, the total area certified under the MSPO standard was
294,000 hectares (under 6% of the total palm area in the country), of which just 4,000
hectares were farmed by independent smallholders 343.

A supply chain standard is currently being developed.

Finally, it is worth noting that in 2015, The Council of Palm Oil Producing Countries
(CPOPC) was formed by Malaysia and Indonesia, with membership open to all oil palm
cultivating countries. Among the objectives of CPOPC is to promote cooperation among
oil palm cultivating countries and the development of a framework for sustainable palm
oil, with the potential to harmonise ISPO and MSPO.

343
Please see: https://www.mpocc.org.my/facts-and-figures, updated 14th December 2017.

2017 EUR 121 EN

8. Task 2: Certification standards, legislation and voluntary initiatives
 Table 38: MSPO at a glance
Theme Characteristics
Overview Date initiated: 2015
Coverage: Malaysia
Motivation: According to the Malaysian Palm Oil Board, the standard was launched in order to
help small and medium-sized growers, who cannot afford RSPO, to operate
sustainably
Oversight: Malaysian Palm Oil Certification Council (MPOCC)
Mandatory or voluntary: Voluntary, but expected to be mandatory by 2019
Market penetration: MSPO reported over 294,000 hectares certified as of November 2017 which was
under 6% of the national total.
Standard Principles and Criteria: 7 principles, 33 criteria (for plantations and organised smallholders)
Additional standards: Standards for independent smallholders; plantations & organised smallholders;
and mills.
Certification Verification mechanism: Audits, with annual surveillance
process Corrective action Internal audits are documented and evaluated with corrective actions
implemented through continuous improvement action plans
Certificate: Decision made by the certification body
Accreditation: Certification bodies accredited by the Department of Standards Malaysia (DSM),
the national standards and accreditation body. DSM is a member of the
International Accreditation Forum and uses ISO guidelines.
Transparency: Public summary of audit report available on certification body websites
Complaints/grievance procedure: Documented procedures required
Supply chain Identity Preserved Segregated Mass balance Book & Claim
No   No
Further information https://www.mpocc.org.my/mspo-certification-scheme

2017 EUR 122 EN

8. Task 2: Certification standards, legislation and voluntary initiatives

 8.1.1.5. Other relevant schemes

The Palm Oil Innovation Group (POIG) certification was initiated in 2013. POIG has
several producer members, NGOs, food manufacturers and retailer members. It is
intended to provide a rigorous, outcome-focused standard for palm oil production.
Perhaps most importantly, it has more rigorous requirements than the RSPO Principles
and Criteria (P&Cs) and so can be used to operationalize the ‘zero deforestation’
commitments that have been made by major retail and manufacturing companies (see
Section 8.6 for more information on these voluntary commitments). Its members cover
an estimated 2% of global palm oil production.

The Rainforest Alliance (RA) was established in 1987, aiming to change land-use and
business practices to reduce their impacts on biodiversity and local people. Working
together with the Sustainable Agriculture Network (SAN), it operates a global system for
certifying the sustainability of farms in a variety of sectors. The SAN Sustainable
Agriculture Standards covers areas such as wildlife protection, water conservation,
ecosystem conservation, and community relations, among others. SAN does not allow
clearance of primary or secondary (logged or burned) natural forest after 1 November
2005. If plantation management destroyed natural ecosystems between 1 November
1999 and 1 November 2005, then the impacts must be mitigated with set-asides on the
plantation.

A final consideration is the traceability processes developed and led by the Tropical
Forest Trust (TFT). This approach tracks palm oil along the entire supply chain. It does
not include social and environmental criteria, and is not a form of certification, although
it is widely used by processor-trader groups, including most major importers of palm oil
into the EU. The approach has been questioned by some environmental groups for not
delivering sustainability outcomes, and by some users who have found it more costly
than expected in relation to the benefits that it brings.

8.1.2. Comparison of RSPO, ISCC, ISPO and MSPO

This section compares the process requirements for the four main certification schemes.
It then assesses the degree to which their standards cover the key environmental and
social themes described in Section 7 of this report.

The following analyses are of the current processes and standards. It is important to
note, however, that all of these certification schemes are in stages of revision: the ISPO
is undergoing a thorough review, the RSPO is in the process of revising its Principles and
Criteria, MSPO is developing a supply chain standard; and the ISCC began to make
summaries of its audit reports publicly available in October 2017. The specific standards
assessed are:

 The RSPO Principles and Criteria for the Production of Sustainable Palm Oil;344
 ISCC (EU) 202 Sustainability Requirements; 345
 ISPO Principles And Criteria Of Indonesian Sustainable Palm Oil for Plantation
Company Operating Cultivation;346 and (for those issues specific to mills)
Principles And Criteria Of Indonesian Sustainable Palm Oil (ISPO) For Plantation
Companies Operating Processing Of Palm Oil/Mill

344
RSPO (2013). RSPO Principles and Criteria for the Production of Sustainable Palm Oil.
345
ISCC (2016). ISCC EU 202. Sustainability requirements, Version 3.0.
346
Ministry of Agriculture of the Republic of Indonesia (2015). Principles and criteria of Indonesian
sustainable palm oil/ISPO for plantation company operating cultivation. Regulation Number
11/Permentan/OT.140/3/2015

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  MSPO General principles for oil palm plantations and organised smallholders.347

The RSPO and ISCC EU standards are included because these are by far the most
commonly used schemes for imports of palm oil into the EU for food and oleochemical
use (RSPO) and biofuels (ISCC). The ISPO and MSPO are included as the national
schemes for the two main producing countries.

8.1.2.1. Certification process

Certification schemes comprise a series of processes, the main ones being the
certification process (who verifies compliance, how, and who decides whether
performance has reached the standard); accreditation; complaints procedures;
transparency; and claims (please see Table 34). The way that these processes are
undertaken provides a greater or lesser prospect of independence of decision-making and
confidence in the system. The tried and tested best practice for each of the processes
within certification is codified by the International Organisation for Standardisation (ISO).
This provides a convenient mechanism for comparing certification schemes,348 with the
following elements defined by Nussbaum et al. (2002)349 as among the key ones:

Who verifies: Does the scheme require certification by an independent, third party
certification body, or is first or second party assessment accepted?

How is compliance verified: For all assessments it is important to establish not only
that plans are assessed, but also that there is collection of objective evidence that the
plans are implemented in practice, in the form of an audit.

How often is it done: Certification schemes must include a requirement for regular and
adequate monitoring of certificate holders and mechanisms to remove certificates if the
standard is no longer being met or if Corrective Action Requests have not been met. In
the context of certification of agricultural crops, an annual surveillance audit is common
practice.

Who decides: The decision whether an audited estate has met the requirements of the
standard should be made impartiality, with a separation of responsibility for certification
decision and audit, and with freedom from pressure that may influence decisions. The
decision is typically made by staff from the certification body who have not been involved
in the audit.

Confidence in the certification system is enhanced by accreditation of the certification

body, complaints and grievance procedures and transparency. The certification body
should be accredited by a credible accreditation body is fundamental to credible third-
party certification independent organization provides assurance that a certification body
is competent. Credibility of an accreditation body can be increased by adherence to
international standards on accreditation, mutual recognition between national
accreditation bodies, or using an international accreditation body, having adequate
complaints procedure mechanisms and by making its activities transparent. 350

347
MSPO (2013). Malaysian Sustainable Palm Oil (MSPO) Part 3: General principles for oil palm
plantations and organised smallholders . MS 2530-3:2013
348
Nussbaum, R., Jennings S., & Garforth M. ‘Assessing Forest Certification Schemes: A Practical
Guide.’ ProForest (2002), UK.
349
Nussbaum et al. (2002). Op. cit.
350
Nussbaum et al. (2002). ibid.

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 Certification bodies should have documented complaints and grievance procedures
which, when implemented, are able to resolve any complaints, appeals and disputes.
Ideally, documentation on complaints and grievances, including their status, should be
publicly available.

Transparency, the third element of building confidence in certification, has a number of

different aspects. The key one considered here is the public availability of audit reports,
which contribute significantly to transparency, but reduce confidentiality for the
plantation company and increase the cost of the scheme, as a public summary of the
audit report must be produced.

The final element of most certification schemes regards traceability and the claims
that can be made about certified products. Depending on the supply chain model, such
claims must be supported by effective chain of custody certification ( Table 34). Its
elements are the standard, certification and accreditation. The scheme should cover
product identification, product segregation and documentation.

Key elements of the certification process of RSPO, ISCC (EU), ISPO and MSPO are
compared in Figure 30. In general terms, RSPO and ISCC follow ISO specifications
closely.

Figure 30: Summary of certification processes within four palm oil certification
schemes
Standard

Certification scheme element RSPO ISCC ISPO MSPO

Certification Who: independent 3rd Party

How: audit
How often: annual surveillance
Who decides: certification body
Accreditation Fully independent accreditation
Complaints Documented procedures available
Transparency Audit reports publicly available
Claims Supply chain verification
Note: Dark shading indicates that the process reaches best practice, pale shading indicates absence of the
process; mid-shade implies an intermediate state.

The ISPO has third party independent audits with annual surveillance, but the ISPO
Commission decides whether a certificate should be issued (rather than the certification
body) and accredits the certification body (rather than an independent accreditation
body). Documented complaints and grievance procedures are required (but complaints
processes are not publicly available) and audit findings are not publicly available. The
MSPO system includes most of the required elements, other than independent supply
chain verification (though procedures for this are under development).

8.1.2.2. Content of the standards

Table 39 summarises the coverage of the environmental themes within the RSPO, ISCC
(EU), ISPO and MSPO standards. There are significant differences between the
requirements of the standards on most key environmental issues. The ISCC standard has
requirements that restrict deforestation, peat land conversion and greenhouse gas
emissions to a greater degree than the other standards, while conserving biodiversity.
The RSPO standard contains the next most restrictive requirements on all aspects except
biodiversity conservation and greenhouse gas emissions, with the requirements of the
MSPO standard being similar or less restrictive than those of the RSPO. The ISPO is

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 officially mandatory, and the MSPO will be mandatory from end-2019. RSPO and ISCC
are voluntary schemes.

The ISCC, RSPO and MSPO have similar degrees of restriction on the use of fire for land
clearance. Regarding air pollution (other than GHG), the RSPO and MSPO standards have
the greatest restrictions for plantation and mill operators. The ISPO standard is
essentially based on existing Indonesian regulations governing palm oil cultivation and
processing, whereas the RSPO and ISCC (and to a lesser degree the MSPO) standards go
beyond existing legal requirements; therefore the ISPO standard typically has less
restrictive requirements on environmental issues than the others. The MSPO has
comprehensive requirements on the maintenance of the quality and availability of surface
and ground water, which include assessment and monitoring of water resources, water
use efficiency, water harvesting, protection of water courses, a prohibition on
obstructions of rivers and streams, and measures to prevent and reduce soil erosion. The
other three standards have broadly similar requirements regarding water resources.

The standards of the four schemes differ markedly regarding deforestation. The ISCC in
effect excludes production from primary forest, and forests of high biodiversity value
(Criterion 1.1), and degraded forest (Criterion 1.3). Degraded forest is defined
conservatively, with a high proportion of logged forest included in the restriction. These
are both classed as ‘major’ criteria; thus compliance is necessary in order to achieve
certification. The RSPO standard has the less exacting requirement that forest clearance
is legal, but primary forest and High Conservation forest are not to be cleared for oil
palm cultivation.351 However, this still provides significantly more safeguards that the
ISPO standard, which permits forest clearance provided it is zoned for agriculture; is
allowed under the environmental impact assessment; and the government has given the
necessary permits. The MSPO standard is broadly similar to ISPO, but with additional
requirements on Environmentally Sensitive Areas and areas with high biodiversity value.

The RSPO standard provides some of the most restrictive requirements on social issues,
such as land use rights, forced labour, child labour, the terms and condition of
employment, treatment of smallholders, and the rights and wellbeing of people affected
by plantations (Table 40). The ISCC has similar requirements for terms and conditions
of labour and rights and wellbeing, and the MSPO is similar in terms of land use rights. It
should be noted that neither the ISPO nor the MSPO standard has specific provision to
exclude forced labour from palm oil production, instead requiring compliance with
national labour laws in general. These results are summarised in Figure 31.

Figure 31: Summary of provisions within four palm oil certification standards
against environmental and social themes.
Standard

Theme RSPO ISCC ISPO MSPO

Deforestation
Biodiversity
Peat land conversion

351
‘High Conservation Value’ was first articulated in the Forest Stewardship Council’s Principles and
Criteria to define and maintain the world’s most important forests for biodiversity, ecosystem
services, culture and society. The notion has been extended to include other, non-forest
ecosystems, and within other sectors, such as oil palm.

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 GHG emissions
Burning
Air pollution
Water pollution
Rights & Wellbeing
Land use rights
Treatment of smallholders
Forced and Child labour
Terms and conditions of labour

Note: Dark shading indicates that the standard provides the greatest restrictions on activities; pale shading
indicates the fewest restrictions; mid-shade indicates an intermediate state.

8.1.2.3. Implementation of schemes

Limited independent research has been conducted on the implementation of schemes

within the palm oil sector. The studies that do exist have largely been focused on the
RSPO. These include concerns that it is not delivering significant environmental
outcomes, such as reduced deforestation and biodiversity conservation, 352 and that the
auditing process is inadequate to detect (or in some cases colludes in) serious breaches
of the standards on issues such as deforestation, land rights,353 forced and child labour,
and terms and conditions of labour.354,355,356 Local communities and smallholders find it
difficult to influence debate and decision within the RSPO, resulting in marginalisation of
some viewpoints.357 This body of research neither covers a wide enough range of
standards, nor a large enough sample of RSPO certified companies to draw overall
conclusions on the implementation of the schemes within the sector, other than that the
requirements of the standards are sometimes not met by certified organisations.

It is increasingly recognised that voluntary schemes are not well equipped to resolve
some of the issues found within the sector, such as land rights violations, for which
national law (and legal reforms) are necessary. 358

352
Ruysschaert, D. & Salles, D. ‘Towards global voluntary standards: Questioning the
effectiveness in attaining conservation goals: The case of the Roundtable on Sustainable Palm
Oil (RSPO)’. Ecological Economics, Volume 107, 2014, Pp. 438–446
353
EIA. ‘Who Watches the Watchmen. Auditors and the Breakdown of Oversight in the RSPO’.
Enviromental Investication Agency International, 2014, London.
354
Amnesty International ‘The Great Palm Oil Scandal: Labour Abuses Behind Big Brand Names’.
Amnesty International, 2016, London
https://www.amnesty.org/en/documents/asa21/5184/2016/en/.
355
Amnesty International (2016), The Great Palm Oil Scandal: Labour Abuses Behind Big Brand
Names (London: Amnesty International, 7 Dec. 2016),
https://www.amnesty.org/en/documents/asa21/5184/2016/en/, accessed 1 Feb. 2017.
356
International Labour Rights Forum & Sawit Watch. Empty Assurances: RSPO Labor Case
Studies. International Labour Rights Forum & Sawit Watch (2013), Washington D.C. & Bogor.
357
Cheyns, E. (2014). Making “minority voices” heard in transnational roundtables: The role of
local NGOs in reintroducing justice and attachments. Agriculture and Human Values, 31(3),
439-453.
358
Colchester, Marcus, Wee Aik Pang, Wong Meng Chuo and Thomas Jalong (2007) Land is Life:
Land Rights and Palm Oil Development in Sarawak. Forest Peoples Programme and
SawitWatch, Bogor.

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 8.1.2.4. Conclusions

There are significant differences between certification schemes used in the palm oil
sector (principally RSPO, RSPO, ISCC (EU), ISPO and MSPO, but also POIG, RSPO Next,
and SAN). These differences include the processes underpinning certification as well as
the requirements of the standards.

Based on the methodology used in this study, the RSPO and ISCC schemes have the
most robust processes around verification, certification, accreditation, and supply chain
certification, ISPO the least, with MSPO intermediate. These processes should separate
roles and responsibilities, and provide confidence in decisions and transparency.

A high degree of transparency in certification is provided by making summaries of audit

reports publicly available, as practiced by RSPO, MSPO and since October 2017, ISCC.
Further transparency is given by stipulating that information should be public regarding
complaints and grievance procedures, which can occur at all levels: plantation,
certification body, accreditation body, and scheme owner. The RSPO is the only one of
the major schemes that provides publicly available information of complaints at all these
stages.

The schemes also differ in how they handle environmental and social issues. This
includes what is covered and how. For example, forced labour is explicitly prohibited in
RSPO and ISCC, but is not referred to directly in ISPO or MSPO, and requirements on
deforestation range from legal compliance (ISPO) to significant restrictions going well
beyond the requirements of national legislation (ISCC).

Whilst the content of the underlying standards and the process requirements of the
certification system indicate what should happen on the ground, the actual practices may
be quite different. This is illustrated by the claims of serious social and environmental
issues within RSPO certificated plantations covering practices that are not compatible
with the RSPO P&Cs. However, there is almost no information available with which to
compare the practices found in plantations certified by other schemes, and hence it is not
possible to conclude whether any of the schemes results in more effective environmental
and social practices on-the-ground than the others.

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 Table 39: Summary of coverage of environmental themes in the standards of the main palm oil certification schemes

Scheme
Theme RSPO ISCC (EU) ISPO MSPO
Deforestation New plantings since November Excludes materials produced Permits must be obtained and No planting on land with high
2005 have not replaced primary from land that was primary the plantation is in accordance biodiversity value or on
forest or any area of HCV (P7) forest or of high carbon stock in with the spatial plan (P1), HCV Environmentally Sensitive Areas
The New Planting Procedure January 2008 (P1) areas identified and not (P7), plantings allowed on land
allows deforestation of HCV converted to oil palm (P3) gazetted for agricultural use.
areas in certain cases so long as
compensation is made.
Biodiversity Populations of rare, threatened Excludes materials produced Preserve biodiversity according Rare, threatened and
and endangered species from land with high biodiversity to the plantation permit (P4) endangered species identified
identified and conserved (P5) value (P1) and maintained if present (P5)
Peat land Extensive planting on peat is Excludes materials produced Oil palm planting on peat lands Planting on peat land according
conversion avoided (P7) from land that was peat land in should not destroy ecosystem to guidelines/industry best
January 2008 (P1) functioning (P2) practice (P7)
GHG emissions Efficiency of fossil fuel use and Excludes materials produced Sources of GHG emissions are Assessment and reduction of
use of renewable energy, and from land that had High Carbon identified and mitigated (P4) GHG emissions (P5)
GHG emissions reduced (P5) Stock in January 2008 (P1)
Burning Use of fire avoided, with Burning as part of land clearance Fire prevention and mitigation Use of fire avoided, with
exceptions as per ASEAN is prohibited (P2) systems and activities in place exceptions as per ASEAN
guidelines or equivalent (P5, P7) (P3) guidelines (P5)
Air pollution Pollution is reduced (P5) Included in the Environmental Air pollution measurement from Sources of pollution documented
Impact Assessment with mills (P2) and reduced (not specific to air
mitigation actions if required pollution) (P5)
(P2)
Water pollution Responsible pesticide use, Use of best practices to maintain Water quality and source A water management plan to
control of soil erosion, and and improve water quality and conservation (P2), management maintain the quality and
maintenance water resources quantity (P2) of mill waste in accordance with availability of surface and
(P4) applicable regulations (P2), ground water, no contamination
conservation of areas with high of water from waste (P5)
erosion potential (P3)

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 Table 40: Summary of coverage of social themes within the standards underlying the main palm oil certification schemes

Scheme
Theme RSPO ISCC (EU) ISPO MSPO
Rights & Social impact assessment (P6, Social impact assessment, A minimum of 20% of the total Social impact assessment,
Wellbeing P7), open and transparent declaration of adherence to plantation area is developed for transparent complaints and
communication with human rights, avoiding negative the community (P1), grievance procedure,
communities (P6), complaints impacts on food security, access commitment to developing local contribution to local
and grievance procedure (P6), to basic services (including child knowledge, welfare of development (P4). Social
contribution to local education) for people living on indigenous communities (P6) benefits offered to the
development (P6) and respect plantations, complaints and and prioritising local community (P4)
for human rights (P6) grievance procedure and procurement (P6)
mediation (P4)
Land use rights The right to use land must be Biomass production shall not Permits and land titles must be The right to use land must be
demonstrated, not legitimately violate land rights (P4) and the obtained, agreement of hand demonstrated, should not
contested, and the rights of right to use land must be over from and compensation to diminish the rights of others
others not diminished without demonstrated (P5) customary use rights holders without FPIC; compensation
FPIC (P2, P7). Compensation obtained (P1) negotiations are documented;
negotiations are documented and the land mapped and
(P6) demarcated (p4)
Treatment of Dealings with smallholders are (No specific provisions) (No specific provisions) (No specific provisions)
smallholders fair and transparent (P6)
Forced and Children are not employed or No minors to be employed, Employment of under-age Children and young persons shall
Child labour exploited, and no forced or children of school age must not workers prohibited (P4). not be employed or exploited
trafficked labour is used (P6) be employed within school hours (No specific provision for forced (P4)
(P4). Forced labour prohibited labour) (No specific provision for forced
(P4). labour)
Terms and Covers occupational health and Covers fair worker contracts, Minimum wage regulations Compliance with occupational
conditions of safety, training, pay (legal and discrimination, treating implemented, plantation health and safety laws, workers’
labour providing a decent living), the employees with respect, management facilitate formation pay and conditions, housing and
right to free assembly, collective bargaining and of trade unions, and equal amenities meets legal
discrimination, harassment representation, a living wage, opportunity implemented and no requirements, fair working hours
and communication (P4), and discrimination (P4) and overtime payment, no
health and safety (P5). sexual harassment, and the right
to join a trade union (P4)

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8.2. Supply and demand of certified oil palm products

8.2.1. Certification of palm products by country and end-use

The market for sustainable products is broadly divided into two parts. The first is related
to sustainability in food, oleochemicals, home & personal care (HPC) end-uses,
dominated by the RSPO for certification and by non-certification traceability mechanisms.
The second relates to sustainability markets for biodiesel. In order to be counted towards
EU Renewable Energy targets, biodiesel feedstocks imported into the EU must satisfy the
sustainability criteria established under the RED, with certification used to ensure
compliance. The International Sustainability and Carbon Certification (ISCC) scheme is
the main scheme used to demonstrate compliance in the EU biodiesel sector.

We review market and trade trends for the RSPO 359. This relies on data releases by the
RSPO, which publishes the most comprehensive data, as well as market research
interviews.

8.2.1.1. The global picture

The RSPO’s summary of Certified Sustainable Palm Oil (CSPO) and Certified Sustainable
Palm Kernel (CSPK) supply in 2017 revealed that its certification system covered 11.6
million and 2.6 million tonnes, respectively, equivalent to 19% of world output, from 310
mills and 2.3 million certified hectares. In 2016 CSPO and CSPK certification covered
12.2 million and 2.8 million tonnes, respectively, which were down from 12.9 and 3.0
million tonnes, respectively, in 2015.

Demand from Consumer Goods Manufacturers (CGMs) accounts for 48% 360 (Table 41) of
RSPO members’ supply of certified CPO in 2015 (leaving 52% of available supply from
certified suppliers being bought as conventional or under other certification schemes,
such as the ISCC). This share would drop to 31% with full certification of RSPO producer
members’ output, unless demand for certified products rises in the interim. In other
words, there is apparent oversupply due to limited demand for certified materials.
Considering that many mills have two types of certification (both RSPO and ISCC), the
combined (overlapping) picture for certified palm oil is a relative balance of supply and
demand for certified sustainable palm oil.

Table 41: Market uptake or RSPO and ISCC certified palm oil in 2015
Number of Estimated Estimated % take-up
mills capacity, sales, '000
'000 tonnes tonnes
RSPO 327 12,890 6,183 48%
ISCC 226 8,814 4,250 48%

In 2016, the RSPO was hit by uncertain supply during the year due to the suspension of
certification of one major supplier from Malaysia as a result of failures by its RSPO

359
LMC International’s regular reports on sustainability. In the last three years (2014-2017), this
includes annual reviews of sustainability trade data and semi-structured survey interviews
(about 50 per year) on sustainability premia and commercial trends among key global
sustainability market participants (suppliers, ingredient manufacturers and consumer goods
manufacturers).
360
CSPO market uptake recently plateaued at just over 45% (from 2011 to 2015).

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auditors; and the voluntary temporary withdrawal from the RSPO system of another
major supplier from Malaysia while it addressed potential deficiencies in its labour
practices. There has been a simultaneous rising commercial interest in non-certified
traceability mechanisms, and geographic diversification of supply, to enhance the
security of supply (especially for specialist and chain-of-custody segregated products).

8.2.1.2. By country

RSPO Supply Chain Certification is concentrated in developed markets (Figure 32). In

2015, the top five countries were: the UK, Germany, Netherlands, France and Italy.

RSPO does not provide trade data for destination markets. However, it is useful to
examine some indicators for the top five RSPO CGM buyers; Unilever, P&G, PepsiCo,
Nestlé and Mondelez International. We estimate that 48% of their overall tonnage is sold
in developing or emerging markets. Thus, 1.72 million tonnes of all palm products
handled are for developed markets and 1.58 million for emerging markets.

These five companies in 2014 had 2.61 million tonnes of palm products certified out of a
total of 3.30 million tonnes of palm-derived purchases. These palm product inputs may
be allocated as follows:

 Certified, developed markets: 1.40 million tonnes; leaving 0.32 million tonnes to
be certified to reach 100% certification in developed markets.
 Certified, emerging markets: 1.21 million tonnes; leaving 0.37 million tonnes to
be certified to reach 100% certification in emerging markets.

Figure 32: RSPO Supply Chain Certified facilities, 2015

39 other countries
Russia
Papua New Guinea
Colombia
Mexico
Greece
Brazil
New Zealand
Portugal
Singapore
Japan
Sweden
Denmark
Canada
India
Thailand#
Switzerland
China
Poland
Ireland
United States
Austria
Spain
Australia
Malaysia#
Indonesia#
Belgium
Italy
France
Netherlands
Germany
United Kingdom

No. of SC C facilities (single and group) by country

No. of RSPO SCC certificates

Note: Indonesia, Malaysia and Thailand SCC facilities are export-oriented.

Demand for certified palm oil is based predominantly in the key sensitive markets of the
EU and the US. If the total (with energy use included) is considered, then even for the
leading German and UK markets, tonnages indicate certified ratios in the region of 61-
63%. This means that in the most advanced markets, including all certification schemes,

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a third of palm oil is still entirely uncertified. The RSPO reported CSPO sales of 6.2 million
tonnes in 2015, 5.6 million tonnes in 2016, and 7.0 million tonnes in 2017, representing
60% of the total certified tonnage.

8.2.1.3. By end-use

Turning to trends among end-uses in the EU and US, we see that the EU market has
shifted steadily away from food to non-food uses of palm oil within a total volume that
has grown since 2010. Palm oil use in food in every large EU market was lower in 2014
than it had been in 2010. Food sectors that managed to avoid declines were
confectionery, margarine and dairy products. All others shrank, most notably snacks.

EU palm kernel oil demand has been flat. Within this total, non-food demand (almost
entirely for oleochemicals) has increased its share. However, suppliers to food companies
and to the large HPC companies, e.g., for surfactants, are worried by analysis that
compares PKO poorly against coconut oil as a sustainable feedstock.
For the US, growth in palm oil food use between 2009 and 2014 was mainly due to the
restrictions on the consumption of trans-fats and the large scale shift away from partially
hydrogenated soybean oil in baking and frying applications in particular. In terms of the
physical chain of custody, the US market was not far ahead of China, Poland and Ireland.

Table 42 summarises the available evidence on the extent of certification for various food
sub-sectors by RSPO members (62 to 98% certified tonnages), with more detail for the
Netherlands food industry (54 to 82% certification). In Table 43, we review data reported
by companies on their sustainability status for selected food and non-food end-uses for
raw materials or products used, certification rates and chain-of-custody options used. For
selected RSPO members in the food segment, the certification rate was 35 to 98% (low
for fried foods and high for bakery and dairy/non-dairy) and for non-food sector, it was
51% for Home and Personal Care and 86% for cosmetics.

For the entire RSPO CGM sector, reported raw materials were divided into 46% palm oil,
15% PKO and 40% fractions and derivatives in 2014. The certification ratio was 67%,
and chain of custody adopted was 67% B&C, 17% MB and 17% SG/IP.

In terms of attainment of general RSPO certification, the food sectors that were most
advanced were bakery, dairy/non-dairy and the slowest was fried foods. However, a
large missing end-use category in RSPO membership and volumes is the restaurant and
catering sector. Chain of custody analysis reveals that the chocolate sector has moved
furthest to SG/IP, led by Ferrero. The raw material profile differs for each end-use sector.
The progression in certification for the three raw material sectors differed by end-use.

The large volume of over 2 million tonnes of palm kernel expeller (PKE) in the dairy
sector warrants some explanation. PKE is a high fibre feed, which is ideal for dairy cattle
as it typically includes around 8% fat content.

Also in the same table, we review indicators for the home and personal care and
cosmetics sectors. In this context, the home and personal care sector (non-food) lagged
the food sector in its certification rate in 2014. Cosmetics had a higher general RSPO
certification attainment, but relied greatly on B&C certificate credits.

A review of the key RSPO buyers in the CGM segment reveals the dominance of the
global brand names and a couple of regional companies. It is arguable that the
processor-traders should be included as they retail cooking oil in China, India and other
developing markets. It is noticeable that large Asian consumer goods makers have yet to
reach the top volume category at the RSPO, for example, makers of instant noodles.

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Table 42: EU food sector volume (2010-2014) and RSPO indicators for the
Netherlands and selected companies, 2014

Food sectors EU-28 Netherlands food RSPO member certification

2014 certification progress, 2014 progress#
vs.
2010
tonnage
Biscuits/baking^ 78% 82% Bakery and 98% 98% certified with 38%
confectionery; with reaching SG/IP
28% SG/IP

Snack food 64% 78% 35% 35% certification rate, with

2% reaching SG/IP

Margarine 101% 60% With 33% SG

76%
Chocolate 111% 76% certification rate with
SG/IP 60%

Sugar-based 106% 82% Bakery and . .

confectionery^ confectionery; with
28% SG/IP

Ready-made meals & 79% . . . .

meats

Dairy & dairy replacers 99% 78% . 98% 98% certified, with 26%
reaching SG/IP

Soups & sauces 59% 54% . . .

Other 84% 77% Potato processors . .

80% sustainable, with
12% SG

All 85% 72% with 39% SG 62% with 27% SG

Note: EU-28 data do not include PKO. Tonnages refer to palm oil tonnages in each food sector. ^Bakery
and confectionery for the Netherlands. Netherlands does not report certification chain of custody
progression for every food sector. #Selected segments are represented by aggregate data for key
companies in these food sectors; but excludes data for the largest diversified CGM companies e.g.
Unilever which is 100% certified and achieved 11% SG progression in 2014.

Pledges in China’s and India’s markets are led by individual companies, typically global
brand names such as Unilever and McDonald’s. Refiners in these markets are dominated
by RSPO members, but they only supply certified oil in response to market demand and
these RSPO members practice limited certification for their consumer pack cooking oils.
India is regarded as lagging and had very few RSPO certified facilities by 2015, while
China lagged Poland and Ireland in this respect. While China has a high sounding pledge
on sustainable palm oil, it only pertains to upstream development by Chinese companies
and does not cover palm oil use. It is likely that these large emerging markets will
become increasingly concerned about traceability (transparency of the supply chain) in
reaction to greater worries around basic local concerns about food safety, adulteration
and contamination. Thus, RSPO supply chains seem likely to remain of secondary
concern to traceability for food safety in these large emerging markets. Key players in
India and China include Wilmar International (controlling a majority market share in
refining-trading in both markets), COFCO (China), Adani and Godrej in India and others.

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Table 43: Various end-uses and RSPO certification indicators for key companies, 2014
Raw Certification Chain of Selected companies
materials rate custody
Palm oil PKO Fractions All* PKE Palm PKO Fractions All* B&C MB SG/IP
& (tonnes) (tonnes) oil &
derivatives derivatives
Food
Chocolate 25% 13% 62% 374,988 - 78% 64% 77% 76% 2% 38% 60% 7 companies, including
Ferrero and Mars.
Fried foods 96% 1% 2% 642,700 - 34% 32% 90% 35% 86% 12% 2% 6 companies, including
PepsiCo and Aviko.
Dairy / non-dairy 70% 26% 26% 240,1132,006,299 97% 56% 57% 98% 24% 50% 26% 7 companies, including
Royal Friesland Campina,
Arla Foods and Fonterra.
Bakery 71% 7% 22% 544,980 60 85% 88% 40% 98% 27% 49% 38% 20 companies, including
United Biscuits, CSM
Bakery Solutions and
others.

Non-food
Home and personal 24% 37% 40% 1,327,736 64% 37% 55% 51% 85% 13% 2% 24 companies, including
care (HPC) P&G, Colgate-Palmolive
and Lion Corp (and
cosmetics).
Cosmetics 1% 1% 98% 128,836 2,102 100% 41% 87% 86% 94% 5% 0% 7 companies, including
L'Oreal and Avon.

Note: *Total volume of all palm oil and palm oil derived products = total volume of palm oil (CPO and refined palm oil) + total volume of palm kernel oil (PKO) + total
volume of other palm oil derivatives and fractions. Certification rate is certified tonnes divided by total tonnage handled (certified and non-certified products).

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8.2.2. Demand for products and types of certification

Annual supply comprised certified sustainable palm oil (CSPO) production of nearly 13
million tonnes (21% of world CPO output). CSPO stearin (calculated as a stearin share of
18.8% of CSPO: roughly 2.5 million tonnes; Certified Sustainable Palm Kernel (CSPK):
3.00 million tonnes; Certified Sustainable Palm Kernel Oil (CSPKO, defined as 45% of the
CSPK supply): 1.35 million tonnes.
RSPO’s Certified Sustainable Palm Oil (CSPO) is the largest certified palm product in
demand, with sales of 5.6 million tonnes in 2016, down from 6.2 million in 2015, as
output was hit by El Niño. Market uptake was 44% of CSPO supply. Within the 2016
total, 65% were Identity Preserved (IP), Segregated (SG) or Mass Balance (MB), up from
44% in 2015. In 2016, the remaining 35% were Book and Claim (B&C) credits.

8.2.3. RSPO premia, costs & margins

For the purpose of this review, we examine compliance with the RSPO Principles and
Criteria for its major product, CSPO, and review added cost and issues for both
plantations and smallholder suppliers361. The major finding of a regressive cost structure
(relatively high unit costs for smallholders) is consistent with similar findings in 2012 by
WWF. Large estates and companies are able to achieve economies of scale in their RSPO
implementation costs, and thus experienced lower barriers to entry. For mid-sized firms,
implementation costs vary based on the number of smallholders, amount of HCV, and
pre-existing practices. The desire for sales premiums was universally expressed as the
primary interest of smallholders in RSPO, as smallholders have no strategic relationships
with large buyers, and also face relatively higher implementation costs. They are
therefore highly price sensitive.

LMC’s review362 identified two main costs in achieving RSPO compliance: Principles &
Criteria (P&C) certification by growers, based on mills and their supply base; and supply
chain certification by processors and traders, for each downstream plant. The costs of
compliance with the P&Cs, include costs that are both direct (membership, audit) and
indirect (some upgrades to capital and operating expenditure). Large plantations faced
costs of up to $5 per tonne in 2015; small producers’ and smallholders’ costs were
significantly higher per tonne, at $8-12,363 equivalent to

RSPO premia have ranged from $2 per tonne for tradable certificates to $300 for
integrated plantation suppliers of RSPO products, able to supply specialist products, such
as PKO, with segregated chain-of-custody that require more sophisticated supply chains.
The RSPO prices within easy reach of smallholders have only ranged up to $12, barely
covering their costs without a subsidy from a buyer.

Evidence about profitability in the first year after certification is inconclusive; GreenPalm
traded certificate premia are very small, at only 1-4% of CPO prices. This would
sometimes, but not always, be sufficient to cover recurrent costs.

361
LMC International’s March 2016 review of palm oil sustainability covered producers and
manufacturers based in Southeast Asia, Latin America, Europe and the US.
362
LMC International, op. cit.
Sime Darby (2015), “Outlook for certified palm oil trade - are premiums realistically traded?”
363

Panel discussion with Haris Arshad, Sime Darby Plantation Sdn Bhd, MPOC Reach & Remind
Friends of the Industry Seminar 2015 & Dialogue, 12 Feb. 2015, Putrajaya, Malaysia.

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As the RSPO’s financial appeal is uncertain (in premia and uptake of certificates), the
selling point to smallholders for certification has to be indirect. Negative reasons include
diminished market access and/or lower product prices for those not certified. Positive
reasons include higher yields and/or lower input costs via better management practices,
which are not unique to RSPO, and a feel / do good factor.

The hope is that large companies (plantations and/or buyers) will support the effort and
costs of their smallholders certifying to RSPO. Against this must be set the less than
robust growth in RSPO volumes.

The main practical conclusion is that the additional costs for sustainable certification by
smallholders have typically been higher than the potential premia for smallholder
farmers, who are at a distinct disadvantage to large integrated plantations that are able
to exploit economies of scale. These are the consistent finding of a handful of appropriate
and rigorous studies.

8.2.3.1. RSPO smallholders sign-on and drop-out problems

While it is relatively easy (although not simple) to get a company’s own estates and
associated smallholders certified, the problem of independent suppliers is greater.

An RSPO-associated study364 on independent smallholders found that upfront costs of

certification were equivalent to 5%-14% of mean annual revenue from oil palm;
recurrent costs at cooperative level were €21-65 per farmer for groups of 200-400
farmers (including annual RSPO fee and surveillance audit, but excluding costs for group
management); operational cash costs increased by 5-20% of mean annual revenue
(though one group reported lower costs).

Cost of certification to smallholders have been cited in the region of $12 per tonne, 365
with a cost of $8 per tonne often cited more recently. This roughly matches the premium
they receive. However, if the smallholders are unable to sell 100% of the certificates,
there would be a financial shortfall.

The RSPO’s direct appeal is not self-evident to many smallholders and the premia and
levels of demand are uncertain. The hope is that large companies (plantations or buyers)
would support the effort and costs of their smallholders certifying to RSPO. The rise in
smallholder certified areas reported indicates that this is starting to happen. It is said to
focus on the highly organised smallholder sector (likely to include fully-managed or
cooperative-managed smallholder schemes). As large plantation groups may earn $10-
15 per tonne on average on certified products, it may make sense for the large
companies to subsidise these smallholders, as the cost guidance is now at about $8 per
CPO tonne (for outside FFB) compared to about $5 for their own produce. However, less
than robust recent growth in total RSPO volumes and a growing preference for
alternatives to RSPO may dampen this.

364
Rietberg, Petra and Maja Slingerland (2016), 'Costs and benefits of RSPO certification for
independent smallholders, A science-for-policy paper for the RSPO,' (May 2016),
http://www.sensorproject.net/sensorwp/wp-content/uploads/2015/04/Costs-and-benefits-of-
RSPO-certification-for-independent-smallholders-FINAL.pdf, accessed 9 Mar. 2017.
365
Sime Darby (2015), “Outlook for certified palm oil trade - are premiums realistically traded?”
Panel discussion with Haris Arshad, Sime Darby Plantation Sdn Bhd, MPOC Reach & Remind
Friends of the Industry Seminar 2015 & Dialogue, 12 Feb. 2015, Putrajaya, Malaysia.

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The high costs of certification for less organised smallholders remain a problem for their
inclusion in sustainability. In September 2016, Solidaridad reported that its West Africa
366
oil palm smallholder sustainability project was costing €147 per smallholder . If one
supposes that the average plot size was 2 hectares per smallholder, with a yield of 3
tonnes of CPO per hectare, this is approaching $30 of added costs per tonne of CPO. This
is higher than $12/tonne added cost observed for fairly large (50 hectare) smallholders
in Malaysia in 2015, and $8/tonne for the new wave of highly organised smallholders.

Larger groups of organised “independent” and settler scheme smallholders and

subsidised smallholders are being added to RSPO certification, but there remains some
pessimism about the rapid and cost-effective inclusion of more (less organised)
367
smallholders and re-certification of existing RSPO smallholders.

The problem for smallholders is succinctly summarised by an expert on independent

smallholder supply-chains interviewed in 2017. “Small growers who put themselves
forward for certification (or are persuaded by NGOs and aid agencies to go along with it)
are the early adopters, the innovators, or the progressive farmers. Our belief is that
these farmers became certified because they were helped (and induced) by millers and
donors to cope with the RSPO bureaucracy. They did not have to make major changes to
their farming practices and we do not believe that their productivity has improved at all.
Initially there was certainly an improvement to their household incomes because they
were able to sell their GreenPalm certificates for as much as $25/tonne each. Then
GreenPalm came under attack from large corporates or ill-informed NGOs and was
eventually shut down by the RSPO itself (GreenPalm ended with 2016 certificates trading
at end March 2017). I'm sure there are many more smallholders being certified
somewhere in the world, judging by the vast sums of aid being thrown in that direction,
but a smallholder certification field expert reports that after several years as certified
growers, this year only 60% of a group of pioneer certified smallholders have bothered to
file RSPO returns. It is no longer worth it, and their more conservative neighbours
watching over the fence will be nodding wisely”.

The outlook is for some changes, notably the RSPO’s move to develop a jurisdictional
approach (with its plans for Ecuador and an awaited Sabah model) to ease the entry of
new suppliers. Also, the RSPO has a policy to be more inclusive of smallholders and is
directed towards reform to assist smallholders. These efforts may help to rebalance the
disadvantage that small suppliers and smallholders face; but deficient demand is a core
problem, with only half of available RSPO certificates bought as such. More supply may
add to the existing supply glut.

We may conclude that the cost of sustainability leaves no or low margins for smallholder
farmers. One might expect a price incentive or robust demand to emerge for
independent smallholder certified material from big buyers who would like to be inclusive
of smallholders. Unfortunately, demand is poor. Reasons include demand for online
traded independent smallholder credits has been overshadowed by buyers’ desire to
move towards traceable, physically traded RSPO products, leaving smallholders at a
disadvantage; and buyers fear association with fires and deforestation and find it safer to
buy from large companies with sizeable sustainability monitoring teams368.

366
Solidaridad (2016), Presentation by Rosemary Addico, Solidaridad, 9 Jun. 2016, at RSPO’s 4th
European Roundtable, Milan, Italy.
367
Interview with a supplier sustainable palm oil, Sep. 2016.
368
From studies by Rietberg and Slingerland (2016), Sime Darby (2015), and WWF (2012), along
with data from Solidaridad (2016).

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Table 44 lists costs and premia for different forms of certification in 2015. When
estimating basic RSPO compliance costs, we apply ex-mill RSPO Principles and Criteria
for existing plantation companies or those with significant areas before the deforestation
cut-off dates. These include regular direct RSPO costs (membership, audit) and indirect
(including some upgrades to capital and operating costs).
Table 44: RSPO cost and premia indicators ($ per tonne), 2015
Book & Claim (B&C) Mass Balance (MB) Segregated (SG)
Premia for certified $4 $10 $20
sustainable palm oil
(CSPO)
Compliance cost/floor Large plantation: $2-5 Floor price set by ISCC $9-15, field to
refinery
Smallholders: $8-12
Premia for certified n/a $50 $90-100
bleached (RBD)
stearin
Compliance cost/floor = CSPO/18.8% stearin = CSPO/18.8%
yield stearin yield
Premia for certified $65 (earlier $80) $60-80 $80-100
sustainable palm
kernel oil
Compliance cost/floor (P&C cost loaded onto = Cost of a small PK Faces inelastic
CSPO) crusher supply

Note: CSPO costs are ex-mill. SG cost includes higher FFB transport cost, tank washing, transport in small
vessels, new tanks.
Source: Industry interviews.

Annual B&C premia are plotted in

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Figure 33. Premia for 2016 averaged $2 and $26.50/tonne for CSPO and CSPKO. The
higher CSPKO B&C premia may reflect supply problems in segregated CSPKO for the
oleochemical sector. With limited available segregated CSPKO premia went as high as
$200/tonne but supplies were limited. Hence, end-users had no option but to bid up
prices for Book and Claim to find supplies.

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Figure 33: RSPO B&C Credits: CSPO and CSPKO (on-market trades) premia

70

60

50
US$/tonne

40

30

20

10

0
2008 2009 2010 2011 2012 2013 2014 2015 YT 31 Dec
2016
Palm oil PKO

8.2.3.2. Integrated companies benefited from rising margins

Margins on certified products were considered good by the large integrated plantations in
2015 and were even better in 2016, as premia spiked due to the four-month suspension
of IOI, a major supplier of value-added specialist products. However, some lead suppliers
of certified and value-added processed palm products report that the multi-year
cumulative cost of investment in certification has yet to be recouped 369.

Large RSPO certified product suppliers can cover their direct and indirect costs and earn
a market premium on certificates sold. These margins can boost their overall financial
profits, and the margins are not required by policy to be directed toward conservation
programmes (but companies may voluntarily spend on corporate social responsibility
efforts). Where payments are made to compensate for the loss of HCV areas, the RSPO is
said to direct plantation companies to fund conservation projects with additionality and
which go beyond RSPO standards370.

369
Interview with RSPO certified products supplier (speciality products), Dec. 2016.
370
Interview with RSPO certified product supplier, Feb. 2017.

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8.3. Analysis of palm oil certification systems and EU/UN
environmental objectives

8.3.1. Review of policy instruments371 and analysis of principal

objectives

8.3.1.1. Policy context

Several EU, UN and other regional policy instruments include objectives related to
sustainable development and environmental issues, which are relevant for a discussion
on the impacts and contribution of palm oil production and consumption. None focus
specifically on palm oil.

In this section, we identify key UN and EU social and environmental policy objectives,
and investigate the alignment and inter-linkages between the different policy
instruments.

8.3.1.2. Structuring the research

A systematic search identified policy instruments that relate to the key environmental,
social, economic and trade and development aspects concerning palm oil.372 These policy
instruments are organised under three main headings:
 UN policy instruments;
 EU policy instruments; and
 Other regional policies and agreements.

The list was further refined to those instruments that have the greatest legislative power,
coverage of environmental and social impacts, direct relevance to palm oil, inter-linkages
and alignment between policy instruments. Reports and studies were excluded from the
summary table due to their lack of legislative power but are included in the annex given
their role in providing the evidence to support policy development or implementation.

A full list of the policy instruments identified, and short names used to refer to the
instruments throughout the narrative are provided in

371
The term ‘policy instrument’ is a widely used term that that covers a broad range of
instruments that can be used to deliver policy objectives. Policy instruments can include:
legislation, regulation, taxation and voluntary initiatives and agreements.
372
EU and UN policy instruments included were those defined in the ToR for this study, with a
revised list agreed with the project steering group.

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Table 45. Policy instruments reviewed in the summary table are indicated by an asterisk
(*). A more detailed summary of the policy instruments can be found in Appendix 7.

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Table 45: Summary of identified policy instruments and abbreviations

Policy Instrument Date Abbreviation

EU policy instruments

Directive 2009/28/EC - On the promotion of the use 23/04/09 EU RED*

of energy from renewable sources

Directive (EU) 2015/1513 - Amendment of Directive 09/11/15 EU RED Amendment*

98/70/EC relating to the quality of petrol and diesel
fuels and amending Directive 2009/28/EC on the
promotion of energy from renewable sources

Regulation (EU) No 233/2014 - Establishing a 01/01/14 EU Financing

financing instrument for development cooperation Instrument*
for the period 2014-2020

COM (2008) 645: Addressing the challenges of 17/10/08 Commission

deforestation and forest degradation to tackle Communication on
climate change and biodiversity loss Deforestation*

COM (2015) 497 - Trade for all – Towards a more 14/10/15 Trade for all*
responsible trade and investment policy

COM (2016) 501 - A European Strategy for Low- 20/07/16 EU Low-emission

Emission Mobility Mobility Strategy*

COM (2011) 244 – ‘Our life insurance, our natural 03/05/11 EU Biodiversity
capital: an EU biodiversity strategy to 2020’ and Strategy*
subsequent updates

COM (2013) 659 Final - ‘A new EU Forest 20.9.2013 EU Forest Strategy373

Strategy: for forests and the forest-based sector.’

EU 7th Environment Action Programme 01/01/14 EU 7th EAP

The new European Consensus on Development ‘Our N/A European Consensus

world, our dignity, our future’ on Development*

COM (2003) 251 - Forest Law Enforcement, 21/05/03 FLEGT

Governance and Trade (FLEGT) Action Plan

Report on palm oil and deforestation of rainforests 17/03/17 European

and European Parliament resolution of 4 April 2017 Parliament Palm Oil

373
The EU Forest Strategy is intended to ensure a coordinated, coherent and holistic approach
towards forests and the whole forest sector, in the EU and worldwide. Within its objective to
strengthen the EU’s effort to promote sustainable forest management, it aims at the reduction
of deforestation at global level through promoting sustainable production and consumption of
forest products. The EU FLEGT Action Plan is considered a key initiative contributing to the
specific objectives of the EU Forest Strategy, and thus they are duly considered in the EU
Forest Strategy Multiannual Implementation Plan.

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Policy Instrument Date Abbreviation
on palm oil and deforestation of rainforests Report374
(2016/2222(INI))

UN policy instruments

The 2030 Agenda (UN Sustainable Development 01/01/16 UN 2030 Agenda*

Goals)

The United Nations Convention to Combat Climate 04/11/16 UNFCCC (Paris

Change (UNFCCC) – Paris Agreement Agreement)*

The Convention on Biological Diversity (CBD)* and 29/12/93 CBD and Strategic
Strategic Plan for Biodiversity Plan*

ILO Fundamental and Other Conventions Various ILO Conventions*

(referenced by number)

UN Non-Legally Binding Instrument on All Types of 22/12/15 UN Forest

Forest Instrument*

UN Strategic Plan for Forests (2017-2030) 20/01/17 UN Strategic Plan

FAO's Voluntary Guidelines on the Responsible 11/05/12 FAO Voluntary

Governance of Tenure of Land, Fisheries and Guidelines*
Forests in the Context of National Food Security

OECD FAO Guidance for Responsible Agricultural 13/07/16 OECD Guidance*

Supply Chains

International Arrangement on Forests 18/05/15 Forest Arrangement

Voluntary Guidelines for Responsible Management 2006 Planted Forests

of planted forests Guidelines

Principles for responsible investment in agriculture 15/10/14 Responsible

and food systems Investment Principles

Other regional policies and agreements

ASEAN Zero Burning Policy 01/04/99 ASEAN Agreements*

ASEAN Agreement on Trans-boundary Haze 25/11/03

Pollution
01/09/13
ASEAN Programme on Sustainable Management of

374
The European Commission responded to the European Parliament’s non-legally binding
resolutions on 7 September 2017. A copy of this response can be found at:
http://www.europarl.europa.eu/oeil/popups/ficheprocedure.do?reference=2016/2222(INI)&l=e
n#tab-0

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Policy Instrument Date Abbreviation
Peatland Ecosystems 2014-2020 (APSMPE)

Amsterdam Declaration Towards Eliminating 07/12/15 Amsterdam

Deforestation from Agricultural Commodity Chains Declarations*
with European Countries

The Amsterdam Declaration in Support of a Fully 07/12/15

Sustainable Palm Oil Supply Chain by 2020

8.3.1.3. Policy instrument coverage, interactions and alignment

Table 46 provides a summary of the key social and environmental objectives in each of
the identified instruments.

These instruments operate within a wider policy landscape, referencing other instruments
that provide coverage of the same environmental and social issues and reinforcing many
of the same objectives.

Figure 34 illustrates that there are a few key policy instruments that tend to underpin
several others. The UN CBD and the ILO Conventions provide some of the earliest
coverage of environmental and social issues of direct relevance to the palm oil industry.
The ILO Conventions define acceptable labour practices in the UN and EU policy
landscapes and also within sustainable palm oil certification standards, whilst the UN CBD
provides concrete targets for the protection of global biodiversity by 2020 (via the Aichi
targets), which are then reflected elsewhere (e.g. in the EU’s Biodiversity Strategy to
2020). As a result, later policy instruments covering the issues of labour rights and
biodiversity reference both of these policy instruments.

In contrast, the UN 2030 Agenda is a relatively new instrument, adopted by world

leaders in September 2015. The Agenda is being included in a growing number of
regional and national policy frameworks, legislation and regulatory regimes. As a result,
it is already being referenced in several more recent EU policy instruments to illustrate
how the EU is integrating the UN’s sustainable development agenda into its own policy
landscape, including commitments on deforestation and ethical trade.

Similarly, the UNFCCC Paris Agreement only came into force in late 2016 but the
objectives must be implemented in national strategies to tackle climate change. The
negotiation and implementation of the Paris Agreement is at the EU level, and so the
objectives of the agreement are reflected in some of the most recent policy instruments,
including the EU Consensus on Development.

The FAO voluntary guidelines provide comprehensive guidance on many of the issues
surrounding land use rights and land tenure. The implementation of these guidelines is
recommended in the EU RED amendment as appropriate action to ensure good
governance and respect for human rights, and the guidelines are incorporated into the
OECD-FAO Guidance for Responsible Agricultural Supply Chains. This provides a level of
policy alignment on land use rights and rights and wellbeing for these policies.

The majority of commitments or objectives within the policy instruments reviewed are
not time bound. Exceptions include the EU RED which includes requirements to
demonstrate increasing GHG savings from biofuels and bioliquids against a set timetable;
the EU Communication on Deforestation’s objective to halt global forest cover loss by

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2030 and to reduce gross tropical deforestation by at least 50% by 2020; and the UN
Forest Instrument’s objective to reverse the loss of forest cover by 2030.

To summarise: alignment between EU, UN and regional policy landscapes appears to be

increasing over time as significant international conventions and agreements are
reflected and embedded in EU and regional policies and legal frameworks. With recent EU
policies relating to trade, the use of financial instruments to support sustainable
development goals and the new EU Consensus on Development, this level of
geographical policy alignment should continue to grow.

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Table 46: Summary of key policy objectives by policy instrument

Theme Summary Environmental objectives Social objectives

EU RED (2009/2015) Framework for the promotion of energy Sustainability criteria for raw materials The sustainability criteria also require the
from renewable sources in the EU. The (including palm oil) used for biomaterials monitoring of the impacts of increased
2015 amendment sets a limit of 7% for and fuels include the achievement of biofuel production in producer countries on
the contribution of biofuels and bioliquids minimum greenhouse gas emissions social sustainability, and the ratification of
produced from food crops to the final savings; and the protection of lands with fundamental ILO Conventions by producer
consumption of energy in transport in the high biodiversity value, high carbon countries.
Member States in 2020. stocks, and peatlands.
EU Financing The regulation sets up a financing Particular focus areas for cooperation Focus areas also include support for the
Instrument (2014) instrument (Development Cooperation include the protection and sustainable use rights of indigenous peoples and human
Instrument) for 2014-20, specifying of biodiversity, equitable access to water rights, the protection of land rights and
programmes the EU can fund to meet and management of water resources. the promotion of decent work, including
development objectives. by combatting child labour.
EU Communication The communication is part of the EU’s The communication sets targets to reduce The communication supports effective
on Deforestation response to climate change and deforestation, supports the inclusion of forest governance and respect for the
(2008) deforestation. The core objective is to ‘halt biodiversity considerations into climate rights of forest-dependent people.
global forest cover loss by 2030 at the negotiations; and raises concerns over the
latest and to reduce gross tropical possible negative impacts of biofuel
deforestation by at least 50% by 2020 production.
compared to current levels’
EU Trade for All The European Commission’s ‘Trade for all’ The strategy promotes the contribution of The strategy promotes the contribution of
(2015) communication outlines the EU’s trade and trade policy to: the conservation of and trade policy to: human rights; the
investment strategy, including a strong sustainable use of natural resources inclusion of small producers in trade
focus on the integration of sustainable (including biodiversity, water and forests). opportunities; the implementation of core
development into trade policy. labour standards; and health and safety
and decent working conditions.
EU Low-emission The low-emission mobility strategy frames The strategy notes that the Commission This policy instrument does not include
Mobility Strategy future initiatives on reducing emissions have indicated that food-based biofuels any social objectives.
(2016) from the transport sector. will play a limited role in decarbonising the
transport sector and should not receive
public support after 2020.
EU Biodiversity The EU Biodiversity Strategy outlines the Target 6 details the EU’s role in tackling This policy instrument does not include
Strategy (2011) EU’s biodiversity policy to 2020, in line global biodiversity loss. The strategy any social objectives.
with meeting its international goals and targets the impact of EU consumption
objectives agreed to under the UN patterns, particularly those with significant
Convention on Biological Diversity (CBD). negative impacts on global biodiversity.
European Consensus The Consensus provides an integrated EU The Consensus promotes the protection of Involvement of local stakeholders; rights

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Theme Summary Environmental objectives Social objectives
on Development development policy with a focus on and sustainable use of natural resources, of local and indigenous people; support for
(2017) supporting sustainable development biodiversity and ecosystems including smallholders; and respect for human
objectives. forests; and the attainment of climate rights, tenure rights and labour standards
change objectives. are key concerns of the Consensus.
UN 2030 Agenda The 2030 Agenda for Sustainable Goal 15 includes commitments to promote Goal 2 promotes secure access to land and
(2016) Development provides the framework for sustainable forest management, halt increased market opportunities for
global action in support of people, planet deforestation and biodiversity loss and smallholders, women and indigenous
and prosperity. restore degraded forests. Goals 12 and 14 peoples. Goal 8 includes commitments to
include commitments for water and air eradicate child and forced labour, protect
protection, and Goal 6 promotes labour rights and ensure decent work.
sustainable water management.
UNFCCC (Paris The United Nations Framework Convention Article 5 recommends action to conserve This policy instrument does not include
Agreement, 2016) on Climate Change (UNFCCC) provides the and enhances sinks and reservoirs of any social objectives.
basis for intergovernmental efforts to greenhouse gases, including conservation
tackle climate change. The Paris and sustainable management of forests,
Agreement sets a target to limit global and recommends that Parties implement
average temperature increase to ‘well policy measures to reduce emissions from
below 2°C’, and preferably below 1.5°C. deforestation and forest degradation.
CBD (1993) and The CBD has three main objectives: Article 8 of the CBD commits parties to Article 8 of the CBD commits parties to
Strategic Plan for 1) The conservation of biological establishing protected biodiversity areas; respecting the practices of indigenous and
Biodiversity (2010) diversity; promoting environmentally sustainable local communities.
2) The sustainable use of the development; and rehabilitating and
components of biological diversity; restoring degraded ecosystems. The Strategic Plan includes a target to
3) The fair and equitable sharing of respect the customary use of biological
the benefits arising out of the Targets in the Strategic Plan include resources by indigenous and local
utilization of genetic resources. halving the rate of loss of forests and communities.
reducing degradation; ensuring
The Strategic Plan for Biodiversity biodiversity conservation; restoring and
(including the Aichi Biodiversity Targets) protecting ecosystem services, and
provides a framework for the protection of enhancing the contribution of biodiversity
biodiversity for the 2011-2020 period. to carbon stocks.
ILO Conventions The International Labour Organisation has This policy instrument does not include The ILO Fundamental Conventions include
drawn up a series of international labour any environmental objectives. conventions prohibiting child and forced
conventions, which provide legally binding labour. Additional relevant conventions
protections for workers and indigenous include conventions on health and safety,
peoples. wage protection, and the ILO Convention
169 on indigenous and tribal people
(expanded in the UN Declaration on the

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8. Task 2: Certification standards, legislation and voluntary initiatives

Theme Summary Environmental objectives Social objectives
Rights of Indigenous Peoples (UNDRIP)).
UN Forest The UN Forest Instrument is formally The first global objective sets out targets The second global objective includes a
Instrument known as the ‘Non-legally binding to ‘reverse the loss of forest cover target to improve the livelihoods of forest-
instrument on all types of forests’ (NLBI). worldwide’ and ‘increase efforts to prevent dependent people. The policy sets out
The Instrument extends the timeline of forest degradation’. specific measures to support indigenous
the global objectives of forests originally peoples and smallholders, and improve
set out in the NLBI from 2015 to 2030. forest access by local communities.
A UN Strategic Plan for Forests (2017-
2030) was adopted in 2017, which further
develops objectives and targets.
FAO Voluntary The guidelines were compiled by the UN The guidelines recommend establishing The guidelines recommend respect for and
Guidelines FAO and the CFS (Committee on World environmental safeguards to minimise appropriate identification of legitimate
Food Security) to provide guidance on degradation and biodiversity loss, for tenure rights. The guidelines also support
improving the governance of land tenure. states using readjustment approaches. human rights, and the rights of indigenous
people and smallholders.
OECD Guidance The OECD-FAO Guidance for Responsible The model enterprise policy includes The model enterprise policy includes
Agricultural Supply Chains was developed commitments to minimise negative commitments to respect human rights;
to bring together existing guidance and impacts on air, land, soil, water, forests share benefits with indigenous people;
standards for responsible business conduct and biodiversity. respect legitimate tenure right holders
in agricultural supply chains. The guidance (including customary rights); and respect
combines existing standards to produce a ILO labour standards including health and
model enterprise policy. safety and decent wages commitments.
ASEAN Agreements The ASEAN Agreement on Haze Pollution The ASEAN Agreements address haze This policy instrument does not include
requires Parties to prevent, monitor and pollution and burning in agricultural any social objectives.
mitigate haze pollution. The ASEAN practices. The agreements also require
Programme on sustainable management parties to manage and use natural
of peatland ecosystems 2014-2020 resources in an ecologically sound and
(APSMPE) sets out six targets to promote sustainable manner.
the sustainable management of peatlands.
Amsterdam The Amsterdam Declarations are two non- The Declaration towards eliminating The declaration draws attention to the
Declarations legally binding declarations of political deforestation supports the elimination of importance of forest governance and land
intent, signed by Denmark, France, deforestation in the agricultural rights, particularly of indigenous
Germany, the Netherlands, Norway, Italy commodity trade, and private and public communities.
and the UK. initiatives to halt deforestation. The
declaration supports reducing emissions
from deforestation and forest degradation.

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8. Task 2: Certification standards, legislation and voluntary initiatives

Figure 34: Schematic summary of policy instrument interactions

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8. Task 2: Certification standards, legislation and voluntary initiatives
8.3.1.4. Key policy objectives pertinent to palm oil

The above review of key policy objectives relating to palm oil in the EU, UN and other
regional policy landscapes has identified several dominant themes. Commitments to
reduce or prevent deforestation, sustainably manage forests, and protect biodiversity,
some of which are time-bound, are frequently included in policy instruments seeking to
improve environmental protections, including the UN 2030 agenda and the European
Consensus on Development. Commitments to protect or conserve water resources are
also found in several of the reviewed instruments.

The majority of policy instruments also address rights and wellbeing, and to a lesser
extent land use rights, in their coverage of social issues. The coverage of these two social
issues often overlaps with policy commitments supporting the rights of indigenous
peoples, including their land rights.

The EU RED forms the basis for action on the use of crops, including palm oil, to produce
biofuel in the EU. It provides sustainability criteria that biofuels must meet in order to
contribute to renewable energy targets, and a limit for such contribution. The policy
instrument is adjusted periodically. Emissions from land use change are also covered by
the EU RED, which excludes the use of biofuels and bioliquids made from raw materials
grown on high carbon stock land from the calculations to achieve renewable energy
targets. The UNFCCC Paris Agreement recognises the role forests play as carbon sinks
and reservoirs, and provides recommendations for their conservation and enhancement.

Haze pollution, as a result of the use of burning in land clearance in Southeast Asian
palm oil producing countries, is addressed by the ASEAN Agreement on Trans-boundary
Haze Pollution. Likewise, commitments to tackle burning in agricultural practices are
included in the ASEAN Agreements. The ASEAN Programme on sustainable management
of peatland ecosystems provides specific guidelines on peatland management. The EU
RED excludes the use of biofuels made from raw materials grown on converted peatland
from the calculations to achieve renewable energy targets. There is no equivalent
mechanism in EU policy that addresses peatland conversion, or the conversion of high
carbon stock forests, for vegetable oils marketed in the EU for use in non-energy sectors.

The ILO Conventions prohibit forced and child labour, and define good labour practices.
Other policy instruments addressing these issues reference the ILO conventions as
minimum standards that must be respected. In their coverage of smallholders, the policy
instruments provide several different objectives including the promotion of land and
resource access and market opportunities.

The following sections provide an analysis of the potential of the four main sustainable
palm oil certification schemes to achieve these policy objectives.

8.3.2. Analysis between certification schemes and EU/UN policy

objectives

8.3.2.1. Assessment approach

The major elements within EU and UN policy instruments that are relevant to palm oil are
identified in Table 46. This forms a basis for mapping how the content of the standards of
the major palm oil certification schemes relate to the policy objectives.
Each policy objective is compared against the content of the RSPO, ISCC (EU), ISPO and
MSPO standards. This comparison is done on a three-point scale:

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 - Fully addressing the objective if implemented. In some cases, the standard
fully addresses or goes beyond the policy objective. These are indicated in dark
blue in Tables 48-55.
- Partly addressing the objective if implemented. Standards often partly cover
a policy objective, but may not cover all of its aspects. These are indicated in mid
blue in Tables 48-55.
- Not addressing the objective, even if implemented. Where the standard
either does not cover a policy objective or where the standard addresses an issue
but in a marginal way. These are indicated in light blue in Tables 48-55.
The comparison is done at the level of criteria (with indicators and guidance used for
clarification and only in a small number of circumstances), although as commonly
numerous criteria within a standard relate to a single policy objective this is summarised
at the level of Principle in Tables 48-55. A worked example of the categorisation, using
deforestation as an illustration, is given in Table 47. A detailed analysis, which relates the
relevant parts of each standard to the text from each policy instrument, is provided in
Appendix 8.

Table 47: Comparison of EU-RED criteria on deforestation and the requirements

of the RSPO, ISCC, ISPO and MSPO standards

The sustainability criteria of the EU Renewable Energy Directive are described in the EU
Directive 2009/28/EC - on the promotion of the use of energy from renewable sources
(RED) and EU Directive 2015/1513 - amending Directive 98/70/EC and amending
Directive 2009/28/EC on the promotion of energy from renewable sources. These can be
summarised as:
- EU Directive 2009/28/EC Article 17.3: In order to account towards the
achievement of the EU renewable energy targets, biofuels and bioliquids shall not
be made from raw material obtained from land with high biodiversity value that
had one of the following statuses in or after January 2008: (a) primary forest
and other wooded land, namely forest and other wooded land of native species,
where there is no clearly visible indication of human activity and the ecological
processes are not significantly disturbed;
- EU Directive 2009/28/EC Article 17.4: In order to account towards the
achievement of the EU renewable energy targets, biofuels and bioliquids shall not
be made from raw material obtained from land with high carbon stock, namely
land that had one of the following statuses in January 2008 and no longer has
that status.
RSPO: The relevant criterion within the RSPO Standard is Criterion 7.3, which requires
that new plantings since November 2005 have not replaced primary forest or any area
required to maintain or enhance one or more High Conservation Values. The RSPO
standard is coherent with the EU RED requirements in that both prohibit the conversion
of primary forest; there is coherence between the EU requirement prohibiting
conversion of ‘high biodiversity value’ and the broader concept of ‘high conservation
value’; and the RSPO cut-off date for conversion if before that of EU RED Article 17.
However, the RSPO does not also prohibit conversion of land with High Carbon Stock,
which is defined in detail in the EU-RED policy documents, and which is an important
part of that policy. The RSPO’s New Planting Procedure allows for compensation for HCV
areas deforested, which is not consistent with the requirements of EU-RED, but such
instances of deforestation are excluded by the requirements of the RSPO-RED. The
RSPO standard is therefore assessed as partly addressing the objective if implemented
with EU-RED.
ISCC (EU): The ISCC standard has two criteria relevant to deforestation: Criterion 1.1

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Table 47: Comparison of EU-RED criteria on deforestation and the requirements
of the RSPO, ISCC, ISPO and MSPO standards
that prohibits production from land with high biodiversity value, and Criterion 1.3 that
prohibits production on land with high carbon stock. With the definitions and cut-off
dates the same, this means that the ISCC scores as ‘addressing the objective if
implemented’ with EU-RED. This is to be expected as the ISCC standard used EU-RED
as its basis.
ISPO: The ISPO Standard has two criteria relating to deforestation. Criterion 3.1: the
availability of land release documents; and Criterion 3.2: availability of location permits.
In addition, Principle 1 includes that the use of plantation land is in accordance with the
provincial general spatial plan (RUTWP) or general regional spatial plan (RUTWK) as per
applicable legislation or other policies in accordance with government or local
government provisions; and Criterion 4.7: requires conservation areas with high erosion
potential: Plantation managers must preserve soil and avoid erosion according to
applicable regulations. None of these criteria entirely exclude deforestation from high
biodiversity value and high carbon stock land as per EU-RED, and therefore ISPO is
scored as not addressing this objective.
MSPO: Criterion 7.1 of the MSPO standard is relevant to deforestation. This prohibits
new plantings on high biodiversity value land. This is explained further through two
indicators, that further clarify that oil palm shall not be planted on land with high
biodiversity value unless in compliance with National and/or State Biodiversity
Legislation; and that oil palm cannot be planted on Environmentally Sensitive Areas
(ESAs) and describing the thresholds for environmental impact assessments to be
carried out. The MSPO standard provides no cut-off date for conversion; has a definition
of ‘high biodiversity value’ that is similar but not identical to that of EU-RED; and does
not prohibit planting on high carbon stock land. It is therefore assessed as partly
addressing the objective if implemented. Note that although both MSPO and RSPO score
as partly addressing the objectives, this does not imply that they are equal: in fact, the
RSPO has more stringent requirements on deforestation by virtue of is cut-off date and
use of the High Conservation Value Forest instrument.

Several caveats should be noted about any analysis of certification schemes against
policy objectives, including the one presented in Table 47 above.

Firstly, none of the schemes were established to enact the full range of EU and UN policy
instruments assessed here. It is therefore not to be expected that these schemes fully
address the objectives put forward in these instruments.

Secondly, the comparison assumes that the Principles and Criteria are implemented fully.
As discussed in the preceding section, even in systems with rigorous certification process
requirements, this is not always the case.

Thirdly, within the same thematic area, a standard is likely to address some objectives
but less so others, because of variations in the way the objectives are formulated/set.
This gives rise to significant variation in how much any given scheme can address the
broad suite of instruments addressed here.

Fourthly, the policy instruments and standards in the schemes use different structures
and different wording to describe any given issue. It is therefore inevitable that a degree
of interpretation is required in mapping their correspondences.

Finally, standards often refer implicitly or explicitly to other documents, including

regulations, laws and treaties. A full analysis of all relevant legal requirements is beyond
the scope of this study, and so only the content of the standards is used for the analysis.

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8.3.2.2. Analysis of environmental issues

The findings of the mapping exercise on how the main palm oil certification systems
relate to the environmental and social objectives in EU/UN policy instruments under
consideration are summarised in Tables 48-55 below and given in detail in Appendix 8.
The main findings for environmental issues are as follows:

Deforestation. The ISCC (EU) standard broadly addresses most of the objectives in EU
and UN policy instruments in terms of deforestation, with all except for the new European
Consensus on Development, the UN SDGs, the UN Forest Instrument and the Amsterdam
Declaration on Forests scoring as ‘fully addresses the objectives if implemented’. This is
largely because the ISCC standard has an explicit and rigorous prohibition on conversion
of high carbon stock areas in addition to the more commonly found prohibitions on
primary forest conversion. The RSPO standard prohibits conversion of primary forest and
High Conservation Value Forest after November 2005, and scores as partly coherent with
the majority of policy requirements evaluated. The MSPO standard scores similar to the
RSPO with respect to the evaluated policy requirements, but as noted in Table 47, the
requirements of the MSPO standard for deforestation are in practice significantly less
restrictive than those of the RSPO. The ISPO requires little more than documented
legality of clearance, which addresses only a sub-set of the objectives articulated in the
instruments.
Biodiversity. The RSPO and ISCC (EU) standards rate similarly with respect to the
requirements on biodiversity conservation (excluding the issue of deforestation, above),
addressing the majority of the policy objectives in the reviewed instruments other than
those within the SEC (2008), the UN SDGs, and the UN Convention on Biological
Diversity. This is in part a theoretical consideration, in that it is impossible to prove that
the certification standards do not 'jeopardise efforts to protect forests or broader
biodiversity priorities' as required by SEC (2008), for example. However, the
requirements of these standards to assess, manage and monitor rare threatened and
endangered species means that they can be considered as addressing most of the
objectives in the instruments evaluated. The MSPO standard only requires legally
compliant conservation of such species, and hence is partly addressing a larger
proportion of policies. The ISPO standard requires biodiversity conservation as specified
by the plantation permit, which is likely to be a weaker measure than those informing the
objectives in the reviewed instruments.
Greenhouse Gas emissions. The ISCC (EU) standard is addressing if implemented the
majority of EU and UN policy objectives surrounding greenhouse gas emissions, whether
they come from land use clearance, or when the palm oil is used for biofuel feedstock.
This is perhaps to be expected as the ISCC standard is focused on biofuels, with
greenhouse gas emissions a significant consideration in their sustainability. The RSPO
standard is partly addressing, if implemented, the majority of policy objectives. Both the
MSPO and ISPO standards are partly addressing or not addressing the objectives of the
policy instruments evaluated. This is largely a result of avoidance of emissions from land
use change not being specified in either standard.
Burning. The ISCC (EU) standard is the only one that prohibits burning for clearance
and preparation entirely, and is therefore addressing or going beyond the objectives of
all of the policy instruments evaluated. The other three standards are in line with the
ASEAN zero burning guidelines, which largely prohibit burning other than in a small
number of specified contexts. These standards therefore rate as partly addressing, if
implemented, the majority of the reviewed instruments.
Peatland conversion. The ISCC (EU) standard prohibits biomass production from land
that was peatland in January 2008 or thereafter. This is addressing, if implemented, all of
the objectives in the policy instruments that have requirements on peatland conversion.
The ISPO standard requires adherence to ASEAN zero burning guidelines, maintaining

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ecosystem functioning and reducing GHG emissions and is addressing or partly
addressing the policy instruments evaluated. The RSPO requires that ‘extensive’ planting
on peat is avoided (Criterion 7.4) which partly meets the objectives in the policy
instruments under consideration. The MSPO standard has the least explicit restrictions of
all of the standards, allowing cultivation and drainage of peat if consistent with MPOB
guidelines.
Haze. All four standards can be considered to broadly address, if implemented, the
objectives of ASEAN Agreements on Trans-boundary Haze Pollution. This agreement calls
for the mitigation of land and/or forest fires.
Water use and pollution. All four standards have broadly similar requirements to
conserve water resources, control erosion, and have responsible management of waste
that could pollute water sources. The standards are generally addressing, if implemented,
the objectives of the evaluated policy instruments.

8.3.2.3. Analysis of social issues

The findings of the mapping exercise on how the main palm oil certification systems
relate to the environmental and social objectives in the EU/UN policy instruments under
consideration are summarised in Tables 48-55, with the detailed assessment behind
this summary is provided in Appendix 8.
The main findings for social issues are as follows:
Rights and wellbeing. This category contains a wide range of issues, such as respect
for human rights and contributions of plantation companies to the wellbeing and
economic development of local communities. The RSPO standard has the most complete
coverage of these issues, including requiring a social impact assessment, open and
transparent communication with communities, a complaints and grievance procedure,
making a contribution to local development and respect for human rights. As a
consequence, the RSPO standard addresses, if implemented the majority of the
objectives in the evaluated policy instruments, apart from some aspects of the UN SDGs
(e.g. health) and the UN Convention on Biological Diversity (support for traditional
lifestyles) for which it rates as partly addressing their objectives. The MSPO standard
addresses more than half of the objectives, as it includes measures such as respect for
human rights and facilitating the development of the wider community. The ISCC and
ISPO standards address, if implemented, fewer objectives than either the RSPO or MSPO,
with the lack of an explicit requirement to respect human rights resulting in the ISPO
standard not addressing the objectives of the OECD FAO Guidance for Responsible
Agricultural Supply Chains. The ISPO standard explicitly requires that plantation
companies provide employment opportunities to indigenous people.
Land use rights. The RSPO standard was assessed as addressing, if implemented, all of
the objectives in the EU and UN instruments evaluated. The RSPO standard – in line with
most other standards – requires legal demonstration of the rights to use land for palm oil
cultivation, and for negotiated compensation with existing rights holders. However, the
RSPO has additional requirements that the right to use the land for palm oil is not
legitimately contested and that the rights of others cannot be diminished without free,
prior and informed consent (FPIC). MSPO is broadly addressing, if implemented, the
majority of policy objectives, other than the New European Consensus on Development
and the Convention on Biological Diversity. In common with the RSPO, the MSPO
standard also specifies that a process of FPIC should occur if the rights of others are
affected by proposed new oil palm developments. The ISCC (EU) standard is also
addressing, if implemented, the majority of reviewed policy instruments, and like the
RSPO standard, explicitly refers to indigenous peoples’ land use and customary rights. It
does not specify FPIC, but in common with the RSPO provides more explicit coverage of
indigenous people’s rights to land and other resources than either the MSPO or ISPO

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standards. The ISPO standard requires land title, permits, disputes resolution and
compensation, and respect for indigenous knowledge but does not specify FPIC, has
limited detail on consultation processes, and does not specify other associated resource
rights (such as water use rights).
Smallholders. The standards have divergent treatment of smallholders. The RSPO
requires fair and transparent dealings with smallholders, and training and technical
support to associated or scheme smallholders, making it address, if implemented, the
objectives of the New European Consensus on Development and COM (2015) 497 (Trade
for all – Towards a more responsible trade and investment policy) in this area. However,
it is difficult to conclude if it fully addresses other policy objectives, partly because of a
lack of clarity over what would constitute securing the full rights of smallholders (c.f. the
UN FAO's Voluntary Guidelines on the Responsible Governance of Tenure of Land,
Fisheries and Forest), whether the policy should refer to all smallholders that a mill
purchases from or just scheme smallholders (c.f. Regulation (EU) No 233/2014 -
Establishing a financing instrument for development cooperation for the period 2014-
2020), etc. The three other standards show to address in a limited manner objectives in
EU/UN policy instruments to improve smallholder’s livelihoods, productivity and rights,
although in specifying fair dealings with smallholders and having developed a standard
specifically with small and medium-sized growers in mind, the MSPO comes closer to
addressing the objectives of the various policy instruments than the ISCC or ISPO
standards.
Forced and child labour. Both the RSPO and ISCC (EU) standards prohibit the use of
child labour and forced labour, and are thus addressing, if implemented, all of the
assessed policy objectives. The ISPO and MSPO prohibit child labour, but neither includes
explicit prohibition of forced labour and so are assessed as not addressing the majority of
policy objectives in this regard in the reviewed instruments, in which forced labour is
explicitly prohibited.
Terms and conditions of labour. This category covers a wide range of issues, from the
presence of fair contracts, decent wages, non-discrimination, the right to free assembly
and collective bargaining, occupational health and safety, etc. The RSPO, ISCC and MSPO
standards have a broad coverage of these issues, are explicitly or largely based on
relevant ILO conventions, and so if implemented would be expected to be broadly
addressing the various policy objectives. The ISPO standard (Principle 4) requires
payment of minimum wage, free association and workers' facilities, but the standard has
no explicit provision for contracts of employment, reduced coverage of occupational
health and safety, and specifies a minimum but not a living wage. ISPO therefore scores
as partly addressing, if implemented, all the relevant objectives in the assessed
instruments, except for OECD FAO Guidance for Responsible Agricultural Supply Chains
(which have strong occupational health and safety requirements and a living wage) which
it does not address.

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Key to Tables 48-55:
Standard addressing the objectives of the Standard addressing the issue referred to in the
assessed policy instruments if implemented assessed policy instrument (without clear
requirement)

Standard partly addressing the policy objectives Standard partly addressing the issue referred to
of the assessed instruments if implemented in the assessed policy instrument (without clear
requirement)

Standard not addressing the policy objectives of Standard not addressing the issue referred to in
the assessed instruments, even if implemented the assessed policy instrument (without clear
requirement)

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Table 48: Summary table of the analysis of the RSPO standard and environmental objectives of assessed EU/UN
and regional policy instruments

Carbon emissions Air pollution

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Mills and Burning Peatland Water use and Haze Others
Plantations conversion pollution

EU RED

EU Financing Instrument

EU Communication on Deforestation

Trade for all

EU Low-emission mobility strategy

EU Biodiversity Strategy to 2020 and Parliament

Resolution

The New European Consensus

UN 2030 Agenda

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for Biodiversity (2011-2020)

and Aichi Biodiversity Targets

ILO Conventions

UN Forest Instrument

FAO's Voluntary Guidelines on the Responsible

Governance of Tenure of Land, Fisheries and Forests
OECD FAO Guidance for Responsible Agricultural Supply
Chains
ASEAN Trans-boundary Haze agreement, APSMPE, and
Zero Burning Policy

Amsterdam Declaration on Deforestation

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Table 49: Summary table of the analysis of the RSPO standard and social objectives of assessed EU/UN and
regional policy instruments
Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and Conditions of
Labour
EU RED

EU Financing Instrument

EU Communication on Deforestation

Trade for all

EU Low-emission mobility strategy

EU Biodiversity Strategy to 2020 and Parliament

Resolution
The New European Consensus

UN 2030 Agenda

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for Biodiversity (2011-

2020) and Aichi Biodiversity Targets
ILO Conventions

UN Forest Instrument

FAO's Voluntary Guidelines on the Responsible

Governance of Tenure of Land, Fisheries and Forests
OECD FAO Guidance for Responsible Agricultural
Supply Chains
ASEAN Trans-boundary Haze agreement, APSMPE, and
Zero Burning Policy
Amsterdam Declaration on Deforestation

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Table 50: Summary table of the analysis of the ISCC (EU) standard and environmental objectives of assessed
EU/UN and regional policy instruments
Carbon emissions Air pollution

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Mills and Burning Peatland Water use and Haze Others
Plantations conversion pollution

EU RED

EU Financing Instrument

EU Communication on Deforestation

Trade for all

EU Low-emission mobility strategy

EU Biodiversity Strategy to 2020 and Parliament

Resolution

The New European Consensus

UN 2030 Agenda

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for Biodiversity (2011-

2020) and Aichi Biodiversity Targets

ILO Conventions

UN Forest Instrument

FAO’s Voluntary Guidelines on the Responsible

Governance of Tenure of Land, Fisheries and Forests
OECD FAO Guidance for Responsible Agricultural
Supply Chains
ASEAN Trans-boundary Haze agreement, APSMPE,
and Zero Burning Policy

Amsterdam Declaration on Deforestation

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Table 51: Summary table of the analysis of the ISCC (EU) standard and social objectives of assessed EU/UN and
regional policy instruments
Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and conditions of labour

EU RED

EU Financing Instrument

EU Communication on Deforestation

Trade for all

EU Low-emission mobility strategy

EU Biodiversity Strategy to 2020 and Parliament

Resolution

The New European Consensus

UN 2030 Agenda

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for Biodiversity (2011-

2020) and Aichi Biodiversity Targets

ILO Conventions

UN Forest Instrument

FAO's Voluntary Guidelines on the Responsible

Governance of Tenure of Land, Fisheries and Forests
OECD FAO Guidance for Responsible Agricultural
Supply Chains
ASEAN Trans-boundary Haze agreement, APSMPE,
and Zero Burning Policy

Amsterdam Declaration on Deforestation

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Table 52: Summary table of the analysis of the ISPO standard and environmental objectives of assessed EU/UN
and regional policy instruments
Carbon emissions Air pollution

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Mills and Burning Peatland Water use and Haze Others
Plantations conversion pollution

EU RED

EU Financing Instrument

EU Communication on Deforestation

Trade for all

EU Low-emission mobility strategy

EU Biodiversity Strategy to 2020 and Parliament

Resolution
The New European Consensus

UN 2030 Agenda

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for Biodiversity (2011-

2020) and Aichi Biodiversity Targets
ILO Conventions

UN Forest Instrument

FAO's Voluntary Guidelines on the Responsible

Governance of Tenure of Land, Fisheries and Forests
OECD FAO Guidance for Responsible Agricultural Supply
Chains
ASEAN Trans-boundary Haze agreement, APSMPE, and
Zero Burning Policy
Amsterdam Declaration on Deforestation

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Table 53: Summary table of the analysis of the ISPO standard and social objectives of assessed EU/UN and
regional policy instruments
Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and conditions of labour

EU RED

EU Financing Instrument

EU Communication on Deforestation

Trade for all

EU Low-emission mobility strategy

EU Biodiversity Strategy to 2020 and Parliament

Resolution
The New European Consensus

UN 2030 Agenda

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for Biodiversity (2011-

2020) and Aichi Biodiversity Targets
ILO Conventions

UN Forest Instrument

FAO's Voluntary Guidelines on the Responsible

Governance of Tenure of Land, Fisheries and Forests
OECD FAO Guidance for Responsible Agricultural
Supply Chains
ASEAN Trans-boundary Haze agreement, APSMPE,
and Zero Burning Policy
Amsterdam Declaration on Deforestation

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Table 54: Summary table of the analysis of the MSPO standard and environmental objectives of assessed EU/UN
and regional policy instruments
Carbon emissions Air pollution

Mills and Peatland Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning conversion pollution Haze Others

EU RED

EU Financing Instrument

EU Communication on Deforestation

Trade for all

EU Low-emission mobility strategy

EU Biodiversity Strategy to 2020 and Parliament

Resolution
The New European Consensus

UN 2030 Agenda

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for Biodiversity (2011-

2020) and Aichi Biodiversity Targets
ILO Conventions

UN Forest Instrument

FAO's Voluntary Guidelines on the Responsible

Governance of Tenure of Land, Fisheries and Forests
OECD FAO Guidance for Responsible Agricultural
Supply Chains
ASEAN Trans-boundary Haze agreement, APSMPE,
and Zero Burning Policy
Amsterdam Declaration on Deforestation

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 165 EN
Table 55: Summary table of the analysis of the MSPO standard and social objectives of assessed EU/UN and
regional policy instruments
Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and conditions of labour

EU RED

EU Financing Instrument

EU Communication on Deforestation

Trade for all

EU Low-emission mobility strategy

EU Biodiversity Strategy to 2020 and Parliament

Resolution
The New European Consensus

UN 2030 Agenda

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for Biodiversity (2011-

2020) and Aichi Biodiversity Targets
ILO Conventions

UN Forest Instrument

FAO's Voluntary Guidelines on the Responsible

Governance of Tenure of Land, Fisheries and Forests
OECD FAO Guidance for Responsible Agricultural
Supply Chains
ASEAN Trans-boundary Haze agreement, APSMPE,
and Zero Burning Policy
Amsterdam Declaration on Deforestation

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 166 EN
8.3.2.4. Conclusions

The above assessment provides a first-order analysis of how the certification standards
relate to the objectives of selected EU and UN policy instruments. The RSPO, ISCC (EU),
MSPO and ISPO standards were assessed as addressing if implemented, partly
addressing, or not addressing the objectives within each of the assessed policy
instruments, organised under environmental and social thematic areas.

The variation in the objectives of the assessed policy instruments meant that there is
significant deviation in the degree to which any given standard addresses the objectives
under each theme. No single certification scheme addresses all of the policy objectives
assessed.

In general terms, however, the ISCC (EU) standard addresses the environmental
objectives of the assessed EU and UN policy instruments more closely than the other
standards. This is largely a result of the restriction on converting land with high carbon
stock, and the clear and conservative definition of high carbon stock within the standard,
that in effect prohibits conversion of all but the most degraded secondary forest. This
resulted in the standard fully addressing the objectives on deforestation and greenhouse
gas emissions from land use change in particular.

The RSPO standard generally addresses the social objectives of the assessed EU and UN
policy instruments to a greater extent than do the other standards. The RSPO standard
has broader and more tightly defined requirements on rights and wellbeing, land rights,
terms and conditions of labour and responsibilities towards smallholders than the other
standards.

The ISPO standard addresses the objectives of the assessed EU and UN policy
instruments to a lesser degree than either RSPO or ISCC standards, with the MSPO
standard intermediate. However, it should be noted that this does not mean that the
ISPO (or any other of the standards assessed here) are ‘poor’: with the partial exception
of ISCC, none of them was designed to address the suite of objectives in the assessed EU
and UN instruments and divergence between the content of the standards and the
objectives of these instruments is therefore not surprising.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 167 EN
8.4. Evaluation of existing legislation and enforcement
regimes (or lack thereof) of direct interest to oil palm
cultivation, production and trade in major producing
countries

8.4.1. Case Study Countries

This section focuses on six case study countries: Indonesia, Malaysia, Brazil, Colombia,
Gabon and Liberia. They include two countries in each producing region, varying in size
from Indonesia and Malaysia to the smaller West African producers. The production area
data in Table 56 below excludes the traditional artisanal groves found in Africa and Brazil.

Table 56: Case study countries’ oil palm areas in 2016 (in hectares)

South East Asia Central/South America West Africa

Country Indonesia Malaysia Colombia Brazil Liberia Gabon

Hectares 11,650,000 5,740,000 550,000 113,000 60,000 38,000

This section reviews environmental and social legislation in each country, the way in
which it is evolving, and an assessment of whether the legislation is adequate and/or
suitably enforced. Appendix 9 provides an overview of the key enforcement issues to
emerge from our literature review and stakeholder interviews, with positive and negative
examples of enforcement issues for each of the six case study countries.

8.4.2. The influence of government legislation on sustainable

production

Government agencies in palm oil producing countries influence the supply of sustainable
palm oil in two main ways: via land use rights through land allocation policies and
programmes; and the extent to which they establish and enforce social and
environmental laws, certification systems, and land use and production standards. 375

We review here the domestic legal and regulatory framework in the six countries, in
relation to international sustainability criteria for palm oil production.

We examine what could be considered desirable in terms of sustainability, noting how the
socio-economic and regulatory systems may intervene. This recognises that a central
problem with assessing the quality of the legal framework governing sustainability is that
it includes topics, some of which may be at odds with each other or differ in importance
for different groups of stakeholders.

We then study the application of sustainability policies in the six case study countries,
identifying the major issues in legislation and/or enforcement.

375
ZSL (2017), Governments in Sustainable Palm Oil Transparency Toolkit (SPOTT),
http://www.sustainablepalmoil.org/governments/.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 168 EN
8.4.3. The reality of the legal framework governing sustainability

Butler (2012)376 offers a useful summary of NGO views on sustainable palm oil,
explaining that for a plantation to be sustainable it should have few chemical inputs, little
run-off into waterways, methane capture to generate electricity, and well-protected
HCV/HCS areas and riparian forests, with no encroachment. However, this may conflict
with rural development.

It is instructive to consider the limits to government legislation. Butler laments that a

major barrier to forest conservation is that the profit from oil palm is much greater than
that from informal markets for forest goods and services. In these cases the government
has little control over the markets for these goods and services. In addition, weaknesses
in the government structure can have counterintuitive implications: Butler notes that
Indonesia's "Ministries of Forestry and Agriculture tend to dole out large forested areas
rather than degraded land for palm oil development... (as) companies are more
interested in the forested land so that they can get a clear title to it and do not have to
deal with local communities... (and) use the proceeds from logging to help kick-start
their plantations. The natural progression is for logging companies to become plantation
companies."

Butler suggests that the way to get companies address land tenure and land rights issues
and develop degraded grassland would be where communities have equity stakes in
mills. In some recent thinking, there is concern about how conservation policy can
accommodate native customary rights against pressures to create native-free
conservation zones where natives may be regarded as trespassers and poachers 377 378.
This is against a background where local people (lured by the profits from oil palm) may
be actors in land degradation, fires and (legal or illegal) deforestation, especially when
there is population pressure.

An alternative market-based proposal backed by NGOs including Conservation

International379 and The Nature Conservancy, as well as some large palm oil using
companies, is the introduction of a flat a $40 carbon tax to do away with "all major
climate regulations, including the (US) Environmental Protection Agency’s authority over
CO2 emissions and an “outright repeal” of the clean power plan"380.

8.4.4. Regulatory context

While the regulatory context for palm oil varies, often significantly, between one country
and another, based on interviews with plantation companies that have achieved a high
level of certification for their operations and a literature review we believe that, based on

376
Butler, Rhett (2012), 'Legislation and palm oil: South America and Southeast Asia', ZSL
interview, 4 Oct 2012, http://www.sustainablepalmoil.org/case-studies/mongabay/.
377
Barkham, Patrick (2017), 'Human rights abuses complaint against WWF to be examined by
OECD', The Guardian, 5 Jan 2017:
https://www.theguardian.com/environment/2017/jan/05/oecd-to-examine-complaint-against-
wwf-over-human-rights-abuses-in-cameroon.
378
Sangka Chuka & Anor v. Pendtadbir Tanah Daerah Mersing, Johor & Ors, Malaysian law Review,
11 Jan: 2016: http://malaysianlawreview.com/sample/MLRH_2017_2_286.pdf.
379
Which it does not see this as an alternative to also addressing environmental challenges by
conveying more rights and power to local communities and indigenous peoples.
380
Milman, Oliver (2017), 'Exxon, BP and Shell back carbon tax proposal to curb emissions' 20
Jun 2017, https://www.theguardian.com/environment/2017/jun/20/exxon-bp-shell-oil-
climate-change.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 169 EN
global best practice, there are four main stages of regulation for palm oil plantation
developments.381

At the award of the concession, there should be a public stakeholder consultation

(including free prior and informed consent of the most directly affected populations), as
well as a competitive bidding process. This is not covered by RSPO regulations.
At the project evaluation stage, before the plantation is developed, there is usually a
mandatory Environmental Impact Assessment. This should be done after public
consultation and have a plan to mitigate consequences on natural and built
environments, and on health and safety. This is akin to New Planting Procedures in the
RSPO Principles & Criteria (P&C).
National laws and regulations, as well as the extent to which those laws are enforced
locally, governing the operations of a plantation concession are part of the RSPO P&C,
but there is wide divergence between countries and the RSPO, including in mill and
estate licensing.
The enforcement of transparency procedures and monitoring of compliance are covered
by the RSPO P&C and its Complaints Procedure382.

This ideal of four fully implemented stages of regulation, as outlined above, is hard to
achieve. Different regulations are often the purview of different departments, creating or
aggravating difficulties in enforcement and oversight. For example, Leiserson et al.
(2017)383 note in their review of Liberia that the jumble of regulations create
enforcement issues which are typical of many countries, and while “some countries have
adopted stronger regulations to govern agricultural concessions, including stringent legal
and procedural protections for communities… laws and procedures are not always
followed in practice… (even in Australia).” Moreover, in some cases enforcement can also
be sought through private or international arbitration, in addition to national courts.

Decentralisation adds to the scope for regulatory confusion and gaps. In Indonesia, Bland
(2017) notes that various economic sectors contend with “multiple approvals from local
and national government departments that are often in conflict in a heavily decentralised
nation”384. Similar inconsistency arises on occasion in Brazil, Malaysia and Colombia.

The complexity of the legal system works in the favour of established plantations,
reinforcing the concentration of ownership. Stakeholders 385,386 point to the problem of
lobbying power (if not corruption) in drafting and enforcing rules and regulations. The
Transparency International Corruption Perception rankings of the six countries covered

381
Leiserson, Elizabeth et al. (2017), 'Governance of Agricultural Concessions in Liberia: Analysis
and Discussion of Possible Reforms', Allard K. Lowenstein International Human Rights Clinic,
Yale Law School,
https://law.yale.edu/system/files/area/center/schell/document/liberia_final_2017.pdf.
382
https://rspo.org/members/complaints
383
Leiserson, Elizabeth et al. (2017), Ibid.
384
Bland, Ben (2017), 'Chinese investors hesitate over Indonesia investment', The Financial
Times, 15 Jun 2017, https://www.ft.com/content/bb1a9658-4517-11e7-8519-9f94ee97d996.
385
Interview with NGO specialist on Liberia, 16 Jun 2017.
386
Interview with legal specialist, 23 Jun 2017.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 170 EN
by the case studies for 2016 were: Malaysia 55, Brazil 79, Colombia 90, Indonesia 90,
Liberia 90, and Gabon 101 (a high score representing a more critical situation)387.

Dividing policy between different departments and regions can also result in poor
capacity to collect data and insufficient transparency. One of the few successful efforts to
halt large-scale deforestation is in Brazil’s Legal Amazon, with substantial data and
effective targeting. “Sophisticated monitoring system provides real-time information
about land use change to Brazil’s environmental enforcement agency, the Brazilian
Institute of Environment and Renewable Natural Resources (IBAMA)” 388 adds to
measures on the ground to implement a policy to reduce deforestation implemented from
2004 (Action Plan to Prevent and Control Deforestation in the Amazon or PPCDAm).
During 2002-2010, several protected areas were designated, and new policies in 2007
and 2008 targeted a “federal blacklist” of municipalities with critical deforestation rates.
Lastly, demand-side efforts (including multi-stakeholder round tables, zero-deforestation
agreements and the soy moratorium) also helped slow down Brazil’s unprecedented
deforestation rate.

One aspect where information is often very scarce is land registration. It was notable
that up to 1995 only about 7% of land in the Indonesian Land Administration Project (for
land registration) had been registered, while central administration of the National Land
Agency had been dismantled and its functions decentralised to the provincial level. A
systematic registration of all land is costly389. Brazil has one of the most advanced
programmes for the registration of land the Cadastro Ambiental Rural. There is some
evidence that this has helped reduce deforestation rates. 390

It is difficult to divorce legislation from the socio-economic context. An NGO specialist391

highlighted the role of civil society in enforcement and improved governance, contrasting
Indonesia’s more vibrant civil society and the FLEGT Independent Monitoring precedent
to that of Malaysia. Historical factors can matter too: countries with lower population
pressure may have fewer problems with forest degradation, deforestation and
biodiversity than those with greater land pressure. In Malaysia the forced resettlement of
farmers to semi-urban villages and native peoples from hamlets into villages during the
Malayan Emergency (1948-60) accelerated urbanisation. Today some of the best-kept
areas of biodiversity in Malaysia were previously out of bounds due to the insurgency.

The level of economic development also has a strong influence on the priorities and
abilities of the legislature. Another NGO specialist392 said of Liberia that the people’s
needs are so basic (“think of an Indonesian outer island 20 years ago”), without
electrification and people making their own charcoal (for household use) and artisan
palm oil, resulting in forest degradation and air pollution. The major community / societal

387
Transparency International (2016), Corruption Perceptions Index 2016,
https://www.transparency.org/news/feature/corruption_perceptions_index_2016#table.
388
Gebrara, Marai F. (2017), Can REDD+ help Brazil roll back rising deforestation rates? CIFOR
Forest News, 23 Jun 2017, http://blog.cifor.org/50288/can-redd-help-brazil-roll-back-rising-
deforestation-rates?fnl=en, accessed 26 Jun 2017
389
Slaats, H. (2000), ‘Land Law in Indonesia’, International Institute for Asian Studies Newsletter
No. 22, http://iias.asia/iiasn/22/regions/22SEA11.html, accessed 28 June 2017.
390
Alix-Garcia, J., Rausch, L. L., L'Roe, J., Gibbs, H. K. and Munger, J. (2017), Avoided
Deforestation Linked to Environmental Registration of Properties in the Brazilian Amazon.
CONSERVATION LETTERS. doi:10.1111/conl.12414
391
Interview with NGO specialist on Indonesia and Malaysia, June 2017.
392
Interview with NGO specialist on Liberia, June 2017.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 171 EN
concern is not environmental but whether economic concessions and conservation
projects could limit or block their customary land rights.

Plantation concession awards and governance for smallholders are not reviewed here,
but large corporations may benefit from rising processing and trading volumes by
expanding mill capacity on the back of smallholder development; “handing over the
baton of expansion to smallholders” or “hiding behind smallholders” (who are often
subject to less stringent rules or weaker enforcement)393.

Laws and regulations – a brief review Table 57 aggregates the national laws
and regulations cited in the Annex sections of the RSPO National Interpretations in
Indonesia, Malaysia, Colombia, Gabon and Liberia (RSPO rules require compliance and
these National Interpretations are available for all these countries except for Brazil,
where they have been applied by the largest palm company, Agropalma) 394.
The central benefit of the RSPO data set is that as a scheme that covers all of the
countries in a harmonised manner it allows us to provide a consistent overview of the
coverage of domestic legislation in Table 57. In subsequent sections we provide a
nuanced discussion of the legislation in each country (including a series of case studies).
Table 57: Overview of legislation in the six case study countries
Indonesia Malaysia Brazil Colombia Gabon Liberia

Deforestation

Biodiversity loss

Land use change

(LUC)
Reducing
carbon Biofuel
emissions
Mills and plantations

Burning

Peatland conversion

Water and pollution

Haze
Air pollution
Others

Indigenous people

Smallholders

Forced and child labour

393
Interview with legal specialist, June 2017.
394
These are of varying quality in terms of referencing laws to sustainability criteria. While there
is an attempt to cover international conventions ratified, there is little effort to map this
against necessary amendments in national laws and regulations. It is probable that
sustainability officials in palm oil companies drafted some lists of legislation with the help of
legal compliance personnel, but without major legal expertise. Despite these limitations, this
set of resources is the best available on this topic.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 172 EN
 Indonesia Malaysia Brazil Colombia Gabon Liberia

Terms and Health & safety

conditions of
labour Wages & others

Anti-corruption and money laundering

Fair pricing

Land ownership/use permit

Licensing for palm oil estate and mill

Source: LMC International analysis based on RSPO data. Note: A shaded box indicates that there is domestic
legislation dealing with that topic.

Appendix 10 and Appendix 11 go into detail regarding specific laws. A large number
of laws and regulations exist, dealing with most of the topics related to sustainability (we
comment later on the efficacy of this legislation). The existence of laws does not provide
any indication of the strength of their enforcement.

Some of these laws may benefit the oil palm plantations. The most obvious of these is
the introduction of mandatory biodiesel blending in Indonesia, Malaysia, Brazil and
Colombia. More subtly Potter (2015) has suggested that the legal system may favour
large plantations when dealing with issues of access to land and the treatment of
smallholders.395 The table also reveals that there are some areas that have not yet come
under legislation.

It is noteworthy that only two countries make specific reference to GHG emissions from
Land Use Change.

Only in Indonesia, Malaysia and Liberia does legislation aim to reduce carbon emissions
from mills and plantations. In a similar vein, burning does not appear to be a priority in
some countries and neither is air pollution more broadly.

8.4.5. Case studies

In this section, we review the implementation of national policies on deforestation and

sustainable palm oil production in six countries: Indonesia and Malaysia in Asia; Brazil
and Colombia in South America; and Gabon and Liberia in Africa. As Indonesia has
witnessed the major share of global growth in oil palm areas in recent years, we focus in
more detail on its policies in this section.

8.4.5.1. Indonesia: attempts to upgrade sustainability policy

The Indonesian government is committed to tackling climate change and environmental

degradation as well as ensuring that the development of oil palm plantations is socially
equitable and contributes to poverty reduction.

395
Potter, Lesley (2015). ‘Managing oil palm landscapes: A seven-country survey of the modern
palm oil industry in Southeast Asia, Latin America and West Africa’, Occasional Paper 122,
Bogor, Indonesia: CIFOR.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 173 EN
To achieve these goals, Indonesia has introduced a large number of regulations
governing the establishment and running of oil palm plantations. These are in addition to
broader legislation, such as the PROPER 396 system, which also applies to the oil palm
sector.

There is detailed legislation regarding licensing for land allocation. However, the
complexity of the regulations, the overlap in responsibility among different ministries and
the problem of decentralisation render enforcement of the legislation challenging.

In terms of protecting indigenous rights the government has introduced new laws to
safeguard customary land rights, but as they stand these cannot be enforced given the
issues and delays with land allocation. In addition, the attempt to support customary
land rights may come at the expense of discouraging deforestation.

To address environmental concerns and the problems created by the land allocation
system, the government has introduced a moratorium and protection of peatland
areas. However, as companies still hold land banks of concessions, which may include
forest, the law is (on its own) not fully sustainable. In addition, it has proven difficult to
enforce. Moreover the Indonesian Supreme Court has revoked on economic grounds
Regulation (Penmerhut) No 17/2017 (adopted in April 2017) that required large
plantations to vacate peat areas with a depth of more than 3 metres, or to reforest after
fires.

One area where the government has had greater success is in the legislation on haze
where Indonesia ratified the 2002 ASEAN Agreement on Transboundary Haze Pollution in
2014. This complemented Law No. 39/2014 on Plantations and Law No. 32/2009 on
Environmental Protection and Management. However, enforcement is not yet
comprehensive, since ‘hotspots’ have appeared during subsequent years during the dry
season; and the mechanism could benefit from greater transparency.

Finally, day-to-day management of plantations remains only partially regulated by the

Indonesian Sustainable Palm Oil scheme, which currently has limited coverage.
However, there are attempts to improve the legislation. At present, issues such as the
treatment of labour are covered by general Indonesian laws not ones pertaining directly
to the oil palm industry.

Each of these areas is outlined in more detail below.

Licensing for land allocation

The system for land allocation is highly regulated. A number of permits are required:

Izin Lokasi (Location permit): is the starting basis for all the licences. This permit is
granted by the head of the district (the Bupati) and outlines the area of the land given to
a company for business purposes. The duration of the permit varies by province, but it
can be extended when it expires.

AMDAL (Environmental Impact Analysis): all companies which conduct business that
affects the environment must obtain an AMDAL. To obtain one, companies need to

396
PROPER is the programme for pollution control, evaluation and rating, which requires that
every company submit annual reports. Failure to meet standards for pollution control results in
the company being downgraded. Below the blue rating, banks may no longer provide credit to
these companies. http://www.menlh.go.id/proper/

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 174 EN
submit an application, along with list of documents. The application is reviewed by the
AMDAL assessment committee, established by the State Minister of Environment, the
governor of the province (each province comprising several districts) or the
regent/mayor.

The process of land allocation also involves the recognition of the need to protect areas
of High Conservation Value. In areas where there is High Conservation Value the
plantation either has the option of doing the conservation itself or of returning that land
to the government.397 However, there have been many cases where plantations have
received different advice from the local government that wishes to develop the land.

IUP (Plantation Business Licence): This is a key licence for a plantation. It allows the
companies to cultivate and process products from the plantation. This permit is granted
by the governor and has no expiration date as long as the company is in the plantation
business. The IUP is divided into three categories: 1) IUP-cultivation; 2) IUP-processing;
and 3) IUP.

The IUP-cultivation is the licence for companies engaged in plantations. The IUP-
processing is the licence for companies processing plantation crops. The IUP itself is the
licence for companies that are integrated from plantations to the processing of crops. As
long as a company has an IUP, there are no restrictions on its ability to conduct a
plantation business.

HGU (Land Right): The HGU is a land right issued by Central Government which can be
granted only on state-owned land, and only for the purposes of agriculture, fisheries, or
animal husbandry.

The system for land allocation involves a full environmental and social impact
assessment. It would be sustainable if it were properly enforced. The overlap in
responsibilities between national and local government as well as between different
ministries means it is not properly enforced. There have been a number of cases where
permission was given for land conversion that was unsustainable. This has come to light
as the administration has brought anti-corruption cases against several Sumatra
governors, including that for Riau, on land conversion (including to oil palm).398 399

Protecting indigenous rights

The granting of the HGU is not necessarily a green light for the development of an
estate. Negotiations then need to occur with settlers (whether or not they actually have a
long-standing connection with the land in question) on the area stipulated in the Izin
Lokasi.

Because negotiation occurs late into the process and without clear land rights means that
the process is fraught for both the developer and the traditional inhabitants. In response
to these issues the Indonesian Constitutional Court has also recognised local community

397
Menteri Agrari Dan Tata Ruang, Surat Edaran No. 10/SE/VII/2015 Penerbitan Izin Pada Areal
Hutan Konservasi Bernilai Tinggi (High Conservation Value Forest)
398
Jakarta Globe (2013), 'Riau Governor Rusli Still in Office Despite Arrest' Jakarta Globe, 17 Jun
2013, http://jakartaglobe.id/news/rusli-still-in-office-despite-arrest-2/, accessed 21 June
2017.
399
Jakarta Globe (2014), 'KPK Arrests Riau Governor in Raid', Jakarta Globe, 26 Sep 2014,
http://www.jakartaglobe.beritasatu.com/news/kpk-arrests-riau-governor-raid/.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 175 EN
rights to customary forests400 401 402. While this is a strong affirmation of the rights of
indigenous populations, given the myriad problems associated with establishing property
rights it is unclear how it might be enforced403.

In addition, the government has indicated that it may pursue a land amnesty to
regularise property rights in cases of smallholder-led deforestation, including in the
upland areas. While sustainable from a social point of view this would clearly be
unsustainable in terms of the signal it sends to allow further smallholder-led
deforestation.

400
Constitutional Court Decision No. 35/2012 on the recognition and protection of customary
forests (hutan adat / tanah ulayat) acknowledges the ownership and the right of local
communities in Indonesia to access their customary forests
401
Gunawan, Apriadi (2017), 'Acknowledgment of customary forests shows govt support for
indigenous people', The Jakarta Post, 17 March 2017,
http://www.thejakartapost.com/news/2017/03/17/acknowledgment-of-customary-forests-
shows-govt-support-for-indigenous-people.html, accessed 21 June 2017.
402
Suksuwan et al. (2015), ‘Consulting Study 10: Overview of existing regulatory mechanisms
and relevant actors A. Institutional framework governing the palm oil sector in Cameroon: A
report on laws, regulations and practices B. Community rights and environmental protection in
the laws and regulations of Indonesia, High Carbon Stock (HCS) Science Study’, Surin
Suksuwan, David Hoyle, Pavithra Ramani, Mike Senior and Rebecca Smalley, December 2015,
http://www.simedarby.com/sustainability/clients/simedarby_sustainability/assets/contentMS/i
mg/template/editor/HCSReports/Consulting%20Report%2010.pdf, accessed 15 June 2017.
403
Personal communication with EU Delegation in Jakarta (2018): While smaller ASEAN Member
States exceed 4 million hectares of forest under social forestry (or community-based)
programmes, Indonesia only has about 1 million hectares most of which has been achieved in
the last 10 years. Although countries may have varying definitions for forest and social
forestry, Indonesia has less than 1% of its total state forest land area under such schemes, as
compared to Vietnam, which has about 30%, and the Philippines, which has 50%.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 176 EN
The moratorium and peat protection

In response to the problems with land allocation, outlined above, President Jokowi
announced a moratorium on new palm oil concessions and a ban on peat deforestation.
However, at a provincial level there have been difficulties enforcing the moratorium. As a
result, record fines have been meted out on agro forestry companies for illegal forest
clearing and fires (including on peatlands).404 405 Payment of these high fines is said to be
pending still. There is also an issue with companies still holding land banks of
concessions that may include forest.

Regulation on haze

The government has introduced better fire prevention regulations after the 2015 haze
crisis, but companies criticise the delays in the One Map spatial planning, which would
help better understand the risk of forest fires. Therefore the law is sustainable but not
properly enforced at present, as it requires greater transparency.

ISPO palm oil certification scheme

While the government has made the ISPO certification scheme mandatory, few
plantations have actually achieved ISPO certification. Recent statements from the
Indonesian Ministry of Agriculture suggest that only 16.7% of the area dedicated to the
cultivation of oil palm in Indonesia has achieved ISPO certification. 406 In addition, some
consider that the initiative has failed to reassure consumers, NGOs and foreign
governments of its effectiveness in reducing negative environmental and social
impacts.407

To address these concerns, significant political commitment is being put into revising
ISPO in light of these perceived weaknesses. These include the ISPO Strengthening
Team, under the Coordinating Ministry of Economic Affairs (CMoEA), aiming at a
Presidential Decree to repeal the current Ministerial Decree on ISPO for late 2017/early
2018. In addition, the Forum Kelapa Sawit Berkelanjutan Indonesia (FoKSBI), a multi-
stakeholder forum led by the Indonesian government and facilitated by UNDP, aims to
increase the coordination, sustainability and efficiency of the palm oil sector, including
developing a National Action Plan408. These processes are expected to result in significant
revisions to the ISPO standards and certification processes that are likely to address
some of the weaknesses that have been identified by stakeholders.

404
Jong, Hans Nicholas (2015), 'Record fine against plantation company upheld', The Jakarta
Post, 13 Sep 2015, http://www.thejakartapost.com/news/2015/09/13/record-fine-against-
plantation-company-upheld.html, accessed 21 June 2017.
405
Jong, Hans Nicholas (2016), 'Landmark court ruling expected to serve as deterrent'. The
Jakarta Post, 18 Nov 2016, http://www.thejakartapost.com/news/2016/11/18/landmark-
court-ruling-expected-to-serve-as-deterrent.html, accessed 21 June 2017.
406
Indonesia Investments (2017), 'Only 16.7% OF Indonesia’s Oil Palm Plantations ISPO
Certified’
https://www.indonesia-investments.com/news/todays-headlines/only-16.7-of-indonesia-s-oil-
palm-plantations-ispo-certified/item8143?, accessed, 18 December 2017.
407
Pacheco P, Gnych S, Dermawan A, Komarudin H and Okarda B. 2017. ‘The palm oil global
value chain: Implications for economic growth and social and environmental sustainability.’
Working Paper 220. Bogor, Indonesia: CIFOR
408
http://redd.unfccc.int/files/frel_submission_by__indonesia_final.pdf

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 177 EN
In conclusion, at present, the ISPO is not yet fully implemented or applied409.

8.4.5.2. Liberia: the development of large plantations

Liberia has a number of agencies and protocols to ensure the environmental and social
sustainability of the oil palm sector.

The major law is the Environmental Protection and Management Law of Liberia (EMPL).
Under this law prior to the establishment of a new plantation a full Environmental Social
Impact Assessment (ESIA) has to be conducted. The ESIA needs to be presented to the
Environmental Protection Agency of Liberia, as well as to a meeting of joint-stakeholders.
In addition, Liberia is a signatory to the Marrakech Declaration by which they adhere to
zero deforestation.

Liberia also has a strong land rights policy through the Liberia Land Rights Act, which
requires large amounts of community involvement in land use decisions. In addition,
worker rights are regulated through the Liberian Decent Work Bill (2015).

Liberia therefore has strong legislation and processes to protect the environment as well
as indigenous communities and workers’ rights. However, Liberia remains a severely
impoverished country emerging from a severe civil war. As with Indonesia and Malaysia
it has sought to encourage development by granting concessions. The development of
these concessions has been accompanied by detailed Environmental and Social surveys
and a commitment to meeting the principles and criteria of the RSPO (including Free
Prior and Informed Consent).

The outcome of the high requirements for due diligence and pressure from NGOs has
been to slow appreciably the development of many concessions. From an environmental
sustainability perspective the laws in Liberia are both sustainable and enforced. In
practice, this has come at a high cost in stopping the further development of the
industry; thus, at an economic level the outcome is unsustainable. In environmental
terms too, the reality on-the-ground is often unsustainable, since the main alternative
source of income for rural populations in the affected areas is often slash and burn
agriculture or charcoal burning.410

8.4.5.3. Gabon: a young oil palm sector based on large plantations

Gabon has adopted a series of impressive sustainability laws. These include, making
RSPO mandatory and a commitment to 50% carbon reduction. To direct development,
Gabon introduced a National Land Use Programme (NLUP), which aims to ensure that
only areas with limited environmental value are developed. This is combined with a
monitoring system to ensure the land use plan is enforced. In developing these
mechanisms it has received substantial aid-assistance. 411

409
At the time of finalising this report, the Indonesian officials in charge of consolidating and
revamping the ISPO standard, principles and criteria were not in a position to provide detailed
information on the content of the new standard, but indicated it would be made available in
2018.
410
J. Porritt (2017) ‘Dispatches from the front line: the oil palm industry in Liberia’
http://www.jonathonporritt.com/sites/default/files/users/Dispatches%20from%20the%20Fron
t%20Line.pdf, accessed 18th of December 2017
411
https://www.ec-leds.org/success/supporting-sustainable-forest-management-gabon, accessed
18th of December 2017

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Uniquely Gabon’s Sustainable Development Law (2014) allows for a system of credits for
carbon reduction, maintaining biodiversity and accumulating community capital. While
criticised for allowing companies to buy out of their environmental obligations, this also
allows for a system that recognises the trade-offs between environmental protection and
economic growth.

As with Liberia, the oil palm industry in Gabon is based on the concession model.
Therefore to understand the level of enforcement of these laws in practice it is important
examine how the concession approach has been managed.

The oil palm sector in Gabon was first developed on a relatively small scale by Agro
Gabon, which was intended to meet the limited domestic market for palm oil. This
market was small as a reflection of the population size. The government of Gabon sold
Agro Gabon to SIAT of Belgium, which undertook replanting and some modernisation of
facilities. The transformation of the palm sector came with the arrival of Olam
International and the development of sizeable estates, with the government as minority
partner. Olam Palm Gabon developed the industrial plantations and acquired the SIAT
subsidiary, while promoting a smallholder cooperative to supply the central mills.

Since, apart from the old Agro Gabon/SIAT plantation, the oil palm sector in Gabon is a
greenfield venture, developed once RSPO was well established, Olam Palm Gabon and
the associated smallholder developments have been able to incorporate RSPO Principles
and Criteria into the environmental impact of the estates, and social aspects of the
conditions of its workers.

One respect in which conditions in Gabon, in common with those in parts of Liberia, differ
from those in Southeast Asia and South America is in the limited pool of semi-skilled
local plantation labour to draw upon at the start of the project. Therefore, the training of
a local labour force was a priority to reduce the initial dependence upon Southeast Asian
workers.

Another respect in which the development of the oil palm estates in Gabon was
distinctive was in the large areas of primary rainforest near the proposed plantation sites.
Therefore, a great deal of care was required to balance the viability of HCV habitats,
including protecting HCV areas and ensuring they were protected with corridors
conserved and buffer zones created around them. This then had to be combined with the
restoration and regeneration of secondary forest on the land managed by the company
while achieving logistical efficiency in the design of the estates.

Olam Palm Gabon has reported that nearly 60% of its oil palm area was previously
secondary forest, and the remaining 40% savannah land. Overall Gabon appears to have
enforced sustainability laws well.

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8.4.5.4. Brazil: Enforcement concentrates on large plantation
companies

Brazil has progressive legislative requirements for palm oil production, mandated
smallholder participation and a wide variety of other environmental regulations
Subsidised or low interest loans are given to plantations that abide by certain criteria,
such as ensuring they are registered and compliant with regulations.

There is a zero deforestation rule, with no exceptions, in the main oil palm area. This
applies to the Ecological and Economic Zone (ZEE). Plantations in the ZEE must maintain
50% of total area as protected forest reserve. For plantations outside the ZEE the
reserve is 80%. This is enforced through satellite monitoring. Large plantations are de
facto law enforcement agencies, with heavy fines levied for transgressions. Data
transparency is excellent with information from real-time satellite monitoring published
openly.

Companies are required to ensure their employees’ wellbeing. Plantations are required to
provide shelters, with tables and toilets for employees to receive food in the field (one for
every 1,000 ha); toilets must be distributed throughout the plantation, or be mobile and
accompany workers throughout the day. There is an extensive network of social
insurance and fringe benefits that is among the most comprehensive in any palm
producing country.

The state of Pará, where most of Brazil’s oil palm has been planted, has large areas of
degraded pastures, and on these areas plantations have increased biodiversity.
Unfortunately, weaker central political control in the country has been accompanied by
increasing deforestation at a national level.

In practice, the authorities rarely enforce the zero deforestation and ZEE laws on small
and medium-sized palm estates. Furthermore, in 2012 the Forest Law was introduced
which gave amnesty for those who deforested illegally before 2008. As with amnesties in
general, this runs the risk of introducing moral hazard into the application of
environmental measures and may be viewed as encouraging further transgressions.
There are also signs that the government is considering the relaxation of its stringent
zero deforestation policy, with the idea floated recently in public discussion that oil palm,
as a “low impact crop”, could be used to reforest protected areas.

Brazil therefore has two distinct oil palm systems in operation today. On the one hand,
there is clear enforcement for large companies, with measures to ensure environmental
sustainability, strong worker rights and transparency. On the other hand, the political
crisis has led to the government increasingly turning a blind eye towards independent
poorer farmers who deforest. Those small farmers who have close links with a nucleus
estate/mill, along similar lines to the Indonesian plasma model, operate very much like
the large nucleus plantation to which they are attached.

8.4.5.5. Colombia: little pressure for deforestation

Colombia has developed its oil palm sector with a legal framework that includes
comprehensive laws (a total of 352 decrees and regulations govern the behaviour of the
sector, from land rights, social security, protection of indigenous groups, maintenance of
soil fertility and water quality, use of chemicals, protection of the environment including
forest cover, workers’ and children’s rights, and land conservation). Colombia’s widely
diversified agricultural sector, in which the issues raised by oil palm cultivation are
applicable to other crops, has meant that these laws are not designed specifically for
palm oil production, but have been drafted to govern practices throughout agriculture.

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The country has had a great advantage of large areas of pasture, which meant that it did
not have to plant oil palm on forest. This has given Colombia some enviable sustainability
credentials. As such, deforestation is a minor issue for Colombia given the large areas of
low intensity, poorly performing cattle ranches that could be converted to oil palm.
Furthermore, the major area of expansion of oil palm is in Los Llanos, on flat, highly acid
soils, dominated by low bushes, rather than trees. When the acid is neutralised with
heavy applications of lime, it becomes very suitable for oil palm. Colombia has also made
strong zero deforestation commitments in the context of their Nationally Declared
Contributions (NDCs) under the UNFCCC Paris Agreement. This should reinforce
incentives to increase zero deforestation and sustainable commodities production in the
country.

Although the industry is dominated by small producers (83% of producers have 50

hectares of palm or fewer), for whom certification and auditing is more difficult and
costly than for large producers, it forecasts that by 2020, 50% of Colombian palm oil
production will be certified by the RSPO.

The most sensitive areas regarding the sustainability credentials of the Colombian palm
sector have been about the labour conditions and the rights of workers, in particular on
small estates. The legal code is strict about these rights, but enforcement is difficult on
small estates, especially where they lie in areas that have suffered many years of armed
conflict. Increasing attention is being given to problems of food insecurity in these areas.

With oil palm seen as an excellent crop for small producers, providing regular incomes
once the planted areas become mature, it was promoted as an attractive alternative to
illegal crops (for drugs). Government support was important for the expansion of the
sector, with many producers taking advantage of funds from the Rural Capitalisation
Incentive to develop new estates.

A significant (but contested) concern about the expansion of oil palm is that in the past
there was some level of violence and displacement, most notably between 1998 and
2006, with much of it associated with the chronic insurgency problems that beset the
country for decades. The December 2016 peace agreement between the Colombian
government and FARC has brought the displacement of small landowners back into focus,
as the government seeks to encourage investment and open-up land for development.

Law 200 of 1936 was admitted by the State to have been poorly drafted. In 2011, Law
1448 imposed upon it an obligation to restitute land to the victims of violence caused by
internal conflict. In mid-2017, oil palm lands covered by this restitution represented a
mere 555 hectares of the total of 213,272 hectares restituted in total (a share of
0.003%). This may be interpreted as an indication that this issue is not a major one for
oil palm, but equally it may be a sign that small-scale oil palm farmers have been slow to
submit claims for restitution.

8.4.5.6. Malaysia: concerns over planting on peat soils

Malaysia has a less complicated regulatory environment than Indonesia. The Malaysian
Palm Oil Board (MPOB) “controls research and development and regulation of the
industry” 412, and is funded by a fixed payment per tonne of CPO output. Anyone wanting

412
Potter, Lesley (2015). ‘Managing oil palm landscapes: A seven-country survey of the modern
palm oil industry in Southeast Asia, Latin America and West Africa’, Occasional Paper 122,
Bogor, Indonesia: CIFOR.

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to harvest oil palm has to be licensed by the MPOB (though interestingly, the planting of
oil palm is not licensed).

129 laws, both Federal and state-specific, govern the behaviour of the palm sector. Since
November 2005, the Federal government has stipulated that new palm estates must not
replace primary forest or have been planted on any area required to maintain or enhance
one or more High Conservation Values.

The clearing of protected land requires the forest to be “degazetted” and the clearing
sanctioned by the relevant state’s government. Malaysia, like the FAO, treats plantation
forests as forests, and allows logging where there is clear felling followed by
reforestation. There are instances where some conversion to (acacia, rubber) timber tree
plantations, but not oil palm, has been allowed to go ahead. While the Federal
Government has strong control over Peninsular Malaysia’s 11 state governments, the
states located on Borneo (Sabah and Sarawak) are more independent. This is particularly
true of policy on forestry, land allocation and agriculture; thus there are regional
differences in regulations and enforcement.

The most controversial aspect of land use concerns the application of Native Customary
Land Rights (known as NCR) in Sarawak. Local tribes have long been considered to have
rights over both their farmland and primary forest on communal land, with a sizeable
proportion of this land constituting deep peat soils. A Federal court ruled in 2016 that
their rights did not apply to primary forest, putting the State government under pressure
to change the Land Code to permit the development of such primary forest413.

Since oil palm is the most popular crop after the clearance of this primary forest, there
are fears that the importance of NCR for local tribes will encourage the Sarawak state
government to sustain rapid growth in its oil palm areas (the growth exceeded 100,000
hectares per annum in 2010-2016), much of it in environmentally sensitive areas.

Data transparency can be limited. Sabah has the most detailed data available, publishing
a comprehensive annual report on its forests. For Sarawak almost no maps are publicly
available. Data in the Peninsular Malaysia region are also limited.

Since, outside Sarawak, Malaysia’s oil palm sector may be considered to be very mature,
with minimal area growth, the major concerns regarding sustainable production relate to
labour and workers’ rights. With its very heavy dependence upon foreign workers,
notably from Indonesia, the regulation of the conditions of these workers is often fraught
with difficulties.

Foreign workers are entitled to the same pay as Malaysian workers, but some states do
not permit these workers to bring their families with them, and the government does not
allow smallholders (which in Malaysia are defined to be farmers with less than 100 acres,
or roughly 40 hectares, of land) to recruit foreign workers directly. This has created a
form of under class of foreign workers who work on such smaller estates, but without
recourse to legal protection.

Enforcement of regulations

Table 58 highlights the major findings on regulatory frameworks and their enforcement
by country. The table was prepared at the end of June 2017 based on literature review

413
Davidson, Desmond (2017), 'Sarawak native rights defender wants change to Land Code
now”, The Malaysian Insight, 13 July 2017.

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and semi-structured interviews in which standard questionnaires were sent to plantation
companies, regulators and NGOs in a selection of countries. Overall approximately 30
people were interviewed in the preparation of this table. It therefore has an inherent bias
towards the preoccupations of large organisations. Where possible we have sought the
opinion of small and medium-enterprises and the informal sector but this is not always
readily available.

The table demonstrates that most countries have sought to introduce regulations.
However, in many cases they are not adequately enforced. This can be the fault of
systemic corruption, a lack of political will and bureaucratic inertia. Often the
bureaucratic inertia is compounded by factors such as decentralisation, which, while
democratically desirable, make political and regulatory control cumbersome. The
overarching historical problem of land rights allocation also re-emerges frequently.

Table 58: Preliminary country rating by sustainability theme

Questions on sustainability-related rules Indonesia**Malaysia* Brazil** Colombia** Gabon* Liberia**

included (or not), within national laws & *
regulations for the palm oil sector

Deforestation

Biodiversity loss

Carbon emissions mitigation Land use change

(LUC)

Biofuel

Mills and
plantations

Burning

Peatland conversion

Water and pollution

Air pollution Haze

Others

Indigenous people

Smallholders

Forced and child labour

Labour Health & safety

Wages & others

Anti-corruption and money laundering

Fair pricing

Land ownership/use permit

Licensing for palm oil (estate and mill)

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 Implementation 'low' (Provision 'Yes' or 'No')
Implementation 'medium' or 'high' (Provision 'Yes')
Blank (if uncertain, not known, not applicable)

Note: The questionnaire asked "Are provisions in laws & regulations adequate? Yes/No" and "In your view,
is implementation low/medium/high?"
The viewpoints from a regulatory expert* or large company** in each country, via a questionnaire that was
completed in June 2017.
# Although there is no specific law requiring this GHG reduction in this type of GHG, both Brazil and
Colombia have policies not to convert forests. Both have extensive pastures or degraded lands that could be
converted to oil palm cultivation without significant GHG emissions due to land-use change.

Some countries benefit from structural elements, which make sustainability issues less
noticeable. For example, both Colombia and Brazil have the advantage of having large
areas of pasture to develop, which has meant less strain on deforestation. However, in
these two countries, the pasture was developed decades earlier, and thus deforestation
may have occurred long before oil palm was planted. Malaysia has benefited from a more
highly urbanised population than Indonesia, making it easier to control deforestation. In
the background, there is always a fundamental tension between immediate economic
returns and long-term and often not easily quantifiable benefits of the environment and
informal markets for other forest goods. In almost all cases large companies are under
sufficient scrutiny now to improve their sustainability. In Indonesia, all publicly quoted
plantation companies combined (with 16% of the total oil palm area in the country)
planted 11,000 hectares of new oil palm areas, which compared with a national total area
increase of 286,000 hectares. Thus, these most visible companies accounted for less
than 4% of the increase in the total area in 2016. The major concern is whether the
government can ensure that smallholders can expand in an economically efficient way,
whilst protecting the environment. The challenge of increasing their yields is a difficult
one, with few signs in recent years of progress in this respect.

The recent slowdown in new plantings in Indonesia and Malaysia has been marked
among publicly quoted companies with the highest visibility. This suggests that the
pressures to limit oil palm expansion may be having an impact. However, this almost
certainly means that a rising share of those new plantings that do occur is being made in
less visible segments of the sector. Whilst there is no direct way of assessing this
dynamic situation, the following tables indicate the likely effectiveness of government
action to limit such new plantings, by summarising surveys from a number of sources
regarding overall governance and corruption in the six case study countries.

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Table 59 lists the rankings that emerge from six alternative measures of governance
collated by the World Bank. The rankings cover 214 different countries, where a high
rank (i.e., above 200) is to be considered to be very good, while a low rank (say, below
50) is poor. We have used colours to indicate rankings by quartile. The bottom quartile
(a ranking below 54) is coloured in dark green. The second lowest quartile (with a rank
between 54 and 107) is in mid green. None of the six countries manages to reach the
third (second highest) or top quartiles.

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Table 59: World Bank Governance Rankings for the six case study countries
Country Control of Rule of Law Regulatory Government Political Voice and
Corruption Quality Effectiveness Stability/No Accountability
Violence
Brazil 38 52 47 48 30 62
Colombia 44 41 67 54 14 50
Gabon 25 31 22 21 44 23
Indonesia 43 39 50 53 33 50
Liberia 26 18 16 8 26 43
Malaysia 62 71 75 76 50 33

Colour Code Bottom Second Third Top Quartile

Quartile Quartile Quartile

Source: World Bank Governance Indicators

Note: Rank out of 214 nations (high being good)

In every respect, other than “voice and accountability”, Malaysia has the best ranking.
The two African countries have the lowest rankings for the measures listed in the first
four columns. Where the palm sector is dominated by a very small number of visible
publicly quoted companies (as is the case in Gabon and Liberia), it is likely that the
ranking of the sector in terms of these indicators will be higher than the rankings for the
country as a whole.

Table 60 focuses upon the perceptions of corruption as published by 12 private rating

agencies and the World Bank. The two left hand columns indicate indices of corruption,
where 0 is a very poor performance (i.e., highly corrupt) and 100 is an excellent
performance (with no corruption). The rankings are listed in the opposite direction, with
a high rank, computed out of a total of 176 countries, being considered a poor outcome
(note that this is the opposite approach to that applied in

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Table 59).
In this case, all six countries are classified as lying within the two middle quartiles, where
the second quartile is rated lower (i.e., with higher corruption) than the bottom quartile,
and the third quartile is rated as better in terms of limiting corruption than the second
quartile. Malaysia and Brazil perform best in these rankings.

Table 60: Transparency International Corruption Ratings for the six case study
countries
Country Index 2015 Index 2016 Rank 2015 Rank 2016
Brazil 38 40 76 79
Colombia 37 37 83 90
Gabon 34 35 98 101
Indonesia 36 37 88 90
Liberia 37 37 83 90
Malaysia 50 49 54 55

Colour Code Bottom Quartile Second Quartile Third Quartile Top Quartile

Source: Transparency International

Note: These are the averages of corruption indices from 12 private rating agencies and the
World Bank
Rank out of 176 nations (a low rank being good); and Index (out of 100, a high value is
good)

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In summary, whilst direct information on legal enforcement in not available for the six
countries assessed, a combination of expert (local) opinion (Table 58) and indirect
indicators (

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Table 59 and Table 60) point towards a likelihood that laws pertaining to oil palm
cultivation may not be consistently enforced. The different indicators used do not paint a
wholly consistent picture, although Malaysia generally performs well on all three analyses
compared to the other countries. However, it should be noted that in all probability there
are companies in all countries that choose to be more compliant with laws and
regulations and others less so: thus highlighting the limitation of analysis of national-
level indicators.

8.5. Analysis of aspects of RSPO Standards left to national

jurisdictions; and summary and analysis of existing
initiatives relating to palm oil in the EU, individual EU
Member States, India & China

For the major producers we will examine how national interpretations differ from the
basic Principles and Criteria of the RSPO. This will be based on evidence provided by
RSPO, highlighting peat as a particular flash point. We will also review the use of
jurisdictional approaches, such as the IDH sustainable trade and other initiatives,
whereby an entire region (Sabah is mentioned as an early possibility) is certified.

We will then review the level of adoption of RSPO in the destination markets. First, for
non-energy use in the EU based on pledges to adopt the RSPO (or equivalent) by sectors
in key markets. Second, for energy-use by examining how the transposition in domestic
laws of the Renewable Energy Directive differs between different Member States. Finally,
we will also review some of the private sector pledges and public sector initiatives in the
other two major consumers India and China.

8.5.1. RSPO National Interpretations

The National Interpretations (NIs) adapt the generic P&C to make them operational
locally. The main variations lie in national laws and regulations (and definitions). In
general there is less variation on topics that are dealt with at an international level, such
as those relating to its HCV, United Nations and International Labour Organization (ILO)
rules.

Each National Interpretation Taskforce (NITF) seeks to deliver pragmatic guidance to oil
palm producers, processors and procurers on how to implement the RSPO P&Cs within a
producer country. The resulting NI must not conflict with the P&Cs but it may, in part,
differ from the generic guidance. The NITF identifies a list of applicable laws and
regulations, as well as new laws introduced or changes made to local legislation. RSPO
plantation members say they prefer using the NI rather than the generic P&C. This
means that multinational companies have to take into account differences in policy
guidance and definitions across different countries. In Table 61 we highlight where NIs
differ for five case study countries (Indonesia, Malaysia, Colombia, Gabon and Liberia).
Of our case study countries Brazil does not have a separate NI yet, only a local NI for
Agropalma.

There are differences in the extent to which countries take advantage of NIs. Indonesia,
Brazil and Liberia have the greatest number of additions in their NIs. Newer producers
like Gabon have fewer. In general, changes to the RSPO P&C are most frequent where
there are domestic laws to take into account. For example, virtually all countries have
their own NIs of criterion 5.3, about waste recycling, where countries have broader
national policies on such issues.

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A summary of the Principles and Criteria adopted in each of the six countries, together
with the details of the number of laws governing the national palm oil industry is
provided in
Table 62. An example of the differences in national applications of the RSPO P&Cs is
given by their application to soil, as may be gauged from the discussion in Appendix 12.

It is also possible for NIs not only to amend the P&Cs of the RSPO but also to add further
indicators. In Colombia’s case, for example, they have introduced six additional
indicators:

 6.7.2 Guidance for companies in taking appropriate measures if they become

aware of child and forced labour in their FFB supply chain.
 6.7.3 Evidence that children working in smallholders’ family farms are in the
education system.
 6.13.2 Progressive implementation of due diligence mechanisms to identify the
level of adherence of business practices to international human rights norms.
 6.13.3 Measures to ensure that hiring private security and surveillance services
does not involve people with criminal records, criminal investigations in progress, or
that have committed crimes against humanity.
 7.3.6 Socialising and training to employees about rare, threatened or
endangered species present in the region and their management plan within the
plantation.
 7.5.2 Due diligence mechanisms in land acquisitions.

Table 61: National Indicators added to the RSPO P&C 2013

Indonesia Malaysia Colombia Gabon Liberia Brazil
Criterion 1.1      
Criterion 1.2      
Criterion 1.3      
Criterion 2.1      
Criterion 2.2      
Criterion 2.3      
Criterion 3.1      
Criterion 4.1      
Criterion 4.2      
Criterion 4.3      
Criterion 4.4      
Criterion 4.5      
Criterion 4.6      
Criterion 4.7      
Criterion 4.8      
Criterion 5.1      
Criterion 5.2      
Criterion 5.3      
Criterion 5.4      
Criterion 5.5      
Criterion 5.6      
Criterion 6.1      
Criterion 6.2      
Criterion 6.3      
Criterion 6.4      
Criterion 6.5      
Criterion 6.6      
Criterion 6.7      
Criterion 6.8      

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 190 EN
 Indonesia Malaysia Colombia Gabon Liberia Brazil
Criterion 6.9      
Criterion 6.10      
Criterion 6.11      
Criterion 6.12      
Criterion 6.13      
Criterion 7.1      
Criterion 7.2      
Criterion 7.3      
Criterion 7.4      
Criterion 7.5      
Criterion 7.6      
Criterion 7.7      
Criterion 7.8      
Criterion 8.1      
Sum 28 19 19 9 24 27
Sources: Countries’ National Interpretations submitted to the RSPO

Table 62: National adoption of the RSPO’s P&Cs and the number of laws
governing the behaviour of the oil palm sector
RSPO P&C RSPO P&C Brazil Colombia Gabon Indonesia Liberia Malaysia
In 2013 2010 2016 2016 2016 2016 2015
Principle No. of Criteria Indicators Indicators Indicators Indicators Indicators Indicators Indicators
1 3 3 2 3 4 4 4 4
2 3 14 12 14 14 14 14 14
3 1 2 3 2f 2 2 2 2
4 8 41 52 41 41 41 41 41
5 6 17 24 17 18 17 17 17
6 13 36 26 40 36 36 36 37
7 8 23 19 25 23 23 23 23
8 1 1 1 1 1 1 1 1
Sum 43 137 139 143 139 138 138 139

No. of laws Brazil Colombia Gabon Indonesia Liberia Malaysia

Federal 1,066 86
State/Local 125 43
Total 1,191 556 59 213 44 129
Sources: Countries’ National Interpretations submitted to the RSPO and local legislation

8.5.2. Implementation questions

In terms of RSPO member compliance, Lord and Durhan (2013) 414, based on a review of
114 audits, found that growers complying with the RSPO P&C experienced the greatest
difficulties with criteria relating to four principles: Principles 2 (transparency, legal and
compliance), Principle 4 (water, chemicals, OHS & training, best management practices),
5 (HCV, waste, environmental) and 6 (social impact analysis, pay & conditions).

414
Lord, Simon and Katrina Durham (2013), 'Analysis of RSPO certification and surveillance audit
reports across Indonesia, Malaysia and the Rest of the World, Global Sustainability Associates',
March 2013, http://www.nbpol.com.pg/wp-content/uploads/downloads/2013/08/RSPO-Audit-
Report_all-v7B.pdf.

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Ambiguity arises in the implementation of RSPO rules as well as audit quality. There is an
RSPO Interpretation Forum, but companies being audited do not have access to this
resource. Instead access is restricted to certification bodies (CBs), auditors, and the
Accreditation Body to clarify any questions about RSPO standards, systems and
procedures. As CBs base their reports on the generic P&C, not the NI, those being
audited have to be very knowledgeable in the implementation and interpretation of the
NI. Part of the problem is that RSPO has a checklist based solely on the generic P&C.
These circumstances often result in differences between plantation company
understanding and the CB’s understanding of RSPO rules.415,416

Some RSPO plantation members faced a mini-crisis over auditing in the first half of 2016
after RSPO sanctioned several accredited auditors in January 2016 (after negative public
reports). Immediately two CBs or auditors were suspended for 6 months and 1 CB was
withdrawn from the RSPO’s approved CB list, forcing its clients to transfer to other CBs.
This “clean-up” followed a Wall Street Journal report on CBs’ alleged failures in auditing
migrant labour problems417 418. The subsequent review of CBs is said to have meant that
as many as half the certificates issued since the start of certification were affected and
that some reviews were needed as the original audits were queried. To avoid real
disruption to the RSPO certificate system, re-audits and re-issuances had to be done
within months.

Audit quality is a big issue for many certification systems including the Rainforest Alliance
and the ISCC. The ISCC reported that in 2015, deficits and non-conformities were
detected especially in GHG calculations, traceability and mass balance. This led to the
withdrawal of five certificates for companies and the issue of three “yellow cards” for
CBs. Forest Peoples Programme (2014) found that “(Community) outreach (by the RSPO)
is increasingly problematic owing to RSPO’s challenged reputation for upholding and
enforcing its standards.”419 Thus, RSPO and other sustainability schemes have faced
rising concerns about the quality of their implementation and have boosted their efforts
regarding audits.

415
In general, sustainability schemes are in a phase of improving their audit and implementation.
There is a contrast in their approaches to this. For example, the ISCC has a proactive in-house
unit, whilst the RSPO has a more hands-off approach and eschews internal policing (associated
with an active public complaints system).
416
Interview with sustainability implementation specialist, 5 July 2017.
417
ASI (2015), ASI-RSPO-PT. Mutuagung Lestari & CU-P&C Compliance/Investigation-Malaysia-
2015, 20 Oct 2015, http://www.accreditation-services.com/resources/document-
library/download-info/asi-rspo-complianceinvestigation-pt-mutuagung-lestari-cu-at-felda-
malaysia-2015.
418
Syed Zain Al-Mahmood, 'Palm-Oil Migrant Workers Tell of Abuses on Malaysian Plantations',
Wall Street Journal, 26 Jul 2015, https://www.wsj.com/articles/palm-oil-migrant-workers-tell-
of-abuses-on-malaysian-plantations-1437933321.
419
Forest Peoples Programme (2014), 'Intermediary Outreach and Engagement in Producing
Countries, Status Assessment and Outreach Plan, Report to the Board of Governors and
Secretary General of the Roundtable on Sustainable Palm Oil,' Forest Peoples Programme,
October 2014. This is an RSPO commissioned assessment of the status of RSPO’s capacity to
engage with communities impacted by palm oil development through ‘intermediary
organisations’. It asked for a plan to suggest how RSPO can enhance such outreach. Some
258 potential entities were interviewed across 21 countries.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 192 EN
8.5.3. Jurisdictional approaches

Landscape or jurisdictional approaches generally combine focus on performance at the

scale of a whole landscape or jurisdiction (i.e., local or national government). They are
multi-stakeholder, involving government working together with other stakeholders
towards one or more shared goals, activities and inputs that support sustainable
development (e.g., reducing deforestation, eliminating child labour or supporting
smallholders), and accountability to provide credibility and assurance, including long-
term governance and monitoring (Proforest, 2016).420

At the RSPO’s annual meeting in November 2016, there was a focus on efforts to include
governments (national and sub-national) in private-public efforts to incorporate the RSPO
standard. Although details are not yet available, traders in sustainable products expect
that the jurisdictional approach will be modified to deliver an “RSPO light” approach.
Hopes that governments can simply make current RSPO rules mandatory may not be
practical, in view of the importance of smallholders (with problems of compliance and/or
legality in several countries), except if group-certification options were made available.

RSPO was the leader in creating a governance platform for large palm oil corporations on
the premise that national governance has been insufficient to address consumers'
expectations and concerns related to palm oil production. The state does not have a
formal seat at its table, but state agency representatives have had roles in its Working
Groups. Since 2015, the RSPO has been trying to realign to the need to include
stakeholders in the government sector. RSPO optimistically said: “When a local
government agrees to RSPO certification guidelines, everyone, from large multinational
plantation owners to the tiniest smallholders, has to enter the programme” for its Sabah
and Central Kalimantan Jurisdictional Certification in October 2015 421 422 implying a hard
mandatory goal. RSPO’s jurisdictional programmes include:

 Sabah, Malaysia (2015). Making RSPO a legal requirement was mooted by Sabah
in November 2016 and again in December 2017. This was one of the RSPO’s
goals, but the final outcome reveals the difficulties the RSPO faces trying to
expand using a voluntary approach. What is now called the “Sabah Jurisdictional
Approach”423 still appears to be at the concept stage, probably evolving to cover
many commodities, with RSPO one of several interested parties. The goals
include: Sabah forests 100% sustainable certified by 2018; Sabah oil palm to be
100% RSPO-Certified sustainable by 2025; Sabah's terrestrial totally protected
areas to cover 30% of total land area by 2025; and a budget of over US$5 million
was indicated.

420
Proforest (2016), 'Introduction to landscape or jurisdictional initiatives in commodity
agriculture', August 2016,
http://www.proforest.net/en/publications/proforest_landscape_approaches_introductionaug20
16_web.pdf, accessed 6 July 2017.
421
RSPO (2015), 'RSPO-Certified palm oil could become the norm in Sabah, Kalimantan', RSPO,
30 October 2015, http://www.rspo.org/news-and-events/news/rspocertified-palm-oil-could-
become-the-norm-in-sabah-kalimantan, 6 July 2017.
422
RSPO (2015), 'Central Kalimantan announced jurisdictional certification for sustainable palm
oil', RSPO, 26 Jun 2015, https://www.rspo.org/news-and-events/news/central-kalimantan-
announces-jurisdictional-certification-for-sustainable-palm-oil, 6 July 2017.
423
Payne, John (2016), 'Introduction to the Sabah Jurisdictional Approach for Sustainable Palm
Oil Production', RSPO 14th Roundtable Meeting, Bangkok, Thailand,
http://rt14.rspo.org/ckfinder/userfiles/files/PC4_4_2%20Datuk%20Dr%20John%20Payne.pdf,
accessed 7 July 2017.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 193 EN
  South Sumatra, Indonesia (2015): Working with IDH424, the example of Musi
Banyasin in South Sumatra Province illustrates the multi-crop interests (palm oil &
palm kernel oil, pulp & paper, soybeans, rice, rubber, coconuts, palm sugar and
nipah palm) of the area’s administrators. The district’s area of 1.4 million hectares
has 0.44 million of oil palm, 0.70 million of forest areas and 0.28 million of peat
areas425.
 Other regions revealing a strong interest in the jurisdictional approach include
Central Kalimantan, Indonesia (2015)426 and Ecuador (2017)427.
 Alternative approaches developed in different regions at a broader level include
The Marrakech Declaration (2016), which saw several West and Central African
palm producers promise mandatory company-level policies with commitments for
a WWF-led zero net deforestation concept. Seven (out of 10 hoped for) producer
nations signed up to the declaration.428 It is part of the Tropical Forest Alliance
2020, Africa Palm Oil Initiative, coordinated by Proforest 429. Proforest explained
that RSPO was seen as insufficient coverage and there was a need to “raise the
floor” (of sustainability practices). RSPO says it is keen to support this, and
would: "Promote appropriate, responsible and transparent investments in the oil
palm sector that adhere to this Declaration and adopt international best
agricultural and environmental practices and promote palm oil certification, such
as The Roundtable on Sustainable Palm Oil (RSPO) Certification Standard." 430
 IDH431 Sustainable Trade Initiative focuses on South Sumatra, West Kalimantan
and Aceh. It aims to bring stakeholders together, both private sector and local
and national governments. South Sumatra’s aim is jurisdictional certification
under RSPO; West Kalimantan and Aceh both have a “green growth” strategy432
433
.

424
IDH (2016), 'Landscapes in Indonesia that IDH supports: Aceh, South Sumatra & West
Kalimantan', IDH, 13 Dec 2016, https://www.idhsustainabletrade.com/news/3765/.
425
Hernedi, Beni (2016), ‘What does Jurisdictional Certification Mean for Musi Banyuasin’,
http://rt14.rspo.org/ckfinder/userfiles/files/PC4_3%20Beni%20Hernedi.pdf.
426
RSPO (2015), 'Central Kalimantan announced jurisdictional certification for sustainable palm
oil', RSPO, 26 Jun 2015, https://www.rspo.org/news-and-events/news/central-kalimantan-
announces-jurisdictional-certification-for-sustainable-palm-oil, 6 July 2017
427
RSPO (2017), 'Ecuador takes a giant step towards Certified Sustainable Palm Oil Production',
RSPO, Mar 2017, http://www.rspo.org/news-and-events/news/ecuador-takes-giant-step-
towards-certified-sustainable-palm-oil-production.
428
Central African Republic, Côte d’Ivoire, Democratic Republic of Congo, Ghana, Liberia, the
Republic of Congo and Sierra Leone
429
Proforest (2016), Marrakesh Declaration signed at COP22, Proforest, 18 Nov 2016,
http://www.proforest.net/en/news/marrakesh-declaration-signed-at-cop22.
430
Tropical Forest Alliance 2020 (2016), 'Tropical Forest Alliance 2020 Marrakesh Declaration for
Sustainable Development of the Oil Palm Sector in Africa Signed at the UN Framework
Convention on Climate Change Twenty-Second Session of the Conference of the Parties', Bab
Ighli, Marrakesh, Morocco, 16th November 2016, https://www.tfa2020.org/wp-
content/uploads/2017/04/TFA2020_Marrakesh_Declaration_post-embargoed.pdf.
431
IDH stands for Initiatief Duurzame Handel, Dutch for Sustainable Trade Initiative.
432
IDH (2016), 'Landscapes in Indonesia that IDH supports: Aceh, South Sumatra & West
Kalimantan', IDH, 13 Dec 2016, https://www.idhsustainabletrade.com/news/3765/.
433
Personal communication with EU Delegation in Jakarta (2018): The 2017 Balikpapan
Statement is built on the understanding that national governments and many companies have
made commitments to reduce both deforestation and greenhouse gas emissions. The
Balikpapan Statement is a multi-phase process, and includes three main pillars: (1)
sustainable commodities; (2) financing; and (3) indigenous communities. The Statement is
supported by 7 Governors out of the 18 provinces that produce palm oil in Indonesia

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 194 EN
  Oxfam Fair Partnerships is a further form of landscape approach 434.

8.5.4. Outlook

The new jurisdictional and landscape approaches represent a policy evolution for
production areas that existing sustainability schemes and some NGOs are favouring.
Some are said to have very few (4 or 5) sustainability indicators and so there are
questions about their breadth of policy coverage, and how they will measure indicators or
performance. These are still only concepts, and are some distance from being
operational435.

Part of the impetus for these approaches is about the need to work with governments to
extend the impact of sustainability schemes since the RSPO only has 20% reach
worldwide, and it is difficult to include smallholders. There is hope for jurisdictional RSPO
certification, but this is still some way off as the RSPO’s lead programme in Sabah still
lacks a detailed plan.

That the Sabah administration is mooting legislative change to make RSPO a legal
requirement underlines the limits of voluntary support. Indeed, Paoli et al. (2016) says:
“We found limited evidence of support among local political leaders for measures that
would significantly change (business as usual) practices in the palm oil sector to reduce
deforestation. In general, governors and district heads (apart from a few progressive
leaders) have limited knowledge of emerging industry sustainability efforts or new legal
provisions designed to improve governance in the sector. Most leaders view such efforts
with indifference or see them as threatening to the political and economic status quo….
Our discussions with experts inside and outside government lead us to believe it’s
unlikely that genuine support from a political leader for a comprehensive JP could be
obtained solely by offering extra-governmental financial incentives (such as through
REDD+ or improved access to markets). Such incentives would probably not be large
enough or sufficiently dependable over time to outweigh political and other benefits
generated by current palm oil driven economic development models. Formal legal carrots
and sticks, backed by transparent accountability mechanisms and enforcement, would be
needed to augment such incentives.”436

8.5.5. Sustainability initiatives at destination markets

We review the EU legislative and voluntary approaches. Broadly, recent European data
indicate a 23-30% RSPO certification ratio for the EU overall (both non-energy and
energy). The RSPO has been unable to gain market share with its RSPO-RED
certification, as the energy sector is dominated by the ISCC. We then review
sustainability initiatives in China and India.

434
Source: https://policy-practice.oxfam.org.uk/publications/fair-companycommunity-
partnerships-in-palm-oil-development-317155
435
Interview with sustainability specialist.
436
Paoli et al. (2016), 'Jurisdictional Approaches to Reducing Palm Oil Driven Deforestation in
Indonesia', Paoli, Gary, Blair Palmer, Jim Schweithelm, Godwin Limberg and Lindsay Green,
Daemeter Consulting, Nov 2016,
http://daemeter.org/new/uploads/20161105170630.Daemeter_JA_2016_Full_Report_ENG.co
mpressed.pdf, accessed 6 July 2017.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 195 EN
8.5.5.1. EU legislative approach (energy uses) – The EU Renewable
Energy Directive (RED)

The European Commission has outlined three main criteria for biofuels and bioliquids to
be considered ‘sustainable’ under the EU RED: a greenhouse gas (GHG) savings target;
biofuel feedstocks cannot be grown in areas converted from land with high carbon stock;
and biofuels cannot be produced from raw materials obtained from land with high
biodiversity value, such as primary forests or highly biodiverse grasslands.

As of July 2017, 15 voluntary certification systems have been recognised by the EC for
the purposes of demonstrating compliance with the EU RED sustainability criteria.
Schemes are recognised for a period of 5 years. However, some of these schemes are
restricted to certain geographical regions, certain types of feedstock or cover only part of
the supply chain. Some schemes do not cover calculation of actual GHG savings. The
RED allows biofuel suppliers either to apply actual GHG savings values or default GHG
savings. Whichever value is higher will be used to maximise the size of the GHG saving.
From 2017, the minimum GHG saving vs. fossil fuels specified in the RED is 50% and for
new plants starting from 2017, the saving by 2018 must be 60%. For palm biodiesel, the
default value is significantly lower (19%) than typical savings (36%). The gap between
the two narrows if methane capture is used at the palm oil mill, the default value is 56%
and the typical value is 62%. This will enhance the appeal of methane capture at oil palm
mills that produce certified CPO.

The consequence of ‘default’ GHG savings values being applied is that, although RSPO is
the most important form of certification for sustainable palm oil used in the food sector,
it has found virtually no market in the EU palm biodiesel sector. In addition, RSPO-RED
only covers palm oil as a feedstock, which gives biodiesel producers limited flexibility to
blend vegetable oil from other feedstocks. This would require an additional form of
certification. The dominance of ISCC in the EU biodiesel market has enabled it to match
the palm oil tonnage of RSPO, which is concentrated in food-use.

The European Commission has in the recast of the Renewable Energy Directive post 2020
(REDII) proposed the abolition of the renewable energy target in the transport sector,
and a gradual phase out of food-based ‘conventional’ biofuels, while it proposes to focus
on the increased use of 2nd and 3rd generation biofuels and other low carbon fuels.
Germany has already applied this approach, and it is to be expected that this will soon be
adopted more widely within the EU, which will also enhance the appeal of methane
capture at oil palm mills that provide certified CPO.

The Commission RED II proposal builds on the ILUC directive, which introduced a cap of
7% on the contribution of conventional biofuels towards the 10% renewable energy
sources (RES) target.

8.5.5.2. Voluntary initiatives in the EU (non-energy uses)

Progress reports by some EU countries are starting to shed more light on the adjustment
of these supply chains for other markets than biofuels. In this section, we review this in
more detail.

National Commitments437 are worded as “RSPO or equivalent”, where RSPO (non-energy

coverage), and its equivalents include the ISCC (energy and non-energy) and non-

437
RSPO (2017), ‘National commitments’, http://www.rspo.org/certification/national-
commitments, accessed 3 July 2017.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 196 EN
certification traceability (non-energy, with NDPE pledge that needs public reporting of
product GHG emissions).

Europe is the leading region for sustainable palm oil use and country initiatives emerged
in the run up to 2015 pledges made by individual companies and organisations to
achieve certified sustainable palm oil use in the EU. There have been problems in keeping
to original company and country pledges, and therefore 2015 turned out to have been a
soft deadline. 2020 is now regarded as the new hard deadline. Following on from the
failure to meet the 2015 targets, the Amsterdam Declaration on Palm Oil (December
2015) was signed by some Member States in support for the Amsterdam pledge by
businesses for the full achievement of the use of RSPO certified or equivalent palm oil
certification by 2020 (See Section 8.3.1 and Appendix 7 for more information on the
Amsterdam Declaration). As pledges tend to occur by end-use sub-sectors (which faced
varying pressure on sustainability compliance, e.g., low for the catering and animal feed
sectors and high for baked goods), the overall coverage has been incomplete.

FEDIOL, the European oilseed sector federation, reports that its members (mostly
processors) in 2016 used 3.59 million tonnes (over half) of the EU's palm oil (or 6.2% of
world palm oil), representing almost the entire non-energy EU tonnage. Their certified
tonnage was 60%, up from 46% in 2014 and 58% in 2015. For palm kernel oil the
certified share was 52% in 2016 (up from 32% in 2014 and 42% in 2015). The reporting
was confined to the physical chain of custody i.e., MB, SG or IP, thus excluding book &
claim).

The MB share for palm oil rose from 9% in 2014 to 16% in both 2015 and 2016, while
the SG/IP share increased from 37% to 42% to reach 44% in 2016. For PKO, the MB
share went from 3% to 4% to 8% and the SG/IP share from 29% to 38% to 44% over
the same three years. 96% of the total palm and palm kernel oil use was traceable in
2016, up from 56% in 2014 and 82% in 2015.

A high degree of market concentration and sensitivity to potential criticisms may have
helped to boost the demand for certified palm products within the EU. Certified palm
products may be expected to capture a larger market share in those sectors with a
higher degree of concentration, such as food retail (which is dominated by three or four
large supermarket chains in many countries, although against this, sustainability pledges
currently cover only their own brand/own label products). Other palm oil end-use sectors
with a high degree of concentration are feed (sustainability has not been a priority in this
market) and home and personal care (which seems to favour non-certification
traceability due its more complicated value-chain). Sub-sectors with a high degree of
sensitivity about sustainability include chocolates and baked goods.

We next present as a case study the uptake in the Netherlands of sustainable palm oil in
the food sector (see Figure 35 and

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 197 EN
Figure 36).

Case study: the food sector in the Netherlands

Figure 35 and

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 198 EN
Figure 36 plot the status and progress of the Dutch food sector (domestic and for
exports) towards the use of certified sustainable palm oil. The data refer to RSPO
certification, which rose to 72% in 2014. Food is about 300.000 tonnes per year of the
total 1.2-1.5 million tonnes of palm oil processed per annum for all applications (energy
and non-energy).

Figure 35: Dutch food industry certified sustainable palm oil demand

350 75%

280 60%

210 45%

140 30%

70 15%

0 0%
2011 2012 2013 2014
Conventional PO Certified sust ainable PO Percent age sustainable PO
Source: Report by Dutch food industry.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 199 EN
Figure 36: Dutch food industry certified sustainable palm oil progression

350 75%

280 60%

210 45%

140 30%

70 15%

0 0%
2011 2012 2013 2014
Conventional PO Certified sust ainable PO Percent age sustainable PO

Source: Report by Dutch food industry.

8.5.5.3. China and India – voluntary efforts

After reviewing the progress in the EU we turn to China and India the other major palm
oil importing markets. The WWF (2016) reports that: “(In 2013) European brands were
well ahead of their competitors in the rest of the world in sourcing CSPO. By 2015,
Australian and US brands had caught up or even surpassed them. Companies in Japan
are also progressing, although slowly. Unfortunately we still see very little progress by
brands elsewhere in Asia. Awareness of sustainability issues among the industry using
palm oil is low even in countries that produce and consume it in large volumes, like
Indonesia and Malaysia.... The European and US markets are progressing well on shifting
to CSPO. But the Asian markets – particularly India and China, which each consume as
much or more than the whole of Europe and where demand is increasing year on year –
are lagging way behind. These markets will shift to CSPO only when global brands start
treating their consumers in Asia with the same respect they give consumers in their
home countries. That means using CSPO in all products produced for and in Asia, and
indeed globally.”438

The main markets for certified palm oil are likely to be those with most certified facilities.
These are in the EU (

438
WWF (2016), 'Sustainable palm oil in China and India', Palm Oil Buyers Scorecard, 2016,
accessed 6 July 2017.
http://awsassets.panda.org/downloads/wwf_palm_oil_scorecard_2016_1.pdf

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 200 EN
Figure 37). The number of RSPO SCCs in China and India has lagged well behind EU
sustainable supply-chain development.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 201 EN
Figure 37: RSPO Supply Chain Certified (SCC) facilities, 2015

39 other countries
Russia
Papua New Guinea
Colombia
Mexico
Greece
Brazil
New Zealand
Portugal
Singapore
Japan
Sweden
Denmark
Canada
India
Thailand#
Switzerland
China
Poland
Ireland
United States
Austria
Spain
Australia
Malaysia#
Indonesia#
Belgium
Italy
France
Netherlands
Germany
United Kingdom

No. of SC C facilities (single and group) by country

No. of RSPO SCC certificates

Note: # Indonesia, Malaysia and Thailand SCC facilities are export-oriented.

Developments in China

Interviews with Chinese processors reveal the slow development of the market. One
processor used the RSPO Mass Balance supply chain at two factories to supply foreign
food and home and personal care (HPC) brands, but saw no need to add more certified
facilities. It felt that the RSPO was not well marketed in China; and had not heard of
traceability programmes. Unless the government supported sustainability initiatives, it
felt local factories see no need to do so439.

These findings are reiterated by the WWF (2016): “China is the world’s second largest
importer of palm oil. The little sustainable palm oil it imports is driven by demand from
multinationals for incorporation into the goods they manufacture there. Domestic
companies have still to make the same commitments” 440.

The largest palm oil importer into China is Wilmar. It offers non-certification TFT
traceable product as well as RSPO certified material, depending on market demand.
Some major RSPO members in China, McDonald’s and KFC included, are moving away
from palm oil use, undermining their demand for sustainable palm oil in China441 442.
WWF noted that “A range of roundtable discussions on sustainable palm oil in China have

439
Based on interviews by LMC International Ltd in late 2015.
440
WWF (2016), 'Sustainable palm oil in China and India', Palm Oil Buyers Scorecard, 2016,
http://awsassets.panda.org/downloads/wwf_palm_oil_scorecard_2016_1.pdf.
441
Wang, Fan (2016), 'McDonald's to use blended oil in China for healthier diet', ECNS Wire, 5
July 2017, http://www.ecns.cn/cns-wire/2016/07-15/218470.shtml.
442
Yum Brands (2017), Palm Oil, Yum Brands, http://www.yumcsr.com/food/nutritional-
improvement.asp#palmOil, accessed 6 July 2017.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 202 EN
been facilitated by Solidaridad, WWF and other stakeholders…Some key domestic palm
oil buyers such as COFCO, Julong and Sinograin have joined the RSPO. Since the last
Scorecard was published in 2013, Chinese RSPO membership has grown from 17 to 52
companies as of 30 June 2016… The RSPO has established a presence in China.” 443

COFCO, Fangshun, Julong, Sinograin and Wilmar belong to the China Sustainable Palm
Oil Working Group (POWG) that was launched at the end of 2015 444. A ‘Guide for
Overseas Investment and Production of Sustainable Palm Oil by Chinese Enterprises” was
drafted by the China Chamber of Commerce of Foodstuffs and Native Produce (CFNA) as
part of a China-UK Collaboration on International Forest Investment and Trade 445. This
applies to China investments in palm oil overseas, and gives guidance to China
enterprises so that their output is consistent with global standards including the RSPO.
Chen (2016) estimated that Wilmar imported 50,000 tonnes of RSPO certified oil into
China in 2015.

India

In 2015, an Indian refiner reported that very little RSPO certified palm oil or products
was being imported into India. A global consumer goods manufacturer asked suppliers to
furnish traceability information, and did not insist on RSPO certified methods. At the time
there were probably two Indian importers buying RSPO GreenPalm Certificates and some
RSPO Mass Balance products. As long as sustainability remained optional, Indian users
had little pressure to support it 446. These findings are reiterated by the WWF (2016):
“Progress on sustainability in India can ultimately be measured by the volume of physical
supply of CSPO entering the Indian market. So far, that figure is negligible” 447.

A leading Indian agribusiness commentator concurred when he wrote in 2017: “Are palm
oil producers ready to face the challenge of cracking the Indian market open for
sustainable palm oil? After all, India is a highly price-conscious market with little
knowledge about or care for sustainable products”448. As in China, Wilmar and its local
partner are major palm oil importers and there is no problem in the supply of non-
certification TFT traceable products or RSPO certified material. However, market demand
is insufficient449. A greater concern is basic food safety. Food safety inspections in India
and Pakistan have found some (palm and other) cooking oil and fats that were deemed
to be unfit for consumption.

443
WWF (2016), 'Sustainable palm oil in China and India', Palm Oil Buyers Scorecard, 2016,
http://awsassets.panda.org/downloads/wwf_palm_oil_scorecard_2016_1.pdf.
444
Solidaridad (2016), 'Chinese delegation to Indonesia signals growing demand for certified
sustainable palm oil', Solidaridad, 2 Dec 2016,
https://www.solidaridadnetwork.org/news/chinese-delegation-to-indonesia-signals-growing-
demand-for-certified-sustainable-palm-oil, accessed 6 July 2017
445
LTS International (2014 - 2018), 'China-UK Collaboration on International Forest Investment &
Trade (InFIT)', LTS International, http://www.ltsi.co.uk/projects/china-uk-collaboration-on-
international-forest-investment-trade-infit/, accessed 6 July 2017.
446
Based on interviews by LMC International Ltd in late 2015.
447
WWF (2016), 'Sustainable palm oil in China and India', Palm Oil Buyers Scorecard, 2016,
http://awsassets.panda.org/downloads/wwf_palm_oil_scorecard_2016_1.pdf.
448
Chandrashekhar, G (2017), 'Is India ready for sustainable palm oil?' The Hindu Business Line,
20 Feb 2017, http://www.thehindubusinessline.com/opinion/sustainable-palm-oil-in-indian-
market/article9552111.ece, accessed 6 July 2017.
449
Adani Wilmar (2017), About Us, Adani Wilmar (website), http://www.adaniwilmar.com/about-
us, accessed 7 July 2017.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 203 EN
Sustainability-related efforts include attempts to lobby for a customs duty rebate that
RSPO products might enjoy. Meanwhile, some Indian firms have formed the “Sustainable
Palm Oil Coalition”, a domestic palm oil coalition that has so far focused on lobbying the
government to support sustainable palm oil purchases. Led by Godrej, Greenpeace,
Hindustan Lever, Ruchi, VVF and WWF-India, the group aims to boost the use of certified
sustainable palm oil through a proposal that the government extend a customs duty
rebate for all palm products, backed by RSPO certificates. Alternatively, they suggested
that the government provides a subsidy to importers of up to 50-75% of the cost of
RSPO certificates450.

The WWF reported in 2016 that “All CEOs of major Indian buyers of palm are aware of
both the sustainability issues linked to palm oil and the RSPO, and have directly engaged
with WWF and other NGOs on the subject... Since 2011, membership of Indian
companies in the RSPO has increased substantially, going from eight to 46 companies as
of May 2016. Another significant development has been the growth in the number of
RSPO supply chain certified companies...Although full commitments to sustainable palm
oil by Indian companies are not common, the recent round of RSPO ACOP reporting
showed that, in addition to the commitments of multinational companies, the likes of
Adani Wilmar, VVF Limited and Godrej have all made time-bound commitments to
sustainable palm oil...2015 saw the establishment of a permanent RSPO presence in
India.” 451

The Solvent Extractors' Association of India (SEA) has tied up with Solidaridad to develop
a sustainability framework for India, since the local environment and farming practices
differ from Indonesia and Malaysia. India produces just 200,000 tonnes of palm oil and
imports nearly 9 million tonnes per annum. 452

8.5.6. Conclusions

There are two main sub-sectors of certified sustainable palm oil, i.e. energy and non-
energy: for non-energy uses, the RSPO certification system and non-certification
traceability by TFT are the leading schemes; for energy uses, the ISCC (EU-RED
emissions reductions-based) scheme dominates.

Adding to this complexity are the many differences by country in RSPO National
Interpretations. These are mostly because the Principles and Criteria of the RSPO have to
be adapted to take into account local laws, and this can be compounded by differences in
technical assessments in different countries, e.g., this appears to be the case in dealing
with soil, as a comparison of Indonesia and Malaysia reveals.

Confusion over National Interpretations has created problems with the RSPO auditing
process, as auditors may not be aware of local National Interpretations. In addition,
auditees are not given access to the same resources as the auditors, making it difficult
for them to understand the requirements. Finally, the RSPO recently suspended a
number of auditors, causing alarm among members.

450
WWF (2011), 'Palm oil in India', WWF Palm Oil Buyers Scorecard, 2011,
http://wwf.panda.org/what_we_do/footprint/agriculture/palm_oil/solutions/responsible_purch
asing/palm_oil_buyers_scorecards/scorecard2011/markets/india/.
451
WWF (2016), 'Sustainable palm oil in China and India', Palm Oil Buyers Scorecard, 2016,
http://awsassets.panda.org/downloads/wwf_palm_oil_scorecard_2016_1.pdf.
452
Reuters (2016), 'India to develop its own palm oil sustainability framework - trade body',
Reuters, 4 Oct 2016, http://in.reuters.com/article/india-palm-idINKCN1241AZ.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 204 EN
The RSPO is actively involved in developing jurisdictional approaches, giving rise to
concern that this could reduce standards. As a voluntary system, the RSPO cannot simply
require that its Principles and Criteria be adopted: consequently attempts to expand have
required the RSPO to deal more closely with governments. The state of Sabah has
contemplated making RSPO a legal requirement, but it has proposed expanding its scope
to include multiple crops and other sustainability indicators. There are fears that this
could lead to a decline in RSPO standards, particularly because there is a lack of support
from politicians in producer countries about taking actions that would disrupt the status
quo.

At the same time alternative approaches have been developed in different regions such
as the Marrakech Declaration and the IDH Sustainable Trade Initiative.

Europe remains the leading market for sustainably sourced palm oil but progress on
Member States’ and companies’ pledges has been slower than anticipated, apart from in
the energy sector. While certified sustainable palm oil has been widely accepted in high
priced food sectors, such as baking, in less visible and more price sensitive sub-sectors
(such as catering and animal feeds) progress has been slow. Having missed their targets
for 100% certification by 2015, several EU governments have adopted the Amsterdam
Declaration, which aims to achieve full RSPO certified or equivalent palm oil usage by
2020.

The penetration of sustainable palm oil in India and China is growing but remains limited,
principally due to weak demand for certified products. Only a small number of facilities
are certified in India and China and interviews reveal that there is limited demand for
sustainable palm oil.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 205 EN
8.6. Review of voluntary initiatives and commitments relating to
palm oil in the public and private sectors

8.6.1. Introduction

As can be seen from previous sections, multiple public policies, laws and regulations and
enforcement regimes have emerged (some successful, others less so), to enhance
sustainability in the development of the palm oil sector from both a production and a
consumption perspective. Sitting inside these evolving policy or regulatory landscapes –
and often challenging them to do more, better and at a faster pace - are an increasing
number of public, NGO and private-sector-driven initiatives and commitments. This has
been driven by a growing global acknowledgement of the risks that social injustice and
environmental issues, like climate change, biodiversity and soil loss, water scarcity and
air pollution, present within the sector.

The 2000s and 2010s have delivered a range of different initiatives and commitments to
improve the governance, transparency and sustainability performance of the palm oil
sector and those working in it or buying from it. This has included action by 11 European
countries, who have established some form of sustainable palm oil commitment at the
national level, and three more countries will potentially introduce one (Esselink and van
der Wekken, 2015)453 454.

In the last five to ten years in particular, a new wave of palm oil-related sustainability
initiatives and commitments have emerged in response to growing pressure to eliminate
deforestation, peatland conversion and worker exploitation, often driven by a relatively
small number of international and local advocacy groups, including large international
environmental NGOs like Greenpeace. The underlying message from these groups was
simple and aimed to achieve what, in their view, the RSPO and other certification
schemes had failed to do: stop the deforestation of biodiverse and carbon-rich primary
and secondary forests and peatlands. These campaigns targeted major oil palm traders
such as Wilmar, GAR, Musim Mas, Cargill, Asian Agri and Astra Agro. This movement
spurred the announcement of more recent commitments that differed from past
sustainability policies from major producers and traders in that they were applied not
only to their direct operations but also to those of their third-party suppliers for the first
time (Pacheco et al 2017).

There are a number of reasons cited by organizations as drivers for establishing

voluntary initiatives and commitments, including (adapted from Pacheco et al, 2017,
Brack, D. & Gregory, M., 2017455, Gnych, SM et al, 2015456 and Consumer Goods Forum

453
Esselink E and van der Wekken D. 2015. Sustainable palm oil in Europe: The national
initiatives approach. In European Palm Oil Conference. Milan, Italy. 29 October 2015,
European Palm Oil Alliance.
454
The 11 European countries that had made sustainable palm oil commitments at this time
were: the UK, the Netherlands, Denmark, Norway, Sweden, Belgium, France, Italy,
Switzerland, Austria and Germany. This considering commitments were: Luxembourg, Spain
and Poland.
455
Brack, D. & Gregory, M. - Company Promises – How businesses are meeting commitments to
end deforestation (FERN, March 2017).
456
Gnych, SM, Limberg, G and Paoli, G. 2015. Risky business: Motivating uptake and
implementation of sustainability standards in the Indonesian palm oil sector. Occasional Paper
139. Bogor, Indonesia: CIFOR.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 206 EN
2017)457:
 Demonstrating industry leadership;
 The need to respond to issues of growing public and government concern, including
deforestation, climate change and sustainability;
 The need to respond to – and engage with – NGOs whose advocacy campaigns
were/are undermining consumer and investor relationships;
 Pressure from customers in the supply chain (e.g. sustainable sourcing policies
requiring certification and/or collaboration);
 Minimizing and managing future corporate and supply chain risks (e.g. to brand and
reputation, security of supply, improving supplier relationships);
 The personal commitment of the CEO of the organization;
 Real or perceived weaknesses in the requirements, operation or outcomes from
existing palm oil sustainability certification schemes;
o E.g. in their principles and criteria or in critical definitions like those for High
Conservation Value areas within plantations;
o E.g. certification can stop at the farm gate, does not consider landscape-level
pressure factors that lead to deforestation, and does not include all stakeholders
needed (especially government) to tackle this issue;
 Real or perceived lack of market share gained by palm oil certification schemes
leading to a reduction in the ability of these schemes to affect positive change (see
Section 8.2);
 A lack of demand pull for certified sustainable palm oil in some major consumer
countries like China and India; and
 Other intangible benefits – e.g. improvements in employee recruitment and retention.

8.6.2. Methods

A structured desk-based literature review was undertaken to identify and, where

possible, evaluate the effectiveness and impact of high profile voluntary initiatives and
commitments in the public, private and environmental NGO sectors against the
environmental, social and economic aspects of palm oil that are of interest to the
Commission; and to gain a better understanding of the role these initiatives and
commitments may play in supporting the delivery of EU and UN policy objectives relating
to palm oil. Where possible case studies were also used to illustrate the range and
effectiveness of different voluntary initiatives and commitments.

The literature review included the collection and analysis of voluntary initiatives and
commitments at different scales:
 Initiatives and commitments made by or through international organisations, regional
governmental bodies and institutions – e.g. the Consumer Goods Forum’s 2020 Zero
Net Deforestation Commitment, which will be achieved through the responsible
sourcing of key commodities, such as palm oil, soy, beef and paper458; and the New
York Declaration on Forests.

457
Consumer Goods Forum – Implementing and scaling-up the CGF Zero Net Deforestation
Commitment (accessed on 25 June 2017).
458
For more information, please see:
http://www.theconsumergoodsforum.com/sustainability-strategic-focus/sustainability-
resolutions

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 207 EN
 Intra-regional initiatives and guidance – e.g. the European Sustainable Palm Oil
(ESPO) initiative, EPOA (European Palm Oil Alliance) and ESPOAG (European
Sustainable Palm Oil Advocacy Group).
 The policies, strategies and commitments adopted by relevant international and
national industry bodies and trade associations, whose members are end users of
palm oil – e.g. MVO – The Netherlands Oils and Fats Industry, FONAP (Forum on
Sustainable Palm Oil) and FASPO (French Alliance for Sustainable Palm Oil).
 Individual corporate sustainability and CSR initiatives and reports – e.g. commitments
from major producer companies and retailers to produce or source palm oil
responsibly and sustainably, including reports on the progress they are making and
the partnerships they have formed.
 Media reports and coverage relating to the above and other examples in the
marketplace.

This review includes consideration of a number of different types of voluntary initiatives

and commitments and, in some cases (where they are relatively mature), how they have
evolved over time, including:
 Those developed in major palm oil producer and consumer countries;
 Those developed to tackle a single issue of concern (e.g. deforestation or land tenure
rights) or that cover multiple environmental and social issues;
 Those involving different actors in the palm oil supply chain (e.g. producer companies,
food manufacturers and retailers);
 Those involving single companies or organisations and those seeking to harness the
added impact of working as a group or collective; and
 A range of different objectives, goals and foci – e.g. collective action on deforestation
and biodiversity loss versus the creation of definitive maps of areas of high
conservation value (HCV) or high carbon stocks (HCS).

Where possible, we assess the key characteristics of these initiatives and commitments
and provide a description of the:

 Organisations and individuals involved them;

 Logic and drivers behind them;
 The geographies and end use sectors that they cover;
 The different response types in play – e.g. the use of purchasing policies, industry
commitments and targets, NGO ‘naming and shaming’, etc.; and
 Their likely impact and legitimacy, including whether and how the scheme or initiative
is measured, monitored and reported (internally or externally) and by who.
The findings from the literature review were then validated and supplemented with
reference to a number of existing reports and survey’s and through a series of
discussions and interviews with those responsible for establishing the initiatives and
commitments identified during the review, those actively involved in delivering them and
both internal (e.g. in-house policy, sustainability, technical and supply chain teams) and
external stakeholders monitoring their progress.

The analysis also takes account of emerging trends amongst these initiatives and
commitments and the changing views of end users of palm oil.

Finally, to provide some structure for the analysis, we have segmented these initiatives
and commitments into four main types as can be seen in Figure 38 below, covering group

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 208 EN
initiatives, individual initiatives, finance and investment support and platforms that can
be used to improve transparency, share information and support the progress reporting
of initiatives.

• e.g. CGF, NYDF, • e.g. Unilever,

TFA 2020, INPOP, Nestle, M&S,
ESPO, EPOA, Ferrero, Danone
ESPOAG, FONAP,
FASPO, etc.

Group Individual
Ini a ves Ini a ves

Finance &
Suppor ng
investment
pla orms
support
• e.g. WRI Global • e.g. IDH PPI
Forest Watch, ZSL Compacts; UN
SPOTT REDD+; LFTLF

Figure 38: typology of the main forms of voluntary initiative

Key: CGF (Consumer Goods Forum Zero Net Deforestation By 2020 Commitment; NYDF (New York Forest
Declaration); TFA 2020 (Tropical Forest Alliance 2020); INPOP (Indonesia Palm Oil Platform); ESPO (European
Sustainable Palm Oil); EPOA (European Palm Oil Alliance), ESPOAG (European Sustainable Palm Oil Advocacy
Group), FONAP (Forum on Sustainable Palm Oil), FASPO (French Alliance for Sustainable Palm Oil), M&S (Marks
and Spencer); WRI (World Resources Institute); ZSL SPOTT (Zoological Society of London, Sustainable Palm Oil
Transparency Toolkit); PPI Compacts (Production, Protection & Inclusion Compacts); UN REDD+ (UN
Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing
Countries); LFTLF (Landscape Fund for Tropical Landscapes and Forests).

8.6.3. Public and private sector, NGO and collective voluntary

initiatives and commitments

This section starts by reviewing some of the more high profile group and individual
initiatives including their scope of implementation and outcomes, noting that some are at
an early stage and it is still too early to assess their likely impact. It then describes some
of the recent financial and investment initiatives and data and reporting platforms that
have emerged to support them. The section concludes with a review of the general state
of play with reference to a small number of publicly available analyses of the progress
being made under voluntary initiatives and commitments.

Examples of high profile group initiatives and collective commitments

Group initiatives and commitments can take many forms (e.g. collective targets, trade
and investment financing and incentives, supply chain partnerships, technology
platforms) and can come about through a number of fora (e.g. industry associations,
trade federations, public-private partnerships, multi-stakeholder groups and group
pledges).

Group initiatives, which incorporate collective commitments, can offer their participants

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 209 EN
and partners a number of benefits, including:
 Making it easier for them to adopt commitments, in the knowledge that they would be
less likely to be undercut by competitors without such targets;
 Templates and model text to support the development of commitments;
 Facilitating the sharing of strategies and best practice;
 Participation in collaborative problem-solving; and
 The development of common metrics and reporting systems 459.
However, those administrating or facilitating these group initiatives also face significant
operational and reporting challenges as a result of their top-down nature, including
effective oversight of their participants, enforcing their commitments and tailoring their
support to meet the needs of different organisations (Donofrio et al, 2017; Brack and
Gregory, 2017).

One of these high profile initiatives, announced in November 2010, was the Consumer
Goods Forum (CGF) resolution to achieve zero net deforestation by 2020460 in key
commodity sectors (soy, palm oil, paper & pulp/timber and beef). Table 63 and Table 64
below provide the wording of this commitment and an explanation of how the term zero
net deforestation is defined in this context. Table 65 then goes on to provide an overview
of the CGF commitment.

Table 63: The Consumer Goods Forum Zero Net Deforestation By 2020
Commitment

The Consumer Goods Forum Zero Net Deforestation By 2020

Commitment

"As the Board of The Consumer Goods Forum, we pledge to mobilise resources
within our respective businesses to help achieve zero net deforestation by 2020.
We will achieve this both by individual company initiatives and by working
collectively in partnership with governments and NGOs.
Together we will develop specific, time bound and cost effective action plans for
the different challenges in sourcing commodities like palm oil, soya, beef, paper
and board in a sustainable fashion.
We will also work with other stakeholders – NGOs, development banks,
governments, etc. – to create funding mechanisms and other practical schemes
that will incentivise and assist forested countries to conserve their natural assets
and enable them to achieve the goal of zero net deforestation, whilst at the same
time meeting their goals for economic development".

459
In January 2017, CERES, a US-based NGO, published its Reporting Guidance for Responsible
Palm-Oil to help companies at all stage of the palm oil supply chain report their sustainable
palm oil activities (accessed 7 July 2017).
460
Consumer Goods Forum – Deforestation Resolution (November 2010): (accessed 25 June
2017).

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 210 EN
Table 64: Defining zero net deforestation

Defining zero net deforestation:

The Consumer Goods Forum endorses and uses the WWF definition of zero net
deforestation461, originally produced for discussion at the Ninth Conference of
Parties to the Convention on Biological Diversity (CBD COP9) in May 2008. The
definition reads:
“Zero Net deforestation” can be distinguished from "zero deforestation", which
means no deforestation anywhere.
"Zero net deforestation" acknowledges that some forest loss could be offset by
forest restoration. Zero net deforestation is not synonymous with a total
prohibition on forest clearing. Rather, it leaves room for change in the
configuration of the land-use mosaic, provided the net quantity, quality and
carbon density of forests is maintained. It recognizes that, in some
circumstances, conversion of forests in one site may contribute to the sustainable
development and conservation of the wider landscape (e.g. reducing livestock
grazing in a protected area may require conversion of forest areas in the buffer
zone to provide farmland to local communities).
However, zero net deforestation is not achieved through the conversion of
primary or natural forests into fast growing plantations. Such conversion would
count as deforestation in assessing progress against the target.

Table 65: Consumer Goods Forum Zero Net Deforestation Commitment

Topic Characteristics

Overview Organisation: Global industry network, bringing together the CEOs and
senior managers of around 400 retailers, consumer goods
manufacturers and service providers across 70 countries,
with combined sales of EUR3.5 trillion and directly
employing 10 million people.
Date November 2010 (at the Cancun Climate Summit)
initiated:
Motivation: Multinational companies account for 20% of all palm oil
purchases; and therefore have a major role in the
transformation of palm oil markets, production and
consumption systems.
Oversight: CGF Sustainability Pillar Steering Committee and CGF
Board of Directors (made up of 50 retailer and
manufacturer CEOs).
Status: Active. Voluntary and authoritative (non-legally binding).

Focus on: Reducing global deforestation by reducing the risks and

impacts of forest-risk commodities (palm oil, soy, beef,

461
Zero Net Deforestation by 2020 - A WWF Briefing Paper (WWF 2008) (accessed on 24 June
2017).

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 211 EN
Topic Characteristics

paper and board).

Verification: Last assessment of progress jointly undertaken by the
Global Canopy Project and CDP in 2016462.
Coverage: Geographical International
scope:
Signatories: In theory all CGF members but 2017 Supply Change
report highlights 99 member companies with active
commitments (a quarter of the membership)
Financing & Linked to new Landscape Fund for Tropical Landscapes
incentives: and Forests and the Soft Commodities Compact (see
below)463.
Key CGF Palm Oil Working Group, CGF Sustainable Palm Oil
activities: Sourcing Guidelines, collaboration with NGOs to assess
progress, mobilising investment in sustainable land use
systems
Impact: High potential, but still significant gaps to be addressed
in order for the CGF to be on course to realize its
ambitious goal (see GCP-CDP 2016 review findings
above).

The size, influence and geographical reach of the CGF’s membership464 has made this
commitment “a truly remarkable milestone in the fight to tackle deforestation” (Bregman
et al, 2016)465. What is perhaps harder to assess, with three and a half years to go until
the end of 2020, is the progress of individual CGF members in achieving this collective
commitment.

To answer this question, at least in part, the Global Canopy Project, using its Forest 500
database (www.forest500.org)466 and the CDP’s Forests Programme
(https://www.cdp.net/en-US/Programmes/Pages/forests.aspx), which requests
companies to disclose every year, on behalf of investors, their policies and measures to
address deforestation in their supply chains, came together in 2016 to review the

462
Bregman, TP, et al – Turning collective commitment into action: Assessing progress by
Consumer Goods Forum members towards achieving deforestation-free supply chains (Global
Canopy Programme and CDP, 2016) (assessed 5 July 2017).
463
World Economic Forum - $400 Million Fund Launched in Davos to Stop Tropical Deforestation and
Boost Farming (published 18 January 2017; accessed 24 June 2017):
464
A list of the CGF’s members can be found at:
http://www.theconsumergoodsforum.com/about-the-forum/our-members
465
Bregman, TP., McCoy, K., Servent, R., and MacFarquhar, C., 2016 – Turning collective
commitment into action: Accessing progress by Consumer Goods Forum members towards
achieving deforestation-free supply chains (Global Canopy Programme and CDP, UK)
(accessed 25 June 2017):
http://globalcanopy.org/sites/default/files/documents/resources/GCP%20and%20CDP%20201
6%20Turning%20collective%20commitment%20into%20action_18_7.pdf
466
The Forest 500 assesses the policies of 250 companies, 150 investors and lenders, 50
jurisdictions, and 50 other power brokers, each selected based on their exposure to forest risk
commodity supply chains.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 212 EN
progress being made by CGF members. 55 of the 250 most influential companies
included in the Forest 500 database are CGF members: and 44 of the 180 companies
that disclosed to the CDP in 2015 were CGF members467.

As part of this review, the progress made by CGF members and non-members was
assessed against a five-step framework that was designed to help companies move from
making high-level commitments on deforestation to embedding and implementing these
at the company-level, including working with suppliers and verifying supplier
performance. Figure 39 below provides an overview of this framework.

Figure 39: Five-step process from high-level individual and collective

commitments to actions that lead to deforestation-free supply chains

The key findings from this review were:

 14 of the 55 CGF members assessed in the Forest 500 have made an individual cross-
commodity zero or zero net deforestation commitment that applies to their own
commodity procurement. This leaves three quarters of the CGF members assessed
without their own overarching policy (Step 1 in the framework).
 89% of the 44 CGF members that disclosed to the CDP’s Forest’s Programme identify
at least one reputational, operational or regulatory risk that could generate a
substantive change in business operations, revenue or expenditure (Step 2).
 79% of CGF members that are exposed to palm oil have a relevant sustainability
policy in place (Step 3).
 85% of CGF members that disclose to the CDP’s Forest’s Programme and have a palm
oil procurement standard in place state that their standard affects their supplier
engagement strategy. However, relatively few CGF members are auditing their
suppliers, a necessary prerequisite to moving towards more direct sourcing of
deforestation-free commodities (Steps 4 and 5).
 36% of CGF members disclosing to CDP’s Forests Programme use certification to
ensure the security of their palm oil supply. However, only 19% of these companies
“require” their suppliers to provide certified products, 69% “encourage” this and 13%

467
In 2015, CDP sent its disclosure request to 87 CGF members, of which 41 responded and 46
did not respond. Three additional CGF members disclosed voluntarily. The review covered all
90 disclosers and non-disclosers.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 213 EN
 “prefer” suppliers that provide certified palm oil.
 More encouragingly, 94% of disclosing CGF members reported sourcing certified palm
oil; although only 70% reported that they sourced some segregated or mass balance
palm oil.
 Whilst the review showed that CGF members are leading non-members
across all five steps in the implementation framework, there are still
significant gaps to be addressed in order for the CGF to be on course to
realize its ambitious goal of deforestation-free supply chains amongst its
members by 2020.

Another significant international voluntary initiative was launched at the UN Rio+20

Conference in 2012. The Tropical Forest Alliance 2020 (TFA 2020) was established when
the CGF partnered with the US government to create a public-private alliance with the
mission of mobilizing all actors to collaborate in reducing commodity-driven tropical
deforestation (Table 66 below). More recently the TFA 2020 has also pledged to support
the achievement of the UN SDGs and the New York Declaration on Forests 468.

Table 66: Overview of the Tropical Forest Alliance 2020

Topic Characteristics
Overview Organisation: Tropical Forest Alliance 2020
Date UN Rio +20 Conference, 2012
initiated:
Motivation Mission is to mobilize all actors to collaborate in
reducing commodity-driven tropical deforestation.
Oversight: Steering Committee of 20 members provides a
balanced representation of consumer and forest
countries, private sector companies, both
producers and consumers, and civil society
organizations.
Status: Active. Voluntary (non-legally binding). Global
public-private alliance.
Focus on: Sustainable, low carbon production systems,
reducing deforestation and protecting peatlands
and biodiversity. Creating new regional markets for
sustainable palm oil.
Verification: Usually on a project-by-project basis
Coverage: Geographical International with regional programmes in major
scope: commodity production zones.
Signatories: Over 90 member organisations: 38 of which are
private sector, 14 governments (including the
governments of Indonesia, Gabon, Liberia and
Colombia), 36 civil society organisations and two
multilateral agencies.

468
Please see: https://www.tfa2020.org/en/about-tfa/objectives/

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 214 EN
Topic Characteristics
Financing & Linked to Landscape Fund for Tropical Landscapes
incentives: and Forests (see below)
Key  African Palm Oil Initiative
activities:  Latin America Initiative (focus on Brazil and
Colombia)
 Southeast Asia Initiative
 Better Growth with Forests Initiative
 Financial Sector Engagement initiative
 Emerging markets demand for deforestation-
free commodities (in development)
Impact: Whilst TFA 2020 is in its early stages there is
considerable potential in its evidence-based
advocacy approaches to highlight the economic,
social and environmental benefits of zero net
deforestation commitments.

The stated aim of the TFA 2020 is to work together with its partner countries, companies
and civil society organizations to:
 Improve planning and management related to tropical forest conservation, agricultural
land use and land tenure;
 Share best practices for tropical forest and ecosystem conservation and commodity
production, including working with smallholder farmers and other producers on
sustainable agricultural intensification, promoting the use of degraded lands and
reforestation;
 Provide expertise and knowledge to assist with the development of commodity and
processed-commodity markets that promote the conservation of tropical forests; and
 Improve monitoring of tropical deforestation and forest degradation to measure
progress.

Aside from the global and regional programmes managed by TFA 2020, the initiative also
visually maps and captures information on the activities of its members via a global map
(www.tfa2020.org/initiatives) and its annual reporting process.

TFA 2020 operates three global initiatives and three regional initiatives in Southeast Asia,
Latin America and West and Central Africa (more information on these initiatives is
included in Table 40 in Appendix 13).

Its three global initiatives are as follows:

 Better Growth with Forests Initiative: including:

 An analysis of the economic and political benefits of zero-deforestation
commitments in producing countries, focusing on investment opportunities and
rural development in those countries469; and

469
This research found that sustainable production processes represent good investment
potential, with circa 90% of the estimated USD160 billion of investment required to support
sustainable land use in tropical forest regions attracting investment returns of over 10% (TFA
2020, 2017 – p.15).

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 215 EN
  In-depth examinations of sub-national jurisdictional approaches to reduce
deforestation and greenhouse gas emissions in five regions: Mato Grosso and Pará,
Brazil, in Liberia, in Sabah, Malaysia and in East Kalimantan, Indonesia.
 Financial Sector Engagement initiative: key components of this engagement
include:
 A clear and thorough articulation of the challenges and opportunities offered by the
transition to deforestation-free supply chains470; and
 Offering a platform for broader engagement around practical solutions to increase
financing mechanisms - e.g. Wilmar’s Financing Sustainable Smallholder Replanting
project, which builds the future supply of sustainable palm oil production from
smallholders by providing financial support.
 Emerging Markets demand for deforestation-free commodities initiative: is
currently being developed.

By December 2014, the growing number of “No Deforestation” commitments led to the
creation of the New York Declaration on Forests471, one of the significant outcomes from
the UN Climate Change Conference in September 2014. This declaration, which includes
national and subnational governments (in Indonesia) as well as civil society and private
sector organizations, aims to halve the rate of deforestation by the end of 2020 and
eliminate it by 2030. Table 67 below provides an overview of the Declaration.

Table 67: Overview of the New York Declaration on Forests (NYDF)

Topic Characteristics

Overview Organisation: United Nations Development Programme (UNDP)

Date 23 September 2014.

initiated:
Motivation: To support major international agreements and
goals by seeking to halve natural forest loss by
2020 and end it by 2030, restore degraded land
and forests, reduce forest-related GHG emissions,
and improve forest governance.
Oversight: United Nations and NYDF Assessment Coalition

Status: Non-legally binding political declaration

Focus on: Eliminating deforestation. Restoring forests and

croplands of an area larger than India. Cutting
carbon emissions by 4.5 to 8.8 billion tonnes a
year.
Verification: Progress assessed by the NYDF Assessment
Coalition against 10 Goals contained in the NYDF.

470
World Economic Forum and TFA 2020 - The Role of the Financial Sector in Deforestation-free
Supply Chains, Research Report (2017).
471
New York Declaration on Forests – Forests – Action Statements and Action Plans (UN Climate
Summit 2014) (accessed 1 July 2017).

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 216 EN
Topic Characteristics

Coverage: Geographical International

scope:
Signatories: 179 entities endorsed the NYDF, including 36
national governments, 20 sub-national
governments, 53 companies, 16 indigenous
peoples groups and 54 NGOs and CSOs.
Financing & Financial support can be sought from the
incentives: multilateral forest and climate programmes of the
World Bank and the UN.
Key  Voluntary Action Agenda providing guidance on
activities: how to achieve the NYDF’s 10 Goals.
 Establishment of UNDP national sustainable
commodity platforms, bringing together all
stakeholders in a particular supply chain
Impact: See NYDF progress assessment below.

In 2015, the first edition of the NYDF Progress Assessment proposed a framework and
respective indicators for measuring progress toward all ten goals and offered an initial
assessment on the status of progress toward achieving them. The second edition of the
NYDF Progress Report (published in 2016) is comprised of two parts: a focus report that
provides an in-depth analysis of Goal 2, on eliminating deforestation from agricultural
commodity supply chains, and a general report with abbreviated updates on Goals 1-
10472.

Highlights from the 2016 NYDF Progress Report can be found Table 68 below.

Table 68: Highlights from the New York Declaration on Forests 2016 Progress
Report

Highlights from the New York Declaration on Forests 2016 Progress

Report (Goal 2 / palm oil focus):

Highlights from the report relating to palm-oil include:

 Palm oil attracts the highest number of private sector deforestation free
commitments: accounting for 59% of the 701 commitments from 415
companies.
 Most companies have adopted policies or strategies to operationalize their
palm oil-related commitments: 87% have conducted a risk assessment, 80%
have their own procurement standard and 57% have a production standard.
 Less than half (49%) of the companies had time bound actionable plans on

472
Progress on the New York Declaration on Forests – Achieving Collective Forest Goals –
Updates on Goals 1-10 and Progress on the New York Declaration on Forests – Eliminating
deforestation from the production of agricultural – Goal 2 Assessment Report (Climate Focus,
2016) (accessed 25 June 2017): http://climatefocus.com/sites/default/files/2016-Updates-on-
Goals-1-10-Report-Executive-Summary.pdf and
http://climatefocus.com/sites/default/files/2016-NYDF-Goal-2-Assessment-Report.pdf

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 217 EN
 palm oil related commitments.
 Around two thirds of companies have traceability systems: 70% of producers,
processors and traders and 64% of manufacturers and retailers have
established traceability systems for palm oil.
 But very few can trace back to the production level: just 7% in the case of
palm oil.
 Disclosure of progress against commitments is still quite low: with 45% of
companies disclosing information on compliance with their deforestation
policies – but for those that disclose information compliance is fairly high.
 90% of manufacturers and retailers that have made commitments are
headquartered in Europe, North America or Australia: those headquartered in
Latin America, Africa and Asia have been slower to act.
 Over 90% of assessed companies produce or source in deforestation hotspots:
including Indonesia, Malaysia and Brazil. Companies operating in these
countries are more advanced in operationalizing their commitments
(approximately 10-20% higher).
 The majority of companies opt to limit procurement to certified products:
rather than create their own product standards.
 Only one third of 150 assessed financial institutions have deforestation-related
commitments in place: according to Forest 500 reporting.
 Weak forest governance presents a major barrier to private sector efforts: with
companies experiencing little improvement in forest governance or public
sector support. More successful public-private collaborations were reported.

Other group initiatives and collective commitments

These major international group commitments also resulted in more regional and local
level alliances such as the Malaysian-dominated Sustainable Palm Oil Manifesto
(SPOM) (see overview in Table 69 below).

Table 69: Overview of the Sustainable Palm Oil Manifesto (SPOM)

Overview of the Sustainable Palm Oil Manifesto (SPOM)

The Sustainable Palm Oil Manifesto (SPOM) is an initiative of five palm oil
producers, which together produce around nine percent (9%) of the world’s palm
oil: Sime Darby, Kuala Lumpour Kepong Berhad, IOI Corporation Berhad, Musim
Mas and Asian Agri. Other signatories include global palm oil trader Cargill and
Apical.
The initiative, announced in July 2014, did not have the support or participation
of NGOs and was heavily criticized for trying to weaken the existing threshold for
no-deforestation. SPOM claims to go beyond the sustainability standards
established by the RSPO but rather than stopping forest clearance, it reportedly
allowed for continued deforestation during the time in which members of the
Manifesto studied tools to determine which forests to develop or protect under
the high carbon stock (HCS) approach. Institutional investors representing over
half a trillion dollars in assets under management called on the group to adopt an
immediate moratorium on deforestation and to support the industry in
establishing traceable, deforestation-free palm oil supply chains. Greenpeace also
criticized the SPOM commitments because they do not cover all traded oil, or
minority shareholdings.
Following this pressure, SPOM members announced in September 2014 an

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 218 EN
immediate moratorium on the clearance of high carbon stock (HCS) forests,
whilst they carried out a year-long study that aims to establish a threshold for
defining what constitutes HCS forests.
In December 2015, the group announced the ‘HCS+’ approach seeking to ensure
carbon neutral development. In November 2016, agreement was reached to work
with another group, including Greenpeace, TFT and Golden Agri-Resources who
had produced a methodology to identify natural forest areas and an approach
that combined carbon storage, biodiversity conservation and local community
rights and livelihoods. Drawing on elements from both approaches a revised
toolkit was published in June 2017.
Sources: http://forest500.org/rankings/other-powerbrokers/sustainable-palm-oil-
manifesto; Brack and Gregory, 2017 and http://highcarbonstock.org/

In Indonesia voluntary action took the form of the Indonesian Palm Oil Pledge
(IPOP), signed at the same UN Climate Summit in 2014 that brought about the New
York Declaration on Forests. IPOP was as an association of five companies (Wilmar
International, Cargill, Golden Agri-Resources, Asian Agri, Musim Mas and Astra Agro
Lestari) and the Indonesian Chamber of Commerce and Industry (Kadin) working toward
the same goal of sustainable palm oil production and zero deforestation commitments.
IPOP included a commitment to lobby the Indonesian Government to raise the standards
of law, which protect only some types of forest and peatland, in line with those of the
pledge (Pacheco et al, 2017).

However, from its inception, the Indonesian Government strongly opposed IPOP,
describing it as a cartel in violation of the country’s competition laws, a threat to national
sovereignty and accusing it of excluding smallholders and SMEs from international
markets (Saturi and Nugraha, 2015)473. In June 2016, after a tense relationship with the
government, IPOP was disbanded (Vit, 2016)474.

Another initiative, the Indonesia Palm Oil Platform (INPOP) 475, led by the Indonesian
Ministry of Agriculture with support from 41 organisations476 including the UN
Development Programme, Greenpeace, Sawit Watch, WWF, IDH, IKEA, Mondelez and
Musim Mas, continues to provide a forum for all palm oil stakeholders – government,
private sector, farmer communities, financial institutions and civil society – to agree and
act on a common agenda to maximise palm oil productivity (especially to smallholders),
while mitigating negative environmental impacts. A National Action Plan for Sustainable
Palm Oil Indonesia, developed under INPOP was released for public consultation in

473
Saturi S and Nugraha I. 7 September 2015. Indonesian officials resist movement to end
deforestation for palm oil. Mongabay. Accessed 16 December 2016
https://news.mongabay.com/2015/09/ (Cited in Pacheco P, Gnych S, Dermawan A,
Komarudin H and Okarda B. 2017. The palm oil global value chain: Implications for economic
growth and social and environmental sustainability. Working Paper 220. Bogor, Indonesia:
CIFOR).
474
Vit J. 1 July 2016. Under gov’t pressure, palm oil giants disband green pledge. Mongabay.
Accessed 6 July 2017.
https://news.mongabay.com/2016/07/under-government-pressure-palm-oilgiants-disband-
green-pledge/
475
For more information on INPOP please visit: http://www.foksbi.id/id/beranda/
476
For a full list of INPOP members please see: http://www.foksbi.id/id/anggota-dan-peserta-
inpop

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 219 EN
February 2017.

At the regional level in Europe the European Sustainable Palm Oil (ESPO) Initiative
is an initiative from the Dutch Oils and Fats sector (MVO) and IDH, the Netherlands
sustainable trade initiative. The ESPO has a commitment to stimulate the uptake of more
sustainable palm oil in Europe through its objective to achieve 100% certified sustainable
palm oil, with a steppingstone to work towards RSPO as a minimum. In its “Commitment
to Support” it also commits to supporting the EU-wide monitoring of the uptake of
certified sustainable palm oil, as undertaken by a range of European national alliances.477

Several national initiatives have resulted in the establishment of national alliances with
the ambition to drive transformation towards 100% sustainable palm oil by 2020. In
addition, the alliances have set additional goals towards zero deforestation, no peat, and
no exploitation. The national alliances are member based and in addition receive support
from the Dutch MVO and the European Palm Oil Alliance. Table 70 below provides an
overview of European national alliances relating to sustainable palm oil.

The European Palm Oil Alliance (EPOA) is a business initiative to engage with and
educate stakeholders on the full palm oil story. EPOA closely collaborates with national
initiatives active in the different European countries, facilitating science-based
communication and creating a balanced view on the nutritional and sustainability aspects
of palm oil. EPOA strongly supports the uptake of 100% sustainable palm oil. Its main
members are the Netherlands Oils and Fats Industry, Malaysian and Indonesian palm oil
producing industry associations, and vegetable oil refiners.

The European Sustainable Palm Oil Advocacy Group (ESPOAG), the European
Sustainable Palm Oil Advocacy Group, represents major food sectors at European level
that source a large range of raw materials. ESPOAG supports the EU objective to stop
deforestation by 2030, at the latest, and the promotion of this objective at international
level. The sectors ESPOAG represents recognize the important role they play in acting as
a responsible steward of forests and the natural environment. Throughout ESPOAG’s
memberships, companies are taking a proactive role in tackling deforestation through
improved traceability and supplier engagement. ESPOAG is composed of the following
European food sectors federations:

• AIBI: International Association of Plant Bakers

• CAOBISCO: Chocolate, Biscuits and Confectionery of Europe
• FEDIMA: Federation of European Union Manufacturers and Suppliers of
Ingredients to the Bakery, Confectionery and Patisserie Industries
• FEDIOL: EU Vegetable Oil and Protein Meal Industry
• IMACE: European Margarine Association

Finally is worth noting that close relations are maintained amongst the European national
alliances, EPOA, and the palm oil producing countries. Their commitment to support
100% sustainable palm oil in European by 2020 has also received support from six EU
Member States in the Amsterdam Declaration in Support of a Fully Sustainable Palm Oil
Supply Chain by 2020.

477
For more information on the ESPO initiative please see:
https://www.idhsustainabletrade.com/initiative/european-sustainable-palm-oil-espo/

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 220 EN
Table 70: European national voluntary initiatives for sustainable palm oil use
Country Members 100% Criteria Additional Criteria
CSPO targets
target
Belgium Food sector + Cosmetics 2015 Sustainable palm 2020 Fully traceable, with
The Belgian and Detergents oil, all supply- no HCS and no peat
Alliance for chain options
Sustainable
Palm Oil
(BASP)
Denmark - Retailer own brands Done Private-label food n/a n/a
DCC products via B&C,
in future MB
Denmark - Food producers 2016 Sustainable palm 2018 100% segregated
CDI oil, all supply- certified palm oil
chain options
French 12 (mostly) food 2015 Sustainable palm 2020 Include traceability,
Alliance for companies oil, all supply- no peat, no
Sustainable chain options deforestation and no
Palm Oil conflict.
Germany, Mostly food sector, some 2014 Sustainable palm Various New commitments for
Austria, home & personal care and palm kernel dates, 2015 specific supply-chain
Switzerland oils, all supply- and beyond options for specific
chain options products toward 100%
segregated
Netherlands Mostly food sector, 2015 Sustainable palm No No
retailers and feed. oils in food and
feed
Norway Food and retail sectors. 2015 Reduce palm oil or 2018 By 2018 any palm oil
use only products used will be
sustainable palm segregated and
oil - applies to traceable.
inputs and
finished products
Sweden Food industry. A 2015 Report on No No
separate programme for volumes
detergent sector.
United Food sector, retailers, 2015 Sustainable palm No No
Kingdom feed, home & personal oil from credible
care, energy. sources.

Individual initiatives and commitments

Individual commitments are many and varied and are evolving over time. Most start with
the development of procurement policies (e.g. in the case of palm oil consumers) or take
the form of production standards (e.g. in the case of producers). Most procurement-
based approaches start with requirements for certified sustainable palm oil (CSPO), often
starting with the use of Book and Claim systems and moving towards mass balance and
source segregated CSPO.

A growing number of palm oil consumers are moving beyond the use of CSPO alone to
achieve their commitments. Some are making significant strides in improving traceability
of palm oil back to the mill (e.g. Mondelez achieved 90% traceability back to the mill at
the end of 2015, exiting contracts with 11 suppliers who did not have suitable policies

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 221 EN
and practices in place)478. Some companies (e.g. Unilever and Danone Wave) are now
making significant direct investments to improve smallholder relationships, yields and
sustainability performance.

Further examples of individual initiatives and commitments can be found referenced in

the section below highlighting the findings from three studies evaluating the progress
being made in voluntary initiatives; and in the case studies in Table 40 of Appendix 13.

The emergence of new finance and investment initiatives and data and
reporting platforms to drive voluntary initiatives and commitments

The increase in company-level adoption of voluntary initiatives and commitments to

address deforestation in their supply chains has also been partly triggered by creation of
new finance and investment initiatives and data and reporting platforms. These have
supported companies who have recognised that they need to go beyond the use of
existing certification-based approaches to achieve their commitments, as certification is
rarely able to take account of the cumulative impacts from adjacent oil palm cultivation
and palm oil production activities in the same landscape or landscape-scale pressures
from other sectors or activities that collectively lead to deforestation, biodiversity loss
and negative social impacts.

This has lead some companies and organisations, like the Consumer Goods Forum and
IDH, to look to collaborative landscape-scale approaches and partnerships to address the
linked issues of land use change and deforestation from the supply-side. They are
developing new multi-stakeholder coalitions with supporting finance and incentives, that
adopt a landscape or jurisdictional (regional or sub-regional) approach, to address the
interconnections between different actors in a landscape and the social, environmental
and economic factors that lead to land use change and deforestation.

For example, the Sustainable Trade Initiative (IDH) is establishing so-called Production,
Protection and Inclusion (PPI) compacts to improve resilience and support the
sustainable use of landscapes (see case study in

Table 71 below)479.

Table 71: Case study on the use of Production, Protection and Inclusion (PPI)
Compacts as landscape scale approaches to forest protection

Case study on the use of Production, Protection and Inclusion (PPI)

Compacts as landscape scale approaches to forest protection

PPI compacts are agreements between public, private and civil society parties to
enhance productive land and secure livelihoods in exchange for forest protection.
These compacts are based on participatory land use planning, whereby land for
production, livelihoods and protection is clearly identified, and their related uses
are agreed upon by the landscape stakeholders and recognized by local and
national governments.

478
Mondelez International, 2015 Progress Report: The Call for Well-being,
http://www.mondelezinternational.com/well-being
479
Wensing, D. and van de Wekken, D. – Implementing and scaling up the CGF Zero Net
Deforestation Commitment (published 12 April 2017 – assessed 30 June 2017)

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 222 EN
The compacts also include goals for each of the PPI components: a time bound
plan of action, clear definition of roles and responsibilities and a budget for
implementation.
IDH, together with its partners, is piloting PPI compacts in several landscapes in
Indonesia, Liberia, Côte d’Ivoire, Kenya, Ghana and Brazil.
In Liberia, a new PPI compact will bring together communities, the Forestry
Development Authority and Golden Veroleum Liberia, to agree to conserve,
actively monitor and manage forests, in exchange for access to investment
capital and technical assistance to establish community oil palm farms.

In parallel, the growth in the use of effective satellite-based deforestation monitoring

systems in tropical countries, like the World Resources Institute’s Global Forests Watch
programme and Suitability Mapper480,481 and ZSL’s Sustainable Palm Oil Transparency
Toolkit (SPOTT)482, have emerged, providing new tools that could help achieve new levels
of transparency and participative planning of suitable areas of degraded land for
sustainable cultivation across landscapes, both locally and globally (New York Declaration
on Forests, 2014).

A number of organizations are also working to develop new business models and create
new value chain structures that support and facilitate the inclusion of smallholders in new
sustainable value chains. These include development organizations such as the IDH and
the Netherlands Development Organization (SNV), multilateral banks such as the
International Finance Corporation (IFC), and private sector associations and working
groups such as PIS Agro’s Palm Oil Working Group483, and the Sustainable Palm Oil
Investors Working Group. Many of these models seek to increase the transparency and
traceability of the supply chain at the local level and aggregate smallholders in order to
access the financial investments needed to replant and increase yields, as well as
meeting internationally recognized sustainability standards (Pacheco et al 2017).

In order to support the work to develop the compacts in

Table 71 above and to encourage other innovative voluntary schemes and initiatives, a
new fund, the Landscape Fund for Tropical Landscapes and Forests, was announced by
Norway at the World Economic Forum in January 2017 (World Economic Forum, 2017).

The Fund, which has a capitalisation goal of USD400 million by 2020; will seek to trigger
private sector investment at a minimum leverage ratio of 1:4, kick-starting up to USD1.6
billion of investment into sustainable, deforestation-free agricultural productivity and

480
Please see: http://www.globalforestwatch.org/ for more information (assessed on 6 July
2017).
481
Please see: http://www.wri.org/resources/maps/suitability-mapper (accessed on 15 August
2017).
482
For more information on SPOTT, including an assessment of 50 of the largest palm oil
producing companies through 50 indicators using publicly available information on disclosure
of their operations and their commitments to environmental and social best practice, please
see: https://www.sustainablepalmoil.org/about/
483
PIS Agro’s (the Partnership for Indonesia sustainable Agriculture) Palm Oil working Group is
currently engaging with 4,785 smallholder farmers working over 11,000ha of land. It has set a
2020 target to work on 100,000 hectares of land, helping 50,000 farmers to increase
production by 150%, whilst reducing environmental impact (assessed 7 July 2017):
http://www.pisagro.org/palm-oil

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 223 EN
protecting 5 million hectares of forests, peatlands and biodiversity by 2020 (equivalent to
the size of Costa Rica), in countries and jurisdictions that are working to reduce
deforestation and peat degradation (Tropical Forest Alliance 2020, 2017) 484.

This funding goal will be achieved through a mix of bi-lateral and multilateral donors and
private sector funders. The Norwegian Government has already committed up to USD100
million to the Fund and Unilever are the first corporate investor, committing to provide
USD25 million of funding over five years 485. The Fund will also work in partnership with
the Global Environment Facility, UN Environment, the Sustainable Trade Initiative (IDH)
and major food companies and environmental NGOs in a collective effort to coordinate
political, commercial and financial assistance efforts to maximise the impact of forest and
peatland protection measures, whilst supporting rural socio-economic development that
contributes to the delivery of UN SDGs 1, 2, 8, 13, 15 and 16.

Collaborating civil society organisations, like WWF, WRI and The Nature Conservancy will
help to ensure the monitoring of progress and provide technical support to the Landscape
Fund where this is required.

A group of 12 international banks, who collectively account for 50% of global trade
finance, also came together in March 2016 under the auspices of the Banking
Environment Initiative486 to make public commitments via a ‘Soft Commodities Compact’
with the CGF487, to increase yields, support sustainable livelihoods and help end
deforestation in commodity supply chains by 2020. The group have two principal aims:
 To mobilise the banking industry to direct capital to – and stimulate trade in -
sustainably sourced commodities through trade finance instruments; and
 Raising banking standards to ensure that by 2020 all corporate and investment
banking customers whose operations include significant production or processing of
forest risk commodities, including palm oil, in markets at high risk of tropical
deforestation can verify that these operations are consistent with zero net
deforestation. Alongside their own due diligence processes, by 2020 Compact banks
will confirm that these customers’ operations have achieved the same internationally-
recognised means of verification that the CGF is prioritising.

In an example of national-level banking collaboration, Indonesia’s eight largest

commercial banks have also committed to responsible lending practices in the palm oil
sector as part of a Sustainable Financial Roadmap developed by the Indonesia Financial
Services Authority (OJK) (Pacheco et al, 2017).

Other sources of finance to support these objectives can be found in the multi-lateral
forest and climate programmes of the World Bank and the United Nations, including the
Forest Carbon Partnership Facility488, BioCarbon Fund Initiative for Sustainable Forest

484
Tropical Forest Alliance 2020 – Annual Report 2016-2017 (Published April 2017; accessed 30
June 2017).
485
Carrefour, Marks & Spencer, Mars, Metro, Nestlé and the Consumer Goods forum have also
pledged to support the Fund.
486
For more information please see: http://www.cisl.cam.ac.uk/business-action/sustainable-
finance/banking-environment-initiative
487
Please see: http://www.cisl.cam.ac.uk/business-action/sustainable-finance/banking-
environment-initiative/pdfs/the-bei-and-cgfs-soft-commodities-compact.pdf
488
For more information please see:
https://www.forestcarbonpartnership.org/about-fcpf-0

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 224 EN
Landscapes489 and the UN REDD Programme490 and the Global Environment Facility491
(New York Declaration on Forests, 2014).

In addition, to the above high profile examples of voluntary initiatives and schemes, we
have sought to capture and summarize examples of other voluntary sustainable palm oil-
related activities to illustrate the diversity of approaches being deployed in international,
national, sub-national, sectoral and organisational contexts in Table 40 in Appendix 13.

8.6.4. Studies on the progress being made in voluntary initiatives and

commitments

The following analysis draws from three publicly available studies that assess the
progress being made on voluntary palm oil initiatives and commitments.

The first of these, the Supply Change survey492, tracks corporate commitments to reduce
deforestation in supply chains from companies that produce, trade, manufacture or retail
products containing to the ‘big four’ commodities associated with deforestation: palm oil,
soy, timber and pulp and beef.

The latest survey, completed in December 2016, identified a total of 718 companies, 447
of which have made 760 commitments (representing an increase in just one year of 22%
and 31% respectively; whilst 271 companies did not have a publicly available
commitment (a 36% increase from the previous years report). It also investigated
whether companies making commitments were reporting their progress or whether
commitments might be considered ‘dormant’. Table 72 below summarises the overall
findings from the 2017 report and highlights those additional findings most relevant to
palm oil.

Table 72: Summary of key findings from the 2017 Supply Change report

Summary of key findings from the 2017 Supply Change report:

Key findings are:

 Progress reporting is on the rise: with 51% of those companies making
deforestation commitments transparently reporting their progress.
 Commitments on palm oil and timber and pulp continue to lead the way:
mainly as a result of established certification schemes and increasing scrutiny
around palm oil-driven deforestation.
 Business size and structure plays a role: smaller, private companies continue
to lag behind their larger, publicly traded peers in making commitments.
Companies with commitments are twice as large as those without them.
 Commitment rates vary across the length of the supply chain: retailers had the
lowest rate of commitments (54%), compared to their peers in the ‘upstream’
supply chain: producers (71%), processors (72%), traders (70%) and

489
For more information please see: http://www.biocarbonfund-isfl.org/
490
For more information please see: http://www.un-redd.org/how-we-work
491
For more information please see: https://www.thegef.org/about/funding
492
Donofrio, S, et al – Supply Change: Tracking Corporate Commitments to Deforestation-Free
Supply Chains, (Forest Trends, 2017).

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 225 EN
 manufacturers (66%).
 Commitments that aren’t accompanied by progress reporting run the risk of
becoming ‘dormant’: Supply Change found that one in five commitments has a
target date that is past due – or never had a target date – and has never
provided progress information. A third (135) of the 447 companies with
commitments have at least one commitment that is dormant.
 Collective action spurs individual action: members of group initiatives that
collectively act on deforestation are far more likely to have their own pledges.
 Companies are increasingly including policies that address on-the-ground
impacts in their commitments: 37% of tracked commitments now explicitly
include policies to protect biodiversity and wildlife, 35% to reduce GHG
emissions, 29% to improve water management and 22% support smallholders.
 Geography is a factor: most companies with commitments are headquartered
in Europe (53%) and North America (23%); and of those without
commitments, most are based in Europe (36%) and in Asia (34%).
 The food and farming sector dominates: of companies with commitments those
producing and selling food products and farming dominate – food products
(27%), food retailers and wholesalers (11%), farming (4%) and restaurants
and bars (3%). The same applies to companies without commitments: food
products (34%), food retailers and wholesalers (21%), farming (10%) and
restaurants and bars (3%).
 The largest growth in progress reporting was found in commitments related to
palm oil: which grew by 75% between 2015 and 2016, suggesting that
progress reporting in the palm oil sector is becoming an industry standard.

The 2017 Supply Change survey also tracks 35 group initiatives in order to understand
how companies are engaging with other external stakeholders and partners to address
commodity-related deforestation.

Table 73 below takes a subset of these group initiatives relevant to palm oil to illustrate
how many company participants have established commitments to reduce deforestation,
the percentage of total participants that represents, and the percentage of commitments
made by participants, for which progress information is available.

Table 74 below highlights changes in participation rates across palm oil-related initiatives
between 2016 and 2017.

Table 73: Highest number of companies and commitments by group initiative

Highest no. of Highest % of Highest % of
participants with participants with commitments with
commitments commitments progress information
available*
Consumer Goods 99 High Carbon Stock 100% Palm Oil 73%
Forum Steering Group Innovation Group
New York 41 New York 98% High Carbon Stock 58%
Declaration on Declaration on Steering Group
Forests Forests
Tropical Forests 39 Tropical Forest 95% Tropical Forest 57%
Trust Alliance 2020 Alliance 2020
We Mean Business 39 Tropical Forest 95% Consumer Goods 54%
(Forest Group) Trust Forum
Tropical Forest 23 We Mean Business 91% We Mean Business 52%

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 226 EN
 Highest no. of Highest % of Highest % of
participants with participants with commitments with
commitments commitments progress information
available*
Alliance 2020 (Forest Group) (Forest Group)
New York 52%
Declaration on
Forests
Key:
 *Across all commitments, progress information is available for 51% of commitments
 NOTE: companies may participate in more than one group initiative that addresses commodity-driven
deforestation

Table 74: Number of organisations participating in different palm-oil-related

voluntary initiatives, as reported in 2016 Supply Change report
2016 Report 2017 Report

Related Activities Number of Number of

participants with participants with
relevant relevant
commitment(s) commitment(s)

Roundtable on Sustainable Palm Oil 193 217

Global Reporting Initiative New 157
Consumer Goods Forum 116 99
Publicly report to CDP 78 87
New York Declaration on Forests 38 41
Tropical Forest Trust 36 39
We Mean Business 34 39
The Sustainability Consortium 37 35
Sustainable Agriculture Initiative 25 30
British Retail Consortium 15 25
Tropical Forest Alliance 2020 13 21
High Carbon Stock Steering Group 6 10
Sustainable Palm Oil Manifesto 8 8
Palm Oil Innovation Group 5 7

The second analysis of voluntary initiatives and commitments was published in a report
by FERN in March 2017493, and assesses why businesses have made these commitments,
how they are monitoring progress towards meeting their commitments to protect and
enhance forest landscapes, the economic cost of doing so, and the barriers they face to
achieving them. The analysis is based on publicly reported information and interviews

493
Brack, D. & Gregory, M. - Company Promises – How businesses are meeting commitments to
end deforestation (FERN, March 2017).

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with companies (a mixture of producers, traders, processors and retailers) making and
working to achieve their commitments to provide a company perspective on the
process494. This report covers palm oil, timber and pulp, cocoa and rubber.

The report highlights the fact that most of the companies interviewed had set out
detailed definitions of what they mean in their top-level commitments for either zero
deforestation, zero net deforestation, sustainable or responsible forest management or in
taking a net positive approach (i.e. a net increase in forest area). Some companies have
also developed more restrictive or specific criteria to protect high conservation value
(HCV) and high carbon stocks (HCS) areas, and establishing the traceability of products
up the supply chain.

Table 75 below summarises the overall findings from the 2017 FERN report and highlights
those additional findings most relevant to palm oil.

Table 75: Summary of the key findings from the FERN Company Promises report

Summary of the key findings from the FERN Company Promises report:

Key findings are:

 Companies are optimistic about achieving their own commitments but pessimistic
about achieving broader group commitments: most companies felt that they could
meet their own targets but that the broader targets of the Consumer Goods Forum
and the New York Declaration on Forests (NYDF) were probably not achievable.
 Key barriers to developing commitments were usually external: with some companies
experiencing problems with investors more focused on short-term returns. None
reported investor pressure to increase their levels of ambition.
 Certification systems play an important role: for some companies (particularly
retailers), achieving 100% certified sustainable palm oil for the products in their
supply chain is the primary means through which they meet their commitments.
Certification is also seen as adding value by providing platforms for discussion with
diverse stakeholder groups.
 Certification schemes have drawbacks too: not least the cost of certification for
smallholders; a failure to gain acceptance in major consuming markets like India and
China; and the inadequacy of RSPO rules in addressing deforestation (although RSPO
Next and POIG are helping with this).
 Company criteria (in addition to certification schemes) are the most extensive,
detailed and complex for palm oil: as it is the agricultural commodity most exposed
to deforestation-related concern.
 Full traceability of palm oil is seen as important but it is difficult and complex:
particularly before it reaches the mill as there are millions of smallholders supplying
the mills, although some companies are making progress to ensure that particular
suppliers are not associated with deforestation.
 Landscape scale solutions are emerging: companies are investing in integrated
sustainable forest and farming systems and providing livelihoods for local
communities that don’t involve clearing forests. Some are also investing in peatland

494
Companies interviewed who were involved in the palm oil sector included: Golden Agri-
Resources, Musim Mas, Sime Darby, Cargill, Modelez, Neste, Nestlé, Olam International,
Unilever, Delhaize, IKEA, Kingfisher and Marks and Spencer. Key individuals in CDP, the CGF,
TFT and Tropical Forest Alliance 2020 were also interviewed to discuss their perspectives on
the issues.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 228 EN
 restoration initiatives in Indonesia.
 Companies are investing in and supporting smallholders: to improve relationships
and increase confidence in sustainable production, encouraging smallholders to enter
RSPO certification; and installing methane capture systems at palm oil mills.
 Social challenges are more difficult to resolve than environmental issues and are a
major obstacle to achieving commitments, requiring the support of producer country
governments: disputes over land tenure and ownership are crucial problems to be
resolved. In particular, lack of clarity over legal concession boundaries and protected
areas, lead to local community encroachment on concessions and damage to
protected areas in the absence of clear legal rights.
 Companies with interests in palm oil are also involved in one or more group initiative
and collective commitment: of the 13 companies with interests in palm oil only three
are not currently involved in the delivery of any external commitments. Eight are
involved in 2-4 group initiatives.
 Leading companies are pushing the boundaries of sustainable palm oil commitments:
only aiming to source from suppliers that possess the same commitments as they did
on deforestation.
 All of the companies interviewed were prepared to drop suppliers that didn’t meet
their criteria: and some had already done this, although they expressed a preference
to work directly with suppliers to improve their performance.
 The cost of implementing commitments can be high: including internal staff time;
paying specialists to help develop policies and map and verify supply chains; and
paying premia for certified sustainable palm oil. One retailer estimated costs of
£250,000 a year for meeting their commitments on palm oil; whilst producers, who
need to make on-the-ground investments, cite investment costs of up to USD200
million over three years.
 Monitoring, auditing and reporting of progress operates at several levels: from
internal audit teams reviewing reports from technical, product and procurement
teams, certified products sourced or produced by companies subject to certification
scheme audit systems, and external specialists mapping and verifying supply chains.
NGO’s were also seen as having a role in reporting supplier’s transgressions. External
reporting of progress is usually included in annual sustainability reports, or in the
sustainability sections of annual reports, with some companies issuing commodity-
specific updates and listing their suppliers in detail to increase transparency and
traceability of supply.
 Systematic monitoring and reporting of company’s contributions to group initiatives
and collective commitments is not common: with the only notable exceptions being
for the CGF’s Zero Net Deforestation by 2020 commitment and commitments made
under the New York Declaration on Forests (see above for more information on these
initiatives).

The third analysis used to assess company performance in relation to preventing or

addressing the environmental and social impacts of palm oil is the 2016 WWF Palm Oil
Buyers Scorecard495. The 2016 scorecard follows previous WWF scorecards in 2009, 2011
and 2013, and assesses the progress of 137 retailers, manufacturers and food service
companies from Australia, Canada, Europe, India, Japan and the USA in achieving their
commitments on palm oil to the end of 2015. Between them these companies use more
that 6 Million tonnes of palm oil a year, representing around 10% of total global palm oil

495
The Palm Oil Buyers Scorecard – Measuring the Progress of Palm Oil Buyers (WWF, 2016).

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 229 EN
consumption. Table 76 below provides a summary of the findings from the 2016 WWF
scorecard.

Table 76: Summary of the key findings from the 2016 WWF Palm Oil Buyers
Scorecard

Summary of the key findings from the 2016 WWF Palm Oil Buyers Scorecard:

Key findings are:

 Almost one in five companies (28 out of 137) did not respond: representing a lack of
engagement and transparency from companies with significant exposure to palm oil-
related risks.
 RSPO has been instrumental in increasing levels of openness and engagement: 106
of the remaining 109 companies are RSPO members.
 The majority of companies assessed had made public commitments to use CSPO:
107 out of 137 companies had done this; and over three quarters of them (78%) had
committed to use 100% CSPO by the end of 2015.
 Over two thirds of companies did use some CSPO in 2015: 96 companies reported
some use of CSPO, leaving 41 who didn’t or didn’t report their use publicly.
 100% CSPO targets were achieved by those companies with commitments to do this:
56 companies out of 78 with 100% CSPO targets by the end of 2015 achieved their
goal; but seven of the remaining companies fell short of their target by 50% or more.
 Progress is being made but not by all companies: Of the 94 companies that were also
assessed in the 2013 scorecard, 76 have shown progress, 11 seem to have stalled
and seven have gone backwards.
 At the time of this scorecard there was over-supply in the RSPO market: so those not
meeting their targets could have achieved 100% CSPO use in 2015.
 Half of the CSPO bought by all of these companies was Book and Claim: with 17 out
of 96 companies relying on the book and claim system for more than three quarters
of the CSPO that they used, despite the fact that the actual palm oil used in their
products may come from uncertified sources.
 Segregated palm oil represented a minority for the companies using CSPO during
2015: with only 15% of the CSPO used coming from segregated sources. Only three
brands used 100% segregated CSPO in 2015: Arnott’s, Danone and Ferrero.
 Physical supplies of palm kernel oil (PKO) and palm oil derivatives (POD) from RSPO-
certified sources are much harder to find than certified crude palm oil (CPO): making
the shift to physical CSPO for companies relying on PKO (e.g. in the personal care
sector) and POD (e.g. in specialist technical products) more difficult.
 Manufacturers are much heavier users of palm oil than retailers: with 48 retailers
using 281,845 tonnes of palm oil and 77 manufacturers using 5,640,475 tonnes of
palm oil.
 During 2015 the companies assessed used CPO the most, followed by POD and PKO:
at 3,116,549 tonnes, 2,072,524 tonnes and 983,205 tonnes respectively.
 Responses from retailers were polarised: while 22 out of 48 are buying 100% CSPO
another 19 aren’t buying any at all; and 14 out of the 33 retailers that are RSPO
members did not submit an Annual Communication of Progress (ACOP) to the RSPO.
25 retailers scored the maximum of nine points in the scorecard, whilst 14 retailers
did not respond to WWF’s request for information.
 Responses from manufacturers were also mixed: with 33 out of 77 using 100% CSPO
(12 using 100% physical CSPO) and 16 appearing to not buy any at all. 10 members
did not submit their ACOP to the RSPO or respond to WWF’s information request. 26

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 230 EN
 manufacturers scored the maximum of nine points in the scorecard.
 Food service companies are behind their retailer and manufacturing peers: with the
majority making little progress and half not buying any CSPO at all. Only four of the
food companies assessed scored the maximum of nine points in the scorecard.
 European, North American and Australian brands are leading the way: with very little
progress evident by Asian brands, although companies in Japan are making slow
progress.
 To realise further significant growth in CSPO Asian markets will have to play their
part: particularly the large and expanding markets in China, India, Indonesia and
Malaysia.
 Company size doesn’t seem to matter: when it comes to sourcing 100% CSPO, with
the performance of companies sourcing 1,000 to 1 million tonnes a year broadly
similar.
 Unilever stands out: as the largest user of palm oil by far and as the single company
that has done the most to source CSPO with 100% CSPO use to meet its needs for
over 1.5 million tonnes of palm oil in 2015.
 The 80:20 rule applies: of the 137 companies assessed, the 14 largest users account
for more than two thirds of the total palm oil used, with Unilever alone making up
nearly 30%.
 Leading brands are moving away from book and claim systems: Nestlé have stopped
buying book and claim certificates, preferring to rely on their own sourcing
guidelines; while other brands are seeking to directly invest in smallholder schemes
rather than book and claim certificates.
 Supporting smallholders is critical: as 40% of palm oil produced globally is grown by
smallholders 23 of the companies assessed are now buying independent smallholder
book and claim certificates.
 Companies are setting additional sourcing requirements: 8 companies specified RSPO
Next, 6 the POIG Charter, 17 companies banned harmful chemicals; 33 sought zero
net emissions, 19 required GHG emissions reductions; and 13 required GHG
reporting.

8.6.5. Palm-free initiatives

A growing number of companies and brands have launched palm oil-free initiatives and
some have introduced palm oil-free labels on their products. However, palm oil-free
labels have raised some legal concerns (e.g. legal uncertainty and potential conflicts with
the requirements of the EU’s Food Information to Consumers (FIC) Regulation No.
1169/2011496; inappropriate and contested marketing claims suggesting that palm oil
free products provide additional health and sustainability benefits497).

The main focus of palm oil-free initiatives to date appears to have been in the food and

496
Scott-Thomas, C. - Palm oil-free products could face legal challenges, say lawyers (Food
Navigator, 3 December 2014) (accessed 7 July 2017):
http://www.foodnavigator.com/Policy/Palm-oil-free-products-could-face-legal-challenge-say-
lawyers
497
Michail, N. – Ferrero wins appeal as Belgium court tells Delhaize [Belgium] to stop saying no
palm oil is healthier and more sustainable (Food Navigator, 7 June 2017) (accessed 7 July
2017): http://www.foodnavigator.com/Policy/Ferrero-wins-appeal-as-Belgian-court-tells-
Delhaize-to-stop-saying-no-palm-oil-is-healthier-more-sustainable

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 231 EN
home and personal care sectors, with a growing number of product listings appearing on
consumer-focused and specialist product websites498, which show listings covering a
growing number of product categories from biscuits and chocolates to nut butters,
chocolate spreads, soaps and shampoos.

Retailers and brands that have introduced palm oil-free products include M&S,
Sainsbury’s, Waitrose, Coop Italia, Body Shop, LUSH, Dorset Cereals, Mondelez, Walkers,
McVities, Balshen, Whole Earth, Devine, Montezuma, Guylian, and Lindt.

Although there are no publicly available studies that attempt to quantify the scale of
palm oil-free initiatives, two presentations to a recent Malaysian palm oil industry
conference referenced a move into palm oil-free animal feeds by New Zealand-based
animal feed company, Landcorp, who recently removed palm kernel expeller (PKE) from
its animal feeds499 and a survey of ‘No Palm Oil’ labels that identified 1,750 of these
labels in use in Italy, France and Belgium alone500.

The level of interest in palm oil free products has prompted the recent launch of a new
certification scheme: the International Palm Oil Free Certification Accreditation
Programme (POFCAP)501. This new, not for profit, consumer-facing certification scheme is
already approved to certify products in Australia and the United Kingdom, with
applications pending in 14 other countries; but it is still too early to determine what the
update will be from the consumer goods industry.

The following sections look at the challenges and barriers to the successful achievement
of voluntary initiatives and commitments, some potential ways forward to overcome
these challenges and a summary of the range of voluntary initiatives and commitments,
including trends and our views on their potential to support the achievement of EU and
UN policy objectives.

8.6.6. Challenges and barriers

Drawing on a number of studies (Pacheco et al, 2017; Brack and Gregory, 2017; WWF,
2016; Donofrio et al, 2017; and Bregman et al 2016), we have identified a number of
challenges to the development and implementation of voluntary initiatives and
commitments and have attempted to draw them out below:

 Top-level leadership within organisations is critical to ensure the proper resourcing of

both initial work (e.g. drafting and agreeing the scope and nature of the initiative and
the commitments and targets within it) and the implementation and reporting process

498
For example: Ethical Consumer, One Green Planet and Selvabeat
(http://www.ethicalconsumer.org/shoppingethically/palmoilfreelist.aspx,
http://www.onegreenplanet.org/lifestyle/guide-vegan-products-and-palm-oil/ and
https://www.selvabeat.com/home/palm-oil-free-shampoo-guide)
499
Source: Puah Chiew Wei, Ph.D. – Regional Highlights: Australasia and Oceania – presentation
to the Malaysian Palm Oil Industry (Malaysian Palm Oil Board, 14 April 2017).
500
Source: Kalanithi Nesaretnam & Rafizah Mazlan – Palm Oil in Europe - presentation to the
Malaysian Palm Oil Industry (Malaysian Palm Oil Board, 12 April 2017).
501
Please see: http://www.palmoilfreecertification.org/ and https://innovation-
forum.co.uk/analysis.php?s=do-consumers-want-to-go-palm-oil-free for more information
(accessed on 29 August 2017).

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 (e.g. mapping and verifying supply chains, internal and external review of
procurement and product reports);
 The lack of available data in the early stages of commitment development and
implementation and the critical nature of establishing new data systems/platforms to
normalise new monitoring and reporting requirements;
 The cost of making and tracking a commitment, particularly as a producer company
where significant on-the-ground investments are required and your supply base can
stretch to tens of thousands of smallholders;
 The difficulty of improving standards and achieving certification amongst smallholders
and SME suppliers in situations where premia are too low to provide an incentive to
invest – this is in the context of a heavy reliance on certification by those seeking to
make or achieve their commitments;
 The current lack of traceability and transparency in the global palm oil supply chain,
particularly when going upstream beyond the palm oil mill;
 The difficulty of responding to, addressing and improving social issues like disputes
over land tenure with 5,000 or so land disputes going through the Indonesian courts
alone (Brack and Gregory, 2017), ownership and natural resource rights, in the
absence of producer country government’s providing the right framework conditions to
support private sector and NGO-driven commitments;
 The complexity and expense of identifying, monitoring, verifying and reporting against
labour issues and rights, including the treatment of bonded or migrant workers and
child labour;
 The lack of demand and pressure for deforestation-free palm oil in major consuming
markets, notably India and China – but also in Eastern Europe;
 The absence of global agreement on definitions and standards for terms like ‘zero
deforestation’ and ‘net zero deforestation’ that are central to most voluntary
initiatives, commitments and targets, creating confusion, lack of comparability
between different initiatives and, in the worst case, inertia in the palm oil market;
 Failures of government regulation and enforcement leading to further uncertainty in
palm oil supply chains;
 Pressure from vested interests and political elites worried about initiatives challenging
the status quo and national sovereignty;
 Working together in pre-competitive collaborations for the good of society and the
environment, whilst avoiding cartel-like behaviour and the potential to breach national
and international competition laws;
 The current lack of legal and geographical clarity around concession and plantation
boundaries and land use claims, leading to deliberate or unintentional encroachment
by local communities on producer company concessions, creating further challenges to
those initiatives and companies trying to establish landscape-scale solutions to
deforestation and biodiversity, and programmes to provide local community
sustainable livelihoods; and
 The difficulties in finding capable, experienced and appropriately trained people to
conduct complex and culturally sensitive procedures to ensure the proper use of free,
prior and informed consent (FPIC) of communities to new projects (this is also a
challenge in the context of the auditing resource available for sustainable palm oil
certification schemes).

The following section looks at some of the solutions that can be brought into play to
overcome or reduce some of the challenges and barriers to the development of and
successful achievement of voluntary initiatives and commitments.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 233 EN
8.6.7. Ways forward

In order to deliver the critical mass of successful voluntary initiatives and commitments
required to transform the palm oil sector into a more sustainable, resilient and equitable
market, the mix of initiatives needs to tackle both supply and demand side policies and
practices. Given the evidence above and in Table 40 in Appendix 13 (further examples
of voluntary initiatives and commitments) these outcomes are most likely to be delivered
through existing and new group initiatives and collective commitments, where some of
the ‘barriers to entry’ referenced in the previous section are more easily overcome.
Closer cooperation and coordination between existing private sector, government,
finance and NGO initiatives would also be helpful to avoid duplicated effort and drive the
pace and scale of change.

One thing is clear: that for voluntary initiatives and commitments to have the impact
they were designed for greater efforts will be required to bring together those with a
keen interest in affecting positive change with those that can set the right framework
conditions (national and sub-national government policies, laws and regulatory
frameworks and incentives) with those able to provide the financing and investment
mechanisms and funds to incentivise change and leverage private sector investments
(e.g. international donors, banks, World Bank and EU and UN financial mechanisms).

So rather than focusing solely on voluntary initiatives and commitments, or dismissing

them as too difficult to achieve, they should be used as a springboard to multi-
stakeholder discussions to reinvigorate a process to assess the changes required in the
palm oil sector and those needed at producer and consumer country level.

Drawing on a number of studies (Pacheco et al, 2017; Brack and Gregory, 2017; WWF,
2016; Donofrio et al, 2017; and Bregman et al 2016), we now look at the roles that
different actors in the palm oil sector can play and the actions they can take to improve
the chances of existing and future voluntary initiatives and commitments succeeding:

Actions by companies:

 Greater investment in smallholder and SME production, building genuine, long-term

partnerships and collaborations and creating the confidence to invest in sustainable
production and certification;
 Working more closely with local communities and indigenous peoples to:
o Establish and promote more participatory planning processes;
o Help with education and training applied to local conditions, providing producers
with better planting material, environmental friendly practices for production, etc.
o Identify opportunities to work together on landscape-scale solutions to
deforestation and biodiversity loss, whilst providing sustainable livelihoods that
don’t require forest clearance or degradation;
o Identify conservation areas including areas of high conservation value (HCV) and
high carbon stocks (HCS);
o Ensure that the principle of free, prior and informed consent is applied to local
communities affected by new projects or developments – and initiate multi-
stakeholder dialogues involving NGOs and government at the early stages of
planning;
 Making greater use of the technology and data sharing platforms available to them,
including satellite remote sensing, geo-spatial data platforms and drone technology to
monitor the progress being made under their commitments;
 Applying pressure to their peers in other major consuming markets to ensure uptake

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 234 EN
 of existing voluntary initiatives or to create new ones in geographies where they don’t
exist; and create more demand pull for sustainable palm oil – organisations like the
CGF, TFA2020, CDP and NGOs have a role here; and
 Taking more advantage of new sources of funding and investment (e.g. carbon funds,
REDD+ finance for standing forests rather than as an ‘extractive resource’).

Actions by producer-country governments:

 The development, agreement and adoption of clear and consistent policies, laws and
regulatory regimes relating to:
o Land tenure and land and natural resource access rights and their effective
administration (no farmer will invest in better systems or certification without clear
tenure rights);
o Landscape-level land use planning, protected area designation and concession
allocation;
o Registration of farmers to avoid sourcing palm oil from illegal sources;
o The settling of historical land use disputes;
 Improving the clarity and consistency of relevant laws and their enforcement at the
national and sub-national level;
 Reform of laws seen as hindering commitments – e.g. in Indonesia the possibility that
undeveloped land within a concession must be handed back to the government,
making it difficult to set aside land for conservation purposes (Brack and Gregory,
2017);
 Improvements in the designation and regulatory protection of HCV and HCS areas,
which would make it easier for producer companies to agree protection policies with
local communities;
 Regular dialogue with producer companies, and with local communities and indigenous
peoples affected by the palm oil sector;
 Continuing research and development programmes with the palm oil industry to
improve yields and sustainable agriculture techniques;
 Working with producer companies to offer support and extension services to
smallholders and SME suppliers; and
 The development of a definitive map of protected areas, concession and plantation
boundaries, land use rights and ownership (similar to that proposed under Indonesia’s
One Map initiative502). And the use of satellite and drone technologies for the
monitoring of compliance with these boundaries and supporting legal and regulatory
frameworks where they exist.

Actions by consumer-country governments:

 The provision of financial and technical support to producer countries and to

smallholder producers in particular;
 The use of public procurement policies to grow the market for sustainable palm oil;
 Supporting the development of common definitions, standards and reporting
frameworks and platforms for sustainable palm oil;

502
For more information on Indonesia’s One Map initiative please visit:
https://www.opengovpartnership.org/sites/default/files/case-study_Indonesia_One-Map-
Policy.pdf

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 235 EN
 Providing greater clarity and raising awareness of key national and regional policy
objectives in relation to the environmental, social and economic impacts and benefits
of palm oil and the role of certification schemes and voluntary initiatives and
commitments in helping to deliver them;
 Establishing programmes in close collaboration with producer countries to help
develop alternative livelihoods for farmers, who would otherwise be inclined to
deforest;
 Exploring the potential for lower taxes on products that meet sustainability criteria
(along the lines of lower VAT rates for energy conservation products); and
 Exploring the potential of FLEGT-like voluntary partnership agreements (VPAs),
including independent monitoring, to be developed and applied in the palm oil sector.
This process is transforming the forestry sector in countries such as Indonesia, Liberia
and Ghana. Other potential models to explore include comparable initiatives on illegal
fishing and conflict minerals (Brack and Gregory, 2017).

Actions by NGOs and other civil society groups:

 On-going monitoring and reporting of the progress being made under voluntary
initiatives and commitments, including for those group initiatives and collective
commitments that haven’t yet received the level of scrutiny that others have;
 Facilitating the development of common definitions and standards, monitoring and
reporting frameworks, by working closely with those involved in voluntary initiatives
and commitments and the certification systems that often underpin them;
 Ensuring that measures are taken to ensure that any competitive or financial benefits
are passed on to producers, who are ultimately the ones incurring the costs associated
with making necessary changes in production practices and in certification, rather than
financial benefits being retained by retailers and manufacturers (Pacheco et al 2017);
and
 Increasing their level of engagement with the banking, finance and investment
communities.

Actions by the banking, finance and investment communities:

 Raising awareness of existing funding and investment opportunities amongst producer

companies, smallholder farmers and SME suppliers;
 Providing the technical support to smallholders and SME suppliers that facilitates
access to funding and investment to enable the adoption of more sustainable
agriculture practices and yield improvements;
 Establishing or extending tailored financial support for those involved in voluntary
initiatives and commitments to allow them to achieve or exceed their targets; and
 Exploring the potential of green bonds as an innovative way of financing investment
and action in palm oil supply chains.

The following section summarizes the analysis of voluntary initiatives and commitments
and makes some general conclusions about their actual and potential role in contributing
to environmental and social policy objectives of relevance to palm oil in the EU and UN
policy instruments reviewed in this study.

8.6.8. Summary and conclusions

It is clear that there has been a significant growth in voluntary initiatives and
commitments relating to different aspects of palm oil sustainability, as well as an
increase in the diversity of the topics covered by them and the range of different

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 236 EN
organisations and sectors involved in them. This is often as a result of sustained
campaigning from advocacy groups, a growing level of awareness from investors of the
risks and opportunities associated with these commodities and pressure from consumers
who are keen to see companies take action.

From the forerunners like the original 2010 Consumer Goods Forum Zero Net
Deforestation by 2020 commitment, with a singular focus on eliminating deforestation, to
more recent initiatives which include other environmental and social impacts, like better
water and waste management, reductions in GHG emissions and direct engagement with
- and support for - smallholder farmers, these commitments are becoming both more
integrated and more complex as a result.

Group initiatives and collective commitments bring with them a number of benefits,
reducing first mover disadvantage and reducing the instance of free riders, providing
those organisations involved with less risk and more confidence. The evidence also
suggests that companies operating within these collective environments are spurred on
to achieve more than if they operated alone.

Challenges for those leading or convening these group initiatives relate to tracking the
progress of individual participants, tailoring their support to different entities and above
all finding effective and robust ways of monitoring progress overall, often having to call
upon multiple sources of data and information, as is the case with both the CGF
commitment and the New York Declaration on Forests.

However, there remain significant obstacles to the success of this growing body of
voluntary initiatives and commitments, in particular:
 On-going challenges around land use planning and land tenure and regulatory
enforcement that threaten to undermine or slow progress; and require greater
emphasis on private/public partnerships and the support of local government to
ensure future economic development and the enforcement of areas of production and
areas of protection (Pacheco et al 2017).
 The difficulty and complexity of addressing social and labour issues.
 The on-going traceability challenges associated with a very large pool of smallholder
farmers and SME suppliers.
 The need to improve the standards and certification systems that so many
commitments are reliant on, whilst including smallholders to ensure that their needs
are met and that they are able to access the markets for their products.
 The need for other major consuming countries to engage more meaningfully, following
the lead of European and North American counterparts.

That said, there are positive signals that progress is being made: reporting of progress
against commitments is generally on the rise with palm oil in the lead; landscape-scale
solutions to deforestation and biodiversity loss are emerging; more companies are
engaging with and investing directly with suppliers (including smallholders) and
improving traceability in the process; inter-linkages and cooperation between different
group initiatives is strengthening – adding to their collective impact and momentum; and
companies operating in deforestation hotspots are accelerating their implementation
efforts.

However, there is no room for complacency as assessments of both high profile group
initiatives and the progress against commitments of individual companies show that
there is still a considerable body of work required for 2020 and 2030 commitments to be
delivered and considerable scepticism by leading companies that the targets embodied in
group initiatives will be achieved within this timeframe.

Another important consideration within this topic is the heavy reliance by many

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 237 EN
organisations on the use of sustainable palm oil certification schemes, like RSPO, to meet
their voluntary commitments.

Whilst RSPO and the other schemes do play an important role in helping to reduce
deforestation and deliver other environmental and social benefits within individual
company supply chains – and their requirements can be improved over time – they
account for a relatively small volume of the global palm oil market and are not being
adopted in major consuming markets like India and China. The result is that there are
significant gaps in the market coverage of these standards as the market demand for
CSPO in these countries is largely absent. This situation, where producers can produce
palm oil unsustainably and supply into these markets, can lead to further deforestation
and peatland conversion. This creates a serious mismatch between a major
implementation vehicle for voluntary commitments and the delivery of reductions in
deforestation and other environmental and social goals on the ground, which will need to
be addressed in the future.

That said, voluntary initiatives and commitments have a role to play in supporting the
achievement of EU and UN environmental and social policy objectives contained in the
instruments taken into consideration in this study, providing useful existing on-the-
ground activity and ready-made collaborations that are open to working more closely
with the public sector.

2017 8. Task 2: Certification standards, legislation and voluntary initiatives EUR 238 EN
9. Summary, conclusions, key findings and insights

9.1. Summary, conclusions, key findings and insights

The following sections summarise the key findings from this study and provide
conclusions on the environmental, social and economic impacts and benefits of palm oil
for consideration by the European Commission, drawing on key findings and insights
identified during the study.

9.2. The economics and agronomics of oil palm cultivation and palm oil
production

The oil palm is a very productive crop, with yields of oil per hectare per annum that are
very much greater than for other oil crops. This high yield means palm oil requires
5-8 times less land area than competing oil crops for the same quantity of oil
and makes it very attractive to producers.

Palm oil today is by far the most important source of vegetable oil for the world, having
overtaken soybean-oil in 2006. Rapeseed oil and sunflower oil are in third and fourth
place, respectively. The world is reliant on palm oil to satisfy growing global
demand for vegetable oil.

Indonesia and Malaysia dominate production with close to 90% of world output. Planted
area, although much more modest, has also expanded in West Africa and Central
America. Indonesia and Malaysia will remain the major producers for the foreseeable
future, with expansion focused on Kalimantan. As a result, discussion of the oil palm
must focus predominantly on Indonesia and Malaysia.

As there has been limited success at mechanisation to date, harvesting is very labour
intensive, which is palm oils major financial disadvantage. To deal with the high
labour requirement of the oil palm plantations often rely on large amounts of
migrant labour.

Oil palm fruits are processed to produce two types of oil:

 Crude Palm Oil (CPO) from the fibrous mesocarp around the outside of the fruits
and;

 Crude Palm Kernel Oil (CPKO) from the kernels at the centre of the fruits.

Although both oils originate from the same fruit, palm kernel oil is chemically and
nutritionally distinct from palm oil and can have different end use applications. The high
level of versatility of palm oil and palm kernel oil means that they are found in
over half of all consumer products covering a wide variety of product categories
from shampoos and liquid detergents to baked goods, margarines and
confectionary.

Importantly palm oil does not require artificial hardening, via hydrogenation, for use as a
food in hard fat applications. Since hydrogenation creates trans-fats, which are
considered unhealthy and have stringent incorporation limits in many markets, palm oil
is widely used as a naturally hard fat in food products. Therefore palm oil is currently
important for the production of many food products in countries where products
are required to be trans-fat fee.

The production of oil palm is split between company owned plantations and smallholders
(defined as having less than 50 hectares). In many countries, it is a requirement that

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 239 EN
company-owned plantations include land for smallholders. The contribution to palm oil
production from smallholders differs depending on the country. In South East Asia
roughly 60% of the palm oil comes from the larger plantation companies (privately
owned or government-linked) and 40% from smallholders. The high yield of the oil
palm makes it a very attractive source of income for smallholder farmers and a
key component of rural development.

The relationship between plantations and smallholders is built on the fact that the FFB
produced from these smallholders’ plantations is processed in company mills alongside
the FFB produced from the company’s plantation. Each mill typically has a catchment
area of up to 5,000 hectares of palms. The FFB deteriorate quickly after harvesting
(typically within 24 hours), which limits the distance they can be transported.
In addition, the company may provide technical support and subsidised inputs, such as
fertiliser, as high and consistent fertiliser applications are required to maintain
yields once harvesting commences.

In order to maximise the oil extraction rate and ensure optimum oil quality, stringent
plantation management, strict harvesting standards and efficient processing of the fresh
fruit bunches (FFB) are critical. The complexity of the supply chain necessitates
close co-operation between smallholders and plantations.

India is the largest consumer of palm oil almost all of which is imported, followed by
Indonesia. Among high-income consumer markets, only the EU (ranked third) and the
US (ranked tenth) appear in the top ten palm oil consumers. All high-income
countries together consume exactly one sixth of world palm oil output. The
remaining five sixths of global production are consumed by middle and low-
income countries. Asia alone consumes exactly two thirds of the world’s palm
oil supply.

The bulk of palm oil consumption and consumption growth will occur in the
developing world.

9.3. The environmental impacts of oil palm cultivation and palm oil production

9.3.1. Deforestation

The environmental impact of the palm oil industry often focuses on deforestation in
tropical forests resulting from oil palm cultivation.

Overall area under oil palm in Indonesia and Malaysia has increased from 2.6
million hectares in 1990 to over 15 million hectares in 2014, and there is
evidence that higher crude palm oil (CPO) prices encourage the planting of oil
palm.

A reliable study suggests that around 45% of oil palm plantations in Southeast
Asia came from areas that were forests in 1989. For Indonesia and Malaysia,
the estimates were 54% and 40% respectively. In other regions the planting on
forested areas appears to have been lower – at 31% in South America, 7% in
Africa and 2% in Central America.503

503
Vijay V., Pimm S.L., Jenkins C.N., Smith S.J. 'The Impacts of Oil Palm on Recent Deforestation
and Biodiversity Loss'. PLoS ONE 11/7 (2017), 1-19.

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 240 EN
The oil palm is not the only cause of deforestation. Estimates for the proportion of
deforestation caused by the expansion of the oil palm in Indonesia range from
11% (between 2000 and 2010) to a maximum of 16% (between 1990 and
2005).504

Two-thirds of the forest area converted to palm oil plantations is estimated to be

505
embodied in global trade in palm oil. The EU alone was estimated to be
responsible for 0.9 million hectares of embodied deforestation through its
506
imports of palm oil between 1980 and 2000.

In summary, we conclude that whilst there are other drivers of historical

deforestation in producer regions, there is a high degree of confidence that the
expansion of oil palm cultivation has resulted in significant deforestation in
Indonesia and Malaysia in particular.

Future expansion of palm oil cultivation may result in different deforestation

patterns to those seen in the past. A large proportion of the suitable oil palm planting
area in Malaysia is now utilised, meaning that further deforestation is likely to be focused
on Sarawak507, where the provincial government is promoting plantation expansion.508
The proposed further doubling of palm oil in Indonesia 509 could theoretically be done
without further loss of forestland and without compromising rice production, 510 but it
remains to be seen whether such a course will be followed.

Globally, an estimated 234 million hectares of suitable and available land are
available for palm oil cultivation, a significant proportion of which is in the
Amazon.511 In Brazil, initiatives from the federal government to restrict oil palm
expansion to already deforested areas (the Sustainable Palm Oil Production Program and
the Agro-Ecological Zoning of Oil Palm in Deforested Areas of the Amazon) have

504
Abood, S. A., Lee, J. S. H., Burivalova, Z., Garcia‐ Ulloa, J., and Koh, L.P. 'Relative
contributions of the logging, fiber, oil palm, and mining industries to forest loss in Indonesia'.
Conservation Letters 8 (2015), 58-67.
505
Henders, S., Persson, U.M. & Kastner, T. (2015). 'Trading forests: land-use change and carbon
emissions embodied in production and exports of forest-risk commodities'. Environmental
Research Letters 10/12 (2015), 125012.
506
Cuypers, D., Geerken, T., Gorissen, L., Lust, A., Peters, G., Karstensen, J., Prieler, S., Fisher,
G., Hizsnyik, E. and van Velthuizen, H. ‘The impact of EU consumption on deforestation:
Comprehensive analysis of the impact of EU consumption on deforestation’. European Union
Technical Report - 2013 - 063 (2013).
507
There is a collaboration between Malaysia, Brunei and Kalimantan, Indonesia under the “Heart
of Borneo” Initiatives for approximately 200,000 km2 of forest conservation. Sarawak targets
increasing the size of Totally Protected Areas and Forest Habitats to 1 million ha by 2020.
508
Cramb, R. ‘The Political Economy of Large Scale Palm Oil development in Sarawak’, in Cramb,
R, and McCarthy, J.F., eds., The Oil Palm Complex (Singapore, 2016) 189-246.
509
Jakarta Post (December 2, 2009) 18 million hectares of land for palm oil. Jakarta Post.
http://www.thejakartapost.com/news/2009/12/02/indonesia-allocates-18- million-hectares-
land-palm-oil.html
510
Koh, L.P. & Ghazoul, J. 'Spatially explicit scenario analysis for reconciling agricultural
expansion, forest protection, and carbon conservation in Indonesia'. Proceedings of the
National Academy of Science, 107/24 (2010), 11140–11144.
511
Pirker, J., Mosnier, A., Kraxner, F., Havlík, P and Obersteiner, M. ’What are the limits to oil
palm expansion?’ Global Environmental Change, 40 (2016) 73–81.

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 241 EN
apparently had some initial success in reducing the environmental impacts of palm oil
512
expansion.

The areas potentially under threat from future deforestation include Borneo,
Indonesian Papua, Papua New Guinea, parts of Central America and large
swathes of West Africa and South America.

9.3.2. Biodiversity loss

A central concern over deforestation is the extent to which it leads to biodiversity loss.
Conversion of forest to other land uses and degradation of forest reduces the extent and
quality of habitat, thus causing a loss of biodiversity. Concern is particularly acute, in the
513
lowland tropics, where oil palm is predominantly cultivated, as they contain the most
514
species rich forests on Earth.

Those of Southeast Asia are amongst the most biodiverse of all, contain high levels of
515
endemism and include charismatic and endangered fauna, such as orang-utan, Asian
elephant, Sumatran tiger, birds of paradise, and three species of rhinoceros. Indonesia,
for example, covers just 1.3% of the globe's land surface, yet its forests are
home to around 10% of all species of flowering plants, 17% of all species of
birds, 12% of all species of mammals, 16% of all species of reptiles, and 16%
516
of all species of amphibians.

It is well established and uncontested that the conversion of tropical forest to agriculture,
plantations and other land uses causes a significant loss of species. 517 Loss of species
occurs whether or not the forest converted to plantations has been previously
logged, because selectively logged forest typically retains a significant proportion of the
biodiversity of unlogged, primary tropical forest.518,519,520

512
Brandão, F. and Schoneveld, G. 'The state of oil palm development in the Brazilian Amazon:
Trends, value chain dynamics and business models.' Centre for International Forestry
Research Working Paper 198. CIFOR (2015), Bogor, Indonesia.
513
Corley, R.H.V. and Tinker P.B. (eds.) The Oil Palm (Oxford, 2003).
514
Whitmore, T.C., Introduction to Tropical Rain Forests (Oxford, 1998).
515
Whitmore, T.C., Tropical Rain Forests of the Far East (Oxford, 1988).
516
Collins, N., Sayer, J.A. and Whitmore, T.C. The Conservation Atlas of Tropical Forests: Asia
and the Pacific. International Union for the Conservation of Nature (IUCN) (London, 1991).
517
Brook, B.W., Sodhi N.S., Ng P.K.L. ‘Catastrophic extinctions follow deforestation in Singapore'.
Nature 424 (2003), 420–423.
518
Barlow, J., Gardner T.A., Araujo I.S., Ávila-Pires, T.C., Bonaldo, A.B., Costa, J.E., Esposito,
M.C., Ferreira, L.V., Hawes, J., Hernandez, M.I.M., Hoogmoed, M.S., Leite, R.N., Lo-Man-
Hung, N.F., Malcolm, J.R., Martins, M.B., Mestre, L.A.M., Miranda-Santos, R., Nunes-Gutjahr,
A.L., Overal, W.L., Parry, L., Peters, S.L., Ribeiro-Junior, M.A., da Silva, M.N.F., da Silva
Motta, C., and Peres, C. A. ‘Quantifying the biodiversity value of tropical primary, secondary
and plantation forests’. Proceedings of the National Academy of Science 104 (2007), 18555–
18560.
519
Gardner, T.A., Ribeiro-Junior, M.A., Barlow, J., Avila-Pires, T.C.S., Hoogmoed M.S., and Peres
C.A. ‘The value of primary, secondary, and plantation forests for a neotropical herpetofauna’.
Conservation Biology 21 (2007), 775–787.
520
Putz, F.E., Zuidema, P.A., Synnott, T., Pena-Claros, M., Pinard, M.A., Sheil, D., Vanclay, J.K.,
Sist, P., Gourlet-Fleury, S., Griscom, B., Palmer, J. and Zagt, R. ‘Sustaining conservation
values in selectively logged tropical forests: the attained and the attainable’. Conservation
Letters 5 (2012), 296–303.

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 242 EN
In summary, there is high confidence that the conversion of forest – primary or
selectively logged – to oil palm cultivation causes a significant loss of
biodiversity, with forest specialist species particularly affected.

9.3.3. Peatland conversion

Malaysia, Indonesia and Papua New Guinea support some of the most extensive tropical
peatlands in the world, covering around 27.1 million hectares. 521 Only 36% of the
historical peat swamp forest area in the region remains, with only 9% currently
in designated protected areas,522 and the majority of the remaining areas are
now degraded.523

The development of peat land can have a disproportionate impact on

biodiversity and greenhouse gas emissions, because the Indo-Malay peat swamp
forests provide habitat for a large number of globally threatened species, which are
threatened by the conversion of peat land and because peat land contains a high
proportion of carbon. Once drained, decomposing organic matter by oxidation results in
carbon dioxide emissions, and drained peat is highly flammable: once alight, peat fires
can burn for months or even years.

The largest oil palm growing regions (Peninsular Malaysia, Borneo and
Sumatra, i.e., virtually all the combined Indonesian and Malaysian oil palm
areas) are estimated to have had 14.75 million hectares of peatland, 27% of
which estimated to have been converted to industrial plantations by 2015, of
which 73% (3.1 million hectares) was oil palm.524

The impact this has had in terms of greenhouse gas emissions is difficult to assess
exactly. This is partly due to the fact there are large differences in peat thickness, which
range from less than 1 metre to over 12 metres.525 As there does not appear to a body of
research describing oil palm planted by peat depth this cannot be consistently factored
into calculations.

9.3.4. Greenhouse gas emissions

Greenhouse gas emissions from oil palm cultivation and palm oil production
derive from two main sources: (a) land use change and (b) plantation and mill
activities.

Tropical forests store around 46% of the world’s living terrestrial carbon, 526 and
25% of total net global carbon emissions may stem from deforestation.527

521
Hooijer, A., Silvius, M., Wösten, H. and Page, S. ‘PEAT-CO2, Assessment of CO2 emissions
from drained peatlands in SE Asia’. Delft Hydraulics report Q3943 (2006), Delft, Netherlands.
522
Posa, et al., (2011). Op. cit.
523
Yule, C.M. ‘Loss of biodiversity and ecosystem functioning in Indo-Malayan peat swamp
forests’. Biodiversity and Conservation (2010) 19:393–409.
524
Miettinen, J., Shi, C., and Liew, S.C. Land cover distribution in the peatlands of Peninsular
Malaysia, Sumatra and Borneo in 2015 with changes since 1990' Global Ecology and
Conservation, Volume 6, (2016), Pp 67–78.
525
Hooijer et al. (2006). Op. cit.
526
Soepadmo, E. ‘Tropical rain forests as carbon sinks’. Chemosphere 27 (1993), 1025–1039.

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 243 EN
Land use change can result in large net greenhouse gas emissions. For example:
unlogged Asian tropical forests store approximately 400 tonnes of carbon per hectare
above ground528, whilst a fully mature oil palm plantation only stores around 91 tonnes
per hectare.

Therefore oil palm plantations only store a third as much carbon as unlogged forests,
meaning that an estimated net amount of 163 tonnes per ha of stored carbon is emitted
to the atmosphere when rainforest is converted to oil palm.529 In addition, clearing
forest with fire is estimated to result in additional emissions of between 207 to
650 tonnes of carbon per hectare.530

If the original habitat were peat swamp forest, then a soil carbon stock of 1,550 tonnes
per hectare would be added to emissions from the oxidisation of drained peat soil,531 or a
total of at least 1,300 tonnes carbon dioxide equivalents during the first 25-year cycle of
oil palm growth.

In contrast, oil palm plantations established on degraded grassland will replace the
released carbon within approximately 10 years, as grassland has an above ground
carbon stock that has been estimated at less than that of a mature oil palm plantation:
39 tonnes per hectare.532 This suggests that oil palm plantations established on
grassland would result in the net removal of about 135 tonnes carbon dioxide
per hectare from the atmosphere over a 25-year period.

In addition to land use change, greenhouse gas emissions occur from mill and
plantation activities, including methane emissions from the treatment of POME,
nitrous oxide release from the use of nitrogen fertilisers, and carbon dioxide
emissions from using fossil fuels. The methane emissions are increasingly being
converted, with government support, into feedstocks for power generation, either for use
within a mill or for electric power for wider geographical use. The emissions from these
sources are smaller than the emissions from forest conversion.

In summary, there is consistent and rigorous evidence that converting forests

to palm oil plantations results in net greenhouse gas emissions. Emissions are
extremely high if the forest being converted is peat swamp forest, high from unlogged
forest on mineral soils and variable from selectively logged forest. Conversion of
grasslands, however, can see a net uptake of carbon dioxide.

527
Skutsch, M., Bird, N., Trines, E., Dutschke, M., Frumhoff, P., de Jong, B., van Laake, P.,
Masera, O., and Murdiyarso, D. ‘Clearing the way for reducing emissions from tropical
deforestation’. Journal of Environmental Science and Policy 10 (2007), 322–334.
528
Murdiyarso, D., M. van Noordwijk, M., Wasrin, U.R., Tomich, T.P. and A. N. Gillison.
‘Environmental benefits and sustainable land use options in the Jambi transect, Sumatra’.
Journal of Vegetation Science 13 (2002), 429–438.
529
Danielsen et al. (2008), op. cit.
530
Germer J. and Sauerborn, J. ‘Estimation of the impact of oil palm plantation establishment on
greenhouse gas balance’. Environment Development and Sustainability 10 (2007), 619-716.
531
Hooijer et al. (2006), op. cit.
532
Murdiyarso et al. (2002), op. cit.

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9.3.5. The use of fire and its impacts

The annual use of fire to clear forests for agriculture, in particular in Kalimantan and
Sumatra, are a major source of greenhouse gas emissions, air pollution and biodiversity
loss, as well as reducing carbon storage.

Forest fires can be particularly severe during the droughts associated with El Niño. For
example, the 2015 fires in Indonesia were associated with an El Niño event and
caused emissions of between 1.62533 and 1.75534 billion tonnes of CO 2
equivalent, effectively tripling Indonesia’s greenhouse gas emissions for that
year.

Oil palm cultivation could be responsible for perhaps 16-19%535 536 (and 52% in
Sumatra in 2013) of these fires, albeit based on a small number of rigorous studies.

9.3.6. Air pollution and haze

Haze pollution consists of airborne particles, including fine (PM 2.5) and ultrafine (PM10)
particles generated from fires. The principal source of haze in Southeast Asia is fires
started in order to clear land for agriculture, especially on peat lands, with Sumatra and
Kalimantan the main source locations.537,538 This has been an occasional but
sometimes severe problem in Southeast Asia over the past 20 years.

The health effects of haze include potential in utero deaths, respiratory ailments and
exacerbation of existing heart and lung conditions. Severe haze in 2015, lasting three
months, resulted in an estimated 100,300 excess deaths across Indonesia,
Malaysia and Singapore.539

533
Chamorro, A., Minnemeyer, S., and Sargent, S. Exploring Indonesia's Long and Complicated
History of Forest Fires. World Resources Institute, February 16, 2017
http://www.wri.org/blog/2017/02/exploring-indonesias-long-and-complicated-history-forest-
fires
534
World Bank ‘The Cost of Fire An Economic Analysis of Indonesia’s 2015 Fire Crisis’. Indonesia
Sustainable Landscapes Knowledge Note: 1. The World Bank Group (2016), Jakarta
535
Recalculated from figure on page 1 of World Bank (2016), op. cit.
536
Cattau, M.E., Marlier, M.E., and DeFries, R. 'Effectiveness of Roundtable on Sustainable Palm
Oil (RSPO) for reducing fires on oil palm concessions in Indonesia from 2012 to 2015'.
Environmental Research Letters 11 (2016), 105007
537
Sastry, N. ‘Forest fires, air pollution, and mortality in Southeast Asia’. Demography 39 (2002),
1–23.
538
Reddington, C., Yoshioka, M., Balasubramanian, R., Ridley, D., Toh, Y., Arnold, S. and
Spracklen, D. ‘Contribution of vegetation and peat fires to particulate air pollution in Southeast
Asia’. Environmental Research Letters, 9 (2014), 094006.
539
Koplitz, S.N., Mickley, L.J., Marlier, M.E., Buonocore, J.J., Kim, P.S., Liu, T., Sulprizio, M.P.,
DeFries, R.S., Jacob, D.J., Schwartz, J., Pongsiri, M. and Myers, S.S. ‘Public health impacts of
the severe haze in Equatorial Asia in September–October 2015: demonstration of a new
framework for informing fire management strategies to reduce downwind smoke exposure’.
Environmental Research Letters, 11 (2016), 094023.

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Other economic impacts include disruption to transport and tourism. 540541 The economic
impacts of haze are felt most strongly in Indonesia, Singapore and Malaysia but can also
extend to Vietnam, Thailand and the Philippines.542543544

In summary, there is a body of evidence that transboundary haze pollution, causes

economic and health damage in Southeast Asia. Forest fires, especially those on peat
lands, which are started to clear land for agriculture, are the main cause of
haze. Oil palm cultivation is one of the contributor factors to these fires.

9.3.7. Water pollution

The dominance of palm cultivation and milling in some landscapes means that
watershed-scale impacts on surface and ground water can occur. The major risks of
water pollution from oil palm cultivation are run-off and sedimentation during the
clearing and establishment phase of plantations when the soil is largely uncovered;545
discharge of untreated palm oil mill effluent (POME); and the release of agrichemicals
through run-off, soil erosion and leaching.546 The limited evidence that exists suggests
that water pollution from palm oil plantations is usually within national and international
norms.

9.4. The economic and social impacts of oil palm cultivation and palm oil
production

The economic and social impacts of palm oil are complex and contradictory. Oil palm
cultivation has provided livelihoods for many rural people, including smallholders, and
has supported rural development 547. However, it has also often been associated with
social concerns, the most important of which are land use rights, forced and child labour,
and issues relating to the terms and conditions of labour, (such as wages, health and
safety and gender discrimination).
9.4.1. The effect of oil palm on smallholders’ livelihoods, income and wellbeing

Smallholder income estimates suggest that the oil palm farmers receive higher
548
incomes than those with similar rice and rubber holdings. However, yields – and

540
Lee, J.S.H., Jaafar, Z., Tan, A.K.J., Carrasco, L.R., Ewing, J.J., Bickford, D.P., Webb, E.L. and
Koh, L.P. ‘Toward clearer skies: challenges in regulating transboundary haze in Southeast
Asia’. Environmental Science and Policy 55 (2016), 87–95.
541
Lin et al., (2017), op. cit.
542
Chisholm, R.A., Wijedasa, L.S. and Swinfield, T. ‘The need for long-term remedies for
Indonesia’s forest fires’. Conservation Biology 30 (2016), 5–6.
543
Lee et al., (2016), op. cit.
544
Lin et al., (2017), op. cit.
545
Goh, K. J., Härdter, R., and Fairhurst, T. 'Fertilizing for maximum return'. In Oil Palm:
Management for Large and Sustainable Yields (T. Fairhurst and R. Hardter, Eds.), pp. 279–
306. Potash & Phosphate Institute/Potash & Phosphate Institute of Canada and International
Potash Institute (PPI/PPIC and IPI), 2003, Singapore.
546
Goh et al. (2003) ibid.
547
Section 7.3.12 discusses the wider economic and social benefits of the oil palm sector using
Input-Output and multiplier techniques.
548
Khor, Yuleng (2016), Socio-economic parameters for peat restoration policy makers
[presentation], LM International Ltd, 15th International Peat Congress (Kuching: 17 Aug.
2016).

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 246 EN
therefore revenue - obtained by smallholders often depend on the assistance they
receive in terms of higher-yielding planting materials, credit, fertiliser and technical
advice. However, poorer households and those unable manage debt or to access
technical support may not be able to benefit.

There is significant variation in the way that smallholder oil palm cultivation is organised.
One of the most successful schemes for organising smallholders is Malaysia’s Federal
Land Development Authority (FELDA). The FELDA project began in 1956 as a
resettlement scheme for landless peasants. FELDA was able to settle 122,000 families
549
between 1959 and 1990, developing about 470,000 hectares (ha). Over five
decades, the Felda scheme succeeded in raising smallholder household incomes
considerably above the national poverty line, prompting some observers to
characterise it as ‘one of the most successful land settlement organisations in the
550
world’. Other notable examples include the corporate-led development of smallholder
schemes in Indonesia.

9.4.2. Land use rights

Oil palm expansion has been accompanied by disputes over land rights in which the
creation of large-scale plantations has, in some instances, resulted in local and
indigenous peoples losing their customary land, and along with it part of their traditional
livelihoods and cultural reference. This has been documented in Indonesia, 551 552 553 554
and to a lesser extent in Malaysia,555 556 Papua New Guinea,557 Cambodia,558 the

549
Khor, Yuleng (2016), Socio-economic parameters for peat restoration policy makers
[presentation], 15th International Peat Congress (Kuching: 17 Aug. 2016).
550
Sutton, K. (1989), Malaysia's FELDA (Federal Land Development Authority) land settlement
model in time and space, Geoforum, Volume 20, Issue 3, 1989, Pages 339-354.
551
Siscawati, M. 'The Case of Indonesia: Under Soeharto's Shadow'. In The bitter fruit of oil
palm: dispossession and deforestation. World Rainforest Movement (2001), UK.
552
Colchester, M. and Jiwan, N. Ghosts on our own land: Indonesian oil palm smallholders and
the Roundtable on Sustainable Palm Oil. Forest People’s Programme & Sawit Watch (2006),
Moreton-in-Marsh, UK and Bogor, Indonesia.
553
Colchester, M., Jiwan, N., Andiko, Sirait, M., Firdaus, A.Y., Surambo, A., and Pane, H.
Promised Land: Palm Oil and Land Acquisition in Indonesia: Implications for local communities
and indigenous peoples. Forest People’s Programme, Sawit Watch, HuMa and World
Agroforestry Centre (2007), Moreton-in-Marsh, UK and Bogor, Indonesia.
554
Marti, S. Loosing ground: the human rights implications of palm oil plantation expansion in
Indonesia. Friends of the Earh & Sawit Watch (2008), London and Bogor.
555
Dayang Norwana, A.A.B., Kunjappan, R., Chin, M., Schoneveld, G., Potter, L. and Andriani, R.
'The local impacts of oil palm expansion in Malaysia: An assessment based on a case study in
Sabah State'. Working Paper 78. CIFOR (2011), Bogor, Indonesia.
556
Chao, S. 'Malaysia: the Murut struggle against palm oil, for land and life'. The Ecologist (12th
December 2016). Available at:
http://www.theecologist.org/campaigning/2988442/malaysia_the_murut_struggle_against_pa
lm_oil_for_land_and_life.html
557
Numapo, J. Commission Of Inquiry Into The Special Agriculture And Business Lease (SABL).
Chief Commissioner Port Moresby 24th June, 2013, Papua New Guinea.
558
Sokhannaro, H.E.P, 'Oil palm development in Cambodia.' In Colchester, M. and Chao, S. Oil
Palm Expansion in South East Asia: Trends and Implications for Local Communities and
Indigenous Peoples. (Forest People's Programme and SawitWatch (2011), Moreton-in-Marsh,
UK and Bogor, Indonesia.

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Philippines,559 Nigeria,560 Liberia,561 and Colombia.562 These land use disputes are often in
fact disagreements about how rural development is carried out rather than about oil palm
per se.563

Accurate figures for the total number of land rights issues associated with oil palm
plantations globally are not available, but Indonesia’s National Land Bureau of Indonesia
estimated that around half of the country’s 8000 land conflicts are within the oil palm
sector in 2012.564 In summary, there is strong evidence that oil palm has expanded
on to land traditionally used by indigenous peoples and local communities. This
can result in grievances that sometimes escalate into conflict, and occasionally violence
between plantation companies and local people. This appears to be a particularly
focused in Indonesia, where many of the examples cited in this study are
recorded.

9.4.3. Forced or child labour

Forced labour is any work or service that is exacted from a person under the threat of
penalty, and for which that person has not offered himself or herself voluntarily. ‘Child
labour’, is defined by ILO Convention No.182 as ‘work that deprives children of their
childhood, their potential and their dignity, and that is harmful to physical and mental
development.’

Whilst there is limited official data on the incidence of forced and child labour
within the palm sector in major producing countries, there are concerns that the
high reliance on migrant labourers on plantations, who are more vulnerable to
exploitation, may result in incidences of forced labour.565

Indeed, the US Department of Labor’s List of Goods Produced by Child Labor or Forced
Labor includes palm oil produced in Malaysia (both forced and child labour),
Indonesia (child labour) and Sierra Leone (child labour).566 NGO and Press reports
of child and forced labour also surface sporadically.567 568 569 Notably in December 2016,

559
Harbinson, R. Broken Promises: Communities in Philippine island take on palm oil companies.
Mongabay (23 October 2015).
560
Friends of the Earth. Exploitation and empty promises: Wilmar's Nigerian land grab. Friends of
the Earth (2016), USA and Nigeria.
561
RAN. Conflict Palm Oil in Practice: Exposing KLK’s role in Rainforest Destruction,
Land Grabbing and Child Labor. Rainforest Action Networm (2014), San Francisco.
562
Miroff, N. 'In Colombia, a palm oil boom with roots in conflict.' The Washington Post
(December 30, 2014).
563
Levang, P., Riva, W.F., Orth, M.G. ‘Oil palm plantations and conflict in Indonesia: evidence
from West Kalimantan’ in Cramb, R, and McCarthy, J.F., eds, The Oil Palm Complex
(Singapore, 2016), 283-300.
564
Badan Pertanahan Nasional (National Land Bureau, Indonesian Government): presentation to
RSPO 2012
565
UNICEF 'Palm Oil and Children in Indonesia'. United Nations Children's Fund (2016)
566
Bureau of International Labor Affairs. List of Goods Produced by Child Labor or Forced Labor.
US Department of Department of Labor (2014), USA.
567
World Vision ‘Forced, child and trafficked labour in the palm oil industry’. World Vision
Australia (2012).
568
Skinner, E.B. ‘Indonesia's Palm Oil Industry Rife With Human-Rights Abuses: The hidden
human toll of the palm oil boom’. Bloomberg Business Week, 2013).

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Amnesty International published the results of an investigation into Wilmar, the world’s
largest processor of palm oil, finding serious human rights abuses in the plantations of
Wilmar and its suppliers.570

Reports range from press reports to meticulous interviews, but do not

collectively provide sufficient information to conclude with a high degree
confidence how widespread forced and child labour is.

9.4.4. Terms and conditions of labour

The terms and conditions of labour (‘working conditions’) cover a broad range of issues,
including hours worked, wages, leave, health and safety and the right to assembly. The
very high reliance on migrant workers once again is a cause for concern, as they typically
have less legal protection on labour rights issues than the domestic workforce.

For example, an estimated two-thirds of palm oil workers in Malaysia and

Indonesia, over 2.5 million people, are internal or international migrants 571.
Indonesian oil palm workers in Malaysia receive only two thirds of the wage of
a Malaysian, and just one third if they are unregistered.572

A recent Amnesty International report into five plantations in Indonesia found that
workers were paid below the legal minimum wage, potential breaches of regulations on
overtime pay, insufficient training on use of hazardous chemicals and inconsistent use of
safety equipment and the potential exclusion of women from permanent employment.

In Malaysia, following complaints, ASI, the organisation that accredits RSPO certifiers,
found pay below the minimum and insufficient leave at an RSPO certified FELDA estate.
Some labourers are kept as causal labourers for extended periods (years), without the
terms and conditions to which permanent employees are entitled.

Evidence from analysis of RSPO audits 573 and NGO investigations 574 575 576
suggest that issues regarding terms and conditions of oil palm plantation

https://www.bloomberg.com/news/articles/2013-07-18/indonesias-palm-oil-industry-rife-
with-human-rights-abuses
569
Al-Mahmood, S.Z. (2015), 'Palm-Oil Migrant Workers Tell of Abuses on Malaysian Plantations',
The Wall Street Journal (26 Jul. 2015), https://www.wsj.com/articles/palm-oil-migrant-
workers-tell-of-abuses-on-malaysian-plantations-1437933321, accessed 1 Feb. 2017.
570
Amnesty International (2016), The Great Palm Oil Scandal: Labour Abuses Behind Big Brand
Names (London: Amnesty International, 7 Dec. 2016),
https://www.amnesty.org/en/documents/asa21/5184/2016/en/, accessed 1 Feb. 2017.
571
Cramb, R, and McCarthy, J.F. ‘Characterising Oil Palm Production in Indonesia and Malaysia’,
in Cramb, R, and McCarthy, J.F., eds., The Oil Palm Complex (Singapore, 2016) 27-77.
572
Cramb, R, and McCarthy, J.F. (2016) ibid.
573
Lord, S., and Durham, K. Analysis of RSPO certification and surveillance audit reports across
Indonesia, Malaysia and the Rest of the World. Global Sustainability Associates (2014),
Singapore.
574
Amnesty International. The Great Palm Oil Scandal: Labour Abuses Behind Big Brand Names,
Amnesty International (2016), London.
575
International Labour Rights Forum & Sawit Watch (2013) op. cit.
576
EIA. Who Watches the Watchmen? Auditors and the Breakdown of Oversight in the RSPO.
Environmental Investigation Agency (2015), London.

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workers, such as below minimum wages, gender discrimination and exposure to
unsafe working practices, may be widespread.

9.5. The role and potential of existing palm oil sustainability certification
schemes

The four main sustainable palm oil certification schemes reviewed in this study are:
 The Roundtable on Sustainable Palm Oil (RSPO): established in 2004 was the
first scheme specific to oil palm. It remains the most prominent global scheme in
the sector with a membership of 3,413 organisations. RSPO is the predominant
certification system in the food, oleochemical and hygiene and care sectors.
 The International Sustainability and Carbon Certification (ISCC): was
created in 2010 and whilst it is applicable to all end uses, the ISCC EU standard is
the predominant standard for biofuels and bioliquids, and is used to ensure
compliance with the sustainability criteria requirements set in the EU Renewable
Energy Directive (Directive 2009/28/EC).
 The Indonesian Palm Oil Standard (ISPO): was launched by the Indonesian
Government in 2011. The standard is based on existing Indonesian regulations
that pertain to palm oil cultivation and processing and is mandatory for
Indonesian companies producing and/or processing palm oil.
 The Malaysian Sustainable Palm Oil (MSPO): was started as a voluntary
standard in 2015 and is expected to become mandatory.

There are significant differences in the processes underpinning certification as well as in

the requirements of the standards. We will look at each in turn.

9.5.1. Certification process of the four schemes

Table 77 summarises the certification process in the four schemes demonstrating that:

 All four schemes rely on third party, independent audits to verify compliance
with the standards, and surveillance audits are repeated annually. The RSPO,
ISCC and MSPO have independent accreditation of the certification bodies who
decide whether a certificate is granted or not, and the same schemes provide a
degree of transparency through making documents on audits and complaints
publicly available. The ISPO system has less robust and transparent procedures
on these elements, but like the ISCC and RSPO, has supply chain verification
mechanisms. MSPO is currently in the process of developing similar supply chain
verification procedures.

 Alongside differences in the certification and accreditation processes there are

differences in how the schemes cover environmental and social themes, as Table
78 below demonstrates. For example, the four standards differ markedly
regarding deforestation. The ISCC excludes production from primary forest, and
forests of high biodiversity value (Criterion 1.1), and degraded forest
(Criterion 1.3). Degraded forest is defined conservatively, with a high proportion
of logged forest included in the restriction. The RSPO standard has the less
exacting requirement that forest clearance is legal, but primary forest and High
Conservation forest are not to be cleared for oil palm cultivation.577 The ISPO

577
High Conservation Value’ was first articulated in the Forest Stewardship Council’s Principles
and Criteria to define and maintain the world’s most important forests for biodiversity,

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 standard permits forest clearance provided it is within land zoned for agriculture;
is allowed under the environmental impact assessment; and the government has
granted the necessary permits. The MSPO standard is broadly similar to ISPO,
but with additional requirements on Environmentally Sensitive Areas and areas
with high biodiversity value.

 Overall, the ISCC provides the most restrictive environmental safeguards,

while the RSPO is stronger on the social issues relating to oil palm. MSPO
provides strict standards for plantation management (dealing with
burning, air and water pollution). The ISPO is based on existing
Indonesian regulations that pertain to oil palm cultivation and processing
and has a more limited coverage, addressing to a lesser extent the
possible negative environmental and social impacts of palm oil
production.

Table 77: Summary of certification processes within four palm oil certification
schemes
Standard

Certification scheme element RSPO ISCC ISPO MSPO

Certification Who: independent 3rd Party

How: audit
How often: annual surveillance
Who decides: certification body
Accreditation Fully independent accreditation
Complaints Documented procedures available
Transparency Audit reports publicly available
Claims Supply chain verification
Note: Dark shading indicates that the process reaches best practice, with the greatest restrictions on activities;
pale shading indicates absence of the process; mid-shade implies an intermediate state.

ecosystem services, culture and society. The notion has been extended to include other, non-
forest ecosystems, and within other sectors, such as oil palm.

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Table 78: Summary of provisions within standards against environmental and
social themes.
St a n da r d

Th e m e RSPO I SCC I SPO M SPO

Deforestation
Biodiversity
Peat land conversion
GHG emissions
Burning
Air pollution
Water pollution
Rights & Wellbeing
Land use rights
Treatment of smallholders
Forced and Child labour
Terms and conditions of labour

Note:
Dark shading indicates that the process reaches best practice, with the greatest restrictions on activities; pale
shading indicates absence of the process; mid-shade implies an intermediate state.

9.5.2. Analysis of palm oil certification systems and the environmental

objectives in selected EU and UN policy instruments

The report provides a first-order analysis of how certification standards relate to the
objectives of selected EU, UN and regional policy instruments.

No single certification scheme fully addresses all of the EU and UN policy

instruments identified and used in this study. It should be noted that this does not
mean that any of the schemes assessed here are ‘poor’: none of them were designed to
address the suite of EU and UN instruments assessed (although the ISCC scheme was
developed around the EU RED sustainability criteria), and divergence between the
content of the schemes and the objectives of these instruments is therefore not
surprising.

In general terms:
 The ISCC addresses a larger share of the environmental objectives of EU
and UN instruments than the other schemes. This is largely a result of the
restrictions on converting land with high carbon stock, and the clear and
conservative definition of high carbon stocks within the standard, that in effect
prohibits conversion of all but the most degraded secondary forest. This resulted
in a strong match with policy objectives on deforestation and greenhouse gas
emissions from land use change in particular.
 The RSPO overall addresses a larger share of the social objectives of EU
and UN instruments than the other schemes. The RSPO standard has broader
and more tightly defined requirements on rights and wellbeing, land rights, terms
and conditions of labour and responsibilities towards smallholders than the other
schemes.
 The ISPO scheme generally addresses fewer objectives of EU and UN instruments
than either RSPO or ISCC schemes, with the MSPO scheme intermediate.

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Although hard evidence on the impact of and certification on the ground is limited, a
number of NGO reports have surfaced which indicate that serious breaches of standards
can occur within certified plantations. However, there is simply insufficient evidence to
judge whether or not such breaches are widespread.

9.5.3. Extent of up-take of certified sustainable palm oil.

Together The RSPO and ISCC account for the vast majority of CSPO. Table 79 shows the
volumes of CSPO sold through RSPO and ISCC.

 The annual supply of RSPO Certified Sustainable Palm Oil (CSPO) is

around 12.8 million tonnes. Sales of RSPO CSPO however, were only around 6
million tonnes.
 ISCC certification covers almost 9 million tonnes. Only around half of total
ISCC CSPO was bought as such (4.2 million tonnes).

Around half of CSPO therefore was sold as such under each scheme, with the
remainder bought as conventional or other certified palm oil. While many
producers may be opting for certification under both schemes (thereby inflating
the total supply), it is still clear that the supply of CSPO exceeds the demand for
certified materials, on a combined basis.

Table 79: RSPO and ISCC market uptake of certified palm oil, 2015

Number of Estimated Estimated % take-up

mills capacity, sales, '000
'000 tonnes tonnes
RSPO 327 12,890 6,183 48%

ISCC 226 8,814 4,250 48%

RSPO does not provide trade data for destination markets. However, an estimated 48%
of their overall tonnage is sold in developing or emerging markets. Europe is the leading
region for sustainable palm oil use, but CSPO still represents less than half on non-
energy uses of palm oil in Europe and the market is declining.

In terms of attainment of general RSPO certification, the food sectors that were most
advanced were bakery, dairy/non-dairy and the slowest was fried foods. The home and
personal care (HPC) and cosmetics sectors appear to lag behind the food sector in their
use of CSPO.

If ISCC CSPO volumes are added to RSPO ISCC, then even for the leading
German and UK markets, tonnages indicate certified ratios in the region of 61-
63%. Even in the most advanced markets therefore a third of palm oil is still
entirely uncertified.

Uptake of CSPO in developing markets is growing but remains very low. Pledges
in China and India are limited to global brand names, such as Unilever and McDonald’s.
There are very few RSPO certified facilities in these markets, particularly in India.

Supply outstrips demand for CSPO. Demand is concentrated in a handful of large

international buyers serving developed markets. While the EU is the most advanced
region pledges to reach 100% CSPO have not yet been met. Even in the most advanced

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member states a third of palm oil is still not certified. Use of CSPO in developing markets
remains very low, outside of global brands, as shown by the lack of RSPO certified
facilities.

9.5.4. Margins for CSPO and costs of certification

As we have seen demand for CSPO only accounts for around half of total supply, with the
remainder sold as regular crude palm oil. As a result of this oversupply basic RSPO
premia are only in the region of $2 per tonne.

Basic RSPO compliance costs for CSPO are usually higher than the premia. For
plantations they are around $5 per tonne (ex-mill) and small producers’ between $8-12
per tonne (ex-mill).

Higher premia are available for suppliers of segregated palm oil and
downstream specialist products (such as palm kernel oil, oleochemicals and
surfactants). However, these are usually the preserve of larger integrated companies.

The significant shortfall between RSPO compliance costs, an inability to secure

higher premia for specialist products and the lower premia available to them as
a result is creating a disincentive to smallholders to become certified.

9.6. Analysis of existing legislation and enforcement regimes in major

producing countries

9.6.1. Extent of existing legislation

Table 80 summarises the main laws by topic in the six case study producer countries
included in this study.

Table 80: Overview of legislation in the six case study countries

Indonesia Malaysia Brazil Colombia Gabon Liberia
Deforestation

Biodiversity loss

Land use change

(LUC)
Reducing
carbon Biofuel
emissions

Mills and plantations

Burning

Peatland conversion

Water and pollution

Haze
Air pollution
Others

Indigenous people

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 Indonesia Malaysia Brazil Colombia Gabon Liberia
Smallholders

Forced and child labour

Terms and Health & safety

conditions of
labour Wages & others

Anti-corruption and money laundering

Fair pricing

Land ownership/use permit

Licensing for palm oil estate and mill

Source: LMC International analysis based on RSPO data. Note: A shaded box indicates that there is domestic
legislation dealing with that topic.

As Table 80 shows, a large number of laws and regulations exist, dealing with most of
the environmental and social themes that relate to palm oil sustainability. The table also
reveals that there are some areas that are not yet covered by legislation. In some cases
this may be because countries benefit from structural elements, which make certain
sustainability issues less noticeable. For example, for deforestation both Colombia and
Brazil have the advantage of having large areas of pasture to develop, while Malaysia has
benefited from a more highly urbanised population than Indonesia, making it easier to
control deforestation.

Nonetheless it is clear that there are some issues that are poorly covered in individual
countries:

 It is noteworthy that only two countries make specific reference to Land

Use Change (Indonesia and Gabon).
 Only in Indonesia, Malaysia and Liberia does legislation aim to reducing carbon
emissions from mills and plantations.
 In a similar vein, burning does not appear to be a priority for legislation in Brazil,
Gabon and Liberia and neither is air pollution more broadly.

The table demonstrates that most countries have sought to introduce regulations.
However, in many cases they are not adequately enforced. In the next section we
highlight some of the major enforcement issues.

9.6.2. Enforcement of existing legislation

Difficulties in enforcing legislation can arise as a result of a number of factors: e.g., a

lack of clarity on roles and responsibilities between national and sub-national
governments and agencies, ambiguity in the underlying laws, a lack of political will,
limited capacity, insufficient resources, the potential for corruption and vested interests
and bureaucratic inertia. Often the bureaucratic inertia is compounded by factors such as
decentralisation, which makes it difficult to enforce national laws. The complexity of the
legal system can work in the favour of established plantations, which may have more
resources to tackle these issues. The overarching historical problem of land rights
allocation also re-emerges frequently.

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 255 EN
The recent slowdown in new plantings in Indonesia has been marked among publicly
quoted companies with the highest visibility. Figure 40 compares the growth in the
planted areas in Indonesia of publicly listed companies with that of Indonesia as a whole
and of all producers who are not publicly listed. The slowdown in growth is marked,
particularly among the most visible, listed companies, the ones most likely to have
signed up to schemes such as RSPO.

Figure 40: The growth in planted areas in Indonesia, by sector

8%
% growth in Indonesian oil palm areas

7%

6%

5%

4%

3%

2%

1%

0%
2011 2012 2013 2014 2015 2016
National total Publicly listed companies Non-listed companies

This suggests that the pressures to limit oil palm expansion in particular areas that are
likely to breach certification standards are having an impact. However, this almost
certainly means that a rising share of those new plantings that do occur is being made in
less visible segments of the sector.

Whilst there is little hard evidence by which to ascertain the degree of legal enforcement
for palm oil companies within producer companies, an indication can be given by
assessing national indicators of governance and of corruption. Six producer countries
assessed (Indonesia, Malaysia, Brazil, Colombia, Liberia and Gabon) were all within the
bottom or second lowest quartile of countries of the World Bank’s Governance ranking.
The same six countries fell within the middle two quartiles of Transparency
International’s Corruption index.

When reported incidences of illegality are also taken into account, it is likely then that
enforcement of laws in many producer countries is not consistent. However, it should
also be noted that national–level indicators do not account for the specifics of the palm
oil sector, nor for companies that choose to be law abiding even in circumstances where
laws may not always be enforced.

Finally, there are a number of enforcement issues worth highlighting owing to their
severity or potential impact:

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 256 EN
  In Indonesia there is concern that the moratorium over developing forest
and peat land may be weakening – despite high level government support for
the policy. To enforce the moratorium, record fines have been meted out on agro
forestry companies for illegal forest clearing and fires (including on peatlands) 578
579
, but payment of these high fines is said to still be pending. New ministries
have been created to improve enforcement but decentralisation and overlapping
governance structures make it difficult for them to act.580
 In Brazil while measures to ensure environmental sustainability, strong worker
rights and transparency are enforced, the political crisis has led to a reduction
in budget allocated to enforcement activities and an increase in deforestation in
the recent past.
 In Colombia there is (contested) concern that some expansion of oil palm in the
past was accompanied by levels of violence and displacement.

9.7. The review of voluntary initiatives and commitments relating to palm oil

Alongside the four main certification schemes, there are an increasing number of public
and private initiatives and commitments relating to different aspects of palm oil
sustainability. These have been motivated by, amongst other things:
 Real or perceived weaknesses in the requirements, operation or outcomes from
existing palm oil sustainability schemes.
 Real or perceived lack of market share gained by palm oil certification schemes
leading to a reduction in the ability of these schemes to affect positive change.
 A growing “No Deforestation, No Peat, No Exploitation” movement, whose argument
has been that the RSPO and other certification schemes have been unable to stop the
deforestation of biodiverse and carbon-rich primary and secondary forests and
peatlands.
 The need to respond to NGO and customer pressure.
 The personal commitment of the CEO of the organisation and the desire to
demonstrate industry leadership.

Figure 41 provides a useful categorisation of voluntary initiatives, splitting them into four
categories: group initiatives, individual initiatives, initiatives to provide finance and
investment support and supporting data and reporting platforms designed to share data,
assess compliance and report progress.

We will look at each in turn highlighting the major examples.

578
Jong, Hans Nicholas (2015), 'Record fine against plantation company upheld', The Jakarta
Post, 13 Sep 2015, http://www.thejakartapost.com/news/2015/09/13/record-fine-against-
plantation-company-upheld.html, accessed 21 June 2017.
579
Jong, Hans Nicholas (2016), 'Landmark court ruling expected to serve as deterrent'. The
Jakarta Post, 18 Nov 2016, http://www.thejakartapost.com/news/2016/11/18/landmark-
court-ruling-expected-to-serve-as-deterrent.html, accessed 21 June 2017.
580
ZSL (2017), 'Governments', Sustainable Palm Oil Transparency Toolkit,
https://www.sustainablepalmoil.org/governments/, accessed, 20 June 2017.

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 257 EN
 • e.g. CGF, NYDF, • e.g. Unilever,
TFA 2020, INPOP, Nestle, M&S,
ESPO, EPOA, Ferrero, Danone
ESPOAG, FONAP,
FASPO, etc.

Group Individual
Ini a ves Ini a ves

Finance &
Suppor ng
investment
pla orms
support
• e.g. WRI Global • e.g. IDH PPI
Forest Watch, ZSL Compacts; UN
SPOTT REDD+; LFTLF

Figure 41: typology of the main forms of voluntary initiative

Key: CGF (Consumer Goods Forum Zero Net Deforestation By 2020 Commitment; NYDF (New York Forest
Declaration); TFA 2020 (Tropical Forest Alliance 2020); INPOP (Indonesia Palm Oil Platform); ESPO (European
Sustainable Palm Oil); EPOA (European Palm Oil Alliance), ESPOAG (European Sustainable Palm Oil Advocacy
Group), FONAP (Forum on Sustainable Palm Oil), FASPO (French Alliance for Sustainable Palm Oil), M&S (Marks
and Spencer); WRI (World Resources Institute); ZSL SPOTT (Zoological Society of London, Sustainable Palm Oil
Transparency Toolkit); PPI Compacts (Production, Protection & Inclusion Compacts); UN REDD+ (UN
Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing
Countries); LFTLF (Landscape Fund for Tropical Landscapes and Forests).

 Group initiatives and collective commitments include the Consumer Goods Forum
(CGF) resolution to achieve zero net deforestation by 2020 in key commodity sectors
,
(soy, palm oil, paper & pulp/timber and beef) the Tropical Forest Alliance 2020 (TFA
2020); and the New York Declaration on Forests which aims to halve the rate of
deforestation by the end of 2020 and eliminate it by 2030. At the regional level in
Europe there are a number of organisations supporting the use of certified sustainable
palm oil, stopping deforestation and protecting the natural environment, including the
European Sustainable Palm Oil (ESPO) Initiative; the European Palm Oil Alliance
(EPOA) and the European Sustainable Palm Oil Advocacy Group (ESPOAG), which
represents major food sectors. At the national level, several national alliances have
been established with the ambition to drive transformation towards 100% sustainable
palm oil by 2020, and have set additional goals towards zero deforestation, no peat,
and no exploitation, and the Indonesia Palm Oil Platform (INPOP) 581, provides a forum
for all palm oil stakeholders to agree and act on a common agenda to maximise palm
oil productivity.

 Individual initiatives and commitments: Individual commitments have evolved

over time, having started with procurement requirements for certified sustainable
palm oil and now making significant strides in improving traceability of palm oil back

581
For more information on INPOP please visit: http://www.foksbi.id/id/beranda/

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 258 EN
 to the mill or making significant direct investments to improve smallholder
relationships, yields and sustainability performance.

 Finance and investment initiatives: these are emerging partly been as a result of
new collaborations and financial instruments to support private and public sector
efforts; and partly due to a growing body of pressure on banks to adhere to
environmental, social and governance commitments. Examples include. Some
examples include the Landscape Fund for Tropical Landscapes and Forests, announced
by Norway at the World Economic Forum in January 2017; a group of 12 international
banks, who collectively account for 50% of global trade finance, coming together in
March 2016 under the auspices of the Banking Environment Initiative 582 to make
public commitments via a ‘Soft Commodities Compact’ with the CGF; and a national-
level banking collaboration, that brought together Indonesia’s eight largest
commercial banks to commit to responsible lending practices in the palm oil sector as
part of a Sustainable Financial Roadmap developed by the Indonesia Financial Services
Authority (OJK). A number of organizations are also working to develop new business
models and create new value chain structures that support and facilitate the inclusion
of smallholders in new sustainable value chains. These include development
organizations such as the IDH and the Netherlands Development Organization (SNV),
multilateral banks such as the International Finance Corporation (IFC), and private
sector associations and working groups such as PIS Agro’s Palm Oil Working Group 583
and the Sustainable Palm Oil Investors Working Group.

 Data and reporting platforms: In parallel, the growth in the use of effective
satellite-based deforestation monitoring systems in tropical countries, like the World
Resources Institute’s Global Forests Watch programme 584 and Suitability Mapper 585,
and ZSL’s Sustainable Palm Oil Transparency Toolkit (SPOTT) 586, have emerged,
providing new tools that could help achieve new levels of transparency and
participative planning of suitable areas of degraded land for sustainable cultivation
across landscapes, both locally and globally.
587 588 589
This growing number of initiatives does appear to be making some progress: –

582
For more information please see: http://www.cisl.cam.ac.uk/business-action/sustainable-
finance/banking-environment-initiative
583
PIS Agro’s (the Partnership for Indonesia sustainable Agriculture) Palm Oil working Group is
currently engaging with 4,785 smallholder farmers working over 11,000ha of land. It has set a
2020 target to work on 100,000 hectares of land, helping 50,000 farmers to increase
production by 150%, whilst reducing environmental impact (assessed 7 July 2017):
http://www.pisagro.org/palm-oil
584
Please see: http://www.wri.org/resources/maps/suitability-mapper (accessed on 15 August
2017).
585
Please see: http://www.globalforestwatch.org/ for more information (assessed on 6 July
2017).
586
For more information on SPOTT, including an assessment of 50 of the largest palm oil
producing companies through 50 indicators using publicly available information on disclosure
of their operations and their commitments to environmental and social best practice, please
see: https://www.sustainablepalmoil.org/about/
587
Donofrio, S, et al – Supply Change: Tracking Corporate Commitments to Deforestation-Free
Supply Chains, (Forest Trends, 2017).
588
Brack, D. & Gregory, M. - Company Promises – How businesses are meeting commitments to
end deforestation (FERN, March 2017).

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 259 EN
  Reporting of progress on voluntary commitments relating to forest risk
commodities is on the rise, with palm oil leading the way;
 Commitments made on sustainable palm oil are embracing landscape-scale
thinking, more restrictive or specific criteria on protecting HCV and HCS land and
improvements in supply chain traceability and transparency;
 The food and farming sector dominants the commitments ‘landscape’;
 The nature of commitments is evolving, initially focusing on deforestation and
then including reducing biodiversity loss, GHG emissions, improving water
stewardship and support for smallholders;
 The number of commitments made across the supply chain varies, with
producers, processors and traders making the most, followed by manufacturers
and retailers;
 Collective action spurs individual action and the number of organisations involved
in group initiatives is generally growing over time;
 Certification systems play an important role in CSPO take-up but can be flawed in
some areas and remain expensive for smallholders to adopt;
 Companies are investing in their palm oil supply chains, especially smallholders,
but are also prepared to drop suppliers that don’t comply with their commitments;
 The cost of voluntary commitments can be high, with retailers citing annual costs
of implementation of £250,000 and producers (investing heavily in on-the-ground
improvements) spending up to USD200 million over three years;
 Progress is being made but not by all companies, even in a market characterised
by over supply of CSPO;
 Companies have used Book and Claim systems to meet their commitments in the
past but are moving towards either than own sourcing guidelines or greater use of
mass balance and source segregated systems;
 European and North American companies are far more advanced than their Asian
counterparts.

There remain significant challenges to the achievement and collective impact of voluntary
commitments, most notably: lack of engagement in some major consumer countries,
such as India and China, cost of implementation, supply chain complexity, traceability
and transparency of supply, weaknesses and lack of inclusion in land use planning
(resulting in land disputes), lack of legal and geographical clarity around concession
boundaries and protected areas and a lack of experienced people to conduct complex
FPIC processes and certification audits (particularly those audits involving national
interpretations of standards).

That said, a growing number of voluntary initiatives are attempting to overcome some of
these historical barriers to progress: the growth of financial, data reporting and geo-
spatial platforms; more investment in, and building better relationships with, suppliers
(including smallholders); a growing number of public/private partnerships to improve the
designation, protection and communication of protected areas and concession
boundaries; the use of private and public procurement policies to drive further demand
for CSPO; and the emergence of landscape-scale thinking to address the multiple drivers
of deforestation and biodiversity loss.

9.8. General conclusions and considerations

The oil palm is a highly productive crop generating yields of palm oil and palm kernel oil
significantly greater than those for other vegetable oils. As a result, it has reduced the
need for agricultural land and is a very attractive crop for producers. Given the labour

589
The Palm Oil Buyers Scorecard – Measuring the Progress of Palm Oil Buyers (WWF, 2016).

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 260 EN
intensity involved in the maintenance and harvesting of oil palm it also provides the
backbone for rural development in major production zones.

Palm oil is likely to remain the dominant vegetable oil for the foreseeable future, having
overtaken production volumes for soy-based oils over a decade ago.

However, the rapid expansion of oil palm cultivation and palm oil production and
consumption, particularly in Indonesia and Malaysia, has come at a high environmental
cost, leading to the deforestation of biodiverse tropical forest ecosystems and peatlands.
In addition, land clearance leads to soil erosion, loss of carbon storage, water and air
pollution and significant regional greenhouse gas emissions and haze events. All of which
also come at an economic cost that runs to billions of dollars and some of which have a
significant impact on human health and mortality. Land use change is the dominant
driver of environmental impact in the palm oil sector; and is the single biggest potential
environmental threat and is very likely to remain so in the future, unless significant
improvements in legislation and enforcement regimes occur, as well as the extension of
existing moratoriums on oil palm development in protected areas and peatland.

The rural development and economic benefits of palm oil are significant. The oil palm has
helped to alleviate poverty and raise family incomes (allowing for improvements in
quality of life and education). To achieve this improvement in living standards there
have, however, been social and environmental costs. Land use planning and land use
rights remain significant challenges, exacerbated by decentralised government
structures, policies and regulations.

The vested interests of established plantations and political elites in some major
producing countries can also complicate the enforcement of regulations, as discussed in
Section 8.4.3. Similarly, a lack of legal and geographical clarity around protected areas
and concession boundaries leads to further conflicts between producers, local
communities and government agencies. In environmental terms this has led to the
development in some instances of land with high environmental value. In social terms
there have been issues regarding the distribution of wealth with some areas losing the
right to their customary lands. In addition, the high reliance on migrant labour combined
with the lack of transparency in terms and conditions of labour have led to instances of
forced and child labour in palm oil supply chains.

Whilst our analysis of the legal and regulatory enforcement regimes in six major palm oil
producing countries, suggests that in some countries decentralised law-making and
enforcement create substantial difficulties in data gathering, enforcement and oversight,
with national, sub-national and local laws and approvals leading to regulatory duplication,
gaps and confusion. With legal and regulatory complexity favouring established
plantations and larger companies with the resources to map, manage and, indeed,
influence the legal landscape.

Some stakeholders also point to the problem of lobbying power (if not corruption) in the
drafting and enforcement of regulations. 590,591 Our analysis also shows that whilst most
of these countries have sought to introduce regulations, in many cases they are not
adequately enforced.

590
Interview with NGO specialist on Liberia, 16 Jun 2017.
591
Interview with legal specialist, 23 Jun 2017.

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 261 EN
The introduction of sustainable palm oil certification schemes, like RSPO, ISCC, MPSO
and ISPO, has attempted to drive positive change. However, the requirements,
performance, market uptake and transparency of these certification schemes differ
considerably. There is also evidence of inconsistency in the way that scheme
requirements are applied and enforced.

As such, none of these schemes are perfect and certification as a tool has limitations in
transforming sectors. These include: the impossibility of defining performance for all
circumstances, the limitations of auditing as a means of verifying performance and the
ability of certification schemes to address complex governance issues.

It is also worth noting that none of the certification schemes currently cover all of
environmental and social issues included in EU and UN policy objectives.

Additional or complementary approaches to securing good economic, environmental and

social outcomes, such as jurisdictional or landscape approaches, are in their infancy and
as yet unproven.

Nonetheless, credible and rigorous certification is currently the only option available at
scale that provides some degree of confidence that palm oil supply chains are free from
the worst forms of environmental and social impacts.

Finally, from our analysis, the growing number of voluntary initiatives and commitments,
offer a promising ready-made platform for further work to address the sustainability
impacts and benefits of palm oil; and to drive further market uptake of CSPO. Whilst, as
noted above, there remain obstacles to the achievement of these commitments, public
policy will play an important role in overcoming existing barriers to achievement and in
unlocking the potential of existing and emerging public/private partnerships and
collaborations.

2017 9. Task 2: Summary, conclusions, key findings and insights EUR 262 EN
 Study on the environmental impact
of palm oil consumption and on
existing sustainability standards
For European Commission, DG Environment

(Study contract No.: 07.0201/2016/743217/ETU/ENV.F3)

Appendices to the Main Report

[Written by Mark Barthel, Steve Jennings, Will Schreiber, Richard Sheane and Sam Royston (3Keel
LLP) and James Fry, Yu Leng Khor and Julian McGill, (LMC International Ltd.]
EUR [number] EN
[February 2018]
Prepared by:

Report prepared by:

Appendices
2017 EUR 2 EN
 Appendices
2017 EUR 3 EN
Table of Contents
Appendix 1 – Research Quality Assurance Framework ..................... 6
Appendix 2: Summary of data quality ....................................................... 8
Appendix 3: Environmental assessment and consequential life
cycle analysis – Review of existing studies and additional
information .......................................................................................................... 11
1.1.1. Consequential approaches in life cycle assessment ............... 11
1.1. Existing Life Cycle Assessment studies/Literature review ........ 12
1.2. Applying existing LCA knowledge to inform policy making ....... 17
Appendix 4: Demand and supply balances for the major countries
producing or consuming palm oil and palm kernel oil ..................... 18
1.1. Major producing countries ........................................................................ 18
1.1.1. Malaysia............................................................................................................. 18
1.1.2. Indonesia.......................................................................................................... 18
1.1.3. Secondary producers (Thailand and Colombia) ........................ 19
1.1.4. Conclusion ........................................................................................................ 19
1.2. Major palm oil consuming countries .................................................... 27
1.2.1. India .................................................................................................................... 27
1.2.2. China ................................................................................................................... 28
1.2.3. European Union ............................................................................................ 28
1.2.4. Conclusion ........................................................................................................ 28
Appendix 5: Areas under soybeans and other annual crops, and
projections of oil crop output to 2026 ..................................................... 35
1.1. Areas under soybeans and other major annual crops in selected
countries....................................................................................................................... 35
1.2. Conclusion ........................................................................................................ 35
1.3. The evolution of the areas planted to oil crops ............................... 36
Appendix 7: Full summaries of EU, UN and regional policy
instruments relating to palm oil................................................................. 45
Appendix 8: Analysis of the four major certification schemes
against requirements of EU, UN and regional policy instruments58
Appendix 9: Key findings from literature review and stakeholder
interviews on sustainability enforcement issues in six palm oil
producer case study countries .................................................................... 77
Appendix 10: Summary of laws and regulations relating to palm oil
by country & sustainability theme ............................................................ 93

Appendices
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 1.1. Additional source documents and information on laws and
regulations in case study countries .................................................................. 99
1.2. Supplementary information on Indonesian laws and regulations
99
Appendix 11: Summary of laws and regulations relating to palm oil
production in Brazil ........................................................................................ 103
Appendix 12: Case study illustrating different approaches to
national applications of RSPO P&C for soil.......................................... 106
Appendix 13: Further examples of voluntary palm oil-related
voluntary initiatives and schemes........................................................... 108
Appendix 14: EC Sustainable Palm Oil Study: Summary notes from
expert validation workshop ....................................................................... 127

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Appendix 1 – Research Quality Assurance Framework

(Please see Section 6.3 of the main report)

Information on the social, environmental and economic aspects of the palm oil sector
comes from various sources, ranging from world-class academic journals, to the ‘grey
literature’ of consultant’s reports to articles in the written media. Palm oil is not a
‘neutral’ subject devoid of opinion or polemic, however, and so it is important to
understand the quality of information that is being used to report sustainability of the
sector, so that the degree of confidence in findings can be reported consistently and
transparently.
The approach we have taken throughout this report is firstly to focus on recent
publications – post 2000 – where possible. This helps with information quality in the
sense that it allows authors to build on the past, and eliminates historical events or
findings that are not relevant today. Ninety-five per cent of the sources cited in this
study have publication dates of 2001 or later (please see Figure 1 below).
Figure 1: Publication date of cited papers

50
45
Number of publications cited

40
35
30
25
20
15
10
5
0

Secondly, we focus on the most rigorous academic publications first. Unfortunately, not
all aspects of the palm oil sector are well covered by rigorous academic study, which
means that other sources of information are often required.
Thirdly, we use an information quality assessment tool. This tool is used on all sections of
the document that rely significantly upon existing literature. Each cited publication is
scored according to the following parameters (following Hagen-Zanker and Mallett,
20131):
 Number of studies: this is the number of studies that are cited to answer a
specific research question
 Appropriateness: this measures whether a particular research method is
appropriate to answering the research question. It is scored as 'high' if the
research methods used are designed to answer the same question that we are
asking, 'medium' if the research methods are partially relevant to the question
and 'low' if the research method can at best just indicate what the answer is.

1
Hagen-Zanker, J. and Mallett, R. ‘How to do a rigorous, evidence focused literature review in
international development. A Guidance Note.’ ODI Working Paper (2013). Overseas
Development Institute, UK.

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  Rigour: this measures the technical thoroughness of the research methodology
used in the cited publication. Each cited source of information is scored 'high' for
peer reviewed academic journals where the methods used include a large sample
size, high quality statistical analysis, etc. A score of 'medium' is given for well-
researched NGO/consultant type grey literature and peer reviewed academic
literature that has some obvious faults (e.g., limited sample size). A 'low' score is
given for journalism, opinion or grey literature with weak methodology
 Consistency: each cited source is scored as either 'positive' if the research shows
a strong positive association between palm oil and the research question, 'neutral'
if the research failed to show any association (or showed both positive and
negative associations in different contexts) or 'negative' if palm oil has the
opposite impact. For example, for the research question ‘does oil palm cultivation
increase smallholder incomes’ a study showing that it does would score positive,
one that showed no difference scores ‘neutral’ and one where smallholder incomes
declined would score negative.
These information quality parameters are reported in a simple table at the end of each
section to which it is relevant. The table reports the number of studies cited to answer
the research question. It also reports the scores for appropriateness, rigour and
consistency, converted into an index ranging from 0-1, with one being the highest score
(i.e., if all cited sources scored high for rigour, the rigour score would be 1). Finally, the
table reports an overall score, which is a measure of the degree of confidence in the
research finding. This score is the average of the appropriateness, rigour and consistency
scores. Scores are colour coded to aid quick visual understanding of the data quality
(please see Table 1 below for example information quality assessment table). All of the
citations that are used to assess the quality of information are stated in an accompanying
footnote.
Table 1: Example of an information quality assessment table

Topic Number of Appropriateness Rigour Consistency Overall score

studies

Research 13 0.7 0.6 1.0 0.8

topic

As Hagen-Zanker and Mallett, 20132 note, all assessments of information quality have a
degree of subjectivity. However, transparency about the quality of information is
important to allow readers to assess the meaning of the report for themselves.

2
Hagen-Zanker & Mallett (2013) ibid

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Appendix 2: Summary of data quality

(Please see Section 5.3 of the main report)

This annex provides a summary of data quality for those sections of this study report
(highlighted in sub-headings) that rely more heavily on socio-economic and market data
and information as the basis for the analysis of topics (described in the left-hand column
of Table 2 below), rather than published studies. The main data sources underpinning
this work are listed in the middle column of the table; and comments related to these
data sources are included in the right-hand column of the table.

Table 2: Table showing summary of data quality assessment for this study

Topic Source Comments

7.1.3.9 and 7.1.3.10 Structure of Employment on Plantations

People (incl. Malaysian Departments of The data refer only to the estate sector.
foreigners) employed Labour and Immigration They do not include foreign workers
on plantations in without work permits.
Malaysia
They do not include comprehensive data
for the smallholder sector, which occupied
16% of the total Malaysian oil palm area
in 2015. (A smallholder cannot get a
permit for a foreign worker if the palm
area is less than 10 hectares.)
In addition, there many State agency and
settler schemes, which occupy a further
23% of the palm area, and do not provide
full coverage of true employment.
The wives of foreign workers, who often
work on estates, are not provided work
permits except in Sabah, and thus are
under-recorded elsewhere. The official
data therefore are likely to represent a
significant under-estimate of true
employment in oil palm production.

Employment on Directorate General of The DGE data provide estimates of the

plantations, Estates. Some publicly listed distribution of palm areas by type of
government estates companies provide data. owner. Smallholders occupy 40% of the
and smallholder plots total area, and estates the remaining
in Indonesia 60%.
The employment figures are therefore
approximations, using Malaysian
estimates as a broad guide to the relative
labour intensity of different sectors.

7.1.3.11 Incomes in the traditional sector vs. those generated by palm oil

Incomes in the palm High Carbon Stock+ Study Estate companies provided confidential
sector data from plantation groups. data on incomes as part of the HCS+
Study.

7.1.3.13 Historical Costs, CPO Prices vs. Production Costs

Prices Bursa Malaysia & Malaysian These are both considered to be reliable
Palm Oil Board prices and transparent

Appendices
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Topic Source Comments

Production costs LMC production costs These are built up as engineering cost
models, and are crosschecked against the
costs reported by individual plantation
companies.

7.3 The evolution of the areas planted to grain and oil crops worldwide

Area data for global UN Food & Agriculture These are the main sources for area data.
crops Organisation, U.S. NB: the FAO classifies rubber as a forest
Department of Agriculture crop, and so conversion from rubber to oil
area data palm, which has been a major source of
palm land in S.E. Asia, is classified as
deforestation.

7.3 The feedback from prices to plantings

Germinated seed Malaysian Palm Oil Board Germinated seed sales are accurate in
sales as a proxy for and individual germinated both countries. If a company has legal
area oil palm seed companies rights to land, palm areas should be
accurate. If land rights are unclear, area
figures will be less precise. This is relevant
to Indonesia. Also some smallholders use
false seeds, from their trees, which are
not included in official data.

7.4.1 Supply and demand of major palm oil producers

Malaysian palm oil Malaysian Palm Oil Board Output is considered to be very accurate.
output + Consumption is only measured indirectly
consumption from production, import, export and stock
data.

Estimates of palm oil U.S. Department of The USDA provides the most
consumption by Agriculture comprehensive estimates of consumption
country and by end- worldwide, relying on its Agricultural
use Attaches at embassies.

Indonesian palm oil Badan Pusat Statistik and These are the best local official sources of
output the Directorate General of data, but are less accurate than the
Estates Malaysian statistics

Indonesian palm oil Gabungan Pengusaha GAPKI is the association of private

output Kelapa Sawit Indonesia estates. Its figures are a guide to growth
trends.

Colombia palm oil Fedepalma These are very accurate as there is a

output revenue sharing scheme for the sector.

Thailand palm oil Bank of Thailand It monitors very closely palm output in
output South Thailand

7.4.1 Palm oil consumers

India supply-demand Solvent Extractors’ SEA works with the Customs authorities to
Association and the Central compile data on imports. The COOIT
Organisation for Oil Industry prepares highly regarded crop forecasts.
& Trade

China supply-demand China National Grain and As a semi-governmental body, the

Oils Information Centre CNGOIC compiles data on production,
imports, exports, oilseed crushing
volumes and stocks. It is also highly

Appendices
2017 EUR 9 EN
Topic Source Comments
regarded.

EU supply-demand European Commission, These all tabulate different aspects of the

COPA-COGECA, Fediol and vegetable oil sector and are viewed as
European Biodiesel Board providing reliable data.

Appendices
2017 EUR 10 EN
Appendix 3: Environmental assessment and consequential life
cycle analysis – Review of existing studies and additional
information
(Please see Section 7.4.1 of the main report).

1.1.1. Consequential approaches in life cycle assessment

One of the primary purposes of public and corporate environmental policy setting is to
reduce the impact of the production and consumption of goods and services. The
ultimate success of these policies should be judged on the net environmental benefit to
society as a whole. Over the past decade, environmental modelling techniques, such as
life cycle assessment (LCA), have been adapted to estimate not only the intended
environmental and social impacts of policies, but also their unintended consequences in
the wider economy3. The principle of using these ‘consequential’ models is sensible given
the interconnected and complex nature of modern economic systems: increased demand
for a product in one part of the world results in changes to production far away.

The most frequently used application of consequential approaches in the agri-food sector
is the estimation of the greenhouse gas emissions from land use change due to increased
demand for biofuels. Conceptually, land use change is either ‘direct’ or ‘indirect’. Direct
land use change is where the crop of interest, for example oil palm, is planted directly on
deforested land. Indirect land use change (ILUC) occurs when the demand for a crop in
one part of the world, such as EU rapeseed, causes land use change elsewhere.

The phenomenon of indirect land use change has been integrated into revisions of EU
biofuel and energy policies4. Section 7 of this report provides further details of the ‘top
down’ impacts associated of land use change relative to existing carbon stocks.

A number of methodologies have been developed to estimate the impacts of land use
change emissions within product systems, ranging from complex economic models to
simple ‘rule-based’ approaches, such as those used in the EU Product Environmental
Footprint guide5. Despite agreement over the potential risk posed by indirect impacts of
environmental policies, it remains an area of controversy due to the inherent
quantification challenges and allocation of impacts to particular products. For example, if
land is cleared for timber but then planted to oil palm, the degree to which each sector
takes responsibility for deforestation is within their own accounting. These issues have
been explored by many authors6, 7, 8 and centre around the uncertainties associated with
predicting cause-effect chains in complex global socio-economic systems. One of the
greatest challenges is quantifying how much land is actually converted to agriculture as a
result of higher demand for a crop. This is because the nature of the response is

3
Marcelle C., McManus A., Caroline M., Taylor (2015) The changing nature of life cycle
assessment. Biomass and Bioenergy 82 (2015) 13-26
4
European Commission (2012) Proposal for a Directive of the European Parliament and of the
Council amending Directive 98/70/EC relating to the quality of petrol and diesel fuels and
amending Directive 2009/28/EC on the promotion of the use of energy from renewable
sources.
5
Schmidt, J., Weidema, B., Branda, M. (2015) A framework for modelling indirect land use
changes in Life Cycle Assessment. Journal of Cleaner Production 99 (2015) 230e238
6
Delzeit, R., Klepper, G. and Söder, M. (2016) An evaluation of approaches for quantifying
emissions from indirect land use change. Kiel Working Paper No. 2035
7
Valin, H., Peters, D., van den Berg, M., Frank, S. Havlik, P., Forsell, N., Hamelinck, C. (2015)
The land use change impact of biofuels consumed in the EU Quantification of area and
greenhouse gas impacts
8
Aoun, W., Gabrielle, B. and Gagnepain, B. (2013) The importance of land use change in the
environmental balance of biofuels. OCL 2013, 20(5) D505

Appendices
2017 EUR 11 EN
influenced by a number of local factors, such as agro-ecological conditions, regulations,
land ownership structures, subsidy regimes, land prices, land use options, etc. 9, 10, 11

The European Commission acknowledged these uncertainties and limitations in its

proposal for amending biofuels regulations to take into account ILUC. Despite these
uncertainties the Commission also acknowledged that ILUC is an important issue and
recommended that it was to be mitigated using a precautionary approach 12 (for example,
by increasing the minimum GHG savings allowable for crop biofuels).

1.1. Existing Life Cycle Assessment studies/Literature review

The research presented in Section 7.2 of this report demonstrates the impacts
associated with palm oil production from land preparation to use, applying a ‘top-down’
approach to impacts. This takes the view of having the entire impacts within the country
divided by the total amount of production. LCA approaches, by contrast, typically use a
‘bottom-up’ approach by isolating each activity and then adding them together to
determine the total impact across a range of categories.

This study included a review of existing LCAs to determine the relative impacts of
different uses of land in Malaysia and Indonesia considering the consequential impacts of
alternative systems. Only LCAs are considered in this section as the full lifecycle view
within a study boundary ensures that all impacts and benefits are accounted for within
the system. Using singular deforestation studies, or palm oil impact studies that only
assess the direct production and processing of palm oil, can potentially exclude
significant impacts.

Although LCAs provide a consistent general method for accounting for impacts within a
product system, the specific rules applied within any one study are largely within the
control of study author, thus restricting the potential comparability of outputs. This
review therefore identified the criteria in Table 3, below, to determine the core
requirements studies should adhere to in order to present the most credible results.

Table 3: Minimum criteria for LCAs

No. Criteria Requirement Why it’s included

1 Conforms to ISO 14040 Essential Most credible international standard and

and ISO 14044 guidelines for completing a life cycle
assessment

2 Includes Malaysian and/or Essential Target countries for analysis

Indonesia palm oil

3 ILUC estimated within Essential Study requires consideration of full

study production impacts, including indirect
land use change

9
Delzeit, R., Klepper, G. and Söder, M. (2016) An evaluation of approaches for quantifying
emissions from indirect land use change. Kiel Working Paper No. 2035
10
European Commission (2010) Report from the Commission on indirect land-use change related
to biofuels and bioliquids
11
Hiederer, R., F. Ramos, C. Capitani, R. Koeble, V. Blujdea, O. Gomez, D. Mulligan and L.
Marelli. (2010) Biofuels: a New Methodology to Estimate GHG Emissions from Global Land Use
Change. EUR 24483 EN. Luxembourg: Office for Official Publications of the European
Communities. 150pp.
12
European Commission (2012) Proposal for a Directive of the European Parliament and of the
Council amending Directive 98/70/EC relating to the quality of petrol and diesel fuels and
amending Directive 2009/28/EC on the promotion of the use of energy from renewable
sources.

Appendices
2017 EUR 12 EN
No. Criteria Requirement Why it’s included

4 Study conducted using Essential Growth in palm oil production over the
data post-2000 past twenty years has placed new land
pressures

5 Considers alternative Desirable Research scope includes a comparison of

crops and/or land use alternative land utilisation

6 Published in peer review Desirable Promotes credibility of approaches and

journal assumptions used by the author

7 Conducted by Desirable Avoidance of bias

independent party

Many existing studies that assess the impacts of palm oil and deforestation typically
include only a single environmental indicator - such as global warming potential13 - or do
not consider the full life cycle of impacts including land use change up to the point of
having a finished product14. Those that do include impacts associated with ILUC often
note the high level of uncertainty surrounding the impacts of deforestation within other
land systems and treat its causes differently depending on the authorship and intention
of the study.

It is essential that LCA results be considered in the context of their goal and scope in to
ensure that they are interpreted correctly. Often studies are funded by particular
stakeholders that have a specific interest in carrying out the research and the scope and
boundaries of studies are often based on the needs of these stakeholders. In the case of
palm oil, past studies have generally focused on answering two questions in response to
governmental and corporate policy initiatives:

1. Biofuel: How do palm oil impacts compare to alternative biofuels?

Comparison based on global production and opportunities for other bio-based
substitutes (e.g. corn)

2. Food oil: How do palm oil impacts compare to other food oils?
Comparison based on global supply chains to deliver substitute (e.g. sunflower oil,
rape, soy)

Over time the number of available LCA studies attempting to answer these questions
have increased as knowledge of land use change – direct and indirect - and associated
accounting methodologies have improved. The focus of these studies has typically been
on the question of palm biodiesel as opposed to palm oil in food 15, however the general
impacts and causes are often the same16.

13
Henders, S. et. al. (2015) Trading forests: land-use change and carbon emissions embodied in
production and exports of forest-risk commodities; Choo, Y.M. et. al. (2011) Determination of
GHG contributions by subsystems in the oil palm supply chain using the LCA approach. Int J
Life Cycle Assess 16, 669-681; Reijnders, L (2006) Palm oil and the emission of carbon-based
greenhouse gases. J Clean Prod. Oct 27 (16), 477-482
14
Norfaradila, J. et. al. (2014) Life cycle assessment (LCA) for the production of palm oil diesel:
a case study in Malaysia and Thailand. Malays. Appl. Biol. 43(1), 53-63; Muhamad, H. et. al.
(2014) Life cycle assessment for the production of oil palm seeds. Tropical Life Sciences
Research 25(2), 41-51; Siregar, K. (2015) A comparison of life cycle assessment on oil palm
(Elaeis guineensis Jacq.) and Physic nut (Jatropha curcas Linn.) as feedstock for biodiesel
production in Indonesia. Energy Procedia (65), 170-179; Ashnani, M.H.M. (2013) Life cycle
assessment of palm oil biodiesel production in Malaysia. Applied Mechanics and Materials Vols.
465-466,1080-1086.
15
Yusoff S (2007) Feasibility study of performing an life cycle assessment on crude palm oil
production in Malaysia. Int J Life Cycle Assess. 12 (1), 50–58; Norfaradila, J. et. al. (2014) Life

Appendices
2017 EUR 13 EN
In 2000 one of the first LCA studies was conducted to include an assessment of land use
change in the production of oil crops17. The study assessed a period of land use change in
Malaysia covering the second half of the twentieth century right before the significant
growth in palm oil plantations that we have experienced over the past twenty years.
Despite the absence of current drivers, the authors postulated that direct land use is
“one of the most significant impact categories” in assessing production, in particular on
the loss of biodiversity.

There remains significant variability between the calculated impacts of land use change
for palm oil production as shown in Sub-task 1-3 and, as noted in a recent study, there
“is currently no consensus in the LCA community for how to model ILUC”. 18 The most
recent meta analysis of palm oil LCAs19 calculated a mean impact across a range of LCAs
indicating an impact of 40 gCO2e per MJ, four times greater than palm oil produced
without ILUC (9 gCO2e/MJ) and ten times less than if the plantation is located on
converted peatland forest (400 gCO2e/MJ). In particular, the authors note the different
methods for accounting for ILUC in LCAs means that the two principal variables affecting
the range relate to how studies account for existing embodied carbon within the biomass
being cleared and the assumption of how long plantations will operate.

How this compares between the total impacts of palm oil production after land clearing
varies by study as shown in

cycle assessment (LCA) for the production of palm oil diesel: a case study in Malaysia and
Thailand. Malays. Appl. Biol. 43(1), 53-63; Ashnani, M.H.M. (2013) Life cycle assessment of
palm oil biodiesel production in Malaysia. Applied Mechanics and Materials Vols. 465-466,
1080-1086.
16
Bessou, C. and Pardon, L. (2017) Environmental impacts of palm oil products: what can we
learn from LCA? IJoLCAS I, 1-7.
17
Mattson, B. et. al. (2000) Agricultural land use in life cycle assessment: case studies of three
vegetable oil crops. Journal of Cleaner Production 8, 283-292.
18
Schmidt, J.H. (2015) Life cycle assessment of five vegetable oils. Journal of Cleaner Production
87, 130-138.
19
Manik, Y. and Halog, A. (2012) A meta-analytic review of life cycle assessment and flow
analyses studies of palm oil biodiesel. Integr Environ Assess Manag. 9(1), 134–141. Bessou
(2017) 


Appendices
2017 EUR 14 EN
Figure 2 below.

Appendices
2017 EUR 15 EN
Figure 2: Comparison of LCA study impacts

Comparison of greenhouse gas emissions by LCA study

8
Other
7
6 iLUC + peat
kgCO2e per unit
5
4
3
2
1
0
Schmidt (2013), KG Hidayatno (2011), KG

Insufficient information is currently available to assess the full lifecycle impacts of

alternative land use scenarios in Malaysia or Indonesia. Although alternative crop
analyses are available (see Figure 3), these are not fair representations of actual crop
production opportunities for Indonesia and Malaysia should palm oil no longer be
produced.20 Nevertheless, as the worst land use change contributor is widely agreed to
be production on forest peatland whereby this will always be the dominant contributor to
a product’s greenhouse gas emissions regardless of the crop, it can be concluded that
changing from palm oil production to another crop within the same plot of land will have
a negligible impact.

21
Figure 3: Comparison of different agricultural crop impacts in Schmidt (2013)

No LCAs have been found that assess the optimal use of land considering the drivers
and impacts of land use change or considering the social impacts of production systems
between products. The lack of existing studies specifically addressing this question
means that it is inappropriate to attempt to draw conclusions from the existing literature
when determining the least impactful use of land within these geographies beyond the
following top level considerations:

 Land use change from deforestation and peat soils are the dominant
contributor to the lifecycle impacts of palm oil production.

20
Schmidt (2015) analysed impacts for palm oil (Indonesia/Malaysia), soybean oil (Brazil),
rapeseed oil (Europe EU27), sunflowers (Ukraine), and peanut oil (India).
21
Schmidt, J. H. (2013) Five edible oils – a comparison. 11th Annual Roundtable Meeting on
Sustainable Palm Oil, 12 November 2013. Peat emissions have been considered “field
emissions” in this chart and are treated separately from other ILUC.

Appendices
2017 EUR 16 EN
 All available studies that have included ILUC have indicated that the majority of
impacts are attributable to the land selection for plantations. In Indonesia and
Malaysia one LCA funded by the Roundtable on Sustainable Palm Oil (RSPO) showed
the impacts of deforestation (2.5 tCO2e / tonne) and peat (2.4 tCO2e / tonne) are
roughly equivalent in their contribution to climate change impacts and make up 71%
of the total impact (6.74 tCO2e / tonne). 22 The second biggest impacts are typically
associated with the mill and whether or not biogas (methane) is captured from
effluent treatment processes.23

 If land use is not considered the impacts of producing palm oil compared to
other oils is not significantly different on a per tonne basis.
All studies that have included ILUC have indicated that the majority of impacts are
attributable to the land selection for plantations. It can therefore be deduced that
planting any crop on this land will likely have a similar magnitude of emissions, as the
scope of reductions will be comparatively small. The amount of land, needed however
may increase between different crops, as the associated yields will not be the same,
as shown in Table 4.
Table 4: Comparison of land requirements per tonne of oil
Crop Tonnes Tonnes of palm Land required for current
/ ha24 oil (2014) production (ha)
Palm oil 4.8 12,500,000
Rape seed oil 1.2 60,000,000 50,000,000
Soybean oil 0.4 150,000,000

Palm oil is the most efficient edible oil crop on a per hectare basis. As the impacts of land
use change are relatively fixed regardless of the crop grown, consideration of where
changes in land use are occurring is an important consideration.

1.2. Applying existing LCA knowledge to inform policy making

Changes to policy have ILUC effects, though assessing the scale of these impacts is still
subject to major uncertainties. Despite these uncertainties, consequential approaches are
valuable when deciding upon public and private sector sustainability policies.

First, simply targeting a single country or land use sector is unlikely to deliver
countrywide or global reductions in deforestation. To deliver reductions in indirect land
use change, sustainability criteria need to be applied to other agricultural crops, or the
conversion of carbon rich areas needs to be more comprehensively restricted 25.

Second, when examining potential future policies in this area, the wider impacts of
changes to consumption should be taken into account, even if not quantified. Overall,
a precautionary approach should be taken, as has been done in the case of EU biofuels
policies. For example, by designing policies with the expectation that ILUC will occur.

Finally, avoiding planting oil palm on peat is consistently beneficial as it results in such
significant GHG emissions. In a study of indirect land use change associated with biofuel
production, Valin et al (2015) noted: “Whereas a global approach could be effective to
tackle unsustainable land use change, this study shows that one of the major
contributors to LUC emissions, peat land drainage, is a relatively local problem. If
peatland drainage in Indonesia and Malaysia were stopped, the negative greenhouse gas
impact of land use change would reduce dramatically. This requires an effort either from

22
Ibid.
23
Bessou (2017).
24
Mattson, B. et. al. (2000) op. cit.
25
European Commission (2010) Report from the Commission on indirect land-use change related
to biofuels and bioliquids

Appendices
2017 EUR 17 EN
the Indonesian and Malaysian governments, all palm oil using sectors (food, personal
care products, biofuel) or, best of all, a combination of both. Whether by global action to
stop unsustainable land conversion, or by local action to stop peatland drainage, our
study shows that LUC values can be reduced by effective policies.” 26

Future LCAs to assess a specific country’s impacts or measures to improve management

practices should ensure that the studies take due consideration of existing land area
characteristics, including biodiversity; the ILUC method used to assess existing carbon
stocks; plantation life expectations; yields; competing demands for land use; and the
avoidance of generic, or global, characterisation factors to convert inputs to impacts.

Appendix 4: Demand and supply balances for the major countries

producing or consuming palm oil and palm kernel oil

(See Section 7.4.1 in the main report.)

1.1. Major producing countries

1.1.1. Malaysia

Table 6 shows the supply and demand balance of palm oil in Malaysia. From 2006 to
2015 annual production grew by around 4 million tonnes. The effect of the El Nino in
2016 reduced output back down the level in 2008.

Around 90% of production is exported, with the trend remaining around that level.
However, of the exports an increasing share is being exported as crude oil as Malaysia
faces difficulty competing with the increased exports of processed products from
Indonesia. In volume terms both exports of biodiesel and oleochemicals have increased
as their share of total exports has fallen.

Of the major end-uses food is the smallest accounting for a fifth of total domestic
consumption. It is also growing at the slowest rate. The fastest growth has been in
biodiesel, as the Malaysian mandate has grown, with biofuel use eclipsing food use in
2014. Oleochemical use remains the largest single domestic use of palm oil.

Table 7 shows the supply and demand balance for palm kernel oil. Production has grown
in line with that of palm oil, which is unsurprising given that palm kernel oil is a co-
product from the oil palm. Around a third of palm kernel oil production is exported, down
from two-fifths in 2006. While the share of exports has declined, the share that is
exported as crude palm kernel oil is growing. Domestic consumption is dominated by the
oleochemical sector, which produces fatty alcohol and other downstream derivatives.

1.1.2. Indonesia

Table 8 shows the supply demand balance for palm oil in Indonesia. In 2006 Indonesian
and Malaysian output were both around 15.9 million tonnes. Since then Indonesian
output has grown much faster than Malaysian with the result that today Indonesia
produces 60% more than Malaysia.

Indonesian exports account for around 70% of total production – a lower share than in
Malaysia due to the much larger domestic market. The share of exports of crude palm oil
has declined since 2006 from around two-fifths to one-fifths of total exports, as
Indonesia has claimed market share in processed palm products from Malaysia.

26
Valin, H., Peters, D., van den Berg, M., Frank, S. Havlik, P., Forsell, N., Hamelinck, C. (2015)
The land use change impact of biofuels consumed in the EU Quantification of area and
greenhouse gas impacts.

Appendices
2017 EUR 18 EN
Food remains the most important domestic use of palm oil in Indonesia, due to its large
population. The fastest growth has been in biodiesel demand. This was initially driven by
free market use of palm methyl ester and more recently by government policy. Biodiesel
exports also increased greatly, particularly when it was cost-competitive, but have
recently fallen back.

Table 9 shows that the production of palm kernel oil has also increased alongside the
palm oil out. A declining share of that output has been exported as crude oil as Indonesia
has taken markets share from Malaysia.

1.1.3. Secondary producers (Thailand and Colombia)

Malaysia and Indonesia account for the vast majority of global palm oil production.
However, there are smaller players in regions with a suitable rainfall pattern and
temperature. Table 10 and Table 11 show the supply and demand data for Colombia
and Thailand, respectively.

Since 2006 Colombian palm oil production, shown in Table 10 has grown from around
700,000 tonnes to just over 1.1 million tonnes. While exports increased so did imports
and most growth was consumed domestically. The main end-use with room to expand
was biodiesel, which grew rapidly as Colombia adopted higher biodiesel mandates.

The situation in Thailand, shown in Table 11, is similar with production growing, with
fluctuations, since 2006. Most of this growth has been used domestically, with biofuel
consumption of palm oil increasing from none in 2006 to almost double that of food use
in 2016.

1.1.4. Conclusion

Malaysia and Indonesia remain the largest producers in the world. Both export the vast
majority of their production. Indonesian output has grown much faster than that of
Malaysia, as has their share of world exports. Domestic support to processing has meant
that the Indonesian share of processed exports has grown particularly quickly – to the
detriment of Malaysia, which has seen an increased share of its palm oil and palm kernel
oil exports being shipped as crude oils.

Other producers, such as Colombia and Thailand, remain very small compared with
Indonesia and Malaysia. Growth in these countries has been driven by increased use of
palm oil in biodiesel.

Data quality: Overall the data quality is high with some variation by country. Table 5
below summarises the main data sources and their accuracy.

Appendices
2017 EUR 19 EN
Table 5: Data quality table for section on supply and demand of major palm oil
producers

Country Source Comments

Malaysia Malaysian Palm Oil Board Output is considered to be very

accurate. Consumption is only
measured indirectly from
production, import, export and
stock data.

Indonesian palm oil output Badan Pusat Statistik and These are the best local official
the Directorate General of sources of data, but are less
Estates accurate than the Malaysian
statistics

Gabungan Pengusaha GAPKI is the association of private

Kelapa Sawit Indonesia estates. Its figures are a guide to
growth trends.

Colombia palm oil output Fedepalma These are very accurate as there is
a revenue sharing scheme for the
sector.

Thailand palm oil output Bank of Thailand It monitors very closely palm output
in South Thailand

Appendices
2017 EUR 20 EN
Supply-demand and end-use

National supply-demand balances

Table 6: Malaysian palm oil data (‘000 tonnes)

Production Exports Exports Total Local Use in Use in Use in Exports of Downstream Products
Crude Processed Exports Demand Food Oleochemicals Biodiesel Oleochemicals Biodiesel
2006 15,881 2,377 12,047 14,423 2,145 500 863 49 2,111 48
2007 15,824 1,936 11,811 13,747 2,264 520 794 98 2,140 95
2008 17,734 2,337 13,076 15,413 2,707 550 720 187 2,076 182
2009 17,565 2,537 13,343 15,881 2,688 570 922 228 2,175 227
2010 16,994 2,740 13,924 16,664 2,301 580 811 156 2,204 90
2011 18,912 3,478 14,516 17,993 2,204 600 919 211 2,181 50
2012 18,781 4,634 12,929 17,563 2,150 620 979 221 2,601 37
2013 19,216 3,986 14,148 18,134 2,451 630 1,438 601 2,727 211
2014 19,667 4,678 12,599 17,277 2,869 649 1,659 749 2,828 339
2015 19,962 5,263 12,178 17,441 2,941 660 1,672 875 2,847 350
2016 17,319 3,796 12,222 16,018 2,990 650 1,728 781 2,756 256

Sources: Malaysia Palm Oil Board, USDA, EC and US import statistics for biodiesel exports and LMC estimates.

Appendices
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Table 7: Malaysian palm kernel oil data (‘000 tonnes)

Production Exports Exports Total Local Use in Use in exported

Crude Processed Exports Demand Oleochemicals Oleochemicals
2006 1,956 97 834 931 1,025 1,135 998
2007 1,908 186 875 1,061 847 1,192 1,077
2008 2,131 148 899 1,047 1,084 1,245 1,085
2009 2,097 184 933 1,117 980 1,338 1,002
2010 2,015 181 983 1,164 851 1,349 1,114
2011 2,145 205 971 1,176 969 1,270 1,010
2012 2,164 220 863 1,083 1,080 1,323 1,298
2013 2,270 245 926 1,171 1,099 1,274 1,031
2014 2,276 322 788 1,111 1,165 1,216 935
2015 2,276 292 775 1,067 1,210 1,344 940
2016 1,959 246 675 921 1,039 1,204 823

Sources: Malaysia Palm Oil Board, USDA, EC and US import statistics for biodiesel exports and LMC estimates.

Appendices
2017 EUR 22 EN
Table 8: Indonesian palm oil data (‘000 tonnes)
Production Exports Exports Total Local Production Exports of Downstream Products
Crude Processed Exports Demand Food Oleochemicals Biodiesel Oleochemicals Biodiesel
2006 15,996 5,068 6,936 12,005 3,680 3,387 230 63 508 52
2007 17,577 5,701 6,440 12,141 4,190 3,744 187 259 445 215
2008 19,685 7,904 6,661 14,565 4,650 4,115 173 361 451 315
2009 22,582 9,567 7,598 17,164 4,835 4,490 205 140 478 20
2010 23,075 9,444 7,161 16,605 5,196 4,118 250 828 635 605
2011 26,106 8,424 8,389 16,813 6,269 4,039 413 1,817 937 1,371
2012 29,432 7,253 11,831 19,084 7,115 4,180 721 2,213 1,616 1,321
2013 29,549 6,585 14,490 21,075 8,035 3,913 1,096 3,026 1,969 1,688
2014 31,853 5,727 17,267 22,994 8,750 4,181 1,513 3,056 2,497 1,376
2015 32,119 7,778 18,959 26,737 7,520 4,949 1,497 1,074 2,571 289
2016 28,304 5,284 18,183 23,467 9,528 5,149 1,424 2,955 2,302 446

Sources: Badan Pusak Statistik (BPS), GAPKI, USDA and LMC estimates.

Appendices
2017 EUR 23 EN
Table 9: Indonesian palm kernel oil data (‘000 tonnes)

Production Exports Exports Total Local Use in Use in exported

Crude Processed Exports Demand Oleochemicals Oleochemicals
2006 1,773 1,032 242 1,274 499 303 222
2007 1,946 1,107 228 1,335 611 280 206
2008 2,175 1,140 217 1,357 818 300 222
2009 2,496 1,471 246 1,717 780 297 219
2010 2,550 1,346 231 1,577 973 416 308
2011 2,834 1,104 351 1,455 1,379 571 419
2012 3,284 1,978 861 2,838 446 975 716
2013 3,244 452 1,251 1,703 1,541 971 698
2014 3,738 401 1,144 1,545 2,193 1,109 787
2015 4,143 606 1,281 1,887 2,256 1,203 859
2016 3,999 270 1,405 1,675 2,324 993 702

Sources: Badan Pusak Statistik (BPS), GAPKI, USDA and LMC estimates.

Appendices
2017 EUR 24 EN
Table 10: Colombian palm oil data (‘000 tonnes)

Production Exports Imports Net Local Palm oil demand in

Exports Demand Food Biodiesel
2006 714 238 12 226 488 488 0
2007 733 341 15 326 407 407 0
2008 778 318 26 292 486 486 0
2009 805 234 59 175 630 467 163
2010 753 114 114 0 753 415 338
2011 941 168 111 57 884 441 443
2012 967 188 122 66 901 411 490
2013 1,039 202 118 84 955 453 502
2014 1,110 274 122 152 958 440 518
2015 1,274 418 123 295 979 465 513
2016 1,142 401 203 198 944 494 450

Sources: Fedepalma.

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Table 11: Thai palm oil data (‘000 tonnes)

Production Exports Imports Net Local Palm oil demand in

Exports Demand Food Biodiesel
2006 1,128 205 1 204 661 388 0
2007 1,019 283 1 282 701 400 28
2008 1,475 360 30 330 1,090 410 407
2009 1,262 114 1 113 1,220 410 536
2010 1,221 121 1 120 1,415 410 732
2011 1,718 382 66 316 1,266 412 580
2012 1,846 293 44 249 1,439 430 736
2013 2,135 549 0 549 1,664 490 901
2014 1,811 222 24 198 1,691 510 908
2015 1,833 51 75 -24 1,737 520 943
2016 1,562 39 28 11 1,781 530 978

Sources: Bank of Thailand and USDA.

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1.2. Major palm oil consuming countries

Having discussed the major palm oil producers we will now look at the three largest
consumers: India, China and the EU, none of which produce palm oil in any significant
volumes and are therefore pure importers.

1.2.1. India

India is the largest importer of crude palm oil; this is due to a tariff structure which
favours domestic refining.

As

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Table 13 shows, crude palm oil (CPO) imports grew threefold over the last decade, but
collapsed in 2016 as poor production pushed up the price of CPO relative to other oils.
Imports of refined palm oil increased greatly from 2007 to 2008, but have since
remained grown only slowly.

The other major vegetable oil in India is soybean oil, the share of which varies according
to relative prices. Currently high relative palm oil prices have increased the share of
soybean oil imports compared with palm oil. The majority of palm oil is for food use with
around a fifth going to oleochemical or other uses.

1.2.2. China

By contrast imports into China are almost entirely of refined palm oil with palm
accounting for close to 70% of imports as shown in Table 14. Soybean oil is the other
major imported oil, but its share has been declining. However, Table 14 only includes
direct imports of vegetable oils. However, for oilseeds they are often imported in seed
form and the crushed into meal and oil in the country. As a result, substantial volumes of
oil are imported indirectly, in the form of seeds, which are then crushed in the country.
Therefore we have prepared Table 15, which also includes these indirect volumes. This
shows that indirect imports actually account for a greater share of total imports – around
65-70% of imports over the past three years. The share of oil from imported seeds has
also been growing, as demand for meat has driven increased demand for soybean meal
as animal feed with soybean oil produced as a co-product from domestic crushing.
Viewed from this perspective, palm therefore only accounts for around a fifth of total
(direct and indirect) vegetable oil imports.

1.2.3. European Union

Table 16 shows that in the EU the direct import of oil is more important than the indirect
import through the crushing of seeds, which yields oil in the EU. One reason for this is
because of the relatively large crushing of domestic seeds, which reduces the need for
imported meal. In addition, as we will see, the growth in biodiesel demand has created
more demand for oil than for meal – therefore favouring direct oil imports over the
import of oilseeds.

Overall direct oil imports have grown by around one third from 6.6 million tonnes in 2006
to just 8.6 million tonnes in 2016. Palm oil accounts for four-fifths of direct oil imports
and one third of total (direct and indirect) oil imports. In both cases the share of palm oil
has increased over time.

Table 17 shows the main end uses of palm oil in the EU. The table demonstrates that
food and other uses have grown over time, but that most of the growth has been in
biodiesel. However, biodiesel use of palm oil has not just been in the form of imported
palm oil or stearin, which is converted into palm methyl ester but also through the direct
importation of palm methyl ester. In the last three years (2013-2016) this accounted for
another 330,000 tonnes of palm oil as biodiesel on average.

1.2.4. Conclusion

Of the three main consumers, India, China and the EU, the dynamics of the palm oil
imports are quite different:

1. India imports predominantly crude palm oil for food use.

2. China imports processed palm oil predominantly for food use, but this has to
compete with large volumes of oilseeds imported for meal and producing oil as a
co-product.
3. The European Union imports palm oil, but the growth has mostly been driven for
biodiesel. As the demand for biodiesel has not created a concomitant demand for
meal, it has favoured palm oil over oilseeds.

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Data quality: the data on which we based our analysis is considered accurate and well
regarded. Table 12 below summarises the different data sources by country.

Table 12: Data quality table for section on palm oil consumers

Country Source Comments

India Solvent Extractors’ SEA works with the Customs authorities to compile
Association and the data on imports. The COOIT prepares highly regarded
Central Organisation crop forecasts.
for Oil Industry &
Trade (COOIT)

China China National Grain As a semi-governmental body, the CNGOIC compiles

and Oils Information data on production, imports, exports, oilseed
Centre crushing volumes and stocks. It is also highly
regarded.

EU European These all tabulate different aspects of the vegetable

Commission, COPA- oil sector and are viewed as providing reliable data.
COGECA, Fediol and
European Biodiesel
Board

Additional estimates U.S. Department of The USDA provides the most comprehensive
of palm oil Agriculture estimates of consumption worldwide, relying on its
consumption by Agricultural Attaches at embassies.
country and by end-
use

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Table 13: Indian vegetable oil import data (‘000 tonnes)

Palm Oil Palm oil demand in

CPO PPO Soybean Oil Other Oils Total % of Imports Food Other
2006 2,586 107 1,608 792 5,093 50.78% 2,300 393
2007 3,125 134 1,270 806 5,335 58.57% 2,960 299
2008 4,330 955 813 726 6,824 63.46% 4,200 335
2009 5,268 1,224 1,107 1,696 9,295 56.68% 5,600 592
2010 5,244 1,141 1,569 1,167 9,122 57.50% 5,600 586
2011 5,422 1,121 941 1,285 8,769 61.83% 5,750 592
2012 6,116 1,574 1,100 1,486 10,276 59.52% 6,985 506
2013 5,961 2,381 1,124 1,622 11,089 53.76% 8,020 573
2014 6,502 1,305 2,101 2,228 12,136 53.57% 8,052 455
2015 7,411 2,019 3,520 2,093 15,044 49.26% 8,750 680
2016 5,601 2,646 3,882 2,235 14,364 39.00% 8,600 547

Sources: Solvent Extractors' Association of India, USDA and LMC estimates.

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Table 14: Chinese imports of vegetable oils (‘000 tonnes)

As oils
CPO PPO Total Palm Soybean Rapeseed Sunflower SUM
2006 183 4,958 5,141 1,543 44 0 6,728
2007 181 4,916 5,097 2,822 375 0 8,294
2008 186 5,062 5,248 2,586 270 0 8,103
2009 229 6,213 6,442 2,391 468 0 9,300
2010 202 5,494 5,696 1,341 985 0 8,023
2011 65 5,847 5,913 1,143 551 0 7,607
2012 0 6,342 6,342 1,693 1,096 0 9,131
2013 0 5,980 5,980 1,158 1,527 361 9,026
2014 0 5,430 5,430 1,119 897 455 7,901
2015 0 5,910 5,910 818 815 624 8,167
2016 1 4,478 4,479 561 700 956 6,695

Sources: China National Oils and Grains Information Company, USDA and LMC estimates.

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Table 15: Share of palm oil in Chinese imports of vegetable oils (‘000 tonnes)

Palm oil Total direct Indirect oil All oil Palm oil demand in Palm oil % of
imports oil imports imports in seed imports Food Other Direct oil imports All oil imports
2006 5,141 6,728 5,528 12,255 3,074 2,067 76.41% 41.95%
2007 5,097 8,294 6,035 14,329 3,188 1,909 61.46% 35.57%
2008 5,248 8,103 7,446 15,550 3,222 2,026 64.76% 33.75%
2009 6,442 9,300 8,940 18,240 3,568 2,874 69.26% 35.32%
2010 5,696 8,023 10,776 18,799 3,880 1,816 71.00% 30.30%
2011 5,913 7,607 10,371 17,978 3,717 2,196 77.73% 32.89%
2012 6,342 9,131 12,118 21,249 3,691 2,651 69.45% 29.85%
2013 5,980 9,026 13,284 22,310 4,189 1,791 66.25% 26.80%
2014 5,430 7,901 14,817 22,718 3,600 1,830 68.73% 23.90%
2015 5,910 8,167 16,910 25,077 3,750 2,160 72.36% 23.57%
2016 4,479 6,695 16,824 23,519 2,800 1,679 66.89% 19.04%

Sources: China National Oils and Grains Information Company, USDA and LMC estimates.

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Table 16: EU imports of vegetable oils (‘000 tonnes)

Total direct Indirect oil Overall oil Output of oils Direct exports Total oils Palm as % Palm as % of imports Palm as %
oil imports imports in seed imports from local seeds of oils supply of oil imports including oil in seed of total supply
2006 6,574 2,995 9,569 7,816 590 16,795 65.04% 26.96% 24.91%
2007 7,264 3,209 10,473 8,334 605 18,202 59.73% 24.95% 22.95%
2008 7,510 3,195 10,705 8,997 722 18,980 66.14% 27.84% 25.46%
2009 7,823 4,040 11,863 9,325 797 20,391 70.42% 28.35% 26.37%
2010 7,400 3,287 10,687 11,059 793 20,953 73.54% 30.61% 25.29%
2011 7,158 3,509 10,667 10,251 1,041 19,877 69.07% 28.28% 23.87%
2012 7,692 3,846 11,538 10,353 1,348 20,543 74.19% 30.16% 26.96%
2013 8,286 3,756 12,042 10,709 1,848 20,903 82.21% 33.95% 31.94%
2014 8,640 3,996 12,636 11,757 1,611 22,782 80.66% 33.40% 29.88%
2015 8,279 3,607 11,886 12,888 1,901 22,873 83.78% 35.21% 29.82%
2016 8,565 4,423 12,988 11,633 1,785 22,836 77.64% 31.34% 28.46%

Sources: European Commission, Fediol, European Biodiesel Board, USDA and LMC estimates.

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Table 17: EU demand for palm oil (‘000 tonnes)
Palm with
indirect
Direct palm oil demand in Net palm oil Palm oil in Total palm Total palm oil biodiesel as %
Food Biodiesel Other demand (- exports) imported PME biodiesel use including imported biodiesel of total supply
2006 2,646 279 1,259 4,184 11 290 4,195 24.96%
2007 2,656 403 1,118 4,177 100 503 4,277 23.37%
2008 2,720 540 1,573 4,833 179 720 5,012 26.16%
2009 2,750 587 2,041 5,378 280 867 5,658 27.37%
2010 2,750 748 1,800 5,298 579 1,327 5,877 27.29%
2011 2,800 685 1,259 4,744 1,104 1,789 5,848 27.87%
2012 2,950 1,484 1,104 5,538 1,170 2,654 6,708 30.90%
2013 3,380 2,214 1,083 6,677 606 2,820 7,283 33.86%
2014 3,280 1,674 1,853 6,807 341 2,014 7,148 30.91%
2015 3,200 1,524 2,096 6,820 362 1,886 7,182 30.91%
2016 3,000 2,039 1,461 6,500 307 2,346 6,807 29.41%

Sources: European Commission, Fediol, European Biodiesel Board, USDA and LMC estimates.

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Appendix 5: Areas under soybeans and other annual crops, and
projections of oil crop output to 2026

(See Section 7.4.2 in the main report.)

1.1. Areas under soybeans and other major annual crops in selected
countries

Figures 4-9 illustrate the growth in soybean areas in the leading producing and
exporting countries, all in the Americas. These soybean areas are contrasted with the
areas planted to all other major annual arable crops that compete for land with
soybeans27. We did not include tree crops and sugar cane with the other crops, as these
are not planted annually and thus only compete with soybeans for land over a long
period.

In the case of Brazil, a distinctive feature is the growth in the double cropping of
soybeans with maize (whose second crop is known as the safrinha, which now accounts
for half the total area planted to maize and half the country’s output of that crop). As the
safrinha means that the total maize area harvested each year includes some land that is
harvested twice, we include a second series for the area under “non-soybean crops” in
Figure 5 for Brazil. This one excludes the safrinha area, as this is already included within
the soybean total.

For the US, we include a series depicting the area under the Conservation Reserve, which
is the land taken out of arable farming for environmental reasons in return for special
payments.

1.2. Conclusion

In all four South American countries the soybean area has grown rapidly. It
now exceeds the areas under all the other major annual arable crops,
combined. In the US, the soybean area has recently grown very slowly.

Figure 4: The growth in soybean areas Figure 5: Area harvested for soybeans
in leading producing countries and other major annual crops - Brazil
120 35

30
100
M illion hectares, Brazil

25
M illion hectares

80
20
60
15

40 10

5
20
0
0 1977 1983 1989 1995 2001 2007 2013
1977 1985 1993 2001 2009 Non-soybean
United States Brazil Argentina Soybean
Bolivia Paraguay Rest of World Non-soybean minus double cropping

Note: The double-cropped safrinha area represents

maize planted immediately after soybean harvesting.

27
The other major are wheat, maize, rice, sorghum, barley, millet, oats, rye, cotton, rapeseed,
sunflower seed and peanuts annual crops. The data are derived from UN FAO, USDA and
CONAB.

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Figure 6: Area harvested for soybeans Figure 7: Area harvested for soybeans
and other major annual crops - and other major annual crops – United
Argentina States
90
22
20 80

18 70
M illion hectares, A rgentina

M illion hectares, U S
16 60

14 50

12 40

10 30

8 20

6 10

4 0
1977 1983 1989 1995 2001 2007 2013
2
Non-soybean Soybean
0 Conservation reserve
1977 1983 1989 1995 2001 2007 2013
Non-soybean Soybean

Figure 8: Area harvested for soybeans Figure 9: Area harvested for soybeans
and other major annual crops – and other major annual crops – Bolivia
Paraguay
1.2
3.5

3.0 1.0
M illion hectares, Bolivia
M illion hectares, P araguay

2.5 0.8

2.0
0.6

1.5
0.4
1.0
0.2
0.5

0.0
0.0
1977 1983 1989 1995 2001 2007 2013
1977 1983 1989 1995 2001 2007 2013
Non-soybean Soybean
Non-soybean Soybean

1.3. The evolution of the areas planted to oil crops

This section analyses the pressures upon agricultural land for the main crops. It reveals
that the area under oil crops has grown for decades. The largest area under these crops
and the greatest absolute increases in areas occurred in soybeans. Rapeseed and
sunflower recorded the second and third largest areas and increases in areas. Oil palm
was in last place among the four main oil crops.

Figure 10 plots the growth in oil crop areas. Figure 11 compares the annual growth in
areas since 1981. Soybeans dominate the growth; rapeseed is second, well behind,
followed by sunflower and oil palm. Figure 12 reveals that the growth in world demand
for oils outstripped that for oilseed meals, both growing slightly faster than world GDP.
Growth rates diverged after 2002, when biofuel demand for oils emerged on a large
scale.

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The small rise in palm areas is due to its high yields of oil per hectare.

Figure 13 compares worldwide yields of such crops. Oil palm, on average, yields
almost 3.5 tonnes of oil per hectare worldwide, soybeans yield under 0.5 tonnes
of oil per hectare. Figure 14 compares the area of each crop needed, on average, to
yield one tonne of oil.

We now consider the land use implied by projections of oil crop output to 2026.
Figure 15 depicts the impact of extrapolating past trends in oil crop areas, assuming
continuation of past demand and yield growth rates. 73 million hectares of oil crops
would be added. 42 million of these hectares would be soybeans, 21 million rapeseed, 13
million hectares would be oil palm and 4 million sunflower.

Figure 16 illustrates the implications for the area that would need to be brought into
cultivation at actual 2013 yields to meet rising oil demand if no increase occurred in
palm areas, keeping it at 19 million hectares, rather than 31 million hectares on trend.
This diagram reveals that, if all the forgone palm oil were replaced with soybean
oil, an additional 98 million hectares of soybeans would be needed, on top of
the 42 million simply following trend. This implies a world soybean area of 257
million hectares in 2025, up from 117 million in 2014.

Figure 10: World areas of oil crops, 1981-2014

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Figure 11: Growth in areas under oil crops, 1981-2014, mn ha. per annum

Figure 12: World GDP, vegetable oil and oilseed meal output, 1972-2014

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Figure 13: World average oil and meal yields per hectare of oil crops

Figure 14: World average hectares per tonne of oil and meal of oil crops

Figure 15: Extrapolating past trends in growth in global areas under oil crops to
2026

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Figure 16: Soybean area if palm oil output remained at 2013 levels and
soybeans supplied the extra oil that would be from palm

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Appendix 6: Principles of main sustainable palm oil certification standards
(Please see Section 8.1.1 of the main report).

The following tables 32-35 summarise the principles contained within each of the major sustainable palm oil certification standards.

Table 18: Summary of RSPO Principles28

Principle Brief description
Principle 1: Commitment to Contains three criteria that specify: provision of information to stakeholders; public availability of specified
Transparency documents; and a commitment to ethical conduct.
Principle 2: Compliance With Contains three criteria that specify: compliance with all applicable local, national and ratified international
Applicable Laws and Regulations laws and regulations; that the company has the (uncontested) right to use the land; and the legal,
customary or user rights of others are not diminished without their free, prior and informed consent (FPIC).
Principle 3: Commitment to Long- Contains one criterion, that requires an implemented management plan that aims to achieve long-term
term Economic & Financial Viability economic and financial viability
Principle 4: Use of Appropriate Includes eight criteria that specify: documentation of management practices; maintenance of soil fertility;
Best Practices by Growers and control of soil erosion; maintenance of ground and surface water; use of integrated pest management
Millers techniques; safe use of pesticides; an Occupational Health and Safety plan; and appropriate staff training.
Principle 5: Environmental Contains six criteria, that specify: environmental impact assessment; identification and management of High
Responsibility and Conservation of Conservation Values (including rare species); waste management; efficient energy use; avoiding the use of
Natural Resources and Biodiversity fire in land preparation; and plans to reduce pollution (including GHG emissions).
Principle 6: Responsible Contains thirteen criteria, that specify: social impact assessment; transparent communication with local
Consideration of Employees and of communities; a complaints and grievances procedure; representation of community groups during
Individuals and Communities compensation negotiations; adequate workers’ pay and conditions; the right of employees to free assembly;
Affected by Growers and Millers absence of child labour; absence of forced labour; absence of discrimination; absence of harassment; fair
treatment of smallholders; contribution to local development; and respect for human rights.
Principle 7: Responsible Contains eight criteria, that specify: a social and environmental impact assessment; soil surveys; that
Development of New Plantings plantings since November 2005 have not replaced primary forest or any area of High Conservation Value;
avoidance of planting on steep slopes and peat; avoidance of planting on land where local people have
demonstrated legal, customary or use rights without FPIC; provision of compensation for people who have
lost use rights; avoidance of use of fire in plantation establishment; and minimisation of GHG emissions.
Principle 8: Commitment To Contains one criterion, specifying demonstrate continual improvement in key operations.
Continual Improvement In Key
Areas of Activity

28
RSPO (2013). Principles and Criteria for the Production of Sustainable Palm Oil.

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Table 19: ISCC Principles (ISCC EU - Sustainability Requirements29)

Principle Brief description

Principle 1: Protection of Land with High Contains three mandatory criteria that specify: biomass is not produced on land with high
Biodiversity Value or High Carbon Stock biodiversity value; high carbon stock; or from peatland
Principle 2: Environmentally Responsible Contains ten criteria that specify: conservation of biodiversity; maintenance of soil fertility;
Production to Protect Soil, Water and Air appropriate fertilizer application; restricted fertilizers, pesticides and seeds; use of integrated
pest management; best practices in agro-chemical application; best practice in storing
resources; best practice in maintaining water resources; and waste and energy management.
Principle 3: Safe Working Conditions Contains two criteria that specify: training and competence of employees and Occupational
Health and Safety
Principle 4: Compliance with Human, Contains two criteria that specify: contribution to rural development; and appropriate terms
Labour and Land Rights and conditions of employment.
Principle 5: Compliance with Laws and Contains two criteria that specify: legitimacy of land use and compliance with laws and treaties.
International Treaties
Principle 6: Good Management Practices Contains two criteria that specify: the documents and process for economic stability and good
and Continuous Improvement management practices.

29
ISCC (2016). ISCC 202 Sustainability Requirements, Version 3.0

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Table 20: ISPO Principles (for integrated plantation and mill companies30)

Principle Brief description

Principle 1: Legal requirements on land Contains nine criteria, that require a company to have a location permit; a business license;
allocated for plantation land title; that the plantation is on specified previous land use types; is consistent with land use
plans; and that the company is a legal entity; contributes to community development; follows
the procedure for unused lands; and has a procedure for dispute resolution.
Principle 2: Plantation management Contains five criteria that require plantation planning; implementation of technical guidelines;
settlement for areas that overlap with mining activities; documentation for plantation and
processing units; and provision of information to stakeholders.
Principle 3: Protections to the utilization Principle only, requiring land release and location permits documents.
of primary natural forest and peatlands
Principle 4: Environmental Management Contains ten criteria that specify compliance with legal obligations related to: integrated
and Monitoring plantations and mills; environmental permits; management of hazardous waste; and
management of noise and odour emissions; fire procedures; preservation of biodiversity;
maintenance of water resources; management of protected areas; erosion control and
reduction of GHG emissions.
Principle 5: Responsibilities towards Contains five criteria that specify requirements for occupational health and safety; workers’
employees welfare and capacity building; prohibition of child labour and discrimination; facilitation of the
formation trade unions; workers and smallholder cooperatives.
Principle 6: Social responsibility and Contains three criteria that require contribution to the welfare of communities around the
community economic empowerment plantation; empowerment of indigenous people; and contribution to the local economy.
Principle 7: Sustainable business Principle only, requiring continual improvement.
improvement

30
ISPO (2015). Regulation Of The Minister of Agriculture of the Republic Of Indonesia Number 11/Permentan/Ot.140/3/2015. Annex II Principles And
Criteria of Indonesian Sustainable Palm Oil (ISPO) For Plantation Companies Operating/Managing Oil Palm Plantation Integrated With Processing
Facilities/Mill, and Produce CPO For Renewable Energy.

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Table 21: MSPO Principles (General Principles31)

Principle Brief description

Principle 1: Management commitment Contains four criteria, specifying documented commitment to the MSPO; internal audits;
and responsibility periodic management review; and continual improvement
Principle 2: Transparency Contains three criteria, specifying availability of documents to stakeholders; procedures for
consultation and communication; and supply chain traceability
Principle 3: Compliance to legal Contains three criteria, specifying compliance with appropriate laws and regulations; legality of
requirements land rights and maintenance of customary land rights
Principle 4: Social responsibility, health, Contains six criteria, that require a social impact assessment, a complaints and grievance
safety and employment conditions procedure; contribution to local development; employee safety and health; terms and
conditions of employment; and training of employees.
Principle 5: Environment, natural Contains seven criteria, requiring environmental management; efficient and renewable energy
resources, biodiversity and ecosystem use; responsible waste management; reduction of air pollution; management of natural water
services resources; maintenance of rare, threatened and endangered species and high biodiversity value
areas; and avoidance of burning.
Principle 6: Best practices Contains four criteria, that specify good practice for site management; a business plan;
transparent and fair pricing for products and services; and an obligation that subcontractors are
aware of MSPO requirements
Principle 7: Development of new planting Contains six criteria, requiring that oil palm is not planted on primary forest or land designated
for protection; mitigation plans for planting on peat; a social and environmental impact
assessment is conducted; a soil and topographic survey conducted; planting on steep slopes is
avoided; and that no new plantings are established on recognized customary land without the
owners’ free, prior and informed consent

31
Department of Standards, Malaysia (2013). Malaysian Sustainable Palm Oil (MSPO) Part 1: General principles. MS 2530-1:2013.

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Appendix 7: Full summaries of EU, UN and regional policy instruments relating to palm oil

(Please see Section 8.3.1.2 of the main report)

Topic Characteristics

Policy instrument: Directive 2009/28/EC: On the promotion of the use of energy from renewable sources amending and subsequently
repealing Directives 2001/77/EC and 2003/30/EC

Description: The Directive establishes a common framework for the promotion of energy from renewable sources. It requires the EU to
fulfil at least 20% of its total energy needs with renewables by 2020, by the attainment of individual national targets. All EU countries
must also ensure that at least 10% of their transport fuels come from renewable sources by 2020. The directive also establishes
sustainability criteria for biofuels and bioliquids.
Overview Issued by: European Parliament and Council
Date established: 23/04/09
Environmental Sustainability criteria (Article 17) for raw materials used to produce biomaterials and biofuels include:
policy objectives:  Greenhouse gas emission savings of at least 35%, 50% from 2017 and 60% from 2018;
 Not grown on land with high biodiversity value;
 Not grown on land with high carbon stock; and
 Not grown on peat land.

The Commission must also report on national measures taken by third countries that are a significant
source of biofuels, to respect the sustainability criteria and for soil, water and air protection.
Social policy  The Commission must report on the impact of increased demand for biofuels on social
objectives: sustainability in third countries, particularly on the availability of foodstuffs at affordable prices
and wider development issues.
 Report should also address land-use rights.
 The Commission must also report whether countries providing a significant source of raw
materials for biofuels have ratified and implemented ILO core conventions.
Policy instrument: Directive 2015/1513: Amendment of Directive 98/70/EC relating to the quality of petrol and diesel fuels and
amendment of Directive 2009/28/EC on the promotion of the use of energy from renewable sources to work towards the inclusion of
indirect land use change emissions into the sustainability criteria for biofuels and bioliquids.

Description: The 2015 amendment to the EU RED recognises the potential negative environmental and social impacts of increased
biofuel production in third countries. To address these impacts, the amendment sets a limit of 7% for the contribution of biofuels and
bioliquids produced from food crops to the final consumption of energy in transport in the Member States in 2020.
Overview Issued by: European Parliament and Council

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 Date 09/11/15
established:
Environmental  The 2015 amendment increases the minimum greenhouse gas emissions savings from 35% to
policy 60% for biofuels and bioliquids produced in installations starting operation after 05/10/15.
objectives:  The Commission must submit a report by the end of 2017 reviewing the effectiveness of
measures introduced by this Directive in limiting indirect land-use change greenhouse gas
emissions and the impact of EU legislation (RED).

Social policy  Stronger regulation of the certification schemes used to demonstrate biofuels meet the
objectives: sustainability criteria - stakeholder involvement (particularly of indigenous and local
communities) should be considered when reviewing voluntary certification schemes.
 Recognises importance of good governance and a rights-based approach, particularly
governance of land tenure and land-use rights - member states should support the
implementation of the FAO Voluntary Guidelines.

Policy instrument: Regulation (EU) No 233/2014: Establishing a financing instrument for development cooperation for the period
2014-2020.

Description: The regulation sets up a financing instrument (the ‘Development Cooperation Instrument’) for the period 2014-20,
specifying geographic and thematic programmes the EU can fund to meet objectives of eradicating poverty, fostering sustainable
development and consolidating and supporting democracy. The regulation gives a good indication of development priorities in the EU’s
external actions.
Overview Issued by: European Parliament and Council
Date 01/01/14
established:
Environmental Focus areas for cooperation include:
policy  The protection and sustainable use of biodiversity
objectives:  Equitable access to water and water resources management
Social policy Focus areas for cooperation include:
objectives:  Support of human rights, including the rights of indigenous peoples
 Protection of land rights
 Smallholder agriculture for sustainable agricultural practices
 The promotion of decent work, including combatting child labour.
Policy instrument: COM(2008) 645: Addressing the challenges of deforestation and forest degradation to tackle climate change and
biodiversity loss.
Description: The communication details the EU’s response to the challenge of climate change, with the core objective to ‘halt global
forest cover loss by 2030 at the latest and to reduce gross tropical deforestation by at least 50% by 2020 compared to current levels’.

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The communication proposes an internationally supported incentive scheme to reduce emissions from deforestation and forest
degradation in developing countries.
Overview Issued by: European Commission
Date 17/10/08
established:
Environmental  Goal is to halt global forest cover loss by 2030 and reduce gross tropical deforestation by at
policy least 50% by 2020.
objectives:  UN CBD should feed biodiversity considerations into international climate negotiations.
 Focus on carbon emissions – proposal of the Global Forest Carbon Mechanism to reduce
emissions from deforestation and forest degradation.
 Mention of biofuel production, indicating the need to ensure future production is sustainable.
Social policy  Communication supports effective forest governance and respect for the rights of forest-
objectives: dependent people.
Policy instrument: Technical Report (2013-063): The impact of EU consumption on deforestation: Comprehensive analysis of the
impact of EU consumption on deforestation

Description: The report links EU consumption patters to deforestation by quantifying the impact of overall EU consumption. The study
developed the concept of embodied deforestation, which refers to deforestation associated with commodity production.
Overview Issued by: Funded by the European Commission, DG ENV
Date 2013
established:
Environmental The report found that palm oil contributes to 8% of global deforestation and that oil crops (soybean
policy and oil palm) and their derived products represent the largest share (63%) of deforestation embodied
objectives: traded crop commodities.
Social policy N/A
objectives:
Policy instrument: COM (2015) 497: Trade for all – Towards a more responsible trade and investment policy.

Description: The ‘Trade for all’ Communication updates the EU’s trade and investment policy to include a focus on values. The main
aim of this policy is the integration of development goals into trade policy, to achieve social and environmental outcomes.
Overview Issued by: European Commission
Date 14/10/15
established:

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 Environmental  The strategy promotes sustainable development through the conservation of and sustainable
policy use of natural resources (including biodiversity, water and forests).
objectives:  The strategy also refers to on-going negotiations for an environmental goods agreement (EGA)
to facilitate trade in green technologies, including renewable energy generation. This could be
relevant to palm oil if it is applied to the production of biofuels in major palm oil producing
countries.
Social policy The strategy promotes:
objectives:  Human rights
 Inclusion of smallholders in trade opportunities
 Implementation of core labour standards including tackling child and forced labour, and decent
working conditions.
Policy instrument: COM (2016) 501: A European Strategy for Low-Emission Mobility

Description: The strategy frames future initiatives on reducing emissions from the transport sector.
Overview Issued by: European Commission
Date 20/07/16
established:
Environmental  The strategy note that the Commission have already indicated that food-based biofuels are
policy likely to have a limited role in decarbonising the transport sector and should not receive public
objectives: support after 2020.
 The strategy references the policy framework for climate and energy (2020 to 2030), which
draws on the proposal for the 2015 amendment on RED, which first suggests the limit on the
contribution of biofuels made from food crops to the RED targets on renewable energy
consumption.
Social policy N/A
objectives:
Policy instrument: COM (2011) 244: Our life insurance, our natural capital: an EU biodiversity strategy to 2020.

Description: The EU Biodiversity Strategy outlines the EU’s biodiversity policy to 2020, in line with meeting its international goals and
objectives under the UN CBD. The strategy is mainly focused on biodiversity policy within the EU, with the exception of target 6, which
details the EU’s role in tackling global biodiversity loss.
Overview Issued by: European Commission
Date 03/05/11
established:

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 Environmental Target 6: By 2020, the EU has stepped up its contribution to averting global biodiversity loss.
policy  Action 17: Reduce indirect drivers of biodiversity loss: measures to reduce the biodiversity
objectives: impacts of EU consumption patterns, enhance contribution of trade policy to conserving
biodiversity, provide correct market signals for biodiversity conservation.
 Action 18: Mobilise additional resources for global biodiversity conservation: contribution of fair
share to international efforts, improve effectiveness of EU funding for global biodiversity.
 Action 19: ‘Biodiversity proof’ EU development cooperation: systematically screen development
cooperation action to minimize any negative impact on biodiversity.
 Action 20: Regulate access to genetic resources and the fair and equitable sharing of benefits
arising from their use.

The mid-term review finds that more efforts are needed to implement provisions on biodiversity in
recent trade agreements, and to integrate biodiversity objectives into EU trade policies.
Social policy N/A
objectives:
Policy instrument: P8_TA (2016) 0034: European Parliament resolution on the mid-term review of the EU’s Biodiversity Strategy

Description: Non-legally binding resolution, providing detailed recommendations for each of the targets in the biodiversity strategy.
Overview Issued by: European Parliament
Date 02/02/16
established:
Environmental The resolution:
policy  Calls for the Commission to submit an ambitious action plan to tackle deforestation and forest
objectives: degradation.
 Calls for social and environmental sustainability criteria for biomass production to form a
coherent part of the framework laid down by EU RED.
 Draws attention to the threat to biodiverse environments, including peatland, posed by growing
demand for biofuels.
 Highlights the impact of forest burning for land clearance.
Social policy Calls on the Commission to promote sustainable management of forests by respecting the rights of
objectives: indigenous people to sustain forest resources.
Policy instrument: EU 7th Environment Action Plan

Description: The EU 7th Environmental Action Plan guides European environment policy until 2020 providing a long-term 2050
direction.
Overview Issued by: European Parliament
Date 20/11/13

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 established:
Environmental Priority objective 9:
policy  Sets a global focus for environmental action to address international environmental and climate
objectives: challenges.
 Calls on the EU to assess the environmental impact of its consumption of food and non-food
commodities, and develop policy proposals to address the findings and give due consideration
to an action plan on deforestation and forest degradation’.
Social policy N/A
objectives:
Policy instrument: 2017/C 210/01: The new European Consensus on Development ‘Our world, our dignity, our future’

Description: Shared vision and framework for action for development cooperation for the European Union (EU) and its Member States.
This Consensus addresses the main focus points of the 2030 Agenda: people, planet, prosperity, peace, and partnership.
Overview Issued by: European Parliament, Council and European Commission
Date 20/06/17
established:
Environmental The EU and its Member States will:
policy  Tackle illegal logging and its associated trade, land and forest degradation, and biodiversity
objectives: loss.
 Support agro-ecological practices to protect soils, conserve water resources, halt, prevent and
reverse deforestation.
 Implement the 2030 Agenda and the Paris Agreement.
Social policy The EU and its Member States will:
objectives:  Implement a rights-based approach to development cooperation and promote labour standards
(including decent working conditions and combatting child labour).
 Promote the involvement of local stakeholders and respect for the rights of all, including
indigenous and local peoples.
 Support improvements in forest governance and equitable access to land tenure, including
customary land use and water access.
Policy instrument: COM (2003) 251: Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan

Description: The EU Action Plan for Forest Law Enforcement, Governance and Trade (FLEGT) outlines measures to prevent the import
of illegal timber into the EU, improve the supply of legal timber, and increase demand for timber from responsibly managed forests.
Overview Issued by: European Commission
Date 21/05/03
established:
Environmental  Establishment of timber verification and licencing systems to control entry of timber into the EU

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 policy from countries in bilateral FLEGT Voluntary Partnership Agreements (VPAs).
objectives:  The EU Timber Regulation (EUTR) (2010) prohibits the import and use of illegally harvested
timber and timber products in the EU, and requires EU traders in timber products to keep
records of their suppliers and customers.

FLEGT is not directly relevant to palm oil, as it is focused on illegally harvested timber rather than
other agricultural commodities, but plays a role in sustainable forest management. Similar approaches
could also be adopted for other agricultural commodities as reviewed in a feasibility study on an EU
deforestation action plan.
Social policy FLEGT plays a role in promoting forest governance.
objectives:
Policy instrument: The 2030 Agenda - UN Sustainable Development Goals (SDGS)

Description: International agenda for sustainable development made up of 17 goals and 169 targets.
Overview Issued by: United Nations
Date 01/01/16
established:
Environmental Goal 6 – Ensure availability and sustainable management of water and sanitation for all
policy  6.3: By 2030, improve water quality by reducing pollution
objectives:  6.6: By 2020, protect and restore water-related ecosystems, including forests and wetlands.

Goal 12 – Ensure sustainable consumption and production patterns

 12.2: By 2030, achieve the sustainable management and efficient use of natural resources
 12.6: Encourage companies to adopt sustainable practices and integrate sustainability
information into reporting cycles
 12.7: Promote sustainable public procurement practices.

Goal 15 – Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage
forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
 15.2: By 2020, promote the implementation of sustainable management of all types of forests,
halt deforestation, restore degraded forests and substantially increase afforestation and
reforestation globally
 15.5 - Take urgent and significant action to reduce the degradation of natural habitats, halt the
loss of biodiversity and, by 2020, protect and prevent the extinction of threatened species
 15.B - Mobilize significant resources from all sources and at all levels to finance sustainable
forest management.
Social policy Goal 2 – End hunger, achieve food security and improved nutrition and promote sustainable
objectives: agriculture

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  2.3: By 2030, double the agricultural productivity and incomes of small-scale food producers,
through secure and equal access to land, and increased markets opportunities.

Goal 8 – Promote sustained, inclusive and sustainable economic growth, full and productive
employment and decent work for all
 8.7: - Take immediate and effective measures to eradicate forced labour, and by 2025 end
child labour in all its forms
 8.8: Protect labour rights and promote safe and secure working environments for all workers.
Policy instrument: The United Nations Convention to Combat Climate Change (UNFCCC) – Paris Agreement

Description: The UNFCCC is a framework for intergovernmental efforts to tackle the challenge posed by climate change. The Paris
Agreement aims to enhance the implementation of the original Convention by setting a target to limit global average temperature
increase to ‘well below 2°C’, and preferably below 1.5°C.
Overview Issued by: United Nations
Date Paris Agreement entered into force 04/11/16
established:
Environmental Parties are encouraged to implement:
policy  Policy approaches and incentives for activities that reduce emissions from deforestation and
objectives: forest degradation.
 Recognise the role of conservation and sustainable management of forests in enhancing forest
carbon stocks.

Social policy N/A

objectives:
Policy instrument: The Convention on Biological Diversity (CBD)
Description: The UN CBD entered into force on 29/12/1993 following the Rio Earth Summit. The treaty has three main objectives:
1. Conservation of biological diversity;
2. Sustainable use of the components of biological diversity;
3. Fair and equitable sharing of the benefits arising out of the utilization of genetic resources.
Overview Issued by: United Nations
Date Entered into force 29/12/93
established:
Environmental Article 8 commits parties to:
policy  Establishing protected areas for biodiversity;
objectives:  Promoting environmentally sound sustainable development;
 Rehabilitating and restoring degraded ecosystems.
Social policy The Convention commits parties to respecting the practices of indigenous and local communities.

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 objectives:
Policy instrument: Strategic plan for Biodiversity 2011-2020

Description: The Strategic Plan, including the Aichi Biodiversity Targets, provides a framework for the protection of biodiversity, which
Parties must translate into national biodiversity strategies and action plans.
Overview Issued by: UNEP
Date established: 29/10/10
Environmental  Target 3 specifies the elimination or reform of incentives, including subsidies, which are
policy objectives: harmful to biodiversity and the need for positive incentives for the conservation and sustainable
use of biodiversity – relevant to biofuels.
 Target 5: halve the rate of loss of all natural habitats, including forests, and significantly reduce
degradation;
 Target 7: sustainably manage areas under forestry to ensure the conservation of biodiversity;
 Target 14: restore and safeguard ecosystem services
 Target 15: enhance the contribution of biodiversity to carbon stocks
Social policy  Target 18: respect the customary use of biological resources by indigenous and local
objectives: communities.
Policy instrument: ILO Conventions

Description: International labour conventions, which provide legally binding protections for workers, children and indigenous peoples.
Overview Issued by: International Labour Organisation (ILO)
Date established: 1930-2001
Environmental N/A
policy objectives:
Social policy  Forced Labour Convention (No. 29)
objectives:  Abolition of Forced Labour Convention (No. 105)
 Minimum Age Convention (No. 138)
 Worst forms of child labour Convention (No. 182)
 Protection of Wages Convention (No. 95)
 Occupational Safety and Health Conventions (multiple)
 ILO Convention concerning Indigenous and Tribal Peoples in Independent Countries (No 169)
expanded in UN Declaration on the Rights of Indigenous Peoples (UNDRIP).
Policy instrument: UN Forest Instrument

Description: The UN Forest Instrument is the most recent version of the ‘Non-legally binding instrument on all types of forests’ (NLBI).
The Instrument extends the timeline of the global objectives of forests originally set out in the NLBI from 2015 to 2030, but otherwise

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the text of the NLBI remains unchanged.
Overview Issued by: United Nations
Date established: 22/12/15 (NLBI established 17/12/07)
Environmental Global objective 1: Reverse the loss of forest cover worldwide through sustainable forest
policy objectives: management, and increase efforts to prevent forest degradation.
Social policy Global objective 2: Enhance forest-based economic, social and environmental benefits, including by
objectives: improving the livelihoods of forest-dependent people. Includes measures to:
 Provide investment opportunities for local and indigenous communities
 Support education, training and extension programmes involving local and indigenous
communities
 Enhance access by households, small-scale forest owners, and forest dependent local and
indigenous communities to forest resources and relevant markets.
Policy instrument: UN Strategic Plan for Forests

Description: The UN Strategic Plan for Forests 2017-2030 provides a global framework for action to sustainably manage all types of
forests and trees outside forests, and halt deforestation and forest degradation.
Overview Issued by: UN Forum on Forests
Date established: 20/01/17
Environmental  Global Forest Goal 1: Reverse the loss of forest cover worldwide through sustainable forest
policy objectives: management, including protection, restoration, afforestation and reforestation, and increase
efforts to prevent forest degradation and contribute to the global effort of addressing climate
change.
 Global Forest Goal 3: Increase significantly the area of protected forests worldwide and other
areas of sustainably managed forests, as well as the proportion of forest products from
sustainably managed forests
Social policy  Global Forest Goal 2: Enhance forest-based economic, social and environmental benefits,
objectives: including by improving the livelihoods of forest dependent people.
 Global Forest Goal 5: Promote governance frameworks to implement sustainable forest
management, including through the UN Forest Instrument, and enhance the contribution of
forests to the 2030 Agenda.
Policy instrument: Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of
National Food Security

Description: Non-legally binding reference document to provide guidance on how to improve the governance of land tenure.
Overview Issued by: FAO and CFS (Committee on World Food Security)
Date established: Endorsed by CFS on 11/05/12

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 Environmental Guidelines recommend establishing environmental safeguards to minimise degradation and
policy objectives: biodiversity loss, for states using readjustment approaches.
Social policy Guidelines recommend:
objectives:  Assessment for potential impacts on human rights
 Respect for and appropriate action to identify all existing tenure right holders including
customary tenure rights
 Particular concern for rights of indigenous peoples
 Protection of tenure rights of smallholders and support
 Appropriate community interactions.
Policy instrument: Voluntary guidelines on the responsible management of planted forests

Description: Guidelines aim to ensure that planted forests have a positive impact on livelihood needs and do not negatively impact the
environment.
Overview Issued by: FAO
Date established: 2006

Environmental Coverage of:

policy objectives:  Biodiversity loss
 Carbon emissions
Social policy Coverage of:
objectives:  Rights and wellbeing of local and indigenous communities
 Land rights
 Rights of smallholders
 Labour rights
Policy instrument: Principles for responsible investment in agriculture and food systems

Description: Endorsed by Committee on World Food Security (CFS) on 15/10/14

Overview Issued by: CFS
Date established: Endorsed by Committee on World Food Security (CFS) on 15/10/14
Environmental Principle 6: Conserve and sustainably manage natural resources
policy objectives:
Social policy Principles 5: Respect tenure of land, fisheries and forests
objectives:
Policy instrument: OECD FAO Guidance for Responsible Agricultural Supply Chains

Description: The guidance combines existing standards to produce a model enterprise policy for responsible business conduct in

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agricultural supply chains.
Overview Issued by: FAO and OECD
Date established: 2016
Environmental Guidance covers:
policy objectives:  Sustainable use of natural resources
 Conservation of biodiversity and ecosystem services
 Reduction of carbon emissions and pollution.
Social policy Guidance covers:
objectives:  Respect for human rights
 Sharing of monetary and non-monetary benefits with indigenous peoples, and respect for
their knowledge
 Respect for legitimate tenure rights holders including indigenous and customary rights
 Respect for ILO Core Conventions including elimination of forced and child labour; and
commitment to decent working conditions
Policy instrument: ASEAN Agreement on Trans-boundary Haze Pollution
Description: The objective of the Agreement is to prevent and monitor transboundary haze pollution as a result of land and/or forest
fires, which should be mitigated, through concerted national efforts and intensified regional and international cooperation.
Overview Issued by: Governments of the ten ASEAN Member Countries. 9 member countries have ratified the agreement.
Date established: Entered into force 25/11/03
Environmental  Commitment for measures to prevent/control haze pollution
policy objectives:  Includes measures to control activities relating to fires
 Requires parties to manage and use natural resources in an ecologically sound and
sustainable manner.
Social policy N/A
objectives:
Policy instrument: ASEAN Programme on Sustainable Management of Peatland Ecosystems 2014-2020
Description: The ASEAN Programme on Sustainable Management of Peatland Ecosystems (APSMPE) supports collaboration among
stakeholders in the ASEAN Region to achieve the goal of the ASEAN Peatland Management Strategy 2006-2020 (APMS), namely: To
promote sustainable management of peatlands in the ASEAN region through collective actions and enhanced cooperation, support and
sustain local livelihoods, reduce risk of fire and associated haze and contribute to global environmental management.
Overview Issued by: ASEAN environment ministers
Date established: September 2013
Environmental Targets include:
policy objectives:  The promotion of the zero burning agricultural practice
 Identification and conservation of peatlands.
Social policy N/A

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 objectives:
Policy instrument: Amsterdam Declaration Towards Eliminating Deforestation from Agricultural Commodity Chains with European
Countries
Description: Non-legally binding declaration of political intent, signed by Denmark, France, Germany, the Netherlands, Norway and the
UK. The Declaration recognises the need to eliminate deforestation relating to agricultural commodity trade, and supports private and
public initiatives to halt deforestation.
Overview Issued by: Ministry of Foreign Affairs (The Netherlands)
Date established: 07/12/15
Environmental  Objective is the elimination of deforestation
policy objectives:  Emphasises the importance of reducing emissions from deforestation and forest degradation
to limit global temperature rise.
Social policy  The declaration draws attention to the importance of forest governance and land rights,
objectives: particularly of indigenous communities.
Policy instrument: The Amsterdam Declaration in Support of a Fully Sustainable Palm Oil Supply Chain by 2020

Description: Non-legally binding declaration of political intent, signed by Denmark, France, Germany, the Netherlands, Norway and the
UK. Signatories support the goal of a ‘fully sustainable palm oil supply chain’.
Overview Issued by: Ministry of Foreign Affairs (The Netherlands)
Date established: 07/12/15
Environmental Signatories support the goal of a fully sustainable palm oil supply chain, but there is little explanation
policy objectives: of what ‘sustainable palm oil’ entails or how this outcome will be achieved.
Social policy N/A
objectives:

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Appendix 8: Analysis of the four major certification schemes against requirements of EU, UN and
regional policy instruments

(Please see Section 8.3.2.2 of the main report).

The following tables provide details of the relationship between the content of the Principles and Criteria of RSPO, ISCC (EU), ISPO and
MSPO standards and the objectives of a range of EU, UN and regional policy instruments. The analysis is summarised visually in Tables
48-55 in the main report.

Analysis between RSPO certification system and environmental aspects required to meet selected EU/UN and
regional objectives
Carbon emissions Air pollution

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Mills and Burning Peatland conversion Water use and Haze Others
Plantations pollution

EU Renewable Energy Directive RSPO Principle 7 RSPO Principle 7 RSPO Principle 7 RSPO Principle 7 RSPO Principle RSPO Principle 7 RSPO Principle 5 RSPO Principle 5
prohibits prohibits the prohibits prohibits 5 includes limits but does not contributes to the contributes to the
conversion of conversion of conversion of conversion of requirements fully exclude reduction of water reduction of water
primary forest but high conservation primary forest primary forest and on waste and conversion of and air pollution and air pollution
not HCS forest value forest and HCV but not HCV but not HCS emissions peatland (Article (Article 17), soil (Article 17).
(Article 17). (Article 17). HCS forest - forest - partly management 17). erosion, and
partly consistent consistent with (Annex V) management of
with reduced GHG reduced GHG conservation areas
emissions from emissions from (Article 18).
LUC (Article 17). LUC (Article 17).

EU Financing Instrument RSPO Principle 5 RSPO Principle 5

requires requires
protection of management of
biodiversity and water, but not
ecosystem equitable access,
services integrated water
(Regulation resource or river
Annex 1 and IV). basin management
(Annex I).
EU Communication on RSPO Principle 7 RSPO Principles 5 RSPO Principle 7 The RSPO RSPO Principles 5 RSPO Principle 5 RSPO Principle 5
Deforestation prohibits and 7 require prohibits Principles and and 7 limits burning covers water requires monitoring
conversion of HCV forest and conversion of Criteria contribute but does not management and and reduction of
and primary biodiversity primary forest towards prohibit it erosion control emissions (section 2.3
forests - partly protection but the and HCV but not sustainability, as (mentioned without (mentioned in the without specific policy
consistent with extent to which HCS forest - required for specific requirement Summary without requirements).
reducing 'gross imports do not partly consistent biofuels (section in section 2.3). specific policy
tropical 'jeopardise efforts with reduced GHG 4.1.2). requirements).
deforestation' to protect forests emissions from
(Objective). or broader LUC (section 5.1).
biodiversity
priorities' is
unknown (section
4.1.2).
EU Communication on Trade for RSPO Principle 5 RSPO Principle 5 RSPO Principle 5 RSPO Principle 5 RSPO Principle 5
all covers covers includes covers conservation requires monitoring
conservation of conservation of requirements on of biodiversity, soil, and reduction of mill
biodiversity, soil, biodiversity, soil, climate change water, wildlife, etc. emissions (section
water, wildlife, water, wildlife, and protecting the (section 4.2.2). 4.2.2 without specific
etc. (section 2.2). etc. (section environment requirements).
4.2.2). (section 4.2.2).

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 Carbon emissions Air pollution

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Mills and Burning Peatland conversion Water use and Haze Others
Plantations pollution

EU Low-emission mobility The strategy re-

strategy affirms a limited
role for food-based
biofuels thus
certification of
palm oil does not
support the policy.
EU Biodiversity Strategy to 2020 RSPO Principle 7 RSPO Principles 7 P8_TA (2016) RSPO Principle 7 RSPO Principle 7
and Parliament Resolution prohibits and 5 cover 0034, Target 3, 48 limits but does not limits but does not
conversion of HCV forest conversion urges prohibit planting on prohibit use of fire
and primary and biodiversity environmental peat, an issue noted for clearing, an
forests - conservation - sustainability in P8_TA (2016) issue noted in
potentially likely to be criteria for 0034 but without P8_TA (2016) 0034
contributes to consistent with biomass specific policy but without specific
P8_TA (2016) Target 6. production requirement. policy requirement.
0034, Target 6, coherent with RED,
62, to take with which the
'ambitious' RSPO is partly
measures to coherent.
tackle
deforestation.
The New European Consensus RSPO Principle 7 RSPO Principle 5 RSPO Principle 5
prohibits includes covers management
conversion of conservation of of soils and water
primary forest and 'rare, threatened sources (section
HCV but does not and endangered 2.3).
prohibit species' - likely to
deforestation be consistent
entirely - partly with maintaining
consistent with biodiversity
halting (section 2.3).
deforestation
(section 2.3).
UN 2030 Agenda RSPO Principle 7 RSPO Principles 5 RSPO Principle 7 RSPO Principle 5 RSPO Principle 5
prohibits and 7 include (limiting types of includes water requires responsible
conversion of maintaining HCVs forest that can be resource chemical use and
primary forest and - partly converted) and management (Goal waste management
HCV but does not consistent with Principle 5 6) and reduced and (Goal 12, 12.4).
halt deforestation Goal 15, Target (conserving environmental
entirely - partly 5. biodiversity) are sound management
consistent Goal partly consistent of chemicals (Goal
15, Target 15.2. with conserving 12).
GHG sinks (Goal
13).

UNFCCC (Paris Agreement) RSPO Principle 7 RSPO Principle 5 RSPO Principle 7

prohibits is likely to be (limiting types of
conversion of HCV consistent with forest that can be
and primary protecting converted) and
forests - partly biodiversity Principle 5
consistent with (Introduction with (conserving
'reducing no specific policy biodiversity) are
emissions from requirement). partly consistent
deforestation' with conserving
(Article 5.2). GHG sinks
(Article 5, 1).
CBD with the Strategic Plan for RSPO Principle 7 RSPO Principles 5 RSPO Principle 4 RSPO Principle 4
Biodiversity (2011-2020) and prohibits and 7 include includes includes ecosystem
conversion of maintaining HCVs ecosystem restoration as an
Aichi Biodiversity Targets primary forest and and conserving restoration as an option, but does not
HCV but does not rare species, but option, but does include
prohibit does not have not include requirements to
deforestation provision for requirements to restore at least 15%
entirely - partly sharing of restore at least of degraded
consistent with at benefits of 15% of degraded ecosystems (Goal D,
least halving loss biodiversity ecosystems (Goal Target 15).
of natural habitats (Article 1, D, Target 15).
(Article 8e). Objectives).
ILO Conventions

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 Carbon emissions Air pollution

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Mills and Burning Peatland conversion Water use and Haze Others
Plantations pollution

UN Forest Instrument RSPO Principle 7

prohibits
conversion of HCV
and primary
forests -partly
consistent with
reversing the loss
of forest cover
(iV.5 Global
Objective 1).
FAO's Voluntary Guidelines on RSPO Principles 5
the Responsible Governance of and 7 include
maintaining HCVs
Tenure of Land, Fisheries and - consistent with
Forests minimising loss of
biodiversity
(Section 13.6).

OECD FAO Guidance for RSPO Principle 7 RSPO Principles 5 RSPO Principles 5 RSPO Principle 5
Responsible Agricultural Supply prohibits and 7 include and 7 include includes requirements
conversion of HCV maintaining HCVs maintaining HCVs - for monitoring and
Chains and primary - consistent with consistent with reducing mill
forests - helps to 'respecting ... preventing and emissions (Model
prevent and high conservation minimising negative Enterprise Policy, 8).
minimise negative value areas and impacts on air, land,
impacts on forests endangered soil, water' (Model
and biodiversity species' (Model Enterprise Policy 8).
(Model Enterprise Enterprise Policy,
Policy, 8). 8).

ASEAN Trans-boundary Haze RSPO Principle 7 RSPO Principles 5 RSPO Principles 5 RSPO Principles 5
agreement, APSMPE, and Zero prohibits and 7 stipulate and 7 stipulate and 7 stipulate
conversion of HCV implementation of implementation of implementation of
Burning Policy and primary guidelines for the guidelines of the guidelines for the
forests - likely to ASEAN Zero Burning Zero Burning Policy, ASEAN Zero Burning
be considered Policy. but allows some Policy - consistent
consistent with peatland conversion with minimizing
the sustainable - potentially in haze (Haze
use of natural conflict with APSME Agreement, Article
resources (Article Target 5. 3.2 and 3.3).
3).

Amsterdam Declaration on RSPO Principle 7 RSPO Principle 7

Deforestation prohibits (limiting types of
conversion of HCV forest that can be
and primary converted) and
forests - Principle 5
consistent with (conserving
their stated biodiversity) are
'global partly consistent
importance' but with reducing
not with achieving emissions by
'zero net deforestation
deforestation'. (Eliminating
Deforestation).

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Analysis between RSPO certification system and social aspects required to meet selected EU/UN and regional
objectives
Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and Conditions of Labour

EU RED RSPO Principle 6 includes 'wider development RSPO Principles 2 and 7 include requirements RSPO has a smallholder working group but RSPO Principle 6 prohibits both child and
issues' required by Article 17 (7), including for respecting land use rights, including FPIC the requirements of certification are forced labour (Article 17,7).
an indicator to ensure affordable food for (Article 17, 7). generally considered burdensome for
workers. smallholders (Article 18, 3).

EU Financing Instrument RSPO Principles 2 and 6 require respect for RSPO Principles 2 and 7 include requirements RSPO Principle 3 includes technical support RSPO Principle 6 prohibits child labour, RSPO Principle 4 includes requirements on
human rights and the law (Article 2 (1b)). for 'protection of land rights of the population to 'scheme' smallholders, and Principle 4 forced labour and trafficking (Annex 2, III. (d terms and conditions of labour, training, and
in its various form and access to land for includes training of 'associated' smallholders, i) and (f i)). social dialogue (Annex 2).
local populations' (Annex 2). partly aligned to Annex I (II).

EU Comm on Deforestation RSPO Principles 2 and 6 include respect for

forest dependent people's rights, including
land use and human rights (section 5.1).

Trade for all RSPO Principle 6 includes respect for human RSPO Principles 2 and 7 include requirements RSPO Principle 6 requires fair dealings with RSPO Principle 6 prohibits child labour, RSPO Principle 4 includes requirements for
rights, responsible treatment of employees for FPIC and hence are consistent with smallholders (section 4.2.4). forced labour and trafficking (sections 4.2.2 non-discrimination, freedom of association,
and people affected by operations (section preventing 'land grabbing' (section 4.2.5). and 4.2.5). health and safety (section 4.2.2).
4.2.2).

EU Low-emission mobility strategy

EU Biodiversity Strategy to 2020 and RSPO Principles 2 & 7 prohibits land rights
Parliament Resolution violations (mentioned without specific
requirement in P8_TA (2016) 0034, Target 3,
44).

The New European Consensus RSPO Principle 6 includes communication and RSPO Principles 2 and 7 include requirements RSPO Principles 3, 4 and 6 require support to RSPO Principle 6 prohibits child labour, RSPO Principle 4 requires decent
consultation with communities (section 1.3 for 'respecting the rights of local populations smallholders (section 2.3, 55). forced labour and trafficking (section 2.3). employment conditions and wages in line
(44)). and of indigenous peoples, including with ILO (section 2.3 (54)).
customary land use and access to water'
(section 2.3 (54)).

UN 2030 Agenda RSPO Principle 1 requires provision of RSPO Principles 2 and 7 include requirements RSPO Principles 2, 3, 4, 6 and 7 support Goal RSPO Principle 6 prohibits child labour, RSPO Principle 4 includes requirements on
adequate information to stakeholders (Goal for ensuring secure access to land for 2 (2.3) on security of land use, transfer of forced labour and trafficking (Goal 8 (8.7)). labour rights and safe working conditions
16, 16.10) and Principle 6 partly aligns with indigenous ad local groups (Goal 2, Target knowledge and fair trade, but do not include (Goal 8 (8.8)).
Goal 3 (health and well-being). 2.3) a productivity target.

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for RSPO Principles 2 and 7 require respect for RSPO Principles 2 and 7 include requirements
Biodiversity (2011-2020) and Aichi indigenous land use (Target 18) but the for respect of customary resources (Strategic
standard does not have provision for Plan, Goal E, Target 18).
Biodiversity Targets supporting traditional lifestyles (Article 8 (j)).

ILO Conventions RSPO Principles 2 and 7 stipulate FPIC and RSPO Principle 6 prohibits child labour, RSPO Principle 4 explicitly refers to ILO core
compensation if land use rights change forced labour and trafficking using the conventions and conventions 184, 87, 98,
(Indigenous and Tribal Peoples Convention, definitions of and referring to the ILO and 138 in its guidance - likely to be
Articles 2, 3 and 4; UN Declaration, Article Conventions. consistent with ILO conventions in general.
10).

UN Forest Instrument RSPO Principle 6 includes local sustainable RSPO Principles 2 and 7 include requirements RSPO Principle 6 requires fair dealings with
development (Global Objectives on forests). on recognising and respecting land rights and smallholders - partly consistent with section
consultation including of indigenous people

Appendices
2017 EUR 61 EN
Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and Conditions of Labour

(Section V.6 (h) & (y)). V,6(y).

FAO's Voluntary Guidelines on the RSPO Principles 2 & 7 include respect for RSPO Principles 2 and 7 include requirements RSPO Principles 2,7 & 6 are partly consistent
Responsible Governance of Tenure of tenure, and Principles 6 identification of compatible with Guiding Principles on with the requirement to identify existing land
impacts (section 3.2). recognising and respecting land rights rights and support smallholders (sections
Land, Fisheries and Forests (including customary rights), and 7.3, 11.8 and 12.2).
consultation as per V.6. (y) & (h).

OECD FAO Guidance for Responsible RSPO Principles 2 & 6 require respect for RSPO Principles 2 and 6 are compatible with RSPO Principle 6 prohibits child labour, RSPO Principle 4 includes requirements on
Agricultural Supply Chains human rights and the law (Model Enterprise Model Enterprise Policy, 6, which includes forced labour and trafficking (section 2 (3). occupational health and safety, wages and
Policy, 2). respect for land tenure rights, including working conditions sufficient to satisfy the
indigenous and customary rights. basic needs of workers (section 2 (3)).

ASEAN Trans-boundary Haze

agreement, APSMPE, and Zero
Burning Policy

Amsterdam Declaration on RSPO Principles 2, 7, and 6 require respect RSPO Principles 2 and 6 are compatible with
Deforestation for law, and the rights of communities and the aim of strengthening the rule of law,
indigenous people, including assessing 'especially those pertaining to their lands'.
women's rights.

Appendices
2017 EUR 62 EN
Analysis between ISCC (EU) certification system and environmental aspects required to meet selected EU/UN
and regional objectives

Carbon emissions Air pollution

Mills and Peatland Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning conversion pollution Haze Others
EU RED ISCC Principle 1 ISCC Principle 1 ISCC Principle 1 ISCC Principle 1 ISCC Principle 2 ISCC Principle 1 ISCC Principle 2 ISCC Principle 2
prohibits biofuels prohibits biofuels prohibits clearance prohibits clearance includes prohibits biomass includes the protection includes the
from land that was from land that was of primary, HCS of primary, HCS and provision for production from of soil, water and air protection of soil,
primary forest, HCS primary forest, and high high biodiversity reducing fuel land that was (Article 17.3, 4 & 7). water and air
forest or of high HCS forest or of biodiversity value value forest in consumption peatland in (Article 17.3, 4 &
biodiversity value in high biodiversity forest in January January 2008 and associated January 2008 or 7).
January 2008 value in January 2008 (Article (Article 17.3). greenhouse gas thereafter (Article
(Article 17.3). 2008 (Article 17.3). emissions 17(5)).
17.3). (Annex V).
EU Financing Instrument ISCC Principle 1 ISCC Principle 2
requires protection requires management
of biodiversity and of water and
ecosystem services maintenance of access
(Regulation Annex for other (Annex 1).
1 and IV).

EU Comm on Deforestation ISCC Principle 1 ISCC Principle 1 ISCC Principle 1 ISCC Principles 1 & 2 ISCC Principle 2 ISCC Principle 2 ISCC Principle 1
prohibits clearance requires forest prohibits clearance contributes towards prohibits burning covers water prohibits burning
of primary, HCS and protection and of primary, HCS sustainability, as for land clearance management and for clearance and is
high biodiversity biodiversity but the and high required for biofuels (mentioned in 2.3 erosion control consistent with
value forest - likely extent to which biodiversity value under section 4.1.2 without specific (mentioned in the reducing air
to be consistent with imports do not forest in January of the Regulation. policy Summary of the pollutants from
the Regulation's 'jeopardise efforts 2008 consistent requirements). Regulation without deforestation
Objective to halve to protect forests with reducing specific policy (mentioned in 2.3
deforestation by or broader emissions from requirements). without specific
2020. biodiversity deforestation requirements).
priorities' is (Section 5.1).
unknown (section
4.1.2).
Trade for all ISCC Principle 1 ISCC Principle 1 is ISCC principles are ISCC Principle 2 ISCC Principle 2
prohibits clearance likely to be consistent with covers conservation of includes the
of primary, HCS and consistent with the reducing emissions biodiversity, soil, protection of soil,
high biodiversity conservation of from deforestation water, wildlife, etc. water and air,
value forest - forests to combat and with EU RED (section 4.2.2). waste management
consistent with climate change (sections 4.2.2 & and energy
section 4.2.2. (section 4.2.2). 4.2.3). management
(section 4.2.2
without specific
requirement).
EU Low-emission mobility The strategy re-
strategy affirms a limited role
of food-based
biofuels thus
certification of palm
oil does not support
the policy.

EU Biodiversity Strategy to ISCC Principle 1 ISCC Principles 1 P8_TA (2016) 0034, ISCC Principle 2 ISCC Principle 2
2020 and Parliament Resolution prohibits clearance cover forest Target 3, 48 urges prohibits burning prohibits burning
of primary, HCS and conversion and environmental for land clearing, for land clearing,
high biodiversity conservation of sustainability criteria an issue noted in an issue noted in
value forest rare, threatened for biomass P8_TA (2016) 0034 P8_TA (2016)
consistent with and endangered production coherent but without specific 0034 but without
P8_TA (2016) 0034, species - likely to with EU RED, with policy requirement. specific policy
Target 6, 62 (no be consistent with which the ISCC is requirement.
specific Target 6. consistent.
requirement).

Appendices
2017 EUR 63 EN
 Carbon emissions Air pollution

Mills and Peatland Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning conversion pollution Haze Others
The New European Consensus ISCC Principle 1 ISCC Principle 1 ISCC Principle 2
prohibits clearance includes requires conservation
of primary, HCS and conservation of of water and control of
high biodiversity 'rare, threatened soil erosion (section
value forest - and endangered 2.3).
whether this fulfils species' - likely to
the objective to be consistent with
'prevent and reverse' maintaining
deforestation is biodiversity
unknown (sections (section 2.3).
2.2 (44) & 2.3 (56)).

UN 2030 Agenda ISCC Principle 1 ISCC Principles 1 ISCC Principle 1 ISCC Principle 2 ISCC Principle 2
prohibits clearance includes prohibits clearance includes water includes chemical
of primary, HCS and maintaining of primary, HCS resource management use and waste
high biodiversity primary forest, and high (Goal 6) and reduced management
value forest but HCVs and HCS and biodiversity value and environmentally including reduction
whether this fulfils conserving rare forest - consistent sound management of of use (Goal 12.4).
the objective to species - unknown with Goal 13 (no chemicals (Goal 12).
prevent whether this is specific
deforestation and fully consistent requirement)
cause reforestation with 'prevent the
is unknown (Goal extinction of rare
15.2). species' (Goal
15.5).
UNFCCC (Paris Agreement) ISCC Principle 1 ISCC Principle 1 ISCC Principle 1
prohibits clearance includes prohibits clearance
of primary, HCS and conserving rare of primary, HCS,
high biodiversity species and and high
value forest - protecting forest, biodiversity value
consistent with consistent with the forest consistent
reducing emissions Introduction (no with conserving
from deforestation specific GHG sinks (Article
and degradation requirement). 5, 1).
(Article 5, 2).
CBD with the Strategic Plan for ISCC Principle 1 ISCC Principle 1 ISCC Principle 1 ISCC Principle 2
Biodiversity (2011-2020) and prohibits clearance includes prohibits clearance includes ecosystem
of primary, HCS and maintaining HCVs of primary, HCS, restoration as an
Aichi Biodiversity Targets high biodiversity and conserving or high biodiversity option, but does not
value forest - likely rare species, but value forest - include a restoration
to be consistent with does not have consistent with target (Goal D, Target
'at least halving the provision for conserving GHG 1).
rate of forest loss by sharing of benefits sinks but without
2010' (CBD Article 8 of biodiversity requiring
(e)). (CBD Article 1 restoration
(Objectives). (Strategic Plan,
Goal D, Target 15).
ILO Conventions

UN Forest Instrument ISCC Principle 1

prohibits clearance
of primary, HCS and
high biodiversity
value forest but
whether this fulfils
the objective to
'reverse
deforestation is
unknown (IV.5.
Global objective 1).

Appendices
2017 EUR 64 EN
 Carbon emissions Air pollution

Mills and Peatland Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning conversion pollution Haze Others
FAO's Voluntary Guidelines on ISCC Principle 1
the Responsible Governance of includes
maintaining HCVs
Tenure of Land, Fisheries and and conserving
Forests rare species -
consistent with
minimising loss of
biodiversity
(section 13.6).
OECD FAO Guidance for ISCC Principle 1 ISCC Principle 1 ISCC Principle 1 ISCC Principle 2
Responsible Agricultural Supply prohibits clearance includes prohibits burning and includes
of primary, HCS and maintaining HCVs, Principle 2 requirements for
Chains high biodiversity which is consistent (conservation or monitoring and
value forest - with 'respecting ... water, soils and reducing mill
consistent with high conservation management of waste emissions (Model
section 2.8. value areas and and pollution) - Enterprise Policy,
endangered consistent with Model 8).
species' (Model Enterprise Policy, 8.
Enterprise Policy,
8).

ASEAN Trans-boundary Haze ISCC Principle 1 ISCC Principle 2 ISCC prohibits ISCC Principle 1
agreement, APSMPE, and Zero prohibits clearance prohibits burning of conversion of prohibits
of primary, HCS and clearance or peatland and burning,
Burning Policy high biodiversity preparation, which burning (APSMPE exceeding the
value forest - exceeds the Targets 2 & 4). ASEAN Zero
consistent with requirements of Burning Policy,
ecologically the ASEAN Zero and consistent
sustainable use of Burning Policy. with minimizing
resources (Haze haze (Haze
Agreement, Article Agreement -
3.4). Article 3.2 and
3.3).
Amsterdam Declaration on ISCC Principle 1 ISCC Principle 1
Deforestation prohibits clearance prohibits clearance
of primary, HCS and of primary, HCS
high biodiversity and high
value forest but biodiversity value
whether this fulfils forest, consistent
the objective of 'zero with reducing
net deforestation' is emissions by
unclear (Eliminating deforestation
Deforestation). (Eliminating
Deforestation).

Appendices
2017 EUR 65 EN
Analysis between ISCC (EU) certification system and social aspects required to meet selected EU/UN and
regional objectives
Terms and conditions of
Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour labour
EU RED ISCC Principles 4 & 5 require compliance with the ISCC Principle 4 prohibits land rights violations There is no specific provision within the ISCC ISCC Principle 4 prohibits both
law, but there is limited treatment of community and its production must not impair food security system to reduce the administrative burden child and forced labour (Article
rights and women's rights (Article 17.7 and 18.3). (Article 17.7). on smallholders (Article 18, without specific 17.7).
requirement).
EU Financing Instrument ISCC Principle 4 prohibits violation of human rights ISCC Principle 4 prohibits land rights violations ISCC Principle 2 describes that smallholders ISCC Principle 4 prohibits child ISCC Principle 4 requires fair
and compliance with the law but makes little and Principle 5 requires proof of legitimate land may be trained on OHS, partly consistent labour, forced labour and contracts, payment of a living
reference to indigenous people (Articles 1, 2, & 3). use and securing traditional land use (Annex 2). with supporting smallholder sustainable trafficking (Annex 2, III. (d i) wage and Principles 2 & 3
agriculture (Annex I (II)). and (f i)). require training (Annex 2).
EU Comm on Deforestation ISCC Principle 4 prohibits violation of human rights
and compliance with the law but makes little
reference to indigenous people (section 5.1).
Trade for all ISCC Principle 4 prohibits violation of human rights ISCC Principle 4 prohibits land rights violations The ISCC standard has no explicit ISCC Principle 4 prohibits child ISCC Principle 4 requires
and compliance with the law (section 4.2). (mentioned in section 4.2.5 without specific requirement for fair trade with smallholders labour, forced labour and freedom of association, non-
requirement). (section 4.2.4). trafficking (sections 4.2.2 and discrimination, and occupational
4.2.5). health and safety (section
4.2.2).
EU Low-emission mobility
strategy
EU Biodiversity Strategy to 2020 ISCC Principle 4 prohibits land rights violations
and Parliament Resolution (mentioned without specific requirement in P8_TA
(2016) 0034, Target 3, 44).

The New European Consensus ISCC Principle 4 prohibits violation of human rights ISCC Principle 4 prohibits land rights violations The ISCC standard does not explicitly require ISCC Principle 4 prohibits child ISCC Principle 4 requires living
and compliance with the law but makes little and Principle 5 specifies respect for indigenous support to smallholders (section 2.3). labour, forced labour and wage, fair contracts and freedom
reference to indigenous people or community people's rights (sections 2.3.54 & 55). trafficking (section 2.3). of association (section 2.4(54)).
consultation (section 1.3 and 2.2).
UN 2030 Agenda ISCC Principle 4 relies on a participatory SIA ISCC Principle 4 prohibits land rights violations The ISCC standard does not require ISCC Principle 4 prohibits child ISCC Principle 4 requires living
process, publicly available and with and Principle 5 specifies respect for indigenous plantation companies to support a doubling labour, forced labour and wage, fair contracts, non-
communications documented, to ensure access to people's rights (Goal 2.3). of the productivity or incomes of trafficking (Goal 8.7). discrimination, freedom of
information, but does not explicitly demand smallholders (Goal 2.3). association, etc. (Goal 8.8).
participation in decision-making (Goal 16).
UNFCCC (Paris Agreement)

CBD with the Strategic Plan for The ISCC standard lacks specific provision for ISCC Principle 4 prohibits land rights violations
Biodiversity (2011-2020) and indigenous people's rights and traditional lifestyles and Principle 5 specifies respect for indigenous
(CBD Article 18) but has provision of community people's rights but does not specify respect for
Aichi Biodiversity Targets wellbeing (Target 14). indigenous knowledge and practices (Strategic
Plan, Goal E, Target 18).
ILO Conventions ISCC Principle 5 specifies respect for indigenous ISCC Principle 4 prohibits child ISCC Principle 4 is explicitly
people's rights but does not specify FPIC labour, forced labour and based on ILO core standards.
(Indigenous and Tribal Peoples Convention and trafficking using the definitions of
United Nations Declaration, Article 10). and referring to the ILO
Conventions.
UN Forest Instrument ISCC Principle 4 includes benefits for the ISCC Principle 4 requires provision of community The ISCC standard does not require
communities (iV.5.2) but these are not specified. benefits but does not require producers to producers to increase the access of
increase the access of local and indigenous smallholders to forest resources or markets
people to forest resources or markets (V.6 (h) & (V.6 (y)).
(y)).
FAO's Voluntary Guidelines on the ISCC Principle 4 prohibits violation of land rights ISCC Principle 4 prohibits land rights violations ISCC Principle 4 requires a complaints
Responsible Governance of and identification of social impacts (section 3.2). including those of indigenous people (sections 7.3 procedure but not full consultation with
& 9.3-5). smallholders on land rights (section 7.3) and
Tenure of Land, Fisheries and does not require investment in smalllholders
Forests (section 12.2).
OECD FAO Guidance for ISCC Principle 4 prohibits violation of human rights ISCC Principle 4 prohibits land rights violations ISCC Principle 4 prohibits child SCC Principle 4 requires living
Responsible Agricultural Supply and compliance with the law (section 2.2). and requires respect for existing water use rights labour, forced labour and wage, fair contracts, non-
(section 2.6). trafficking (section 2.3). discrimination, freedom of
Chains association, etc. (section 2.3).
ASEAN Trans-boundary Haze
agreement, APSMPE, and Zero
Burning Policy
Amsterdam Declaration on ISCC Principle 4 prohibits violation of human rights ISCC Principle 4 prohibits violation of human
Deforestation and compliance with the law and Principle 5 rights and compliance with the law and Principle 5
specifies respect for indigenous people's rights specifies respect for indigenous people's rights
(Eliminating deforestation). (Eliminating deforestation).

Appendices
2017 EUR 66 EN
Analysis between ISPO certification system and environmental aspects required to meet selected EU/UN and
regional objectives
Carbon emissions Air pollution

Mills and Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning Peatland conversion pollution Haze Others

EU RED ISPO has no specific ISPO Principle 3 requires ISPO Principle 3 requires ISPO Principle 3 ISPO Principle 4 ISPO Principle 2 requires ISPO Principles 2 & 3 ISPO Principles 2 & 3
provisions for primary plantation managers to sources of GHG emissions requires sources of requires an inventory that planting on peat include requirements for include requirements for
forests, HCV or HCS (Article preserve biodiversity as to be identified, but does GHG emissions to be of GHG emissions and should take into account water quality water quality
17). per the plantation permit not specify emissions identified, but does not emissions reduction ecosystem functioning, conservation, controlling conservation, controlling
but has no specific from LUC or prohibit specify emissions from measures to be in but does not prohibit erosion, and waste erosion, and waste
provision for high conversion of HCS forest LUC or prohibit place but does not planting on peat after management (Article 17 management (Article 17
biodiversity value areas (Article 17). conversion of HCS specify methane January 2008 or (7) and Article 18). (7) and Article 18).
(Article 17). forest as (Article 17). capture (Annex V). drainage (Article 17.5).

EU Financing Instrument ISPO Principle 3 requires ISPO Principles 2 & 3

plantation managers to include requirements for
preserve biodiversity as water quality
per the plantation permit conservation, controlling
but does not per se erosion, and waste
promote protection of management but not for
biodiversity (Annex 1 (e)). equitable access (Annex
I A, I (e)).

EU Comm on ISPO Principles 1 requires ISPO Principle 3 requires ISPO Principle 3 requires The ISPO Principles and ISPO Principle 2 ISPO Principles 2 & 3 ISPO Principle 2 requires
Deforestation land title, permits and preservation of sources of GHG emissions Criteria contribute (guidance) include requirements for monitoring and reduction
consistency with the spatial biodiversity as per the to be identified, but does towards sustainability, requires an SOP water quality of mill emissions (section
plan, and Principle 3 requires plantation permit, but not specify emissions as required for biofuels for land conservation, controlling 2.3 without specific
avoidance of erosion prone does not ensure that from LUC (section 5.1). (section 4.1.2). clearance erosion, and waste requirements).
areas but not to halt forest imports do not 'jeopardise without burning management (mentioned
cover loss (Objective). efforts to protect forests (section 2.3). in the Summary without
or broader biodiversity specific requirement).
priorities' (section 4.1.2).

Trade for all ISPO Principle 1 includes ISPO Principle 3 requires ISPO Principle 3 ISPO Principles 2 & 3 ISPO Principle 2 requires
coherence with spatial plans preservation of includes identification include requirements for waste management and
and Principle 3 requires biodiversity as per the of sources of GHG water quality monitoring and reduction
avoidance of erosion prone plantation permit, but emissions (section conservation, controlling of mill emissions (section
areas - partly consistent with depending on the permit 4.2.2). erosion, and waste 4.2.2 without specific
conservation of biodiversity, may not result in management consistent requirements).
soil, water, wildlife, etc. significant conservation of with sustainable
(section 2.2). biodiversity (section 2.2). management of water
(section 4.2.2).

EU Low-emission The strategy re-affirms

mobility strategy a limited role of food-
based biofuels thus
certification of palm oil
does not support the
policy.

EU Biodiversity Strategy ISPO Principles 1 requires ISPO Principle 3 requires P8_TA (2016) 0034, ISPO Principle 2 ISPO Principle 2 requires
to 2020 and Parliament land title, permits and preservation of Target 3, 48 urges (guidance) that planting on peat
consistency with the spatial biodiversity as per the environmental requires an SOP should take into account
Resolution plan, and Principle 3 requires plantation permit - partly sustainability criteria for land ecosystem functioning,
avoidance of erosion prone coherent with 'halting for biomass production clearance but does not prohibit it
areas but not requirements biodiversity loss (Headline coherent with RED, without burning (P8_TA (2016) 0034
to combat deforestation Target). with which ISPO is (P8_TA (2016) Target 3 (49) without
(P8_TA (2016) 0034, Target partly coherent. 0034, Target 3, specific requirement).
6, 62). 49).

The New European ISPO Principles 1 requires ISPO Principle 3 requires ISPO Principles 2 & 3
Consensus land title, permits and preservation of include requirements for
consistency with the spatial biodiversity as per the water quality
plan, and Principle 3 requires plantation permit, - conservation, controlling

Appendices
2017 EUR 67 EN
 Carbon emissions Air pollution

Mills and Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning Peatland conversion pollution Haze Others

avoidance of erosion prone consistent with erosion, and waste

areas but not to 'prevent and conservation of management consistent
reverse' deforestation biodiversity and with 'actions to conserve
(section 2.3 (56)). ecosystems (sections water resources' (section
2.2(44) and 2.3 (56)). 2.3 (56)).

UN 2030 Agenda ISPO Principles 1 requires ISPO Principle 3 requires ISPO Principle 3 requires ISPO Principles 2 & 3 ISPO Principle 2 requires
land title, permits and preservation of sources of GHG emissions include requirements for responsible waste
consistency with the spatial biodiversity as per the to be identified, but does water quality management (Goal
plan, and Principle 3 requires plantation permit, - not specify emissions conservation, controlling 12.4).
avoidance of erosion prone depending on the permit from LUC or prohibit erosion, and waste
areas but not requirements may be consistent with conversion of HCS forest management (Goals
to combat deforestation Goal 15.5. (Goal 13 without specific 12.4 and 14.1).
(Goal 15.2). requirements).

UNFCCC (Paris ISPO Principles 1 requires ISPO Principle 3 is likely ISPO Principle 3 requires
Agreement) land title, permits and to be consistent with sources of GHG emissions
consistency with the spatial protecting biodiversity as to be identified, but does
plan, and Principle 3 requires noted in the Introduction not specify LUC - partly
avoidance of erosion prone with no specific policy consistent with
areas but not requirements requirement. conserving sinks of
to reduce emissions from greenhouse gases (Article
deforestation (Article 5, 2). 5, 1).

CBD with the Strategic ISPO Principles 1 requires ISPO Principle 3 requires ISPO Principle 3 requires ISPO Principles 2 & 3
Plan for Biodiversity land title, permits and preservation of sources of GHG emissions include requirements for
consistency with the spatial biodiversity as per the to be identified, but does water quality
(2011-2020) and Aichi plan, and Principle 3 requires plantation permit, - partly not specify LUC - partly conservation, controlling
Biodiversity Targets avoidance of erosion prone consistent with consistent with erosion, and waste
areas but not to at least conservation of biological conserving carbon stocks management, but not
halve deforestation (CBD diversity (Article 1 (Strategic Plan, Goal D, restoration (Strategic
Strategic Plan, Goal B, (Objectives)). Target 15). Plan, Goal D, Target 14).
Target 5).

ILO Conventions

UN Forest Instrument ISPO Principles 1 requires

land title, permits and
consistency with the spatial
plan, and Principle 3 requires
avoidance of erosion prone
areas but not requirements
to reverse the loss of forest
cover (IV.5 Global objective
1).

FAO's Voluntary ISPO Principle 3 is likely

Guidelines on the to be consistent with
protecting biodiversity as
Responsible Governance noted in the section 13
of Tenure of Land, with no specific policy
Fisheries and Forests requirement.

OECD FAO Guidance for ISPO Principle 1 requires ISPO Principle 3 requires ISPO Principles 2 & 3 ISPO Principles 2 & 3
Responsible Agricultural consistency with the spatial preservation of include requirements for include requirements for
plan, which would include biodiversity as per the water quality water quality
Supply Chains Protected Areas -partly plantation permit; - conservation, controlling conservation, controlling
consistent with Section 2.8. depending on the permit erosion, and waste erosion, and waste
may be consistent with management (section management and
conserving biodiversity 2.8). monitoring and reducing
mill emissions (section

Appendices
2017 EUR 68 EN
 Carbon emissions Air pollution

Mills and Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning Peatland conversion pollution Haze Others

(section 2.8). 2.8).

ASEAN Trans-boundary ISPO Principles 1 requires ISPO Principle 2 ISPO Principle 2 includes ISPO Principle 2
Haze agreement, consistency with the spatial (guidance) requirements for zero (guidance)
plan, and Principle 3 requires requires an SOP burning, maintaining requires an SOP
APSMPE, and Zero avoidance of erosion prone for land ecosystem functioning for land clearance
Burning Policy areas, partly consistent with clearance and reducing GHG without burning
managing forests in a without burning emission from peat (Haze Agreement;
'sustainable manner' (Article (Article 9). (APSMPE Targets 2, 4 & Article 3 (2 & 3).
3). 5).

Amsterdam Declaration ISPO Principles 1 requires ISPO Principle 3 requires

on Deforestation land title, permits and sources of GHG emissions
consistency with the spatial to be identified, but does
plan, and Principle 3 requires not specify emissions
avoidance of erosion prone from LUC (Eliminating
areas but not requirements Deforestation).
to achieve ‘zero net
deforestation’.

Appendices
2017 EUR 69 EN
Analysis between ISPO certification system and social aspects required to meet selected EU/UN and regional
objectives
Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and conditions of labour

EU RED ISPO Principles 1, 2 & 6 require consultation with ISPO Principle 1 requires land title, permits, ISPO certification is not mandatory for The ISPO standard does not prohibit
indigenous and local people on land rights, and dispute resolution and compensation, and smallholders (Article 18). forced labour; Principle 4 requires 'a
facilitating development in the wider community (Article provision of information but with limited detail policy regarding worker age
17.7 and Amendment 2009/28/EC, 6 (d)). on consultation (Article 17.7). requirements that follows applicable
legislation' (Article 17.7).

EU Financing Instrument ISPO Principles 1, 2, & 6 include consultation with, ISPO Principle 1 requires land title, permits, The ISPO standard does not stipulate The ISPO standard does not prohibit ISPO Principle 4 requires payment of minimum
welfare and respect for knowledge of indigenous people, disputes resolution and compensation, and support for smallholder's agricultural forced labour; Principle 4 requires a wage, free association and workers' facilities,
but does not specify respect for human rights (Article 2.1 provision of information but with limited detail practice (Annex I (II)). policy regarding worker age but the standard has no provision for contracts
(b), Article 3.1 and Annex 1 & 2). on consultation and protection of land rights requirements that follows applicable of employment (Annex 2 III.(f) (i).
(Annex 2, IV). legislation (Annex 2, III, d (i) & f (i)).

EU Comm on Deforestation ISPO Principles 1, 2 & 6 include consultation with, welfare

and respect for knowledge of indigenous people, but does
not specify respect for human rights (section 5.1).

Trade for all ISPO Principle 5 includes responsible treatment of With no requirement for FPIC, ISPO certification No explicit ISPO requirements to deal The ISPO standard does not prohibit ISPO Principle 4 requires free association and
employees and people affected by operations, but these is potentially open to accusations of land grabs fairly with smallholders (section 4.2.4). forced labour; Principle 4 requires a non-discrimination but has minimal
do not cover all ILO fundamental conventions (section (section 4.2.5). policy regarding worker age requirements for OHS (section 4.2.2).
4.2.2) requirements that follows applicable
legislation (sections 4.2.2 & 4.2.5).

EU Low-emission mobility
strategy

EU Biodiversity Strategy to ISPO Principles 4 & 5 require consultation on

2020 and Parliament Resolution land rights and respect for the knowledge of
indigenous people (P8_TA (2016) 0034, Target
3, 44).

The New European Consensus ISPO Principles 1, 2 & 6 require consultation with ISPO Principle 1 requires land title, permits, No explicit ISPO requirements to deal The ISPO standard does not prohibit ISPO Principle 4 requires payment of minimum
indigenous and local people on land rights, and disputes resolution and compensation, and faily with, train or ensure food security forced labour; Principle 4 requires a wage, free association and workers' facilities,
facilitating development in the wider community (section provision of information but with limited detail of smallholders (section 2.3, 55). policy regarding worker age but the standard has no requirements for
1.3 (16 & 44)). on consultation and no requirements on requirements that follows applicable contracts of employment (section 2.3 54).
equitable access (P8_TA (2016) 0034 2.3, 54 & legislation (section 2.3, 54).
55).

UN 2030 Agenda ISPO Principles 1, 2 & 6 require consultation with ISPO Principle 1 includes land title, provision of The ISPO standard does not stipulate The ISPO standard does not prohibit ISPO Principle 4 requires payment of minimum
indigenous and local people on land rights, and at least 20% of land for smallholder support for smallholder's agricultural forced labour; Principle 4 requires a wage, free association and workers' facilities,
facilitating development in the wider community (Goal 3). plantations; but does not define 'equal access' practice and market access (Goal 2.3). policy regarding worker age but the standard has no provision for contracts
(Goal 2.3). requirements that follows applicable of employment and minimal requirements on
legislation (Goal 8.7). OHS (Goal 8.8).

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for ISPO Principles 1, 2 & 6 include consultation with, welfare ISPO Principles 4 & 5 require consultation on
Biodiversity (2011-2020) and and respect for knowledge of indigenous people, but does land rights and respect for the knowledge of
not specify how this contributes to their sustainable indigenous people in line with national
Aichi Biodiversity Targets management of natural resources or safeguard legislation (Strategic Plan, Goal E, Target 18).
ecosystems (CBD Article 8 (j); Strategic Plan, Goal E,
Target 14 & 16).

ILO Conventions ISPO Principle 1, 4 & 5 requires land title, The ISPO standard does not prohibit ISPO Principle 4 requires payment of minimum
permits, disputes resolution and compensation, forced labour; Principle 4 requires a wage, free association and workers' facilities,
and respect for indigenous knowledge but does policy regarding worker age but the standard has no provision for contracts
not specify FPIC (United Nations Declaration, requirements that follows applicable of employment and minimal requirements on

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Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and conditions of labour

Article 10). legislation (Conventions 29, 105, 138 & OHS (Conventions 155, 161, 184 & 95).
182).

UN Forest Instrument ISPO Principles 1, 2 & 6 require consultation with ISPO has no requirements for training or ISPO Principle 1 includes provision of at
indigenous and local people on land rights, and market access of indigenous people or to least 20% of land for smallholder
facilitating development in the wider community (section increase access to forest resource (section V.6 plantations (section V.6 (v)).
IV.5. Global Objective 2). (y) & (h)).

FAO's Voluntary Guidelines on ISPO Principle 3 requires and social impact assessment ISPO Principles 1, 4 & 5 requires land title, ISPO Principle 1 includes provision of
the Responsible Governance of but this does not cover 'all human rights (section 3.3). permits, disputes resolution and compensation, land tenure, but there is no explicit
and respect for indigenous knowledge but does requirement to increase food security,
Tenure of Land, Fisheries and not specify fully 'secure' customary tenure market access, poverty reduction, etc.
Forests (sections 7.3 and 9.3-5). (sections 7.3, 11.8 & 12.2).

OECD FAO Guidance for ISPO Principles do not explicitly require respect for ISPO Principles 1, 4 & 5 requires land title, The ISPO standard does not prohibit ISPO Principle 4 has minimal OHS
Responsible Agricultural Supply human rights (Model Enterprise Policy, 2). permits, disputes resolution and compensation, forced labour; Principle 4 requires a requirements and although requires payment
and respect for indigenous knowledge but does policy regarding worker age of a minimum wage does not specify a living
Chains not specify fully 'secure' customary tenure requirements that follows applicable wage (section 2.3).
(section 7.3) or water rights (section 2.6). legislation and free association (section
2.3).

ASEAN Trans-boundary Haze

agreement, APSMPE, and Zero
Burning Policy

Amsterdam Declaration on ISPO is formulated to respect the rule of law and ISPO is formulated to respect the rule of law
Deforestation Principles 1, 2 & 6 contain provisions on indigenous and Principles 1, 2 & 6 contain provisions on
people, but there are no specific requirements for indigenous people, but there are no specific
women's rights (Eliminating Deforestation). requirements for women's rights (Eliminating
Deforestation)

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Analysis between MSPO certification system and environmental aspects required to meet selected EU/UN and
regional objectives
Carbon emissions Air pollution

Mills and Peatland Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning conversion pollution Haze Others

EU RED MSPO Principle 7 prohibits MSPO Principle 7 prohibits MSPO Principle 5 requires MSPO Principle 5 MSPO Principle 4 MSPO Principle 5 MSPO Principle 5 includes MSPO Principles 5 & 6
clearance of primary forest, clearance of primary sources of GHG requires sources of requires an assessment permits cultivation requirements for water contribute to the
protected areas and areas forest, protected areas emissions to be GHG emissions to be of air pollution and and drainage of peat if resource management and reduction of water and
needed to conserve rare, and areas with rare, identified, but does not identified, but does not implementation of a consistent with MPOB Principle 6 includes air pollution (Article
threatened and endangered threatened and specify emissions from specify emissions from plan to reduce it but guidelines, but does requirements for erosion 17), soil erosion, and
species but not HCS forest endangered species LUC or prohibit LUC or prohibit does not specify not prohibit planting control and avoiding management of
(Article 17). (Article 17.3). conversion of HCS forest conversion of HCS methane capture on peat after January contamination (Article 17.7 conservation areas
(Article 17). forest (Article 17). (Annex V). 2008 (Article 17.5). and Article 18). (Article 18).

EU Financing Instrument MSPO Principle 7 requires MSPO Principle 5 includes

protection of 'high requirements for water
biodiversity value' areas resource management and
and Principle 5 requires Principle 6 includes
conservation of requirements for erosion
biodiversity (Regulation control and avoiding
Annex 1 and IV). contamination but without
specifying equitable access
(Annex I (e)).

EU Comm on MSPO Principle 7 prohibits MSPO Principles 5 and 7 MSPO Principle 5 requires The MSPO Principles MSPO Principle 5 MSPO Principles 5 & 6 MSPO Principle 5
Deforestation conversion of primary forests, require forest protection sources of GHG and Criteria can be limits burning but include requirements for requires monitoring
protected areas and areas and biodiversity but the emissions to be argued to contribute does not prohibit it water quality conservation, and reduction of
with rare, threatened and extent to which imports identified, but does not towards sustainability, (mentioned without controlling erosion, and emissions (section 2.3
endangered species - partly do not 'jeopardise efforts specify emissions from as required for biofuels specific requirement waste management without specific
consistent with reducing to protect forests or LUC (section 5.1). (section 4.1.2). in section 2.3). (mentioned in the requirements).
'gross tropical deforestation' broader biodiversity Summary without specific
(Objective). priorities' is unknown requirements).
(section 4.1.2).

Trade for all MSPO Principle 7 prohibits MSPO Principle 5 covers MSPO Principle 3 MSPO Principles 5 & 6 MSPO Principle 5
clearance of primary forests, conservation of includes identification include requirements for requires waste
protected areas and areas biodiversity, soil, water, of sources of GHG water quality conservation, management and
with rare, threatened and wildlife, etc. (section emissions (section controlling erosion, and monitoring and
endangered species (section 4.2.2). 4.2.2). waste management reduction of mill
4.2.2). consistent with sustainable emissions (section
management of water 4.2.2 without specific
(section 4.2.2). requirements).

EU Low-emission The strategy re-affirms

mobility strategy a limited role for food-
based biofuels thus
certification of palm oil
does not contribute to
the policy.

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 Carbon emissions Air pollution

Mills and Peatland Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning conversion pollution Haze Others

EU Biodiversity Strategy MSPO Principle 7 prohibits MSPO Principles 5 and 7 P8_TA (2016) 0034, MSPO Principle 5 MSPO Principle 5
to 2020 and Parliament conversion of primary forests, cover forest conversion Target 3, 48 urges limits but does not permits cultivation
protected areas and areas and biodiversity environmental prohibit planting on and drainage of peat if
Resolution with rare, threatened and conservation (Target 6). sustainability criteria peat, an issue noted consistent with MPOB
endangered species - for biomass production in P8_TA (2016) guidelines, but does
potentially contributes to coherent with RED, 0034 but without not prohibit it (P8_TA
P8_TA (2016) 0034, Target 6, with which MSPO is specific policy (2016) 0034, Target
62, to take 'ambitious' partly consistent. requirement. 3, 49).
measures to tackle
deforestation.

The New European MSPO Principle 7 prohibits MSPO Principle 5 includes MSPO Principles 5 & 6
Consensus conversion of forest with 'high conservation of 'rare, include requirements for
biodiversity value' but does threatened and water quality conservation,
not prohibit deforestation endangered species' - controlling erosion, and
entirely - partly consistent likely to be consistent waste management
with halting deforestation with maintaining consistent with 'actions to
(section 2.3). biodiversity (section 2.2 conserve water resources'
(44) & (56)). (section 2.3 (56)).

UN 2030 Agenda MSPO Principle 7 prohibits MSPO Principles 5 and 7 MSPO Principle 5 requires MSPO Principles 5 & 6 MSPO Principles 5 & 6
conversion of 'high include maintaining HCVs sources of GHG include requirements for require responsible
biodiversity value' forest but - partly consistent with emissions to be water quality conservation, chemical use and
does not prohibit Goal 15.5. identified, but does not controlling erosion, and waste management
deforestation entirely - partly specify emissions from waste management (Goals (Goal 12.4).
consistent with halting LUC or prohibit 12.4 and 14.1).
deforestation (Goal 15.2). conversion of HCS forest
(Goal 13 without specific
requirements).

UNFCCC (Paris MSPO Principle 7 prohibits MSPO Principle 5 requires MSPO Principle 5 requires
Agreement) conversion of 'high legally compliant sources of GHG
biodiversity value forests' - conservation of rare emissions to be
partly consistent with species - partly consistent identified, but does not
'reducing emissions from with protecting specify LUC - partly
deforestation' (Article 5.2). biodiversity consistent with
(Introduction). conserving sinks of
greenhouse gases (Article
5, 1).

CBD with the Strategic MSPO Principle 7 prohibits MSPO Principles 5 and 7 MSPO Principle 5 requires MSPO Principle 5 includes
Plan for Biodiversity conversion of 'high require maintaining high sources of GHG ecosystem restoration as
biodiversity value' forest but biodiversity value areas emissions to be an option, but does not
(2011-2020) and Aichi does not fully prohibit and conserving rare identified, but does not include requirements to
Biodiversity Targets deforestation - partly species, but without specify LUC - partly restore at least 15% of
consistent with at least provision for sharing the consistent with degraded ecosystems
halving loss of natural benefits of biodiversity conserving carbon stocks (Goal D, Target 1).
habitats (Article 8e). (Article 1). (Strategic Plan, Goal D,
Target 15).

ILO Conventions

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 Carbon emissions Air pollution

Mills and Peatland Water use and

Policy Instrument Deforestation Biodiversity loss LUC Biofuel Plantations Burning conversion pollution Haze Others

UN Forest Instrument MSPO Principle 7 prohibits

conversion of high biodiversity
value forest - partly
consistent with reversing the
loss of forest cover (IV.5.
Global objective 1).

FAO's Voluntary MSPO Principles 5 and 7

Guidelines on the include protecting high
biodiversity values -
Responsible Governance partly consistent with
of Tenure of Land, preventing and minimizing
Fisheries and Forests biodiversity loss (section
13.6).

OECD FAO Guidance for MSPO Principle 7 prohibits MSPO Principles 5 and 7 MSPO Principles 5 & 6 MSPO Principles 5 & 6
Responsible Agricultural conversion of 'high include maintaining high include requirements for include requirements
biodiversity value forests and biodiversity value area - water quality conservation, for monitoring and
Supply Chains so helps to prevent and partly consistent with controlling erosion, and reducing mill emissions
minimise negative impacts on 'respecting ... high waste management (Model (Model Enterprise
forests and biodiversity conservation value areas Enterprise Policy, 8). Policy, 8).
(Model Enterprise Policy, 8). and endangered species'
(Model Enterprise Policy,
8).

ASEAN Trans-boundary MSPO Principle 7 prohibits MSPO Principle 5 MSPO Principle 5 is MSPO Principle
Haze agreement, conversion 'high biodiversity limits use of fire to consistent with 5 requires use
value' forests and is likely to specific situations, APSMPE burning and of regional best
APSMPE, and Zero be considered consistent with as identified by economic practice (Haze
Burning Policy the sustainable use of natural ASEAN Zero Burning management of Agreement -
resources (Article 3). Policy. peatlands, but not Article 3.2 &
fully consistent with 3.3).
conservation of
peatlands (Target 5).

Amsterdam Declaration MSPO Principle 7 prohibits MSPO Principle 5 requires

on Deforestation clearance of primary forest, sources of GHG
protected areas and areas emissions to be
with rare, threatened and identified, but does not
endangered species but not specify emissions from
HCV areas (Eliminating LUC (Eliminating
Deforestation). Deforestation).

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Analysis between MSPO certification system and environmental aspects required to meet selected EU/UN and
regional objectives
Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and conditions of labour

EU RED MSPO Principle 4 includes contributions to community MSPO Principles 4 & 7 requires demonstration MSPO has standards for organised and for The MSPO standard does not explicitly
development (Article 17.7) of the right to use land that should not independent smallholders (Article 18). prohibit forced labour; but Principle 4
diminish the rights of others without FPIC and does prohibit child labour and exploitation
compensation negotiations, (Article 17.7). of children (Article 17, 7).

EU Financing Instrument MSPO Principle 4 requires a policy on human rights and MSPO Principles 4 & 7 requires demonstration Support for organised smallholder's The MSPO standard does not explicitly MSPO Principle 4 includes requirements on
Principle 3 requires compliance with the law (Annex of the right to use land that should not agricultural practice by plantations is prohibit forced labour; but Principle 4 terms and conditions of labour, training,
2.1(b)). diminish the rights of others without FPIC and implicit (Annex I (II)). does prohibit child labour and exploitation and social dialogue (Annex 2).
compensation negotiations (Annex 2.iV (a)). of children (Annex 2, III, d (i) & f (i)).

EU Comm on Deforestation MSPO has no explicit mention of forest dependent people

but Principle 4 includes respect for human rights and
Principle 7 includes FPIC for indigenous land rights
(section 5.1).

Trade for all MSPO Principle 4 includes respect for human rights, MSPO Principle 4 includes respect for human MSPO Principle 6 requires fair dealings with The MSPO standard does not explicitly MSPO Principle 4 includes requirements for
responsible treatment of employees and people affected rights and Principle 7 includes FPIC for smallholders (section 4.2.4). prohibit forced labour; but Principle 4 non-discrimination, freedom of
by operations, but these do not cover all ILO indigenous land rights (section 4.2.5 without does prohibit child labour and exploitation association, health and safety (section
fundamental conventions (section 4.2). specific requirements). of children (sections 4.2.2 & 4.2.5). 4.2.2).

EU Low-emission mobility
strategy

EU Biodiversity Strategy to 2020 MSPO Principles 4 & includes respect for

and Parliament Resolution human rights and land rights (P8_TA (2016)
0034, Target 3, 44 without specific
requirement).

The New European Consensus MSPO Principles 4 & 7 require consultation with MSPO Principles 4 & 7 include requirements MSPO Principle 6 requires fair dealings with The MSPO standard does not explicitly MSPO Principle 4 requires decent
indigenous and local people on land rights, and for respecting local peoples' and indigenous smallholders but there is no explicit prohibit forced labour; but Principle 4 employment conditions and wages broadly
facilitating development in the wider community (section people's land rights, including customary requirement to train or ensure food does prohibit child labour and exploitation in line with ILO (section 2.3, 54).
1.3, 16 & 44). rights but without specific provision for access security of smallholders (section 2.3, 55). of children (section 2.3, 54).
to water (section 2.3, 54).

UN 2030 Agenda MSPO Principles 4 & 7 require consultation with MSPO Principles 4 and 7 include requirements Support for organised smallholder's The MSPO standard does not explicitly MSPO Principle 4 includes requirements on
indigenous and local people on land rights, and for ensuring secure access to land for agricultural practice or market access is prohibit forced labour; but Principle 4 labour rights and safe working conditions
facilitating development in the wider community (Goal indigenous and local groups (Goal 2.3). implicit in the MSPO standard (Goal 2.3). does prohibit child labour and exploitation (Goal 8.8).
3). of children (Goal 8.7).

UNFCCC (Paris Agreement)

CBD with the Strategic Plan for ISPO Principles 4 & 7 include consultation with MSPO Principles 4 and 7 include requirements
Biodiversity (2011-2020) and indigenous people, but does not specify respect for their for respect of customary land use but without
knowledge or wellbeing nor how this contributes to their specific mention of other resources (Strategic
Aichi Biodiversity Targets sustainable management of natural resources (CBD Plan, Goal E, Target 18).
Article 8 (j); Strategic Plan, Goal E, Target 14 & 16).

ILO Conventions MSPO Principles 4 and 7 stipulate FPIC and The MSPO standard does not explicitly MSPO Principle 4 does not explicitly refer
compensation if land use rights change prohibit forced labour; but Principle 4 to ILO core conventions 184, 87, 98 and
(Indigenous and Tribal Peoples Convention, does prohibit child labour and exploitation 138 but is likely to be consistent with ILO
Articles 2, 3 and 4; UN Declaration, Article of children (Conventions 29, 105, 138 & conventions in general.
10). 182).

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Policy Instrument Rights and wellbeing Land use rights Smallholders Forced and child labour Terms and conditions of labour

UN Forest Instrument ISPO Principles 4 & 7 require FPIC with indigenous and MSPO Principles 2 and 7 include requirements The MSPO standard does not require
local people on land rights, and facilitating development on recognising and respecting land rights and producers to increase the access of
in the wider community (section IV.5. Global Objective consultation including of indigenous people smallholders to forest resources or
2). (section V.6 (h) & (y)). markets (section V.6 (y)).

FAO's Voluntary Guidelines on MSPO Principle 4 requires social impact assessment but MSPO Principles 4 and 7 include requirements MSPO Principle 4 includes provision of land
the Responsible Governance of this does not cover 'all human rights (section 3.3). compatible with Guiding Principles on tenure, but there is no explicit requirement
recognising and respecting land rights to increase food security, market access,
Tenure of Land, Fisheries and (including customary rights), and consultation poverty reduction, etc. (sections 7.3, 11.8
Forests (sections 3.1 and 7.3). & 12.2).

OECD FAO Guidance for MSPO Principles 3 & 4 require respect for human rights RSPO Principles 2 and 6 are compatible with The MISPO standard does not explicitly MSPO Principle 4 includes requirements on
Responsible Agricultural Supply and the law (Model Enterprise Policy, 2). Model Enterprise Policy, 6, which includes prohibit forced labour; Principle 4 does occupational health and safety, wages and
respect for land tenure rights, including prohibit child labour and exploitation of working conditions sufficient to satisfy the
Chains indigenous and customary rights. children and requires free association basic needs of workers (Model Enterprise
(Model Enterprise Policy, 3). Policy, 3).

ASEAN Trans-boundary Haze

agreement, APSMPE, and Zero
Burning Policy

Amsterdam Declaration on RSPO Principles 3, 4, and 7 require respect for law, and RSPO Principles 3, 4 & 7 are compatible with
Deforestation the rights of communities and indigenous people, but the aim of strengthening the rule of law,
without explicit mention of women's rights (Eliminating 'especially those pertaining to their lands'
Deforestation).

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Appendix 9: Key findings from literature review and stakeholder interviews on sustainability
enforcement issues in six palm oil producer case study countries

(Please see Section 8.4.1 in the main report).

Table 22: Sustainability enforcement issues for six palm oil producing countries
Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
Deforestation Still focused on Between 1990 and 2005, *Br1: Brazil has Deforestation issues were Refer to "Case study: There is a Forestry Law in
increasing the area under oil palm expanded far progressive legislative not as critical in Colombia Development disputed in Liberia (with a
the crop rather than more than any decline in safeguards for palm oil as in Indonesia, given the high forested areas, the community element), but
improving yields; land under other crops; production, mandated large areas of poorly Gabon example" -- Olam there is a great deal of
conclusion that future such expansion was most smallholder participation performing cattle ranches points to the “right to degradation from
development should be likely taking place at the and all sorts of other that could be converted develop” of nations like charcoal production by
on degraded or expense of forests, in environmental to oil palm, especially on Gabon, where a third of local peoples. Norway has
deforested land has many cases previously regulations; although not the eastern savannas, people live below the (pledged $160 million for
scarcely been heeded. A logged forests(Po.15). always evenly enforced. the most promising area poverty line and a fifth conservation targets, to
big theme in the More recently the Subsidized loans or low for future development are unemployed. “We be spent on capacity
literature for both Malaysian and Indonesian interest loans for (Po.15). Oil palm agree with Gabon’s building and World Bank
Indonesia and Sarawak governments have been plantations who abide by cultivation has been sovereign right to convert is focusing on
remains the destruction looking to establish certain criteria - register developed in Colombia a tiny percentage of its degradation. Liberia has
of forest and wildlife policies that more property and compliant without deforestation. least valuable forested mixed capacity at the
habitat, especially effectively address (Bu.12). The Academic studies report: land for agriculture, so policy level and its
incursions of oil palm environmental and social expansion of oil palm is even though Colombia long as it is responsibly Environmental Protection
onto peat soils with issues (Zs.17). A restricted to areas increased 69.5% its and transparently done,” Agency has low capacity.
concomitant burning big theme in the already affected by planted area with oil Olam said. Local communities have a
(Po.15). Area literature for both human activity before palm between 1989 and big role in degradation;
converted illegally from Indonesia and Sarawak July 2008. Areas of intact 2013, the deforestation due to Liberia's
conservation area could remains the destruction native vegetation, was 0%; and expansion backwardness there is
remain oil palm for a of forest and wildlife conservation areas and between 2001 and 2014 limited electrification
certain number of years habitat, especially reserves set aside for was in lands that were (only near towns). The
to compensate for incursions of oil palm quilombolas (Afro- previously intervened by new Tropical Forest
investment by private onto peat soils with Brazilians) and pastures for extensive Alliance Marrakesh
sectors or local concomitant burning. A indigenous groups have farming or by other crops Declaration signed end
communities but after public policy debate is been excluded. The forest such as cotton, rice or 2016 - sets a mandatory
that to restore the area raging about the RSPO, reserve of (50 or 80%) of bananas. Colombia will HCS Approach signed by
to forest (Pu.15). MSPO and sustainability the land farmed must, be be soon signing the President (but this is still
More recently the issues, with the maintained. Agricultural international Agreement stuck at a very high
Malaysian and Indonesian declaration of Wilmar lobby in the National between Germany, level) EPA..
governments have been causing great concern, Congress tried to change Norway and United
looking to establish especially in Sarawak. the Forest Code to Kingdom on zero
policies that more Some officials continue to allowed oil palm deforestation. With

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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
effectively address deny that deforestation plantations to count commitment to prevent
environmental and social has occurred in Sarawak. towards the reserve. deforestation and the
issues (Zs.17). This attitude of denial, Revised Forest Code defence of human and
Indonesia suffers from when such claims can be 2012 retains the 80% labor rights, the industry
illegal use of conservationeasily refuted, does the legal reserve in the expects that by 2020,
areas, while Malaysia Malaysian palm oil Amazon, but exempts 50% of the Colombian
hardly faces this (St.17). industry no service family farmers but there palm oil production can
(Po.15). New policy is a rule to restore 5 m of be certified by the RSPO
includes Sarawak no degraded woods beyond (St.17).
more concessions on peat their boundaries
(does not preclude Landowners can cultivate
smallholder on peat). riverbanks and hillsides
Negeri Sembilan no more (previously restricted)
wetland conversion but must restore up to 30
(St.17). m of previously
deforested areas and join
the Rural Environmental
Registry (CAR; used to
monitor illegal
deforestation via
satellites. ...Most warn
that weak governance
can easily undermine the
system. Development is
in limited areas of Pará,
and with some needed
improvement in yields at
traditional Bahi palm
groves; size is not yet
uncontrollable, even with
the growth plans of
bigger companies.
However, other states of
the Legal Amazon are
waiting to participate
(Po.15).
Biodiversity loss Also refer to Also refer to Also refer to [4]. Also refer to Liberia has the most
Deforestation, [3], [4] Deforestation, [3], [4] Deforestation is on the Deforestation, [4]. valuable rainforest
HCV requirements are rise again. Forest Law For 2012-2108, there is outside Congo - with
there, but it is a general 2012 amnesty for those joint project financed by pygmy hippos and other
UN HCV (St.17).; who deforested illegally the United Nations, GEF: rich indigenous flora &
before 2008. Farmers “A Biodiverse oil palm fauna; there is illegal
need to register landscape” has been hunting. There was a riot

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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
properties and rule to jointly undertaken by the on a conservation system
restore or provide WWF, the Alexander Von that did not take local
compensation for Humboldt Institute, community needs into
illegally-deforested areas Cenipalma and account. Conservation
delayed twice. Brazil's Fedepalma. It has so far set-asides policy needs
sub-national initiatives to found 1200 insect species co-management to be
reduce deforestation lack and 560 animal species effective, prevent
demonstrated such as birds, mammals, degradation and that it is
coordination, added amphibians and reptiles, not taken by another
pressure will come from among others, are company or community
beef (opening of US and preserved as a result of (St.17).
China markets). The the oil palm crops, which
number of conservation are cultivated in areas
units in the Amazon has that were previously
been reduced, leading to intervened by pastures
an increase in illegal for extensive farming or
occupation Ge.17) by annual crops (St.17).
Forest The conclusion that Also refer to Also refer to Also refer to Also refer to
degradation future development Deforestation. Deforestation. Deforestation. Deforestation.
should be on degraded or There is no regulation to Some aspects of
deforested land has cover degradation of non-deforestation were more
scarcely been heeded gazetted forest. But this subtle in the Brazilian
(Po.15) would be an issue for Amazon, more recently
logging people, I've not the idea was floated that
heard of palm oil oil palm as a “low impact
involved. The HCS crop”, could be used to
concept is not in reforest protected areas
regulations (St.17). (Po.15).
Degradation is not well
regulated. This is due to
bad logging practices
(and not palm oil);
maybe Malaysia is better
than other countries;
Sabah has had bad
logging (more degraded)
while Peninsular logged
over forest still looks
quite good (St.17).
Reducing carbon Also refer to In terms of impacts on The recent expansion of On emissions - carbon
emissions Deforestation and land-use change, in parts oil palm plantations in commitments will come
Peatland. The Indonesian of Peninsular Malaysia, oil the Amazon is presented with the work ongoing on
government has tried to palm was planted on by the Brazilian mapping and carbon

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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
address greenhouse gas former rubber land, so Government as a accounting. (St.17).
issues by signing a the original deforestation carefully controlled
moratorium with the took place much earlier, development using
Norwegian government, much of it for 1960s predominantly degraded
halting the release of new FELDA schemes (e.g. in lands in restricted areas.
concessions on forested the Jengka Triangle of It obviously provides an
land (Zs.17). Pahang) (Po.15). economic improvement
to the previously run-
down pastures the
plantations have replaced
and foreshadows a
possible environmental
gain in reduced GHG
emissions (Po.15).
Ambitious targets for Domestic biofuels does Colombia has a biodiesel
biodiesel expansion will not require GHG mix of 10%. According to
increase domestic emissions reductions EMPA, a Swiss company,
demand for palm oil, and ratings (St.17). after analyzing the life
risks driving expansion of cycle of this biofuel,
plantations for domestic Colombian palm biodiesel
use. Could potentially reduces in 83% to 108%
offset progress made by the greenhouse gases
cleaning up palm oil (GHG); comparing
supply chains linked to positive to the biofuel
more discriminating parameters of 20% and
international markets. 35% in USA and in the
Producers selling to local European Union (St.17).
biodiesel exempt from
ISPO certification. Two-
tiered market with
differential sustainability
norms (Da.15).
There is a real worry that
a tougher new EU
approach will be difficult
for smallholders (while
large business can fall
back on lobbying for
more domestic burning of
palm oil in the biodiesel
mandate) (St.17).
Public policy debate has Mill emissions and an Any palm producer in
focused most attention energy assessment plan Brazil that only complies

Appendices
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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
on efforts to change the is required (it is a listing with the legal
mind-set of large of items on GHG; there is requirements will be
plantation firms (Po.15) no calculation required, easily approved in any of
The Indonesian and there is no mitigation the certification schemes
Parliament is upset at EU requirement yet). There RSPO, Rainforest Alliance
politicians’ recent is a biogas capture rule and meet 85% of the
demand for tougher and 94 mills have requirements required by
standards; but points out implemented, but it is not POIG (Palm Oil
that there has apparently mandatory yet; This is Innovation Group) that
not been enough effort for the Kyoto obligation constitute the most
from the industry (there but the CDM market difficult multi-
are only about 20-25 didn't work well on price stakeholders initiative
exporters) to disclose collapse (St.17). (St.17).
sufficient data (including
on GHG emissions) to
satisfy these markets
(St.17).
Burning Also refer to "Case study: Policy for zero burning, to Partial bans? Charcoal making is
Indonesia sustainability manage water tables in common activity. Local
policy upgrading" peat areas to reduce farmers use fire, and
subsidence. (St.17). slash and burn. They
were not happy with "no
burning" policy in the
concession areas. Fallow
cycles are shortening
with increased pressure
on the land.
Peatland Issues of deforestation Also refer to The total area of peat 339,000 ha of peat. Possible areas. There aren't significant
conversion and peat (moratorium Deforestation (comments land in Brazil is estimated peat lands (St.17).
policy), fires in Riau (on on Sarawak, which has to be nearly 24 000 km2, 40,000 ha of peat.
peat), and GHG substantial peat zones). the second largest in
emissions from A big theme in the South America after Peru.
plantations. In Riau, literature for both There are large peat
Sumatra, a GIS analysis Indonesia and Sarawak deposits in the Middle
of land cover change remains the destruction Amazon and in a large
found large plantations of forest and wildlife marshy plain (Pantanal)
were mainly the ones habitat, especially near the Bolivian border.
involved in deforestation, incursions of oil palm Smaller areas of peatland
especially in the peat onto peat soils with are located in coastal
swamps, which concomitant burning areas. World Energy
smallholders found too (Po.15). Policy for (2017), 'Peat in Brazil',
difficult to work. A big zero burning, to manage https://www.worldenergy
theme in the literature water tables in peat .org/data/resources/coun

Appendices
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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
for both Indonesia and areas to reduce try/brazil/peat/, accessed
Sarawak remains the subsidence. Peat rule; 30 Jun 2017; 1.5 million
destruction of forest and planting and replanting ha.
wildlife habitat, especially allowed with water
incursions of oil palm management program,
onto peat soils with water level maintenance
concomitant burning and natural water
(Po.15) resources. Records of
this. EIA reports to each
state authority for peat
SOPs - water levels and
fertilizer management
especially particular for
peat; Guidelines of the
Devt of a Std Op
Procedure for Oil Palm
Cultivation on Peat,
MPOB. A Unified Peat
Classification System will
be added (it will indicate
which type of peat is not
feasible i.e. woody, and
focus shallow peat with
appropriate SOP (St.17).
Water and In Sabah and Sarawak, Brazilian and Canadian A real problem in
pollution more in-depth researchers seeking to concession areas; these
environmental analyses find the source of have been subject to
are needed, not on mercury contamination in RSPO complaints.
forests, which seem to be the Amazon came to a Mistakes were made in
covered, but on local startling conclusion: the first two years of
aspects such as effluents agricultural practices development. The big
from mills (Po.15). Mill rather than gold mining plantations didn't leave
waste products are were most to margins around villages,
covered by regulation. blame....mercury was rivers and creeks. Palms
DOE enforces and I hear occurring naturally in the were planted to the
many mills get summons soil and was being edges. Water was
on this; regulation is released into the river polluted and they
100ppm Peninsula system -- and eventually overplanted into swampy
(looser) and 20ppm for the food chain -- by areas (that locals use for
Sabah (areas like slash-and-burn farming. rice and fish). Some
Kinabatangan are Johnson, M. (unknown) compensation was done
sensitive); there is 'CASE STUDY: Brazil — for this, but problems
constant news about Mercury contamination in with water still there, as

Appendices
2017 EUR 82 EN
Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
state DOE enforcement the Amazon, well as loss of a key
(St.17). https://www.idrc.ca/en/a protein source (St.17).
rticle/case-study-brazil-
mercury-contamination-
amazon, accessed 30 Jun
2017.
Air pollution A network of powerful Refer to Burning.
actors (local elites,
absentee investors and
migrant groups) and a
“culture of patronage”
involved in the political
economy of fire and
haze. “Farmer group
organizers gained as
much as USD486 per
hectare. They influence
decision-making through
their patronage network
for their own interests.
The networks provide
power, support,
protection and access to
various resources. To
effectively reduce fire,
governments need to
disempower these farmer
group organizers through
law and policy (Pu.17).
State DOE enforced and Refer to Burning.
mills regularly get
summons, E.g.
Kinabatangan, Sabah.
Indigenous Negative reports on the In East Malaysia native Dozens of indigenous From the 1960s, the Despite their
people performance and customary land is taken people are killed each unresolved agrarian Knight, Judy (2006), contributions, significant
direction of the rural over in a series of year in Brazil in fights issues led to the 'Indigenous Forest concerns that agricultural
economy, with the well- schemes hardly profitable with farmers and formation of guerrilla Peoples of Gabon Face concessionaires have
supported plantation to the landholder. In ranchers over land, often groups and violent armed Uncertain Future', dispossessed
sector expanding and Sabah and Sarawak in the relatively lawless conflict, partly fuelled by http://www.iwgia.org/pu communities of control
profiting from workers these are large areas, Amazon region, where the trade in illicit crops, blications/search- over and benefits from
and villagers, with the which the governments hired gunmen have been notably coca....the Uribe pubs?publication_id=444, their own lands.
exception of a group of characterize as used to push the government decided that accessed 30 Jun 2017. Negotiations are in

Appendices
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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
small and middle-level unproductive. indigenous off resource- oil palm would be a Monrovia, far from
producers (Po.15). Partnerships to develop rich reserves. suitable candidate among affected communities and
The rights of indigenous oil palm here, but poor http://www.nbcnews.com a number of other without consultation from
peoples / smallholders treatment of indigenous /news/latino/brazil- possible choices.. Many community members.
would be helped by people by some estate indigenous-protest-over- of the land dealings Concessions are in
recognizing traditional companies, with land-rights-turns-violent- which took place in the isolated rural
use. This was not so in confiscation of their n751336 countryside during this communities that operate
Indonesia, and lands. Sabah has a high period have been outside formal legal
companies might convert percentage of land described as structures. Under the
community forest into a occupied by oil palm, risk “accumulation by Aborigines Law and the
plantation (Bu.12). of food security issue dispossession” These Public Lands Law in 1956,
More recently the there (Po.15). More were: oil palm cultivation the Liberian government
Malaysian and Indonesian recently the Malaysian in connection with has treated all land not
governments have been and Indonesian displacement operated by under private ownership
looking to establish governments have been illegal armed groups; as public property owned
policies that more looking to establish take-over of land left by by the
effectively address policies that more internally; displaced state....Communities
environmental and social effectively address people; actual or have voiced anger and
issues (Zs.17). environmental and social attempted occupation of frustrations, and resulting
Also refer to [2], "Case issues (Zs.17). We lands under contested conflicts are well
study: Indonesia support of Sarawak and ownership rights; documented. A
sustainability policy Sabah native rights and occupation of public concessionaire allegedly
upgrading" have projects to include lands; land-use change; occupied the entirety of
them in oil palm land concentration…. Oil one community’s land
development; the palm’s expansion has not with no space for
Ministry has been led by always been associated subsistence farming, so
East Malaysian politicians with high levels of they were “scavengers”
for several years. Some violence and on their own land. At the
"conflict" can be displacement, though this time of interviews, the
opportunistic claims when was common between community was
a development project 1998 and 2006 (Po.16). organizing a peaceful
arrives There is strong protest to respond to
voting for the ruling government and
government, in spite of concessionaire’s inaction
complaints (St.17). (Le.17). Forestry
Orang Asli are now Law (with a community
pressured in Kelantan policy element); but
and seems to be due to there has been poor / no
logging. Sarawak and implementation of FPIC
Sabah are better; but in on oil palm concessions
the Peninsula natives (St.17).
have been marginalized
(much like the Aborigines

Appendices
2017 EUR 84 EN
Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
of Australia in the past)
(St.17).
Smallholders Reduced smallholder Indonesia and Malaysia . The “social fuel seal” is Access to funds from the Companies often promise
benefit, especially have made much available to estates that lucrative Rural to undertake community
through the latest 80/20 progress towards incorporated “family Capitalization Incentive development projects
schemes, increasing certifying smallholders. A farmers” (Po.15). was available to (health clinics and
socioeconomic gaps model, developed by Also refer to Br1. plantations, especially schools), but may not
among smallholders, Malaysia, of smallholder There are so many legal when they initiated deliver for years or may
many suffer ‘adverse “clusters” grouped requirements that a smallholder alliances. , not provide access to
incorporation’, and some around estates who company can rarely get Fedepalma has been residents who are not
say oil palm participation receive training in any operating license in working with alliance directly employed A
is only for the rich. agronomic and less than a year of term, groups using a model, Columbia University
Current government environmental practices, and in some cases developed by Malaysia, of report , “Unless directly
policies of disengagement is run by the MPOB, with environmental licensing smallholder “clusters” hired
are not working; Worries NGO assistance, using processes extend for five, grouped around estates communities]experience
about certification of government funding to ten or more years. I dare who receive training in little improvement to
smallholders to ISPO, replant aged trees. As in say that more than 90% agronomic and living standards” ... Cash
high cost of bringing Indonesia, the neoliberal of the family farmers in environmental payments for destroyed
independent smallholder model of market Brazil are illegal under practices... Among crops often fail to
productivity up to a dominance has been the laws. We can say unsolved issues there is compensate for the loss
certification standard. adopted in Malaysia, with certainty that still much scope for of livelihood of local
Indonesia and Malaysia though the government is Brazilian legal regulation improvement of farmers; food insecurity
have made much closer to the private is highly sustainable conditions of workers on can increase... A 2016
progress towards plantation sector than its when correctly applied, the plantations and for study found economic
certifying smallholders Indonesian counterpart but rarely this will occur more attention to be losses would far outweigh
(Po.15). Must and exercises more between small companies given to problems of food any economic gains
crackdown on schemes control over much of the and family farming insecurity in the (concentrated in the
between companies and smallholder sector. (St.17). plantation areas.... The minority directly
smallholders that are Malaysia is (more background of violence employed , while the
abusive and use debt fortunate than Indonesia) and land consolidation... losses would affect the
bondage. Smallholders as government remains a factor and is entire community).... In
may have to sell fruit organizations have a one of the reasons why 2013 a new Land Rights
bunches for whatever the continuing role in the (current oil palm) Policy., but it is not
company will pay for managing much of the model has failed (Po.15). binding as yet to enact
them (Bu.12). smallholder sector of the Studies of conflict regions the Land Rights Act.... In
There is a real worry that industry (Po.15). with and without palm oil interviews, government
a tougher new EU show that those with oil officials expressed
approach will be difficult palm crops have a higher concern regarding the
for smallholders (while per capita income of limited recognition of
big business can fall back about 30% (palm’s customary land
on lobbying for more "social dividend")... Small ownership despite the
domestic burning of palm producers dominate Land Rights Policy
oil in the biodiesel production and 83% of (Le.17). There are

Appendices
2017 EUR 85 EN
Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
mandate) (St.17). producers have less than village stands of oil palm;
Indonesia has 5 million 50 hectares. They are all concessions will have
smallholders. Most have organized around over smallholders but with
2 hectares. There could 130 productive alliances major delays, none have
be 1 million who with larger proceeded (partly due to
deforested without entrepreneurs. (St.17). land issue delay). GROW
permit. There is a major has an out grower
problem with smallholder schemes but has funding
legality. Policy in delays; smallholder areas
Indonesia is topsy turvy have been work in
(St.17). Also refer progress since 2009-
to [2].. 2011 ; the concessions
focus on their own
(delayed) estates, and
mills have only just start
operating.(St.17).
Forced and child Labour rules fall short of Brazil's ministry of labour With commitment to Gabon is primarily a Child labor, including in
labour ILO conventions, most has fined 340 Brazilian prevent deforestation and destination and transit the production of rubber
core ILO conventions are companies for using slave the defence of human country for children and and mining diamonds,
not signed; and then you labour, including forced and labor rights, the women from Benin, and in the worst forms of
need to translate this labour and people industry expects that by Nigeria, Togo, Mali, child labor, including in
content to national law working in degrading 2020, 50% of the Guinea, and other West forced labor in domestic
and there are still some conditions for little or no Colombian palm oil African countries who are work (US, DOL)
gaps. There may not be pay in rural and urban production can be subjected to forced labor
political will to change areas, a leading anti- certified by the RSPO and sex
the situation driving a big slavery group has said. A (St.17). Colombian trafficking….Gabon's
illegal pool of workers; "dirty list" published by labor trafficking victims population is
why not make it free the rights group Reporter are found in mining, approximately 1.8
market (permit is Brazil this month agriculture, and domestic million, with foreigners
personal to the worker revealed that 340 service. Colombian (mostly Africans from
and not with the Brazilian companies from children working in the West and central Africa)
company) and whoever is May 2013 to May 2015 informal sector, including making up as much as
here can be hired legally? employed people working as street vendors, are one quarter to one third
(St.17). Some in slave-like conditions, vulnerable to labor of that total. Foreign
premises now have including in sweatshops trafficking. Colombian firms report a shortage of
passport access; this will producing clothes, in children and adults are highly-skilled Gabonese
likely be widespread in a farms, cattle ranches, exploited in forced labor...Recruited to take
voluntary basis, but not timber companies, begging in urban areas. up hard or dangerous
likely to be written into construction and charcoal Illegal armed groups work in mines, forests
labour rules. Passage production.http://www.re forcibly recruit children to and plantations, or
cost as paying upfront uters.com/article/brazil- serve as combatants and otherwise drawn by the
seems normal and slavery-idUSL8N15U3CD informants, to cultivate petro-dollar boom,
accepted. Housing for a illegal narcotics, or to be foreigners from

Appendices
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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
family is a 2 bedroom exploited in prostitution elsewhere in Africa are
unit, and hostels for (US, DOS) Gabon's vulnerable
those without family and underclass. Gabon - Non-
this comply with the Gabonese Africans,
relevant act. However, Minority Rights (2017),
there are issues with http://minorityrights.org/
illegal status workers minorities/non-gabonese-
(but legalization drives africans/, accessed 30
happen often) (St.17). Jun 2017.
Terms and Indonesia transmigrant There is good Mendeloff, John (2015), Colombia—dubbed by the Health and safety Constant accidents,
conditions of workers may be enforcement of the OSH 'Occupational Safety and AFL-CIO’s Solidarity standards are in place neglect, abuse and other
labour mistreated, sent to Act (St.17). Health in Brazil', RAND Center the most but not always observed. health related cases...
marginal land they could Corporation Working dangerous place in the the Liberian government
be displaced and they Paper, Jul 2015, world for trade unionists. needs to establish a
have no fall back but to https://www.rand.org/co Franklin, S. (2013), comprehensive safety
take on jobs on ntent/dam/rand/pubs/wo 'Colombian Workers and regulatory policy that
plantations. With poor rking_papers/WR1100/W Struggle for a Voice and will lead to the enactment
pay and conditions R1105/RAND_WR1105.pd Safe Jobs', of the National
(amenities, water supply f, accessed 30 Jun 2017. http://pulitzercenter.org/ Occupational Safety and
etc.) (St.17). reporting/colombian- Health Act of Liberia,
workers-struggle-voice- http://www.frontpageafri
and-safe-jobs, accessed caonline.com/index.php/l
30 Jun 2017. etter-comment/3069-
establishing-
comprehensive-safety-
management-policy-in-
liberia
On labor, wage levels in Discriminatory practices A company is required to On labor, particularly the Gabon's French-inspired The minimum wage is not
the plantation industry a occur such as withholding provide shelters, with conditions under which labor code recognizes the a living wage; min wage
problem; particularly the migrant workers’ tables and toilets for workers are hired on the right of workers to form recently in place
conditions under which passports (Po.15). employees to receive estates. The use of and join independent $5.50/day not $6.50/day
workers are hired on the Direct employment of food in the field. E.g. for indirect or casual labor is unions and bargain as hoped. Full month
estates. The use of migrant workers seems 40,000 ha zone there will common in Colombia and collectively, and prohibits earnings is $100-
indirect or casual labor is fine; they can earn be a need for at least 40 Indonesia… Among antiunion discrimination, 150/month (with a
common in Colombia and Rm2000/month in of these. Also obligatory unsolved issues there is but the right to strike system of deductions
Indonesia (Po.15). Also harvester and supervisor the presence of toilets still much scope for was limited or restricted. too); so Liberians cannot
refer to Indigenous roles, but others earn distributed by the improvement of ...Labor unions and afford secondary school
People minimum wage. plantation, or in movable conditions of workers on confederations are active. education for their
Contractor employed vehicles that accompany the plantations (Po.15). There is a law pending children who need to go
workers may be more the workers throughout enactment that would to towns for this.
problematic (St.17). the day, one for men and limit foreign workers to Contract workers earn
one for women. There is 10 percent of a less e.g. half day,
an extensive network of company’s workforce (Us,

Appendices
2017 EUR 87 EN
Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
social insurance, unique DOS). $80/month (St.17).
rules and benefits that
are among the best for
global palm producer
(St.17)
Anti-corruption Economic demand for Also refer to [1]. Also refer to [1]. Also refer to [1]. Also refer to [1]. Also refer to [1].
and money lands that are degraded, By moving to online Both Indonesia and Brazil Colombia remains a Ghosh, P (2013), This is a corrupt political-
laundering burned and then planted licensing renewals and have a lot of problems seriously conflicted 'Gabon’s Bongo Family: economy, plantations and
with oil palm provides such there are few with corruption. This country, although there Living In Luxury, Paid For mining companies donate
huge benefits to certain avenues for corruption. affects transparency and are some signs of By Corruption And to community
actors (Pu.15). Various Perhaps some issues in public data about improvement... The Embezzlement', 15 Feb development funds and
sectors worry about the past on issuance of concessions. Progress is government is beginning 2013, these have not
“multiple approvals from new mills licenses noted for sectors such as to distance itself http://www.ibtimes.com/ materialized; apparently
local and national (St.17). logging in Brazil but somewhat from the cozy gabons-bongo-family- taken by local politicians.
government departments Indonesia is still behind. relationship with the living-luxury-paid- There is an Anti-
that are often in conflict A database of geo- palm oil industry that corruption- corruption Commission,
in a heavily decentralised referenced plantations characterized the Uribe embezzlement-1088930, but it has no budget for
nation” and insufficient and their land use plans years and this means accessed 30 Jun 2017. lawyers. It handles some
transparency (Bl.17). combined with use of fewer opportunities for very minor cases, but
Both Indonesia and Brazil remote sensing corruption. Following his there are big scandals in
have a lot of problems technology can increase reelection, Santos has the news (St.17).
with corruption. This transparency; data points promised a Colombia with
affects transparency and must be entered into an more justice and equality
public data about accessible system, then and the end of violence...
concessions. Progress is NGOs and others could his planned restitution of
noted for sectors such as monitor it (Bu.12). “stolen lands” is still far
logging in Brazil but from a reality. A low level
Indonesia is still behind. of violence is certainly
A database of geo- continuing most of it not
referenced plantations directed specifically at
and their land use plans the palm oil industry,
combined with use of although small outbreaks
remote sensing still occur. However, they
technology can increase are marginal compared to
transparency; data points the situation in the past
must be entered into an (Po.15).
accessible system, then
NGOs and others could
monitor it (Bu.12).
Also refer to [1]. "Case
study: Indonesia
sustainability policy
upgrading"

Appendices
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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
Fair pricing (Under de facto debt Malaysia is (more Liberian palm oil is traded
bondage) Smallholders fortunate than Indonesia) locally and even to
may have to sell fruit as government Nigeria (it is a smoked
bunches for whatever the organizations have a palm oil). Prices vary. It
company will pay for continuing role in is processes in hot
them (Bu.12). managing much of the cauldrons for two days
smallholder sector of the (need charcoal for this).
industry (Po.15). Informal vs outgrower
Pricing of FFB is okay, but segments will have
some more remote zones different price/economic
e.g. Limbang, Lawas vs regulation (no price
Miri; suffer on transport monitoring for the
distance, OER grading is informal sector) (St.17).
fair at 20% and
smallholders seem happy
(St.17).
Land President Joko Widodo’s Also refer to [4]. *Also refer to Br1.. Also refer to [4]. While some customary Concession negotiations
ownership/use administration has Untitled lands, especially Also refer to [4]. Those with "legal use of land is upheld, have deviated from the
permit already established a swidden fallows and protection of their no family or community formal legal procedures
task force to resolve secondary forests, lands... meant that can secure ownership of required of them. A 2013
conflicts in Indonesia’s although in customary established oil palm its traditional forests, audit by London-based
forests. The task force use, are considered ‘idle’ producers could not arguably its most accounting firm Moore
will be a joint and at risk of state acquire such lands. precious livelihood and Stephens found that only
collaboration between intervention in the name However local capital asset. Colonial six out of the 68
Ministry of Environment of ‘development’ or landholders could be and post-colonial concession contracts
and Forestry (MOEF), the poverty alleviation. persuaded to enter into administrations have examined were awarded
Home Affairs Ministry, Indigenous Sabahans “productive alliances” continued to hand over in accordance with
the Agrarian Ministry, have “enthusiastically with the plantations and rights and resources to Liberian law.. Without a
and the Corruption embraced” smallholder oil thus expand the oil palm big business rather than formal land tenure
Eradication Commission palm whether their lands frontier....Such a process invest in local initiatives. system in place,
(KPK) (Pu.15). have titles or not, and also applied where Rights-based reforms in concessionaires
Indonesia’s One Map will also plant oil palm to displaced small farmers land tenure and effectively become the
Policy remit to identify demonstrate that their were allocated land by governance in Africa final authority to
and resolve overlapping lands are not idle, in the government, since the 1990s have determine which
land claims, and also feedorder to prevent “land provided they planted it simply passed Gabon by. communities are entitled
into Indonesia’s grabbing” by the big with oil palm. Some small Fern (2102), Land Rights to compensation. Leaving
centralized Land Registry companies {Po.15). farmers entered an in Gabon, Facing Up to concessionaires to sort
(Ci.16) Also refer Land titles are handled by alliance under these the Past - and Present, out conflicting land claims
to [4], "Case study: the District Office; terms because it seemed FERN, 26 Jun 2012, is problematic since some
Indonesia sustainability legality of land is in MSPO to be the only means of http://www.fern.org/publ concessions are located
policy upgrading" rules; but those in NCR keeping their land. ications/reports/land- on areas subject to “long-
areas have low Others perceived the rights-gabon-facing-past- standing and well-known
awareness of compliance alliance as potentially and-present, accessed 30 boundary conflicts.”...

Appendices
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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
with legal areas (St.17). profitable, so did not feel Jun 2017. While some companies
disadvantaged (Po.15). are working to address
these concerns, for
example by walking with
community members on
their land to find and
confirm boundary stones
together, such policies
are not universally
practiced (Le.17).
The progressive new land
law (is stuck in
legislature); confusion
over concessions overlap
with customary and
private land - this was
not unencumbered state
land the companies
hoped for. Positively,
after expiry of
concession, it goes back
to customary ownership
(unlike Indonesia)
(St.17).
Licensing for The compulsory ISPO Also refer to [3]. The Ecologic and Within Gabon, they are In sum, despite benefits
palm oil (estate (rival to the RSPO) has Policy is for MSPO to Economic Zoning (ZEE) very strict. All aspects that concessions have
and mill) been rather slow to be become compulsory, for palm oil defines zones are with permits and provided to some
implemented, (not target dates 2018-2019. for cultivation, totally government approval communities, there is
surprising. It is a huge ISPO and MSPO may monitored by satellites (St.17) reason to be cautious
job), but potentially could need add-on efforts to and with control and about the continued
have a major positive meet market demand, on history of deforestation advisability of a
impact throughout the top of better since 2008. The rule is concession-driven
industry...Continuing implementing domestic zero deforestation, with development strategy,
poor behaviour of some rules (St.17). We have no exceptions. Legal both in Liberia and
plantations licenses from selling reserves: Plantations worldwide. Other
(deforestation, land fruit.to every stage of the within the ZEE need to countries that have
conflicts and poor value chain (St.17). maintain 50% of total depended on agricultural
treatment of casual area protected under concessions have
estate workers (Po.15). forest reserve. For experienced similar
Some major refiners plantations outside the problems to those
often RSPO members) ZEE legal reserve of 80% described above.
have been identified as (St.17). 1,400 Common criticisms are
buying illegal (tainted) legal requirements that large-scale

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Sustainability Indonesia Malaysia Brazil# Colombia Gabon Liberia
enforcement
issues
(examples of
positive and
negative)
produce from necessary for the concessions reduce the
conservation and forest establishment and ability of states to self-
zones, and recently continuity of a palm oil govern, threaten food
accused of non-tax company in Brazil, but security, harm the
compliance and these results in environment, fuel land
corruption (NGOs. vs. segregation: a) large conflicts, and benefit
four RSPO members and corporations are neither national nor local
others). Indonesia has constantly monitored by economies to the degree
been driving legalization law enforcement anticipated. Unlike the
via Ministerial Decrees agencies, and face heavy forestry sector, which is
and other land status fines. b) These same governed in large part by
releases akin to amnesty authorities know that the a single piece of
(St.17). The small and medium-sized regulatory legislation, no
decentralization agenda ones do not have the general management law
and overlapping laws financial, administrative regulates Liberia’s
have made it difficult for and logistical conditions agricultural sector.
policy to effectively to comply and they are Instead, a number of
address sustainability rarely checked. Results in laws impact the awarding
issues.... The Indonesian centers of excellence in and operation of
Sustainable Palm Oil the midst of illegality with agricultural concessions.
(ISPO) standard sets likely more than 90% of All of these laws should
mandatory sustainability family farmers in Brazil be interpreted in light of
requirements for all oil illegal under the laws. the fundamental rights
palm growers (Zs.17). Brazil does not need protected in the Liberian
ISPO and MSPO may more laws; but we need Constitution. (Le.17).
need add-on efforts to enforcement so that
meet market demand, on everyone implements
top of better these laws at all stages of
implementing domestic the production chain,
rules (St.17). Also regardless of the size of
refer to [3] the producer (St.17).

Notes: 1. The Transparency International Corruption Perception rankings for 2016 were: Malaysia 55, Brazil 79, Colombia 90, Indonesia 90, Liberia
90, and Gabon 101 (Tr.16).; but this may represent “smaller-scale everyday corruption rather than ‘grand corruption’ (in political business
circles)” (St.17).
2. “It is not enough just to earn the right to call the land or forest their own, people also need to be able to use it – in some cases
management regulations are very restrictive, and in other cases people need technical support, tools and financing, to be able to make the
best use of resources to improve their livelihoods.” (La.17)
3. Bu.12 holds more negative view on Malaysia and Indonesia as both established palm oil certifications based on legality (rather than
sustainability criteria), and this suggests a lot of non-compliance to existing rules. There is a surfeit of land use laws, not enforced very well.
There are gaps in legislation for protecting High Conservation Value (HCV) areas.

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 4. The main issues in Southeast Asia and South America are zoning, land use planning and best practice issues. HCV areas are critical to land
use planning - for dividing up the forest and determine where to expand agriculture (Bu.12).
.. Not covered in literature review sources and stakeholder interviews.
Sources: Bl.17 Bland, Ben (2017), 'Chinese investors hesitate over Indonesia investment', The Financial Times, 15 Jun 2017,
https://www.ft.com/content/bb1a9658-4517-11e7-8519-9f94ee97d996, accessed 24 Jun 2017.
Bu.12 Butler, Rhett (2012), 'Legislation and palm oil: South America and Southeast Asia', ZSL interview, 4 Oct 2012,
http://www.sustainablepalmoil.org/case-studies/mongabay/, accessed 15 Jun 2017.
Ci.26 CIFOR (2016), 'The Political Economy of Fire and Haze in Indonesia', http://www.cifor.org/fire-and-haze/wp-
content/uploads/sites/26/2016/09/088-Fire-and-Haze-project-flyer_v18.pdf, CIFOR, accessed 28 Jun 2017.
Da.15 Daemeter Consulting (2015), 'Indonesia's Evolving Governance Framework for Palm Oil: Implications for a No Deforestation, No Peat
Palm Oil Sector', August 2015,http://daemeter.org/new/uploads/20150902122555.RFN_E_Book_p09.pdf, accessed 15 Jun 2017.
Ge.17 Gebrara, Marai F. (2017), Can REDD+ help Brazil roll back rising deforestation rates? CIFOR Forest News, 23 Jun 2017,
http://blog.cifor.org/50288/can-redd-help-brazil-roll-back-rising-deforestation-rates?fnl=en, accessed 26 Jun 2017.
La.17 Larson, Anne (2017), 'Tenure reform: Lessons from the Global South', CIFOR Forest News, 20 Mar 2017,
http://blog.cifor.org/48869/tenure-reform-lessons-from-the-global-south?fnl=en, accessed 28 Jun 2017.
Le.17 Leiserson, Elizabeth et al. (2017), 'Governance of Agricultural Concessions in Liberia: Analysis and Discussion of Possible Reforms',
Allard K. Lowenstein International Human Rights Clinic at Yale Law School, 13 Mar 2017,
https://law.yale.edu/system/files/area/center/schell/document/liberia_final_2017.pdf, accessed 23 Jun 2017.
Po.15 Potter, Lesley (2015). ‘Managing oil palm landscapes: A seven-country survey of the modern palm oil industry in Southeast Asia, Latin
America and West Africa’, Occasional Paper 122, Bogor, Indonesia: CIFOR.
Pu.17 Purnomo, Herry (2017), 'Fire economy and actor network of forest and land fires in Indonesia', Forest Policy and Economics 78: 21-31,
DOI: 10.1016/j.forpol.2017.01.001.
St.17 Stakeholder views, June 2017 (total of 6; 2 from each region including regulators, NGOs, corporates).
Tr.16 Transparency International (2016), Corruption Perceptions Index 2016,
https://www.transparency.org/news/feature/corruption_perceptions_index_2016#table, accessed 24 Jun 2017.
Zs.17 ZSL (2017), 'Governments', Sustainable Palm Oil Transparency Toolkit, https://www.sustainablepalmoil.org/governments/, accessed,
20 Jun 2017.

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Appendix 10: Summary of laws and regulations relating to palm oil by country & sustainability theme

(Please see Section 8.4.5 in the main report).

Table 23: Summary of laws and regulations by country and sustainability theme
Indonesia Malaysia Brazil Colombia Gabon Liberia
Deforestation Company's Social and Kyoto Protocol UNFCCC New Forest Code Forest utilization, Agriculture (agricultural Environmental
Environmental (2002), Environmentally (Permanent Protection Requirements of the code; sustainable Protection and
Responsibility, Sensitive Areas (ESAs) Areas along the water Environmental agricultural Management Law
Environmental Impact Ranking in National courses and Legal Management System, development),
Assessment, Forest Physical Plan (NPP), Reserve, that in National System of Environment
Destruction. Forest National Forestry, Amazonia varies from Protected Areas (EIA/impact studies),
Area, Conservation National Park 50% up to 80%), (SINAP), Environmental National Parks
Area, Postponement for National System of determinants
New Permit and Conservation Unities of
Improvement of Primary Nature (National Parks,
Forest and Peatland Biological Reserves,
Management Environmental
Protection Areas, etc.)
Biodiversity High Conservation Value Wildlife Environmental Crimes National System of Forest (protection of Environmental
loss Forest, Conservation, Conservation, National Law (fines and jail times Protected Areas wildlife, repression of Protection and
Protected Area, / State Parks (Federal for deforestation, (SINAP), offenses, hunting, Management Law
Convention on Biological and State) hunting, pollution, and Environmental integrally & partially
Diversity other environmental determinants, protected species),
crimes). [Also refer to Wildlife and threatened United Nations
Deforestation] species Framework Convention
on Biological Diversity
(CBD), Algiers (nature
and natural resources),
Bonn (migratory
species) ad Washington
(endangered flors &
fauna, CITES)
conventions
Forest
degradation
Reducing Land use REDD, Carbon Emission, UNFCCC - Kyoto
carbon change Carbon Stock Protocol
emissions (LUC) Measurement, Land
Cover Classification
Biofuel Biofuel, National Policy Biodiesel blending Biodiesel blending *Colombia has a
on Energy *Domestic mandate mandate biodiesel mix of 10%.
biofuel exempted from According to EMPA, a
ISPO. Swiss company,
analyzing the life cycle
of biofuel, Colombian
palm biodiesel reduces

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 Indonesia Malaysia Brazil Colombia Gabon Liberia
83% to 108% GHG
emissions; comparing
well to the biofuel
parameters of 20% and
35% in USA and in the
European Union. (Also
refer to Deforestation)
Mills and *No policy *MPOB licensing Environmental
plantations required introduction of Protection and
methane capture Management Law
facilities
Burning Forest Fire ASEAN policy on zero- Controlled burning in
burning, Environment the agricultural sector
Quality (Open Burning) - (disposal of waste.)
both 2003
Peatland Protection and Proper use of soil, Land- Ramsar Convention on Environmental
conversion Management of Peat, related standards in Wetlands Protection and
Peat Land Utilization, communities and ethnic Management Law,
Postponement for New groups National Forestry
Permit and Reform Law
Improvement of Primary
Forest and Peatland
Management
Water and Waste Management, Natural Resources and National Policy on Hydric Planning and watershed Environment (pollution. Environmental
pollution Water Resources, Environment, Irrigation Resources, Pesticides management, Water waste disposal, Protection and
Swamp, River, Areas, Environmental Laws, National Policy of harvesting, Water use, discharge in waters, Management Law,
Watershed Quality (width of river Solid Residues Vertimientos, Water anti-pollution, Certain National Forestry
Management, reserves), Pesticides Management reuse, Use of authorized Hazardous Chemicals Reform Law
Controlling Water Act, Environment pesticides, Education and Pesticides in
Pollution, Domestic Quality (Scheduled and training, Medical International Trade);
Waste, Wastewater Wastes, 2005), Poison. care, Measures for the Stockholm Convention
Standard protection of the on Persistent Organic
environment and Pollutants (POPs)
people, Pesticide
application,
Management of
remnants, residues and
pesticide containers,
Integrated management
of ordinary solid waste,
Integrated management
of hazardous waste -
RESPEL, Transport and
final disposal of RESPEL
Air pollution Haze (Refer to Burning and (Refer to Burning and Controlled burning in
Peatland conversion) Peatland conversion) the agricultural sector
(disposal of waste.),
Atmospheric Emissions

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 Indonesia Malaysia Brazil Colombia Gabon Liberia
Others Pesticides Monitoring, Environmental Quality, Use of authorized Environment (pollution. Environmental
Pesticides Residues, Air Municipal Waste, pesticides, Education waste disposal, Protection and
Pollution, Emission Environmental Quality and training, Medical discharge in waters, Management Law,
Standard (Clean Air Regulation, care, Measures for the anti-pollution, Certain National Forestry
Control of Emissions protection of the Hazardous Chemicals Reform Law
from Engines) environment and and Pesticides in
people, Pesticide International Trade);
application, Stockholm Convention
Management of on Persistent Organic
remnants, residues and Pollutants (POPs)
pesticide containers;
Integrated management
of ordinary solid waste,
Integrated management
of hazardous waste -
RESPEL, Transport and
final disposal of RESPEL,
Offensive Odour, Noise
Indigenous Customary Community, Constitution (Orang Asli “Lands Statute”, agro- Determination of Land Property Community
people Communal Reserved rights), Aboriginal ecological zoning, indigenous reservations, (customary rights of Rights Law,
Land, Customary People Act, Land Ecological Economic Prior consultation, use), Agriculture Community Forest
Forest, Social Conflict, Ordinance/Code, Zoning of North and Property belonging to (compensation) Law, Land Right
International Covenant Environmental Impact East of Para State ethnic groups, Laws on Policy, Liberian
on Economic, Social and Assessment, UN (where oil palm protection of property, Constitution,
Cultural Rights Declaration on the plantations are located), Laws relating to ethnic Environmental
(ICESCR), Social Aspect Rights of Indigenous “Indigenous Peoples minorities, Types of Protection and
Assessment in EIA Peoples, United Nations Statute”, quilombola processes related to real Management Law
Process, Company's Guiding Principles on (Afro-Brazilian) estate; Forms in which
Social and Business and Human communities, Penal land is used, Conflict
Environmental Rights Code, Civil Code, resolution; Soil use,
Responsibility. Children and Teenagers Forestry, Building
Statutes, National Policy materials ; Private
of Traditional Peoples Property, Victims' Law,
and Communities National and
Sustainable international regulation
Developments (other related to the protection
kinds of traditional and respect for human
peoples, rather than rights, Official language
indigenous or of Colombia, Official
quilombola) language of minorities,
Right of petition,
Standards related to
land ownership and
ethnic minorities

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 Indonesia Malaysia Brazil Colombia Gabon Liberia
Smallholders **Changes in *MPOB Regulations *Brazil has progressive Commercial contracts, Model Agriculture
plantation/ smallholder legislative safeguards Fair prices Concession
arrangements gradually for palm oil production, Agreement
reduced smallholder mandated smallholder (MACA)
benefit (Potter, 2015) participation and all
sorts of other
environmental
regulations.
Forced and child labour ILO Conventions on Child Children and Young “Consolidation of Labor Rights of children and ILO Conventions Labor Law, Liberian
Labour, Forced Labour Person (Employment), Laws” (labor relations, adolescents, Constitution
Labour Ordinance, ILO minimum wage, Prohibition of forms of
Convention Minimum annual 30 day of paid forced labor, ILO
Age, ILO Convention leave, 120 days of Conventions
Worst Form of Child paid maternity leave
Labour, Human Rights and other maternity
Commission, Children rights, prohibition of
and Young Person child labor, freedom of
(Employment), association)
Terms and Health & Occupational Health and OSH, Factories & Health and Safety, Medical insurance, Labour (labour code, Environmental
conditions of safety Safety, Use of Machinery, Sexual companies’ Internal Occupational hazard safety and health) Protection and
labour Pesticides, Hazardous Harassment In The Commission of Labor insurance, Work Management Law,
Chemical Workplace Accidents Prevention, accident, Hygiene and Model Agriculture
Personnel Protection safety measures, Concession
Equipment, Plan for Occupational disease, Agreement
Medical Control of Medical care, industrial (MACA)
Occupational Health hygiene and safety;
(PCMSO), Program of Exclusive dedication of
Labor Environmental civic activities by
Risks Prevention (PPRA),workers, Workplace
work involving harassment, Sexual
electricity, rules for harassment
transportation, storage
and handling of
materials and goods, for
machinery and
equipment operations,
for boilers operation,
rural labor, work at
height

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 Indonesia Malaysia Brazil Colombia Gabon Liberia
Wages & Employment, Minimum Minimum Wage Order, “Consolidation of Labor Contract of ILO Conventions Labor Law,
others Wage, Compensation Employment Acts & Laws” (labor relations, employment, Social Liberian
and Social Insurance, Regulations, Social minimum wage, annual benefits, Contractors; Constitution
Representation in Security, Estate Workers 30 day of paid leave, Trade union agreement,
Industrial Relation, Minimum Standards 120 days of paid Collective bargaining,
Industrial Dispute Housing Act, Trade maternity leave and Conflict resolution, Non-
Settlement, Unions, Employment Act other maternity rights, union associations
Discrimination / Labour Ordinance, prohibition of child
labor, freedom of
association), non-
discrimination, Brazilian
official retirement
pension fund
Anti-corruption and Eradication of Money Malaysia Anti- Anti-corruption statute Penal Law, Model
money laundering Laundering, Corruption Corruption Agriculture Concession
Prevention and Commission (MACC) Agreement (MACA)
Eradication, UN Act, Whistleblower
Convention Against Protection Act, United
Corruption Nations Conventions
Against Corruption

Fair pricing Determining Fresh Fruit *MPOB Regulations Commercial contracts, Agriculture (collection Model Agriculture
Bunches Prices Fair prices and marketing) Concession
Agreement
(MACA)
Land ownership/use Basic Agrarian Law. National Land Code, (Refer items in Determination of Land (urban and rural Community Rights
permit Spatial Planning, National Land Rules/Ordinance Deforestation) indigenous land forming part of Law, Community
Landscape, Location (of each state) reservations, Prior the private domain of Forest Law, Land Right
Permit (Ijin Lokasi), Land consultation, Property the State), Land Policy
Suitability for Oil Palm belonging to ethnic Property (long leases
groups, Laws on granted by the state),
protection of property, Land Ownership (land
Laws relating to ethnic register, system of
minorities, Types of ownership,
processes related to cancellation of deeds),
real estate Land Expropriation

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 Indonesia Malaysia Brazil Colombia Gabon Liberia
Licensing for palm oil Plantation Cultivation, *MPOB Regulations Environmental **Every plantation Agriculture (technical
(estate and mill) Plantation Business Permit licensing for must have a certificate approval farm
agriculture activities that indicates that it operator; legal status
has been established of agricultural and
in an area suitable for farm operator)
agriculture in the
municipal land use
plan; the rural
planning agency
recently created
suitability maps for
different crops
including oil palm.

Note: Short name of laws and regulations (prepared from RSPO National Interpretation Annex lists)
# As no RSPO NI Annex listing is available for Brazil, this is derived from "Sustainability Regulations Applicable to Palm Oil Production in Brasil" by Agropalma
Group
* Updated from stakeholders interviews, Jun 2017 or literature review.
.. Uncertain

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1.1. Additional source documents and information on laws and
regulations in case study countries

We refer readers to the source documents for the full listings of the laws and regulations
as follows:

 Indonesia - The Indonesia NI (INANI 2016) of the RSPO Principles and Criteria was
endorsed by the RSPO Board of Governors on 30th September 2016 32. As
Indonesia’s laws and regulations have been evolving, we include a listing to
highlight newer items (2005 and after) in the text above.

 Malaysa - The Malaysia National Interpretation (MYNI) 2014 of the RSPO Principles
and Criteria was endorsed on 6th March 2015 33.

 Brazil – As there was no RSPO NI document for Brazil, a summary listing from
Agropalma Group is included above.

 Colombia - The Colombia NI (CO NI 2016) of the RSPO Principles and Criteria was
endorsed by the RSPO Board of Governors on 26th September 2016 34.

 Gabon - The Gabon NI (GA NI 2017) of the RSPO Principles and Criteria was
endorsed by the RSPO Board of Governors on 6th March 2017 35.

 Liberia - Liberia: Adoption of the International RSPO Criteria in its Entirety as a

National Interpretation [Draft for Endorsement by the RSPO Secretariat March
2014]36.

1.2. Supplementary information on Indonesian laws and regulations

A regulatory expert notes that key regulations are those 2005 and later (which include
some international sustainability considerations; rather than just domestic), especially
those from the Minister of Environment and Forestry 37. Broad environmental items
include, Act (House of Representative/ President): 2004 Ratification on Kyoto Protocol To
The United Nations Framework Convention On Climate Change.", 2009 Environmental
Protection and Management; Government Regulation (President): 2012 Environmental
Permit, 2012 Company's Social and Environmental Responsibility; and various MR
Minister of Environment, ranging from Managing and Monitoring to Environmental
Document for Business and or Activities that have Business Permit But Have No
Environment Document.

 A listing of some laws and regulations applying to sustainable palm oil companies is
shown in Table 24, adapted from “Annex 1. List of Some Regulations related to
RSPO Principles and Criteria 2013 (as of June 2015)”, by type and approval body
(Act by House of Representative/President, Government Regulation, President
Instruction, President Decree, President Regulation, Supreme Court Decree,

32
RSPO (2017), RSPO National Interpretations documents, http://www.rspo.org/key-
documents/certification/rspo-national-interpretations, accessed 15 Jun 2017.
33
Ibid.
34
Ibid.
35
Ibid.
36
Ibid.
37
Interview with Indonesia regulatory expert, 20 Jun 2017.

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 Minister Regulation, Minister Decree, other Decree and Indonesia National
Standard), focusing on more recent items (2005 and after) 38:

38
RSPO (2016), The Indonesia NI (INANI 2016) of the RSPO Principles and Criteria was endorsed
by the RSPO Board of Governors on 30th September 2016, http://www.rspo.org/key-
documents/certification/rspo-national-interpretations, accessed 21 Jun 2017.

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Table 24: Supplementary information on Indonesia laws and regulations relating to palm oil
Endorse/ Time No. of No. of Recent items include
Approval By period items (all items
years) (2005 and
later)#
Act House of 1956- 50 17 2014 Industry, 2013 Prevention and Eradication of Forest Destruction, 2012 Handling Social Conflict,
Representative/ 2014 2010 Prevention and Eradication of Money Laundering, 2009 Environmental Protection and
President Management, 2007 Spatial Planning, 2006 Ratification of the UN Convention Against Corruption,
2005 Ratification of the International Covenant on Economic, Social and Cultural Rights (ICESCR).
GR President 1973- 43 18 2014 Protection and Management of Peat, 2012 Environmental Permit, 2012 Company's Social and
2014 Environmental Responsibility, 2012 Procedure for Changing Allocation and Function of Forest Area,
2012 Forest Area Use, 2011 Management of Natural Preserve and Conservation Area, 2010
Plantation Cultivation, 2010 Procedure for allocation and Function of Forest Area, 2008 National
Landscape.
PI President 2006- 3 3 2013 Action for Corruption Prevention and Eradication, 2011 Postponement for New Permit and
2013 Improvement of Primary Forest and Peatland Management, 2006 Biofuel.
PD President 1978- 7 0 1990 Protected Area Management, 1987 Ratification for Endangered species, 1978 CITES
1998 Ratification.
PR President 2005- 6 6 2010 Labor Supervision, 2005 Beijing Amendment to The Montreal protocol on Substances That
2010 Deplete The Ozone layer, 2005 Validation of Amendment To The Basel Convention On The Control
Of Transboundary Movements Of Hazardous Wastes and Their Disposal.
MR Minister of 2006- 12 12 2013 Guidance for Plantation Business Permit, 2013 Guidance for Determining Fresh Fruit Bunches
Agriculture 2013 Prices, 2011 Requirements and Procedure for Pesticide Registration, 2011 Guidance for Indonesian
Sustainable Palm Oil, 2009 Guidance for Peat Land Utilization for Oil Palm Cultivation.
MR Minister of 2006- 19 19 2013 Symbol and Label for Toxic and Hazardous Material, 2013 Measurement, Reporting and
Environment 2013 Verification for Mitigation Action of Climate Change, 2012 Emission Standard for Vehicle Type L3,
2012 Guidance for Composing Environmental Document, 2012 Community involvement and
Information Transparency in the Process of Environment Impact Assessment (SEIA).
MR Minister of 1980- 16 11 2013 Minimum Wage, 2011 Procedure to Establish and Validate Company Regulation, and to
Manpower 2013 Establish and Register Collective Labour Agreement (PKB), 2010 Personal Protective Equipment and
Material Safety Data Sheet,

MR Minister of 2008- 6 6 2014 Guidance of Forest Utilization, 2013 Inaugural of Forest Area, 2009 Forest Fire Management,
Forestry 2014 2009 Procedure of Reducing Emissions from Deforestation and Forest Degradation (REDD), 2008
Implementation of Reducing Carbon Emission of Forest Degradation and Deforestation, 2008
Guidance for Human and Wildlife Conflict Prevention.
Minister of Home 2014 1 1 2014 Guideline of Recognition and Protection of Legitimate Customary Community.
Affairs

MR Head of 1999 2 0 1999 Guidelines for the Settlement of Problems Related to the Communal Reserved Land of the
National Land Customary Law Abiding Community, 1999 Location Permit (Ijin Lokasi).
Body
MR Minister of 1993 1 0 1993 Riparian Strip, Riparian Utilization Area, Riparian Authorization.
Public Work
MR Minister of 2010 1 1 2010 Requirement of Drinking Water Quality.
Health

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 Endorse/ Time No. of No. of Recent items include
Approval By period items (all items
years) (2005 and
later)#
SC Supreme 2008 1 1 2008 Mediation Procedure on Court.
Court
MD Minister of 2004 1 0 2004 Standard Operational Procedure for Saving and Loan Cooperative Management and Unit.
Cooperatives

CC Constitution 2012 1 1 2012 Customary Forest.

Court
MD Minister of 1996- 6 2 2007 Pesticides Monitoring, 2006 Commodities Under Management of Directorate General of
Agriculture (and 2007 Plantation, Directorate General of Food Crops, and Directorate General of Horticulture.
Health)

MD Minister of 1995- 11 1 2005 Guidance for Establishing Environment Management and Monitoring Plan Report, 2004 Quality
Environment 2005 Standard of Sea Water, 2003 Waste Water Standard for Domestic Industry, 2003 Technical
Guidance for Assessing Palm Oil Effluent Utilization to Soil in Palm Oil Plantation Industry.
MD Minister of 1999- 13 1 2012 Guidance of Completion Occupational Accident and Disease Case, 2004 Provision of
Manpower (and 2012 Implementation of PKWT (Temporary Labour Agreement), 2004 Overtime Period and Wages.
Transmigration)
MD Minister of 1998- 7 2 2008 Plantation Permit, 2006 High Conservation Value Forest, 2004 Establishment of Forest Area,
Forestry (and 2008 Status Changing and Function of Forest Area.
Estate)
D Head of 1996 3 0 1996 Technical Guidance Social Aspect Assessment in EIA Process, 1996 Technical Guidance Relates
Environment to Air Pollution.
Impact Control
Body
INS National 2010- 3 3 2011 Allometric Equation to Estimate Forest Carbon Stock Based on Field Measurement, 2011
Standard Body 2011 Carbon Stock Measurement and Calculation, 2010 Land Cover Classification.

Total 213 105

Notes: Adapted from Annex in RSPO NI for Indonesia39.

Act, GR Government Regulation, PI President Instruction, PD President Decree, PR President Regulation, SC Supreme Court Decree, MR Minister Regulation, MD
Minister Decree, D Decree of, INS Indonesia National Standard.
# Laws and regulations made 2005 and after considered to have more sustainability considerations included.
Please also refer to “Case study: Indonesia sustainability policy upgrading” in this report segment for a summary of new regulatory directions, especially those
from 2015.

39
RSPO (2016), Indonesia NI, http://www.rspo.org/key-documents/certification/rspo-national-interpretations , accessed 21 Jun 2017. The Indonesia
NI (INANI 2016) of the RSPO Principles and Criteria was endorsed by the RSPO Board of Governors on 30th September 2016.

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Appendix 11: Summary of laws and regulations relating to palm oil production in Brazil

(Please see Section 8.4.5 in the main report).

As no RSPO NI Annex listing is available for Brazil, the following is reproduced from "Sustainability Regulations Applicable to Palm Oil
Production in Brasil" by Agropalma Group 40. Readers may also refer to reviews such as Brandão and Schoneveld (2015) 41.

Theme Requirement Subjects approached

TERRITORIAL Establishes the “Lands Statute” to regulate the access, possession and property of lands by private owners and assure the right
AND LAND Lei nº 4504/1964
of indigenous peoples to the lands they occupy. – In Brazil, there is no concession system, as it happens in Southeast Asia.
ACCESS
REGULATIONS
Decreto nº Establishes the agro-ecological zoning for oil palm cultivation in Brazil, excluding areas of forest, conservation unities and
7.17/2010 indigenous lands.

Lei Estadual
Approves the Ecological Economic Zoning of North and East of Para State, where oil palm plantations are located.
7398/2010
ZEE Zona Leste e
Volume 3 of Ecological Economic Zoning of North and East Zones of Para State, where oil palm plantations are located. It defines
Calha Norte
the guidelines for territorial management and land use and occupation.
Volume 3

Establishes the National System of Conservation Unities of Nature (National Parks, Biological Reserves, Environmental Protection
Lei nº 9985/2000
Areas, etc.). – In 2010, there were 1.174.258 Km2 protected under conservation unities in Brazilian Amazônia.

Establishes the “Indigenous Peoples Statute”, recognizing their rights on the lands they occupy, the respect for their own
Lei nº 6001/1973 tradition, culture and costumes and rights of indigenous people to have the same protection services established by the laws, as
any Brazilian citizen. In 2010 there were 1.860.950 Km2 of officially recognized indigenous lands in Brazilian Amazonia.

Establishes the procedures for identification, recognition, delimitation, demarcation and titling of land occupied by quilombola
Decreto nº
communities. – Quilombola are communities funded by African descendants, that run way from slavery condition and hidden in
4887/2003
remote areas of Brazil, during the Portuguese domain and Imperial periods (up to 1889).
ENVIROMENTAL
Establishes the National Policy on Hydric Resources, regulating the access to water aiming to preserve this resource and avoid
REGULATIONS Lei nº 9433/1997
conflicts related to water use.

Establishes the new Forest Code, that regulates forests use and suppression, and determine the mandatory requirements to all
Lei nº 12561/2012 farms and plantations in Brazil to keep Permanent Protection Areas along the water courses and Legal Reserve, that in Amazonia
varies from 50% up to 80%.
Decreto de 24 de Authorizes the reduction Legal Reserve from 80% up to 50% in some specific areas of Para State (only in cases of restoration
abril de 2013 needs), as indicated Ecological Economic Zoning. The palm oil plantations are located in this region.

40
Agropalma (2017), ‘Sustainability Regulations Applicable to Palm Oil Production in Brasil’, Agropalma Group, May 2017.
41
Brandão F and Schoneveld G. 2015. The state of oil palm development in the Brazilian Amazon. Working Paper 198, Bogor, Indonesia: CIFOR,
http://www.cifor.org/publications/pdf_files/WPapers/WP198CIFOR.pdf, accessed 15 Jun 2017.

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 Theme Requirement Subjects approached
Pesticides Law. Establishes strict rules on the research, development, production, transportation, commercialization, use, correct
Lei nº 7802/1989
disposal of residues and empty packages, and control framework of pesticides.
Decreto4074/2002 Complement the “Pesticides Law”.
Environmental Crimes Law. It establishes the penalties (fines and jail times) for deforestation, hunting, pollution, and other
Lei nº 9605/1998
environmental crimes.
Lei nº 2305/2010 Establishes the National Policy of Solid Residues Management, with requirements for recycling and final disposal.
Resolução CONAMA
Establishes the requirement of environmental licensing process for agriculture activities.
nº 237/1997
HEALTH AND NR 04 Establishes the requirements for the companies’ internal services of Health and Safety in labor.
SAFETY
REGULATIONS NR 05 Establishes the requirements for the companies’ Internal Commission of Labor Accidents Prevention.
NR 06 Establishes the requirements for the use of Personnel Protection Equipment.
NR 07 Establishes the requirements for the Plan for Medical Control of Occupational Health (PCMSO).
NR 09 Establishes the requirements for the Program of Labor Environmental Risks Prevention (PPRA).
NR 10 Heath and safety rules to work involving electricity.
NR 11 Health and safety rules for transportation, storage and handling of materials and goods.
NR 12 Health and safety rules for machinery and equipment operations.
NR 13 Health and safety rules for boilers operation.
NR 31 Establishes the requirements of health and safety in rural labor.
NR 35 Health and safety rule for work at height.
LABOR The “Consolidation of Labor Laws” that establishes the main requirements and rules on labor relations, including worker rights
REGULATIONS Decreto Lei nº (ex. minimum wage, annual 30 day of paid leave, 120 days of paid maternity leave and other maternity rights, prohibition of
5452/1943 child labor, freedom to create and join unions and recognition of their official role as workers representatives, among many
others).
Forbids any employer from applying any form of discrimination in labor relations (including hiring processes), based on sex,
Lei nº 9029/1995 ethnic or geographic origin, race, skin colour, civil state, familiar situation, disability, age, and others. Specifically, it prevents the
employer from requesting pregnancy test or sterilization certificates during hiring processes.
SOCIAL
PROTECTION Decreto Lei Establishes the Penal Code, defining, among others, the crimes against personal freedom and penalties for them (ex. crimes of
REGULATIONS nº2848/1940 sexual harassment, crime of coercion, crime of threat, and crimes against labor organization, among others).

Establishes de Civil Code, that regulates, among others, society and business relations between private parties and require
Lei nº 10406/2002 specific documentation for private properties transactions (including lands for farms and plantations) and conditions for a contract
be considered legally valid.
Lei nº 8069/1990 Establishes the Children and Teenagers Statutes, with their rights and protection legal devices.
Decreto nº Establishes the National Policy of Traditional Peoples and Communities Sustainable Developments, recognizing their right to their
6040/2007 territories (approach other kinds of traditional peoples, rather than indigenous or quilombola).

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 Theme Requirement Subjects approached
Regulates the Brazilian official retirement pension fund (available to all workers in Brazil). All employers and employees are
obligated to contribute with this fund, to support employee’s retirement payments.
Lei 8213/1991

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Appendix 12: Case study illustrating different approaches to
national applications of RSPO P&C for soil
(Please see Section 8.5.1 in main report).

One area in which there is significant departure from the P&C of the RSPO is in dealing
with soil.42 Table 25 lists some of the differences in definitions and guidance for Malaysia
and Indonesia within the RSPO. The issues include:
(i) The use of technical and confusing terminologies that are challenging for most
RSPO auditors and HCV/HCS assessors to apply accurately.
(ii) Different definitions for peat, marginal soils and fragile soils (RSPO vs. MSPO vs.
ISPO vs. the HCS Approach (used by TFT traceability - Wilmar.
(iii) Difficulties in mapping peat soil location and depths, as well as inconsistent or
conflicting maps of peat lands43.

Table 25: Case Study: Soil considerations in the RSPO

Malaysian Interpretation of P&C Indonesian Interpretation of P&C
(2014) (2014)

Problem/risky Problem and marginal soils – may Risky and marginal soils – may include
and marginal include podzols soils such as BRIS and sandy soils, low organic content soils,
soils kerangas soil, and potential or actual and potential or actual acid sulphate
acid sulphate soils. soils.
Fragile soils Fragile soils on which extensive Fragile soils on which extensive
planting shall be avoided – include peat planting shall be avoided – include
soils and mangrove sites. peat soils, mangrove sites and other
wetland areas.
Peat Peat: Soil profile with more than half of Peat: planting on peat areas with
the top 100cm consists of organic soil depth of 3m or more is not allowed
materials. Planting on peat areas with within a new development. If planting
depth of 3m or more is not allowed is conducted on peat with <3 m
within a new development. Planting on depth, then the area shall meet the
peat domes or fibric/woody peat should following requirements: a. Within
be avoided as well as any other areas designated cultivation area b.
identified to be excluded in EIA, HCV Proportion of <3m depth of peat soil
assessment and carbon stock and mineral soil (if any) is minimal
assessment. 70% of the total concession area c.
Peat soil maturity level is mature
(sapric) d. Fertility level is eutrophic.

Note: Soil considerations in MSPO, ISPO and TFT’s HCS Approach differ44 Source: Adapted from
Suksuwan (2017)45

42
Relevant P&C include Criterion 4.3: Practices minimise and control erosion and degradation of
soils and Criterion 7.4: Extensive planting on steep terrain, and/or marginal and fragile soils,
including peat, is avoided.
43
Suksuwan, Surin (2017), 'Soil Considerations in Palm Oil Sustainability, HCV and HCS: A
Practical Perspective of Key Issues' (Presentation), Proforest, CEH & CFF Workshop on Soil
Quality Challenges in Malaysia and Indonesian Oil Palm Plantations, 2-3 March 2017,
Semenyih, Malaysia.
44
Suksuwan (2017): Soil considerations in MSPO: Fragile soils defined as problematic and
marginal soils in which their utilisation requires higher production cost due to specific
management requirements. Peat: soils with organic soil material which make up more than
half the total cumulative thickness of the upper 100 cm. Soil considerations in ISPO: Planting
allowed on peat soil in a block with depth < 3 m and proportion up to 70% of cultivated peat
area, the mineral soil layer beneath the peat is not quartzite sand or acid sulphate soil, and on
peatland with a sapric maturity level. HCS Approach: In addition to aboveground biomass,
peatlands must be identified and conserved – no development on peat regardless of depth.

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For Malaysia the RSPO NI includes national guidance on erosion (4.3.1 erosion on sloping
land; and 4.3.4 about peat soils, see below), riparian buffer zones (4.4.2 refers to
national best practice and national guidelines) and storage of pesticides (4.6.6 according
to national regulations). It is notable that definitions vary on problem and marginal soil
and extensive planting on fragile soils46

Protection of all soils with an organic layer of >15 cm in depth as a precaution to ensure that
the soil carbon threshold is never exceeded.
45
Suksuwan, Surin (2017), 'Soil Considerations in Palm Oil Sustainability, HCV and HCS: A
Practical Perspective of Key Issues' (Presentation), Proforest, CEH & CFF Workshop on Soil
Quality Challenges in Malaysia and Indonesian Oil Palm Plantations, 2-3 March 2017,
Semenyih, Malaysia.
46
Interview with sustainability implementation specialist, 5 July 2017.

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Appendix 13: Further examples of voluntary palm oil-related voluntary initiatives and schemes

(Please see Section 8.6 in main report).

Table 26: Summary table of examples for other voluntary palm oil-related initiatives and schemes

Topic Characteristics

Name of initiative: The Terra Bella Colombia Fund

Description: The Terra Bella Colombia Fund is designed to mobilize private equity investments to finance smallholder agriculture, non-
timber forest products, and climate change mitigation in Colombia. The Fund utilizes an innovative public-private partnership structure,
combining anchor investments from USAID/Colombia with private funds to deliver Colombia’s first investment fund dedicated to
smallholders and rural development, including for Afro Colombians, Indigenous and other community groups and cooperatives.
Overview Lead by: Terra Global Capital (Fund Manager: Terra Global Investment Management, was founded in 2006)
Partners: USAID and private sector investors
Demand / Supply-side focus targeting the production-end of value chains, focusing on the stages that are managed
supply- directly by the smallholder producers.
side:
Scope: National. Non-timber forest products; smallholder support and rural development in Colombia.
Objectives To generate long-term returns for investors while delivering measureable environmental and social
& targets: benefits by enabling transformation to sustainable landscape management and increased rural incomes,
including through the sale of emissions reductions certificates generated from avoiding deforestation,
promoting reforestation, and adopting climate-smart agriculture.
Key Investing in climate-smart smallholder agriculture. Linked Technical Assistance Facility to “bridge the gap”
activities: that smallholders face in achieving readiness to access investment capital.
Likely Unknown at this time
impact:
Source: http://www.terraglobalcapital.com/terra-bella-colombia-fund-0

Name of initiative: Nestlé SA Global Sustainable Palm Oil Programme and Commitment on (Zero) Deforestation and Forest
Stewardship

Description: In 2016, Nestlé bought 420,000 tonnes of palm oil, mostly from Malaysia and Indonesia. It has committed to zero
deforestation in its supply chains by 2020, with an initial focus on the main forest-risk commodities in its supply chain (i.e. palm oil,
soya, beef, timber products, coffee and cocoa); and has laid out a clear process by which it works with two NGOs – The Forest Trust
and Proforest – to ensure that suppliers comply with, and are auditing against, Nestlé’s policy and the requirements of its Responsible
Sourcing Guidelines, which include Specific Requirements for Palm Oil, which go beyond the requirements of the RSPO Standard,

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particularly in relation to high carbon stocks and high conversation value forest and peatland.
Overview Lead by: Nestlé SA
Partners: The Forest Trust and Proforest
Demand / Combination
supply-
side:
Scope: Global. Applies to all palm oil suppliers, including smallholders.
Objectives Zero deforestation by 2020.
& targets:
Key Development of palm oil specific principles and requirements within Sustainable Sourcing Guidelines;
activities: independent auditing of suppliers.
Likely Significant given volume of palm oil procured, ‘beyond RSPO” approach and independent NGO supplier
impact: audits. Nestlé approach cited as exemplar model by GCP and CDP in their review of the CGF Zero Net
Deforestation by 2020 Commitment.
Source: http://www.nestle.com/csv/communities/responsible-sourcing/palm-oil and http://www.nestle.com/asset-
library/documents/library/documents/corporate_social_responsibility/nestle-responsible-sourcing-
guidelines.pdf

Name of initiative: Yum! Brands Palm Oil Policy

Description: The Yum! Brands Palm Oil Policy sets goals across the company’s restaurants (including KFC, Pizza Hut, and Taco Bell) to
reduce use of palm oil as cooking oil, and to give preference to suppliers certified by the RSPO.
Overview Lead by: Yum! Brands Palm Oil Policy
Partners:
Demand / Supply-side
supply-
side:
Scope: International. Affects all restaurants under the brand’s purview.
Objectives Removal of palm oil as cooking oil restaurants by 2017, contingent upon what the market allows.
& targets: Remaining palm oil used for cooking will be sourced from responsible and sustainable sources by the end
of 2017; preference will be given to suppliers certified by RSPO, in addition to the following principles:
 No development on HCV or HCS forests/landscapes
 No development on peatlands regardless of depth
 Compliance with country laws and regulations, and Yum! Brands supplier code of conduct
 Prevention and resolution of conflicts with the principle of FPIC
 Traceability to the extraction mill and validation of fresh fruit bunches
 Respect and protection of human rights including not employing children or forced labourers

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 Key Phasing-out of palm oil wherever feasible. Sourcing palm oil from certified suppliers.
activities:
Likely Unknown. Possibly limited by market circumstances. Currently, 70 percent of the brand’s global
impact: restaurants do not use palm oil as their cooking oil
Source: http://yumcsr.com/environment/environment-policies.asp
http://yumcsr.com/food/nutritional-improvement.asp#palmOil
Name of initiative: Palm Oil Traceability Working Group

Description: The Sustainable Trade Initiative (IDH) has assembled the Palm Oil Traceability Working Group (TWG) in order to align key
stakeholders in terms of the definition and implementation of supply chain traceability.
Overview Lead by: IDH – The Sustainable Trade Initiative
Partners: Cargill, First Resources, GAR, Hershey, IOI, Johnson & Johnson, Kuala Lumpur Kepong Berhad, Musim
Mas, Neste Oil, P&G, Unilever, Wilmar
Demand / Demand- and Supply-side
supply-
side:
Scope: International
Objectives  To promote a common definition of traceability for all actors in the industry.
& targets:  To achieve full traceability and sustainability to plantation level
 That all TWG members follow a transparent process in achieving traceability and sustainability in their
supply chains, including the prioritization of highest risk mills.
Key Establishing common definitions, milestones, and methods. Cooperation amongst members in prioritizing
activities: high-risk areas and verifying shared mills.
Likely Increased transparency across the industry
impact:
Source: https://www.idhsustainabletrade.com/uploaded/2016/07/TWG-concept-note.pdf

Name of initiative: andgreen.fund

Description: The andgreen.fund aims to finance inclusive, sustainable, and deforestation-free commodity production, and so
strengthen the case for a new rural development paradigm that protects valuable forests and peatlands and promotes high-productivity
agriculture.
Overview Lead by: IDH – The Sustainable Trade Initiative
Partners: Norway’s International Climate and Forest Initiative
Demand / Supply-side
supply-
side:

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 Scope: International.
Objectives  Protect and restore tropical forests and peatlands
& targets:  Improve smallholder livelihoods
 Inclusively increase agricultural production
 To attract commercial investors by mitigating their credit and environmental risk
Key  Investing up to $400 million by 2020
activities:
Likely Potentially more investment in smallholder producers
impact:
Source: http://www.andgreen.fund/
http://innpact.com/en/References/andgreen-fund
Name of initiative: Sustainable Palm Oil Investor Working Group (IWG)

Description: The IWG is a grouping of investment organizations which support the development of a sustainable palm oil industry
through the work of the RSPO
Overview Lead by: United Nations-supported Principles for Responsible Investment
Partners: Allianz Global Investors, APG Asset Management, Arisaig Partners, Aviva Investors, Boston Common Asset
Management, Christian Super, CDC Group Plc, DNB, DoubleDividend Investment Management, Ecofi
Investissements, First State Investments, Generation Investment Management, Guardians of New Zealand
Superannuation, Hermes Equity Ownership Services, Investec Asset Management, Kempen Capital
Management, Local Authority Pension Fund Forum, Local government Super, MN, Natixis Asset
Management, NEI Investments, Nelson Capital Management, PGGM Investments, RobecoSAM, Swedbank
Robur, Stichting Pensioenfonds UWV, Trillium Asset Management, Triodos Investment Management, Union
Investment
Demand / Demand-side
supply-
side:
Scope: International
Objectives  To expand investor interest in the palm oil industry as it relates to sustainable development goals
& targets:  To encourage investee adherence to practices that are consistent with the development of a sustainable
palm oil industry
Key Engagement with buyers of palm oil to encourage them to purchase only CSPO, as well as engagement
activities: with the suppliers of palm oil to adhere to the principles and criteria established by the RSPO.
Likely Unknown
impact:
Source: https://www.unpri.org/page/investors-urge-greater-sustainability-commitments-from-palm-oil-producers
https://www.unpri.org/download_report/3864

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Name of initiative: Wilmar Financing Sustainable Smallholder Replanting

Description: A collaborative effort lead by Wilmar, an independent smallholder cooperative with 2,700 members who typically manage
2-5 Ha of land, which aims to provide financial support to palm oil smallholders.
Overview Lead by: Wilmar
Partners: Nestle, IDH, L'Oréal
Demand / Supply-side
supply-
side:
Scope: Smallholders in Indonesia
Objectives To build increased future supply of sustainable palm oil production from smallholders by providing financial
& targets: support to enable RSPO certification and replanting. The programme innovates through requiring upfront
commitment, especially from downstream buyer companies that are customers of the palm oil mill where
the smallholder fresh fruit bunches are delivered to.
Key Financing of $4,000 per Ha over 15 years; benefits 2,700 independent smallholders
activities:
Likely Increased adoption of RSPO certification by smallholders, who may benefit from premiums
impact:
Source: https://www.tfa2020.org/wp-content/uploads/2016/11/Wilmar-Financing-Sustainable-Smallholder-
Replanting-2016.pdf
http://www.wilmar-international.com/sustainability/wp-content/uploads/2016/10/Q3-2016-Sustainability-
Policy-Implementation-Progress-Update.pdf
Name of initiative: PepsiCo Palm Oil Action Plan

Description: PepsiCo’s Palm Oil Action Plan details the company’s commitments to source sustainable palm oil, which apply to all of
the company’s brands and products worldwide.
Overview Lead by: PepsiCo
Partners: IDH Traceability Working Group, Proforest, Control Union
Demand / Demand-side
supply-
side:
Scope: International
Objectives  100% traceability with independent verification
& targets:  100% mass balance physically certified palm oil by 2020
Key  Conducting assessments of mills per the checklist developed by the TWG
activities:  Assessment visits to high-risk mills, and interventions to ensure compliance

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 Likely Unknown.
impact:
Source: https://www.pepsico.com/docs/album/policies-doc/pepsico-palm-oil-action-plan-progress-report-august-
2016.pdf?sfvrsn=4
https://www.environmentalleader.com/2017/08/pepsico-now-traces-90-palm-oil-back-mill-ensure-future-
supply/
Name of initiative: South Sumatra Partnership for Sembilang-Dangku Alndscape Management MoU

Description: The Memorandum of Understanding signed between SNV Netherlands Development and GAR/SMART is an agreement to
work together to help palm oil smallholders increase field productivity and income, and apply for sustainable palm oil certification.
Overview Lead by: SNV Netherlands Development
Partners: GAR/SMART
Demand / Demand- and Supply-Side
supply-
side:
Scope: South Sumatra, Indonesia
Objectives  To minimise risks of smallholder production activities which are not in line with GAR Social and
& targets: Environmental Policy
 To increase smallholder field productivity through best practice sharing, resulting in higher income
 To support smallholders in applying for sustainable palm oil certification, such as ISPO, ISCC, and RSPO
Key Training for smallholders in best practices, and support in applying for sustainable palm oil certification
activities:
Likely Inclusion of smallholders in growth
impact:
Source: https://goldenagri.com.sg/partnership-snv-support-palm-oil-smallholders/

Name of initiative: Earth and People

Description: Earth and People is the endowment fund of the Cérélia company, which is to provide support and/or financing for all
public interest projects stemming from Cérélia’s social responsibility commitments. PALMCI and the SIFCA Group are both leading palm
oil producers; the former is the leading producer of crude palm oil in Côte d’Ivoire, while the latter operates internationally and is
involved in every stage of the palm oil value chain.
Overview Lead by: Cérélia
Partners: TFT, PALMCI, SIFCA
Demand / Supply-side
supply-
side:

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 Scope: International, with a focus on Côte d’Ivoire
Objectives Company-wide goals:
& targets:  To buy 100% certified RSPO palm oil
 To use 100% palm oil following Cérélia’s more stringent criteria by 2018
Project-specific goals
 To help develop the Ivorian sustainable palm oil industry by improving plantation yields without
resorting to deforestation
 To protect the environment
 To improve living conditions for communities and producers who rely for part of their livelihood palm oil
Key Two initial activities are being carried out to identify needs:
activities:  A diagnosis of Integrated Farm Units in Néka village, and their environmental impact
 A map of the plantations to identify zones to be protected
 A survey to identify the needs of the growers concerned
After the completion of this initial phase, the rest of the programme will be implemented until 2020
Likely Unknown
impact:
Source: http://www.cerelia.com/_media/files/Communique-Presse-07122015_EN.pdf
http://www.tft-transparency.org/member/cerelia/
Name of initiative: Wilmar Action Plan to Address Labour Concerns in North Sumatra

Description: Following an Amnesty International report, which raised the issue of plantation workers’ welfare, Wilmar conducted
multiple internal and external assessments in two plantations in North Sumatra, after which the company developed and implemented a
comprehensive labour programme.
Overview Lead by: Wilmar
Partners: Verité South East Asia
Demand / Supply-side
supply-
side:
Scope: Indonesia, with a focus upon Wilmar’s plantations
Objectives The objective is to formulate sustainable solutions to systemic labour problems existing in the Indonesian
& targets: palm oil sector, and to help ensure sustained company-wide conformance to social standards.
Key  Measures to stop child labour, which include encouraging children to attend school, educating parents,
activities: and reinforcing the No Child Labour policy with all workers
 Reducing the proportion of temporary workers, with priority given to female temporary workers
 Increased healthcare benefits and health education for workers
 Supporting worker unions
 Re-assessment of OSH policies and OSH worker trainings

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 Likely Improved conditions for labourers and communities
impact:
Source: http://www.wilmar-international.com/sustainability/wp-content/uploads/2017/04/Wilmar%E2%80%99s-
Action-Plan-To-Address-Labour-Concerns-In-North-Sumatra.pdf
http://www.foodnavigator.com/Business/Wilmar-announces-partnership-to-end-labour-violations-in-palm-
oil-supply-chain
Name of initiative: Mars Palm Oil Policy / GOOD Program

Description: The Mars Palm Oil Policy details the company’s ambitions in terms of sourcing palm oil, while the GOOD program is a plan
for collaborating with suppliers to help transform the way palm oil is produced.
Overview Lead by: Mars
Partners: TFT, Wilmar
Demand / Demand- and Supply-side
supply-
side:
Scope: International, with a emphasis on Indonesia and Malaysia
Objectives General:
& targets:  To source fully sustainable and traceable supplies that are free from deforestation and produced with
respect for human rights.
Program-specific:
 Work with suppliers to simplify palm oil supply chain
 Increase support for the Aggregator Refinery Transformation program in key landscapes that contribute
to the company’s supply chain
 Work with strategic partner Verité on a human rights plan for palm oil
 Continue to support the development of TFT’s monitoring and verification framework
Key  Working with the TFT to achieve 95% traceability of palm oil supplies to mill level
activities:  Continued collaboration with Wilmar and TFT as they implement the ART program
 Playing an active role in the Consumer Goods Forum working group on forced labour in palm oil
 Participating at major industry events including the 14 th RSPO roundtable in Bangkok
 Supporting TFT to pilot an innovative framework for monitoring and verification of policy compliance
Likely Increased market presence for sustainable palm oil
impact:
Source: http://www.mars.com/docs/default-source/Policies-and-Practices/palm-update-q2-2017.pdf?sfvrsn=6

Name of initiative: Solaridad Smallholder Programme

Description: An initial smallholder programme with a budget of €2.7 million, led by Solaridad, engaged with farmers in Honduras from
2013-15. The project area covered 100,000 Ha and reached 7,500 smallholders and 5,000 workers. A second project in Inodnesia will

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run from 2015-2020, and plans to engage 5,500 smallholders with a project area covering 16,000 Ha.
Overview Lead by: Solaridad
Partners: Henkel, BASF (Indonesia programme only), WWF, Proforest, SNV, Good Return, Credit Union Keling
Kuman,
Demand / Supply-side
supply-
side:
Scope: Honduras, Indonesia (West Kalimantan)
Objectives The aim of both projects is capacity-building amongst smallholders through investment in sustainable and
& targets: inclusive palm oil supply chains.

Key Generally, both projects aim to help smallholders attain requirements for certified palm oil production:
activities:  Direct training and support on (sustainable) best agricultural practices
 Improved farm management practices
 Training concerning areas of health and safety, environmental and social impact management
Likely Increased palm fruit yields and increased smallholders’ revenue. Farmers and companies participating in
impact: the Honduras project increased their yields by more than 25 per cent.
Source: Honduras project:
https://www.solidaridadnetwork.org/news/henkel-and-solidaridad-foster-smallholder-programme-to-
support-sustainable-palm-oil
https://www.solidaridadnetwork.org/news/smallholder-programme-reaches-17500-farmers-in-honduras
http://www.henkel.com/press-and-media/press-releases-and-kits/2016-06-08-smallholder-program-in-
honduras-reached-17500-small-farmers-and-workers/688154

Indonesia project:
https://www.solidaridadnetwork.org/news/solidaridad-henkel-and-basf-support-smallholders-in-poorest-
regions-of-indonesia
Name of initiative: Wild Asia Group Scheme for Small Producers

Description: The Wild Asia Group Schemes (WAGS) is intended to address the challenges of traceability in the palm oil supply chain, to
understand the challenges palm oil suppliers face to meet “zero deforestation” commitments, and the challenges of smallholders in
enhancing their productivity and best management practices. Since 2010, the scheme has supported smallholders across Malaysia in
six areas, with four areas having achieved RSPO certification. These areas have experience dramatic yield increases.
Overview Lead by: Wild Asia
Partners: Cargill, Solaridad
Demand / Supply-side
supply-

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 side:
Scope: Malaysia
Objectives Capacity-building for smallholders, including the adoption of best agricultural practices and facilitation of
& targets: RSPO certification.

Key Providing smallholders and dealers with technical assistance, better access to technology, and the
activities: necessary expertise to help them adopt responsible and efficient practices to improve their crop yields and
obtain the RSPO certification
Likely Large increase in smallholder yields and RSPO certification, inclusive growth for smallholders
impact:
Source: https://www.cargill.com/2017/cargill-grows-base-of-certified-sustainable-independent-oil-palm
http://oilpalm.wildasia.org/small-producers/wags/
Name of initiative: Dutch Alliance Sustainable Palm Oil (DASPO)

Description: Successor to the Dutch Task Force Sustainable Palm Oil.

Overview Lead by: MVO – The Netherlands Oils and Fats Industry, who provide the secretariat for DASPO and act as
spokesperson for its members.

Partners: Dutch Bakery and Confectionary Industry (VBZ), Dutch Convenience Food Association (AKSV), Dutch Food
Retail Association (CBL), Dutch Food Industry Federation (FNLI), Dutch Potato Processors’ Association
(VAVI), International Margarine Association for the Countries of Europe (IMACE-NL), The Dutch Feed
Industry Association (Nevedi), and the Association of Dutch Producers of Edible Oils and Fats (Vernof).
IDH, the Sustainable Trade Initiative is also a partner of DASPO.

Demand / Demand-side.
supply-
side:
Scope: Sectoral. Dutch food industry.
Objectives Three main commitments:
& targets: 1. Maintain the commitment towards the level of 100% sustainable palm oil1 processed in the
Netherlands and destined for the Dutch market.
2. Stimulate their members to use physical sustainable palm oil, palm kernel oil, fractions and
derivatives in RSPO (Identity Preserved, Segregated and Mass Balance) or -equivalent to process or
buy for the Dutch market.
3. To plea for, and stimulate the continuous improvement of certification systems for sustainable palm oil
such as the RSPO or –equivalent in line with relevant developments.

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 Key  Seeking to achieve ‘100 per cent sustainable palm oil processed in the Netherlands and destined for the
activities: Dutch market’ through food sector and cross-sectoral collaboration.
 DASPO members aim to increase the share of physical, certified sustainable palm oil by stimulating the
demand for Identity Preserved, Segregated or Mass Balance trading models as much as possible.
 Lobbying and working towards improvements in sustainable palm oil standards, in particular with a
focus on improving the protection of high carbon stock areas and peatland; and supporting of
sustainable palm oil production by (independent) smallholders to prevent them from being excluded
from a sustainable palm oil supply chain.
Likely The members of the DASPO will evaluate their commitment every year. All DASPO members are open for
impact: relevant input and knowledge from external stakeholders. NOTE: at the end of 2014 the Dutch food
industry had achieved 72% sustainable palm oil use.
Source: http://www.taskforceduurzamepalmolie.nl/uploads/media/Dutch_Alliance_Sustainable_Palm_Oil_-
_commitment_english.pdf and
https://www.palmoilandfood.eu/sites/default/files/6_A%20150929%20EPOC%20and%20ESPO%20FINAL.
pdf

Name of initiative: We Mean Business Coalition

Description: Coalition of organisations and businesses working towards the transition to a low carbon economy. Acts as a platform for
businesses to make public commitments to reduce emissions, which are automatically fed into the UNFCCC's NAZCA platform.
Companies are encouraged to commit to one or more of several initiatives to reduce their emissions, including removing commodity-
driven deforestation from all supply chains by 2020; and growing the market for sustainable fuels. To date, 765 companies and
investors have made commitments.
Overview Lead by: BSR, CDP, Ceres, The B Team, The Climate Group, wbscd.
Partners: UNEP Finance Initiative, cebds, WWF etc.
Demand / Supply and demand– companies with commitments include major producers and traders of palm oil such
supply-side: as Bunge and Olam, manufacturers such as General Mills, and retailers such as Carrefour.
Scope: Global – businesses form around the world.
Objectives & Amplify the business voice in climate change action.
targets:
Key Public forum for commitments to emissions reductions.
activities:
Likely Encouragement of bold climate commitments by businesses, as these commitments are recognised in a
impact: public forum.
Source: https://www.wemeanbusinesscoalition.org/take-action

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Name of initiative: GAR Innovative Financing Program

Description: Financing program, which allow independent smallholders to secure loans with affordable interest rates to fund their
replanting under the umbrella of the Partnership for Indonesia’s Sustainable Agriculture (PISAgro).
Overview Lead by: Golden Agri Resources Ltd.
Partners: Indonesian Government
Demand / Demand
supply-side:
Scope: Indonesia
Objectives &  To increase smallholders’ productivity and income while minimising additional land development
targets:  To engage farmers and build capacity via education and training
 To support Government land certification program and legalise farmer’s land ownership
 To provide subsistence income during replanting growth period
Key Assisting smallholders in securing loans for replanting of oil palm and helping to increase average CPO
activities: yield through provision of high quality seeds and encouragement of GAPs.
Likely Local. Over 450 smallholders participate in the programme and to date, GAR has successfully assisted
impact: independent smallholders to secure a loan facility of IDR 100 billion from a state-owned bank to replant
1,200 hectares.
Source: https://www.tfa2020.org/en/reports/annual-report-2017/#landscape-fund-for-tropical-landscapes-and-
forests
Name of initiative: LandMark

Description: Online, interactive global platform mapping the lands collectively held and used by indigenous peoples
Overview Lead by: The Instituto del Bien Común (IBC), World Resources Institute (WRI) and the International Land Coalition
(ILC)
Partners: AMAN, RRI, Foundation for Ecological Security (FES) in India, Philippine Association for Intercultural
Development (PAFID), Forest Peoples Programme (FPP), Rainforest Foundation United Kingdom (RFUK),
the World Atlas of Indigenous Peoples' Territories (WAIPT), The Union of Indigenous Nomadic Tribes of
Iran (UNINOMAD) and Red Amazónica de Información Socioambiental Georreferenciada (RAISG).
Demand / Supply – tackling issues of land tenure.
supply-side:
Scope: Global but currently with a focus on
Objectives & The global platform is designed to help Indigenous Peoples and communities protect their land rights and
targets: secure tenure over their lands.
Key LandMark provides Indigenous Peoples and communities with an online global platform to make
activities: governments, development assistance agencies and others aware of the lands they hold and use. The site

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 allows indigenous people to be proactive in their efforts to protect their lands.
Likely Protection of land held by indigenous peoples in new palm oil developments.
impact:
Source: http://www.landmarkmap.org/

Name of initiative: Bonn Challenge

Description: Global effort to bring 150 million hectares of the world’s deforested and degraded land into restoration by 2020, and 350
million hectares by 2030.
Overview Lead by: Overseen by the Global Partnership on Forest Landscape Restoration, with the International Union for
Conservation of Nature as its Secretariat.
Partners: National governments
Demand / Supply-side
supply-side:
Scope: Global
Objectives & Bring 150 million hectares of the world’s deforested and degraded land into restoration by 2020, and 350
targets: million hectares by 2030.
Key Gathering commitments to increase area of world’s degraded land under restoration pledges.
activities:
Likely The restoration of 150 million hectares of degraded and deforested lands in biomes around the world will
impact: create approximately USD 84 billion per year in net benefits that could bring direct additional income
opportunities for rural communities.
Source: http://www.bonnchallenge.org/

Name of initiative: Retail Palm Oil Transparency Coalition (RPOTC)

Description: The Retail Palm Oil Transparency Coalition (RPOTC) is formed of companies working together to remove deforestation and
exploitation from palm oil supply chains.
Overview Lead by: Marks and Spencer
Partners: Tesco, Sainsbury’s, Aldi, Boots, Co-operative Foods, etc.
Demand / Demand-side
supply-side:
Scope: Global
Objectives &  Achieve greater transparency of the progress European and US importers are making towards zero
targets: deforestation palm oil supply chains;
 Enable individual retailers and product suppliers/manufacturers to make more informed
sourcing/purchasing decisions; and,
 Drive faster progress towards the supply of zero deforestation palm oil for European and US markets

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 and helping the same globally through the take up of this or similar models.
Key Development of a comprehensive survey that will be used to annually assess the individual performance
activities: of the First European and US Palm Oil / Kernel Importers covering a range of environmental and social
issues.
Likely Unknown.
impact:
Source: 3Keel project database.

Name of initiative: Retail Palm Oil Group (RPOG)

Description: The Retail Palm Oil Group is a non-competitive coalition of Retail Companies with a common aim of promoting the
adoption of sustainable palm oil.
Overview Lead by: Secretariat provided by member of the RSPO governing board in the UK
Partners: The group’s participants are: Aldi-SOUTH Group; Asda (part of Wal-Mart); Boots UK; Coles (Australia);
COOP (Switzerland); Delhaize Group; Federation of Migros Cooperatives; J Sainsbury; Marks & Spencer;
Royal Ahold; Tesco; The Body Shop International; The Co-operative Food (UK); and Waitrose. The group’s
members are: Aldi-SOUTH Group; Asda (part of Wal-Mart); Boots UK; Coles (Australia); COOP
(Switzerland); Delhaize Group; Federation of Migros Cooperatives; J Sainsbury; Marks & Spencer; Royal
Ahold; Tesco; The Body Shop International; The Co-operative Food (UK); and Waitrose.

Demand / Demand-side
supply-
side:
Scope: Global
Objectives To improve transparency in palm oil sourcing for the retail sector; and promote the adoption of sustainable
& targets: palm oil. All of the retailers in the Group have set their own goals and targets in relation to sustainable
palm oil.
Key Developing common criteria and assessing importers (processors and refiners), to provide information to
activities: all retailers.

Likely Provides an important shared information source on the sustainability performance of palm oil importers,
impact: helping to inform global retailer sourcing policies and buying decisions.
Source: https://www.rspo.org/organisation/info/belinda-howell and https://corporate.marksandspencer.com/plan-
a/our-approach/food-and-household/product-standards/raw-materials-commodities-and-ingredients/palm-
oil
Name of initiative: Unilever Sustainable Palm Oil Sourcing Policy

Description: As the worlds single largest end user of palm oil in the consumer goods industry, Unilever’s Sustainable Palm Oil Sourcing

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Policy aims to drive transformational change in the palm oil supply chain.
Overview Lead by: Unilever
Partners: Policy covers supply chain, as well as collaborating with key suppliers, governments, and NGOs
Demand / Demand- and Supply-side
supply-
side:
Scope: Global
Objectives To reach 100% traceable and physically certified palm oil in the company’s supply chain by 2019, as well
& targets: as to transform the broader palm oil market. Specifically, the Policy commits to:
 No deforestation, including no conversion of HCV or HCS forests
 No development on peat
 No exploitation of people or communities, including FPIC for indigenous and local communities
 Driving positive social and economic impact for smallholders and women
 Transparency within the supply chain
Key Ensuring that suppliers and third parties meet the policies above through adherence to the RSPO Principles
activities: & Criteria and New Planting Procedure, in addition to requirements on HCS and peat. High-risk sources are
required to provide independent third-party verification. These requirements are accompanied by strategic
investments in the supply-chain.
Likely Possibility for raised standards across the industry
impact:
Source: https://www.unilever.com/Images/unilever-palm-oil-policy-2016_tcm244-479933_en.pdf

Name of initiative: Golden Agri-Resources Social and Environmental Policy (GSEP)

Description: As the world’s second largest palm oil plantation company, Golden Agri-Resources’ SEP aims to achieve sustainable palm
oil production throughout the company’s supply chain, as well as to promote this policy across the palm oil industry.
Overview Lead by: Golden Agri-Resources (GAR)
Partners: Policy covers supply chain, as well as engaging with community stakeholders, Government of Indonesia,
civil society organisations and industry stakeholders
Demand / Demand- and Supply-side
supply-
side:
Scope: Indonesia
Objectives To attain palm oil operations that are deforestation-free, traceable, and bring benefits to the people and
& targets: communities where GAR operates. The Policy commits to:
 Environmental management, including no development of HCS or HCV forests or peatlands
 Social and community engagement, including FPIC for indigenous and local communities

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  Work environment and industrial relations commitments
 Marketplace and supply chain commitments, including traceable and transparent supply chain
Key Ensuring that the above requirements are met across the company’s vertically integrated supply chain, as
activities: well as third-party suppliers. This is accompanied by investments into yield improvements, continued
development of the HCS Approach methodology, and collaboration with stakeholders.
Likely Elimination of deforestation from the GAR supply chain
impact:
Source: http://goldenagri.com.sg/wp-content/uploads/2016/09/GAR_Social_and_Environmental_Policy-2.pdf

Name of initiative: Tropical Forest Alliance 2020 African Palm Oil Initiative (APOI)
Description: The was the first regional partner initiative of the TFA 2020: 10 West and Central African countries engaged in the African
Palm Oil Initiative of the TFA 2020, signing the Marrakesh Declaration for Sustainable Development of the Oil Palm Sector in Africa at
COP22 in November 2016, pledging to develop a new regional market for sustainable oil palm sector across the region. This process
would be guided by the Declaration’s underlying principles in favour of sustainability, good governance, transparency, recognition of
community and human rights, partnerships, and the equitable sharing of benefits. Together, the seven countries represent over 250
million hectares of tropical forests, or 13% of the world’s total (TFA 2020, 2016) 47.
Overview Lead by: Tropical Forest Alliance 2020
Partners: National Governments of Cameroon, Central African Republic, Côte d’Ivoire, Democratic Republic of Congo,
Gabon, Ghana, Liberia, Nigeria, Republic of Congo, and Sierra Leone, as well as companies, civil society,
and indigenous and local peoples groups
Demand / Demand- and Supply-side
supply-
side:
Scope: Regional
Objectives Specifically, deforestation-free palm oil development. More broadly, transforming the regional palm oil
& targets: sector into a sustainable driver of low-carbon, socially beneficial development while protecting biodiversity-
rich tropical forests.
Key Development of national action plans to guide the expansion of palm oil cultivation in Côte d’Ivoire, Ghana,
activities: and Liberia, as well as the Marrakesh Declaration, a regional pledge by seven African governments to shift
towards sustainable palm oil production.
Likely Reduced deforestation, as well as improved smallholder incomes, and improved governance practice
impact:
Source: https://www.tfa2020.org/en/reports/annual-report-2017/#landscape-fund-for-tropical-landscapes-and-
forests

47
TFA 2020 Release – 16 November 2016: Partners and Non-Partners of the Tropical Forest Alliance 2020 Announce Support for the Marrakesh
Declaration for Sustainable Development of the Oil Palm Sector in Africa (accessed 30 June 2017).

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Name of initiative: Tropical Forest Alliance 2020 Latin America Initiative (LAI)
Description: The majority of TFA 2020’s work in Latin America to date has been focused on facilitating relationships between Brazilian
producers and international companies and on boosting the efforts of existing national and subnational actors.
Overview Lead by: Tropical Forest Alliance 2020
Partners: Brazilian and Colombian palm oil producers, the Brazilian Coalition on Climate, Forests and Agriculture, the
governments of Brazil and Colombia.
Demand / Demand- and Supply-side
supply-
side:
Scope: Regional
Objectives Specifically, deforestation-free palm oil development. More broadly, transforming the regional palm oil
& targets: sector into a sustainable driver of low-carbon, socially beneficial development while protecting biodiversity-
rich tropical forests.
Key  The Latin American Initiative have collaborated with WWF and Proforest to publish a report outlining the
activities: opportunities brought about by supporting legal compliance and zero deforestation in Brazil, including a
mapping of 73 local tools and initiatives to facilitate better partnerships and connections48.
 The TFA 2020 Brazil working group and the Brazilian Coalition on Climate, Forests and Agriculture have
formed a joint team to work together to help companies comply with Brazil’s Forest Code and identify
how best practices can be better shared and implemented across the country.
 TFA 2020 partners in Colombia are working to develop a platform for public private cooperation, aimed
at meeting Colombia’s deforestation goals.
Likely Reduced deforestation, as well as improved smallholder incomes, and improved governance practice
impact:
Source: https://www.tfa2020.org/en/reports/annual-report-2017/#landscape-fund-for-tropical-landscapes-and-
forests
Name of initiative: Tropical Forest Alliance 2020 Southeast Asia Initiative
Description: The SEAI supports Southeast Asian partners, businesses, NGOs, and governments to eliminate deforestation from key
commodities’ supply chains. The focus of this initiative to date has been to develop regional adaptations of TFA 2020’s Better Growth
with Forests and Financial Sector Engagement Initiatives. A working group on Supporting Smallholder Farmers is also on-going.
Overview Lead by: Tropical Forest Alliance 2020
Partners: Indonesia Palm Oil Pledge, Government of Indonesia, Peatland Restoration Agency, subnational
governments in Indonesia and Malaysia,

48
TFA 2020, WWF and Proforest - Legal compliance and elimination of deforestation from commodity production in Brazil: useful tools and initiatives for
value chain companies (2016).

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 Demand / Demand- and Supply-side
supply-
side:
Scope: Indonesia and Malaysia
Objectives Eliminate deforestation from key commodities’ supply chains by 2020
& targets:
Key  Creation of a Smallholder Farmer Task Force to exchange best practices on smallholder inclusion in
activities: sustainable supply chains and to show positive relationship between the development of sustainable
land use models and the economic and social impact on rural populations
 Promotion of leadership for sustainable land management
 Promotion of investments in sustainable commodity production
Likely Strengthened government efforts to transform the palm oil sector
impact:
Source: https://www.tfa2020.org/en/reports/annual-report-2017/#landscape-fund-for-tropical-landscapes-and-
forests
Name of initiative: Ferrero Palm Oil Charter

Description: The company’s Palm Oil Charter aims to exceed RSPO standards in addressing deforestation and socio-
economic sustainability concerns
Overview Lead by: Ferrero
Partners: The Forest Trust (TFT)
Demand / Demand-side
supply-
side:
Scope: Global
Objectives To maintain and exceed RSPO standards in the company’s supply chain, including:
& targets:  Ensuring suppliers provide fully traceable palm oil, while including smallholders
 No development in HCS or HCV forests, or on peat land
 Not using fire to clear land
 Respecting human rights, including FPIC for indigenous and local communities
 Actively fighting corruption
Key Agreements with suppliers, as well as independent third-party verification from NGO partners, including
activities: TFT, to assess suppliers, monitor progress, and publically report company performance
Likely Improved standards in the palm oil sector
impact:
Source: http://www.tft-earth.org/wp-content/uploads/2015/01/Ferrero-Palm-Oil-Charter.pdf

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Name of initiative: Forum for Sustainable Palm Oil (FONAP)
Description: The aim of the Forum for Sustainable Palm Oil (FONAP) is to significantly boost the proportion of certified palm oil, palm
kernel oil and their derivatives and fractions on the German, Austrian and Swiss markets. Together the member companies are working
towards the goal of ensuring as soon as possible all the palm oil and palm kernel oil available on these markets is certified.

Overview Lead by: FONAP Secretariat (hosted by GIZ), which assists a Steering Committee of elected member organisations
to make decisions and provides advise on issues relating to sustainable palm oil.
Partners: 46 members, including small, medium-sized and multinational companies from the food, chemicals,
detergents and cleaning products sectors and the cosmetics industry, as well as NGOs, consultancy
companies, associations and the German Federal Ministry of Food and Agriculture (BMEL).
Demand / Demand-side focus targeting the main palm oil consuming sectors and industries in its constituent
supply- countries.
side:
Scope: International – Germany, Switzerland and Austria. All palm oil consumed in these markets.
Objectives The FONAP has three pillars:
& targets: 1. A switch to certified sustainable palm oil, palm kernel oil and fractions and derivatives
2. Discussions with suppliers on traceability and other add-on criteria (e.g. POIG or RSPO Next)
3. Detailed reporting on the achievement of objectives
Key Five working groups on the following topics: communications, derivative-related issues, improving
activities: certification schemes, monitoring and reviewing progress against the FONAP Commitment and on
proposals for concrete projects in producer countries.
Likely According to the FONAP Secretariat all members already use 100% certified sustainable palm oil; and
impact: members are required to report their progress against the FONAP Commitment and that of their suppliers
through an annual membership survey. Progress information is available for around 95% of FONAP
members (see third link below).
Source: https://www.forumpalmoel.org/the-fonap and https://www.forumpalmoel.org/imglib/downloads/FONAP-
Selbstverpflichtung-Mitglieder.pdf and
https://www.forumpalmoel.org/imglib/news/Fortschrittsbericht%202016.pdf

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Appendix 14: EC Sustainable Palm Oil Study: Summary notes from
expert validation workshop
Date: 2 October 2017

Time: 09.00 – 17.30 CET

Venue: Conference Centre Albert Borschette, Brussels

Workshop objectives:

 To share and validate the main findings, messages and conclusions from the draft
study with invited experts.
 To draw on the knowledge, skills and expertise of workshop participants in order
to improve the deliverables from the study prior to finalization.

Purpose of these notes

This summary provides an overview of the key discussion points and comments from the
expert workshop and is not intended to provide a complete verbatim note of the
discussions that took place during the course of the workshop. They follow the agenda
for the day and do not attribute comments to individual participants or the organisations
that they represent.

Introductory plenary session:

The expert workshop was opened by Emmanuelle Maire (Head of Unit, ENV.F3 –
Multilateral Environmental Cooperation at DG Environment, European Commission), who
welcomed participants to the workshop and explained the importance of the palm oil
study in the context of a number of European initiatives and policies.

Hélène Perier (Forest and Wildlife Policy Officer, Unit ENV.F3) then went on to describe
the purpose and objectives of the palm oil study, including the multifaceted policy
context for the study from issues and policy around deforestation, renewable energy and
biofuels to food, trade, employment, development cooperation and research. This
included consideration of the European Parliament’s 4 April 2017 initiative on palm oil
and deforestation of rainforests and the associated non-legally binding resolution and the
Commission’s recent (7 September 2017) response to this, as well as highlighting
growing NGO and public concerns around the impact of palm oil production and
consumption; international initiatives, like the Amsterdam Declaration; and the growing
number of sustainable palm oil initiatives in the private sector.

The three main objectives of the palm oil study were to:

1) Broaden the knowledge base on the environmental, social and economic aspects
of oil palm production and palm oil consumption, trade flows in palm oil, and
actions undertaken by economic operators, EU governments and third countries
(in particular India and China) focusing on palm oil.
2) Analyse existing sustainability standards (including RSPO, ISPO and MSPO),
evaluate their completeness (especially concerning biodiversity and carbon
aspects) and appraise the gaps between such standards and the environmental
aspects to be considered in order to achieve relevant EU and international
objectives.
3) Summarise and evaluate existing initiatives at the EU level and in EU Member
States, as well as in India and China, concerning the sustainable production of
palm oil.

It was noted that as the palm oil study was analytical in nature and does not discuss or
recommend potential future policy developments in relation to palm oil discussion of

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policy was out of scope of the workshop discussions. However, the recent Commission
response to the European Parliament report and resolution provides a clear overview of
the Commission’s position on various policy areas.

Mark Barthel (3Keel) went on to provide an overview of research undertaken to date in

the study and the activities required to complete the study.

Environmental and social impact analysis

Dr Steve Jennings (3Keel), provided an overview of the environmental and social impact
analysis undertaken during the study with reference to the following themes:
 Environmental themes: deforestation, peatland conversion, biodiversity loss,
greenhouse gas emissions, use of fire in land clearance, air and water pollution.
 Social themes: land rights, forced and child labour, terms and conditions of
labour and smallholders.

During the Q&A session following this presentation the main discussion points included:
 Emphasising that the complexity of social and economic development benefits of
oil palm cultivation and palm oil production in producer countries are highlighted
in the study report (e.g. who gains better household incomes, and who doesn’t,
etc.).
 Reiteration of the differences between producer countries in South East Asia and
in Latin America, where levels of deforestation, the use of fire to clear land and
the use of forced labour are considered to be significantly lower.
 The need to compare the environmental and social impacts/benefits of palm oil
with other vegetable oils (it was noted that this was out of scope for the palm oil
study but was included in the scope of the European Commission’s feasibility
study into the development of a Global Deforestation Action Plan).
 The availability of existing and new studies and data on different modes and
systems of palm oil production (e.g. smallholder cooperatives); abuses of land
and labour rights (e.g. HCS social impacts study, RSPO complaints panel, Human
Rights Commission); and the consequences of underlying legal frameworks for
palm oil workers and their families (e.g. there are estimated to be 60,000
stateless children in Sabah as migrant workers cannot bring in their spouses).
 The potential to highlight best practice at the company-level in the palm oil sector
and particularly with regard to smallholder engagement (noting that this is
covered to some degree in the sections of the report covering voluntary initiatives
in producer and consumer countries).

Analysis of palm oil sustainability certification systems and their coverage of

environmental and social aspects required to meet EU and international policy
objectives

Dr Steve Jennings (3Keel) then provided an overview of the four main sustainable palm
oil standards and certification schemes assessed during the study (RSPO, MSPO, ISPO
and ISCC) and the environmental and social aspects to be considered in order to achieve
relevant EU and international objectives. For each of the schemes he described their key
attributes and provided examples of where different standards and systems had different
requirements (e.g. around transparency of reporting audit findings, independence of
accreditation bodies); and different ways of addressing the environmental and social
themes covered by the study (e.g. deforestation and land use rights).
This presentation was followed by another provided by Yu Leng Khor (LMC), covering the
use of national interpretations in RSPO and jurisdictional approaches in sustainable palm
oil certification schemes; and the legislative and enforcement regimes in the studies six
case study countries (Indonesia, Malaysia, Colombia, Brazil, Gabon and Liberia).

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During the Q&A session following these presentations the main discussion points
included:
 The imminent publication of an IDDRI report on the benchmarking of
sustainability standards and schemes (now shared with the project team).
 Reiteration that the RSPO principles and criteria are currently in he process of
review, which seeks to address some of the issues raised in the study
(information now shared with the project team).
 The sensitivities involved in comparing a legally based standard, like ISPO, to a
sustainability standard, like RSPO – when the former may be considered more
important by a producer country.
 Reiteration of the significant work that is going into strengthen the ISPO system,
which may be finalised before the end of 2017, and which will take into account
the findings from this study. The new ISPO Standard will include two additional
criteria: traceability and human rights; as well as independent verification
(information on the strengthening of the ISPO Standards has now been shared
with the project team).
 The existence of a version of the RSPO Standard compliant with the requirements
of the EU Renewable Energy Directive was noted, which has stricter criteria on
HCV, HCS and peatland conversion.
 Similarly, the existence of an ISCC+ Standard that takes the same sustainability
criteria as the ISCC EU Standard but is being used in the food (not biofuels)
market was noted.
 Efforts to improve the complementarity of standards: e.g. RSPO working with
ISPO and MSPO to harmonise the schemes.
 The ISCC Standard is seeking to improve its own transparency, with the prospect
of audit reports being made publicly available.
 The need for robust legal and enforcement regimes in producer countries as the
basis for stronger performance in all certification schemes.
 The need to address significant legal challenges in some producer countries – e.g.
palm oil concessions being issued in violation of legislation; concerns over
corruption.
 How to ensure the integrity of all certification systems when they are competing
for market share.
 What can be done to improve the interaction between - and complementarity of –
private and mandatory certification schemes?
 The opportunity to use jurisdictional approaches to make certification more
accessible and affordable for smallholders and to address ‘leakage’ (e.g.
deforestation that happens outside of plantation areas); and to drive demand for
certification from China and India.
 The difficulties and costs inherent in assessing the on-the-ground impact and
performance of the different certification schemes; and the woeful lack of peer
reviewed academic studies as a result.

Market context, economics and economic sustainability: palm oils role in the
vegetable oil sector
Dr James Fry (LMC) then provided a presentation illustrating the market context,
economics and economic sustainability for palm oil (including for smallholders) and its
current and future role in the vegetable oil market.

This presentation was followed by a presentation from Yu Leng Khor (LMC) on the impact
of changes in commodity prices on deforestation and peatland drainage.

During the Q&A session following these presentations the main discussion points
included:

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  The high environmental impact of peatland conversion for oil palm cultivation and
whether there is any publicly available evidence on the positive impact of the
Peatland Moratorium in Indonesia.
 The fact that increasing incomes and the dietary aspirations of a growing global
middle class will lead to increases in dairy, meat and poultry consumption, in turn
requiring more soymeal, makes it likely that soybean production and consumption
will increase in the future.
 The importance of the relatively high yields from the oil palm when compared to
other vegetable oil crops, particularly in the context of growing global demand for
vegetable oils, but that the comparison needs to take into account that other
crops (e.g., soy) produce protein as well as oil.
 The potential for new oil palm plantings to increase palm oil yields – and, if done
using existing best practice, and/or combined with intercropping with food crops
can reduce demand for new land and reduce deforestation.
 Is it possible to isolate the conditions under which palm oil brings positive social
development? What lessons can others learn from the success of the FELDA
scheme?
 Will changes in legislation in Indonesia and Malaysia, enhancements to existing
certification schemes (e.g. ISPO strengthening, RSPO Next), and a slowing down
of new oil palm planting mean a reduction in deforestation and other
environmental impacts in the sector in the future?
 Price and new seedlings - new seedlings are undifferentiated between replacing
plantations and for new plantations. Is the any data to show the proportion of new
seedlings used in new plantations versus new seedlings used to replant existing
plantations, as the latter would increase production without increasing land
pressure?

Public, private, NGO and other voluntary palm oil initiatives

Yu Leng Khor (LMC) provided an overview of the range of palm oil initiatives in the EU,
EU Member States, India and China. This included a review of the demand for certified
palm products of different types (e.g. mass balance, segregated and identity preserved
and traceable) within the EU, China and India, illustrating the leading role that the EU is
playing with respect to CSPO.

Mark Barthel (3Keel) then went on to describe the range of palm oil-related voluntary
commitments and commitments globally, with reference to different types of initiative
(group initiatives with shared / collective commitments, individual organisation
commitments, sustainable trade and financial initiatives and technology or data driven
initiatives). This included the on-going challenges facing those involved in voluntary
commitments, the progress being made towards the achievement of commitments and
the role of different actors in maximising the benefits arising from voluntary initiatives.

During the Q&A session following these presentations the main discussion points
included:
 The focus of many studies on initiatives to drive the uptake of sustainable palm oil
and its derivatives using RSPO certification. Can future studies look at the impact
of other palm oil certification schemes?
 The importance of increasing demand for CSPO in China and India to prevent
further ‘leakage’ and to bolster demand in what is currently a global oversupply
situation.
 The potential for new seed varieties to increase yields up to 8 tonnes per hectare
by 2026.
 If mechanisation is introduced in oil palm cultivation and harvesting to bring down
the costs of labour, which is increasing by 8-10% every year in some producing
countries, how will this affect rural communities and social development? There is
a need to do some research on this issue.

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  Some commitments and national Initiatives in Malaysia have not been considered
in the report - e.g. initiatives to maintain at least 50% of forest cover since Rio
summit (currently have more than 55% of forest cover in country), since 2009 no
net loss of forest cover, national policy of biological diversity including sustainable
forest development which addresses issues relating to sustainable development
and peat development.
 The need to include more evidence of the various EU Member State national palm
oil initiatives and the level of cooperation within and between them in the report
(information on these national initiatives was provided after the workshop).
 The existence of other voluntary initiatives, some of which are supported by palm
oil certification schemes (e.g. RSPO’s group certification scheme and support fund
for smallholders).
 The recent growth in RSPO members in China (35% growth).
 The role of retailers in driving demand for CSPO, particularly through group
initiatives, such as the Consumer Goods Forum’s Zero Net Deforestation
Commitment by 2020.

Final Q&A session

The workshop concluded with a final Q&A session at the end of the day, providing
workshop participants with the opportunity to ask questions about the study and make
recommendations on how to improve the final report. Key discussion points from this
session included:
 The need for clearer standards and definitions to avoid confusion over forests in
land use classifications and physical classifications.
 The importance of applying the high carbon stocks approach to protect forests and
peatland, particular where a zero net deforestation commitment (rather than a no
deforestation commitment) was in place or being considered.
 The need to combine commitments and policies on CSPO with other on-the-
ground approaches to drive real change (e.g. smallholder support, use of geo-
spatial/remote sensing to monitor legal compliance and the progress being made
against ‘beyond legislation’ voluntary commitments).
 The potential to use this study to improve sustainable palm oil certification
systems; and to test whether existing principles and criteria may work against
each other or not be stringent enough.
 The role of the palm oil study in highlighting areas where the science is poor or
underrepresented and requires further research.

Closing remarks

Hélène Perier (DG Environment) summarised the day, thanking workshop participants in
Brussels, Jakarta and Kuala Lumpur for their positive contributions and their
perseverance given the time zone differences. She advised all workshop participants that
the deadline for written comments on the report was Friday, 13 October 2017 and asked
them to forward their comments to her and to the consultants at 3Keel.

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