Palm oil and cocoa commitments undermined by poor regulation
In the past six months there have been a spate of reports focused on the commitments made by producers, traders and buyers of commodities like palm oil, cocoa, timber and rubber – as well as exposés implicating major companies in illegal forest clearance and child labour.
However, Fern, an NGO that monitors the European Union’s involvement in forests, have produced a new report – Company promises: how businesses are meeting commitments to end deforestation – that provides a unique insight into the challenges facing 15 major firms, including Nestlé, Mondelez, Cargill and Unilever.
“We asked them why they have made these commitments, how they monitor progress, the economic costs of these commitments and, importantly, what they perceive as the barriers to achieving their commitments,” explained campaign coordinator Saskia Ozinga.
In producer countries, it’s lack of good governance, clarity of tenure rights and law enforcement that combine to make it difficult for companies to meet their commitments, the authors conclude.
As one interviewee put it: “Ultimately this is about systemic change at landscape level. The only people who can make this work are governments. The private sector can reinforce it, can do some trail blazing … but at the end of the day no one single company can do landscape solutions … unless governments do their part it won’t work.”
In consumer countries, there’s also a lack of regulation to ban illegally and unsustainably sourced products, which “further undercuts companies that are willing to change their practices”.
Set the standards
Earlier this week, the European Parliament voted in favour of new regulations on palm oil – a major contributor to deforestation – that could result in minimum sustainability criteria and anti-deforestation articles in future trade deals.
Some have questioned whether a single mandatory scheme for sustainable palm oil across the EU can work, yet Fern found that the absence of global agreement on definitions and standards is a headache for companies striving to reduce deforestation in their supply chains.
“Virtually every company we interviewed possesses slightly different standards and criteria,” the authors noted. “Potential actions by consumer-country governments included …. the development of common standards and reporting frameworks for sustainability [and] the development of a European Union (EU) action plan on deforestation.”
Responding to the vote this week, Fern said it was particularly encouraged that the report calls for such an action plan, as well as the “provision of technical and financial assistance to producing countries in order to strengthen their land registry regimes and improve the environmental sustainability of palm oil plantations”.
Fern said governments must create the conditions that enable companies to meet their commitments to stop deforestation. “Rather than just focusing on the company commitments, or dismissing them, we believe that they should be used as a springboard for governments to work with companies, local NGOs and local communities.”
Wide of the target
Fern also found – as others have – “little evidence that enough is happening on the ground” to meet targets to eliminate deforestation from supply chains under the New York Declaration on Forests or the Consumer Goods Forum. However, company-wide commitments would be met, the interviewees suggested.
The costs of achieving these goals are extremely difficult to calculate, many admitted, but are seen as “significant but not excessive for large companies” but “possibly beyond the capacity of smaller companies”. Mondelēz’s Cocoa Life programme, for example, has a commitment of €375m (US$400m) over 10 years.
A retail company interviewed by Fern estimated costs of €293,000 (£250,000) a year for meeting their commitments on palm oil; while manageable, this level of expenditure could “not be sustained for all ingredients”. Tracking compliance with labour standards was “particularly expensive”.
Justifying all these costs appears to be a challenge, with some firms admitting they have experienced problems with investors focused on short-term profits. Indeed, none of the companies interviewed were feeling pressure from investors to up the ante in relation to their commitments around deforestation.
Research by the Global Canopy Programme last year found that a “small but incrementally growing number” of financial institutions are introducing policies on deforestation. In February, HSBC, Europe’s largest bank, published a new zero-deforestation policy following an investigation by Greenpeace.