Palm oil has become a massive business, and while its total value is difficult to assess, CNN reports suggest the global market for this product could be as high as $50 billion. Few people actually cook with palm oil or have even seen this raw material, but WWF says at least half of the world’s consumer products include it as an ingredient. As a result of that rising demand, the palm oil industry has been tied to environmental destruction in countries such as Malaysia and Indonesia, and those concerns led to the rise of the Roundtable on Responsible Palm Oil (RSPO).
Despite the efforts of RSPO, the evidence suggests that demand for palm oil, which is used in everything from packaged cookies to biofuels, is still causing rapid deforestation. Companies accused of contributing to deforestation can often trace these allegations to their palm oil sourcing policies. Criticism of the industry and its customers are intensifying; Rainforest Action Network, for example, recently issued a report accusing an Indonesian producer of PepsiCo-branded foods of being complicit in human rights violations resulting from the palm oil industry’s operations in that country.
Last year, the growing outcry over alleged abuses by palm oil suppliers led to the RSPO suspending many of its members. But many environmental organizations and human rights activists were still unsatisfied with the progress made within the palm oil industry. One NGO’s investigation of one of the world’s largest palm oil suppliers led to Unilever cutting ties with that company. The company in question, IOI Group of Malaysia, was a founding member of the RSPO. But the sustainable palm oil standards organization determined the company was not meeting its obligations and then suspended the company. IOI then sued RSPO in a Swiss court, demanding reinstatement based on what it said were technicalities over the terms of its suspension.
The spectacle proved to be too much for many food companies — which are increasingly under more stakeholder pressure to source all raw materials responsibly, whether they are grains, soy or even the energy they use to power their operations. The global food conglomerate Mondelez International, for example, urged IOI last month to cease its litigation against the RSPO. Considering the risk to its long-term business — and the fact that companies including Mars Inc. and Kellogg’s followed Unilever’s lead and dropped IOI as a key supplier — the company’s executives have apparently realized they should follow the standards of the organization that they helped establish in the first place.
Earlier this week, IOI announced that it would withdraw its lawsuit against the RSPO. The legal challenge will be officially canceled during a hearing scheduled for June 14.
In addition dropping the litigation, IOI insists that it will comply with the the RSPO Next certification system by the end of this year. This program, which the RSPO says is a more stringent set of guidelines than the standards previously issued by the organization, was drafted with the goal to accelerate efforts to stop the industry’s deforestation and rising greenhouse gas emissions. In order to be eligible for this certification, growers must prove that 60 percent of their palm oil farms are already compliant with RSPO policies. In addition, the standards include the following: a strict no-deforestation policy; an absolute ban on planting within peatlands; no use of fires; disclosures that prove fair agreements have been made with workers on living wages and labor rights; and a complete ban on the use of the pesticide Paraquat.
Reactions to IOI’s about-face have been tepid at best. Aidenvironment, one of the NGOs whose investigations led to the company’s suspension from the RSPO, said in a written statement, “It is too early to say that the requirements set by the RSPO Complaint Panel have been met.” And in a knock on the organization and its members, the NGO added, “We invite RSPO to discuss some important lessons-learned from [these] complaint proceedings.”
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