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Money Talks: The Big Switch to Sustainable Palm Oil
When your pooled assets add up to more than $600 billion, people tend to pay attention when you write them a letter about sustainable palm oil. That seems to be the case in Friday's announcement by five major palm oil producers, which pledged to self-impose an immediate moratorium on clearing high carbon stock forests.
The announcement came a week after four of the companies received a letter from a group of investors spearheaded by Green Century Capital Management, with collective assets topping the aforementioned $600 billion. In addition to calling for the moratorium, the Green Century letter urged the producers to adopt more sustainable palm oil practices, in accordance with a growing number of industry stakeholders.
Unfortunately, that's where things could get sticky.
Green Century Capital Management writes a letter...
Green Century's sustainable palm oil letter, dated Sept. 8, was addressed to four of the five palm oil producers: Sime Darby, Asian Agri, IOI Corp. and Kuala Lumpur Kepong. (We'll get to the fifth, Musim Mas, in a minute.)
The letter cuts straight to the mustard: It starts off by noting that major stakeholders, including Wilmar, Golden Agri-Resources, Nestle and Unilever, have already pledged to establish traceable systems to ensure that their supply chain does not begin with the development of High Carbon Stock (HCS) or High Conservation Value (HCV) forests, as well as peatlands.
With the major suppliers Wilmar and Golden Agri-Resources already responding to increased demand for sustainable palm oil by staking out a "first mover" supply chain advantage, the holdouts risk losing a huge chunk of business.
The letter includes a list of actions for reducing environmental impacts and ending human rights abuses in conventional palm oil operations, specifically referencing Kuala Lumpur Kepong. It calls upon the producers to:
...adopt an immediate moratorium on clearance of any potential HCS areas and peat land areas, and to adopt a time-bound plan by which all palm oil supplied by KLK and its third-party contractors will be traceable back to plantations that meet the above criteria for protecting forests, peatlands, and human rights.
Notably, the letter points out that publicity over both environmental and human rights abuses in the palm oil industry have created "significant brand and reputational risks" for industry stakeholders and their shareholders.
Along with Unilever and Nestle, the letter also cites Procter & Gamble and Colgate-Palmolive for signing on to the sustainable palm oil movement.
...which gets results...sort of...
We're not saying there's a direct cause-and-effect here, but it is true that just a few business days after the letter was issued, all four of the recipients -- as well as a fifth producer, Musim Mas -- jointly announced that they would adopt an immediate moratorium on HCS clearing (a link to the copyrighted announcement is available on Sime Darby's website).
The moratorium will be in effect while a yearlong industry-funded study is underway, which aims to provide a standard of definition for HCS forests.
That's not quite as simple as it sounds. The sustainability risk analysis company Chain Reaction Research points out that the five growers were previously behind a somewhat notorious greenwashing exercise called the "Sustainable Palm Oil Manifesto," which allowed HCS clearing.
Chain Reaction also notes that the public statement issued by the group does not specify what the moratorium would actually cover, in terms of defining HCS areas until the study is concluded. The statement is also thin on compliance methodology -- although Asian Agri has stated that it will use the HCS developed by the Forest Trust, Golden AgriRsources and Greenpeace until the study is concluded.
Although cheered by the joint announcement, Green Century has also taken a we'll-believe-it-when-we-see-it-approach.
Momentum builds for sustainable palm oil
On the other hand, Green Century has a much stronger hand to deal compared to just a few months ago. On Dec. 13 of last year, Green Century issued a similar sustainable palm oil letter to leading palm oil producers and stakeholders when it only represented $270 billion in assets.
The recipients included Wilmar, which now appears to be firmly in the sustainable palm oil camp.
It certainly doesn't hurt that sales of sustainable palm oil are surging in response to increased demand. That includes new and recent pledges from major U.S. customers like Starbucks, Dr. Bronner's, Dunkin' Donuts and Mars among others.
It's also worth noting that palm oil is just one of Green Century's green initiatives, fracking disclosure being another topic of concern.
Like they say, money talks...
Image credit (cropped): Lip Kee via flickr.com, cc license
Tina writes frequently for TriplePundit and other websites, with a focus on military, government and corporate sustainability, clean tech research and emerging energy technologies. She is a former Deputy Director of Public Affairs of the New York City Department of Environmental Protection, and author of books and articles on recycling and other conservation themes.
