Transforming the Palm Oil Sector

Belinda Morris leads the Packard Foundation’s work on Climate and Land Use. In this role, she led an update to the Palm Oil Strategy, which will guide the Foundation’s investments from 2018-2021. Below, Belinda highlights what the Foundation has learned since we began this work in 2014, and how the updated strategy will tackle new challenges moving forward. (Baca postingan blog ini dalam Bahasa Inggris disini).

The production of palm oil is responsible for substantial global emissions of greenhouse gases, primarily from the expansion of oil palm farming in tropical forest countries, driving deforestation and drainage of carbon-rich peat soils. With increasing global demand for palm oil, there are ever-increasing pressures on forested land.

At the Packard Foundation, we’re investing in transforming the palm oil sector to be low-carbon, pro-smallholder, and respectful of international norms related to the protection of land rights, labor rights, and biodiversity values, with a primary focus on Indonesia. We recently updated our Palm Oil Strategy for the period of 2018-2021 and have been implementing our grants under this revised strategy since early this year.

Since we first launched our palm oil strategy in early 2014, there has been a rapid increase in the number of companies pledged to eliminate deforestation from their supply chains. A March 2017 Forest Trends report estimated that around 450 companies had made commitments to reducing deforestation impacts in their supply chains. This includes major consumer facing companies like PepsiCo and Unilever, global trading companies like Wilmar and Cargill, and producer companies like Sime Darby and Musim Mas. This unprecedented progress in securing No Deforestation, No Peat Expansion, No Exploitation (NDPE) commitments gave rise to a new suite of challenges around the complexities of implementing the commitments—in particular, implementing commitments within the stated time frames and monitoring mid-sized and smaller producer companies in the supply chain to ensure these companies also shift their practices. As a result, we see the need for a more concentrated focus on ensuring the transparent implementation and verification of company commitments.

Over the past four years of supporting work aimed at stopping the rate of forest conversion caused by palm oil industry expansion, we have learned that:

  • Demand-side approaches, focused on mobilizing buyers and traders to incentivize improved production practices by producers, are important for catalyzing change;
  • Supply-side efforts, focused on improving governance conditions and directly engaging local stakeholders, are critical for supporting successes achieved on the demand-side; and,
  • Achieving full implementation of strong private sector commitments will take time and concerted efforts from multiple parties.

We have also learned that while private voluntary efforts can change the practices of progressive companies within areas that they control, and policies in consumer countries can provide additional incentives for change (although not without the potential for backlash from producer countries), neither can directly address the poor governance conditions or illegal activity that allow forest and peatland conversion to continue. Thus, strengthening land and forest governance is vital to the overall long-term success of the strategy, and we feel an approach working from the subnational level is the most effective way to strengthen policies and their overall enforcement.

We have updated the strategy to acknowledge these lessons and other changes in the political and social context. Our work today is even more critical following the Paris Agreement on climate change, given the recognized importance of land and forests for achieving our climate goals.

The Foundation’s grantmaking under the Palm Oil Strategy over the next four years aims to achieve the following four consolidated and refined outcomes:

  • Major trader and consumer goods companies have strong NDPE commitments, publicly disclose progress on a verifiable path towards changing their practices, and align with progressive producer companies to advance a common vision for NDPE-compliant palm oil throughout the supply chain.
  • Consumer country policies send strong demand-side market signals to suppliers to adopt NDPE practices.
  • Progressive sub-national leaders effect meaningful changes in regulations, policy, and practice governing land use at the jurisdictional scale by providing sufficient incentives.
  • Decision-making of key stakeholders is guided and influenced by credible data and narratives on the benefits of low-emission development in the land use sector.

Our hope is that by the end of 2021, the rate of conversion of Indonesian peatland and native forest to oil palm will be trending sharply downwards, and that there is a long-term transformational shift in the global oil palm industry that reduces emissions while protecting biodiversity and people’s livelihoods.