Research: Commentary

NO DEFORESTATION, NO PEAT, NO EXPLOITATION

January 21, 2016 | Article

By Glenn Hurowitz

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Two years ago, I stood with the CEO of Asia's largest agribusiness, Wilmar International, to launch the company's groundbreaking "No Deforestation, No Peat, No Exploitation" policy. This was a big deal: Wilmar controls approximately 45 percent of global palm oil trade, is the biggest importer of soybeans from Latin America and is one of the largest sugar companies in the world. All of those crops are heavily associated with destruction of the world's tropical rainforests. We knew there would be challenges, but we hoped that Wilmar's move would spark a revolution that would break the link between expansion of agriculture and deforestation, a link that has existed for millennia.

Two years on, we've seen the beginnings of what could be that revolution: The commitments made in the Wilmar policy have become the new benchmark for responsible commodity agriculture, and have been adopted by major companies representing the overwhelming majority of global palm oil trade. Both Wilmar's joint venture partner Archer Daniels Midland (an agriculture giant in its own right) and competitor Bunge adopted similar commitments for soy in Latin America.

And global consumer companies like Kellogg, Mars, Dunkin' Donuts and dozens of others all adopted policies that, once implemented in full, aim to ensure that their products will be free of links to deforestation.

As discussed in a progress report it released today in Davos, Wilmar even brought a measure of real transparency to an industry that was long notorious for opacity by disclosing the identities and mill locations of more than 800 of its suppliers, driving major competitors to do the same. Private sector actors who had previously been Mother Nature's leading antagonists were suddenly leading the global charge for conservation.

Nonetheless, despite these enormous strides, the challenges have also dramatically exceeded expectations. Indeed, despite private sector action, 2015 was a terrible year for Southeast Asia's forests. Deliberately set forest fires in Indonesia engulfed more than two million hectares. While the palm oil industry alone wasn't responsible for the fires, rogue palm oil companies lit fires that contributed significantly to the destruction. On several days, Indonesia's forest fires were releasing more pollution into the air than China or the United States' entire economies.

It's clear that companies, including Wilmar, need to do more -- a lot more. Independent NGOs continue to find major suppliers like Bumitama and Kencana Agri clearing forests and abusing community rights. These breaches show that too many suppliers either require more education or more rigorous sanction, or both. Wilmar deserves a lot of credit for setting the industry pace by working with The Forest Trust to quickly and aggressively to grievances raised by civil society, including by in some instances cutting off suppliers that have refused to comply with their policy. But rather than just reacting to grievances filed, companies like Wilmar, Cargill, IOI and GAR need to be more proactive in providing information on what's going on out there.

Indeed, although several companies have followed Wilmar's lead in identifying their suppliers and mill locations, no company is providing information on supplier performance on reducing deforestation, the metric that ultimately matters. Nor are companies always making clear to the public or suppliers what the consequences of non-compliance are. This transparency gap should be an area of major focus for the industry in 2016, and Wilmar can once again lead the way.

The other lesson from the fires is equally clear: private sector action is necessary but not sufficient to provide a long-term future for forests, wildlife and people. Governments must do much more to enforce laws against deforestation. While the Indonesian government has recently taken some positive steps to avoid a repeat of this summer's crisis, during the crisis itself several senior officials attacked companies like Wilmar that were leading the charge for conservation. Indonesia needs to actually demonstrate dramatic reductions in deforestation before it has a realistic hope of regaining the confidence of global customers who have a growing array of options when it comes to sustainable sourcing. In turn, companies should more energetically join with civil society to support government efforts to hold anyone who destroys forests and peatlands legally accountable.

The potential of this kind of joint action is proven. In Brazil, the major soy companies (and later the large cattle companies too) banded together to create a moratorium on deforestation in the Amazon. Growers and whole districts were held responsible for any breaches, giving everyone from farmers to corporate executives a powerful incentive to protect the forest. The result: within three years, Brazil had virtually eliminated deforestation for soy in the Amazon, a huge global success. Meanwhile, Brazil has doubled cattle and soy production, showing that it is possible to break the link between deforestation and growth on a grand scale. That kind of progress is possible in the palm oil industry as well, but it will require companies to lead the way.

Finally, companies should start the process of undoing at least some of the damage that has been done. The palm oil industry has a moral responsibility to restore an area of forest equivalent to that which it has cleared. Reforestation efforts have in the past run into governance and other challenges, but countries like the Philippines have shown it is possible to conduct large-scale, ecologically sensitive restoration projects in Southeast Asia. Following their example would be an opportunity for Wilmar and other companies - as well as regional governments - to show the world that they are truly embarking on a long-term sustainable future.

Because Wilmar is working to provide customers the responsibly grown products they demand, it has become much more attractive to customers and investors. It's creating a model in which growth and environmental protection go hand in hand. But that commercial honeymoon won't last unless the industry as a whole joins with governments to actually deliver demonstrated reductions in deforestation on a global scale. We have the opportunity to do so: Brazil has proven it's possible, and despite all the enormous and unpredicted challenges, the alignment of the private sector and civil society behind strong action puts even the loftiest of environmental ambitions within reach.

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