Wednesday, December 22, 2010

Redefining sustainability of palm oil

Sustainability of palm oil production, philosophically speaking, is striking a balance between the three bottom-line factors of economic prosperity, environmental quality and social justice. Such a broad concept has been interpreted in different ways by different parties to serve various interests and agenda.

Sustainability standards and parameters have been the subject of heated debates and adversity among concerned stakeholders, particularly the palm oil industry versus the NGOs.

There is a growing awareness among concerned stakeholders of the need to work together and reach a consensus to share a common set of values and standards in equal partnership.

The palm oil industry and its many actors, including smallholders, company growers, industry consumers and NGOs, is also one of the first industries to undergo the transformation from an adverse relationship into a partnership. This resulted in the Roundtable on Sustainable Palm Oil (RSPO), which many hailed as the forum where many actors with diverse interests got together as equal partners.

However, after some short years of experimentation, the relationship has been tainted by some blind spots from some actors that are preventing the industry from advancing in partnership.

Crane and Matten (2004) have predicted this as a result of the difficulties of managing relations between culturally diverse organizations, especially if they are from developed and developing worlds, and also ensuring consistency and commitment.

One could easily assert that when NGOs and businesses sit at the same table, the businesses will exert more power than NGOs, in terms of resources, political influence, capital, etc. However, we tend to overlook the power of NGOs in terms of their expertise in communicating with the public, exerting its credibility and public sentiments toward business.

The complexity of a multi-stakeholder nature augmented with diverse, sometimes contradictory interests along with suspicion over the power imbalance are seen as the main stumbling blocks toward achieving a more productive result from this mutual partnership. Taking those challenges into account, is there any way for regulating palm oil actors to achieve sustainability?

Crane and Matten identified at least three options: government as regulator, self-regulation by business and regulation involving business, governmental actors and CSOs. The third option is now considered the viable one.

They cited the Netherlands case on how the “covenant” approach was developed. It is a specific and unique approach to a national environmental regulation, by involving business, government, and other stakeholders in the specification, implementation and monitoring of the covenant. The covenant approach focuses on bringing relevant stakeholders together to find consensus on acceptable processes and outcomes.

The government of Indonesia is currently considering establishing a covenant unique to Indonesia, called Indonesia Sustainable Palm Oil (ISPO) to advance sustainable palm oil production in Indonesia. The primary focus of ISPO is to ensure legal compliance as the baseline of sustainability standards.

Elkington mentioned that a covenant usually creates a wider base of support from within the industry. The same goals would not be achieved through legislation, which in many cases, is time-consuming and not necessarily very effective.

The process will entail certification and standardization of palm oil production, in which the palm oil industry is bound to meet the agreed standards. By building the criteria on consensus among all concerned stakeholders in a transparent, fair, accountable and equitable manner, we can expect the palm oil industry to shape a sustainable future.

Certification and standardization of palm oil is one of key factors in shaping the sustainability. Another driving force to sustainability is market demand and public opinion toward sustainable palm oil.

For the past year, there has been some negative campaign targeted at the Indonesian palm oil industry, which hurt the goodwill of the industry to sit together to shape a common future. This is exactly how power imbalance takes place.

Many have tended to assume that among these three dimensions, economic and environmental concerns are the most important aspects of palm oil cultivation, and have largely ignored the third one, social justice.

Michael Porter and der Linde, noted that we need to forge strong links between environmental protection, resource productivity, innovation, and competitiveness. They stated that environmental constraints drive innovation and, as a result, eco-efficiency.

Porter and der Linde stated that the fixed trade-off: Ecology vs economy was a thing of the past. Today and tomorrow, eco-efficiency is one aspect of sustainability. Eco-efficiency in palm oil cultivation is striking a balance between economy and ecology within the sustainability framework of our agricultural operations.

A palm oil estate in general has far higher productivity, 6-10 times more, than any other oil vegetable crop in terms of efficiency in land use and productivity. This is what Porter described it as eco-efficiency.

Furthermore, palm oil cultivation promotes social development in otherwise abandoned and marginalized areas. Palm oil plantations play a critical role in the advancement of social development, including poverty alleviation, food security, employment creation, human rights observance, community development toward improvement in the quality of life, distribution of wealth, and providing an alternative source of energy (biofuel).

John Elkington noted that eco-efficiency is a necessary condition for fully sustainable development, but it is not sufficient. Genuine sustainability also means that we seriously look at social justice.

Social justice is often overlooked in the discourses on sustainability of palm oil among stakeholders. There are two conflicting mainstreams of environmental consciousness brought by market and civil society against the economic profitability of business.

The socio-economic benefits of palm oil plantations must be taken into account and treated with equal importance as financial profitability and environmental conservation in the development of standards and building public opinion.

The sustainable future of palm oil is to be shaped by placing the social dimension of palm oil cultivation on a par with economic prosperity and environmental quality. Only when the three dimensions of sustainability are proportionately accounted for and treated equally, then common and generally accepted terms and a definition of sustainable palm oil plantations can be achieved.

Edi Suhardi is Head of CSR, PT Agro Harapan Lestari

Indonesia Plantation

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