The haze from annual fires in Sumatra, which worsened disastrously in 2013, has focused regional and global attention on making palm oil production sustainable. Industry leaders are facing increasing pressure from governments and consumers to prove that their palm oil sourcing practices are sustainable. Leon Perera, Chief Executive Officer of Spire Research and Consulting, shared his views on how the palm oil industry was adapting to these new realities.
Large-scale burning in many parts of Sumatra remains an annual affair. The winds of the Southwest Monsoon circulate smoke and unhealthy particulates from the burning vegetation towards Singapore, Malaysia and many parts of Indonesia itself, such as Sumatra and the Riau islands. Aside from the public health problem it creates, the haze has drawn global attention to the environmental disaster of replacing rainforest with palm oil plantations in Sumatra and Kalimantan in an unsustainable way.
Palm oil companies are facing increasing pressure to end slash-and-burn land clearance methods. This is not new. The Roundtable on Sustainable Palm Oil Plantation (RSPO), founded in 2004, was a response to these pressures.
But more recently, attention has been drawn to the fact that some 40% of Indonesia’s crude palm oil was produced by third-party crops or owners of small farms. Large companies and governments are facing calls to ensure that all inputs into the palm oil industry are sustainably produced.
Many large palm oil companies have been responsive to these concerns by “pledging to produce palm oil sustainably – by not clearing forests of high conservation value, not developing on peat land and adhering to a no-burn policy”. Perera shared that banks, pension funds, sovereign wealth funds and asset management funds can help to bolster such efforts through ethical investor activism.
He went on to say that investors had a vested interest in this issue. They had to ensure that their palm oil investee companies avoided any possible boycott, blacklisting or adverse regulatory decision that might damage the value of their investment. He added that Singapore’s proposed Transboundary Haze Pollution Bill was a sign that governments were “ready to take tougher action to enforce laws and take companies to task”.
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