Seeing through the haze – is palm oil still to blame?

Transboundary haze pollution is back with a vengeance in Southeast Asia. The Eco-Business Podcast talks to RSPO CEO Joseph D’Cruz about what the palm oil sector can do to put out the peatland fires that have burned annually for four decades.

Air pollution in Indonesia and Malaysia has spiked in recent weeks.

Toxic smoke from smouldering peatlands has prompted the authorities to close schools in Indonesia and Malaysia as diplomatic tensions between the two countries have escalated over who is to blame for the smog.

Singapore has been suffering too, although favourable wind direction has spared the city-state from the worst of the haze, which has so far been less severe than previous episodes in 2019 and 2015, when millions of hectares of peatlands burned creating record carbon emissions.

The return of the haze to Southeast Asian skies, after a few years in which wet weather conditions have dampened the fires, has raised questions about how to bring an end to a problem that has persisted for more than four decades.

Indonesia has taken legal action against companies suspected of illegal burning in the past, as has Singapore. However, peatland fires continue with varying degrees of severity almost every year.

It is depressing to think that haze is just something we have to accept as the status quo. Honestly, I don’t think we should.

Joseph D’Cruz, CEO, Roundtable on Sustainable Palm Oil

In June, five Association of Southeast Asian Nations (Asean) states pledged to enhance monitoring and prevention measures to reduce transboundary haze during dry periods in anticipation of a bad haze season this year, which has been exacerbated by the El Niño dry-weather phenomenon.

In September, with the dry season underway, environmental campaign group Greenpeace called on the region’s governments to introduce domestic laws to combat transboundary air pollution so that companies linked to the fires are held to account.

Much of the blame for the haze lies with slash-and-burn forestry, a cheap method of preparing the land for planting used by smallholder farmers. Palm oil and pulp and paper are the two crops most commonly linked to haze-causing land clearing, and large agribusiness firms have been under intense pressure to stamp out the fires by incentivising smallholders to avoid burning.

Joseph D'Cruz, CEO, RSPO

Joseph D’Cruz, chief executive of the Roundtable on Sustainable Palm Oil. Image: LinkedIn

Joining the Eco-Business Podcast to discuss the transboundary haze situation and how to combat it is Joseph D’Cruz, chief executive of the Roundtable on Sustainable Palm Oil (RSPO), the industry’s lead standard for sustainably grown palm oil.

Tune in as we discuss:

  • Does the returning haze mean that corporate no-deforestation policies haven’t worked?
  • Are smallholders still to blame?
  • How can fire-starters be identified?
  • Is the haze now just a fact of life?
  • What does the future of sustainable palm oil hold?
  • India and China – “leakage” markets?

The edited podcast:

In years when the haze hasn’t been severe, palm oil companies have often said that this is the result of their successful No Deforestation, No Peat, and No Exploitation (NDPE) policies. Now that the haze is back, does this prove that the haze is more a result of the weather and drained peatlands than sustainable farming policy?

It’s always fun in these conversations to start off by talking about the weather.

The RSPO continuously tracks incidents of hotspots, meaning satellite data is showing the possibility of fire or heat signatures across the entire region. And we’ve been doing so continuously for years, whether it’s haze season or not.

In September 2022, there were a total of 1,941 hotspots detected across Malaysia and Indonesia. In September of 2023, there were 121,962 hotspots in Malaysia and Indonesia.

We all know, from the weather point of view, what the reason for that might be – the El Niño effect, which typically brings hotter and drier weather, resulting in more fires. 

So do I think the weather is a factor in the haze? Absolutely.

The second part of your question was, are the actions being taken by palm oil companies’ NDPE policies contributing to a solution?

The RSPO has had an NDPE policy in place for the last five years since November 2018.

In addition to that, RSPO standards also require members to not only not use fire for clearing, but to actively prevent fires on their plantations, and to work with surrounding communities to minimise and prevent fires in the surrounding areas.

So does it have any effect? Well, RSPO concessions cover approximately 28 per cent of the oil palm states across Malaysia and Indonesia. Of the 121,962 hotspots detected across the region in September this year, 551 hotspots were detected in RSPO concessions.

So I would argue yes, NDPE policies and the kinds of standards that the RSPO requires from our members does contribute to reducing the incidence of hotspots. Will it prevent them? No. Fires are going to be a serious challenge for the years to come. But I do think the efforts that the industry has made in this regard have been worthwhile and should generally be applauded.

Smallholders tend to be blamed for the haze through slash-and-burn techniques. Do you feel that they are still the main cause of the problem? What does the data tell us?

One of the automatic assumptions that are made when fires and haze occurs is it is caused by burning, it is caused by burning in oil palm plantations, and it is caused by burning by smallholders using slash and burn.

As we just discussed a minute ago, that first assumption that it’s automatically oil palm farm companies using fires to clear land doesn’t really hold at least in the part of the world that comes within the ambit of the RSPO.

The other thing that is important about how we are approaching this issue is less of a focus on who caused the fire, but rather, where does the fire occur, and therefore, whose responsibility is it to respond to?

In the RSPO system, and increasingly also in the way government regulations address these issues, the responsibility lies with the person who owns and controls the land irrespective of how the fire started or who started it.

With smallholders, is there a factor here of smallholders in some agricultural supply chains using fire for land clearing? I think the data shows that yes, it is an issue.

But of course, in years which are wetter, the risk of these fires spreading and causing haze is much lower, so the connection with weather is still critical.

In Indonesia, for instance, the government regulations prohibit the use of fire for land clearing, but there is an exception for smallholders with land holdings under two hectares. I believe, because the assumption is that people living in marginal areas don’t often have an alternative for land clearing. I believe the Indonesian government is revisiting that regulation. 

In the case of the RSPO, where we have smallholders certified under our standards, those smallholders are also held to a similar standard as our large growers – no use of fire for land clearing, and active management of fire within their plantations. So it is possible for smalholders to manage their land holdings sustainably without the use of fire.

I think the challenge for us is how do we provide smallholders with the support, the knowledge and the resources needed to be able to farm sustainably without using fire as a tool, whether that’s an oil farm, whether that’s in rice cultivation, or in other agricultural supply chains.

It is important to point out that over many years peatlands have been systematically drained by large companies, leaving them vulnerable to fires. How can the palm oil sector get better at identifying who is responsible for haze? And what is RSPO’s procedure for engaging with companies found to be culpable?

You’re right – the draining of peatlands is probably one of the other most important underlying drivers for why seasonal fires have now become a systematic transboundary issue in Southeast Asia and elsewhere. Because these dried peatlands have so much carbon in them and burn for such a long time that they tend to generate huge amounts of smoke.

In the RSPO, we have now got a prohibition on any further conversion of peatlands, and we’re working actively with our members who have plantations on peatlands on how to better manage and ultimately rehabilitate those areas to prevent this kind of recurrence.

On this question of who is at fault, we have to recognise that for a lot of these peatlands the change in the ecological structure from draining is now, unfortunately, a fait accompli.

We can prevent further drainage and clearing, we can work to re-wet peatlands, which, for example, the Indonesian government has been doing quite actively already. But it is going to be a problem that we face for the next few years.

Who’s at fault is a difficult question to answer because the conversion of peatlands at that point in time was legal. It’s only been more recently, that national and global policy has recognised the tremendous damage that these kinds of conversions can do.

Now we are taking steps to respond to it. And hopefully over time, we will be able to minimise the impact this kind of peatland conversion has had, not just on the haze, but also on carbon dioxide emissions.

So is the haze just a fact of life now? Can the problem ever go away?

It is depressing to think that this is just something we have to accept as part of the status quo. Honestly, I don’t think we should. There is a lot that can be done.

First of all, by simply ensuring we don’t do any further damage. And there is a lot of work being done now, in government policy and also in science, to understand how we can overcome this problem to rewet and rehabilitate peatlands.

The Indonesian government has had a peatland rehabilitation programme underway for a number of years, and has actually rehabilitated and re-wetted quite large areas of peatlands within the country.

Are we going to have to live with haze, with forest fires more readily in the years to come? Unfortunately, that’s where the challenge is, because the incidences of haze and forest fires are tied very much to climate extremes. We are seeing these events happening not just in Southeast Asia, but in many parts of the world. 

Will this be a continuing challenge? Perhaps even a growing challenge? Yes. Can we do more collectively to respond to it, to minimise the risk of fire? Absolutely.

We would like to work with the rest of the industry to try and roll out sustainable practices and ultimately, hopefully, also the rest of agriculture in the region to try and minimise the damage that we are seeing today. It takes huge efforts to achieve these results but it is possible. 

Financial institutions are often willing to fund sustainability initiatives in the energy sector, but might consider agriculture too risky. We are now seeing banks saying that they are not backing the EU’s Deforestation Law as it’s faced a backlash from producing countries concerned it will create unfair trade barriers. What does RSPO think are some of the best ways to advance collaboration between finance institutions and downstream actors to scale climate action? 

I think on the issue of financial institutions backing or not backing the EU deforestation law, just to be precise on that one – the statements that financial institutions are not backing the EU deforestation law were actually made by a colleague from the European Commission. Not by a bank.

For the record, I have not seen or heard of financial institutions actually saying that they don’t back the law. We also very much support the principle of trying to tackle deforestation and to eliminate deforestation from supply chains. That’s what we’ve been doing for years now. Though, we, of course, have concerns and ongoing conversations about how to apply that in a way that actually contributes to the solution rather than creating barriers for smallholders.

Now, on the challenge of working with smallholders on issues like financing climate transition. Is it difficult? Yes. If you’ve worked in the finance sector, you would know that it’s much easier to structure a loan to convert an energy plant to a renewable source, than it is to work with 1,000 smallholders to help them move towards more sustainable practices.

Working in agriculture, and working with small communities is messy and complicated. But it is necessary, because that’s where many of the greatest benefits accrue – not just in terms of reducing CO2 emissions and climate change, but also by providing greater livelihoods, greater social impact, greater opportunities for people.

In our experience within the RSPO system, one of the most effective ways in which we are able to work with smallholders and influence change in those sectors is working through groups. So in the RSPO system itself, when we certify smallholders, we don’t certify individual small holdings. We work with communities to set up collaborative groups or cooperatives with multiple smallholders who work together to understand our certification system and to get certified. And they are then audited and assessed collectively as a group.

Now, that is part of the solution also for financing. If financial institutions can work with platforms like ours, to connect to and financially support these smallholder groups, then you have a mechanism by which you can deploy financing in the way that’s actually feasible and scalable.

These groups are set up as legal entities, they are routinely audited, they are trained, they are mutually accountable. And they are large enough in scale, that you can actually deploy financing in a way that is feasible for banks and other financial institutions.

So that’s a space where I think we can work more with financial institutions to figure out what kind of support do smallholders need to be able to deal with the kind of climate transitions they will need to overcome in the years to come. How do we look at the impact of climate change on these smallholders and deploy smart financial solutions to help them make those transition? How do we deploy tools such as risk insurance to help them deal with the consequences of climate change, whether it is flooding or fire? I think there is a lot we can do there, and if we work with financial institutions, we can demonstrate progress in the years to come. 

RSPO is holding its annual roundtable (RT) in Jakarta in November. So tell us a bit about how smallholders will feature in the discussion?

I hope those who attend RT will see a very strong presence of smallholders, not just as participants, but as an active part of the vision that RSPO has for the years to come. 

RSPO is fundamentally a sustainability organisation, not just sustainability from an environmental point of view, but also from a social and economic point of view. And working with smallholders, engaging with them to make their practices more sustainable, unlocks tremendous benefits, also on the social and economic side of sustainability – making local communities more resilient, giving opportunities to not just the farmers themselves, but also young people in the communities. 

At the RT, we are talking much more now not just about ways in which we can work with smallholders. We have sessions looking at how you can empower smallholders to succeed in the midst of a more complex regulatory environment, and others sessions talking about how we can provide tools and solutions on financing and climate and others. We are also having sessions focused on the role of smallholders in working collaboratively to overcome these challenges.

A critical factor in those conversations will be how people downstream – traders, retailers and consumers – can more effectively support smallholders in their sustainability journey. Challenges we face in some of the regulatory conversations about traceability and deforestation is that a lot of these relations require that a smallholder is required to deliver his or her end product to Europe and be able to provide documentation throughout the supply chain to show where the product came from, that it is produced sustainably and that it is traceable back to its origin. That is a big challenge for a smallholder who often sells his or her fresh fruit bunches to her local trader who then sells it to an aggregator who then sells it to a mill. Smallholders don’t control supply chains, they don’t have a lot of influence over it.

RSPO has a solution, which is for smallholders who cannot supply their product through sustainable traceable supply chains, we provide them with a credit. For a smallholder who produces his or her products sustainably and can demonstrate and verify that, even if she sells it to a conventional buyer who cannot provide sustainability documentation, she can then claim a credit from RSPO, and people downstream, such as retailers, can buy these credits to recognise and compensate her for her efforts. Those credits have been a critical. In spite of the changes in the regulatory environment, we are encouraging our members to continue supporting smallholders directly by buying these credits. 

A segment at RT will focus on the future of the industry. What in your view are the key themes that will dominate the sustainable palm oil conversation in years to come? Surely one key question is how to increase the share of sustainable palm oil beyond the 20 per cent market share that has remained flat for so long?

RSPO has been around for 20 years now. And so we want to ask our members about the challenges this industry needs to address and overcome over the next 20 years, and what role can a partnership like the RSPO play. You alluded to the 20 per cent share question, which has remained the same for some years. Obviously, we want to see that percentage go up.

When we look at the pipeline of production areas coming under certification, the volume of production is going to go up in the years to come. Just on the basis of our existing members, who are progressively getting their plantations certified. The challenge we face for a while now is increasing demand – getting the downstream actors consumer goods companies, traders, retailers and consumers – getting them to be willing to pay the small premium required to buy sustainably. How do we work in emerging markets like India, China, Malaysia and Indonesia, to convince consumers and consumer goods manufacturers that they should source a sustainable product? This is a case that has been made very strongly in Europe, United States and Japan already, but the growth is not coming from the emerging markets. That is going to be a huge focus of our work in the years to come. 

But in addition to that, one shift you see from the RSPO is that we are not only looking at certification as our only way to change the industry – we don’t just focus on what percentage of the industry is certified according to RSPO standards. We see that as an end goal but we also see a lot of other ways we need to influence the industry as a sutainability catalyst. Our future strategy is, how do we more actively engage with the parts of the industry that’s not yet part of our sphere?

Instead of just saying you should become an RSPO member, how do we engage, how do we advocate, how do we share our experience, how do we show smallholders and emerging producers that following these practices actually is of benefit to them? How do we, as a global partnership, lead the way in thinking what sustainability means for the oil palm sector for the next 20 years? 

Other challenges include how we continue to provide decent jobs and livelihoods for workers, so that we continue to attract new generations of people to come in and work in the sector to rethink and reimagine how we produce our products, and how we work on rights issues, build models for sustainable oil palm production in other parts of the world, be more attuned to the social and political realities of those countries. 

How can RSPO better engage with “leakage” markets like India and China, which tend to be bigger buyers of palm oil that is not certified sustainable?

I need to actually push back on the terminology “leakage” markets. I don’t like and I don’t subscribe to this idea of seeing markets like India and China as leakage markets. Because that creates a perception that you have a black and white – that some parts of the world source palm oil that’s sustainable, and all others source palm oil that’s dirty. The reality is, it’s a pathway – a trajectory.

Does India source a lot of certified sustainable palm oil today? No. But within the industry in India, there is an intense conversation going on about how our members and partners can convince consumers, consumer goods manufacturers, retailers and others, to better recognise the importance of sustainability, to gradually bring in sustainability principles into their sourcing and purchasing and also to look at which of the many supply chains for palm products in India may be places where sustainability can be introduced.

So India is not a leakage market. India is a market of potential. It is an emerging market. And if we engage with that market, I really believe that we’re going to see tremendous progress there in the next few years. 

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