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.
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:
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.