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Institut du développement durable
et des relations internationales
27, rue Saint-Guillaume
75337 Paris cedex 07 France
N°11/17 OCTOBER 2017
www.iddri.org
Implementation and effectiveness
of sustainability initiatives in the
palm oil sector: a review
Pierre-Marie Aubert (IDDRI), Anis Chakib (independent
consultant), Yann Laurans (IDDRI)
PALM OIL IN SOUTHEAST ASIA: THE SUSTAINABILITY
OF A TWOFOLD SYSTEM INTO QUESTION
In Southeast Asia, two broad types of palm oil production systems coexist:
industrial plantations and independent smallholders. Recent research
suggests that while smalholder production lags clearly behind the indus-
trial one in terms of yields/productivity, it tends to have lower impact
on deforestation and better impact on rural development/rural poverty
alleviation. As a consequence, taking action to improve the sustainability
of the sector means simultaneously (i) helping smahollders to improve
their yields while monitoring their environmental and social performance
to continue enhancing their level of sustainability, and (ii) supporting
private actors to meet their sustainability commitments through both
incentives and regulations.
SUSTAINABILITY INITIATIVES: CERTIFICATIONS, COMMITTED
BUSINESS, TERRITORIAL APPROACHES
Existing initiatives to encourage sustainability in the palm oil industry
inlude: certification schemes (whichever standard is considered); private
commitments that are independent from or go beyond certification stand-
ards; and territorial approaches, based on "production area". Their respec-
tive level of stringency results from the relationships that exist between
actors that bear each of them, and has gradually increased over the last
to years, following a very positive “race to the top”. Their actual impact
is however still well below what they aim to achieve and there are avenues
for improvement.
GUIDELINES FOR PROMOTING THE SUSTAINABILITY
OF PALM OIL PLANTATIONS
The improvement of certification schemes relies first on: developing inde-
pendent audit systems, in which the direct client-supplier relationship
between the auditee and the auditor is severed; strengthening dispute
settlement procedures; and ensuring the recognition of the protected
status of forests, and more specifically of HCV and HCS forests, in all
existing standards. Other policy recommendations include better docu-
menting the negotiation processes between actors of the value chain to
reinforce the effectiveness of corporate commitments, and strengthening
international cooperation to transform agricultural and rural develop-
ment policies.
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As a foundation of public utility, IDDRI encour-
ages reproduction and communication of its copy-
righted materials to the public, with proper credit
(bibliographical reference and/or corresponding
URL), for personal, corporate or public policy
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IDDRI’s copyrighted materials are not for commer-
cial use or dissemination (print or electronic).
Citation: Aubert, P.-M., Chakib, A., Laurans,
Y. (). Implementation and effectiveness of
sustainability initiatives in the palm oil sector: a
review. Studies N° /, IDDRI, Paris, France, p.
This work has received financial support from the
Agence Nationale de la Recherche of the French
government through the Investissements d’avenir
[ANR--LABX--] programme, and from the
French Alliance for Sustainable Palm Oil.
For any questions on this publication please
contact:
Pierre-Marie Aubert – pierremarie.aubert@iddri.org
3
LIST OF FIGURES & TABLES 4
LIST OF ACRONYMS 5
EXECUTIVE SUMMARY 7
INTRODUCTION 11
1. IMPACTS OF PALM OIL PRODUCTION ON TERRITORIES 13
.. Structure and governance of the palm oil sector, from upstream to
downstream
.. Four main modes of production upstream
.. Differing impact of the production modes on territories
.. Balance sheet of impacts, production modes and transition
2. INITIATIVES THAT RESPOND CONTRASTINGLY TO THE IMPACTS
OF PALM OIL PRODUCTION ON THE TERRITORIES 22
3. A STRATEGIC AND COMPETITIVE DYNAMIC THAT EXPLAINS
THE DIFFERENCE IN THE AMBITIONS OF THE INITIATIVES 24
.. The RSPO, a criticized standard but a reference for all actors
.. Environmental criticisms of the RSPO and the emergence of a
methodology for “no deforestation”: the HCS approach
.. From HCS to POIG, SPOM and RSPO-Next
.. From the multiplication of private commitments to their consequences
in producing countries
.. Parallel processes that interfere politically: the emergence of ISPO and
MSPO national standards
.. Territorial and jurisdictional approaches: the gamble of strengthened
links between corporate commitments, certification and local policies
4. INITIATIVES HAVE DIFFERENT IMPACTS DUE TO CONTRASTING
IMPLEMENTATION MODALITIES 33
.. Approaches through certification
.. Individual commitments of companies
.. Landscape approaches
CONCLUSION 50
ANNEX 1: LIST OF INTERVIEWED ORGANISATIONS 52
REFERENCES 53
Implementation and effectiveness of sustainability
initiatives in the palm oil sector: a review
Pierre-Marie Aubert (IDDRI), Anis Chakib (independent
consultant), Yann Laurans (IDDRI)
STUDY 11/2017
4IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
LIST OF FIGURES & TABLES
Figure 1. Main stages and main operators of the palm
oil sector 13
Figure 2. Market shares of main palm oil traders on
the world market 15
Figure 3. Global consumption of palm oil in 2015 15
Figure 4. Evolution of areas managed by smallholders
and industrial plantations in Indonesia 17
Figure 5. Scenarios for changes in smallholder yields
according to the adopted practice 18
Figure 6. Structure of Indonesian agri-food exports
from 1990 to 2010 19
Figure 7. Monthly prices of crude palm oil in
Rotterdam from January 2004 to September 2016 19
Figure 8. Monthly salaries for major Indonesian crops
according to type of tenure 20
Figure 9. Membership of RSPO according to activity
field, between 2004 (creation) and 2015 25
Figure 10. Approximate location of the main territorial
approaches in Indonesia 32
Figure 11. Average premium ($/certificate) and
number of certificates sold for palm oil (CPO), palm
kernel oil (PKO) and palm kernel expeller (PKE) 2008
to 2014 36
Figure 12. Share of certified RSPO production sold as
RSPO 36
Figure 13. Average processing time of a complaint
filed with the grievance mechanism (in days) 41
Figure 14. Changes in the share price of IOI in the first
half of 2016 44
Figure 15. No deforestation, no burning, no peatlands
commitments made according to company size as
based on estimated planted areas 45
Figure 16. Schematic positioning of the main
landscape approaches deployed in Indonesia
according to the targeted actors 48
Table 1. The main initiatives to improve the
sustainability of the palm oil sector launched
between 2004 and 2017 12
Table 2. Main upstream operators and respective
shares of world production (2014) 14
Table 3. Main issues to improve the impact of each
production mode 22
Table 4. List of initiatives studied according to type 22
Table 5. Comparison of the 8 initiatives according to
the main issues considered 23
Table 6. Successive launch of sustainability policies of
the main upstream actors Source: authors 29
Table 7. Review of territorial projects/approaches in
Indonesia over the last 10 years 32
STUDY 11/2017 5
IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
LIST OF ACRONYMS
ASI Accreditation Services International
CDP Carbon Disclosure Project
CGF Consumer Goods Forum
CI Conservation International
CIFOR Centre for International Forestry Research
CPI Climate Policy Initiative
CPO Crude Palm Oil
CPOPC Council of Palm Oil Producing Countries
CSPO Certified Sustainable Palm Oil
EHP Eagle High Plantation
EIA Environmental Investigation Agency
EII Earth Innovation Institute
FPIC Free, Prior and Informed consent
FPP Forest People Programme
GAPKI Gabungan Pengusaha Kelapa Sawit
Indonesia (Indonesian Palm Oil Association)
GAR Golden Agri-Resources Ltd
GCP Global Canopy Programme
GP Greenpeace
GVL Golden Veroleum Liberia
HCS-A High Carbon Stock Forests Approach
HCS+ High Carbon Stock Forest Study (piloté
par le SPOM)
IDH The Sustainable Trade Initiative
InPOP The Indonesian Palm Oil Platform
IPOP Indonesian Palm Oil Pledge
ISCC International Sustainabilty and Carbon
Certification
ISPO Indonesian Sustainable Palm Oil
LUP Land Use Planning
MPOCC Malaysian Palm Oil Certification Council
MSPO Malaysian Sustainable Palm Oil
NBPOL New Britain Palm Oil Limited (planteur,
racheté par Sime Darby)
NDPE No Deforestation, no Peat, no Exploitation
OECD Organisation for economic cooperation
and development
PCI Principles, Criteria and Indicators
PK Palm Kernel
PKE Palm Kernal Expeller
PKO Palm Kernel Oil
POIG Palm Oil Innovative Group
RAN Rainforest Alliance Network
RSPO Roundtable on Sustainable Palm Oil
SAN Sustainable Agriculture Network
SEI Stockholm Environmental Institute
SEIA Social and Environmental Impact
Assessment
SPOM Sustainable Palm Oil Manifesto
TFA 2020 Tropical Forest Alliance 2020
TFT The Forest Trust
TNC The Nature Conservancy
UNDP/PNUD United Nations Programme for Development
WRI World Resources Institute
WWF World Wide Fund for Nature
ZSL Zoological Society of London
EXECUTIVE SUMMARY
Introduction and methodology
This study is the first publication from IDDRI’s
initiative on the links between global trade and
local biodiversity management. It focuses on the
impacts of palm oil production in Southeast Asia
and on the ability of existing sustainability initia-
tives to bring substantial improvements to the
situation. It is based mainly on the analysis of the
existing documentation for each initiative and on
the available academic literature. More than
documents were studied. To complete the anal-
ysis, formal interviews were conducted with
sustainability actors from several organizations
and industry experts. The list of organizations
consulted is shown in Appendix of this study.
Three main intervention types to encourage sus-
tainability in the palm oil industry were identified.
They are not mutually exclusive and a single ac-
tor or a single territory can apply a combination of
types. They are based on:
. certification (whichever standard is
considered);
. the definition of internal company policies
that are independent from or go beyond certifica-
tion standards;
. territorial approaches, based on “production
area”.
While these approaches are often presented as
complementary (e.g.Nepstad et al., ), this
paper begins by analysing them individually and
giving details of their practical implementation
modalities. This first step allows for a qualitative
assessment of their possible impact on the three
issues broadly covered by this study: deforestation
(and the associated loss of biodiversity and related
GHG emissions); rural poverty and working condi-
tions; and respect for customary land rights.
To achieve this, the analysis was carried out in
three steps.
. Firstly, we describe the processes by which
palm oil production affects the issues mentioned
above.
. Secondly, the report presents the theory of
change specific to each initiative. By theory of
change, we mean here the theory of how and why
an initiative works, i.e. how it is supposed to at-
tain its stated outcomes through the implementa-
tion of a diversity of activities and measures. In
our case, it encompasses all assumptions made by
each initiative, implicitly or explicitly, about the
actions that should be taken to enable the sustain-
able transformation of the palm oil sector towards
more sustainability;
. Thirdly and finally, this theory of change is
compared with our knowledge about the imple-
mentation of each initiative to date. This last an-
alytical step enables a qualitative assessment of
their actual or potential impact.
A fundamental distinction
between modes of production
with respect to their impact
on sustainability
In Southeast Asia, two broad types of palm oil
production systems coexist:
mIndustrial plantations (above thousands of hec-
tares), which are operated either by large, verti-
cally integrated companies, often the subsidiar-
ies of large trusts, and which invest significantly
STUDY 11/2017 7
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
in this production: purchase of concessions,
land management (including wetlands reclama-
tion), building and maintaining mills, etc.; or by
national companies that are mainly/solely ac-
tive in the palm oil sector.
mIndependent smallholders, which are mostly—
though not only—family farms of to ha
maximum who plant oil palm on their land in
place of other crops (rice, avocado, pineapple)
or forest.
In Indonesia and Malaysia, about % of plant-
ed areas are operated by industrial plantations as
of December . However, out of the million
people working in the palm oil sector, to %
are smallholders. Recent research suggests their
practices appear more sustainable than industrial
production with respect to the three dimensions of
sustainable development:
mIn economic terms, the monthly income of In-
donesian independent smallholders is said to
be % higher than that of plantation workers
(bearing in mind that on average plantation
workers earn a monthly wage that barely covers
their needs).
mWith respect to social issues, concerns regarding
poor working conditions and infringement of
the land rights of forest populations are almost
exclusively linked to industrial plantations;
mIn the environmental field, smallholders are
much less implicated in deforestation than in-
dustrial plantations. This is exemplified by the
deforestation dynamics of Sumatra, an area in
which most of Indonesia’s production is concen-
trated, and where % of the area deforested
for palm oil between and was due to
large scale / industrial plantations. One reason
for this trend is that the oil palms planted by in-
dependent producers have more often replaced
rice or rubber trees than forest.
While smallholders depend on mills and trans-
port infrastructure that are generally provided by
industrial plantations, there are few technical or
economic reasons why harvesting and primary
processing could not be carried out in a decentral-
ized manner, as economies of scale in the palm oil
sector are low. From a quantitative point of view,
it would also be possible to substantially improve
the productivity of smallholder plantations. Such
an increase could be sufficient to meet the grow-
ing international demand if the share of palm oil
used for biofuel slightly decreases, particularly in
Europe.
Data collected so far therefore suggest that tak-
ing action to improve the sustainability of the sector
means simultaneously (a) favouring independent
producers while monitoring their environmental
and social performance to continue improving
their level of sustainability and (b) better regulat-
ing industrial production. Certification initiatives,
as well as other private sustainability approaches
and their contribution to a more sustainable palm
oil sector should therefore be assessed with re-
spect to both of these objectives.
Limitations of certifications
and of their alternatives
Certifications
Certification schemes are based on a set of prin-
ciples and indicators which producers and supply
chain operators have to comply with to get certi-
fied. Their compliance is assessed through third
party audits and then verified with a label / certifi-
cate if standards are met. Such schemes, and their
governance, can be private (i.e. NGOs and compa-
nies defining the rules together) or public (the
government defines and runs the mechanism and
issues certificates).
The first certification scheme in the palm oil
sector, the Roundtable for Responsible Palm Oil
(RSPO) is a private undertaking. Established in
, it was initiated by WWF and companies
within the sector. It now covers % of global pro-
duction and coexists with other standards; two of
which are private and voluntary - the International
Standard for Carbon Certification (ISCC) and the
palm oil standards of the Sustainable Agriculture
Network; and the other two are mandatory gov-
ernmental standards, the Indonesian Sustainable
Palm Oil (ISPO) system and the Malaysian Sus-
tainable Palm Oil (MSPO) certification scheme.
The scope and effectiveness of certification ini-
tiatives are based on the assumptions that: () cer-
tified oil is sold at a higher price than uncertified
oil; () this additional payment leads to a change
towards more sustainable practices; and () com-
pliance with certification provisions is guaranteed
without the possibility of evading the system. For
Southeast Asia, these three hypotheses are only
partially true, irrespective of the system under
consideration.
() Certification provides a very low economic
incentive. While nearly % of production is certi-
fied today (adding together the ISCC and RSPO’s
certified production), less than half is actually sold
at a certified price. Since the certification premi-
um rarely exceeds %, it has virtually no impact
on the net income of producers, even when con-
sidering improvements in productivity and input
reductions. Moreover, the economic incentive is
non-existent for all the operators that sell in coun-
tries with low demand for certified products, such
STUDY 11/2017
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
as China, India or Indonesia (these three countries
alone account for nearly % of demand).
() Certification schemes do not really induce
significant changes in practices. On the one hand,
such changes depend on the level of requirement
imposed by different standards, which are far from
homogeneous. On the environmental side for ex-
ample, not all standards recognize forests with
high conservation value (HCV) or high carbon
stocks (HCS), although this recognition is known
to be the only way to ensure that palm oil does not
come from deforestation. On the other hand, most
certification schemes mainly require operators to
provide auditors with impact assessments, legal
documents, action plans, or evidence that aware-
ness and information procedures have been put in
place. Requirements for actual changes in produc-
tion and operational practices represent less than
a quarter of the RSPO criteria and about half for
ISCC. Industrial groups, which are well versed in
reporting to their shareholders, have thus man-
aged to comply with certification procedures
without significantly transforming their practices.
While independent smallholders have recently
been identified as one of the priority targets for all
standards, certification remains costly and com-
plex for them, even though criteria and indicators
have been adapted. Certification yields a very low
additional income, no significant increase in their
market opportunities, and no way to differentiate
themselves from industrial producers.
() The conflict management procedures and
the penalties incurred are insufficient to ensure
compliance with the certification criteria. Con-
flicts of interest between auditees and auditors
and their consequences are well documented and
the management of potential disputes is often
slow and partial.
Corporate commitments going beyond
certification
Faced with the limits of certification, some NGOs
have turned to the purchasing and leading compa-
nies in the sector, who are often already members
of the RSPO, to require additional guarantees with
respect to deforestation, peatland destruction
and the mistreatment of local populations. Such
commitments, known as “No Deforestation, No
Peat, No Exploitation” commitments with refer-
ence to the first policy presented by Wilmar in
December , now cover nearly % of the oil
traded on world markets. The approach relies on a
twofold hypothesis: () that committed companies
will increase their level of transparency by making
public their supply chain; and () that they will be
able to bring their suppliers to gradually align with
their own commitments.
This approach has generated significant ad-
vances for some plantation companies. To date,
its impact however is not as strong as expected.
The power of buyers in respect to suppliers does
not appear as great as initially envisaged, since
many of the largest companies in Indonesia have
not yet transformed their practices to comply with
the requirements of buyers. Besides, this approach
is hampered by a lack of alignment between buy-
ers’ requirements and the policy orientations of
producer countries, which focus primarily on eco-
nomic development in rural areas.
Landscape approaches
Aiming to respond to these shortcomings, a
third kind of approach, termed “landscape
approaches”, have developed since the begin-
ning of this decade. Landscape approaches are
based on negotiating a sustainable land use plan
between all the players in an administrative terri-
tory and then translating it into local regulations,
while providing specific support to small inde-
pendent producers.
International NGOs and local governments have
initiated such approaches in about ten Indonesian
territories. Projects rely on two key ideas: () the
remuneration of “performing” territories via cli-
mate finance and the implementation of an adapt-
ed metric; and () focusing buyers’ procurement
policies on these areas (a so-called “jurisdictional”
certification approach, e.g. in the Sabah State of
Malaysia). We still lack experience and knowl-
edge for the effective implementation of these
approaches, but their implementation appears as
rather complex and time-consuming.
Guidelines for promoting
the sustainability of
palm oil plantations
Improving the performance of large-scale
plantations
The improvement of certification schemes relies
first on developing independent audit systems,
in which the direct client-supplier relationship
between the auditee and the auditor is severed.
One option to achieve this objective would be the
development of an “auditing fund”, managed by
the organisations in charge a particular certifica-
tion scheme: instead of directly hiring an auditing
company, a producer would pay auditing fees to
the RSPO or the ISCC, who would in turn hire the
auditing company.
Strengthening dispute settlement procedures is
another important point, which could, in particu-
lar, allow for a better consideration of the point of
view of the local population.
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
Lastly, ensuring the recognition of the protected
status of forests, and more specifically of HCV and
HCS forests, in all existing standards, is key.
Measures supporting the demand for certi-
fied oil to ensure a higher market value and new
market opportunities for sustainable production
should also be considered. They would however
only make sense if certification schemes have been
strengthened beforehand: there would be no point
in increasing demand if certified production meth-
ods remain unsustainable.
Better documenting the
negotiation between actors
of the sector to reinforce
the effectiveness of
corporate commitments
Approaches based on private commitments rely
heavily on an externalization of constraints to
producers, assuming that the market power of
buyers will be sufficient to constrain their suppliers.
The efficiency of this operating mode on a large
scale has still to be proven. Corporate commit-
ments could however benefit from a better under-
standing of buyer/supplier negotiation conditions,
in particular on the compensation offered by buyers
to their suppliers in exchange for their alignment
with increasingly demanding requirements.
Strengthening international
cooperation to transform
agricultural and rural
development policies
Until now, neither certification schemes nor
corporate commitments have proven sufficient
to support independent production. To attain
such support would indeed mean (re)orienting
economic and rural development policies. In
this perspective, the EU, its businesses and its
civil society should reinforce the dialogue with
producing countries, with a twofold objective:
mto develop a sector-based policy that would
structure the supply capacity of independent
producers and enable them to capture a greater
share of the added value, for example through
the development of cooperative agricultural
models. The work of development agencies in
that sector, in which they often have an exten-
sive experience, could be supported.
mto support ongoing discussions in producing
countries towards the legal recognition of the
protected status of HCV and HCS forests. Such
decisions would support countries in the im-
plementation of their commitments under the
Paris Climate Accord, which include large-scale
actions targeting land-use, and which could mo-
bilize part of the climate finance funds.
STUDY 11/2017
10 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
INTRODUCTION
Since the early s, civil society has placed a
particular focus on palm oil production. Its envi-
ronmental and social impacts in large production
areas, in Southeast Asia in particular, have raised
many concerns: tropical deforestation, harsh
working conditions in industrial plantations, land
grabbing... although the contribution of palm oil
development to economic growth in these coun-
tries has also been highlighted.
In response to these criticisms, the number of
initiatives—both private and public—aiming to
mitigate the environmental and social impacts of
production has multiplied. While they have helped
to considerably improved the sustainability of the
sector over the last five to ten years, deforestation
rates are still high and land conflicts widespread,
calling for all actors to continue their efforts. To-
day, there are no fewer than sustainability ini-
tiatives in the sector, making the situation particu-
larly complex.
It is in this context that several European op-
erators—public and private—have recently (re)
affirmed their willingness to move towards a “zero
deforestation” palm oil sector. Such examples in-
clude the Amsterdam Declaration, the Consumer
Goods Forum commitments and the European
Parliament’s resolution on palm oil and tropical
deforestation (see Table ).
In this context, this study (part of IDDRI’s Stud-
ies collection) aims to identify practical leeway for
private, public and civil society actors to improve
the effectiveness of the main existing sustainabil-
ity initiatives. This study focuses on the Southeast
Asia, and more particularly the case of Indonesian
for which much literature is available. Data from
Malaysia are also used when available, the two
countries now accounting for nearly % of world
production. It provides three main contributions
to the ongoing debates:
. It characterizes the impacts of the main exist-
ing production modes on three aspects of sustain-
able development—environmental (deforestation
and biodiversity), economic (fighting poverty in
rural areas) and social (respect for customary land
rights)—(Section );
. It presents the sequence of strategic actions
which, from to , has resulted in the
emergence of more than fifteen different initia-
tives, to explain the different requirements of each
initiative in relation to the three sustainability is-
sues considered here (Sections & );
. Finally, it assesses qualitatively the impact of
these initiatives on upstream production meth-
ods by comparing for each of them the theory of
change on which they are based and the practical
modalities of their deployment (Section ).
Based on these results, a final concluding sec-
tion provides three recommendations to improve
the effectiveness of existing initiatives. The results
presented are based on a review of the available
literature—more than documents from the
grey and academic literature—supplemented by
interviews with major experts and actors in the
sector (the list of organizations and interview grid
are shown in Annex ).
This study is the first step of an initiative launched
at IDDRI at the end of , focusing on the links
between governance of global value chains and en-
vironmental management of territories in the case
of three raw materials: palm oil, tuna and cocoa.
In relation to palm oil, there will be two following
STUDY 11/2017 11
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
thematic studies by mid-. One will have a par-
ticular focus on the evolution of the governance
of the palm oil value chain over the past years.
The other will focus on the policy framework that
Table 1. The main initiatives to improve the sustainability of the palm oil sector launched between 2004 and 2017
Name of initiative Acronym Year Actors driving initiative Initiative type Specific Analysed
Round Table on Sustainable
Palm Oil
RSPO 2004 WWF, Unilever, MPOB Private Standard /
Certification
Y Y
Sustainable agriculture network SAN 2008 Rainforest Alliance Private Standard /
Certification
N Y
International Standard on Carbon
Certification
ISCC 2010 WWF Germany, IOI Private Standard /
Certification
N Y
Deforestation Resolution 2010 Consumer Goods Forum Private Sector Commitment N N
Indonesian Sustainable Palm Oil ISPO 2011 Indonesian government National / Legal Standard Y N
High Carbon Stock Approach HCS-A 2012 GP, TFT, GAR Prioritization / land
management tool
Y Y
Palm Oil Innovative Group POIG 2013 WWF, GP, FPP, GAR Private Sector Commitment Y Y
Malaysian Sustainable Palm Oil MSPO 2013 Malaysian government (upon
the request of the national
industries)
National / Legal Standard Y Y
Sustainable Landscape
Partnership
SLP 2013 CI, USAID Territorial approach N Y
Sustainable Palm Oil Manifesto /
High Carbon Stock Study
SPOM /
HCS-+
2014 Sime Darby, IOI, Cargill, Asian
Agri, Musim Mas
Private Sector Commitment /
Land Use Planning Tool
Y Y
Indonesian Palm Oil Platform InPOP 2014 Indonesian government Platform for coordination
between actors in palm
oil sector to benefit small
producers
Y N
Indonesian Palm Oil Pledge IPOP 2014 Main traders operating in
Indonesia + Chamber of
Commerce
Private Sector Commitment
/ Link with public policies in
producer countries
Y Y
RSPO Next 2014 RSPO Secretariat Private Standard /
Certification
Y Y
New York Declaration on Forests 2014 United Nations International and multi-actor
declaration of intent
N Y
Amsterdam Declaration in Support
of a Fully Sustainable Palm Oil
Supply Chain
2015 Government of the Netherlands International declaration of
intent to support the private
sector
Y N
French Biodiversity Law, article 27 2016 French government Consumer country regulation Y N
International Sustainable
Landscape
ISLA 2016 IDH Territorial approach N Y
Landscape Programme 2016 TFT Territorial approach Y Y
Resolution on Palm Oil and
Deforestation of rainforests
2017 European Parliament Consumer country regulation Y N
Source: authors
accompanies the expansion of palm oil in the ma-
jor producing countries. These two subjects will
therefore only be marginally addressed in the fol-
lowing pages.
STUDY 11/2017
12 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
1. IMPACTS OF PALM OIL
PRODUCTION ON TERRITORIES
On the basis on technical and economic criteria
(particularly access to the main production
factors, namely land, capital and labour), this
section will identify the main palm oil production
systems existing in Southeast Asia. This distinc-
tion, however schematic, will enable to analyse
the contrasting impacts of each production system
on the three core issues of this study: deforestation
(and the associated biodiversity and greenhouse
gas emissions – GHGs); rural poverty and working
conditions; and respect for customary land rights.
This part is organized as follows: a first section
recalls the main features of the palm oil sector
regarding its technical and economic organiza-
tion. The second section presents their respective
characteristics, followed by an impact evaluation
in a third section.
1.1. Structure and governance
of the palm oil sector, from
upstream to downstream
1.1.1. Main stages of the production process
Figure shows the main stages of the palm oil
industry. Plantations, which vary in size from a few
hundred square metres to thousands of hectares,
are derived either from plant material selected in
a nursery (in the case of industrial plantations and
the small producers linked to them), or are cloned
or reproduced by independent smallholders. After
planting, oil palms go into production after to
years. They will be at maximum productive capacity
after about years, with an average lifespan of
to years. The harvest of fresh fruit bunches
(FFB), which can weigh up to kg, is carried out by
hand throughout the year. The older the age of the
plantation, the taller the oil palm and therefore the
more difficult the process becomes.
Source: author
Figure 1. Main stages and main operators of the palm oil sector
FFB: Fresh Fruit Bunches
CPO: Crude Palm Oil PK:
Palm Kernel Oil
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
Once the bunches have been collected, the grow-
er has to hours to take them to be pressed at
a mill. The longer the delay before pressing, the
higher the free fatty acid (FFA) content, which
adversely affects the quality of the oil produced,
which gradually becomes less fit for consumption.
A specific feature of the oil palm is that it provides
two different oils: one is extracted from the fruit
pulp, the other from the kernel. The former is
crude palm oil proper (CPO), the second is known
as palm kernel oil (PKO). While the composition
of these two oils differs significantly, giving rise
to different uses, this report largely sets aside this
distinction.
Following extraction, crude palm oil and palm
kernel oil must be refined before use. There are
three main sectors that utilize palm oil: agri-food,
body care and biofuels.
1.1.2. Actors and markets in the palm oil
sector
Without entering here into too much detail,
four main production systems upstream can be
distinguished:
mLarge, vertically integrated groups, able to
control the whole production process from the
nursery to the refinery, and which usually con-
trol several thousands hectares of plantation;
mlarge independent farmers / plantations, who
sometimes have had the opportunity to invest in
a mill and can control all stages from planting
to pressing;
mSmallholder plantations linked to an industrial
plantation—known as a tied or schemed small-
holder, regardless of the type of link;
mand independent smallholder plantations.
Both tied and independent smallholders are
concentrated on the most upstream stages of pro-
duction: planting and harvesting of fresh fruit
bunches. They generally sell their produce to in-
termediaries along the roads at gathering points,
who then transport it to the nearest mill;
The sector is today polarized towards the up-
stream, with a strong level of horizontal concen-
tration and vertical integration. About fifteen
large groups in Southeast Asia (based in Malaysia,
Singapore and Indonesia) share -% of world
production, depending on the year, and -% of
world trade (see Figure & Figure ).
Table 2. Main upstream operators and respective shares
of world production (2014)
Company Production of
crude palm
oil (million
tonnes)
World
production
share (in %)
FELDA 3.09 4.9%
Golden Agri-Resources Ltd 2.38 3.8%
Sime Darby Plantation Sdn Bhd 2.18 3.5%
Wilmar International Ltd 1.52 2.4%
Kuala Lumpur Kepong Berhad 1.06 1.7%
PT Salim Ivomas Pratama Tbk 1.00 1.6%
IOI Group 0.78 1.2%
Bumitama Agri Ltd 0.74 1.2%
PT Smart Tbk 0.74 1.2%
First Resources Limited 0.69 1.1%
PT Perkebunan Nusantara III 0.60 1.0%
PT Ivo Mas Tunggal 0.55 0.9%
New Britain Palm Oil Ltd 0.50 0.8%
PT PERKEBUNAN NUSANTARA IV 0.48 0.8%
PT PP London Sumatra Indonesia Tbk 0.48 0.8%
PT Agrowiratama 0.45 0.7%
PPB Oil Palms Berhad 0.43 0.7%
TOTAL 17.66 28.2%
Source: RSPO / Growers sectoral report, ACOP 2015.
While currently only moderately developed
downstream, giants like Wilmar, Golden Agri Re-
sources or Indofood (which owns .% of Salim
Ivomas and .% of London Sumatra, both listed
in Table ) all have finished product lines that are
destined for consumers in the Chinese, Indian,
Malaysian and Indonesian markets. In this way,
they have progressively encroached on market
segments of the major European agri-food groups,
which a few decades ago controlled not only
downstream but also the upstream of this sector
(Unilever in particular) (OECD, , p. ). The
emergence and development of these Asian giants,
which today represent tens of billions of dollars in
annual turnover and have diversified in many are-
as, is the result in particular of the support provid-
ed by the Malaysian and Indonesian states within
the framework of consolidated developmentalist
strategies (see, for example, Cramb, ). Their
progressive rise in dominance in the upstream of
the sector and their increasing downstream in-
volvement seems to testify to a particularly suc-
cessful process of economic “upgrading” (regard-
ing upgrading, see in particular Gereffi, ).
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
Figure 2. Market shares of main palm oil traders on the
world market
Source: https//chainreactionresearch.com
The current preeminent position of upstream
firms and their proximity to states (which often
hold a large proportion of the capital of firms, as is
the case for Malaysia) is to a large extent responsi-
ble for the impacts of the expansion of industry at
the territorial level, which is particularly due to col-
lusion of economic and political interests and the
clientelist mechanisms that characterize the sec-
tor. Stéphanie Barral (), and also Rob Cramb
(), both provide a good description of the po-
litical economics underlying the expansion of these
major groups and the negative consequences on
forests, which have an ambiguous impact on local
populations in the cases of Indonesia and Malaysia.
Downstream, however, the use of palm oil and
refined palm kernel oil is particularly widespread,
whatever the type of usage considered. In , the
distribution of global volumes between the three
main uses of palm oil was estimated as follows:
% for agri-food, % for body care and % for
biofuels (Dufour, ). Nevertheless, Transport
& Environment has shown that the proportion of
European imports of palm oil dedicated to biofuels
is now % (Transport & Environment, ). Al-
though Europe today represents only % of global
consumption (see Figure ), the policies to sup-
port the development of palm oil-based biofuels,
launched years ago in Indonesia and Malaysia,
have probably had a similar impact. The largest
markets are in Asia - China, India, Indonesia and
Malaysia (accounting for %) - while the Europe-
an Union only represents % of global consump-
tion, and Northern America barely % (see Figure
). If we also take Japan, Australia and Russia into
account, consumption in the North only just reach-
es % of world production.
Figure 3. Global consumption of palm oil in 2015
Source:Oil World (2016).
The companies that consume the most palm
oil account for up to .% of world production,
for example Unilever and Ruchi Soya (an Indian
company), or . million tonnes of CPO. The vast
majority of multinationals purchase a few hun-
dred thousand tonnes when firms of national
size rarely exceed , tonnes. However, it is
on downstream companies in the European and
North American markets where the reputational
risk is focused. This is due in particular to the sen-
sitivity of consumers and civil society to social and
environmental issues. This, in turn, has triggered
the development of sustainability initiatives at
first in these countries, as part of this report will
explain.
1.2. Four main modes of
production upstream
Based on technical and economic criteria (in
particular access to the three main production
factors: land, capital and labour), the literature
usually distinguishes between four main palm oil
production systems in Southeast Asia (e.g.Dae-
meter, ; Marzin et al., ; Cramb & McCa-
rthy, ): large industrial and capitalist planta-
tions, medium-size and independent plantations,
smallholder plantations linked to industrial plan-
tations (irrespective of the type of link), and inde-
pendent smallholder plantations.
mLarge industrial plantations are plantations
of more than a thousand hectares that are
equipped with industrial facilities—especially
mills—for primary processing. They are most
often implemented by companies that are them-
selves subsidiaries of global or national-wide
groups.
mMedium size and independent plantations can
be a few dozen to a few hundred hectares large.
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They are owned by local middle class entrepre-
neurs or political elites.
mSmallholder plantations linked to industrial
plantations are known as schemed or tied
smallholder. In this type of organization, indi-
viduals are allocated with a plantation area of
to hectares in the immediate vicinity of the
industrial plantation, and also provided with
technical assistance, as well as a guarantee that
a mill, included in a development scheme, will
purchase and press their produce. The small-
holders gradually repay the cost of starting up
the plantation through a levy system on sales to
the mill. Such families can either be the land-
owners, who receive an associated plantation in
exchange for handing over the land-use rights to
the industrial plantation, as is the case in some
“Nucleus-Plasma schemes” (known hereafter as
“NES” for those in Indonesia and “FELCRA” for
Malaysia). These families may also be landless
or semi-landless peasants who, in the case of
the Indonesian Transmigration Program or the
Malaysian FELDA, have been allocated a plot of
land.
mThe term “independent smallholders” refers
to individuals who are free from any con-
tractual relationships and who manage their
plantations in a completely autonomous way,
although in some cases they receive state sup-
port (see RSPO, , p. ). In many ways, this
production method is the closest to traditional
agricultural production methods. Independent
smallholders account for a significant propor-
tion of total production, even though there are
no reliable figures currently available for Indo-
nesia; the most common estimates suggest that
-% of smallholders are independent. These
smallholders have often converted all or part of
their agroforestry plots into palm groves, in re-
sponse in particular to favourable world prices,
generating a substantial income for a crop that
is technically less demanding (Feintrenie et al.,
b, p. ).
This distinction of four groups should not hide
neither the extreme heterogeneity of each group
in terms of their endowment in production factors
and of operational practices, nor the multiple ways
in which they relate to each other. For example,
many tied / schemed smallholders have been able
over time to acquire new plots of land on which
they have developed independent plantations
(IFC, ). Conversely, independent smallholders
can also decide to invest into plasma plots which
are often more productive in order to intensify
their exploitation (Baudoin et al., , p. ).
Barral () also makes the case that permanent
workers (more specifically foreman) of industrial
plantations have been able to invest into oil palm
plots—sometimes up to a few dozen of hectares—
to secure a living for their retirement. In such case,
they are simultaneously workers in industrial
plantations and owners of medium size independ-
ent plantations. It must be noted here that almost
no data is available concerning those medium
size plantations. As a consequence, and despite
they are sometimes said to be a growing driver
of deforestation (Daemeter, , p. ), they are
not included per se in the rest of this report which
will stick to the classical distinction between large
scale, industrial plantations and smallholder ones
(RSPO, ).
The proportion of these modes of production
in terms of volumes produced and areas exploit-
ed varies greatly from one region to another. It
is estimated that industrial plantation represents
less than % of the volume in Nigeria, but around
% to % in Indonesia, Ghana and Papua New
Guinea.
For just over a decade, two contradictory trends
seem to be characteristic of the relationship be-
tween capitalist plantations, associated smallhold-
ers and independent smallholders in Indonesia
and Malaysia. Regarding industrial plantations
and associated smallholders, the proportion of
the latter has gradually decreased in favour of the
ever-growing development of large plantations.
The different schemes, funded by governments
to support a form of rural development, particu-
larly through transmigration programmes (in the
case of Indonesia) have gradually evolved towards
less support for smallholders and stronger support
for industrial plantations. In the late s in Ma-
laysia, development agencies responsible for the
development of organised smallholder schemes
(FELDA and FELCRA) became companies and
are now listed on the Malaysian Stock Exchange
(Cramb & McCarthy, ). Over time, public au-
thorities have reversed the proportions of small-
holders required in their different schemes. From
% smallholders and % plantations in the
s and s, to become / in the late s
(see IFC, ).
At the same time, the enthusiasm of independ-
ent smallholders for oil palm has resulted in a
steady increase in the area they manage, and a
relative increase in their share of total production
in both Indonesia and Malaysia (for an analysis
of the processes of converting traditional crops
into palm oil plantations see Feintrenie et al.,
a). Despite the increase in the share of small-
holder farmers in overall production, and also
despite the profusion of announcements aimed
at improving their circumstances (IFC, ),
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
Cramb and McCarthy () showed that their
access to production factors (land and capital in
particular) has become more complicated with
the decrease of government support for small-
holders and the financialization of major pro-
ducer groups. The authors indeed argue that
increased profitability sought by such groups is
incompatible with the coexistence of large plan-
tations and smallholders.
Figure 4. Evolution of areas managed by smallholders
and industrial plantations in Indonesia
Source IFC (2013).
1.3. Differing impact of the
production modes on territories
The territorial impact of oil palm production in
Southeast Asia, particularly in Indonesia and
Malaysia, is particularly ambivalent. On the one
hand, it is considered to be responsible for a large
proportion of the deforestation that has occurred
in these two countries over the last years. It
is also presented as one of the main engines of
growth and rural development that these coun-
tries have experienced. Presented in these terms,
the situation presents a dilemma: having to choose
between forest conservation or rural development
and economic growth. However, this section seeks
to show that the impacts of palm oil production,
both economically and environmentally, differ
significantly according to the production method,
thus potentially revealing possibilities for trajecto-
ries of sustainable trade-offs. As stated above, the
analysis that follows will only make the distinc-
tion between large scale industrial plantations
and independent smallholder ones. As such, it will
leave out of the scope medium size plantations
operated by middle class actors or local political
elite, as well as tied / schemed smallholder plan-
tations, as their impact greatly vary depending on
the type of link they have with the industrial plan-
tations on which they depend.
1.3.1. Environment: small producers are
relatively less responsible for deforestation
From to it is estimated that between
and million ha of forests disappeared in Indo-
nesia, of which about million ha could have
been described as intact or degraded primary
forests (Margono et al., ). At the same time,
the oil palm planted area rose from . million to
. million ha. Although not all oil palm develop-
ment has been carried out in forest areas, it has
clearly contributed to the deforestation that has
occurred in both countries—though many contro-
versies exist about the exact figures (see Wicke et
al., ; Tsujino et al., ). However, there are
great disparities when focusing on the production
methods. The study by Lee et al. () in Sumatra
is revealing in this respect.
Between and , the island of Sumatra
lost about . Mha of forests, of which % is di-
rectly attributable to the development of oil palm,
i.e. a little less than , ha. At the same time,
industrial plantations have increased by %
(from . to . Mha) and smallholder (independ-
ent and associated) plantations have increased by
% (from . Mha to . Mha). While the area
of plantations managed by smallholders has in-
creased faster than that managed by large plan-
tations, the impact of the latter in terms of both
deforestation and GHG emissions is much higher.
Their study shows that large plantations account
for % of forest conversions, compared to less
than % for smallholders, and more than % of
GHG emissions compared to % for smallholders.
There are three reasons that partly explain this
difference:
mThe majority of smallholder palm areas were
first established on former agricultural plots
that were already no longer forest areas, where-
as concessions entrusted to companies are in
nearly all cases in forest areas;
mSecondly, most smallholders do not have the
means to convert dense forests or peatlands into
plantations because this requires significant in-
vestment in terms of time and capital;
mFinally, large companies tend to prioritize the
conversion of areas where there is a low prob-
ability of land conflicts with local populations,
this often means areas that are located in dense
forest and/or peatlands that are difficult to
develop.
While it is of course impossible to extrapolate
these results to Indonesia as a whole, they provide
a fairly good illustration of the importance of ana-
lysing the impacts of palm expansion according to
the production methods. The assumption that simi-
lar dynamics are at work in other Indonesian and
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
Malaysian islands nevertheless appears realistic,
especially given the fact that large plantations are
largely dominant in these islands.
However, three elements call for tempering this
first assessment when considering other environ-
mental issues and not only deforestation alone.
The first relates to the role of smallholders in fire
outbreaks in Indonesia since the mid-s in
times of drought, the impact of which in terms
of both GHGs and public health is dramatic—the
burning of peatlands representing more than %
of Indonesia’s total emissions over the period -
(Boer et al., ). Several studies focusing
on different episodes (, , ) show that
burned areas outside concessions, for which small-
holders are therefore potentially responsible, vary
between and % (Gaveau et al., ; Mar-
lier et al., ). Practices include slash-and-burn
agriculture (swidden), “clean-up” of plots or their
preparation prior to the plantation of oil palm or
other tree species, but also arson in cases of land
conflicts (Dennis et al., ). However, in recent
fire outbreaks, because a large proportion of the
burned areas outside of concessions were sparsely
treed, the proportion of GHG emissions attribut-
able to smallholders remained below % (Gaveau
et al., ; Marlier et al., ).
A second element concerns the impact of the
conversion of smallholder agricultural plots into
oil palm plantations. As well described by Fein-
trenie et al. (a ; b), the tendency of small-
holders to transform complex agroforestry mo-
saics into monoculture plantations, particularly
for palm oil, is mainly linked to two parameters:
the much greater economic benefits of monocul-
ture systems - at least in the short term - and the
technical simplicity of the crop management. The
transition from one to the other, however, results
in a drastic simplification of the ecosystem and a
subsequent significant decrease in the ecosystem
services provided (Clough et al., ).
Finally, the increasing development of oil palm
by independent producers goes hand in hand with
low yields, sometimes less than half of those ob-
tained in industrial plantations (see Figure ). For
Cramb & McCarthy, this situation is a consequence
of the increasing difficulty for smallholders to ac-
cess credit, investment and training (Cramb &
McCarthy, ). In some cases, however, it has
resulted in an expansion of cultivated areas to the
detriment of agroforests, while an improvement
in productivity could have led to better economic
results and less environmental impact (IFC, ).
While the impact of smallholders on deforesta-
tion, GHG emissions and associated biodiversity is
actually lower than that of large plantations, we
should not be too quick to jump to the conclusion
that their practices are exemplary. Firstly, they
do contribute—even to a lesser degree—to Indo-
nesian deforestation through the development of
oil palms on forest areas in an often informal way.
Secondly, they have a significant involvement in
large-scale fires and contribute to the country’s
GHG emissions. Finally, while the conversion of
agroforests into oil palm plantations is not defor-
estation per se, it does results in a drastic simpli-
fication of ecosystems and a significant biodiver-
sity loss. Moreover, this is partly due to the lower
yields obtained by smallholders on their plots.
Figure 5. Scenarios for changes in smallholder yields
according to the adopted practice
Source: IFC (2013).
The small dotted lines show a scenario where industrial plantations adopt best prac-
tices; the dashed line shows a scenario whereby smallholders use the same good
practices according to their capacities; the two solid lines indicate the actual yields
obtained by smallholders, both tied and independent.
1.3.2. Significantly different social outcomes
and impacts of production methods
1.3.2.1. Industrial plantations often imply
difficult working conditions
About million people work in the palm oil
industry in Indonesia and Malaysia. Of these
million people, one third (and up to two-fifths,
depending on the estimates) are independent
smallholders who manage their own working
conditions and for whom oil palm exploitation can
represent only a part of their activity, sometimes
a small one. Although the functioning of family
farms is frequently associated with child labour,
the head of the family remains the “master” of the
working conditions.
This is not the case for the remaining two-thirds
of palm oil workers who are either employed in an
industrial plantation or are smallholders tied to a
major plantation. Large plantations, the homeland
of agrarian capitalism, have always been charac-
terized by difficult working conditions, although
the situation has evolved positively over time
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
(Barral, ). In the case of palm oil, respect for
safety conditions, working hours, weekly time off,
child labour and forced labour, especially for mi-
grants, are all subjects that cause tensions between
companies and NGOs. Amnesty International’s re-
cent report on working conditions in the Wilmar
plantations and its third party suppliers (Amnesty
International, ) points out that this issue is not
confined to history and, despite the many regula-
tions, it remains highly topical. Furthermore, Bar-
ral () and also Cramb and McCarthy (),
demonstrate the way public power in both Indo-
nesia and Malaysia has contributed to the struc-
turing of a labour market that can meet the needs
and challenges of plantation companies in terms
of human resources, to the detriment of the social
protection of employees.
1.3.2.2. Contrasting spin-offs in terms of
economic and rural development
Economic spin-offs remain important for the
national economies of producing countries
Export crops have played a key role in the Indo-
nesian development strategy for a long time. Such
crops have long been dominated by rubber, which
was only overtaken by palm oil at the beginning
of the s—the two types of production repre-
sented, during the period -, more than
% of agro-exports in terms of value.
Since then, palm oil has been a key currency
earning source for the Indonesian economy as a
whole, although its contribution to GDP growth
remains marginal (.% in , % in , cur-
rent figures not available) (Rhein, ). The
importance of exports, however, means that Indo-
nesia, and producers in general, face price volatil-
ity on agricultural commodity markets, which has
been growing steadily over the past years (see
Figure ).
Figure 7. Monthly prices of crude palm oil in Rotterdam
from January 2004 to September 2016
Source: Oil World (2016).
Nevertheless, when focusing more specifical-
ly on the rural area, the importance of palm oil
cannot be denied. Based on a counterfactual as-
sessment, Ryan Edwards () showed that the
standard of living for more than . million Indo-
nesian rural people was directly improved by the
development of palm oil in their region.
The economic spin-offs of independent
production are conducive to local development
In a retrospective analysis of palm oil’s contribution
Figure 6. Structure of Indonesian agri-food exports from 1990 to 2010
Source: OECD (2012).
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
to the Indonesian economy, Matthias Rhein (),
however, is more nuanced. While he recognizes
the importance of oil palms in improving rural
incomes, he however stresses that this contribu-
tion is much higher for small independent growers
than for workers in large plantations, with wage
differentials close to % in favour of smallholders
(see Figure ).
Among plantation workers, Stéphanie Barral
() showed that a form of “de-proletarianiza-
tion” was nevertheless possible. This is, however,
based on the possibility of the workers to reinvest
part of their earnings in the development of their
own oil palm plots. Such a scenario, however, can
only take place in contexts where access to land
does not pose difficulties: uncultivated land is
available, which is not already claimed.
Figure 8. Monthly salaries for major Indonesian crops
according to type of tenure
14
12
10
8
6
4
2
Oil palm
Rice
Sugar
Rubber
Coconut
Other plantations
Smallholder Plantation
employee
Non-farm
employee
Monthly Earnlngs
(Hundred Thousand IDR)
Source: Rhein (2014).
For tied smallholders, their hectares of land al-
located under the Nucleus-Plasma schemes is of-
ten insufficient to ensure the perpetuation of the
family farm, forcing families to sell their land or
the heads of households to work in neighbouring
plantations and leave their children in charge of
running the family plantation. In such a context, it
is difficult to speak of true “development trajecto-
ries” (Zen et al., ).
Finally, independent smallholders who obtain
the necessary resources to develop palm oil man-
age to generate a much higher income than em-
ployees or tied smallholders, as shown in Figure .
Feintrenie et al. (a) showed how the expected
gain associated with palm oil development was a
determining factor in the expansion of this crop
among small growers, who gradually convert their
rice fields or rubber agro-forests, or sometimes
open up new plots in the middle of forests. The
necessity to “freeze” a plot for to years after
planting, the time needed before oil palms begin
to produce, is nevertheless the vector of a growing
social differentiation between small landowners.
Thus, only those with a minimum capital and al-
ternative sources of income can engage in this cul-
ture which, in return, will help to consolidate their
incomes, further increasing the gap that already
separates them from the less affluent (McCarthy,
).
While it is necessary to distinguish between pro-
duction methods to enable the understanding of
the impact of palm oil in terms of rural develop-
ment, we must also consider two parameters of
the territorial context: land accessibility and infra-
structure density. From a macroeconomic point of
view, the OECD agrees with Barral’s findings that
palm oil-related rural poverty reduction has been
greater in districts with large land reserves (i.e.
when a large part of forest has been converted…):
In Kalimantan, Sulawesi and Sumatra where
land is still available for crop expansion, a larger
share of income is derived from high-productivity
perennial crops and non-agricultural activities
than from food crops. In these regions rural in-
come growth is generally above the national aver-
age and rural poverty incidence is lower (OECD,
, p.-).
In terms of infrastructure, Hayami (, for a
summary of his work) showed that in the field of
palm oil, large plantations do not allow for specific
economies of scale, although this is often claimed
(see also Cramb & McCarthy, , pp.-). Nev-
ertheless, a sufficient rural infrastructure is nec-
essary to enable the processing of the fresh fruit
bunches at the mill in less than hours. Thus, the
comparative advantage of large-scale planting de-
creases as rural infrastructure develops, enabling
small-scale producers to deliver their production
quickly enough.
The impact of oil palms on the socio-economic
level is therefore far from being unambiguous and
depends largely on (i) production patterns and (ii)
territorial context. This ambiguous impact is even
clearer if we analyse more broadly the conditions
for the establishment of palm groves and the land
access modalities. This is addressed in the follow-
ing section.
1.3.3. Socio-political impacts and the land
issue
The land issue is one of the most structuring
aspects of palm oil, particularly because it often
enables a link to be made between environmental
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
and social issues, especially concerning popula-
tions living in or around forests. Industrial plan-
tations and tied smallholders are particularly
concerned with these issues. Large plantations
have been established within the framework of
the so-called Nucleus-Plasma scheme (see section
) where the “nucleus” (= large plantations) has
represented between % in the early years and
up to % or even % today. “Plasma” desig-
nates the proportion of the concession reserved
for smallholders who are tied by the following
conditions: in exchange for the transfer of their
land rights for the development of the plantation,
local populations are allocated hectare produc-
tion plots (+ hectare for food crops from )
on which the company is committed to financing
production costs, purchasing bunches, moni-
toring, and the provision of agricultural advice
throughout the planting cycle. Until the mid-s
and even until today, the NGO FPP (Colchester et
al., ) and Zen et al. () reported that the
NES schemes have rarely been implemented in
a fully transparent way. In many cases—that are
difficult to quantify—the plantation has developed
without the consent of the populations concerned.
In other cases, local people have given away their
land without obtaining all of the compensation
promised by the contract. While the situation is
not unique to palm oil and concerns all of the agro-
industrial and forestry sectors (rubber, pulp/plan-
tation), it has taken on a new dimension with the
boom of the late s. For example, in , the
OECD identified over , cases of land disputes
reported to the courts, amounting to a total area of
, ha, mostly related to cases of concession
expansion.
This mode of oil palm expansion, though it has
often been justified in the name of national devel-
opment and national interest, therefore appears to
be particularly problematic from a socio-political
point of view. However, it largely accounts for the
low cost of land access in the Indonesian context
and therefore the comparative advantage of the
country on the international market. Any modifi-
cation of this access regime is thus inevitably likely
to increase the cost of land and therefore to ques-
tion the country’s competitiveness.
1.4. Balance sheet of impacts,
production modes and transition
This broad analysis ultimately highlights that in
terms of sustainability, smallholder/family-type
production systems are more beneficial than large-
scale plantation systems. Their environmental
impact is lower, they generate a higher income
per worker and they pose few problems in terms
of land access. Consequently, actions to be under-
taken to improve sustainability are different for
each of these systems. Table identifies, for each
production mode, the processes on which action
is required to improve their impact on the three
issues considered (deforestation/biodiversity,
rural development/working conditions, respect
for land rights).
Schematically, we can conclude that an initiative
to improve the sustainability of the sector should
simultaneously aim at the better control of indus-
trial production while supporting the improve-
ment of small producers. More specifically, four
intervention types seem essential:
mLimiting/preventing the expansion of planta-
tions into forests of ecological value (regardless
of the production mode) by ensuring their iden-
tification and preservation;
mGuaranteeing better working conditions and a
living wage for all workers in the sector;
mEnsuring greater transparency in the allocation
of land for the development of oil palm, par-
ticularly by guaranteeing fair negotiation condi-
tions between plantation companies and local
populations;
mEncouraging the improvement of the abilities of
smallholders through (i) training, (ii) access to
credit, and (iii) enhancing their bargaining ca-
pacity in relation to buyers.
In the following sections, each initiative will be
studied in the light of this first result. Thus, Sec-
tion shows the differences in ambition between
the initiatives studied. Part then explains the
identified differences by analysing simultaneously
(i) the political processes that led to their emer-
gence and (ii) their mode of governance. Finally,
part provides the basis for a qualitative assess-
ment of the capacity of these initiatives to achieve
their objectives by comparing their theory of
change with the actual modalities of their imple-
mentation. The conclusion summarizes the main
results obtained and discusses their main implica-
tions in the form of recommendations.
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
2. INITIATIVES THAT RESPOND
CONTRASTINGLY TO THE IMPACTS
OF PALM OIL PRODUCTION
ON THE TERRITORIES
Table , which presents the main sustainability
initiatives of the palm oil sector, was proposed
in the introduction and is shown again on the
following page. It enables the identification four
main types of initiatives, namely:
mCertification managed by private actors, NGOs
and companies: RSPO, RSPO-Next, Sustainable
Agriculture Network standard, and the standard
initially developed for the biofuel sector by Ger-
many now used for a diversity of uses: the ISCC;
mPrivate sector commitments, resulting in decla-
rations or charter formalization: POIG, SPOM,
the Consumer Goods Forum statement. More
broadly, this category includes all commitments
made by companies on an individual basis ac-
cording to their own CSR/sustainability policy.
These commitments are not shown in this table
but have been identified by McCarthy ();
mThe so-called “mandatory” certifications, led by
producer countries: ISPO and MSPO;
mFinally, territorial/landscape approaches, that
are more recent and most often led by interna-
tional NGOs.
While these four groups of initiatives differ in
the type of actors who manage them, their modes
of governance and the theory of change on which
they rely, they are not necessarily mutually exclu-
sive. In particular, the operationalization of com-
mitments undertaken by the private sector may
well be based on one or more of the other three
types of initiatives, or involve the development of
ad-hoc approaches.
The coexistence of these different types of ini-
tiative results from a series of proposals/counter-
proposals made over the past years by actors
with different definitions of what constitutes
sustainable palm oil. Five main types of actors
have contributed to this debate: the upstream in-
dustrial operators, who are most often the target
of blame; the governments of producer countries;
downstream buyers (distributors and agri-food
industries); environmental NGOs; and NGOs sup-
porting human rights and local populations.
Prior to further analysis of this process, this part
compares eight of the most important initiatives in
terms of their level of ambition towards the main
issues that were identified in part , i.e.:
mLimiting/preventing the expansion of planta-
tions into forests of ecological interest (regard-
less of the production mode) by ensuring their
identification and preservation;
mGuaranteeing better working conditions and a
living wage for all workers in the sector;
mEnsuring greater transparency in the allocation
of land for the development of oil palm, guar-
anteeing in particular conditions for balanced
negotiations between plantation companies and
local populations;
The initiatives studied in detail in this part are
shown in Table . The so-called “landscape” or
territorial approaches, in particular, were not in-
cluded in this first benchmark. Indeed, one of their
particularities is a capacity to adapt to different
contexts; they do not therefore really provide a
generic framework that explicitly outlines sustain-
ability criteria/indicators.
Table 4. List of initiatives studied according to type
Type Initiatives
Private Standards / Certification RSPO, RSPO-Next, RA-SAN, ISCC
National legal standard ISPO, MSPO
Private sector commitment
outside of certification
POIG, No Deforestation – No Peat –
No Exploitation (NDPE) Wilmar
This comparison is based both on a thorough
analysis of the content of each initiative and a re-
view of the other benchmarks established recent-
ly by WWF (Schlamann et al., ), Daemeter
Table 3. Main issues to improve the impact of each production mode
Deforestation / biodiversity Rural development / working condi-
tions / rural household income
Respect for customary
land rights
Independent Smallholders Limiting expansion into environmentally impor-
tant forests and agroforest conversion.
Improving productivity (and therefore improving
access to credit / capital)
Improving the quality of production to
raise incomes
Improving bargaining capacity with
buyers / mills
—
Tied Smallholders Highly context dependent
Large, capitalist
plantations
Limiting the expansion of new plantations into
environmentally important forests.
Improving working conditions
Increasing daily salaries to reach the
living wage, especially for temporary
workers
Transparency in the process
of granting concessions and
developing new plantations
Source: authors
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22 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
(), Rainforest Alliance () and the joint
RSPO-ISPO study carried out with the support
of UNDP in - (ISPO & RSPO, ). It is
also based on the analyses suggested by the www.
standardsmap.org website, which provides an
almost exhaustive comparison of the different
standards. The results are given in the form of a
summary table (see Table ), but the details of the
criteria and indicators considered for comparison
are given in the appendix to this document.
Moreover, at this stage it is important to note
that, on its own, the level of ambition shown by an
initiative says little or nothing about its effective
capacity to lead to more sustainability: for exam-
ple, a less ambitious initiative can be very effec-
tive, therefore being a greater catalyst for change
than a very ambitious initiative, the implementa-
tion of which is minimal. What makes this study
unique is that it goes beyond the mere compari-
son of objectives - as is the case with all the reports
studied as part of the research for this comparison
- by analysing more precisely how each initiative is
practically implemented / set in motion (part ).
Three main conclusions can be drawn from Ta-
ble , which serve as starting points for the next
part of this paper.
mNot all initiatives have effectively the same levels
of requirement, ambition and precision on the
three issues that concern this study. A general
classification, which is of course subjective, can
be proposed as follows:
POIG>NDPE Policies > RSPO-Next & RA-SAN
> RSPO > ISPO-MSPO.
mIn general, the legal standards steered by the
governments of producing countries show a def-
inition of sustainability and a degree of require-
ment that are lower than private commitments
and certifications/labels.
mThe table clearly shows that tensions between
actors regarding the modalities of dealing with
particular problems are crystallized in the nego-
tiations, and also shows the gradual adoption of
increasingly standardized tools to identify and
address a problem. This applies to the issue of de-
forestation surrounding definitions of high conser-
vation value and high carbon stock forests. In the
socio-economic area, current discussions focus on
the notion of a living wage, which is today little re-
spected in the palm oil sector. Finally, in the area
of land tenure and the recognition of customary
rights, the so-called FPIC process, which means
Free, Prior and Informed Consent, has gradu-
ally gained recognition but its application remains
open to interpretation. While the RSPO explicitly
refers to the United Nations guidelines, the MSPO
mentions the FPIC without reference to any meth-
odology of application, while ISPO makes no refer-
ence to it at all.
Table 5. Comparison of the 8 initiatives according to the main issues considered
Source: authors
RSPO RSPO-Next ISCC RA-SAN ISPO MSPO POIG NDPE
Deforestation 2 3 4 4 1 1 4 4
Forests with high
conservation value HCV
+ ++ Very wide
definition of
forest, pre-
venting any
conversion
No possible
conversion
of natural
ecosystem
No formal
recognition
of HCV and
HCS forests
No formal
recognition
of HCV and
HCS forests
++ ++
High Carbon Stock Forests
HCS
0 + ++ ++
Socio-economy 2 3 2 3 2 2 4 2
Living wage (beyond
minimum wage)
+ + ++ (Explicit
mention)
+ 0 0 ++ (Explicit
mention)
0 (only
minimum
wage)
Working conditions + ++ + (base ILO) + 0 + ++ ++
Employment of local
populations
+ (Minimum
but not
mandatory
quotas)
+ 0 + (Ambitious
but not very
detailed
criterion for
implementa-
tion)
++ + ++ 0 (no detail)
Land Issues 2 3 2 2 1 2 4 4
Consultation with local
populations, customary
rights and FPIC
+ ++ 0/+ + (No explic-
it reference
to FPIC but
very detailed
criteria)
0 + (FPIC
mentioned
without
methodology)
++ Requires
enforceable
participatory
mapping
++
Land dispute management
mechanism
+ + 0 (no
precision)
0 + + ++ (Detailed
requirements)
++
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
3. A STRATEGIC AND COMPETITIVE
DYNAMIC THAT EXPLAINS THE
DIFFERENCE IN THE AMBITIONS
OF THE INITIATIVES
This third part aims to account for the differences
noted above through an analysis of the political
processes that led to their emergence and stabili-
zation. In addition to the eight initiatives outlined
above, we have added the internal policies of
companies, large producers and traders, which in
some cases are more demanding and have taken
on increasing importance over five years. For each
initiative, we analysed the negotiations through
which a definition of sustainability was adopted,
focusing on two main issues:
. Externally: How did actors who proposed new
initiatives have to position themselves vis-à-vis
other initiatives and their proponents?
. Internally: who participates in the definition
of the sustainability criteria adopted: level of in-
clusiveness, type of representativeness? What are
the modalities of decision-making: by consensus,
by simple/qualified majority voting? How were
the instruments for the implementation of the
adopted sustainability definition defined?
The result of this analysis is a six-tier narrative,
summarized below:
(i) The development of the Roundtable for Re-
sponsible Palm Oil (RSPO) and its progressive af-
firmation as a reference initiative for all actors;
(ii) Challenges to the RSPO and the emergence
of proposals and then counter-proposals regarding
the zero deforestation component;
(iii) The subsequent development of private
commitments such as “no deforestation, no peat,
no exploitation” (NDPE) by major upstream and
trading actors, faced with pressure from their buy-
ers and civil societies;
(iv) the emergence of national standards as an
expression of the willingness of producer coun-
tries to resume (or retain) control over sustainabil-
ity issues;
(v) In parallel, the development of biofuels in
Europe that gave rise to the ISCC, which rapidly
established itself as an important actor in the palm
oil sector;
(vi) More recently, and to deal with what more
and more actors perceive as the limits of certifica-
tion standards, territorial approaches have been
launched, which do not however exclude forms of
links with private commitments outside standards
or with certification mechanisms.
3.1. The RSPO, a criticized
standard but a reference
for all actors
In the early s, as the expansion of oil palm
plantations in Southeast Asia led to significant
deforestation rates, WWF began to explore the
idea of a sustainability standard for palm oil. Thus,
in an informal cooperation was launched
between WWF and several companies in the sector,
Aarhus United UK Ltd, Migros, the Malaysian Palm
Oil Association and Unilever. In , the RSPO
was formally established and organizations
signed a press release declaring their intention
to participate in the RSPO. In November , an
initial version of RSPO’s Principles and Criteria
(P&C) was adopted by companies for an initial
implementation pilot period. A review process of
these RSPO P&Cs was carried out in and in
October , and a new revised version of the
RSPO P&Cs was adopted. Compared with the
previous ones, it incorporates more precise indica-
tors and guidelines.
The initiative grew rapidly to the present day.
In August , the RSPO was already certifying
million hectares of oil palm plantations, i.e. mil-
lion tonnes of certified palm oil (% of world pro-
duction). As of June , the RSPO has certi-
fied nearly . million hectares of plantations and
has more than , ordinary members distribut-
ed across seven fields: growers, refiners/traders,
downstream industrialists, distributors, financial
actors, ENGOs and NGOs. This extremely broad
membership gives the RSPO its strength and in-
dispensible nature. RSPO certified oil (according
to one of three processes: green palm, book and
claim, segregated) now accounts for % of the
world market.
Nevertheless, the RSPO is also the subject of nu-
merous criticisms on the social and environmental
levels:
mOn the social level: marginalization of small-
scale producers, little consideration of local
populations, few safeguards for working condi-
tions (Cheyns, );
mOn the environmental level: the possibility of
using chemical inputs deemed dangerous for
workers and the environment, an overly flexible
framework for fighting against deforestation
(Laurance et al., ).
The history of the RSPO, as well as the cur-
rent modalities for the definition of its Principles,
Criteria and Indicators (PCI), makes it possible
to account for this situation. In terms of history,
Nikoloyuk et al. () showed that the initiative,
initially conceived as a downstream coalition to
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24 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
promote palm oil with strict environmental re-
quirements, has gradually had to deal with impor-
tant upstream actors without whom it would have
lost all legitimacy. The latter have, in particular,
imposed a formal structure which gives them a
decision-making influence that is at least equal to
that of NGOs, a crucial aspect at the time of revis-
ing the RSPO’s PCIs.
These revisions occur every five years, the last
revision taking place in . The review process
involves a standing committee on PCIs, in charge
of steering the process of their review. This stand-
ing committee must draw up a review draft which,
once validated internally, is submitted to the
Board of Governors of the RSPO. If the review is
validated, the proposal for revision is subsequent-
ly put to the vote of the RSPO General Assembly,
where decisions are taken by simple majority, with
each member counting for one vote (RSPO, ).
However, the Board of Governors is rather domi-
nated by the upstream of the sector, because out
of the seats on the Board, are reserved for
growers and for refiners/traders (who are also
growers). Also, up until the last revision of the
PCIs, membership was largely dominated by the
upstream palm oil sector, although things have
since changed, as shown in Figure .
In this context, the possibility of making the
RSPO evolve towards a more socially and envi-
ronmentally demanding standard, adding direct
constraints on producers without the certified
oil market really being profitable, appears dif-
ficult because the same producers occupy strong
positions in the decision-making processes.
Moreover, as shown by Emmanuelle Cheyns ( ;
), the mode of discussion leaves little room for
local populations (plantation workers and small-
holders) who are not experienced in defending
their viewpoints and concerns in the language of
this type of arena.
Among current members, downstream actors
now occupy a decisive position, which could lead
to major changes/developments in the upcoming
revision of RSPO PCIs in . Until then, actors
who are not satisfied with the RSPO have already
looked for other ways to improve the sustainability
of the sector, leading in particular to the creation
of RSPO-Next (which is discussed below).
3.2. Environmental criticisms
of the RSPO and the
emergence of a methodology
for “no deforestation”:
the HCS approach
Greenpeace has never been a member of RSPO
and has was quick to denounced its limita-
tions, especially with regard to the challenges of
climate change (Greenpeace, ) and defor-
estation (Greenpeace, ). Following a series of
campaigns against Golden Agri Resources (GAR),
the world’s leading producer at the time, and then
its main clients, Unilever and Nestlé, in , the
organisation put forth the notion of “High Carbon
Stocks Forest” to operationalize the “no deforesta-
tion” commitment taken by GAR (for a detailed
account of the adoption of this methodology see
Aubert et al., ).
Figure 9. Membership of RSPO according to activity field, between 2004 (creation) and 2015
Source: based on RSPO data
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
The methodology is based on vegetation map-
ping that enables the distinction of vegetation
units considered as “forests” - and therefore to be
preserved - from non-forests - on which it is possi-
ble to develop oil palm. Originally developed with-
out consultation with local populations or their
representatives, the methodology took little ac-
count of land-use patterns by local populations. To
address these limitations, which were highlighted
in a report by the Forest People Program NGO
(FPP, ), a broader consultation of NGOs and
actors involved in the palm oil sector was organ-
ized to refine the methodology between and
. The academic community was also largely
involved in this exercise, which culminated in the
formalization of a toolkit in spring (HCS Ap-
proach Steering Group, ).
In this process, the opening up of the decision-
making process to include a number of environ-
mental NGOs and an NGO advocating social rights
that worked closely with the former is one of the
key elements in achieving a much more ambitious
definition of sustainability. From the environmen-
tal perspective, the HCS approach enables the more
precise operationalization of a zero deforestation
commitment. From a social perspective, it defines
a modus operandi for implementing objectives
that have already been formulated in the RSPO,
detailing for the FPIC in particular the modalities
of the deployment of a participatory mapping. The
maturation process of the HCS approach lasted al-
most years, between and . Within this
same timeframe, some of the actors supporting the
HCS approach sought to highlight the innovations
that they had developed within the RSPO, launch-
ing the Palm Oil Innovative Group (POIG).
3.3. From HCS to POIG,
SPOM and RSPO-Next
3.3.1. The launch of POIG in 2013: testing
innovations to improve the RSPO
3.3.1.1. Origin and creation of POIG
The Palm Oil Innovative Group (POIG) was
launched on June at a meeting of the Trop-
ical Forest Alliance (TFA) in Jakarta, two months
after completion of the RSPO P&C review process.
The declaration of the creation of the POIG
announced the intention of the group’s members
to go beyond the requirements of the RSPO, which
was considered to be insufficient to address the
challenges of the sector. This first press release
was signed by four palm oil producing compa-
nies (DAABON, AgroPalma, NBPO and GAR),
three environmental NGOs (Greenpeace, WWF
and Rainforest Action Network), and a social
NGO (Forest People Program). While the four
NGOs that initiated POIG have contributed to the
development of the HCS approach, only one of
the four companies (GAR) participated, the other
three being new entrants into the sustainability
debate. Two of them, DAABON and AgroPalma,
particularly operate in Latin America, where oil
palm is still moderately developed.
It was not until several months later, on No-
vember , that version of the POIG Charter
was formally signed by the same organizations
(companies and NGOs) with the exception of the
GAR group. It includes in particular the strength-
ening of the existing RSPO criteria: protection of
HCS forests, prohibition of the use of Paraquat and
other toxic inputs, prohibition of GMOs, respect
for the customary rights of populations through
the implementation of the FPIC procedure, and
complete traceability all the way to the mill. No-
tably, none of the sector’s leaders from Indonesia
and Malaysia were present within POIG at the time
of the launch of the first version of the charter.
The first sentence in the introduction to the
charter states that the POIG aims to support the
RSPO by building onto it, by experimenting with
innovations in the setting up of the existing RSPO
standards but also with additional critical issues.
The POIG charter focuses openly on the specific
commitments of palm oil production companies
(growers). In particular, it aims to increase mar-
ket demand for innovative palm oil products and
remains open to all types of private actors and civil
society. The charter plans to integrate additional
components for negotiators, investors, manu-
facturers, resellers and consumers who support
the charter to ensure that its standards apply to
the entire value chain. Thus, in November ,
the POIG Charter was adopted for retailers and
manufacturers.
3.3.1.2. Governance of the POIG
The POIG is a network and not a formal organiza-
tion. All decisions are therefore taken by consensus.
Members discuss and establish charter indicators,
audit and verification procedures, budgets for
specific initiatives and communication initiatives.
A POIG organizing committee consisting of five
founding members (Agropalma, DABOON, GP,
WWF and FFP) is responsible for the admission,
suspension or exclusion of members, governance
structures and development of the initiative. It
should be noted that this organizing committee
includes companies, environmental NGOs and
social NGO. However, this governance element
relating to the internal operation of the network
must be verified through interviews. This situa-
tion, which is apparently favourable for NGOs,
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
is balanced by a consensus-based decision-making
method; nevertheless, the absence of historical
companies (GAR, Sime Darby, Wilmar...) is clearly
a factor that facilitates the setting of ambitious
objectives. It can nevertheless also be considered
as a limitation to the POIG’s influential capacity
with respect to the sector as a whole. Finally, the
POIG secretariat is provided by a sustainable devel-
opment consultancy, Helikonia, based in Malaysia.
In addition, the POIG was expanded through the
recruitment of new members, including Musim
Mas, a major grower, refiner and trader (% of
global trading market), and also Ferrero, Danon
and Boulder Brands. This enlargement gives the
POIG an increasingly strong voice and ability to
have an impact on the discussions in other fora,
particularly on the RSPO, its main target. How-
ever, while the initial ambition was to change
the RSPO “from the inside” by proving that more
ambitious sustainability criteria were compatible
with an economically viable activity, one of the
RSPO’s responses was the creation in of the
RSPO-Next. This decision received a mixed reac-
tion within the POIG because it ran the risk of gen-
erating a “two-speed” system, the transformative
scope of which could rapidly become limited. The
creation of the RSPO-Next (see Section ...) can-
not however be understood without taking into ac-
count the emergence of another grower-led initia-
tive: the Sustainable Palm Oil Manifesto (SPOM).
3.3.2. SPOM: a “firewall” built by large
industries that led to an open and
transparent process
The emergence and consolidation of the HCS
approach between and shone the spot-
light onto a way of defining the forest, which made
it very difficult to implement any zero deforesta-
tion policies. One of the most contentious aspects
was the threshold value of - tonnes of above
ground carbon per hectare as the threshold
between forest and non-forest vegetation. The
first validation of this threshold after several pilot
phases in Kalimantan, and then in a GAR subsid-
iary in Liberia (see Aubert et al., ) led to the
main actors in the sector fearing the consequences
of its possible widespread application which,
according to them, would have brought an end to
the development of palm oil.
3.3.2.1. Creation of the SPOM
It is on the basis of these concerns that the idea for
SPOM emerged among several actors, including
Unilever and the large plantation companies in
Southeast Asia. Unilever supported the first version
of SPOM that was launched on November ;
it was however only in July that five grower
companies signed the current version of SPOM,
this time not including Unilever. These compa-
nies were Sime Darby, IOI Corporation Bhd, Kuala
Lumpur Kepong Bhd (KLK), Musim Mas Group
and Asian Agri. These five companies account for
about % of the world’s palm oil production. In
addition to these five grower companies were two
important actors from the global palm oil trade:
Apical and Cargill.
The SPOM is a “manifesto” signed by a group of
companies wishing to exceed the commitments of
the RSPO P&C, but which, above all, do not
subscribe to the HCS approach as adopted by POIG
members. To establish a definition and methodol-
ogy for the identification of HCS forests, one that
competes with the existing one and is potentially
more favourable, SPOM signatory companies are
financing, conducting and commissioning inde-
pendent research under the heading of “HCS+
study”.
3.3.2.2. HCS+ Steering Committee and
governance
To steer and manage this study over a period of
months, the SPOM signatories created a Steering
Committee, which mainly gathered actors with
a direct or indirect interest in the current palm
oil development model, such as the Indonesian
Growers’ Association, the MPOB and the RSPO.
However, the presence of ProForest and the London
Zoological Society brings a degree of openness. In
contrast, the study was based on researchers and
consultants with alternative positions, particularly
in the socio-economic field, that were known to
all. This resulted in particularly critical reports and
ambitious recommendations for the development
of a possible HCS+ approach.
At the same time as when the governance of
HCS+ was taking shape, and when the HCS Study
was underway, organizations working on the “ini-
tial” HCS approach developed by Greenpeace,
TFT and GAR, were continuing their formaliza-
tion work. In the second half of and the first
half of , the coexistence of these two processes
gave rise to important—yet informal—exchanges
between the two approaches. The following part
analyses the convergence process followed by both
approaches up to the present day, and the recipro-
cal influence between this process of convergence
and the creation of RSPO-Next.
3.3.3. The HCS Convergence Working Group
and RSPO-Next
After a little more than a year of informal exchanges
between the actors of the two processes, encour-
aged in particular by Wilmar, RSPO and IDH, a
convergence process was officially launched on
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
October , at a meeting held in Singapore,
which gathered the leaders of the HCS Approach
and the HCS+ Science Study, as well as repre-
sentatives from Unilever, Wilmar, Musim Mas,
GAR, Sime Darby, Cargill, Greenpeace, The Forest
Trust, Union of Concerned Scientists, Forest
Peoples Programme and WWF. The objective of
the newly created “HCS Convergence Working
Group”, as stated in a press release, was to work
together on an agreement to define a clear and
unique set of rules for the implementation of
zero-deforestation commitments for companies.
Points of convergence were identified, although
the members of the working group also acknowl-
edged the existence of important issues: working
with local communities, integrating the HCS
Approach into the RSPO, and adaptation of the
methodology to areas with high forest cover.
The convergence work continued throughout
to reach a formal agreement during the
RSPO roundtable. While this agreement put
forward the convergences found regarding the
aspect of above-ground vegetation, it also men-
tions areas where there is still work to be done,
in particular with regard to taking social and land
issues into account.
In this convergence process, the RSPO has
played an essential role. Indeed, in a document
entitled “RSPO-Next”, that was published on the
launch day of the RSPO roundtable, this ap-
proach was presented as follows:
mRSPO NEXT is a voluntary effort that engages
with RSPO member companies that have met
the current requirements and guidance of the
RSPO Principles and Criteria […] The compo-
nents of RSPO NEXT fall into the following cat-
egories: No Deforestation, No Fire, No Planting
on Peat, Reduction of GHGs, Respect for Hu-
man Rights and Transparency. […] The RSPO
members need consensus on a definition
and methodology to identify High Carbon
Stock Forest which will be endorsed by the
RSPO. Without such convergence, the devel-
opment of a fundamental part of a working
definition of “No Deforestation” is not pos-
sible. As convergence emerges it will be in-
corporated into the indicators below (RSPO,
b, p. ).
The HCS-A/POIG/SPOM/RSPO-Next sequence
thus shows how the actors have changed their po-
sitions in the game and the consequences that this
has had on the definition of sustainability. While
the RSPO appeared “closed” to NGOs, which
could not make themselves heard here, it was by
forming alliances with downstream industrialists
that they succeeded in changing the positions of
the growers/refiners/traders, in some way forc-
ing the RSPO to position itself with the launch of
the RSPO-Next. The creation of the RSPO-Next
was however criticized for two main reasons: it
envisages two-tier certification, and the market
will probably not be able to provide remuneration
for “Next” given that RSPO produced and certi-
fied volumes do not always find buyers. Its emer-
gence was nevertheless also a consequence of the
fact that many companies had already moved for-
wards in terms of sustainability, as discussed in
the next section.
3.4. From the multiplication
of private commitments
to their consequences in
producing countries
Faced with the limits of certification, some NGOs
have turned towards buying companies that
are leaders in their sector to demand additional
guarantees against deforestation, the destruc-
tion of peat, and the exploitation of local popu-
lations. Following a series of campaigns which
were sometimes quite violent, many downstream
companies made commitments in and .
This, in turn, led their suppliers to make similar
individual commitments to no deforestation, no
peatland exploitation, and no labour exploitation
(most often abbreviated as NDPE for No Defor-
estation, No Peat and No Exploitation).
Table shows, in chronological order, the main
corporate policies made between and
by the major actors in the upstream palm sector.
It illustrates an uncommon “race to the top” phe-
nomenon in highly competitive markets, where
the commitments of some stimulate those of oth-
ers, in a circle that is at first glance very virtuous
(we return to this in part ). In this process, two
events were probably key:
mthe commitment made by Wilmar, which rep-
resents nearly % of global trading, in Decem-
ber ;
mthe mid- negotiations between SPOM and
the NGOs supporting the HCS-A, during which
the SPOM initiators had to commit to the freez-
ing of any conversion of peatlands or forest are-
as, pending the finalization of the HCS+ study.
This commitment was eventually included in
their corporate policies.
The role of The Forest Trust (TFT), a non-profit
organization working with industries in the sec-
tor, should also be highlighted. Indeed, the ma-
jor actors in the upstream sector (GAR, Wilmar,
Cargill, NBPO) and downstream (Nestlé, Ferrero,
Johnson & Johnson, Mars...) are all members of
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28 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
the TFT, while others have approached it regard-
ing the traceability of their supply (Musim Mas in
particular).
Table 6. Successive launch of sustainability policies of
the main upstream actors Source: authors
Release
date of
sustainability
policy (NDPE)
Production (%
global S)
Share of
global trading
GAR Feb-11 3.8% 14%
Wilmar Dec-13 2.4% 43%
Cargill Jul-14 0.6% 4%
Asian Agri /
Apical
Sept-14 1.0% <2%
IOI (Malaysia) Dec -14 1.2% 10%
Musim Mas Dec -14 0.4% 18%
KLK Dec -14 1.7% 2%
Astra Agro Lestari Sept-15 1.9% <2%
TOTAL 12.9% 91%
One of the main drivers of these commitments
was the successive challenges made regarding cer-
tification standards (in particular the RSPO), high-
lighting their inability to guarantee to consum-
ers that palm oil had not been obtained through
deforestation. The commitment of the Consumer
Goods Forum in to “help achieve zero net
deforestation by ” was also an important
step in this respect. Since then, the latest Supply
Change report has identified companies that
have made a commitment to reduce their impact
on deforestation in the palm oil sector (McCarthy,
, p.).
Another important driver of these commitments
is risk management, particularly reputational,
even if the operational and compliance aspects
are also mentioned. For many downstream com-
panies, certification indeed no longer guarantees
protection from NGO criticism on social and en-
vironmental aspects. In contrast, companies who
are not worried about this type of reputational risk
clearly state their lack of concern, as is the case for
Ruchi Soya, an Indian company that handles the
same volumes as Unilever:
“CSPO material is costly. In India due to costing
factor, there is no demand for CSPO material. As
soon as there would be demand, we will surely use
CSPO material” (ACOP Ruchi Soya).
Interestingly, this essentially private dynamic
has also tried to influence public policies in pro-
ducing countries. In September , Cargill,
Asian Agri, GAR and Wilmar, with the support of
the Indonesian Chamber of Commerce, launched
the Indonesian Palm Oil Pledge (IPOP), with two
objectives: (i) to make public and collective their
commitment to end deforestation and human
rights violations within their own operations, as
well as those of all their suppliers and subsidiar-
ies; (ii) to work with the Indonesian Government
to ensure that their objectives are ultimately for-
malized and codified within the framework of In-
donesian legislation.
Nevertheless, the Indonesian State has constant-
ly criticized the IPOP, denouncing the companies
as operating as a cartel and influencing prices in
contravention to WTO rules, as well as their ini-
tiatives that were deemed to interfere in national
affairs (none of the companies being based in In-
donesia). Despite Asian Agri and then Musim Mas
joining IPOP, tensions between the IPOP and the
Indonesian government led to its dissolution on
July , . Officially the companies announced
this dissolution as the logical consequence of the
new commitments made by the Government of
Indonesia. However, it was also largely the result
of pressure on signatories from government and a
number of national companies that were disgrun-
tled by being “blacklisted” by IPOP signatories due
to their non-compliance with HCS, FPIC or other
commitments.
This process in fact illustrates the major difficul-
ties in the dialogue between Indonesian and Ma-
laysian governments and some actors in the palm
oil sector, particularly those with ambitious pro-
posals for sustainability. The creation of national
standards in these two countries, mainly steered
by governments, illustrates this point well.
3.5. Parallel processes that
interfere politically: the
emergence of ISPO and
MSPO national standards
Indonesia and Malaysia are the world’s two largest
palm oil producers. These two countries alone
account for % of world palm oil production.
In the front line against the criticisms of envi-
ronmental NGOs regarding deforestation and its
impacts on climate change and biodiversity loss,
Indonesia and Malaysia have particularly reacted
through the creation of certification standards.
This approach, however, is part of a more global
movement to develop certification standards
steered by producing countries in the South. As
demonstrated by Schouten and Bitzer (), this
dynamic is characterized in particular by the will-
ingness of Southern countries to set standards that
are adapted to their own issues and constraints,
rather than to what they often consider as
“injunctions” from Northern countries or even
neo-colonialism.
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
3.5.1. Creation of ISPO and MSPO
As early as July , the Indonesian government,
through its Ministry of Agriculture, launched the
creation of the Indonesian Sustainable Palm Oil
standard (or ISPO), which did not start until :
a mandatory certification and “legal” standard for
all companies operating in the Indonesian palm
oil sector. Officially, the aim was to improve the
competitiveness of Indonesian palm oil in the global
market that is increasingly aiming for sustainability,
as shown by the significant growth of the RSPO. One
of the reasons for the creation of ISPO was therefore
a market logic, which persuaded the Indonesian
government to support its domestic producers in an
evolving international context where the sustaina-
bility of production was becoming more important.
ISPO’s second objective is also to reduce GHG emis-
sions and to take account of environmental issues
(source: ISPO website). In concrete terms, the objec-
tive is also to strengthen compliance and enforce-
ment of laws in the palm oil sector and to encourage
small and medium-sized producers to adopt good
practices. ISPO allows producers to obtain certifica-
tion who do not have the means or the desire to join
the RSPO. Indeed, ISPO is generally less demanding
than the RSPO and essentially corresponds to a
standard that requires, as a minimum, compliance
with national laws and regulations. The ISPO has
indeed been designed to be applicable by any actor
in the palm oil sector.
Faced with the establishment of ISPO by its
neighbour and the same international context,
Malaysia also launched its certification standard
in . Developed by the Malaysian government
with the support of many actors in the palm oil
industry, the MSPO Standards were officially
launched in November but its implementation
did not start until January . The Malaysian
Palm Oil Board (MPOB) was particularly involved
in the development of the standard, an organiza-
tion responsible for the drafting of the standard
and initially responsible for its international pro-
motion. In practice, the MSPO provides a frame-
work for the management of oil palm production,
with many existing national laws and regulations,
while using the pillars of sustainability to define
many criteria. Unlike ISPO, the MSPO was not
mandatory at the beginning. However, the discus-
sions that have gone on since the end of and
the beginning of have been clearly directed
towards making the MSPO mandatory for all op-
erators in the very short term. Like the ISPO, the
MSPO was initially launched to allow small and
medium-sized producers who cannot afford the
RSPO to work towards sustainability. It was also
intended to support the competitiveness of Malay-
sian palm oil on the international market.
3.5.2. A complex legitimacy for standards
with modest ambitions
The modest level of ambition shown by the Malay-
sian and Indonesian national standards is primarily
due to the motivation underlying their creation: to
set a standard that is accessible to small national
operators (smallholders and medium-sized indus-
tries) for whom “paying” for RSPO certification
is impossible or very difficult. The fact that these
two standards are aligned with the legislation in
place, which is why most NGOs say that they are
ultimately “legal” standards, also shows that the
public policy framework in place is in itself a guar-
antee of sustainability.
The setting up of both ISPO and the MSPO have
mainly involved the main industrial and national
actors of the sector. Representatives of local popu-
lations, environmental or social NGOs, have barely
been invited to take part in defining the content
of both standards, though their governance has
gradually evolved over time to leave more space
to those actors. As a result, MSPO and ISPO stand-
ards tend to have a strong legitimacy in the eyes
of the national industrial actors, particularly the
Malaysian Palm Oil Board and GAPKI (producer
organizations in Malaysia and Indonesia) and, on
the other hand, a rather weak legitimacy from the
point of view of downstream actors.
3.6. Territorial and jurisdictional
approaches: the gamble of
strengthened links between
corporate commitments,
certification and local policies
3.6.1. Territorial approaches or the
“rediscovery” of land use planning issues
In a recently published literature review, Reed
and colleagues () showed that while the
notion of “landscape approach” has been
proposed since the early s, it became
increasingly important at the turn of s. It
has sparked the interest of the academic sphere
as well as among practitioners, development
and conservation operators. The idea of a terri-
torial approach, in the context of tropical defor-
estation, is indeed at the crossroads of two types
of concern.
On the one hand, industrial actors, which have
committed en masse to eliminating deforesta-
tion from their supply chains, have clearly per-
ceived the limits of the approaches developed so
far. Certification, by stopping at the farm gates,
does not fully enable the effects induced at the
territorial level (food security, fight against pov-
erty, need for biodiversity corridors, etc.) to be
taken into account. Private commitments such
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
as certification have, moreover, been in many
cases inconsistent, and sometimes frankly in-
compatible, with existing public policy frame-
works. This has led actors to seek further col-
laboration with public authorities, particularly
at territorial levels where local governments are
expected to have more manoeuvre room and
flexibility than national governments.
On the other hand, forestry and climate ac-
tors have developed so-called jurisdictional
approaches within the REDD+ framework to
address the complexity and slowness of REDD
implementation in the national context. The
possibility of combining the gains of certification
and supply chain approaches with the jurisdic-
tional approaches of REDD+, revealed a source
of additional incentives for local governments
and donors to stimulate project development.
The palm oil sector, of Indonesia in particular,
has not escaped this trend. Over the past five
years, a dozen or so projects have been launched
by a few key players: IDH, Earth Innovation In-
stitute (EII), Conservation International (CI),
The Nature Conservancy (TNC) and TFT. The
analyses presented below are based on these
experiments. Before going into detail on these
projects, some diachronic and definitional ele-
ments seem important.
Drawing on the definition proposed by Denier
and colleagues (), a territory/landscape
can be considered as a socio-ecological system
composed of natural and/or human-modified
ecosystems. The properties of which are the re-
sult of ecological, social, political and economic
processes. In particular, different land uses may
either coexist in a complementary manner or, in
contrast, be mutually exclusive. In this case, the
appropriation of land and the choice of its use
are subject to competition or even conflicts that
are regulated more or less peacefully by forms of
governance specific to each territory.
Adopting a territorial approach thus consists
in acting on this governance framework to foster
the integration of different practices and usages,
that are possibly conflictual, taking into account
multiple objectives among which there is at
least: conservation (biodiversity, regulation of
water regimes and climate change), agricultural
production and the fight against poverty. More
specifically, a territorial approach can thus be
defined as an intervention aimed at influencing
the land use on a territory and at a given time
horizon, in particular by influencing two aspects
of the territorial governance framework:
(i) The nature of the decision-making process:
which actors can participate, how and with what
mandates and resources?
(ii) What are the criteria that are taken into
account when choosing between different land
uses in the case of mutually exclusive usages,
and how are they weighted (between conser-
vation, economic development, distribution of
benefits, land access and recognition of custom-
ary rights, etc.)?
This working definition of territorial ap-
proaches leads to two preliminary remarks.
Firstly, as Reed et al. (, p. ) states,
it requires explicit recognition that it will not
necessarily be possible to satisfy all actors in a
territory. One of the challenges of such an ap-
proach is thus to characterize the expectations
of the various actors to identify possible syner-
gies, needs for compromise, winning and los-
ing actors, and the necessary compensation or
alternatives.
Secondly, this working definition leaves open
the question of the leadership of the territorial
approach developed. In this perspective, juris-
dictional approaches appear to be a subset of
territorial approaches in which leadership is
entrusted (or proactively taken over) by a local
government.
3.6.2. A diversity of projects on a few
well-identified territories supported by
internationally leading actors
Table lists the various Indonesian territories
on which one or more projects are in progress
or have been developed in previous years. It
also identifies for each territory the main actors
involved and, when the data are available, the
type of approach developed. Ten provinces are
concerned (to which West Papua should be
added, but on which no information is available
at this stage), which concentrate most of the
issues in terms of deforestation and biodiversity
conservation.
These projects intersect with broader pro-
grammes undertaken by different organizations.
Examples include the Sustainable Landscape
Partnership (CI, USAID), the Farm and Finance
Initiative (EII), the Integrated Sustainable Land-
scape Approach (IDH) and the Landscape Pro-
gram (TFT). While the table shows that several
organizations are sometimes present on the
same territory, the precise nature of their inter-
actions is difficult to assess from a review of the
literature and a few interviews. Partnerships are
mentioned in some documents, while some in-
terviewees have mentioned collaborations that
were sometimes difficult.
A significant proportion of the identified
project leaders are not only operationally ac-
tive but regularly contribute to the updating of
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
Figure 10. Approximate location of the main territorial approaches in Indonesia
Source: author, from different organisations’ websites
Table 7. Review of territorial projects/approaches in Indonesia over the last 10 years
Province District NGO / Development
operators
Companies Local government
involvement
Approach Date
Aceh Tamiang, Timur,
Singkil
IDH, TFT, Wilmar, APP No data Development of a
provincial “Green
Growth Plan”
2016-
Riau Giam Siak Kecil TFT APP, Wimar No data 2016-
West Kalimantan Ketapang IDH, RSPO No data Governors province
and district,
Biodiv. corridor +
development of
provincial “Green
Growth Plan”
2015-
South Sumatra Musi Banyuasin IDH, ZSL, Daemeter,
FPP, SNV, RSPO
No data Governors district District 100%
RSPO by 2018 +
Development of a
“Green Growth Plan”
2015-
Jambi Muaro Jambi &
Tanjung Jabung
SNV, Deltares, ZSL +
National Partners
No data No data No data 2016-2018
North Sumatra 5 districts IDH, CI Unilever No data No data 2015-
North Sumatra Mandailing Natal,
Tapanuli Selatan
CI, USAID, Walter
Family Foundation, ZSL
No data Central provincial
& district
governments
Support for
the realization
of Strategic
Environmental
Assessment for LUP
2013-2018
Central Kalimantan Seruyan,
Kotawaringin
Barat
EII, INOBU, CPI, RSPO,
Governor’s Climate and
Forest Group
No data Provincial & district
governments
Province 100%
RSPO by 2020
+ development
of Low Emission
Development Strategy
2012-
East Kalimantan Timur Kutai TFT APP No data No data 2016-
East Kalimantan Berau district TNC, ICRAF No data REDD + pilot
jurisdiction from
2010 to 2014
2010-2014
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
guidelines and other assessments of best prac-
tice (e.g. Wolosin, ). While all the identified
projects do not proceed in a similar way, all use
the main building blocks of territorial approach-
es as identified in The Little Sustainable Land-
scape Book (Denier et al., ). Four components
can be distinguished:
. A mapping of the territory in question, mak-
ing it possible to prioritize the areas to be protect-
ed, areas for agricultural development and areas
that are reserved for local populations. Several
methodologies have been developed for this pur-
pose, putting the emphasis on one aspect or an-
other (Sitting Tool, Starling, SMART, Palm Risk,
etc.). They are all based on the identification of
biophysical parameters (HCV and HCS), climate
change for Sitting Tool, social aspects (FPIC and
participatory mapping) and, less systematically,
elements relating to the organization of the most
important sector(s) in the territory.
. Mobilization of the maps thus produced in
a multi-stakeholder discussion on land use plan-
ning in the short, medium or long term. This dis-
cussion can take place in the framework of a very
formalized or, conversely, relatively informal
process.
. The integration of the results of this discus-
sion into a local development strategy, a formal
land-use plan or a territorial development plan,
whatever the term used. What matters is that the
trade-offs made by actors regarding the compet-
ing land uses are translated into a guideline docu-
ment that frames the future practices of each.
. The implementation of this action plan that
particularly requires support for the actors of
the territory to change their practices according
to the “new” territorial governance framework
or land use scheme. The focus is most often on
smallholders, in order to support them with farm
development in a both controlled and profitable
way. Some actors such as the TFT also emphasize
the need to support companies of varying sizes lo-
cated in the most at risk areas, which are the least
likely to change their behaviour.
Despite broadly similar modus operandi, these
approaches do not emphasize the same aspects,
particularly between local governments, the pri-
vate sector and smallholders. In the last part of
this report, we see that these choices have major
consequences for the practical implementation of
the projects considered.
4. INITIATIVES HAVE DIFFERENT
IMPACTS DUE TO CONTRASTING
IMPLEMENTATION MODALITIES
In this fourth and final part, the aim is to compare,
for each of the three types of initiative considered,
the theory of change that characterizes it with the
practical modalities of its implementation. Let us
briefly recall here what we mean by the theory
of change of an initiative—a concept we borrow
from Weiss (): the concept encompasses the
assumptions made about the actions that should be
taken either to counter / reverse processes which
are considered as impacting upon the sustaina-
bility of the sector; or to foster other processes that
are deemed to enhance this sustainability.
4.1. Approaches through
certification
Different certification schemes are considered in
this study, namely: RSPO, ISCC, Rainforest Alli-
ance, MSPO and ISPO. The first three are purely
private initiatives while the latter two have been
developed and are being implemented by the
Malaysian and Indonesian governments. This
difference between the actors who have promoted
the development and implementation of these
standards has certain impacts on the underlying
theory of change. Due to a lack of data on national
standards, this part will mainly deal with the
standards promoted by private actors. It is organ-
ized into three sections. The theory of change of
private standards is presented in the first section.
In the second section, this theory of change is
contrasted with the practical implementation
modalities of these standards, particularly basing
our work on the RSPO, for which there is some
perspective. The final section puts these analyses
into perspective with what is known about the
Malaysian and Indonesian government stand-
ards and the possible links between private and
national standards.
4.1.1. A theory of change at three levels
The modus operandi of any standard has three
operational components:
. An operator must first change his or her prac-
tices to comply with the Principles, Criteria and
Indicators (PCI) of the targeted standard;
. The operator must then be audited by a third
party that will certify—or not—that the compa-
ny complies with all PCIs; the audit may reveal
instances of non-compliance, which may be ma-
jor or minor. In this case, the company must un-
dertake corrective actions in the relatively short
term, depending on the level of severity.
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
. In the event that the company applying for
the certification and the auditor or another ac-
tor (often from civil society) cannot agree on the
validity of the conducted audit, the certification
schemes have mechanisms for conflict manage-
ment and resolution.
This modus operandi is backed by a theory of
change, where three levels can be distinguished.
At the first, and most general, level, which con-
cerns the links between the market and the pro-
duction modes, the certification schemes make
the following assumptions:
(i) Buyers are willing to pay more for a prod-
uct that is guaranteed to have been “sustainably”
produced.
(ii) The premium they are prepared to pay is a
sufficient incentive for producers to modify their
practices according to the sustainability criteria
required.
(iii) Consumer demand is strong enough to
transform the entire market in this way, and thus
the production sector.
At a second, more specific level, all standards
are based on the definition of objectively verifi-
able criteria and indicators, which, once moni-
tored, must ensure that production has no impact
or only limited impacts, on the issues identified by
the standard. This approach is based on a double
assumption:
(i) If an impact indicator (in terms of biodiver-
sity or social conditions) is in a state x, it is because
the operator has successfully implemented the
corresponding type of procedure or corrective ac-
tion, effectively leading to greater sustainability;
(ii) The involvement of all stakeholders in the
definition of these criteria and indicators ensures
that the diversity of issues is taken into account to
obtain a true sustainability.
At a last level, that of the actual functioning of
the standard, there are again two assumptions:
(i) The third party so-called independent audit
enables the objective evaluation of the practices of
the audited operator with regard to the standard
reference;
(ii) The penalties incurred by an operator in
case of failure to comply with the requirements of
a standard are sufficiently dissuasive to avoid de-
viation from the standard or, when detected, for its
rapid resolution.
The robustness of this theory of change is put to
the test by the practical modalities of the deploy-
ment of the certification standards, for which reli-
able data are available, distinguishing on the one
hand according to the three operational compo-
nents mentioned above (change of practices, au-
dits, conflict resolution), and on the other hand de-
pending on the modes of production. This analysis
will ultimately show that the theory of change un-
derlying the certification mechanisms encounters
many practical obstacles on the ground, largely
explaining the low impact of the RSPO - and more
generally of certification standards - in terms of sus-
tainable and profound transformation of the sector.
4.1.2. A theory of change challenged at
different levels
4.1.2.1. A low demand and low-paying market
To understand the functioning of the market for
certified products it should first be noted that
upstream operators, such as buyers, can choose
between different terms of sale according to the
types of certification. The RSPO distinguishes
types of marketing: the sale of Green Palm certifi-
cates, sale in mass balance, the sale of segregated
oil and the sale of so-called “identity preserved”
oil. Similarly, ISCC provides “mass balance”,
“segregated” and “identity preserved” sales. As for
RA-SAN-certified products, they can only be sold
through fully segregated channels and the possi-
bility of selling in mass balance is not available.
While these different forms of marketing have no
direct impact on the way fruit are produced at the
scale of the plot, the choice of one or the other has a
decisive impact on the rest of the logistics and pro-
cessing chain. Thus, an RSPO-certified producer
can sell his or her bunches in a totally undifferen-
tiated way, while placing on the market a number
of certificates equivalent to his or her production.
Conversely, purchasing companies can buy oil
without paying particular attention to whether it
is certified or not, but can buy a number of certifi-
cates on the market equivalent to their purchase
volume in order to support sustainable production.
This system is called “Book and Claim”.
With the mass balance, the fruit producer val-
ues his or her fruit at the price of the certified
production (RSPO or ISCC), but these are then
mixed with fruits and then oils that may or may
not be certified. In this case the mill operator must
maintain a register enabling him to sell on the
market a volume of certified oil strictly equivalent
to the volume of certified fruit that was bought;
in contrast, it is impossible to guarantee that this
oil comes from palm groves managed according to
RSPO principles.
The systems of segregation and preserved iden-
tity go further. They impose a total segregation of
the certified and non-certified channels and make
it possible to guarantee that the oil thus purchased
is exclusively sourced from RSPO palm groves. The
“preserved identity” system is based on complete
traceability to identify from which palm groves the
oil is sourced from.
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
impact of the RSPO on improving the functioning
and productivity of plantations, their results also
imply that there is a need to look elsewhere for an
incentive for producers and not only at increases
in incomes (at least in the short term). We return
to this issue in the paragraph on the operational
implementation of PCIs for producers.
. Demand is strong enough to transform the
entire sector
If the market is not particularly profitable for certi-
fied oil, and certainly not sufficiently profitable to
constitute a clear economic signal, this is particu-
larly due to a demand that remains low, including
in countries where buyers are most sensitive to
reputational risk (Europe, United States). Thus,
since the beginning of the RSPO, the proportion of
certified palm oil that is able to find a buyer in the
market has barely exceeded % (see RSPO, a,
p. and figure ), although the purchasing compa-
nies remain below their CSPO procurement targets
(WWF, ). Moreover, some companies with a
supply that is not solely CSPO tend to invest their
resources in other approaches/strategies that are
not based on certification. For example, less than
a quarter of Nestlé’s palm oil supply is certified
(WWF, , p.), but the company has been very
much involved in the “no deforestation, no peat,
no exploitation” traceability approach, particularly
with the support of the TFT.
Compared to other produce (coffee or cocoa
for example), the palm oil sector is, however,
characterized by a substantial proportion of cer-
tified production. Thus, RSPO certified produc-
tion reached . million tonnes in , i.e. just
over % of world production. At the same time,
about million tonnes of ISCC-certified palm oil
was purchased (the exact production figure is
unavailable), however, the overall proportion of
double certified oil (RSPO and ISCC) is probably
significant.
RSPO has set a target of % of the European
market, % of the Indonesian and Malaysian
markets and % of the Indian market to be RSPO
certified by (RSPO, a, p. ). However,
despite the formal commitments made by some
companies, on which basis RSPO claims that its
targets are realistic (RSPO, a, p. ), the cur-
rent trends do not seem to be heading in this di-
rection. It should be noted, however, that the docu-
ment does not specify which marketing method is
involved; indeed while it seems possible to progress
rather rapidly in terms of book and claim or mass
balance, the development of a segregated market
generates significant logistical costs, and it will be
necessary to see which actors are willing to cover
such costs.
The logistical cost associated with each of these
marketing methods will obviously increase as we
move towards a completely traceable product,
from planting to finished product.
In the context described above, we review the
main assumptions of the certification process con-
cerning the links between markets and production.
. Buyers are willing to pay more for a
“sustainable” product, and the premium is high
enough to be an incentive for producers =>
untested hypothesis
In recent years, the certified oil market appears
to be showing a trend towards lower remunera-
tion, regardless of the mode of sale considered.
This is particularly clear in the case of Green Palm
certificates, whose average nominal value has only
decreased since , from close to ./tonne
to less than /tonne in for the CSPO (see
below). Changes in the value of certificates for
palm kernel oil (reported in the Figure ) are still
poorly understood to this day.
Regarding the premium obtained on oils sold
as mass balance or segregated, there is little com-
munication from the different standard managers
(RSPO, ISCC, and Rainforest Alliance). One of the
main reasons for this is the large variability in the
price of the palm oil itself (see Figure ) and the
fact that the premium changes accordingly. One
report, now slightly dated, mentions a premium of
to /tonnes for RSPO oil depending on the
marketing method, i.e. mass balance or segregated
(see WWF et al., ). The interviews conducted
in the framework of this study provided a similar
range for ISCC as for RSPO, albeit slightly lower,
from to /tonne. The order of magnitude of
the premium for certified oil is thus between . and
% higher than uncertified oil, a value that is rela-
tively convergent with the latest study published by
the RSPO on this subject (.%) (Preusser, ).
The two studies commissioned by the RSPO
(WWF et al., ; Preusser, ) on the profit-
ability of certification are moreover relatively
convergent in terms of results. Indeed they show
that while certification makes it possible to im-
prove the productivity of a plantation (sometimes
up to more than % productivity improvement)
and to some extent to reduce costs (reduction of
conflicts, of input use, improvement of internal
procedures, etc.), it has no direct mechanical im-
pacts on the income or profit of large-scale opera-
tors involved in certification as both variations do
not occur simultaneously. The study conducted by
Preusser involving companies shows no statis-
tically significant difference in company turnover
or profit per hectare (Preusser, , p.). While
the two above-mentioned reports welcome the
STUDY 11/2017 35
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
Until now, the certification market (for palm oil
and other commodities) has been struggling against
the central objective of the RSPO (“transforming
the market to make sustainable palm oil the norm”).
However, % of certified production cannot be
considered as a negligible proportion. What is its
impact on the practices of upstream operators? The
following section provides insights on this issue.
4.1.2.2. The adoption of a certification
standard does not lead to fundamental
changes in the practices of growers
Two assumptions can be distinguished on the
operational side:
. Compliance with PCIs by an operator involves
concrete changes in practices;
. The definition of these PCIs satisfactorily cov-
ers the diversity of sustainability issues:
The second aspect has been addressed in part
of this report. We showed that the degree of pre-
cision, completeness and requirement varies from
one standard to another and that not all standards
can be considered on the same level. The following
ranking was proposed, with a particular focus on
environmental issues:
POIG / HCS > RSPO Next / ISCC > RSPO > RA-
SAN > ISPO / MSPO.
Nevertheless, whatever the standard consid-
ered and whatever its degree of requirement, to
be certified always implies that an operator should
modify his/her practices according to the set of
principles, criteria and indicators of the standard
concerned. A comparative analysis of the different
standards shows that five main types of measures
can be required by the standards:
. Carrying out studies to assess the potential or
actual risks or impacts of the company’s activity on
the various issues identified by the standard;
. Implementing action plans to minimize nega-
tive impacts/maximize positive impacts;
. Establishing systems to monitor the imple-
mentation of the above-mentioned action plans
and to assess the effectiveness/efficiency of this
implementation;
. Establishing internal operational procedures
to guarantee compliance of the daily practices of
all company employees with the PCIs of the rel-
evant standard;
. Keeping track of and making available all
documents to the various stakeholders (in particu-
lar the auditors) that relate to the internal func-
tioning of the company, its relations with external
stakeholders, making it possible to judge the suc-
cessful implementation of the four other types of
measures mentioned above.
A detailed analysis of the measures demanded by
RSPO, ISCC and MSPO shows that ISCC requires
2014201320122011201020092008
6,636
82,464
269,665
369,564
519,053
487,477
4,452
3,520
245,813
842,619
1,659,516
2,504,404
2,962,256
2,928,810
4,225
5,522
CPO
PKO
PKE
2008 2009 2010 2011 2012 2013 2014
2,76
1,50
1,85
1,50
6,74
3,89
5,29
5,53
7,82
11,52
30,96
9,05
18,82
44,49
21,08
61,39
Figure 11. Average premium ($/certificate) and number
of certificates sold for palm oil (CPO), palm kernel oil
(PKO) and palm kernel expeller (PKE) 2008 to 2014
Source RSPO (2015a)
Figure 12. Share of certified RSPO production sold as
RSPO
Source: RSPO
STUDY 11/2017
36 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
the implementation of practical operational pro-
cedures much more than studies or action plans,
and it therefore appears more “practical” or prag-
matic. It also shows that the extent of the require-
ments of each standard is extremely broad; in this
sense, implementation applied to the letter would
be likely to have impacts that are far greater than
what is documented today. To understand why we
are still waiting for these impacts, we must there-
fore go down to the level of the actual functioning
of the upstream operators and analyse how they
translate, in their daily operation, the PCIs of the
standards studied.
However, few studies document these aspects,
or at least only in a very unequal way, depending
on the production modes. Thus, there are (rela-
tively) numerous works explaining how small-
holders have organized themselves to meet the
requirements of the standards or on what factors
limit their adoption (e.g. Brandi et al., , Hi-
dayat et al., , Hidayat et al., , Zen et al.,
). Conversely, work focusing on companies is
very rare. The annual communication of progress
(ACOP) reports submitted annually to the organi-
zation by RSPO members offer some elements of
analysis but remain very brief and approximate.
These reports nevertheless serve as a basis for the
analysis of changes in a company’s practices that
follows below.
On the other hand, there are analyses that at-
tempt to assess the consequences of certification
using large-scale indicators (productivity, profit-
ability, turnover, etc.), without however clarifying
the nature of the changes in practices at stake. In
particular, as mentioned above, two reports car-
ried out on behalf of the RSPO tend to show that
certified operators (smallholders as well as com-
panies) have higher productivity per hectare than
non-certified operators. Certain elements relating
to the costs of certification are also available in the
same reports. They show that it is possible to dis-
tinguish between three types of certification costs
(WWF et al., ):
The initial costs correspond to the cost of estab-
lishing new procedures to meet the requirements
of the standard. They generally include a pre-au-
dit phase, which identifies gaps between existing
practices and the objectives of the standard; the
establishment of the corrective actions and action
plans required by the standard; and the costs of
the audit itself. The total cost to the company is be-
tween and ./ha.
Operating costs correspond to the extra cost of
maintaining operational practices and monitoring
systems to meet the objectives of the standard over
time. Although the data available to estimate these
costs are limited, values of . to /ha/year are
given for information.
Finally, land management costs are related
to environmental and social impact studies ( to
./ha for the environment and . to /
ha for the social), HCV studies (between . and
/ha on average, but up to in complex land-
scapes) and then to protection/conservation of
areas identified as important by these preliminary
studies (between and ./ha, depending on
the size of the areas considered).
The indicative costs for each of these catego-
ries per hectare vary within significant ranges
and are obviously highly dependent on the type
of operator considered. In particular, due to the
importance of the initial fixed costs, the existence
of economies of scale in terms of certification is
largely attested, illustrating the comparative ad-
vantage of large companies over smaller ones for
certification (WWF et al. , p.).
Based on this relatively scattered data, the fol-
lowing three paragraphs attempt to account for
the practical consequences of adopting standards
for different categories of upstream operators.
In addition to the distinction between industrial
plantations, tied smallholders and independent
smallholders, a distinction was made between in-
dustrial plantations managed by large groups with
international reach and industrial plantations
managed by Indonesian or Malaysian companies
of national size.
Major groups: compliance with PCIs through
the adaptation of CSR policy and the use of the
services of external consultants
Major groups have two characteristics that influ-
ence the way in which they implement a standard.
Firstly, they are listed on the stock exchange and
are dependent on external shareholders, which
implies a certain familiarity with reporting, in
particular as regards CSR. Moreover, most of
the time they have already adhered to different
standards well before the arrival of the RSPO, in
particular from the ISO system ( , ,
), and are therefore already “trained” in
adapting their practices to bring them in line with
externally defined standards.
A large proportion of RSPO, ISCC and MSPO
PCIs do not involve radical changes for these com-
panies. They can formalize practices that could
have pre-existed and subject them to an external
analysis of the practices. This is the case, for exam-
ple, with the company IOI, with “good agricultural
practices”, a theme that was introduced into the
company as early as , including zero-burning,
methods for soil and water conservation, the con-
servation of riparian woodlands, an integrated
pest management approach and energy savings.
STUDY 11/2017 37
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
The group then conducted internal audits to ver-
ify the implementation of these practices. Similar
practices may also be required by the ISO system
and other certifications such as the RSPO, which
may have led NBPOL to attempt to integrate RSPO
and ISO audits:
In , a joint program between NBPOL and
British Standards International saw the first ever
integration of the ISO and RSPO standards into a
single audit procedure. […] The ISO framework
has helped us tremendously to structure our sus-
tainability activities, and as a result we are now
undertaking integrated ISO and RSPO au-
dits in West New Britain.
However, regarding the most critical issues at
the heart of this study (deforestation/biodiversity,
working conditions, respect for land rights), avail-
able secondary data show that companies have
had some difficulty in operationalizing the PCIs of
standards.
On the social aspect (working conditions and
wages) firstly, the various standards require,
among other things:
mthat salaries are indexed to a “minimum living
wage”, which is nevertheless left to the discre-
tion of companies,
mthat there is no “forced labour”,
mthat onsite accommodation, if offered, is decent,
and
mthat employees are not exposed to dangerous
products without protection and training.
However, the way in which these requirements
actually affect wage conditions appears complicat-
ed to analyse in the absence of precise data for at
least two reasons. There is a lack of accurate data
on life in plantations. It is also known from the
work of Stéphanie Barral that the situation of In-
donesian plantation workers is mainly determined
by the liberalization of the system of social cover in
the s. This liberalization has imposed an obli-
gation on workers to save money throughout their
careers to ensure that they have a pension, since
plantations were no longer supporting their retire-
ment. This obligation is reflected in a permanent
search for extra-salary activities, since the average
worker’s salary does not cover all the running costs
of a family (Barral, , p. -). The obligation
of a “living wage” included in the standards but lit-
tle defined does not seem to be able to compensate
for the consequences of legislation that is particu-
larly advantageous for companies.
Regarding working conditions, Amnesty Inter-
national’s recent report () illustrating the ex-
istence of types of forced labour, unsafe working
conditions and the underpayment of wage-earning
workers, including in certified plantations, seems
to confirm the low influence of standards on the
wage practices of plantations. A closer analysis
would also need to distinguish between temporary
workers and permanent workers in plantations, be-
cause the cases reported by Amnesty refer mainly
to temporary workers, whose situations are of-
ten much more difficult than those of permanent
workers.
Regarding deforestation and the respect of cus-
tomary land rights, most of the issues crystallize
around new plantations. Indeed, most standards
today contain at least three obligations for the de-
velopment of all new plantations: (i) respect for
HCV forests, or even HCS forests; (ii) the conduct
of an Environmental and Social Impact Assessment
(SEIA); (iii) compliance with the principles of free,
informed and prior consent (FPIC). Compliance
with these obligations requires competences rare-
ly available to companies internally, which leads
them either to train internally or, more generally,
to hire an external consultant.
A report by the Environmental Investigation
Agency shows that external evaluations are very of-
ten partial and biased: HCV forests are sometimes
deliberately omitted from the study submitted to
the commissioning company, as are the existence
of land conflicts (EIA, ).
To meet these challenges, the RSPO has recently
outsourced to the HCV resource network the task
of empowering consultants to conduct HCV stud-
ies. More seriousness is expected in the conduct of
studies, but the practical effects of these changes
are still to be assessed on the ground. These ele-
ments also illustrate the fact that, in relation to the
issues relevant to our study, certification is not a
guarantee of significant changes in practices.
National companies: little change despite a
growing reputational challenge
There is today little information on the internal
processes of small and medium-sized and growing
companies, often less focused on international
markets and thus less inclined to commit to a certi-
fication process that is otherwise costly for them. In
a context where domestic Indonesian and Malay-
sian markets represent more than % of global
consumption, the practices of these companies (or,
on the contrary, the absence of any change in their
practices) are likely to have a decisive impact on the
future of rural areas, that are adapted to the devel-
opment of oil palm. To illustrate the case of these
companies, we examine here the example of Eagle
High Plantation (EHP).
Created in under the name Budi Perdana,
the group became Eagle Eye Plantation in
after the friendly acquisition of the Green Eagle
group. It has, as of //, a planted area of
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38 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
just over , ha (of which , ha are plas-
ma managed by smallholders) and a “landbank”
of more than , ha. Between and ,
, ha were planted at a decreasing rate, but
none of these new plantations were RSPO certi-
fied and not therefore covered by the New Plant-
ing Procedures clauses. While the group has been
an active member of RSPO since at least
(the date when the first reference to the RSPO ap-
pears in its activity report), it has still not certified
any hectares, although since it has regularly
announced its desire to certify. Its action plan, as
designated to the RSPO for certification, has thus
changed twice, with the % certified target be-
ing postponed from to , according to the
following plan: % CSPO in , % of CSPO in
and only .% of CSPO in .
There is little doubt that the recent commitments
to certification are the result of pressure exerted on
the company by various NGOs, as noted in the
activity report:
Other challenges we faced in were to explain
why the Company had a weaker than expected pro-
duction during the year which put pressure on our
cash flow, and negative opinions about our business
from a few large NGOs. […] And to answer criti-
cism, we decided the best way is to focus on trying
to get our sustainability certification as fast as pos-
sible and this is one of our key strategies for .
Indeed, the challenge is not so much to access in-
ternational markets, for a group that clearly claims
the Indonesian domestic market as its primary tar-
get (Eagle High Plantation, , p.), but rather
to guard against strong criticism. While the group’s
annual sustainability reports refer to the integra-
tion of certain practices, such as “good agricultural
practices” (from ) or good employee treatment
(as of ), procedural aspects of new plantations
(NPP, New Planting Procedures) are not addressed
until :
We commit to conducting rigorous Social and
Environmental Impact Assessments and High Con-
servation Value assessments for all of our existing
plantations and prior to commencing any new
planting and to use the results to monitor and im-
prove our operations. In early we have com-
pleted our first HCS study. We will strive to con-
tinuously improve ourselves in all these areas. We
would like to reach the highest recognized stand-
ard, which is currently RSPO certification.
The precise modalities of conducting HCV and
SEIA studies are not, however, detailed. One can
easily imagine that the company outsources these
studies to a consultant or an NGO, with conse-
quences similar to those of large groups.
Such companies represent crucial targets for all
actors concerned with improving the sustainability
of the sector. With a landbank of , ha, its po-
tential impact is indeed enormous. Paradoxically,
because of its position in the sector, the levers avail-
able to act on them are much less important: low
international visibility, little link or no link with the
world markets and traders who have undertaken
commitments for no deforestation. The leaders of
these companies are also frequently closely linked
to the power in place and have a strong capacity
to influence, enabling them in particular to limit
any action taken against them. Many protagonist
consider that it is companies like this one which, in
, pressured the government to require the dis-
solution of the Indonesian Palm Oil Pledge (IPOP),
a collective commitment made by the main Indo-
nesian traders to Indonesian policies (see note ).
In parallel to RSPO commitments, which have
not yet materialized, the company has had two
of its ISPO plantations certified since . In this
way, it can boast of a form of sustainability vis-
à-vis its buyers and its criticisms. This situation
raises a crucial question, which will nevertheless
be only slightly addressed here: that of “multi-cer-
tification” by many companies in the sector (RSPO,
ISPO, ISCC most often).
Smallholder certification entails changes in
practices that have no obvious consequences for
ecological sustainability or income
For the certification systems, the fact of targeting
smallholders has for a long time been associated
with two main issues. On the one hand, their sys-
tem generates the most benefits. It must therefore
be encouraged, promoted, improved, and prevent-
ed from being marginalized because it would no
longer have access to markets requiring only certi-
fied production (a situation common in the agricul-
tural sectors, even if very dependent on the sector’s
governance, see Lee et al., ). Ideally, it is also
important to ensure that a certified smallholder can
benefit from additional income in a context where
certification, because it represents a significant ini-
tial cost, often plays the role of a barrier to entry
for smallholders. This first issue was at the heart
of the first RSPO smallholder Task Force: “ensure
that smallholders are not marginalised from the
sustainable palm oil market and are able to benefit
from improved standards and best practice”.
On the other hand, insofar as smallholders also
represent a major proportion of production, there
is a strong need to accompany the development of
their production systems towards the best possible
sustainable trajectory, particularly without affect-
ing forest areas that are important for conservation.
Faced with these two challenges, and in view of
the fact that certification was originally conceived
for large companies (apart from RA-SAN which is
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
more specifically focused on smallholders), the
different certification systems have established
special procedures for smallholders, including:
(i) an adaptation of PCIs to their specific
situation;
(ii) specific funds to support certification
implementation.
Practically, smallholder certification takes dif-
ferent forms depending on whether the focus is
on tied smallholders or independent SHs. For tied
smallholders, the responsibility for certification
is borne by the company to which they are tied,
through the formation of farmer groups of varying
sizes and the support of cooperative systems. This
often includes the support of the company and/or
a third-party NGO, such as Solidaridad.
Independent smallholders must organize them-
selves around a certification group and it there-
fore seems absolutely necessary that they receive
external support. This support can be provided
either by an NGO or possibly a company, such as
Wilmar recently (Hidayat et al., ).
Available research shows that smallholder certi-
fication can have diverse effects:
. it triggers changes in practices through im-
provement in training, which can have positive
effects on yields, although this is not guaranteed.
In addition, it has an impact on the reduction of in-
puts and thus enables savings on production costs,
as well as an impact on the adoption of “best prac-
tices” in terms of water and soil conservation, and
in terms of the production of fruits, which can be
of better quality and therefore generate a higher
income (Hidayat et al., , p. -);
. it however increases SH dependence on ex-
ternal actors for the management of certification
and access to associated benefits (credit, training,
etc.). While it helps independent SHs to access the
market, it has little effect on tied SHs because they
are contractually linked to the company that pro-
cesses their FFBs.
. the fact of being certified does not, however,
solve the issue of asymmetries of power for SHs
vis-à-vis their buyers, and the fact that generally
speaking they are in a subordinated position in the
sector;
. finally, we currently don’t know anything about
the effect of certification on the potential propensi-
ty of SHs to establish new plantations in forests. Ad-
mittedly, according to the results of Lee et al. ()
the impact of SHs is not as great as that of large in-
dustries, but it does exist. It is therefore important
to see how certification can take this into account.
However, the relaxation of PCIs for SHs leaves little
scope to limit their expansion into forests.
One of the frequently asked questions about SHs
concerns the factors limiting their enrolment in
certification (e.g.Brandi et al., ). Many factors
are often put forward:
. the organizational cost that this represents
(it is necessary form groups and to pay a group
manager),
. the lack of knowledge and training, and
. The fact that several RSPO requirements rep-
resent significant challenges in this context: ob-
taining a proper land title; the low quality of the
plant material used is a problem in relation to
national regulations and therefore to the RSPO
(since it requires compliance with laws and regu-
lations); poor control of pesticides and fertilizers
is also a problem; the most important challenge is
the virtually inability of SHs to provide documen-
tation on their practices as required by the RSPO.
Nevertheless, this type of analysis makes the a
priori assumption that certification is positive for
SHs and sustainability, which, in view of the above,
is not obvious. While the system seems at least par-
tially to favour the SHs who manage to access cer-
tification, it does not give them a clear compara-
tive advantage over other production systems, nor
does it push them towards limiting their potential
impact on deforestation. The challenge of certifica-
tion for SHs therefore seems to be open to debate.
As Hidayat and colleagues () said, as long as
it does not strengthen their negotiating skills with
their buyers, its impact is likely to remain limited.
4.1.2.3. Generally poorly functioning auditing
and conflict management systems
At the operational level, the effectiveness of a
certification standard is based on two ideas:
(i) that the third party audit makes it possible to
objectively assess the practices of an operator with
regard to the PCIs;
(ii) that the sanctions incurred in the case of
non-compliance with the criteria and indicators
are sufficiently dissuasive to encourage operators
to rapidly establish corrective action.
The first aspect refers to the functioning of the
audit itself. The second refers partly to the modali-
ties of the management of the results of the audit
(and therefore to the relationship between the
RSPO and the operator when the RSPO receives
the results of the audit), and partly to the manage-
ment of potential conflicts between a third actor
who is the victim of the non-compliance of a PCI
and the operator concerned.
The audit
The modalities of the audit are similar for each
standard: a company must undergo a pre-audit
and then a full audit. If it successfully passes the
audit, it is certified for years. Each standard
entrusts the delivery of auditing authorizations
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40 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
to certifying bodies (CBs). In the case of the
RSPO, the latter has managed the issuing of these
authorizations itself until . Since that date, it
has outsourced this function to ASI, Accreditation
Services International, in particular to guarantee
more independence and transparency. The ISCC
still manages the different CBs who can audit for
it: any organization that follows a days training
programme organized - times a year by the
management association of the standard and that
meet general requirements and qualifications, can
become an ISCC auditor.
In all cases, it is the company that bears the bur-
den of the audit, by paying the auditing company for
the cost of the audit. Conflicts of interest associated
with certification are well known. In the case of the
RSPO, an EIA () report strongly questions the
ability of the audit to effectively play its role. This
report is all the more worrying given that at the
present there is very little data on the modalities of
realizing the audit, and the auditors themselves are
not easily approachable (it was impossible to obtain
an interview for this study). The situations reported
by EIA include complacency audits, auditing com-
panies that are dependent on the market and there-
fore unable to issue a critical report, etc.
This aspect appears to be particularly problem-
atic in the case of the RSPO, where few safeguards
are implemented. Conversely, the ISCC has set up
an independent audit system which is superim-
posed on the audit carried out by the company.
For that, the ISCC works together with three inde-
pendent integrity auditors who carry out about
independent audits per year in situations consid-
ered problematic.
The literature review shows a major lack of data
at this stage. The available data are not very encour-
aging and tend to cast doubt on one of the foun-
dations of certification, namely that the so-called
“independent” third party audit is a guarantee of
compliance with PCIs for a certified company.
This situation is further confirmed by the high
number of conflicts that reach the RSPO’s “griev-
ance mechanism”. Each of these conflicts results
from a situation in which a third party actor con-
siders to have been adversely affected by the non-
respect by an operator of one or more RSPO PCIs.
And the modalities of managing these conflicts ap-
pear at least problematic.
Conflict resolution: the example of the RSPO’s
“grievance mechanism”
The most serious risk for a company involved in a
dispute is that its RSPO membership is suspended.
While this sanction may appear weak, it raises the
reputational issue that was well illustrated in the
“case” of the IOI company in (see Thoumi &
Levicharova, ). However, the strength of the
penalty is likely to change according to the level
of the reputational “risk” that a company takes by
“exiting” the RSPO (or being excluded).
Prior to suspension, which is only a last resort,
accusations are brought before a grievance mecha-
nism set up within the RSPO. Any actor can file a
complaint within this relatively complex mecha-
nism, the burden of proof falling on the complain-
ant. The complaint may concern not only a breach
in PCI compliance, but also any other structuring
text of the RSPO. The complaint is then considered
by a “complaint panel”, which is usually composed
of members ( grower, environmental NGO,
social NGO, supply chain member and affili-
ated member), which rules on the validity of the
complaint. The actor can then direct the complaint
towards a “Dispute Settlement Facility”, a dispute
resolution body where the challenge is to find a so-
lution through discussion that suits everyone. The
discussion may involve several rounds of debate,
appraisals and counter-appraisals, before a con-
clusion is reached.
In fact, the number of successful complaints is
relatively low: since the mechanism was estab-
lished, of which are active today. Almost half
of the complaints received concern land problems,
confirming the importance of the problem and the
difficulty for the RSPO to provide a totally satisfac-
tory solution.
Operationally, the processing time for com-
plaints is very long: more than one year and up to
almost two years, and even close to four years for
the initial complaints filed when the mechanism
was launched! (See Figure ).
Figure 13. Average processing time of a complaint filed
with the grievance mechanism (in days)
Source: RSPO website
More generally, a recent report highlights the
shortcomings of the mechanism (McDonald & Ba-
laton-Chrimes, ), with particular emphasis on
aspects:
(i) The weak capacity of the RSPO to provide
solutions to complaints filed with the mechanism,
with only a minority of complaints having been
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
concluded either by a sanction or agreement;
(ii) A very long processing time, even if this dis-
cussion time could in some specific cases enable
advances to be made regarding difficulties in the
field;
(iii) A rather small learning effect, particularly
due to the fact that the same companies have been
the subject of complaints several times without
any real progress being made. This can be illustrat-
ed by the case of Wilmar. The company has been
accused on numerous occasions either via the
RSPO or in front of the office of the Ombudsman
of the International Finance Corporation between
and , and has again been challenged by
the recent Amnesty report denouncing the poor
working conditions on its plantations or those of
its suppliers.
(iv) Difficulties of the mechanism to conduct
independent and robust analyses and to enable
affected communities (or those claiming to be af-
fected) to gain competence in order to remain part
of the relevant mechanisms;
(v) There are few sanctions, and even these are
poorly applied;
(vi) Finally, there is a lack of transparency which
has exacerbated all the limitations mentioned
above.
4.1.3. Links between private standards
and national standards and impact on
transformational potential
The emergence of national standards (discussed in
part of the report) raises several questions about
the potential effectiveness or the future of private
standards. Concerning the level of incentive repre-
sented by the different standards, national and
private standards are not at the same level. Being
certified ISPO or MSPO now offers no advantage
for accessing Western markets. On the other hand,
we do know nothing about the Chinese, Indian,
Indonesian or Malaysian markets in terms of
consumer demands for certified sustainable prod-
ucts. The national standards may be largely suffi-
cient in these markets, and may even be preferred
in future, thus eliminating the incentive for
national/regional companies to be RSPO/ISCC/
etc. certified.
The ISPO and RSPO have also demonstrated a
willingness to work together through UNDP me-
diation in the framework of the SPOI project (see
Suharto et al., ). The follow up to this prelimi-
nary comparison between the two standards, al-
though officially announced, is still unclear.
The emergence of national standards, their af-
filiation to a Council of Palm Oil-Producing Coun-
tries (the CPOPC, created in November ), and
the fact that similar initiatives have emerged for
other commodities, illustrates well the willing-
ness of producing countries to regain control over
how sustainability should be defined. The exist-
ence of regional markets for a certified product
with a lower degree of requirement suggests that
these tactics can be a winning strategy for pro-
ducer states.
As a corporate-state led standard, it is however
often feared that little room will be left for social/
human rights NGOs, and the ability of such stand-
ards to promote the development of village planta-
tions/smallholders must be challenged (Wijaya &
Glasbergen, , p. ).
4.2. Individual commitments
of companies
Many organizations and projects support compa-
nies in the definition and implementation of their
commitments. Some organizations are directly
involved with companies, such as the Tropical
Forest Trust (TFT) or the Sustainable Trade Initi-
ative (IDH). Others play the role of a collabo-
rative platform, such as the Consumer Goods
Forum (CGF) or the Tropical Forest Alliance
(TFA), a global public-private partnership
that brings together states, companies and
NGOs and research organizations. Lastly, others
“follow” the commitments made by the actors and
promote their visibility through various tools. This
is the case for the Global Canopy Program (GCP)
with its “Forest ” project, and the Carbon
Disclosure Project (CDP), an international NGO
based in Germany voluntarily collecting data on
emissions from large companies.
4.2.1. A promising theory of change
Despite the diversity of approaches developed
by these organizations, all are based on a similar
modus operandi, which involve four steps:
m Encouraging a company to make clear commit-
ments towards ensuring a more responsible sup-
ply with respect to three issues, namely defor-
estation, working conditions and land tenure;
mOperationalizing these commitments through
one or more specific company policies, focusing
in particular on purchasing policy, knowledge/
traceability of the supply chain and certain as-
pects of the internal organization (remunera-
tion of purchasing managers in particular);
mThe company subsequently strives to communi-
cate in a transparent manner on the progress it
is making, the results it achieves and the obsta-
cles it encounters in the implementation of this
policy;
mIt constantly adjusts its ambitions, its corporate
policy and the modalities of its implementation
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
based on feedback from its stakeholders on the
basis of its external communication.
As in the case of certification, this modus oper-
andi is backed by a theory of change that distin-
guishes three operational levels: the organization
of the company, the role of the company in the sec-
tor, the relationship between traceability/trans-
parency and compliance with commitments.
At the first level, that of the company, this theory
of change makes two assumptions:
(i) The first assumption is that the company
is an economic actor but also a political/moral
one: if the company is committed to the greater
sustainability of its supplies, it is both because it
sees economic value in this (being sustainable is a
good way to be more profitable), but also because
it wants to contribute to the common good (or at
least not to contribute to causing damage);
(ii) The second considers that a commitment
made at the highest political level of a company is
effectively and practically (and rapidly) reflected
in the operational functioning of the company,
through company policy, remuneration methods,
relationships with suppliers…
At a second level, that of the organization of the
sector, the theory of change based on private com-
mitments again makes two kinds of assumptions:
(i) A first hypothesis deals with the relation-
ship between the company and its competitors in
the same segment: when a company with a sig-
nificant market share and/or high esteem/reputa-
tion makes a commitment, it influences its direct
competitors to make similar commitments. This
influence grows as the market share of commit-
ted companies increases, until eventually causing
a “threshold” effect from which all companies are
likely to follow (this threshold, if one exists, would
obviously be specific to each sector and to each
segment of the sector).
(ii) A second hypothesis deals with the relation-
ship between the company that makes commit-
ments and its suppliers. In a context where the
ultimate goal of all these approaches is to change
practices at the plantation level (industrial or small-
holder), the passage through the commitment of
purchasing companies (industrial producer of fi-
nal consumer goods, refiner/traders) is ultimately
based on the assumption that they are in a position
to negotiate with their suppliers to lead them to
implement practices consistent with their commit-
ments (voir aussi Christmann & Taylor, ).
Finally, at the last level of the relationship be-
tween the objective of transparency and the re-
spect of commitments, we can distinguish two
assumptions.
(i) The first considers that if the company
makes a commitment, then it is able to be totally
transparent about the origin of its supplies, ena-
bling its stakeholders to identify possible dis-
crepancies between the commitments taken
and what happens in the field (both socially and
environmentally);
(ii) The second assumption is that in the event of
a discrepancy, these stakeholders have sufficient
means to push the company to take “corrective”
measures.
Such a theory of change is based on the develop-
ment and mobilization of two types of tools:
a- Landscape analysis tools, which allow prioriti-
zation of development zones, conservation zones
and areas reserved for local populations. Such tools
rely heavily on the HCS and HCV methodologies;
b- Verification and transparency tools to enable
the continual monitoring of the inclusion of envi-
ronmental issues (mainly deforestation with tools
such as Starling) and social issues (through the
mobilization of local, national and international
social movements).
More recently, several organizations involved in
supporting companies in implementing their com-
mitments have started to develop integrative tools
at the territorial/landscape scale. The objective is
to integrate the issues of the palm oil sector into
a wider reflection involving local governments in
land use planning. Since this last aspect has taken
on particular importance and covers multiple fac-
ets, it is the subject of the last part of this report
and is not directly addressed here (see section ).
As before, this theory of change is put to the
test of the practical modalities of the deployment
of private commitments in the palm sector and its
consequences so far. Given the relatively recent
nature of most of these commitments and the
fact that the analysis presented is based largely
on written sources, the conclusions will necessar-
ily be qualified. It will show, however, that while
this approach by private commitments appears in
many respects promising, its operationalization is
particularly ambiguous.
4.2.2. Assessing the effect of the individual
commitments of companies: a promising
theory of change, the deployment of which
faces two main obstacles
4.2.2.1. The company, a political actor whose
decisions are translated into operational
terms: yes, but…
Commitments driven by intertwining moral
convictions and economic interests
The engagement of companies in all segments of
the palm sector is often accompanied by vibrant
advocacy for forest conservation and/or protection
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
of the rural population, thus seemingly confirming
the highly political and moral dimension of their
commitment. Nevertheless, economic pressure is
never far away in the same discourse, and the two
dimensions appear inseparably linked: the company
is all the more inclined to adopt moral behaviours
as the market rewards it for doing so, or penalizes
it if it does not. The case of IOI, whose share price
fell sharply after it tried to sue the RSPO in protest
against its suspension, that in the first instance
was deemed unfounded, is a good example of this
(Thoumi & Levicharova, ) (see Figure ).
Symmetrically, the fact that small companies with
little or no reputational risk have not so far made
any commitments, although they are fully aware
of their contribution to certain aspects that are
otherwise considered “negative”, argues against
an excessively exclusive political/moral view of
corporate decisions (see Padfield et al., ). More
in-depth interviews with the CEOs and managers of
these companies would help to clarify this aspect.
Figure 14. Changes in the share price of IOI in the first
half of 2016
Source: Thoumi & Levicharova (2016)
A poorly informed translation of the
commitments into operational terms
Regarding the second assumption according
to which the commitments taken at the highest
level are practically translated in the company’s
practices, the voluntary commitments approach
has drawbacks related to its advantages when
compared to certification. Where certification
provides the company with an implementa-
tion mode, in the form of a list of items to be
audited by the third party auditors, the voluntary
commitment approach leaves the company the
freedom of choice. This method has the advan-
tage of flexibility but leaves it to companies to
make their own decisions about how they want to
address the issues considered. The major down-
stream industrial companies and most traders
and refiners have in the last three to four years
published their corporate policies announcing
ambitious commitments. Few of them, however,
have precisely explained how they intend to set
in motion such commitments in their internal
organization, and so far there have been almost
no reports or studies to document the imple-
mentation of such commitments. This requires
further consideration if we are to truly under-
stand the changes—if any—that may eventually
be induced.
While the company is a political actor, the state
is nevertheless an economic actor
A final aspect seems important to emphasize
at this first level. While the voluntary commit-
ments approach considers that companies are
indeed political actors, it may tend to ignore the
fact that states are also, in many cases, economic
actors. This is particularly true of developmen-
talist states such as Indonesia or Malaysia. On
the one hand, they are major shareholders of
many upstream companies; on the other, they
are likely to successfully oppose some corporate
policies that would go against their own objec-
tives, as the dissolution of the Indonesian Palm
Oil Pledge last July illustrates fairly well (see Part
of this study). Even if officially all companies
that were initial IPOP signatories have indicated
that the evolution of the context no longer justi-
fies maintaining this structure, tensions with the
Indonesian officials have not been totally unre-
lated to this dissolution.
4.2.2.2. The interdependencies of the
sector, the levers of change that are fragile
upstream
Two types of sectoral interdependence are
taken into account in the voluntary commit-
ments approach: interdependencies that can
be called horizontal, linking companies to their
direct competitors; and vertical interdependen-
cies, which link a company to its suppliers and
customers.
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
Competitive dynamics that tend to elevate
companies
Regarding horizontal interdependencies, the
dynamics of the palm oil sector have been rather
virtuous. While in many cases competition
between certification systems tends to lead the
whole of a sector towards the lowest common
denominator, as is the case for coffee, for example,
competition between private companies in the
same segment of the palm oil sector clearly
seems to have encouraged higher ambitions. The
example of refiners/traders is a good illustration.
For example, Wilmar’s announcement of its NDPE
policy on December in some ways obliged
all of its main competitors to position themselves
along similar lines within the following months.
The following table shows the dates of publication
of the company policies of all the main traders in
the sector between and . Concerning the
downstream companies, a similar dynamic has
probably been at work although a more systematic
review has yet to be carried out to demonstrate it
properly. The announcement of Nestlé’s Guide-
lines for Responsible Sourcing in May has
had a triggering effect for most major downstream
palm oil buyers. However, the link between these
commitments and the more upstream changes is
more ambiguous, as explained in the next section.
More ambiguous downstream-upstream links
The nature of the vertical interdependencies within
the palm sector is variable. On the one hand,
the commitments made by the leading brands
producing final consumer goods have clearly had
a strong leverage on the commitments of the main
traders, such as GAR and Wilmar, the first traders
to make commitments. The pressure exerted by
IOI’s main clients in after the company had
announced its intention to suspend the RSPO is
also a good example (see Thoumi & Levicharova,
).
On the other hand, the links between intermedi-
ary buyers such as traders and upstream produc-
ers are much less clear, as exemplified by three
indicators. The first is provided by the Chain Re-
action Research group, which focuses on possible
chain reactions within the sector. By comparing
two reports produced at an interval of months,
comparing the practices of the top ten Indonesian
palm oil growers with the requirements of their
main buyers, it is clear that downstream pressure
was not sufficient to significantly change upstream
policies. Despite their ranking as “at risk” vis-à-vis
buyers, and investor expectations in June (ten
Kate et al., ), these policies changed little in the
following year, and last December only two com-
panies had moved according to the Chain Reaction
classification from “High Risk” to “Medium Risk”
(ten Kate et al., ).
A second indicator of a similar nature is provid-
ed by a recent paper by Padfield et al. (). The
authors show that among the major plantation
companies in Indonesia, Malaysia and Singapore,
only the largest ones have made concrete NDPE
commitments. This observation, shown in Fig-
ure , tends to show that reputational risk, even
for upstream companies, has a much greater im-
pact than market pressure. This behaviour is made
possible by the development of markets that are
not influenced, or are only slightly influenced, by
NDPE-type commitments (such as the Indonesian
and Malaysian domestic markets, particularly for
biofuels, and the Chinese and Indian markets).
The third and final indicator refers to the reac-
tion of the two main growers’ unions in Indonesia
(GAPKI) and in the Sarawak region of Malaysia
(SOPPOA). Indeed these unions have largely criti-
cized the commitments made by the downstream
companies and the new consequent requirements
through different channels (press releases and
press conferences). They have made explicit the
fact that their members do not intend to adhere to
such requirements if not strongly coerced.
Figure 15. No deforestation, no burning, no peatlands
commitments made according to company size as based
on estimated planted areas
No peatland No deforestation Zero burning
25
20
15
10
5
0
Number of company policies
Class 1:<10k ha Class 2:10-50k ha Class 3:10-100k Class 4:<100k ha
ha
Company size according to plantation hectarage
Source: Padfield et al. (2016)
Note: The figure is based on RSPO 2014 data for all RSPO member companies from
Indonesia (46 companies), Malaysia (25 companies) and Singapore (6 companies).
Figure 2. Policy pledges to « zero burning », « no deforestation » and « no planting
on peatland » by palm oil growers according to the size of plantation (Class 1:<10
k ha, Class 2: 10-50 k ha, Class 3: 50-100 k ha, Class 4:>100 k ha) from Malaysia
(25 grower companies), Indonesia 46 grower companies) and Singapore (6 grower
companies) with RSPO-approved membership. The figure is based on all RSPO palm
oil grower members from the three named countries as reported in December 2014.
Source: RSPO (2014) and palm oil company websites.
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
An explanation for the apparent “resistance” of
upstream operators refers to the forms of clien-
telism that characterize the palm sector in Indo-
nesia and Malaysia for many authors (see Varkkey,
). In other words, upstream actors can disre-
gard injunctions that come from the downstream,
mainly because of the state protection they re-
ceive, which, for example, guarantees them na-
tional market access, on which the same require-
ments do not apply. This is another illustration of
the centrality of public authorities, which the pri-
vate commitment approach has tended to down-
play, particularly because it is unable to influence
it. These three points illustrate quite well the fact
that the upstream-downstream relations are not
free from tension and that, like all social relations,
they are power relations. If an organization like
TFT invites the various actors in the sector to “seek
value creation” when they commit with their sup-
pliers (TFT, ), the ability of an actor to obtain
from its supplier the guarantee that the palm oil
bought is produced according to a defined specifi-
cation depends ultimately on the resources it has
at its disposal to impose this specification. How-
ever, to our knowledge, there have been no studies
so far that have examined the buyer/supplier ne-
gotiation conditions. In particular, we know noth-
ing about the compensation offered to suppliers
by buyers in exchange for their alignment with in-
creasingly stringent requirements. While the CDP
urges downstream brands to audit their suppliers
to ensure their compliance with imposed specifica-
tions (e.g. CDP, , page ), it is not certain that
suppliers have the means to do so within the exist-
ing negotiation framework.
4.2.2.3. Transparency and traceability, levers
with highly contextual effectiveness
Companies that make commitments could have
much more transparent practices…
Behind this assumption are two distinct issues: the
technical feasibility of transparency and tracea-
bility; and the political will to communicate about
the subject. The technical feasibility of traceability
seems virtually assured, particularly due to the fact
that many consulting firms have seized the issue
as well as due to the huge work that the TFT has
accomplished with its members. Tools to commu-
nicate about this transparency have also emerged,
such as the TFT sustainability dashboard.
The issue of political will is more ambiguous.
On the one hand, among companies that commu-
nicate on the subject, not all do so with the level
of precision provided by dashboard-type tools—
far from it in fact. Musim Mas and Sime Darby,
for example, only distribute information in dribs
and drabs, via their website and without recourse
to more developed tools. On the other hand, the
proportion of companies that communicate is not
%, including among those who have made
commitments. The results of the survey carried
out each year by the CDP are, from this perspec-
tive, a good, even if imperfect, indicator. The non-
responders to the survey include the producer/
refiner and trader IOI, Astra Agro Lestari, and
even the “major” French retailers Casino and Les
Mousquetaires, not to mention Wal-Mart. A more
thorough analysis of the transparency policies
of companies that have made firm commitments
should be conducted to explore this issue further,
but there is every reason to believe that the level of
transparency remains rather low.
As a result, it is difficult for the stakeholders of
these companies, particularly civil society, to “con-
tinuously” monitor, as proposed by the TFT, the
impacts of their actions on the ground. And when
this is possible—for example Wilmar that com-
municates about its entire supply chain—there is
no guarantee that civil society or investors will be
able to make use of the information it successfully
obtains. In addition, the verification tools are still
lacking. From the environmental perspective, the
development of tools such as Starling or GRAS must
enable in the short to medium term the detection of
any change in land use contrary to commitments
made by a company, including in very remote ar-
eas, providing something to grip onto for the stake-
holders. On the social level, however, things are
much more complicated. Significant fieldwork is
required to reveal the impacts of upstream business
practices on land or working conditions and no re-
mote monitoring is possible. The proposal of the
TFT to develop a specific fund to finance this moni-
toring work by local NGOs (Kumacaya) could offer
interesting perspectives from this point of view.
The main challenge remains that, from both the
environmental and social perspective, it is some-
times difficult for the actors in possession of the
necessary information to change the practices of
a company. It is therefore necessary to distinguish
between two types of actors seeking to hold com-
panies accountable for their actions: actors of civil
society and investors. The question of the role of
investors has so far been little explored and will
therefore remain outside the scope of this meta-
analysis. Only NGOs will be considered in the next
paragraph.
A balance of power that is rarely favourable to
NGOs
There are often tensions, sometimes very serious
ones, between NGOs and companies where situa-
tions of gaps between commitments and practices
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
have been observed or revealed. In many cases,
a public campaign is the last resort for an NGO
confronted by companies that do not want to
change their practices. The media impact of such
a campaign will be decisive to convince, or not, the
company to take into account the requirements
formulated by the NGO(s). From this point of
view, although Greenpeace’s successive campaigns
targeting various companies in the palm oil sector
have had considerable impacts (particularly
cooking the climate in and the Kit Kat short
film in ), the social stakes have rarely had
similar impacts until the recent Amnesty Interna-
tional campaign ().
The Wilmar example is relatively interesting
from this point of view. The company, which was
the main target of Amnesty International’s report,
had received numerous complaints either logged
with the RSPO or with the Ombudsman’s office for
compliance with the IFC and MIGA rules, none of
which had really led to anything according to the
NGO Corporate Accountability Research (Bala-
ton-Chrimes & McDonald, ).
From this perspective, the discussion echoes the
previous one on the effectiveness of the RSPO’s
conflict management mechanism. In the context
of voluntary commitments and when, structurally,
the public authority is rather unfavourable to the
commitments made, social actors that make criti-
cisms/challenges have little manoeuvre room to
make their demands apart from by undermining
the reputation of the company.
Since data and publications relating to the con-
flicts between NGOs and companies on this basis
are rare, this paper will limit itself to these few
observations. These observations lead globally to
consider with great caution the assumption ac-
cording to which increased transparency may be
sufficient to lead the sector towards a structural
transformation of the whole.
4.2.3. In summary: an approach whose
implementation faces two main obstacles
The above analysis shows two main variables that
limit the implementation of the private commit-
ments approach. The first is due to the existence of
asymmetries of power that are insufficiently taken
into account by the proponents of the approach,
both within the sector (between downstream
and upstream actors), and between actors in the
sector and external NGOs. While one understands
the important of minimizing these power asym-
metries by inviting the actors to create value that
would benefit all of them, they largely condition a
successful implementation of the approach.
The second variable is the determining weight
of states in the functioning of the palm oil sector
in the context of developmentalist states such as
Indonesia or Malaysia. Until recently, state actors
were far from occupying a central position in these
approaches. It can even be said that these ap-
proaches had developed to partly overcome a rath-
er unfavourable public policy framework. These
same state actors have nevertheless reminded
the advocates of private commitment approaches
of their existence, who have gradually “put them
back into the landscape”. One of the main tools to
do this has been the development of landscape ap-
proaches, to which the last part of this article is
devoted.
4.3. Landscape approaches
It should be remembered that “landscape
approaches” are projects in which groups of actors
come together to intervene in land use planning,
in particular through the framework of territo-
rial governance. The objective is to promote the
integration of uses to meet several sustainable
development objectives, in particular: conserva-
tion (biodiversity, regulation of water regimes and
climate change), agricultural development and
the fight against poverty. However, this very broad
definition encompasses a wide range of initiatives.
In this section, a review of their theory of change
enables the appreciation of this diversity before
a reality test is proposed, which is necessarily
limited because of the relatively recent nature of
this type of project.
4.3.1. Different approaches and different
theories of change according to the actors
who are primarily targeted or mobilized
Among the projects reviewed, we identified
three main “implementation poles”: government,
private sector, smallholders. Each pole corre-
sponds to one or more assumptions regarding the
way in which the project should be implemented.
A given project usually specifically combines
different implementation poles to construct a
theory of change of its own. The following chart
shows these projects according to the importance
they assign to these three implementation poles.
The involvement of local governments in land-
scape approaches is based on two structural
assumptions.
(i) The first is that if land use decisions that are
adopted by the actors of the territory are formally
translated into a territorial development plan or a
land use plan validated by the local government,
they are much more likely to be realized;
(ii) The second considers that if there is a pos-
sibility of remunerating the performance of a
territory in terms of a recognized metric, local
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
governments can be strong drivers of landscape
approaches. This second assumption itself con-
tains a number of presumptions about the possi-
bility of defining a metric and a monitoring system
to evaluate this performance.
The involvement of companies, both upstream
and downstream, in landscape approaches, refers
to two other assumptions.
(i) A first assumption considers that the down-
stream companies could be the driving force in the
development of landscape approaches by develop-
ing “jurisdictional” sourcing strategies. Such strat-
egies are characterized by a preferential sourcing
of territories that have made clear commitments in
the fight against deforestation, by paying a premi-
um to the suppliers and/or territories concerned
(e.g. CGF, ).
(ii) A second assumption relates more specifi-
cally to upstream companies. It refers to the fact
that a good knowledge of the supply shed of one
or more refineries of highly engaged groups makes
it possible to identify producers with the most im-
pactful practices to accompany them in a process
of progress (see in particular TFT, , p. ).
The desire to involve small producers in the im-
plementation of landscape approaches is based ul-
timately on two assumptions:
(i) Strengthening the organizational capacities
of small producers is essential for them to become
drivers in land-use planning and, in particular,
to highlight their stakes in relation to industrial
plantations;
(ii) Improving their income is essential to limit
incentives to expand their crops to the detriment of
forests. In particular, this is achieved by strength-
ening their bargaining power vis-à-vis their direct
buyers, namely the middle man, on whom they
are entirely dependent for the purchase of their
production as well as price setting (INOBU, ,
p. -); and by improving their level of educa-
tion and access to credit (IFC, ; INOBU, ).
Given the recent nature of the landscape ap-
proach projects, it is not possible to subject these
assumptions to the same reality check as in the
previous sections. However, the following section
questions their ability to address the sustainability
issues identified in Part of this report in light of
the data already available today.
Figure 16. Schematic positioning of the main landscape approaches deployed in Indonesia according to the targeted actors
Source: author, based on project data
SLP: Sustainable Landscape Partnership, developed by Conservation International in North Sumatra LED-S + J. RSPO: Low Emission Development Strategy + jurisdictional
RSPO, supported by the Earth Innovation Institute in Central Kalimantan J. REDD+: Jurisdictional REDD+, supported by (among others) TNC in the District of Berau J. RSPO
+ GGP: Jurisdictional RSPO + Green Growth Plan, supported by IDH-the sustainable trade and the Zoological Society of London GGP: Green Growth Plan, supported by IDH and
Fauna and Flora International in Ketapang
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48 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
4.3.2. Interesting assumptions, but with a
questionable scope
4.3.2.1. Difficulty to involve local governments
and remunerate territories
The governors of six Indonesian provinces (West
Kalimantan, Central Kalimantan, East Kalim-
antan, Papua, West Papua and Aceh) are signato-
ries to the Rio Branco declaration, through which
they commit in particular to “reduce deforestation,
develop partnerships with private sector initiatives
that leverage the opportunities available through
jurisdictional programmes, and rapidly and effec-
tively channel performance-based funds for the
promotion of forest based and forest friendly
economic development for producers, farmers,
ranchers, indigenous peoples, local communi-
ties, and other forest stakeholders” (Governors’
Climate & Forests Task Force, , p. ). If we
include the Governor of South Sumatra, who was
also strongly involved with IDH in developing and
launching a landscape approach, seven of the most
important provinces in the fight against deforesta-
tion were mobilized. The potential consequences,
both in terms of forest protection and land rights,
and in terms of supporting smallholder develop-
ment appear significant. Nevertheless, in assessing
these declarations at their fair value, it is necessary
to consider three aspects.
Firstly, the implementation of the commitments
made in the framework of the Rio Branco Declara-
tion is clearly conditioned by the support that the
signatory local governments will receive from both
public and private donors:
“Our efforts to build jurisdictional strategies
and programmes for low emissions development
cannot be sustained without additional support.
We call upon the international community to part-
ner with us as we continue to build robust jurisdic-
tional programmes that will enable large-scale in-
tegrated transitions to sustainable development.”
However, few—if any—support mechanisms or
financial resources have today reached local gov-
ernments in the frame of such landscape projects,
and there is little prospect for change in the near
future.
Secondly, the release of additional funds to sup-
port these initiatives is often conditional on the
ability of governments to demonstrate the effec-
tiveness of the measures taken in the framework of
a performance payment. However, such a perfor-
mance payment is closely linked to the existence
of metrics and tracking systems to continuously
document the progress of the territories involved.
As in the case of the verification mentioned in the
previous section, metrics and tracking systems are
still lacking, despite the many proposals that are
now on the table (e.g. Buck et al., ; INOBU &
EU REDD Facility, ). The necessary means for
the continuous collection of the required data, and
the difficulty of agreeing on a common monitor-
ing framework, largely explain the absence of such
systems.
Thirdly, the fact that seven provincial governors
have committed themselves to the development
of landscape approaches does not mean that the
governors of the other provinces involved in the
development of palm oil have a real or potential
interest in doing the same (Daemeter, ). While
provincial governors could perhaps become more
involved given the size of the territory they admin-
ister, a recent report suggests that it is unlikely that
the governors at the district level would make any
commitments without significant changes in the
current policy framework. The first type of change
concerns the legislative framework at the national
level, whose objective in terms of sustainable land
management remains too far away from the objec-
tives of most jurisdictional approaches. A second
type of change is related to the funding that is cur-
rently available, which in the view of the authors is
too complicated to obtain, too unstable over time,
and too low. A third change relates to the elector-
ate and the low “value” it assigns to a governor
engaging in the fight against deforestation, this
limited value means that the political rewards for
such action are low.
4.3.2.2. The ambiguity of private companies
While two major downstream companies, Unilever
and Marks & Spencer, announced in their
willingness to bring forward their supply strate-
gies to give them a territorial basis (CGF, ),
the practical modalities for the implementation
of these announcements remain unclear. For two
years, Unilever has been involved in a project of
this nature in five districts in the province of North
Sumatra. However, it was not possible to find any
tangible information on this subject in the course
of this investigation. One of the key questions refers
in particular to the premium that can be paid by the
buyers to the actors in the territories concerned,
whatever the form of the payment: directly to the
producer (smallholder or industrial plantation), or
targeted towards local governments.
Moreover, it is far from being guaranteed that
upstream companies will show an interest in par-
ticipating in discussions on land use, where one of
the objectives is specifically the characterization of
forest areas into which they will be asked not to
encroach. And because at the same time, not par-
ticipating in this type of process gives them the op-
portunity to denounce the results that will emerge
in the name of “neo-colonialism” (Wolosin, ),
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
the possibility of establishing a truly inclusive pro-
cess may in some cases prove to be particularly
complicated for companies.
4.3.2.3. Involving local populations
and smallholders: political dimensions and
practical issues
The desire to support smallholders as central
actors in the land use planning process is truly
something to be welcomed due to its democratic
nature. However, from a practical point of view,
such an objective involves considerable resources.
In many situations, independent producers and,
more broadly, local populations are geographically
very distant from the urban centres where partici-
patory workshops can take place, they sometimes
have only a very vague idea of the functioning of
administrations and, more broadly, of organiza-
tions, public or private, with which they are asked
to interact, and have only a very rudimentary level
of education (see the example of Berau’s REDD+
jurisdictional project in Fishbein & Lee, ).
Assuming that this capacity building could be
carried out, it is also necessary to question the ca-
pacity of these local populations to effectively act
as a counterweight that is sufficient to balance out
the industrial companies who have a large appetite
and means for pressure, not to mention their prox-
imity to the established power (Varkkey, ).
On a more political level, this will to involve lo-
cal populations in land-use planning should also
not ignore the fact that for over years, social
movements, sometimes extremely dynamic, have
sought to make their voices heard in land use plan-
ning processes in the face of—mainly—unilateral
decisions of local administrations or governments
(Peluso et al., ; Di Gregorio, ). It is not
certain that the mere invocation of a “new” land-
scape approach manages, as if by magic, to reduce
the tensions that have accumulated between these
social movements and the same public authorities
which, even recently, refused them the right to sit
at the negotiating table.
CONCLUSION
Consideration of the sustainability of palm oil
production must be based primarily on the fact
that three modes of production coexist, which
have different impacts on the three dimensions of
sustainable development considered here: defor-
estation, rural poverty and working conditions,
and respect for customary land rights. Regarding
all three dimensions, the information gathered
here suggests that independent smallholder
production is the most efficient. It is estimated
that this type of production provides better remu-
neration for producers and is considerably less
responsible for deforestation as well as problems
of working conditions. It is in particular with this
characteristic in mind that one must appreciate the
scope of the initiatives that aim at containing the
negative effects of this production, which is also
of strategic importance for the economies of the
producing countries.
The historical analysis of sustainability initia-
tives showed an initial period marked by the emer-
gence and then the multiplication of certification
schemes before they became subject to increas-
ing criticism regarding their ability to transform
production systems and to orient development
towards more sustainability. As a result, under
pressure from NGOs, a number of individual com-
mitments by companies have been made to guar-
antee their non-involvement in deforestation,
peatland destruction and worker exploitation.
Given the scale of this movement, Indonesia and
Malaysia have set up their own standards, in par-
ticular with the aim of offering cheaper and less
demanding certifications to small national opera-
tors. More recently, different actors have set up
territorial projects upstream of the sector; one of
the challenges is to be able to contribute to land-
use planning and to encourage the reconciliation
of sometimes contradictory uses and projects.
This study also goes beyond the analysis of sus-
tainability principles on which these initiatives
are based to look at their ability to produce effec-
tive change. In this sense, it makes explicit their
theory of change and puts it in comparison with
the practical modalities of their deployment /
implementation.
Available knowledge suggests that most certifi-
cations do not appear to be able to generate the
necessary changes for four interlinked reasons:
(i) the market does not pay enough for certified
production and possible additional production
costs; (ii) certifications are focused on proce-
dural requirements rather than on practices; (iii)
verification and litigation systems do not seem to
be good enough, and (iv) above all they do not
STUDY 11/2017
50 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
sufficiently favour independent producers who
have been shown to represent the most sustain-
able mode of production.
The individual commitments of companies
have a more promising theory of change. How-
ever, they are confronted with several issues, in-
cluding: asymmetries of power; the fact that they
mainly concern companies subject to the scru-
tiny of actors from Western consumer countries;
a difficulty in documenting the effectiveness of
the commitments made; the limitations of ap-
proaches that bypass the governments of produc-
ing countries; and finally, the difficulty faced by
downstream actors in ensuring that their suppli-
ers align themselves with their commitments and
that they replicate them.
Finally, although it is still too early to assess the
scope of the landscape approaches, we observe
that: they are based on financial support from
public and private donors, which seems slow to
materialize; it seems difficult to measure and to
certify the effectiveness of the actions; practices
are still vaguely defined, with limited remunera-
tion premiums; and questions remain as to what
improvements will be made to help the situation
of local populations.
On the basis of these results, this study propos-
es three recommendations.
Improving the framing of practices in large-
scale plantations
There are ways to improve certification in this
respect: developing independent audit systems,
i.e. in which the commercial link between the
audited company and the auditor would disap-
pear; strengthening the dispute resolution proce-
dures, in particular to better take into account
the arguments of local populations; ensuring
the recognition of forests, particularly HCV and
HCS forests, in all existing standards. Measures
favouring the demand for certified oil to ensure a
better valorization of sustainable production are
also conceivable. However, they would only make
sense if targeted certifications were first strength-
ened: there would be no point in improving
demand from fragile modes of production.
Better understanding of the negotiation
conditions between actors of the sector
to reinforce the effectiveness of private
commitments
Approaches based on private commitments rely
heavily on putting constraints on producers,
assuming that the market power of buyers will be
sufficient to constrain their suppliers. While the
efficiency of the modus operandi is not yet evident,
a better understanding of buyer/supplier negotia-
tion conditions, in particular on the counterparties
offered by buyers to their suppliers in exchange
for their alignment with ever more demanding
requirements would make it possible to develop
these approaches in a favourable direction.
Strengthening international cooperation to
transform agricultural and rural development
policies
Until now, certification schemes such as private
commitments have been less able to support inde-
pendent production methods. Taking action in this
direction would in fact mean guiding economic
and territorial development policies. To this end,
the EU, EU companies and its civil society must
strengthen the dialogue with governments of
producer countries to act in two directions.
() To develop a sector policy to structure the
supply of independent producers and enable them
to capture a greater share of value added, for ex-
ample through the development of cooperative ag-
ricultural models. Development assistance actors
with experience in this area could be more widely
supported.
() To support ongoing discussions in producing
countries towards the legal recognition of the con-
servation status of high value conservation forests
and high carbon stocks. Such decisions would also
help countries to implement their commitments
under the Paris Climate Agreement, which involve
broad actions in the land sector through the mobi-
lization of part of the climate funds. ❚
STUDY 11/2017 51
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Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
ANNEX 1: LIST OF INTERVIEWED ORGANISATIONS
Organisation Interview date
AidEnvironment 21/02/17
Conservation International 20/12/16
Global Environmental Change 15/09/16
Greenpeace 15/09/16
IDH Indonésie 13/01/17
IDH Indonésie 06/02/17
GAPKI 06/10/16
ISCC 17/01/17
MPOB 15/12/16
MPOCC 01/12/16
Musim Mas 14/09/16
Rainforest Alliance 28/09/16
RSPO 30/11/16
RSPO 16/10/16
Sime Darby 02/02/17
TFT 06/12/16
TFT 29/11/16
Wilmar Europe 12/09/16
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52 IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
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STUDY 11/2017 55
IDDRI
Implementation and effectiveness of sustainability initiatives in the palm oil sector: a review
Implementation and effectiveness of
sustainability initiatives in the palm oil sector: a
review
Pierre-Marie Aubert (IDDRI), Anis Chakib (independent
consultant), Yann Laurans (IDDRI)
The Institute for Sustainable Development and International Relations (IDDRI) is a
non-profit policy research institute based in Paris. Its objective is to determine and
share the keys for analyzing and understanding strategic issues linked to sustainable
development from a global perspective. IDDRI helps stakeholders in deliberating
on global governance of the major issues of common interest: action to attenuate
climate change, to protect biodiversity, to enhance food security and to manage
urbanisation. IDDRI also takes part in efforts to reframe development pathways. A
special effort has been made to develop a partnership network with emerging coun-
tries to better understand and share various perspectives on sustainable develop-
ment issues and governance.
For more effective action, IDDRI operates with a network of partners from the private
sector, academia, civil society and the public sector, not only in France and Europe
but also internationally. As an independent institute, IDDRI mobilises resources
and expertise to disseminate the most relevant scientific ideas and research ahead
of negotiations and decision-making processes. It applies a cross-cutting approach
to its work, which focuses on seven themes: Global Governance, Climate and
Energy, Biodiversity, Oceans and Coastal Zones, Urban Fabric, Agriculture, and New
Prosperity.
IDDRI organises its publications policy around its own collections, books in partner-
ship (such as Planet for Life, the result of a scientific collaboration with the French
Development Agency and The Energy and Resource Institute, and an editorial part-
nership with Armand Colin for its French edition, Regards sur la Terre) and papers
in scientific journals. IDDRI also publishes studies within the framework of the Club
d’ingénierie prospective énergie et environnement [CLIP]: Les Cahiers du CLIP.
IDDRI’s own collections are made up of short texts (Issue Briefs and Policy Briefs),
working papers (Working Papers) and studies or reports (Studies).
To learn more on IDDRI’s publications and activities, visit www.iddri.org
Publications available online at: www.iddri.org
mAubert, P.-M., Chakib, A., Laurans,
Y. (2017). Towards a (more)
sustainable palm oil: what role for
importing countries? IDDRI, Policy
Briefs N°04/17.
mJonville, M. et al. (2016). A natural
and sustainable cosmetics sector?
Limited benefits for biodiversity.
IDDRI, Issue Briefs N°02/16.
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