Indonesia's two year moratorium on commercial development of forests and peat lands, expected to come into effect this year, is forcing palm oil producers to look elsewhere for expansion as the demand and price of the controversial commodity soar. And Africa is the new destination for many.
Malaysia-based Sime Darby Plantation, world's largest crude palm oil producer, is said to be considering a $2.5 billion investment in Cameroon to develop 300,000 hectares of oil palm plantation. The company currently has 530,000 hectares of palm oil plantations in Malaysia and Indonesia.
Cameroon government may find the proposal attractive as the project promises to create 30,000 jobs in the impoverished country. But the expansion may alarm environmental groups who have been campaigning against the industry's unsustainable practices including destruction of natural forests.
Sime's expansion plans also include ventures in Liberia where the company has been granted a concession of 220,000 hectares.
Other palm oil giants which have announced plans to expand to Africa in recent months include Wilmar International, Olam International and Golden Agri. While Golden Agri has signed a $1.6 billion project in Liberia, Olam has announced a 300,000 hectares project in Gabon. UK-listed Equatorial Palm Oil already operates 169,000 hectares oil palm plantation in Liberia.
Palm oil prices have now crossed $1100 a tonne, almost doubling from the average $500 a tonne over the last decade. That explains frantic expansion plans by the industry players. The key question is: how will the industry ensure its expansion in Africa is above board, and sustainable?
Monday, February 28, 2011
Saturday, February 26, 2011
Editorial ethics at Ethical Corporation
Ethical Corporation, the magazine that I write for, also has a significant conferencing business. I have been asked, on many occasions, how we maintain integrity and impartiality of what we write in the magazine and whether we can afford to embarrass the companies which are our conference clients or sponsors.
Well, here is the answer straight from Toby Webb, founder of Ethical Corporation magazine and himself a respected corporate responsibility commentator, in a podcast with Brendan May.
Well, here is the answer straight from Toby Webb, founder of Ethical Corporation magazine and himself a respected corporate responsibility commentator, in a podcast with Brendan May.
Friday, February 25, 2011
India's textile dyers opposing tighter environmental controls
Textile dyeing and processing industry in India is resisting the demands of zero liquid discharge system (ZLD). Environmental Campaigners want the industry to switch to zero discharge to save soil and water resources from being further polluted. The industry is responsible for releasing millions of liters of toxic wastewater which has destroyed water and soil systems in the neighborhood.
India's two largest textile manufacturing hubs are in Tirupur (South India) and Ludhiana (North India). On petitions filed by environmentalists, Madras High Court has ordered to shut down all dyeing units in Tirupur for failing to implementing ZLD.
In Ludhiana, the dyers associations are opposing similar demands from a local environmental activist. Read here.
These campaigns also expose a serious fault in multinational retailers' supply chain responsibility programmes. Retailers' current code of conduct programme does not extend to textile dyeing and processing units even though these units account for the largest environmental impact in the textile supply chain.
India's two largest textile manufacturing hubs are in Tirupur (South India) and Ludhiana (North India). On petitions filed by environmentalists, Madras High Court has ordered to shut down all dyeing units in Tirupur for failing to implementing ZLD.
In Ludhiana, the dyers associations are opposing similar demands from a local environmental activist. Read here.
These campaigns also expose a serious fault in multinational retailers' supply chain responsibility programmes. Retailers' current code of conduct programme does not extend to textile dyeing and processing units even though these units account for the largest environmental impact in the textile supply chain.
Monday, February 21, 2011
Court order to shut down polluting textile units in South Indian city
Hundreds of textile bleaching and dyeing mills in the South Indian city of Tirupur have been ordered to shut down by the Madras High Court in response to public petitions. Tirupur is one of the largest textile manufacturing hubs in Asia where most multinational retailers have suppliers.
Farmers groups have alleged that textile units dumped untreated effluent in the Noyyal river which farmers rely on for irrigation.
The court order also includes closing down Common Effluent Treatment Plants and Integrated Effluent Treatment Plants in the area. These plants were set up by the government agencies mostly to treat wastewater from textile mills. In a previous order in 2006, the court had directed these plants to achieve "zero liquid discharge" level. In the latest court filing, it is alleged that these units failed to comply with the court order and continued to operate and pollute the area.
Textile industry associations have banded together to put pressure on the government to allow effluent discharge until an acceptable solution is found. Farmers lobby is opposed to any leniency toward polluting textile industry.
Observers say that the industry has not taken its responsibility for wastewater treatment seriously in spite of repeated campaigns by farmers in the past. The industry is accused of destroying large tracts of farmland by contaminating water and land by dumping untreated toxic wastewater.
There have been reports in the past alleging that though textile units install wastewater treatment plants to meet retailers' code of conduct requirement, they seldom operate these plants because running treatment plants costs money! Government inspectors don't mind looking the other way as long as their palms are greased.
Tirupur is a key sourcing destination for knitted garments for a number of large and small multinational retailers. None of them has reacted publicly so far to the developments in Tirupur.
The city's textile industry also provides thousands of jobs. These jobs are now at risk as hundreds of units are now closed due to the court order. Trade unions have given a call to shut down the entire city tomorrow to put pressure on the government to find a solution so that units can be opened and jobs can be saved.
See more here
And here
Farmers groups have alleged that textile units dumped untreated effluent in the Noyyal river which farmers rely on for irrigation.
The court order also includes closing down Common Effluent Treatment Plants and Integrated Effluent Treatment Plants in the area. These plants were set up by the government agencies mostly to treat wastewater from textile mills. In a previous order in 2006, the court had directed these plants to achieve "zero liquid discharge" level. In the latest court filing, it is alleged that these units failed to comply with the court order and continued to operate and pollute the area.
Textile industry associations have banded together to put pressure on the government to allow effluent discharge until an acceptable solution is found. Farmers lobby is opposed to any leniency toward polluting textile industry.
Observers say that the industry has not taken its responsibility for wastewater treatment seriously in spite of repeated campaigns by farmers in the past. The industry is accused of destroying large tracts of farmland by contaminating water and land by dumping untreated toxic wastewater.
There have been reports in the past alleging that though textile units install wastewater treatment plants to meet retailers' code of conduct requirement, they seldom operate these plants because running treatment plants costs money! Government inspectors don't mind looking the other way as long as their palms are greased.
Tirupur is a key sourcing destination for knitted garments for a number of large and small multinational retailers. None of them has reacted publicly so far to the developments in Tirupur.
The city's textile industry also provides thousands of jobs. These jobs are now at risk as hundreds of units are now closed due to the court order. Trade unions have given a call to shut down the entire city tomorrow to put pressure on the government to find a solution so that units can be opened and jobs can be saved.
See more here
And here
Wednesday, October 27, 2010
Government incentive for CSR, or not
With the government's intervention, CSR debate in India has taken a perverse course.
Indian companies, and foreign companies operating in India, have by and large failed to demonstrate respect for responsible business practices. Their inaction, and often irresponsible behaviour, is a result of the fact that India lacks a robust stakeholder community. A good chunk of NGOs in India are only too happy to receive donations than to press them to adopt responsible business practices. No wonder, most companies get away with PR-ish charity in the name of CSR.
Multinational companies operating in India have also found it convenient to join the charity-CSR bandwagon rather than setting leadership examples. Many of them have respectable CR initiatives in their home country but in India their CR fails to rise above charity.
Industry's apathy prompted the government last year to introduce voluntary CSR guidelines for listed companies. Though the CSR guidelines are quite impressive in the sense that they include several key issues such as care for stakeholders, workers rights, human rights, environment and inclusive development, the industry does not seem to be obliging. The industry actually started lobbying for incentives such as tax breaks if it were to spend on CSR.
Government officials are divided. India's corporate affairs minister has been quoted saying that companies may be provided fiscal incentives for participating in CSR activities. But a senior official in his ministry recently said that companies should adopt CSR as a corporate culture rather than asking for incentives. He even indicated that if companies fail to adopt CSR, the government may even make CSR-spend mandatory.
Now the perverse piece here is that CSR is being interpreted as philanthropy. Unfortunately, India Inc needs to include larger issues that have become more pronounced with breakneck economic development. These issues include climate change/carbon emission, environmental protection, anti-pollution measures, working conditions, human rights, customer protection, privacy and bribery.
India is even pushing for a bill in parliament that would require companies to spend at least 2% of their profit on CSR activities.
Most likely, companies will have to deal with local politicians and legislators who would want companies to spend on their pet projects. The legislation will also give rise to potential accounting fraud where companies will falsely claim expenditure on CSR.
But this is what happens when the private sector does not take voluntary action. Legislative action then appears as the only alternative. But legislative CSR is compliance, not CSR. Did we not teach all these years that CSR is when companies go beyond compliance?
Indian companies, and foreign companies operating in India, have by and large failed to demonstrate respect for responsible business practices. Their inaction, and often irresponsible behaviour, is a result of the fact that India lacks a robust stakeholder community. A good chunk of NGOs in India are only too happy to receive donations than to press them to adopt responsible business practices. No wonder, most companies get away with PR-ish charity in the name of CSR.
Multinational companies operating in India have also found it convenient to join the charity-CSR bandwagon rather than setting leadership examples. Many of them have respectable CR initiatives in their home country but in India their CR fails to rise above charity.
Industry's apathy prompted the government last year to introduce voluntary CSR guidelines for listed companies. Though the CSR guidelines are quite impressive in the sense that they include several key issues such as care for stakeholders, workers rights, human rights, environment and inclusive development, the industry does not seem to be obliging. The industry actually started lobbying for incentives such as tax breaks if it were to spend on CSR.
Government officials are divided. India's corporate affairs minister has been quoted saying that companies may be provided fiscal incentives for participating in CSR activities. But a senior official in his ministry recently said that companies should adopt CSR as a corporate culture rather than asking for incentives. He even indicated that if companies fail to adopt CSR, the government may even make CSR-spend mandatory.
Now the perverse piece here is that CSR is being interpreted as philanthropy. Unfortunately, India Inc needs to include larger issues that have become more pronounced with breakneck economic development. These issues include climate change/carbon emission, environmental protection, anti-pollution measures, working conditions, human rights, customer protection, privacy and bribery.
India is even pushing for a bill in parliament that would require companies to spend at least 2% of their profit on CSR activities.
Most likely, companies will have to deal with local politicians and legislators who would want companies to spend on their pet projects. The legislation will also give rise to potential accounting fraud where companies will falsely claim expenditure on CSR.
But this is what happens when the private sector does not take voluntary action. Legislative action then appears as the only alternative. But legislative CSR is compliance, not CSR. Did we not teach all these years that CSR is when companies go beyond compliance?
Wednesday, October 20, 2010
Manufacturers take lead on sustainable fashion
The textile and fashion industry in Singapore is playing a leadership role in promoting sustainable fashion, clearly a first in Asia. The lead is being taken by the Textile & Fashion Industry Federation of Singapore (TAFF), the apex industry body.
I recently had the privilege of developing national competency framework standards for sustainable fashion for Singapore's textile and fashion industry. Based on the competency standards then I helped develop a three-day course on sustainable fashion value chain complete with an assessment plan. The course will be run by the Textile and Fashion Industry Training Centre, the training arm of the Textile and Fashion federation of Singapore. The course will be generously subsidised by the government which is keen to build sustainable fashion capabilities for the industry.
The Singapore industry is also hosting an international conference on sustainable fashion to be held on the 24th Nov 2010. I will be one of the speakers at the conference speaking on "Establishing the Industry Standards for Sustainable Fashion." Other key speakers include Adidas, M&S, Organic Exchange, IFC / World Bank Group, and Brandix-Sri Lanka.
See here for more detailed programme, or here.
To register for the seminar, see here, or get in touch with Textile & Fashion Industry Training Centre Pte Ltd, 2 Leng Kee Road, #02-09 Thye Hong Centre, Singapore 159086, Tel +65 64759897 Fax (65) 74753583 E-mail: eric@taftc.org
I recently had the privilege of developing national competency framework standards for sustainable fashion for Singapore's textile and fashion industry. Based on the competency standards then I helped develop a three-day course on sustainable fashion value chain complete with an assessment plan. The course will be run by the Textile and Fashion Industry Training Centre, the training arm of the Textile and Fashion federation of Singapore. The course will be generously subsidised by the government which is keen to build sustainable fashion capabilities for the industry.
The Singapore industry is also hosting an international conference on sustainable fashion to be held on the 24th Nov 2010. I will be one of the speakers at the conference speaking on "Establishing the Industry Standards for Sustainable Fashion." Other key speakers include Adidas, M&S, Organic Exchange, IFC / World Bank Group, and Brandix-Sri Lanka.
See here for more detailed programme, or here.
To register for the seminar, see here, or get in touch with Textile & Fashion Industry Training Centre Pte Ltd, 2 Leng Kee Road, #02-09 Thye Hong Centre, Singapore 159086, Tel +65 64759897 Fax (65) 74753583 E-mail: eric@taftc.org
Sunday, October 17, 2010
What's shaping CSR in Asia
Further to my comments on what is driving CSR in Asia, types of CSR activities preferred by companies in Asia, and key challenges for CSR in Asia, here are some of the recent developments in Asia that will potentially influence the course of CSR in Asia:
- Voluntary sustainability reporting guidelines by the Singapore Stock Exchange
- Hang Seng Corporate Sustainability Index by the Hong Kong Stock Exchange
- Voluntary CSR guidelines by the ministry of corporate affairs in India (comprehensive, core elements include care for stakeholders, ethical functioning, workers rights, human rights, environment and social development; includes need for policy, strategy, clear goals, measurement and reporting)
- India pushing for legislation to impose CSR Tax on companies
- Philanthropy in China: Tycoons pledging their wealth for charitable causes
- Asian businesses making headlines for the wrong reasons:
Foxconn, the Apple Computers supplier in China for working conditions and workers suicides, a bunch of palm oil companies for environmental destruction and human rights issues, Vedanta Resources, a mining company, for controversial mining projects in the state of Orissa in India.
Friday, October 15, 2010
Key challenges for CSR in Asia
In the last couple of days, I have shared some points on "What is driving CSR in Asia" and "Types of favourite CSR activities in Asia" on this blog. These are the points that I made during my speech including a the panel discussion at the International Singapore Compact CSR Conference 2010 held in Singapore on 6-7 October.
As promised, today I am sharing a few thoughts on the real and potential challenges that face corporate responsibility in Asia. Here they are:
Key challenges
- Absence of strong and mature stakeholders means companies are under no pressure or scrutiny to do the right thing.
- In fact, green-washing is going to be one of the biggest problems in the coming months as more and more companies start writing annual sustainability reports to meet government guidelines.
- In the absence of a robust stakeholder community, green-washers will more likely have a free run.
- Green-washing is also going to be a big problem for those companies which are genuinely doing good work. Their work will be undermined by the Green-washers.
- Capability is going to be a major challenge. Companies will need to hire competent sustainability experts if they are to drive a genuine sustainability programme. And such talent is in short supply.
Lack of pressure from activists is actually an opportunity for businesses here. They can formulate a well thought out sustainability plan.
Most western companies did not have the luxury of planning out a well rounded sustainability programme. For most of them, it was a knee jerk reaction. When they were hit by a crisis, they reacted by taking one small step necessary to address the crisis. So every new criticism brought a new action. Only now some of them have started to take a more holistic approach toward sustainability.
Tomorrow, will be writing about the recent developments in Asia that will potentially influence of course of CSR in the region.
Thursday, October 14, 2010
Types of CSR initiatives in Asia
Further to my blog post "CSR drivers in Asia" yesterday, here are what I find three broad categories of CSR activities in being pursued by companies in Asia:
- Compliance driven initiatives, mostly in the global supply chain
- PR-led initiatives, glossy reports and tall claims but no real work on the ground, mostly philanthropy
- PR-led initiatives, some initiatives on non-threatening issues such as environment but total silence on the core issues that are really material to their business
- Companies genuinely trying to embrace sustainability or corporate responsibility; this group is in minority
Your views or suggestions to improve/expand this list are welcome! Please leave your comment.
Tomorrow, will be talking about the key challenges facing corporate responsibility in Asia.
Tuesday, October 12, 2010
CSR drivers in Asia
Recently, I was asked to share my views in a panel discussion on "What is driving CSR in Asia" at the International Singapore Compact CSR Summit held at the Resorts World Sentosa Convention Centre on 6-7 Oct. Here are some of the points I made:
Key drivers:
Compliance was the first key driver in Asia when multinational retailers introduced social responsibility code of conduct for their suppliers. And compliance still remains a major driver.
Much of CSR in Asia is still limited to philanthropy. Last month, India’s leading industry federation Assocham published a report on CSR by Indian companies. The report said the companies’ primary focus is on community welfare.
PR is becoming an important driver. So you can expect to see more and more companies releasing glossy annual CSR reports, largely assembled by their spin doctors, low on substance and high on rhetoric and tall claims.
Reputational risk is becoming a driver in some of the sectors such as the palm oil industry.
More recently, governments have started driving sustainability. Sustainability reporting guidelines by the Singapore Stock exchange, CSR guidelines by the ministry of corporate affairs in India, and CSR reporting guidelines by Bursa Malaysia are some of the examples.
In Singapore, the Green Mark Scheme is another example where it is mandatory for property developers to achieve at least the Green Mark for all new developments.
Singapore has recently approved a national competency framework for sustainable fashion value chain which I help developed. The initiative is aimed at developing sustainable fashion and retail industry in Singapore. And Singapore will be organizing the first international sustainable fashion conference on the 24th of November this year. The sustainable fashion framework will be launched in that conference.
If you have other thoughts, will be happy to know. Please comment.
Tomorrow I will share the three broad types of of CSR initiatives in Asia, and the key challenges ahead. So, please return to this blog tomorrow!
Tuesday, October 05, 2010
Philanthropy is CSR in India
It's official now. CSR for Indian companies means philanthropy.
A study by the Associated Chamber of Commerce and Industry in India, a top industry federation in the country, says that community welfare is the primary focus of CSR initiatives by Indian companies. Education for the underprivileged and rural development are the other CSR priorities listed by the surveyed companies.
FMCG companies are at the forefront of CSR (actually philanthropy) followed by chemicals companies and IT companies.
There is no mention of workers' rights, human rights, child labour, tribal rights, bribery and ethics, governance, responsible supply chain, fair wages, workplace health and safety, discrimination, carbon reduction, product safety, consumer rights, stakeholder engagement, protecting natural resources etc.
Though there is no talk of moving toward a low carbon economy or committing to voluntary reduction of carbon emission, the report indicates that making money through carbon credits is catching the attention of companies. "The big corporate houses are now going for the carbon credits which have been a good attempt to prevent the global warming," says the Assocham press release on the report.
In most companies, CSR is being driven by PR executives who see philanthropy as a good photo-op. Many of these companies go on to win CSR awards and get invited (ok, they buy these speaking slots by way of sponsorships) to CSR conferences to lecture on CSR.
Actually, Indian companies have no pressure to embrace corporate responsibility in their operations. An enlightened civil society is missing and media is equally illiterate about corporate responsibility.
Ironically, development NGOs love these companies which are proving to be their new source of funding for philanthropic projects and saving their own jobs.
See here for more on the Assocham report.
A study by the Associated Chamber of Commerce and Industry in India, a top industry federation in the country, says that community welfare is the primary focus of CSR initiatives by Indian companies. Education for the underprivileged and rural development are the other CSR priorities listed by the surveyed companies.
FMCG companies are at the forefront of CSR (actually philanthropy) followed by chemicals companies and IT companies.
There is no mention of workers' rights, human rights, child labour, tribal rights, bribery and ethics, governance, responsible supply chain, fair wages, workplace health and safety, discrimination, carbon reduction, product safety, consumer rights, stakeholder engagement, protecting natural resources etc.
Though there is no talk of moving toward a low carbon economy or committing to voluntary reduction of carbon emission, the report indicates that making money through carbon credits is catching the attention of companies. "The big corporate houses are now going for the carbon credits which have been a good attempt to prevent the global warming," says the Assocham press release on the report.
In most companies, CSR is being driven by PR executives who see philanthropy as a good photo-op. Many of these companies go on to win CSR awards and get invited (ok, they buy these speaking slots by way of sponsorships) to CSR conferences to lecture on CSR.
Actually, Indian companies have no pressure to embrace corporate responsibility in their operations. An enlightened civil society is missing and media is equally illiterate about corporate responsibility.
Ironically, development NGOs love these companies which are proving to be their new source of funding for philanthropic projects and saving their own jobs.
See here for more on the Assocham report.
Saturday, October 02, 2010
See you at the International Singapore Compact CSR Summit 2010
The two-day International Singapore Compact CSR Summit 2010 begins on the 6th Oct at the Resorts World Convention Centre, Sentosa, Singapore.
I will be speaking at the conference on Asia's Successful CSR Strategies on Day-1, Plenary Session 2 (1:30:3:00 pm). Here is the session detail:
Plenary Session 2
Asia’s Successful CSR Strategies
· What are the regional drivers for CSR?
· How significant is CSR for businesses in ASEAN and Asia?
· What are the latest developments on CSR in the region?
Panelists
Dr Filemon Uriarte,Executive Director, The ASEAN Foundation
Rajesh Chhabara, Asia Editor, Ethical Corporation Magazine
Professor Richard Welford, Co-Founder & Chairman, CSR Asia
Moderator
Mr. Tay Kay Luan, President, Business Council for Sustainable Development Malaysia
Chief Executive, Institute of Bankers Malaysia
Book launch
The conference will also see the launch of "Socially Responsible and Sustainable-Company perspectives and experiences," a book on sustainability stories from Singapore. I am one of the co-authors of the book, published by Singapore Compact.
For more information on the conference, please see here.
I will be speaking at the conference on Asia's Successful CSR Strategies on Day-1, Plenary Session 2 (1:30:3:00 pm). Here is the session detail:
Plenary Session 2
Asia’s Successful CSR Strategies
· What are the regional drivers for CSR?
· How significant is CSR for businesses in ASEAN and Asia?
· What are the latest developments on CSR in the region?
Panelists
Dr Filemon Uriarte,Executive Director, The ASEAN Foundation
Rajesh Chhabara, Asia Editor, Ethical Corporation Magazine
Professor Richard Welford, Co-Founder & Chairman, CSR Asia
Moderator
Mr. Tay Kay Luan, President, Business Council for Sustainable Development Malaysia
Chief Executive, Institute of Bankers Malaysia
Book launch
The conference will also see the launch of "Socially Responsible and Sustainable-Company perspectives and experiences," a book on sustainability stories from Singapore. I am one of the co-authors of the book, published by Singapore Compact.
For more information on the conference, please see here.
Wednesday, September 08, 2010
Now Burger King drops palm oil group Sinar Mas
Now Burger King has dropped Sinar Mas, the palm oil giant which is struggling to cope with a reputational disaster for alleged environmental damage through destroying forests.
Last month, Sinar Mas unsuccessfully tried to use an audit report to clear itself from the allegations. That attempt backfired when BSI, one of the audit firms involved, came out saying that the report was misrepresented.
We did our bit of coverage on this blog and on Ethical Corporation website and also in Ethical Corporation magazine. See here.
Now Burger King has cited the same audit report in its decision to stop buying palm oil from Sinar Mas group companies.
A statement by Burger King reads: "After completing a thorough review of the independent verification report conducted by Control Union Certification (CUC) and BSI Group, we believe the report has raised valid concerns about some of the sustainability practices of Sinar Mas' palm oil production and its impact on the rainforest. These practices are inconsistent with our corporate responsibility commitments."
"As a result, we have decided we will no longer purchase palm oil from Sinar Mas or its subsidiaries."
By the way, Sinar Mas Group walked away with no so coveted title of Greenwasher of the Year at the Ethical Corporation Responsible Business 2010 Awards earlier this year.
The problem with many of the palm oil companies is that they really don't get it. They also continue to rely on half-baked self-certified corporate responsibility consultants and incompetent PR executives to address the issue. It is not working. And will not work. It's time for them to get some sound advice from sound minded professionals.
Last month, Sinar Mas unsuccessfully tried to use an audit report to clear itself from the allegations. That attempt backfired when BSI, one of the audit firms involved, came out saying that the report was misrepresented.
We did our bit of coverage on this blog and on Ethical Corporation website and also in Ethical Corporation magazine. See here.
Now Burger King has cited the same audit report in its decision to stop buying palm oil from Sinar Mas group companies.
A statement by Burger King reads: "After completing a thorough review of the independent verification report conducted by Control Union Certification (CUC) and BSI Group, we believe the report has raised valid concerns about some of the sustainability practices of Sinar Mas' palm oil production and its impact on the rainforest. These practices are inconsistent with our corporate responsibility commitments."
"As a result, we have decided we will no longer purchase palm oil from Sinar Mas or its subsidiaries."
By the way, Sinar Mas Group walked away with no so coveted title of Greenwasher of the Year at the Ethical Corporation Responsible Business 2010 Awards earlier this year.
The problem with many of the palm oil companies is that they really don't get it. They also continue to rely on half-baked self-certified corporate responsibility consultants and incompetent PR executives to address the issue. It is not working. And will not work. It's time for them to get some sound advice from sound minded professionals.
Have you said "No" to Uzbek cotton yet?
As this year's cotton harvesting season draws near, Environmental Justice Foundation is worrying that the Uzbek regime will once again force the children to pick cotton.
EJF says "contrary to promises by Karimov’s regime not to force children into the fields to pick their billion dollar crop, it sounds like it will be business as usual, unless urgent action is taken."
EJF has long campaigned against the government practice of forced child labour on cotton fields in Uzbekistan. The NGO is seeking international support to boycott cotton from Uzbekistan and put pressure on the rulers of Uzbekistan to take corrective measures.
Should we hope that hundreds of thousands of Uzbek children will be in school this autumn and not toiling in a cotton field?
We have covered the issue in Ethical Corporation several times. See some of them here. And here. Also a podcast here.
Just to mention, EJF was awarded the Highly Commended Effective Campaigner award at Ethical Corporation 2010 Responsible Business Awards.
EJF says "contrary to promises by Karimov’s regime not to force children into the fields to pick their billion dollar crop, it sounds like it will be business as usual, unless urgent action is taken."
EJF has long campaigned against the government practice of forced child labour on cotton fields in Uzbekistan. The NGO is seeking international support to boycott cotton from Uzbekistan and put pressure on the rulers of Uzbekistan to take corrective measures.
Should we hope that hundreds of thousands of Uzbek children will be in school this autumn and not toiling in a cotton field?
We have covered the issue in Ethical Corporation several times. See some of them here. And here. Also a podcast here.
Just to mention, EJF was awarded the Highly Commended Effective Campaigner award at Ethical Corporation 2010 Responsible Business Awards.
Wednesday, September 01, 2010
NGOs trash World Bank framework for palm oil industry
The proposed World Bank/IFC Framework for the Palm Oil Sector is receiving negative comments from the NGOs who say the framework is weak and does not address the real problem.
See also here for the critics are saying.
In an interesting development, the Indonesian government has said that it will reject any loan offers from the World Bank/IFC for the palm oil industry. The government says it does not need loans from the World Bank/IFC. The government officials say the industry should continue to rely on loans from commercial banks.
Are they saying this as they don't want their companies to be subjected to more demanding World Bank/IFC framework?
Industry players on the other hand are hoping for that the World Bank will lift the financing ban and loans will start flowing again.
See also here for the critics are saying.
In an interesting development, the Indonesian government has said that it will reject any loan offers from the World Bank/IFC for the palm oil industry. The government says it does not need loans from the World Bank/IFC. The government officials say the industry should continue to rely on loans from commercial banks.
Are they saying this as they don't want their companies to be subjected to more demanding World Bank/IFC framework?
Industry players on the other hand are hoping for that the World Bank will lift the financing ban and loans will start flowing again.
Sustainability reporting guidelines for Singapore-listed companies
In a significant move, Singapore Stock Exchange has issued a policy statement and a guide on sustainability reporting for its listed companies.
The Exchange is seeking feedback from the public and market players on the policy statement.
The policy statement says the sustainability reporting guidelines are voluntary at the moment. But there is a hint that the reporting may become mandatory in future. The policy statement says: "SGX is of the view that as more companies become inspired to adopt sustainability reporting, it will be natural to take the next step on guidelines and standards leading to rules."
These are the key points of the SGX policy statement and the reporting guidelines:
The Exchange is seeking feedback from the public and market players on the policy statement.
The policy statement says the sustainability reporting guidelines are voluntary at the moment. But there is a hint that the reporting may become mandatory in future. The policy statement says: "SGX is of the view that as more companies become inspired to adopt sustainability reporting, it will be natural to take the next step on guidelines and standards leading to rules."
These are the key points of the SGX policy statement and the reporting guidelines:
- The Board is responsible for matters of sustainability as it leads and directs the company.
- Environmental, social and governance considerations are important for the long term performance of the company.
- No single standard is advocated, but the Global Reporting Initiative’s Sustainability Reporting Guidelines which are linked to the UN Compact principles, are among the globally recognised standards.
- Applying global standards is important for cross-jurisdictional comparability and to give confidence that SGX-listed companies aim to achieve global best practices.
- The reporting guide says that sustainability reporting is particularly relevant for companies that operate in industries that are susceptible to environmental risks e.g. oil & gas, mining & metals, raw material processing; industries that produce significant environmental pollutants such as chemical and apparel industries; heavy users of natural resources such as palm oil producers, forestry companies, etc.; or part of a supply chain where end customers demand that suppliers behave responsibly.
- The guideline also emphasises the importance of independent assurance of the report from credible assurance firms.
The SGX policy for encouraging sustainability reporting is likely to result in more Singapore-listed companies reporting on their social and environmental impacts. Currently, Singapore companies lag behind in sustainability performance and disclosure from their peers in other developed countries.
The last date for the submission of feedback is on the 29th Oct 2010.
The full policy statement and the guide are available here.
Monday, August 23, 2010
Palm oil giant's claim disputed by their own auditors
A confrontationist approach taken by palm oil giant PT SMART (the Indonesian palm oil arm of Sinar Mas), part of the Singapore Exchange listed Golden Agri Resources, to discredit Greenpeace report seems to have backfired, literally.
In a report, Greenpeace had accused PT SMART of destroying forests to raise oil palm plantations. The report prompted several of PT SMART customers including Unilever, Kraft and Nestle to terminate their sourcing agreements with the company.
PT SMART which has all along denied Greenpeace allegations then said it would commission an independent audit of its palm oil plantations to prove it has done no wrong.
Two weeks ago, PT SMART executives, armed with the "independent audit report" and advised by a UK-based PR firm Bell Pottinger, arrived in the UK to hold a press conference to claim that Greenpeace allegations were found to be untrue.
A fine spin work ensured worldwide headlines implying that an independent audit had cleared PT SMART of all wrongdoing and making Greenpeace look like a nuisance maker.
Greenpeace accused the company of misreporting the audit findings and selectively ignoring parts of the report. Ethical Corporation published comments from Greenpeace on the matter and invited PT SMART to respond. But nothing heard from the company yet.
Within three days of the press conference, BSI-one of the two audit firms involved in the audit- came out saying that PT SMART had misreported the audit findings. Well, this is what we call "a gun backfiring."
Greenpeace has ceased the opportunity and has written to the Singapore Stock Exchange seeking action against Golden Agri Resources for making factually incorrect claims.
PT SMART still insists it has not misreported the findings. Is this the advice they are getting from Bell Pottinger? And whoever are their sustainability advisers. They appear to in the wrong hands.
In the meantime, Golden Agri plans to expand into Liberia. The company is investing in private equity fund Verdant that is the sole shareholder of a Liberia-based firm in the process of being granted a government concession to develop 220,000 hectares for 20 years.
In a report, Greenpeace had accused PT SMART of destroying forests to raise oil palm plantations. The report prompted several of PT SMART customers including Unilever, Kraft and Nestle to terminate their sourcing agreements with the company.
PT SMART which has all along denied Greenpeace allegations then said it would commission an independent audit of its palm oil plantations to prove it has done no wrong.
Two weeks ago, PT SMART executives, armed with the "independent audit report" and advised by a UK-based PR firm Bell Pottinger, arrived in the UK to hold a press conference to claim that Greenpeace allegations were found to be untrue.
A fine spin work ensured worldwide headlines implying that an independent audit had cleared PT SMART of all wrongdoing and making Greenpeace look like a nuisance maker.
Greenpeace accused the company of misreporting the audit findings and selectively ignoring parts of the report. Ethical Corporation published comments from Greenpeace on the matter and invited PT SMART to respond. But nothing heard from the company yet.
Within three days of the press conference, BSI-one of the two audit firms involved in the audit- came out saying that PT SMART had misreported the audit findings. Well, this is what we call "a gun backfiring."
Greenpeace has ceased the opportunity and has written to the Singapore Stock Exchange seeking action against Golden Agri Resources for making factually incorrect claims.
PT SMART still insists it has not misreported the findings. Is this the advice they are getting from Bell Pottinger? And whoever are their sustainability advisers. They appear to in the wrong hands.
In the meantime, Golden Agri plans to expand into Liberia. The company is investing in private equity fund Verdant that is the sole shareholder of a Liberia-based firm in the process of being granted a government concession to develop 220,000 hectares for 20 years.
Sunday, August 22, 2010
Maximum corporate liability for a nuclear disaster in India : $322 million
The Gulf of Mexico oil spill disaster which killed nine Americans and destroyed some marine life in the affected area will cost the British company BP an estimated 30 -50 billion dollars in liability.
But an American nuclear power company will have to pay a maximum of 322 million dollars for a nuclear disaster in India which can potentially kill hundreds of thousands of people and leave behind contamination affecting future generations with birth defects and severe health problems.
Indian Cabinet has finally approved the controversial Nuclear Liability Bill (Civil Liability for Nuclear Damage Bill) which caps the liability for a civilian nuclear power power plant disaster to a maximum of $322 million. This amount is three times higher than the original proposed by the ruling Congress party regime. They increased the amount in the face of intense opposition and criticism from other parties and activists.
The American nuclear industry lobby wanted the liability cap before they start investing in India's civilian nuclear sector which has recently been opened up for private investment. They have succeeded. US company General Electric will be the biggest beneficiary of the liability cap as the company will now be able to look for nuclear deals in India without much worries about the potential liability.
By contrast, a nuclear power plant operator's liability in the US under the US legislation is $12.5 billion dollars.
German, Russian and French nuclear power companies had already started signing deals in India as they were not seeking any liability cap. The reason is that their respective governments underwrite their nuclear disaster liability.
But the US government does not take any such responsibility for the US companies' actions abroad. As a result, the US companies were not bidding for nuclear plant contracts in India. Rather they relied on an intensive lobbying with the reported support of the Obama administration to influence the legislation.
The bill needs to be passed by the parliament where it is likely to meet protests by the main opposition party BJP which want more stringent supplier liability clause in the bill.
It may be mentioned that the infamous Bhopal Gas disaster took place when the currently ruling Congress party was in power. And the disaster happened in a chemical plant owned by Union Carbide, a US company. So they have not learnt any lessons. See here a feature we did in Ethical Corporation on this.
But an American nuclear power company will have to pay a maximum of 322 million dollars for a nuclear disaster in India which can potentially kill hundreds of thousands of people and leave behind contamination affecting future generations with birth defects and severe health problems.
Indian Cabinet has finally approved the controversial Nuclear Liability Bill (Civil Liability for Nuclear Damage Bill) which caps the liability for a civilian nuclear power power plant disaster to a maximum of $322 million. This amount is three times higher than the original proposed by the ruling Congress party regime. They increased the amount in the face of intense opposition and criticism from other parties and activists.
The American nuclear industry lobby wanted the liability cap before they start investing in India's civilian nuclear sector which has recently been opened up for private investment. They have succeeded. US company General Electric will be the biggest beneficiary of the liability cap as the company will now be able to look for nuclear deals in India without much worries about the potential liability.
By contrast, a nuclear power plant operator's liability in the US under the US legislation is $12.5 billion dollars.
German, Russian and French nuclear power companies had already started signing deals in India as they were not seeking any liability cap. The reason is that their respective governments underwrite their nuclear disaster liability.
But the US government does not take any such responsibility for the US companies' actions abroad. As a result, the US companies were not bidding for nuclear plant contracts in India. Rather they relied on an intensive lobbying with the reported support of the Obama administration to influence the legislation.
The bill needs to be passed by the parliament where it is likely to meet protests by the main opposition party BJP which want more stringent supplier liability clause in the bill.
It may be mentioned that the infamous Bhopal Gas disaster took place when the currently ruling Congress party was in power. And the disaster happened in a chemical plant owned by Union Carbide, a US company. So they have not learnt any lessons. See here a feature we did in Ethical Corporation on this.
Tuesday, August 17, 2010
Comments on draft Framework for Palm Oil Sector
A few weeks ago I wrote on this blog that the World Bank and IFC have released a Draft Framework for Palm oil sector for consultation.
Robert Goodland, a reader of my blog, has sent me his comments on the Framework that he has submitted to the World Bank Group. His comments are interesting and I am reproducing them here:
“WBG Framework for Palm Oil”
(undated) Draft for Consultation
palmoilstrategy@ifc.org
Comments for the consultation by R. Goodland (RbtGoodland@gmail.org) respectfully submitted on:17 August 2010
[Note: Pagination refers to the page numbers in the 46-page WBG Framework. The text of the Framework has been italicized. My comments are in bold.]
P.3: The World Bank Group, with its primary mission of poverty reduction, sees the palm oil sector as an important contributor to furthering economic development in many developing countries.
The Framework needs to make the case that palm oil projects reduce poverty more than a similar investment elsewhere. That case has not yet been made convincingly in the current draft.
P.3: The World Bank Group is aware of the sector’s negative environmental and social impacts, including deforestation, biodiversity loss, greenhouse gas emissions, land use conflicts, and questions over land tenure and human rights.
Such awareness must be very recent as IFC denied the sector’s negative impacts by categorizing the Wilmar, Bertin industrial cattle ranching, monoculture Maggi soy and other damaging projects as ESA Category “B” until brought to book by CAO and others.
P.3: Recent civil society organization complaints to the Office of the Compliance Advisor/Ombudsman in relation to IFC’s handling of four downstream investments (in a palm oil trader and a refinery), as well as a complaint to the Inspection Panel regarding a World Bank smallholder oil palm program have raised concerns about sustainability issues. The World Bank Group recognized the legitimacy of these concerns and in response temporarily suspended any new investments in the palm oil sector.
It should not need CAO reports, massive outcries and complaints for the WBG to ‘recognize the legitimacy of these concerns’. The Knowledge Bank should be aware of such basic facts in advance, especially if it is to offer advisory services. These negative impacts are all too well known worldwide, and have been known inside the WBG at least since US Congress (led by Rep. Henry Reuss) pressured WBG President Robert McNamara on Malaysia’s massive Jengka Triangle oil palm projects in the 1970s.
P.4: A Common Approach …. In particular, IFC will only invest in plantation operations that are certified for sustainable palm oil production according to an internationally-recognized certification scheme, or have a time-bound action plan to achieve such certification.
This is too risky. It is well known that development agencies have highest leverage up to and just before Board approval. Once approved, such pari passu leverage and interest wanes fast. Time-bound action plans to achieve certain standards usually fail in such cases. Only part of the action plan is divulged. How the client is progressing to meet action plans is never divulged by IFC.
P.5: World Bank Group Commitments Key actions could include: working with governments to implement land registration systems, build capacity for environmental and social impact assessment and regulation, strengthen forest and land governance and administration and increase productivity.
Commitments and key actions could include a lot of good stuff. That is inadequate at this stage. IFC has been caught violating its own policies. The time has come to clarify what specifics IFC will firmly commit to in order to prevent such social and environmental damage and violations in the future.
P.6: Concerns about sustainability-related issues in the sector were highlighted by the IFC’s Office of the Compliance Advisor, the World Bank’s inspection panel, and civil society organizations and prompted a temporary moratorium in November 2009 on new World Bank Group investments in the palm oil sector pending development of a more strategic approach to
engagement in the sector.
(a) Is this “Framework” document supposed to be the strategic approach mandated by President Zoellick, and fostered by the unprecedented moratorium? The document is entitled Framework, but in places a strategy is hinted at. The e-mail address for comments on the Framework is “Strategy”. Clearly a strategy or even a policy is required if the recent massive impacts of IFCs investments leading to the moratorium are to be prevented in the future.
(b) IFC’s Compliance Adviser’s evaluation of IFC’s oil palm investments was kept secret for months before they were only partially released. CAO convincingly showed that corporate pressures had repeatedly trumped social and environmental concerns, starting with what is commonly IFCs weakest point, miscategorization for the Environmental and Social Assessment (ESA). Categorization as the ESA Category “B” of any project a priori likely to impact fairly intact tropical forest, likely to impact Indigenous Peoples, likely to emit significant GHG from forest removal, burning or peats, involuntary displacement—all should be systematically categorized as “A”. IFC’s AMaggi soy monoculture investment in the Amazon forest region, IFC’s Bertin industrial cattle ranching in Amazon forest region, and most, if not all oil palm projects, should routinely be classified as “A”. IFC categorized them all as “B” and refused to categorize them prudently without prolonged pressures, complaints, CAO investigations etc. All branches of the WBG should be enhancing prudentiary measures, rather than struggling to lower the standards.
(c) In addition, the CAO’s reports, the Inspection Panels reports and the complaints need to be included in full in the new oil palm Framework as annexes, or at least with easy-to-use links.
(d) CAOs findings -- that IFC systematically violated its own standards and policies -- need to rectified and stringently prevented in the future. Therefore, this Framework needs to specify precisely how the CAO-identified policy violations will be prevented in future.
P.6: The World Bank Group’s engagement in the palm oil sector is consistent with its mission to fight poverty without compromising economic, environmental and social sustainability.
Clearly not, or not yet. This claim is worrying. The Framework seeks to make WBG’s engagement consistent etc., but it’s a long way from achieving that as yet. The moratorium was commendably imposed on IFC precisely because IFC was refusing to follow its own standards and normal precautions. The CAO, IP and other evaluations showed that IFCs projects were exacerbating poverty and wreaking much environmental damage.
P.15: Table 1: A Summary of Possible World Bank Group Interventions under the Four Themes and Their Relation to Feedback from Consultations.
A menu of possible options is not what is needed at this stage. This Framework has been drafted precisely because IFC has been caught violating its own policies and standards. At this stage, firm commitments are needed, not “possible interventions.”
P.18: IFC may invest in oil palm plantation operations and other palm oil sector companies even if the public sector legal/regulatory enabling environment is less than ideal, if IFC is convinced that the project will have strong and measurable development impacts and that any risks can be mitigated through other governmental or non-governmental programs, including other World Bank Group operations, if present.
This has been tried by IFC and has failed. Post-approval leverage to foster compliance with pari passu action plans is weak at best. IFC needs to ensure that the design of projects it supports is as prudent as possible in advance, and that it has reduced all possible risks to a low or acceptable state. See comment on P.4 (above) on the risks of resorting to such pari passu aspirations.
P. 18: ….any risks can be mitigated through other governmental or non-governmental programs, including other World Bank Group operations, if present.
Up until now this statement is false. IFC has failed to mitigate risks such as destruction of forest, impacts in Indigenous and other poor people, harming GHG sequestration and forest fires etc, that’s why the moratorium was imposed on IFC. The moratorium is IBRD/IDA’s way of stopping IFC from creating more damage until their procedures are upgraded, fully agreed upon and conscientiously implemented by IFC, preferably with independent third party verification. The Framework as currently drafted could reduce risks further, but that would be insufficient. At this stage, in view of IFCs violations and irreversible damage as exposed by the CAO and others, the new strategy must ensure that: (a) no more forest is destroyed; (b) no more Indigenous People or poor re harmed; (c) no more GHG sequestration is impaired; (d) no more water is polluted. Clarifications and emphases on these basic priorities must be added to the next draft.
P.18: Last para: For the World Bank, the final selection of indicators will follow as activities are selected.
Despite all the Framework’s rhetoric about enhanced coordination between IFC and the rest of the WBG, this para suggests IFC prepared this Framework mainly on their own, but hopes IBRD/IDA will come in later.
P.23: Issue regarding how companies and government agencies obtained consent for land use changes was a strong theme. ….. Full adherence to the concept of Free Prior Informed Consent by investors in the palm oil sector was seen as essential by many of the stakeholders.
If FPIC is considered essential, where is IFC’s response? As FPIC is so important to RSPO and many other stakeholders, does the WBG propose to follow the United Nations Declaration (UNDRIP) and accept FPIC, or will it persist in debasing the UN Declaration into FPIConsultation? IFC is supposed to be a member of RSPO in good standing. As IFC apparently does not accept FPIC, it is violating RSPO’s membership criteria of accepting FPIC.
P.31 & 32: These projects are not discussed in the review because at the time of the research, the projects were missing from the Bank’s information depository (Business Warehouse) due to a problem with the internal sector coding system.
I respectfully suggest the missing projects be found and their lessons learned be integrated into this Framework while still in draft. I suspect the comment on P.3 (above) refers to these or similar projects.
P.44: All World Bank projects are categorized on the basis of the environmental and social risks associated with the project. Depending on the assessment of environmental and social
impacts and risks, projects may require Environmental Assessments and/or Environmental Management Plans to be prepared and implemented.
In fact, as already mentioned, IFC rarely finds a project worthy of an ESA Category “A”. IFC classifies practically all of its forest-, Indigenous Peoples- and GHG emitting projects as Category “B” at least until the CAO or others show how imprudent IFCs classification is. If IFC wants to promote sustainability and prudence, while reducing risks to environment or humans, it will classify any proposed project as a Category “A” that may impact or otherwise affect Indigenous Peoples, forest or GHG sequestration capacity, or any projects needing involuntary resettlement.
Conclusion: Three Gaps in the Draft Framework
1. Definition of ‘degraded’ sites: The Strategy or Framework should emphasize clearly that the WBG will decline to finance (or otherwise encourage) destruction of tropical, high conservation value, critical natural habitat, old-growth forest, secondary forest, hi-graded or selectively logged forest or other ecosystems, and impacts on Indigenous People. Further, that human displacement will be avoided or minimized, and that GHG emissions will be fully accounted beforehand, compensated for, and minimized.
The sites on which oil palm, soy or other projects may be located must be scrupulously defined. Brazil’s commendable policy is to select ‘abandoned’ or ‘degraded’ sites only. That’s a good first step. In the WBG’s case how a proposed site was found to be suitably abandoned or sufficiently degraded needs to be explicitly described. There have been far too many cases in which nomadic ethnic groups have hidden from development officials or are in another part of their customary ambits during a visit. Similarly, some officials may opine that a forest from which some mature trees of one species have been removed – selective logging -- is sufficiently altered to be called ‘degraded’. The basic premise, now that climate risks have intensified, is that most forest still standing is providing GHG sequestration services which are more valuable than more oil palm.
2. Use of Vegetable Oils: This is a tricky one akin to claiming: “guns don’t kill people.” On the one hand, IFC will garner much support if they can show that oil palm investments directly reduce poverty, create jobs for the poor etc, while not causing environmental and social damage. On the other hand, if the main benefit of oil palm production is to fuel vehicles, IFC won’t get much support. Between these two extremes, if oil palm production makes corporations more profitable and a fraction of this profit eventually trickles down to the poor, support for IFC also is likely to be weak (except from multinationals). If oil palm based industries are created in-country, thus diversifying products and expanding refining and processing benefits to the producing country, that would be a benefit. IFC should encourage domestic processing and value-added to the fullest extent possible. Indonesia rejected WBG advice a few years ago by thoughtfully imposing a ban on the export of crude undressed logs. As a result, Indonesia now has a thriving plywood, veneer, particle-board and finished wood products industry, along with massive wood processing jobs. As an ecologist, I haven’t a ready solution, but the problems are real and should be tackled.
3. Water Use and Pollution: Now that fresh water has become scarcer than at any time in history, its conservation has risen in priority. It may have been understandable in the 1950s and 1960s for palm oil producers to dispose of their extremely high BOD oil palm wastewater into the nearest creek. That era has long gone. Now even untreated sewage outfalls from coastal cities into the ocean are increasingly being banned. The time has come for IFC to lead palm oil producers into closed-cycle water management. This would conserve the supplies of water, while preventing the pollution of waterways below the oil palm factory. In addition, it would create secondary industries in recycling and use of waste products regained form wastewaters.
Robert Goodland, a reader of my blog, has sent me his comments on the Framework that he has submitted to the World Bank Group. His comments are interesting and I am reproducing them here:
“WBG Framework for Palm Oil”
(undated) Draft for Consultation
palmoilstrategy@ifc.org
Comments for the consultation by R. Goodland (RbtGoodland@gmail.org) respectfully submitted on:17 August 2010
[Note: Pagination refers to the page numbers in the 46-page WBG Framework. The text of the Framework has been italicized. My comments are in bold.]
P.3: The World Bank Group, with its primary mission of poverty reduction, sees the palm oil sector as an important contributor to furthering economic development in many developing countries.
The Framework needs to make the case that palm oil projects reduce poverty more than a similar investment elsewhere. That case has not yet been made convincingly in the current draft.
P.3: The World Bank Group is aware of the sector’s negative environmental and social impacts, including deforestation, biodiversity loss, greenhouse gas emissions, land use conflicts, and questions over land tenure and human rights.
Such awareness must be very recent as IFC denied the sector’s negative impacts by categorizing the Wilmar, Bertin industrial cattle ranching, monoculture Maggi soy and other damaging projects as ESA Category “B” until brought to book by CAO and others.
P.3: Recent civil society organization complaints to the Office of the Compliance Advisor/Ombudsman in relation to IFC’s handling of four downstream investments (in a palm oil trader and a refinery), as well as a complaint to the Inspection Panel regarding a World Bank smallholder oil palm program have raised concerns about sustainability issues. The World Bank Group recognized the legitimacy of these concerns and in response temporarily suspended any new investments in the palm oil sector.
It should not need CAO reports, massive outcries and complaints for the WBG to ‘recognize the legitimacy of these concerns’. The Knowledge Bank should be aware of such basic facts in advance, especially if it is to offer advisory services. These negative impacts are all too well known worldwide, and have been known inside the WBG at least since US Congress (led by Rep. Henry Reuss) pressured WBG President Robert McNamara on Malaysia’s massive Jengka Triangle oil palm projects in the 1970s.
P.4: A Common Approach …. In particular, IFC will only invest in plantation operations that are certified for sustainable palm oil production according to an internationally-recognized certification scheme, or have a time-bound action plan to achieve such certification.
This is too risky. It is well known that development agencies have highest leverage up to and just before Board approval. Once approved, such pari passu leverage and interest wanes fast. Time-bound action plans to achieve certain standards usually fail in such cases. Only part of the action plan is divulged. How the client is progressing to meet action plans is never divulged by IFC.
P.5: World Bank Group Commitments Key actions could include: working with governments to implement land registration systems, build capacity for environmental and social impact assessment and regulation, strengthen forest and land governance and administration and increase productivity.
Commitments and key actions could include a lot of good stuff. That is inadequate at this stage. IFC has been caught violating its own policies. The time has come to clarify what specifics IFC will firmly commit to in order to prevent such social and environmental damage and violations in the future.
P.6: Concerns about sustainability-related issues in the sector were highlighted by the IFC’s Office of the Compliance Advisor, the World Bank’s inspection panel, and civil society organizations and prompted a temporary moratorium in November 2009 on new World Bank Group investments in the palm oil sector pending development of a more strategic approach to
engagement in the sector.
(a) Is this “Framework” document supposed to be the strategic approach mandated by President Zoellick, and fostered by the unprecedented moratorium? The document is entitled Framework, but in places a strategy is hinted at. The e-mail address for comments on the Framework is “Strategy”. Clearly a strategy or even a policy is required if the recent massive impacts of IFCs investments leading to the moratorium are to be prevented in the future.
(b) IFC’s Compliance Adviser’s evaluation of IFC’s oil palm investments was kept secret for months before they were only partially released. CAO convincingly showed that corporate pressures had repeatedly trumped social and environmental concerns, starting with what is commonly IFCs weakest point, miscategorization for the Environmental and Social Assessment (ESA). Categorization as the ESA Category “B” of any project a priori likely to impact fairly intact tropical forest, likely to impact Indigenous Peoples, likely to emit significant GHG from forest removal, burning or peats, involuntary displacement—all should be systematically categorized as “A”. IFC’s AMaggi soy monoculture investment in the Amazon forest region, IFC’s Bertin industrial cattle ranching in Amazon forest region, and most, if not all oil palm projects, should routinely be classified as “A”. IFC categorized them all as “B” and refused to categorize them prudently without prolonged pressures, complaints, CAO investigations etc. All branches of the WBG should be enhancing prudentiary measures, rather than struggling to lower the standards.
(c) In addition, the CAO’s reports, the Inspection Panels reports and the complaints need to be included in full in the new oil palm Framework as annexes, or at least with easy-to-use links.
(d) CAOs findings -- that IFC systematically violated its own standards and policies -- need to rectified and stringently prevented in the future. Therefore, this Framework needs to specify precisely how the CAO-identified policy violations will be prevented in future.
P.6: The World Bank Group’s engagement in the palm oil sector is consistent with its mission to fight poverty without compromising economic, environmental and social sustainability.
Clearly not, or not yet. This claim is worrying. The Framework seeks to make WBG’s engagement consistent etc., but it’s a long way from achieving that as yet. The moratorium was commendably imposed on IFC precisely because IFC was refusing to follow its own standards and normal precautions. The CAO, IP and other evaluations showed that IFCs projects were exacerbating poverty and wreaking much environmental damage.
P.15: Table 1: A Summary of Possible World Bank Group Interventions under the Four Themes and Their Relation to Feedback from Consultations.
A menu of possible options is not what is needed at this stage. This Framework has been drafted precisely because IFC has been caught violating its own policies and standards. At this stage, firm commitments are needed, not “possible interventions.”
P.18: IFC may invest in oil palm plantation operations and other palm oil sector companies even if the public sector legal/regulatory enabling environment is less than ideal, if IFC is convinced that the project will have strong and measurable development impacts and that any risks can be mitigated through other governmental or non-governmental programs, including other World Bank Group operations, if present.
This has been tried by IFC and has failed. Post-approval leverage to foster compliance with pari passu action plans is weak at best. IFC needs to ensure that the design of projects it supports is as prudent as possible in advance, and that it has reduced all possible risks to a low or acceptable state. See comment on P.4 (above) on the risks of resorting to such pari passu aspirations.
P. 18: ….any risks can be mitigated through other governmental or non-governmental programs, including other World Bank Group operations, if present.
Up until now this statement is false. IFC has failed to mitigate risks such as destruction of forest, impacts in Indigenous and other poor people, harming GHG sequestration and forest fires etc, that’s why the moratorium was imposed on IFC. The moratorium is IBRD/IDA’s way of stopping IFC from creating more damage until their procedures are upgraded, fully agreed upon and conscientiously implemented by IFC, preferably with independent third party verification. The Framework as currently drafted could reduce risks further, but that would be insufficient. At this stage, in view of IFCs violations and irreversible damage as exposed by the CAO and others, the new strategy must ensure that: (a) no more forest is destroyed; (b) no more Indigenous People or poor re harmed; (c) no more GHG sequestration is impaired; (d) no more water is polluted. Clarifications and emphases on these basic priorities must be added to the next draft.
P.18: Last para: For the World Bank, the final selection of indicators will follow as activities are selected.
Despite all the Framework’s rhetoric about enhanced coordination between IFC and the rest of the WBG, this para suggests IFC prepared this Framework mainly on their own, but hopes IBRD/IDA will come in later.
P.23: Issue regarding how companies and government agencies obtained consent for land use changes was a strong theme. ….. Full adherence to the concept of Free Prior Informed Consent by investors in the palm oil sector was seen as essential by many of the stakeholders.
If FPIC is considered essential, where is IFC’s response? As FPIC is so important to RSPO and many other stakeholders, does the WBG propose to follow the United Nations Declaration (UNDRIP) and accept FPIC, or will it persist in debasing the UN Declaration into FPIConsultation? IFC is supposed to be a member of RSPO in good standing. As IFC apparently does not accept FPIC, it is violating RSPO’s membership criteria of accepting FPIC.
P.31 & 32: These projects are not discussed in the review because at the time of the research, the projects were missing from the Bank’s information depository (Business Warehouse) due to a problem with the internal sector coding system.
I respectfully suggest the missing projects be found and their lessons learned be integrated into this Framework while still in draft. I suspect the comment on P.3 (above) refers to these or similar projects.
P.44: All World Bank projects are categorized on the basis of the environmental and social risks associated with the project. Depending on the assessment of environmental and social
impacts and risks, projects may require Environmental Assessments and/or Environmental Management Plans to be prepared and implemented.
In fact, as already mentioned, IFC rarely finds a project worthy of an ESA Category “A”. IFC classifies practically all of its forest-, Indigenous Peoples- and GHG emitting projects as Category “B” at least until the CAO or others show how imprudent IFCs classification is. If IFC wants to promote sustainability and prudence, while reducing risks to environment or humans, it will classify any proposed project as a Category “A” that may impact or otherwise affect Indigenous Peoples, forest or GHG sequestration capacity, or any projects needing involuntary resettlement.
Conclusion: Three Gaps in the Draft Framework
1. Definition of ‘degraded’ sites: The Strategy or Framework should emphasize clearly that the WBG will decline to finance (or otherwise encourage) destruction of tropical, high conservation value, critical natural habitat, old-growth forest, secondary forest, hi-graded or selectively logged forest or other ecosystems, and impacts on Indigenous People. Further, that human displacement will be avoided or minimized, and that GHG emissions will be fully accounted beforehand, compensated for, and minimized.
The sites on which oil palm, soy or other projects may be located must be scrupulously defined. Brazil’s commendable policy is to select ‘abandoned’ or ‘degraded’ sites only. That’s a good first step. In the WBG’s case how a proposed site was found to be suitably abandoned or sufficiently degraded needs to be explicitly described. There have been far too many cases in which nomadic ethnic groups have hidden from development officials or are in another part of their customary ambits during a visit. Similarly, some officials may opine that a forest from which some mature trees of one species have been removed – selective logging -- is sufficiently altered to be called ‘degraded’. The basic premise, now that climate risks have intensified, is that most forest still standing is providing GHG sequestration services which are more valuable than more oil palm.
2. Use of Vegetable Oils: This is a tricky one akin to claiming: “guns don’t kill people.” On the one hand, IFC will garner much support if they can show that oil palm investments directly reduce poverty, create jobs for the poor etc, while not causing environmental and social damage. On the other hand, if the main benefit of oil palm production is to fuel vehicles, IFC won’t get much support. Between these two extremes, if oil palm production makes corporations more profitable and a fraction of this profit eventually trickles down to the poor, support for IFC also is likely to be weak (except from multinationals). If oil palm based industries are created in-country, thus diversifying products and expanding refining and processing benefits to the producing country, that would be a benefit. IFC should encourage domestic processing and value-added to the fullest extent possible. Indonesia rejected WBG advice a few years ago by thoughtfully imposing a ban on the export of crude undressed logs. As a result, Indonesia now has a thriving plywood, veneer, particle-board and finished wood products industry, along with massive wood processing jobs. As an ecologist, I haven’t a ready solution, but the problems are real and should be tackled.
3. Water Use and Pollution: Now that fresh water has become scarcer than at any time in history, its conservation has risen in priority. It may have been understandable in the 1950s and 1960s for palm oil producers to dispose of their extremely high BOD oil palm wastewater into the nearest creek. That era has long gone. Now even untreated sewage outfalls from coastal cities into the ocean are increasingly being banned. The time has come for IFC to lead palm oil producers into closed-cycle water management. This would conserve the supplies of water, while preventing the pollution of waterways below the oil palm factory. In addition, it would create secondary industries in recycling and use of waste products regained form wastewaters.
Monday, August 09, 2010
Carbon credits for palm oil plantation companies?
While environmental campaigners accuse the palm oil industry of destroying natural forests in Indonesia, the Indonesian government is preparing to allow the palm oil plantations to claim carbon credits under reducing emissions from deforestation and degradation (REDD), a UN backed scheme still under negotiation.
REDD is yet to be approved by the UN Framework Convention on Climate Change.
If REDD is approved, the Indonesian government's plan to include palm oil plantations in the scheme would generate billions of dollars revenue for the palm oil companies as they will be able to claim carbon emission reduction units or carbon credits and sell them in the market!
Here is more on this.
Activists are for sure going to see red.
REDD is yet to be approved by the UN Framework Convention on Climate Change.
If REDD is approved, the Indonesian government's plan to include palm oil plantations in the scheme would generate billions of dollars revenue for the palm oil companies as they will be able to claim carbon emission reduction units or carbon credits and sell them in the market!
Here is more on this.
Activists are for sure going to see red.
Subscribe to:
Posts (Atom)