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Finance & Investment
Global Investors Urge RSPO for Stronger Standards

More than 90 institutional investors, representing more than $6.7T in assets, have voiced their concerns over the Roundtable on Sustainable Palm Oil’s relevance and effectiveness, and the current disconnect between its criteria and corporate policy commitments.

More than 90 institutional investors representing more than $6.7 trillion in assets under management have called on the Roundtable on Sustainable Palm Oil (RSPO) to strengthen its draft standards for certifying the sustainable production of palm oil, a key ingredient found in nearly 50 percent of all packaged goods, from cosmetics to cleaning products to candy.

In a letter sent earlier this month to the RSPO, investors voiced their concerns over the group’s relevance and effectiveness and the current disconnect between leading corporate policy commitments and the RSPO’s Principles and Criteria Guidance. The investors outline specific recommendations to help bridge the gap.

“Our investment portfolios include companies that have significant exposure to deforestation risks and therefore, have made robust no-deforestation policies and strong commitments to sourcing sustainably certified palm oil,” the investors wrote. The letter, coordinated by the sustainability nonprofit organization Ceres, urges the certification body to include stronger provisions for protecting high carbon stock forests, peat soils and the human rights of plantation workers. The RSPO is preparing to release its new guidance in November 2018. It will help to guide “sustainable palm oil production” for the next five years.

The RSPO, a multi-stakeholder sustainability certification body for the palm oil industry, is tasked with providing assurance that palm oil has been produced sustainably, but has faced mounting pressure in recent years from investors and CPG brands to strengthen its standards and enforcement. The current draft standards do not include robust protections for peatlands, high carbon stock forests and labor concerns — such as children’s and worker’s rights.

“To move from policy commitments to implementation, companies need assurance that their palm oil supplies are deforestation-free,” said Julie Nash, Director of Food and Capital Markets at Ceres. “Without that, their businesses are vulnerable to reputation and market risks. This new guidance has the opportunity to help companies implement no-deforestation pledges, but it must meet industry norms for zero deforestation.”

Nineteen percent of the world’s palm oil is currently RSPO-certified.

In a statement to Sustainable Brands, an RSPO representative said: "Our Principles & Criteria review process is designed to allow members and stakeholders alike the opportunity to provide input on proposed updates to our standards, including through two 60-day public consultation periods. In the first round of public consultation, we received more than 10,000 comments from stakeholders across all sectors of society. We anticipate that the second public consultation period for Draft 2 of the P&C 2018, which concluded on August 2, garnered as much, if not more.

"We welcome this diverse input and encourage it from all groups, including the signatories of the recent open letter. All comments submitted are carefully considered, with final revisions decided according to an inclusive decision-making process. The membership and the P&C Taskforce of the RSPO aim to create a system that is feasible in field, equitable to all countries with palm oil industries, addresses the concerns of civil society and helps make sustainable palm oil the norm. To do that, we must collaborate with and gain consensus from our stakeholders, NGOs, growers, manufacturers and all others alike. In addition to reviewing comments submitted related to our no deforestation standards, we are currently in active discussions with the High Carbon Stock Approach (HCSA)."

“We want the RSPO to succeed,” said Adam Kanzer, Managing Director of Corporate Engagement at Domini Impact Investments LLC. ”Companies, investors, consumers and local communities will all benefit from a single gold standard for sustainable palm oil. Investors strongly support many of the proposed amendments to the P&C, but more work is needed to bring RSPO standards into compliance with corporate NDPE commitments, as well as relevant ILO Conventions on child labor. Questions also remain about the RSPO’s audit processes and grievance mechanisms. We look forward to working with the RSPO and its members to help ensure the market receives the reliable assurance it requires.”

The rapid expansion of the $37 billion palm oil industry has contributed to the destruction of rainforests, drainage of carbon-rich peatlands, and land conflicts with local communities. Palm production continues to be a leading driver of deforestation — which causes 10 percent of global greenhouse gas (GHG) emissions. In fact, new data from the University of Maryland indicates that last year was the second-worst on record for tropical tree cover loss.

The timing of the RSPO standards review is especially relevant as companies strive to achieve their zero deforestation commitments by 2020, and governments seek to meet international pledges to reduce greenhouse gas emissions in line with the Paris Agreement.

"Strengthening the RSPO standards is vitally important,” said Beth Richtman, CalPERS’ managing investment director, sustainable investments. “Without stronger standards, deforestation and land rights abuses could continue in palm oil production leading to financial risks for investors. Without stronger standards, companies trying to lower their risk and improve the sustainability of their supply chains are operating in the dark. RSPO needs to be the bright light that incentivizes and guides the palm oil industry into one that is truly sustainable in all meanings of the word.”

Specific recommendations in the investor letter include:

  • A ban on cutting down and planting on High Carbon Stock forests (as defined by the HCSA) and development of management plans for the conservation of HCS forests;
  • Revised definition of peat soil and guidance on phasing out development or replanting on peat soils.
  • Procedures and mechanisms to ensure protection of human rights defenders from threats, intimidation and/or violence, aligned with the UN Declaration on Human Rights Defenders;
  • Alignment with the Free and Fair Labor in Palm Oil Production Principles and Implementation Guidance, published by a broad coalition of NGOs.

“Investors and the companies in the palm oil supply chain are looking to the RSPO to catch up to the current state of play in the industry,” said Leslie Samuelrich, President of Green Century. “Without meaningful standards, companies will be forced to develop alternative paths for verification. Strengthened standards will benefit RSPO members, investors that support these members, and the environment.”

As pressure has mounted on RSPO to toughen its standards, industry and investor groups have taken it upon themselves to try and establish more comprehensive guidelines. In November 2016, after a year of intensive work, the High Carbon Stock (HCS) Convergence Working Group — comprised of controversial palm oil traders such as Golden Agri, IOI Group and Wilmar International; CPG companies such as Cargill and Unilever; and NGOs including Greenpeace, Union of Concerned Scientists and WWF — took matters into their own hands and reached agreement on a single, coherent set of rules for implementation of companies’ commitments to “no deforestation” in their palm oil operations and supply chains, which goes above and beyond RSPO standards and provides a roadmap forward for addressing the issues that remain in an integrated and collaborative way. The recommendations were incorporated into the revised High Carbon Stock Approach Toolkit and the members of the Group are committed to further the implementation of these recommendations and to address the important remaining issues through their engagement in the HCSA Steering Group, including the possible adaptation and application beyond palm oil to other commodities and biomes.

Then in January 2017, a diverse group of NGOs and investor organizations, led by Ceres, released shared guidance for corporate reporting on company commitments towards responsible palm oil sourcing and production. Collaboratively developed by over 18 organizations including Oxfam, Rainforest Alliance, CDP and Rainforest Action Network, with input from companies, the guidance document aims to create consistency and clarity for companies in the palm oil value chain on reporting.