Circular Economy Circular Economy

Past, Present and Future:
The Road to a Sustainable Agricultural Sector

Thick clouds of smoke, a suffocating heat. Forests, lush and green and bustling with all types of life, reduced to burned land and ashes. In Indonesia, in the 1997-98 fires, approximately 10 million hectares of rainforest, an area the size of Switzerland, were affected. The regional economic costs of the fires were estimated at $9 billion. These fires were set deliberately, by palm oil estates, to clear land for rapid and cheap expansion of their plantations, and to hide timber poaching and land theft.

By Lucas Simons | Published 9 years ago | About a 5 minute read

Significant air pollution, loss of biodiversity (especially threatening to the habitat of the orangutan), land grabbing, emission of greenhouse gases, degradation of peatlands and the poor position of smallholders are all connected to this massive process of deforestation.

In a way the palm oil estates cannot be blamed. They are players in a game in which the rules favour this highly unsustainable behaviour. Until 1994, ‘controlled burning’ was legal and commonly practiced in Indonesia to clear land for agriculture. The market demanded a low price, which was achieved through externalizing the costs as much as possible, and the demand for sustainably sourced palm oil was low. But these fires demanded a response and things were about to change.

At the end of 1997, WWF issued the milestone report, The year the world caught fire, calling for political leaders, industrialists, and other stakeholders to work together and find solutions. This finally happened in 2002 when the WWF held a multi-stakeholder meeting in London. The initiative was formalized in 2004 into the Roundtable on Sustainable Palm Oil (RSPO), which focused on standards and certification as a tool to reach sector sustainability. Interventions on a farm level and in the rest of the value chain were implemented to change local conditions and assure traceability of sustainably sourced palm oil. To date, 14 percent of world palm oil production has been certified, though there is debate among NGOs as to the efficacy of RSPO. Also, the massive forest fires have not disappeared: In March 2014, satellites revealed more than 1,400 significant fire sites, and nearly 50,000 Indonesians were reported to have suffered severe respiratory ailments due to air pollution.

We see this in other agri sectors as well. A highly undesirable issue threatens the sector, actions are taken, certification is used as the main tool to reach sustainability in the sector, but at the end of the day the problem is not resolved. For example in the coffee sector, which experienced crisis in the early 2000s – after overproduction brought prices to an ultimate low and pushed farmers into bankruptcy, the need for sustainably sourced coffee became clear. In 2004, Sara Lee and Douwe Egberts (nowadays called D.E Master Blenders 1753) were the first to enter into a partnership with a certifying organization, in this case Utz Kapeh (later UTZ Certified). The company committed to sourcing an increasing amount of certified coffee, starting with 2,500 tons in 2004. In only a few years, Douwe Egberts´ initial volume of 2,500 tons of certified coffee per year grew to more than 10 times that. Other roasters made similar commitments, even publicly claiming they would ultimately reach 100 percent certified volume.

But the ‘’tick-the-box’’ mentality that is ingrained in the standards and certification system does not lead to true sector sustainability. Adjusting elements within the system cannot fundamentally change its outcome - a complete revision of the system is needed, a focus on continuous improvement instead of ticking off a sustainability to-do list. And changing the rules of the game singlehandedly is impossible for any one business. Key stakeholders from industry, civil society and governments need to join forces for pre-competitive interests, define and agree upon a sustainability strategy for the sector, create roadmaps towards change and implement them - simply put in one sentence, but a process that takes years and a lot of hard work.

A sustainable market transformation can be divided into four phases:

First is the awareness phase - an alarming issue emerges that is not likely to just go away. Individual projects are set up, mainly by NGOs, but they are not able to combat the problem.
Then the sector realizes that the problem will not go away by itself and collective action is required. First-movers start working together and roundtables are initiated. Commitments are made and competition is fierce. The palm oil sector and the coffee sector are at the end of this second phase. It is clear that standards and certification, the primary tools to aim for sustainability in the sector, are not fulfilling their promise and another approach is due.
The third phase is focused on structural change - changing the rules of the game. Stakeholders work together to tackle pre-competitive obstacles for true sustainability. At the end of this critical mass phase, institutionalization of sustainability is well on its way.
In the final ‘’level playing field’’ phase, sustainability becomes mainstream and institutionalized.

The cocoa sector is at present a frontrunner when it comes to sustainable market transformations in agriculture. 11 of the biggest companies in cocoa formulated a game-changing strategy called CocoaAction and are currently reaching out to governments, NGOs, and standards and certification organizations to align efforts towards a sustainable cocoa sector. My predictions are that the palm oil sector will soon move to this third phase, where the importance of standards will be less critical.

More important will be to develop a holistic sector-wide vision on what true sustainability means for the sector and how to get there; to identify the roles, responsibilities and measures of success. The sector should focus more on continuous improvement and make sure there is accountability about moving towards that objective. When that happens I see sustainability shimmering through the clouds of smoke.