More than 90 institutional investors representing more than $6.7 trillion in assets under management 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 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 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 rights.
“To move from policy commitments to implementation, companies need assurance that their palm oil supplies are deforestation-free,” said Julie Nash, Director, 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.
“We want the RSPO to succeed,” said Adam Kanzer, Managing Director of Corporate Engagement, 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.”
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.”