The COVID-19 pandemic has been first and foremost a humanitarian crisis, with the fallout having a debilitating impact on the global economy, as activity slowed to a resounding halt back in March. As we forecast our outlook on what a post-pandemic economy will look like, advancing a stable climate and prioritizing sustainable development may have slipped further down the list of priorities. However, in observance of the UN’s World Environment Day focusing on Biological Diversity, it is a critical reminder that without the inclusion of sustainable development in our core business practices, a successful socioeconomic rebound may not be possible.
The need for businesses to synergize efforts for shareholders and stakeholders to create long-term and sustained value was highlighted at the World Economic Forum at Davos 2020. As the fastest-growing major economy and the architect of the UN’s Sustainable Development Goals (SDGs), India is uniquely placed to guide the rest of the world on the integration of the economic, environmental and social dimensions of a purpose-driven trajectory.
Although a key contributor to the global economy, India’s high demand for ‘dirty’ palm oil continues to raise sustainability concerns within its fast-moving consumer goods (FMCG) market.
Considered the most economic crop, palm oil and palm kernel oil, together account for 40% of the global supply of vegetable oils as per the OECD-FAO Agriculture Outlook 2019-28. African oil palms, which are native to West Africa, produce high yields of fruit that are processed at diesel-powered mills to extract the oil, which is then shipped across the world in crude, refined or processed forms. This cheap, production-efficient and highly stable oil is a versatile ingredient that is used in a variety of food, hygiene and cosmetic products and is even used in the creation of biodiesel. According to World Wildlife Fund (WWF) and the International Union for Conservation of Nature (IUCN) reports, it’s yield is four to ten times more oil per hectare than other vegetable oil, making palm oil production an efficient and profitable use of land.
However, the uncontrolled cultivation of the palm oil crop has resulted in it being dubbed as a highly controversial commodity, as its production sees devastating losses of critical rainforest cover and biodiversity. According to the WWF, the equivalent of 300 football fields of rainforest are cleared hourly in Southeast Asia for palm oil. Deforestation and hunting-related to palm oil production killed nearly 150,000 Bornean orangutans between 1999 and 2015. This environmental degradation to produce unsustainable palm oil is potentially a major facilitator of deadly, zoonotic diseases. Indonesia, which is currently the largest producer of palm oil, has the highest deforestation rate in the world. Malaysia isn’t far behind. As the second largest palm oil producing country, 15% of its total land area is covered by palm oil plantations.
This unsustainable expansion continues to cause toxic pollution and severe spikes in CO2 emissions, catapulting Indonesia into becoming one of the worst CO2 emitting countries in the world. As labelled the “Southeast Asian trans-boundary Haze”, the smog blankets entire cities, forcing its population into a collective asthma attack by financially and socially burdening the Indonesians and Malaysians.
As the largest importer and second largest consumer for palm oil in the world, India consumes 23% of the global supply; closely followed by China (at 16%) and the EU (14%). The commodity’s low cost and middle-class expenditure increase on FMCGs, groceries and personal care products has resulted in palm oil becoming the most consumed and in-demand vegetable oil in India. While palm oil cultivation has led to environmental degradation, it has remained dominant in India’s edible oil market, as its demand of providing inexpensive food to an ever-growing population increases. According to the Centre for Responsible Business (CRB), governmental organisations have realised the growing importance of the palm oil industry however, the policies and measures adopted so far, have focused largely on promoting domestic cultivation rather than on imported palm oil. This inherent complexity is central to the palm oil paradox, as India relies almost entirely on imports, while domestic production is estimated at less than 4%. As Kamal Prakash Seth, the Indian Representative from the Roundtable on Sustainable Production of Palm Oil (RSPO) echoed,
“if India were to demand, there is a significant stock of RSPO’s ‘Certified Sustainable Palm Oil’ in Indonesia and Malaysia. The challenge is not to supply but to commit to importing sustainably produced palm oil. It is a shared responsibility across the supply chain and also a big opportunity for businesses in India to rebuild the economy in a more sustainable manner during and after the COVID-19 crisis”.
Today, approximately 86% of all palm oil is cultivated in Malaysia and Indonesia and 4.5 million people are earning a living from the industry. In Indonesia alone, another 25 million people indirectly rely on palm oil productions for their livelihoods. This means that if produced responsibly, palm oil could play important roles in the alleviation of poverty, disease and habitat conservation.
Although the environmental and social side effects associated with palm oil are not localised in India, the large import volumes make India and Indian companies important players in efforts to mitigate the destructive impacts, by transforming the culture of the industry. However, due to the trans-boundary nature of the impacts, the challenge of advocating and engaging the Indian industry to transition to the use of certified sustainable palm oil increases.
The RSPO is driving this change by uniting stakeholders from the seven sectors of the palm oil industry: oil palm producers, processors or traders, consumer goods manufacturers, retailers, banks/investors and NGOs, to implement global standards for sustainable and protected palm oil production. The RSPO has developed a set of social and environmental criteria which companies must comply with, in order to produce certified sustainable palm oil. When implemented, these outcomes are designed to improve the lives’ of farmers and to create a more prosperous palm oil industry with a mind to conservation of the planet and its resources. Currently the RSPO has 4,755 global members, producing 15.40 million tonnes of sustainable palm oil on 4.22 million hectares of certified land. While the world falls under the grip of the virus, upholding social standards for palm oil workers is now more crucial than ever. To support this, the RSPO is encouraging their members to strengthen human and labour rights by providing their workers with job security, decent living wages and the provision of healthy and adequate food, among other social requirements.
To strengthen the sustainability trajectory, in 2018, the RSPO joined forces with the Centre for Responsible Business (CRB), World Wildlife Fund (WWF) India and Rainforest Alliance to form an industry-driven multi-stakeholder coalition (I-SPOC) to facilitate industry collaboration across the value chain of sustainable palm oil. The forum addresses the barriers and challenges in sustainable palm oil production by reviewing policies, production best practices, trade linkages and consumer sensitisation to sustainability. Educating consumers on their consumption and purchasing behaviours creates a powerful cycle of momentum. If consumer demand for sustainable products becomes more prevalent, then businesses are more likely to invest in responsible practices. Therefore, consumer conscientiousness shouldn’t be ignored and is a powerful driver of change. Despite its infancy, I-SPOC is demonstrating to the rest of the world that by constructively engaging with stakeholders, governments and consumers, India has the power to build resilient supply chains of the responsible production and consumption of palm oil.
As a post-pandemic existence looms, 2020-2030 could be the most environmentally, economically and socially consequential decade in modern history. To be able to successfully recover from this crisis, the world needs a moment of introspection. As highlighted by Rijit Sengupta, the Chief Executive Officer at the Centre for Responsible Business:
As we forge ahead into our recovery, the inclusion of sustainable development in our core business practices has never been more important to our economic recovery and inclusive growth. We owe our planet that much.