EP’s deforestation position; breakthrough or boomerang?

On Wednesday 13 September the European Parliament (EP) voted on its amendments to the Commission’s proposal for a regulation banning goods related to deforestation or forest degradation from the EU market. I welcome the fact that in its position the EP is championing the interests of smallholders, local communities and indigenous people. Something the RSPO strongly supports and that is consistent with our producers’ standards.

But for all its good intentions, the EP’s omission to anchor its proposal with key stakeholders in the supply chain means its proposal could come back like a boomerang and hurt exactly those smallholders and local communities it aims to protect.

?One problem comes forth out of the fact that the current proposal consistently groups “smallholders” (=small-scale farmers) and “indigenous people” as vulnerable stakeholders. ?But although both groups deserve special attention, their issues and interests are different.

?On the rights of indigenous peoples

Indigenous people face challenges such as the respect for their tenure rights to lands; being denied access to Free, Prior and Informed Consent (FPIC); insufficient or no access to discussions and negotiations around land development; lack of representation in international trade agreements as well as physical threats to their life and livelihoods. All these issues are incredibly serious, and I am glad see a plethora of proposals from the EP to strengthen the position and rights of indigenous peoples when it comes to human rights abuses related to deforestation and forest degradation.

On smallholder inclusion

Palm oil is grown in many countries across Africa, South America, and Southeast Asia. But with approximately 84% of the global production coming from Indonesia and Malaysia, these two countries dominate the global market. In Indonesia approximately 42% of the production is led?by smallholders, a number which is expected to rise to 60% by 2030. The RSPO now estimates that we are talking about over 7.5 million small-scale famers and their families in the global palm oil supply chain.

The issues facing them are different from those facing indigenous people. They are above all producers in need of a market. Their primary concern is a stable and sufficiently high yield and income. Their lives depend on market access and they face issues such as the fact that they cannot afford to invest in sustainability requirements put on them by the EU; lack of infrastructure and technology; lack of knowledge on the latest agricultural management practices etc. That is why the RSPO has a special independent smallholder standard as well as a smallholder academy which helps oil palm smallholders and their supporting organisations with high quality training so that they develop more capacity to achieve sustainable livelihoods. We help them to improve their yields and bring them along on the path toward sustainability certification.

I recognise that with its proposed amendments the EP takes large steps to improve the position of smallholders and it takes an integrated approach by placing extra responsibility on companies, national governments and the European Commission alike. The EP explicitly recognises the economic importance of commodity exports for third countries as well as the specific challenges that smallholders, especially women, may face (amendment 33). It proposes a.o. that trade partnerships should take into account the rights of smallholders (amendments 26,28); states that any rules and requirements following from the regulation should try to minimise the burden on smallholders in third countries and try to prevent barriers to their access to the Union market and to international trade (amendment 32); and it places an obligation on operators to engage with smallholders in a meaningful way to ensure that vulnerable stakeholders receive adequate assistance and fair remuneration so that their commodities and products can comply with the rules, in particular with regard to the geolocation requirement (amendment 114).

So what is the problem?

Out of the six commodities currently covered by the proposal, palm oil is amongst those better equipped to deal with the proposed traceability requirements. But also for palm oil it will take time for companies to adjust their supply chain and supply chain information systems. Although in countries such as Indonesia and Malaysia over 40% of the production of palm oil comes from smallholders, most European companies are not in direct contact with them and middlemen and other marketplaces still play an important role in the supply chain. Equipping and training all these people in the rural countryside of Papua New Guinea, Indonesia, Malaysia, West Africa and Latin America will take time and energy. And once they are trained and equipped, you might have geolocation data but not yet traceability. Information systems must be installed to transfer all data along the supply chain, which are safe, traceable and verifiable; legal systems must be adapted or aligned to ensure that information can be shared etc.

Let there be no misunderstanding. I firmly believe traceability is a crucial element of sustainability and an important element of the Commission’s proposal. The fact that regulators are pushing European companies to take their responsibility and invest time, money and energy in improving their sustainability performance is something to be applauded. But if you combine these investments with too short deadlines to be able to comply and high fines for non-compliance, the business reality is that you are pushing companies towards the only viable alternative: to cut out all the risk. ?In other words, to stop sourcing from smallholders and their local communities and only source from large companies and industrial plantations in regions where you know there is less risk of non-compliance. That is not improving sustainability. On the contrary, it frustrates or ends the significant improvements that smallholders have made in sustainability; hurts the investments they have made to start their sustainability journey and stops the socio-economic development of local communities.

?On commodity specific guidelines

The EP proposes that after 12 months the Commission issues user-friendly commodity-specific guidelines to clarify due diligence responsibilities and traceability rules of operators that are tailored to fit their respective supply chains (amendment 153). I have previously stated that instead of a one-size-fits-all-commodities approach, traceability and information storage requirements should be adapted to the specificities of the different commodities. So whilst the EP proposal sounds alluring, it is at this moment hard to imagine what these guidelines can entail as long as the text of the regulation remains as specific as it is on the due diligence requirements. What is there to regulate in secondary legislation or guidelines if the requirements are all detailed in the parent legislation unless the guidelines will allow for deviation of the higher regulation which (in my view) would be dubious from a legal perspective. But I am sure this will be further explored in the coming period.

?So what needs to be done?

The EP has taken its position and has – as expected - championed the rights of indigenous people, smallholders and local communities. But for these laudable proposals of the EP to become reality on the ground we now need the Council to ensure the legislation becomes workable for companies, with timelines that allow them to transition their supply chains without leaving anyone behind. That is why the Council must stick to its 18-month implementation timeline; strengthen provisions that support the implementation for companies and be wary for an enlargement of the scope (in the first phase) that can complicate the implementation further.

If both institutions understand and respect that they are not on opposite sides of the debate but can recognise the complementarity of their positions, this regulation can become an example of the mutual strengthening of environmental protection and social development. It will illustrate the integrated and holistic approach that underpins the Sustainable Development Goals, and it will be a prime example of how the European Green Deal can be achieved.

I wish the negotiators the wisdom to find the right balance in the upcoming trilogue and look forward to continue our engagement with all involved as they enter the last stage of negotiations to finalise this important piece of legislation.

Ruben Brunsveld, Dpt. Director EMEA, RSPO