Despite palm oil's meteoric rise as a global commodity, the industry is beset by its problematic association with rainforest clearance, indigenous rights violations and the extinction of species like the Orangutan.
This has prompted regulators and investors to introduce measures which could curb the growth of the palm oil sector.
Now, the multi-billion dollar industry is hitting back with more sophisticated lobbying efforts aimed at altering negative perceptions of palm oil, and have found their champions in free market, libertarian think tanks and Conservative UK politicians.
Does this unlikely alliance indicate a future course of debate and clarity, or opportunism and spin?
On the 7th April 2011, the fast food company KFC announced it was phasing out the use of palm oil in its restaurants, citing environmental and public health concerns for its switch to rapeseed oil. The move followed a trend of multinationals exercising greater scrutiny over their oil palm procurement.
Last year, Unilever, Kraft and Nestlé cancelled contracts with Indonesia's largest palm oil producer Sinar Mas, after Greenpeace revealed the company's involvement in rainforest clearance.
These multinationals have now published explicit oil palm procurement policies, which they claim will ensure zero deforestation. Whether or not these measures have the publicised effect, the decisions were a hugely symbolic moment considering these three companies together purchase over 4 per cent of world palm oil.
Similar evidence presented by Civil Society has affected change from powerful regulatory and financial institutions.
In 2009, the World Bank placed an 18-month moratorium on lending to major oil palm companies after internal audits highlighted numerous conflicts between local communities and plantation companies. When lending resumed in 2011, the new framework for engagement contained much stronger social and environmental safeguards.
Similarly, the European Parliament is mulling over bills for palm oil's compulsory labelling on food products, which, given the product's negative publicity could erode consumer demand in the EU, currently the third largest market.
Whilst access to the huge European biofuels market is currently blocked by the sustainability criteria of the Renewable Energy Directive that specifies sources must reduce greenhouse gas emissions and not cause deforestation or compete with food cultivation. Criteria which, it is proposed, the oil palm industry cannot currently guarantee.
The palm oil industry:
| Importer | '000 Tonnes | Exporters | '000 tonnes | Consumers | '000 tonnes |
| India | 7,200 | Indonesia | 18,000 | India | 7,750 |
| China | 6,250 | Malaysia | 16,100 | China | 6,277 |
| EU-27 | 5,400 | Benin | 480 | EU-27 | 5,388 |
| Pakistan | 2,300 | PNG | 438 | Indonesia | 4,910 |
| Malaysia | 1,250 | UAE | 265 | Malaysia | 3,800 |
| World | 36,688 | World | 37,372 | World | 48,158 |
Source: USDA
The industry, dominated by Indonesian and Malaysian companies (who together account for 91 per cent of world exports), hit back with a publicity campaign aimed at rebranding palm oil as inherently sustainable.
The most conspicuous efforts were those of the Malaysian Palm Oil Council, which coined the plant as 'The Tree of Life' that 'helps our planet to breathe, and gives home to hundreds of species of flora and fauna'. Much to the council's embarrassment, the TV advert, and following year's amended version were both banned by the British Advertising Standards Authority because they were deemed misleading.
The adverts were even attacked by oil palm companies themselves in a 2008 sustainability conference, with one senior executive stating that 'some of the statements are so blatantly untrue that it undermines our credibility... environmental groups are going to focus on the obvious fallacies and use them against us'.
Lobbyists for the industry have thus pursued more pragmatic strategies, with the MPOC inviting the Conservative Member of the European Parliament (MEP) Roger Helmer to Kuala Lumpur in 2010 to address the council on how to better lobby the EU. Helmer, a prominent climate change sceptic and outspoken critic of Western environmental NGOs focused his speech on what he termed 'tax-payer funded environmentalism', urging the council to establish a lobbying presence in the EU.
Lobbying tactics in Europe
Subsequently, in April 2011, the Malaysian and Indonesian governments agreed to form a permanent lobbying body in Brussels, the European Palm Oil Council (EPOC), tasked with combating compulsory food labelling regulation and trade barriers to the biofuels market.
In addition to these direct political manoeuvres, the sector has also forged links with Western think-tanks who are able to criticise regulation and champion the sector from a seemingly objective standpoint.
Their most prolific advocate has been the World Growth Institute (WGI), a non-profit organisation based in Washington, who unreservedly endorses palm oil and rebukes all negative factors proposed by Civil Society groups.
Their reports have attacked the World Bank's amended framework for engagement with the oil palm sector - which includes provisions that prioritise smallholders over large companies, and plantations on degraded land over forested land - as 'anti-poor'. It further accused the group of caving into the 'anti-free-trade' agenda of NGOs and transforming itself into a 'de facto sustainability czar'.
Lobbying efforts have also created inroads in Europe, with the Malaysian Ministry for Plantations and Commodities establishing connections with the Adam Smith Institute (ASI). The ASI, whose charter is based on advocating free-markets and limited government, was constitutionally sympathetic to the international regulatory barriers facing the palm oil industry.
Adam Smith Institute
After a chance meeting between an ASI fellow and the Malaysian plantations minister, the ASI produced a report entitled 'Dispelling the Myths: Palm Oil and the Environmental Lobby'. The report reiterated similar anti-regulation positions as the World Growth Institute, proposing that the EU is inhibiting growth in developing countries by using regulatory barriers to protect its uncompetitive rapeseed producers and 'shackle competition from cheaper and more efficient international rivals'.
It also proposed that these barriers are being justified by the distorted picture of the palm oil industry painted by Civil Society groups, some of which are funded by the EU.
Through these organisations and political allies, it appears that the palm oil sector is securing a more robust footing in preparation for a protracted period of lobbying.
Yet how much integrity do these relations really exhibit?
The independence of its Washington champion, the WGI is dubious. WGI's chairman, Alan Oxley, through his consultancy ITS Global, has longstanding commercial connections with prominent palm oil companies including Sinar Mas and Rimbunan Hijau.
In a damning letter published in the Jakarta Globe, the WGI's integrity was questioned by 12 prominent botanists and zoologists, who accused Alan Oxley's organisations of propagating 'significant distortions, misrepresentations, or misinterpretations of fact...designed to defend the credibility of corporations...directly or indirectly supporting them financially. As such, WGI...should be treated as lobbying or advocacy groups...and their arguments weighted accordingly'.
In addition its reports are thin on third party sources, drawing 5 out of 7 of references for its 'Palm Oil Green Development Campaign' from literature produced by the Malaysian Palm Oil Council (MPOC).
Later, when quizzed by a Malaysian newspaper whether he was funded by palm oil companies, Oxley described the question as 'immaterial'.
The ideological convergence of the palm oil sector and Adam Smith Institute is also problematic as the principles of competition and openness used to criticise decisions by the EU and World Bank are not practiced in the countries of production, namely Indonesia and Malaysia.
Corruption cases
Malaysia's economy is strongly shaped by a system of political patronage where commercial opportunities are obtained through political connections rather a competitive process of open tender. In the palm oil sector, this has resulted in rural land, often with existing private property claims, being alienated by the state and awarded to politically connected individuals at grossly undervalued rates.
A recent example in the state of Sarawak saw an elected politician being awarded 15,500 hectares of land for plantation valued at around $33m, for a rock bottom $1.9m. In the much trumpeted joint-venture agreement with the indigenous residents, the beneficiary company and local communities took 70 per cent and 30 per cent respectively, earning the politician-cum-director $1.73m in the first year, and the 2,877 residents $190,000 ($66 each).
In many other cases, indigenous land has been alienated for plantations without their Free, Prior and Informed Consent (FPIC) and without providing them with any economic stake, thereby depriving communities of their land assets and eroding their traditional livelihoods, actually increasing rates of poverty.
In Sarawak alone, there are now over 180 villages that have filed court cases against the state government and beneficiary companies (many of them for palm oil estates) for unsolicited expansion into their native land.
This implies that the Malaysian government is currently neither transparent or economically efficient in attracting and screening private sector investment for palm oil, resulting in projects that ignore private property claims and deny the landowning communities any meaningful stake.
A similar correlation between land grabbing for palm oil estates and rural poverty has been documented in Indonesia. Analysis from the World Bank noted that palm oil business models involving large-scale land acquisition for private estates often led to increased rates of poverty.
Conversely, the same research found that smallholdings have a positive correlation with poverty reduction. An independent academic study in Sumatra confirmed this correlation, noting that a smallholding of just 4 hectares provided owners with an average of $12,000 per annum.
Such findings prompted the World Resource Institute to urge the World Bank to further strengthen its regulatory framework and focus on achieving and measuring poverty reduction, not overall palm oil investment.
The future for palm oil
Such a nuanced approach has come to be adopted by most Civil Society groups, who do not deny the oil palm's natural productivity, or its socio-economic contributions if implemented according to best practice. As the Indonesian NGO Sawit Watch describes: 'done right, palm oil should generate wealth and employment for local communities. Done wrong, oil palm estates can lead to land alienation, loss of livelihoods, social conflicts, exploitative labour relations and degraded ecosystems'.
There are signs that some in the palm oil industry have matured and are willing to engage in a more frank and open dialogue about establishing best practice. Though still highly contentious, the Roundtable on Sustainable Palm Oil (RSPO) remains the most significant initiative to date.
Yet the progress made in such dialogue is put into question by recent lobbying efforts. As Greenpeace noted in response the the ASI report, 'they can't see that all-out reality denial is exactly what gives the industry a bad name whilst simultaneously harming the efforts of those companies that are working to tackle these problems'.
If the palm oil sector is so concerned about economic competition, why is corruption so rife in the sector? If they are concerned about sustainability, why object to prioritising plantations on degraded land over felling existing forests? And if they propose palm oil plantations as a carbon capture solution, why use prominent climate-change sceptics such as Roger Helmer and Alan Oxley as advocates?
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