Governance reform essential to reducing palm oil deforestation

While palm oil has been acclaimed for its versatility and economic viability, it has also garnered severe criticism over its significant contribution to tropical deforestation. There is growing advocacy for deforestation-free palm oil, while alternative vegetable oils have also been proposed as substitutes.

Palm oil is a cornerstone of the global economy, with diverse applications spanning from food and cosmetics to biofuels and industrial lubricants. Unsurprisingly, the commodity has garnered favour among farmers in tropical regions for its robust market demand, high productivity and cost accessibility. Yet escalating demand for palm oil has engendered adverse effects on environmental sustainability.

Oil palm plantations in Indonesia have expanded from 4.7 million hectares in 2001 to 15.3 million hectares in 2022, yielding adverse repercussions on the environment and society. A 2019 study found palm oil plantations to be the primary contributor to deforestation, while also destroying habitats for endangered species, displacing indigenous communities and intensifying carbon emissions.

The drive towards deforestation-free palm oil and alternative vegetable oils has garnered momentum in recent years, particularly from European markets. Advocates of alternative vegetable oils contend that transitioning away from palm oil could mitigate deforestation and its environmental consequences.

Yet a 2023 study suggests otherwise. The study examines three scenarios, where palm oil utilisation is reduced by 25, 50 and 100 per cent in Indonesia and Malaysia, the largest palm oil-producing countries. Scenarios were also conducted for alternative vegetable oils, specifically soybean, rapeseed and sunflower.

While total greenhouse gas emissions remained nearly unchanged between these scenarios, deforestation was projected to escalate by 28–52 million hectares, as alternative vegetable oils require more land for equivalent production. Achieving ‘zero deforestation’ in the palm oil industry would lead to a 92 per cent reduction in emissions, underscoring palm oil’s potential in advancing sustainability.

Replacing palm oil with alternative vegetable oils might seem like a viable solution, but it overlooks the issue of unsustainable land use, primarily stemming from weak governance.

Patronage ties between local governments and palm oil companies have led to poor implementation and enforcement of environmental policies. These patronage networks create conflicts of interest, where officials prioritise profit over environmental protection and sustainability. Lobbying efforts by palm oil companies, enabled by close relationships with government officials, have hindered stricter environmental policies.

Corporations and governmental bodies must enforce ‘no deforestation’ policies across all palm oil production regions. Initiating a traceable and ethically sound supply chain is the first step in the right direction.

Incentive structures and mechanisms for accountability must be established to foster widespread adoption of environmental policies. Equally significant is improving governance — including bolstering land ownership rights for indigenous communities, advocating for agroforestry practices and promoting sustainable land management techniques.

Some interventions must be implemented to solve critical barriers. For example, efforts to strengthen communal land tenure for indigenous groups often clashes with the financial interests of palm oil companies and corrupt officials. Overcoming opposition to these reforms will require strong political will and grassroots advocacy from civil society organisations.

Sustainable techniques like crop rotation, cover crops and zero-burn farming require extra labour, resources and technical assistance. The associated costs and the lack of immediate benefits limit the economic viability of cash-crop farmers. Without addressing economic and political roadblocks, governance reforms risk remaining theoretical or confined to limited pilot projects.

Consumers are also pivotal in fostering demand for sustainable and deforestation-free palm oil products. By selecting sustainable items, consumers effectively communicate the importance of sustainability to corporations and policymakers.

Yet some consumers are sceptical of sustainability labels and certifications, which they view as potential ‘greenwashing’ by companies. Environmental non-profits have also criticised vague or lax standards that allow certifications to be granted based on minimal effort. Assurance on the credibility of a product’s sustainability could be provided through transparent standards endorsed by a global multi-stakeholder alliance and regular audits by accredited third-party verifiers on criteria like pesticide usage, labour conditions and conservation impacts.

In April 2023, a multi-stakeholder dialogue in Indonesia proposed a moderate approach to realising deforestation-free palm oil, urging the government to align its policies with state mandates and key agendas — such as the FOLU Net Sink 2030, which targets a 60 per cent reduction in national emissions by 2030.

For farmers, requisite capacity-building measures include training and financial support. In Indonesia, district government association Lingkar Temu Kabupaten Lestari works with nine districts to encourage the sustainable development of strategic commodities.

This approach involves shifting from monoculture plantations like palm oil to various nature-based commodities such as coffee, cocoa, coconut and agroforestry by-products. The nine districts work closely with over 70 national and local networks in a spirit of mutual participation (‘gotong royong’) to sustainably oversee their jurisdictions through collective actions involving various partners.

To address deforestation, a collective endeavour encompassing governments, businesses, civil society organisations and consumers is needed. It is also important to transcend simplistic solutions, such as substituting palm oil with alternative oils, and adopt a comprehensive approach to sustainability that confronts the underlying drivers of deforestation while advocating for a fairer and ecologically sound future.

Tags: vegetable oils, Indonesia, palm oil, deforestation, Plantations