Pulling out of palm oil altogether won’t solve anything

Friso Koopmans is Global Head of Agri-Commodities at ABN AMRO, while Wijbrand Fabius is a Stakeholder & Engagement Manager active in numerous sustainability processes.

What is palm oil, and how is it used?

Wijbrand Fabius: “The Dutch consume an average of sixteen litres of palm oil a year. It’s a key ingredient in many of the products we use every day. Palm oil provides flavour, as well as texture, and is found in everything from cosmetics to soup, pizza, baby food, chocolate, bread and cleaning products. Without even realising it, we easily use dozens of products containing palm oil each day. In fact, palm oil accounts for about one-third of all vegetable oils consumed. “Palm oil comes from the fruit of certain palm trees, which mainly grow in Asia. Malaysia and Indonesia together account for about 85 per cent of world production. The use of palm oil is set to increase sharply, primarily as a result of population growth and prosperity in countries like China and India. This growth is also fuelling the need for land where palm trees can grow, which, in turn, increases the risk of unsustainable, harmful production techniques, given the high yields involved in palm oil production.”

What issues are at play in the palm oil industry?

Friso Koopmans: “Irresponsible palm oil production can result in a number of abuses. The three most serious are illegal deforestation, human exploitation and land rights abuses. Palm oil is produced on plantations, and sometimes entire forests are destroyed to make room for them. What’s more, plantations often employ people from vulnerable groups in society. The prospect of work then results in migration, be it legal or illegal, to these plantation areas. It’s important to ensure that vulnerable groups aren’t exploited. And then, there are land rights. Unfortunately, land ownership often isn’t officially documented in areas where palm oil plantations are concentrated. As a result, there’s frequently disagreement as to whether new plantations should be built. Sometimes it’s even unclear who is actually authorised to sell the land. In some cases, the rightful owners have literally been driven off their own property.”

How is ABN AMRO involved in this industry?

Wijbrand Fabius: “There are roughly 200 large- and medium-sized palm oil producers. A handful of the bigger players are our clients, to whom we provide lending services. We have very long-standing relationships with some of these companies. But that also means we can exert our influence on them, helping our clients as they make the transition to a more sustainable business model. That may sound simple, but you have to remember that these are companies which are active in places like Indonesia, Africa and Brazil. Doing business and dealing with the authorities as you would in, say, the Netherlands can be extremely complex. However, the bank does require that all its palm oil clients pursue an active sustainability policy.”

How does ABN AMRO exert its influence to make the sector more sustainable?

Friso Koopmans: “We’ve established a credit policy for the palm oil sector. If producers want to apply for a new loan, they must comply with this policy, or be able to show that they are implementing measures to comply with it within an agreed time frame. If a particular company, or that company’s supply chain, is at odds with our sustainability policy, we call them to account. We also exert our influence to help change the situation, together with the client. We call this engagement. One example of the impact our influence has had is the increased transparency of our clients’ policies – they’re now proactively accountable for the choices they make and for the impact of those choices instead of giving a post hoc account – often after an NGO has blown the whistle. Technological developments also help us and our clients better monitor what’s actually going on at the plantations. The world’s largest palm oil producer has just launched a drone programme that scans entire areas for signs of deforestation, for instance. There’s also track-and-trace technology, which makes it easier to trace the origin of palm oil.”

Why doesn’t ABN AMRO just pull out of palm oil altogether?

Wijbrand Fabius: “Because that wouldn’t solve anything. Just because the bank were to pull out doesn’t mean the abuses would suddenly disappear. In fact, the opposite is probably true. It’s only by staying involved that we can exert influence to help improve the sector. We’re not alone in this either – nearly all the NGOs out there endorse this stance. Actually, the same goes for the entire agri-sector. There are about 500 million small farmers and small farms in the world. Millions of people are employed thanks to palm oil. One of our colleagues recently visited a few of these farming families and saw just how vulnerable and dependent these people are on the industry. If we and other Dutch banks were to pull out, other banks would step in to provide financing. Chances are those banks would have little or no sustainability agenda in place. As a result, the situation would deteriorate drastically for these families.”

What improvements are we seeing?

Friso Koopmans: “In addition to talking directly to our clients about their policies, we’re an active member of the Round Table on Sustainable Palm Oil (RSPO), along with several other major Dutch banks. Certain NGOs like the World Wildlife Fund and Oxfam Novib are also involved, as are a number of big players including food producers and supermarket chains. The RSPO has established guidelines which are endorsed by all the stakeholders. ABN AMRO requires that its clients, too, are members of the RSPO. The RSPO is working to make palm oil production more sustainable, having recently set new standards for the production of palm oil to counteract deforestation and human rights abuses.” Wijbrand Fabius: “NGOs play an important role in exposing abuses in the industry. The majority of NGOs support our decision to remain involved on an ongoing basis. It may not always be the easiest way, but through continued involvement in the sector, we can keep raising issues and effect change for the better.”