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Unpacking the EU’s Confused Approach to Indonesian Palm Oil

Brussels’ approach to Indonesian palm oil is beset with confusion. Some EU officials – most notably the EU Embassies in Jakarta and Kuala Lumpur – insist publicly that the EU has no problem with palm oil imports, and is not trying to ban it.

This is positive and welcome rhetoric. Unfortunately, it is fairly often contradicted by the actions taken by EU decision-makers in Brussels. Notably, the public admission that the EU Parliament is seeking a ban on palm oil biofuels, for example.

This confused approach has become even more pronounced now that the EU is considering regulations on labor rights as well as on environmental sustainability – both of which could have an effect on Indonesian palm oil exports. This is best illustrated by two examples.

Back in April this year, Greenpeace released a report attacking palm oil certification schemes. It was error-filled and flew in the face of data and evidence compiled by major international bodies including World Resources Institute (WRI), United Nations FAO, RSPO, WWF and even the EU itself. The WRI, for example, praised Indonesia, saying “The fall was down to government policies including a moratorium on clearing primary forest and a freeze on permits for oil palm plantations, improvements in law enforcement and land rights, and use of technologies to tackle forest fires.”

The Indonesian Palm Oil Association (GAPKI) provided a detailed rebuttal to Greenpeace, based on facts and data, stating Certification provides certainty for producers; reassurance for consumers; data and information for governments; and transparency for media; and a seat at the table for civil society. Certification is not only the mature approach; it also has a track record of concrete results … Indonesia, through certification for palm oil, timber and other commodities, has cut its deforestation rates by extraordinary amounts in recent years”.

This position was provided directly to the EU Commission. Given that Greenpeace’s views were so far outside of the mainstream environmental debate – which is supportive of certification, from NGOs to producers, consumers, companies, and governments – it should be simple for the EU Commission to make common cause and support the principle of certification.

This did not happen.

Instead, in a recent letter sent to GAPKI, the Commission would state only that “certification is a complex matter”. A clear indication that the Commission does not take the same view as GAPKI. It seems that – rather than supporting the existing certification framework, which includes B2B schemes as well as government schemes such as ISPO, and now underpins almost every global commodity market – the Berlaymont sees this as an opportunity to regulate, and expand its bureaucratic reach through an EU-directed approach to sustainable commodities.

This is a problem because regulation should, in the first instance, be looking to target something that is undesirable or is working poorly. The certification market, however, is working well. Businesses, NGOs, governments, farmers, researchers, are all working together in the certification world to deliver better outcomes – including on sustainability and environment – than previously existed.

This is objectively verifiable. More Indonesian companies are certified under B2B or multi-stakeholder schemes such as RSPO and ISCC; ISPO is up and running as a government scheme. Deforestation in Indonesia is at its lowest rate ever. This is not a coincidence.

Any substantive EU regulation would uproot large parts of the existing successful certification ecosystem. Importing multinationals would be compelled to adopt it. Producers would then face yet another different set of standards and compliance. NGOs would lose some of their influence over the process. The incentive for continuous improvement of existing efforts would stall.

All of this uprooting, for what benefit? Primarily for the benefit of EU leaders who wish to be seen as doing something (not to mention the many consultancies, NGO-lobbyists and others who are EU-funded and need to justify their budgets). These appear to be the only winners. Everyone else loses from upending a certification ecosystem that is well-established and successful, and replacing it with the uncertainty and caprice of a top-down EU plan.

One element of the EU plan revealed in the letter to GAPKI is that any new rules would apply internally (to EU producers) as well as to importers: the letter states “As regards the scope of the legislative initiative, the proposal is expected to cover a series of commodities, including wood, palm oil, soy, cattle, coffee and cocoa. The rules are meant to apply to commodities produced both within and outside the EU.”

This is, almost certainly, not the level playing field it may appear to be at first glance. The EU has form on this point. In the Renewable Energy Directive (RED I) the default values applied to everyone equally in theory … but in practice the calculations were skewed to harm palm oil and benefit EU-grown rapeseed. Similarly, the ‘high ILUC risk’ criteria developed in the RED II Delegated Act apply equally in theory. In practice, palm oil was the only commodity negatively impacted. The Due Diligence criteria will likely be targeted in the same manner: but producing  countries are wise to this now and will not take at face value any claims of ‘equal treatment’ unless they apply in practice to outcomes – not merely on paper.

The EU does not need to look far, to find a better approach to Due Diligence. The UK Government is further advanced on its Environmental Due Diligence regulation, compared to Brussels, and has already dismissed the idea of a complex new sustainability approach. Rather, London has decreed that a legality standard – respecting existing laws and certifications – is the better way forward. This means more certainty for importers and consumers, and less burdens and costs for producers. The EU would be well-served to follow this sensible approach.

On other issues, the EU is taking a much more sensible and practical approach.

A recent EU document entitled “Guidance on Due Diligence for EU Businesses to Address the Risk of Forced Labour in Their Operations and Supply Chains”, promoted by DG Trade and the EU External Action Service (EEAS), is reasonable, thoughtful and in alignment with mainstream international thinking. Read more detail and analysis on the Guidance Document here.

Why the stark difference between the EU’s reasonable approach to labour issues, and its lurch away from the mainstream on environment policy? Two clear influences present themselves:

Firstly, the EU sees itself as a leader on environment policy: Brussels likes to boast about setting the tone on climate and sustainability, globally. This leads to constant pressure and demands to go further, take the next step, move faster. On labour issues, the EU is far behind. The US is the global leader and so far the EU seems happy to follow the lead of the US and international bodies such as ILO. This relative passivity is clearly a good thing, as the EU’s rhetoric is more reasonable and grounded in established and accepted facts and data.

Second, as a result of these dynamics, the Commission is under less pressure from lobbyists in Brussels on labour rights, compared to environment. The NGO ecosystem on sustainability in Brussels is formidable – the EU spends hundreds of millions of Euros funding NGOs, which in turn lobby EU institutions to go further and further with Green policies such as Emissions Trading System (ETS) and Carbon Border Adjustment Mechanism (CBAM), to mention only a few. The surround-sound noise on labour is much lower, which means the Commission can rely on data & reality rather than basing regulation on Twitter polls and online petitions.

The hope is that the EU could apply the sensible nature of the labour approach, to the environmental policy side. This looks unlikely, sadly. The two issues will come together when the EU decides its forthcoming Due Diligence regulation, and some MEPs are already calling for bans and other draconian approaches. The confusion, and double standard, looks set to remain.

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