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The Chain: First Resources adopts zero-deforestation palm oil policy

July 28, 2015

First Resources is first major palm oil grower to adopt zero-deforestation policy

Singapore-based palm oil company First Resources (FR:SP) committed earlier this month to end deforestation, peatland development, and human rights abuses it its supply chain, becoming one of the first palm oil company operating primarily at the grower level to join the wave of global traders adopting No Deforestation, No Peat, No Exploitation policies. First Resources has been one of the fastest-growing palm oil producers in Southeast Asia, and has been a member of the Roundtable on Sustainable Palm Oil (RSPO) for years.

However, the company has faced serious environmental challenges and has been highlighted in the past as an irresponsible supplier by civil society groups. In 2012, the Environmental Investigation Agency lodged a formal complaint against First Resources, which resulted in RSPO sanctions against the company. RSPO found that First Resources was guilty of clearing and developing on forest land in Indonesia’s East Kalimantan prior to carrying out High Conservation Value (HCV) assessments and without getting the consent of indigenous populations. First Resources was also accused of clearing HCV forest in West Kalimantan, leading the RSPO to conclude that the company’s practices were systematic.

In its new policy, First Resources commits to not develop High Carbon Stock (HCS), HCV, or carbon-rich peatland areas. It also commits to upholding the rights of indigenous and local communities. The policy was made effective immediately and applies across the board to the company’s subsidiaries and third-party suppliers.

Study: Moratoria more effective than certification to curb deforestation

A new study comparing the effectiveness of four different types of voluntary agreements to reduce deforestation in the tropics finds that temporary bans tend to be more effective than certification schemes. The study focuses on initiatives aimed at reducing deforestation in Brazil and Indonesia: the Soy Moratorium (Brazil), the Cattle Agreement (Brazil), the Roundtable on Responsible Soy (RTRS) in Brazil, and the Roundtable on Sustainable Palm Oil (RSPO) in Indonesia. The first two involve temporary bans, or moratoria, with major traders agreeing not to buy from producers clearing forests. The latter two are certification programs that involve members across the supply chain, from growers to traders to consumer companies.

The study shows that with the moratoria, traders were able to have greater influence further down the supply chain, creating higher compliance than with certification schemes, which often require consensus and compromise among all members, thereby creating a tendency to agree upon the lowest common denominator for sustainability standards. With both types of initiatives, the study finds that companies are most often compelled to voluntarily join in order to avoid reputational risks associated with public pressure from consumers and civil society. Ultimately, while both moratoria and certification mechanisms require further government reform and legal frameworks in order to ensure lasting change, the research appears to support the effectiveness of recent zero-deforestation policies by major palm oil traders, which tend to impose stricter standards of sustainability and compliance than the RSPO and other certification mechanisms.

Banks catching up with corporate push for zero-deforestation

After long being viewed as a laggard, the financial sector is increasingly stepping up pressure to curb rainforest clearing and limit exposure to sustainability risk. Ten major banks have recently signed on to the Soft Commodities Compact, which now covers 20% of the global agricultural commodity market. The Compact – which was initiated last year by the Consumer Goods Forum, the Banking Environment Initiative, and the World Wildlife Fund – aims to mobilize financial institutions to use their leverage and influence to help transform commodity agriculture, with the goal of reaching zero net deforestation by 2020.

Banks joining the initiative are committing to work with major consumer companies, such as Unilever and Proctor & Gamble, that are large users of palm oil and other “soft” commodities, in order to finance the growth of sustainable agriculture and put pressure on clients to stop sourcing from deforestation. The initiative by banks coincides with pledges from 400 consumer companies with $3 trillion in buying power to reach zero net deforestation within the next five years. The full list of banks that have currently signed on to the Soft Commodities Pact includes: Barclays, BNP Paribas, Deutsche Bank, Lloyds Banking Group, Royal Bank of Scotland, Santander, Standard Chartered, Rabobank, UBS, and Westpac.


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