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The Chain: Wilmar update report shows mixed progress on implementation

February 2, 2016

Wilmar update report shows mixed progress on implementation

Last week at the World Economic Forum gathering in Davos, agribusiness giant Wilmar International released the two-year progress update report on its No Deforestation, No Peat, No Exploitation policy. Wilmar’s original commitment in December 2013 was to have full implementation of the policy across its global operations by the end of 2015. As the largest palm oil trader in the world, Wilmar’s pledge started a major shift in the industry, with several other major producers and traders subsequently issuing similar policies to meet consumer and public demands for sustainability.

Since the adoption of its policy, Wilmar has made important strides in improving its supply chain transparency – most notably with the launch, one year ago, of an online dashboard with information about all the 800 palm oil refineries and mills responsible for its supply. This latest report shows significant progress on traceability, with some some initial tracking from the mills back to the plantation source. However, the company still has a long way to go before it will know where and how its suppliers’ product is being harvested.

Civil society groups gave mixed reviews to Wilmar’s latest progress update, with some noting the importance of the company’s leadership on transparency, and others criticizing its ongoing connection to deforestation, peatland burning, and social conflict. Looking ahead, Wilmar stated that it would continue to push forward with plans to improve supplier compliance, traceability, smallholder relations, labor protection and other sustainability efforts in 2016 and beyond.

Indonesian government increases pressure to prevent haze

As detailed in previous updates and reports, last year’s haze crisis in Indonesia will have enormous costs for the country’s economy and will create significant market risks for companies and investors operating in the region. According to the World Bank, the fires cost the Indonesian economy USD $16 billion last year alone – more than double the sum spent on rebuilding Aceh after the 2004 tsunami. Chain Reaction Research’s analysis from December showed that the total costs of the 2015 fires could reach USD $35 billion. In response to the economic and political pressures of the crisis, the Indonesian government has taken several steps to remedy the problem, including a ban on the conversion of peatlands (including in existing concessions), as well as a ban on the use of fire and a mandate for the restoration of burnt lands. Most recently, President Jokowi created a new government agency to oversee the country’s peat restoration plans, and appointed renowned conservationist Nazir Foead to lead the new Peatland Restoration Agency.

In addition to strengthening its own oversight capacity, the Indonesian government has increased its scrutiny of companies accused of causing the historic fires. Last month it was reported that the Ministry of Environment and Forestry had punished at least 23 plantation companies with fines and revoked licenses, and was in the process of investigating at least 33 more. The government has also sought to get tougher on prosecuting plantation companies by challenging court decisions to absolve companies’ responsibility. In a recent case, a district court in South Sumatra rejected a lawsuit against PT Bumi Mekar Hijau, an Asia Pulp & Paper supplier accused of causing peat fires, but environment minister Siti Nurbaya has said that the ministry will appeal the decision in order to set the tone for its efforts to prosecute other companies accused of burning.

World leaders make forests a key climate priority in Paris

At December’s United Nations climate conference in Paris, world leaders announced major new funding to protect and restore forests, new initiatives to stop forest and peatland fires in Southeast Asia, and a major new corporate commitment to guarantee a market for sustainably sourced commodities.

Heads of state made several dozen announcements at the summit, including a pledge by Germany, Norway, and the United Kingdom to collectively provide over USD 5 billion from 2015 to 2020 to tropical forest countries – if those countries provide measured, reported, and verified emission reductions from forests. On the corporate side, major consumer product companies Marks & Spencer and Unilever signed a new pledge committing to prioritize responsible sourcing for major commodities, including palm oil, beef, and paper. As co-chairs of the Consumer Goods Forum (CGF), the two companies said they would seek to reward countries and jurisdictions with comprehensive policies designed to deliver sustainable forest management and drive market demand for responsible products.

In the final text of the Paris Agreement, nations agreed to achieve net zero emissions in the second half of this century and to seek to limit global warming to 1.5 degrees C above pre-industrial levels. To make good on these long-term goals, governments, companies, and financiers must now move quickly to end deforestation and invest in massive reforestation around the world.


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