New palm oil company assessments

As another hazy dry season looks set to loom across Southeast Asia, the latest SPOTT assessments find palm oil producers and traders varying in their commitments to combating fires and ensuring sustainability. While some companies are making positive progress in disclosing critically important information, many could be far more ambitious in making stronger and wider commitments to manage risks such as deforestation and human rights abuses.

ZSL’s SPOTT initiative conducts assessments for 50 of the world’s largest palm oil producers and traders, including big players such as Astra Agro Lestari, Sime Darby and Wilmar International. SPOTT assesses these companies against a revised framework of 125 indicators using publicly available data on environmental, social and governance (ESG) issues.

Each company receives a total percentage score based on the indicators that apply to their operations, along with scores breaking down performance against the following 10 categories:

Sustainability policy and leadership

Landbank, maps and traceability

Deforestation and biodiversity

HCV, HCS and impact assessments

Peat, fire and GHG emissions

Water, chemical and pest management

Community, land and labour rights

Certification standards

Smallholders and suppliers

Governance and grievances

As Indonesia enters its dry season, the polluting haze that sweeps over the region during this time is often attributed to fires started to clear land. Given estimates over 2.5 million hectares – 100 million tennis courts – of land burned in 2015, it is encouraging to see an increase in corporate “zero burning” policies and evidence of implementation. More widely, however, there is little evidence of companies monitoring and reporting on implementation of “zero deforestation” commitments, potentially placing valuable forests and carbon-rich peatlands at risk.

Companies also scored poorly on new biodiversity indicators, with many producers lacking commitments to protect habitats and endangered species, especially outside of conservation areas. Few companies have published time-bound plans on reducing their greenhouse gas (GHG) emissions, and even fewer have public commitments to manage water responsibly.

In response to user needs and feedback, SPOTT assessments now score companies in more detail on social and governance issues, including policies on the fair treatment of workers, anti-corruption and whistleblowing. In obtaining free, prior and informed consent (FPIC) from local and indigenous communities affected by development, company policies lack detail in describing customary rights and to whom they apply. Not all of the companies have grievance processes in place, and few give details on the steps towards remediation.

ZSL’s palm oil technical advisor, Izabela Delabre, said: “We revised SPOTT’s indicators to provide a more comprehensive and in-depth analysis of corporate progress on addressing ESG issues, and to give more weight to the implementation of commitments. After sending companies their draft assessments last month, we have seen many of them showing eagerness to engage with us, as well as making subsequent disclosures of important sustainability information. We are observing a demonstrable increase in buy-in from top management with regard to ESG issues, and willingness to progress.”

Recently shortlisted for a Responsible Investor award, SPOTT also highlights recent media reports relevant to the assessments, in order to provide evidence of policy implementation and hold the industry to account.

The Zoological Society of London’s (ZSL) SPOTT initiative is expanding to assess the transparency of major forest product producers operating in priority tropical areas, scoring companies on their commitments to environmental, social and governance (ESG) best practice. We have selected 24 companies for publication by November 2017.

Timber and pulp production – a growing problem

International trade in wood products represents a market worth billions of dollars per year. This market requires a huge input of raw materials from the world’s forests, with global demand for industrial roundwood estimated to reach two billion cubic metres per annum by 2030 – an increase of 25% in twenty years.

Growth in production will be underpinned by increased demand for wood products: with consumption of pulp and paper products set to more than double by 2060; and the market for solid wood products anticipated to increase by at least a quarter over the same period. As the supply of wood from developed countries is set to carry on falling as demand grows globally, forest nations in the tropical zone will likely play an ever more important role in production.

If managed appropriately, the world’s forests have the potential to provide these renewable commodities in perpetuity. However, growing global demand is pushing tropical countries to produce cheap timber and pulp through the unsustainable exploitation of primary forests and the development of fast-growing plantations in place of these natural forests. Such activities may jeopardise both the long term economic development of producer nations and the globally important environmental services provided by natural forest ecosystems – including carbon storage, watershed regulation, and biodiversity conservation.

Tools for responsible investment

In the past ten years, the shift towards more sustainable and responsible patterns of investment has been pronounced, with an increasing number of investment professionals making commitments to sustainable finance initiatives such as the UN Principles for Responsible Investment. The delivery of these commitments can be made more difficult by the operational and reputational risks faced by tropical zone forest product producers, particularly as the finance sector increases its exposure in these emerging markets. To mitigate these risks, investors can use the information provided by SPOTT to improve their engagement processes and inform the research which guides their investment decisions.

New ESG indicators and assessments

SPOTT currently assesses the public disclosures and commitments of palm oil producers to provide Environmental, Social and Governance (ESG) relevant information to investors, buyers and other stakeholders looking to fulfil their own commitments.  SPOTT assessments for timber and pulp companies will provide users with a tried and tested toolkit for monitoring the transparency of key forest product companies operating in the tropics. 

Corporate transparency will be assessed through an indicator framework that draws on established sustainable forest management best practice principles – for example, the identification and appropriate management of High Conservation Value (HCV) areas. By assessing publicly available information against these indicators, the new assessments will help stakeholders to monitor progress, support uptake of best practice and foster better on-the-ground outcomes.

SPOTT will focus on tropical forests given their extremely high species diversity, vital role in livelihoods, and importance as carbon sinks and stores. Forest loss due to fire and forestry is also greatest in the tropics. According to Supply Change, an estimated 53% of timber and 37-60% of pulp exports from tropical countries have displaced forests. 

Country selection

To identify priority countries we applied a range of criteria to countries in the tropics such as amount of primary forest cover (FAO 2015), tree cover loss (GFW 2014 and FAO 2015), Industrial Roundwood production (ITTO 2014) and Intact Forest Landscape area (GFW 2014). We also considered the size of timber, pulp and paper industries within each country, and the extent to which they are driving deforestation. Our appraisal of deforestation risk made use of WWF’s Deforestation Fronts driver and threat assessments among other sources.

We identified 10 countries with large areas of high quality forest cover under threat from unsustainable timber and pulp production:

Company selection

With the list of priority countries selected, we identified key timber and pulp producers operating in these areas. We acquired an initial list of 383 companies provided by Bloomberg, refining the selection further by looking at those that specifically filed revenue from ‘forestry and logging’, ‘logging’ and ‘timber resources’. Other selection factors included location of operations, size of landbank and market capitalization.

SPOTT will initially score 24 timber and pulp companies, with a view to expanding this to 50 companies in future. 

The first set of assessments for timber and pulp companies will be published in November 2017. 

For more information and a full list of indicators and company details, please visit the assessment page for timber and pulp companies.

The Zoological Society of London (ZSL) runs conservation programmes in over 50 countries, including Indonesia, where we work to protect the Sumatran tiger (Panthera tigris sumatrae) through species monitoring, anti-poaching programmes, and engagement with local communities and industry. We recently invited members of the Roundtable on Sustainable Palm Oil (RSPO) to ZSL London Zoo’s Tiger Territory exhibit to find out more about our work in the field.

Tigers in decline

Tigers (Panthera tigris) – classified as Endangered by the IUCN Red List of Threatened Species – face a growing number of threats, from deforestation and habitat loss to poaching. Originally found across much of Asia, tigers now inhabit less than 6% of their historic range, with a 42% decline since 2006. At least three subspecies are now extinct, with tiger populations disappearing from Vietnam, Cambodia and Lao in as little as the last five years, where once thousands roamed. 

Of the remaining subspecies, the Critically Endangered Sumatran tiger is among the most vulnerable to extinction. Sumatra has one of the highest levels of deforestation in Indonesia, leading to highly fragmented forest patches that cannot support healthy tiger populations. This also increases the chances of human-wildlife conflict and makes the forest more accessible to poachers. 

The Indonesian province of South Sumatra is home to the Sembilang section of the Berbak-Sembilang National Park on the east coast and the Dangku conservation complex in its centre – some of the few remaining tiger habitats. However, less than 30 tigers are estimated to be living in the landscape, with no more than 400 individuals left in the wild. 

Our work in Indonesia

ZSL first started working with the palm oil industry in 2001, after a company contacted ZSL for advice on how to manage populations of Sumatran tigers found in concession sites around their plantations. Since then, we have been working on tiger habitat conservation in Indonesia through a variety of initiatives. 

ZSL Indonesia’s Wildlife Crime Investigation Unit

According to a survey from TRAFFIC, the global wildlife trade monitoring network, poaching of tigers for the illegal wildlife trade is responsible for over 78% of Sumatran tiger deaths. ZSL has set up a Wildlife Crime Investigation Unit to tackle illegal wildlife trafficking. Together with our Wildlife Conflict and Response Teams, our teams are working to address key threats to tigers, including poaching, illegal trading and human-tiger conflicts.

Through a collaboration with the Indonesia Ministry of Environment and Forestry we have also set up Tiger Protection and Patrol Units to tackle tiger and prey poaching. The patrol teams make use of the SMART approach– developed by ZSL and other leading conservation organisations – to identify and map threats such as poaching or disease, and make patrols more effective.

KELOLA Sendang

In South Sumatra, we are working to increase connectivity between crucial tiger habitats, now too small to support viable populations on their own. Part of a much larger landscape level project, KELOLA Sendang aims to facilitate and support government, the private sector and local communities to pilot a sustainable landscape management partnership model, potentially replicable across other areas in Indonesia and beyond.

ZSL’s SPOTT initiative aims to assess key palm oil and timber and pulp producers, some of which operating in the Sembilang-Dangku landscape on their commitments to environmental and social best practice. Expansion of oil palm and pulpwood plantations was responsible for nearly two-thirds of the destruction of tiger habitat in Sumatra from 2009 to 2011, so engaging with these companies is crucial to ensure populations are protected. 

Petra Meekers speaking at ZSL London Zoo

Following the RSPO European meeting in London, the SPOTT team recently invited delegates to an evening reception at our Tiger Territory exhibit at ZSL London Zoo. The event highlighted the importance of our conservation work with tigers and the palm oil industry, including a corporate perspective from Petra Meekers, Director of CSR and Sustainable Development for Musim Mas Group – a key palm oil producer assessed on SPOTT and operating in the KELOLA Sendang landscape. Petra reflected on the collaborative approach between ZSL and Musim Mas, emphasising the necessity of close consultation with multiple stakeholders.

On behalf of ZSL, we would like to thank our speakers and everyone who attended, and we look forward to further collaboration towards a sustainable industry – one that benefits people and assures a future for tigers and other animals.

As ZSL’s palm oil technical advisor, I attended this year’s Roundtable on Sustainable Palm Oil (RSPO) European meeting in London on 12-13 June 2017 to take part in a panel discussion on innovation and partnerships. The entire conference provided our team with opportunities to engage with companies on their forthcoming transparency assessments, but also to highlight the various reasons why ZSL and many other conservation organisations work with the palm oil industry.

Biodiversity at risk

Worldwide biological diversity is in steep decline. Through joint analysis by WWF and ZSL, the Living Planet Report showed that vertebrate populations have plummeted by 58% from 1970-2012, and we are on track to lose two thirds by 2020.

This loss of critical biodiversity is a direct result of environmental pressure from unsustainable use of the world’s natural habitats. On a global level, human activities including deforestation, pollution, overfishing – compounded by the effects of climate change – are pushing species to the edge of existence.

Indonesia is home to some of the world’s most iconic and threatened species, and from 1990-2005, the country lost over 25% of its forest and woodland habitat.

As producer companies are responsible for managing large tracts of land, they have a critical role to play in managing this biodiversity decline. Encouragingly, national and subnational governments are showing an appetite for change, as demonstrated through a public-private people partnership, KELOLA Sendang.

KELOLA Sendang

KELOLA Sendang is a landscape project led by ZSL in the Sembilang-Dangku landscape in northeastern South Sumatra, Indonesia. The project seeks to facilitate and support government, the private sector and local communities to pilot a sustainable landscape management and partnership model, helping the Government of South Sumatra to achieve its Green Growth Vision, which looks to achieve inclusive economic growth, biodiversity conservation and forest protection and restoration. It also aims to reduce land-based greenhouse gas (GHG) emissions through preventing deforestation, peatland drainage and fires.

There are numerous competing pressures on the landscape including forest conversion, fires, illegal logging, growing human populations and peatland drainage. These drive environmental degradation, increase GHG emissions, and contribute to biodiversity loss. Given the multiple pressures on the landscape, a diverse range of partners is needed – one actor cannot work alone in this. The partners in this project are establishing biophysical baselines and monitoring for peat and lowland landscape management, ensuring broader participation of stakeholders in decision-making, and including community participation in land use and boundary mapping. 

Another component of this project is using SPOTT to assess the environmental, social and governance (ESG) transparency of commodity producing companies – including those operating within the Sembilang-Dangku landscape. SPOTT ESG transparency assessments of timber, pulp and paper companies will be published in October, while our updated assessments of palm oil producers and traders – under a revised indicator framework – are due out at the end of this month.

The project is also working towards increasing connectivity between core habitats, creating corridors for tigers and other wildlife. ZSL first started working with the palm oil industry in 2001, advising companies on how to manage populations of Sumatran tigers found in their concession sites. On the evening of the close of the RSPO European Roundtable in London, we held an evening reception focusing on tiger habitat conservation following the RSPO European Roundtable at our Tiger Territory exhibit at ZSL London Zoo, to demonstrate our shared vision for a sustainable palm oil industry.

On behalf of ZSL, I would like to thank RSPO for hosting the 2017 European Roundtable in London, and I look forward to further engagement with companies, investors and other stakeholders in supporting transparency and moving towards more sustainable practices in the palm oil industry.

Banner image credit: James Anderson, World Resources Institute on Flickr CC BY-NC-SA 2.0