Theme 5: Impacts of trade and investment on forests and people Archives - Page 8 of 9

By Rob Finlayson, originally published at Agroforestry World Blog

Regrowth on degraded hillside, Myanmar. Photo: ICRAF

Ten Southeast Asian nations will form a single economic bloc at the end of 2015. Agroforestry, forestry and agricultural policies, implementation and law enforcement are lagging behind. The gap threatens millions of livelihoods, environmental safety and national abilities to adapt to climate change, despite some inspiring progress.

‘For ASEAN economic integration to work for the millions of citizens and national budgets reliant on agroforestry, forestry and agriculture’, said Delia Catacutan, ‘we need a change of mindset and behaviours as well as new, integrated policies, real implementation and enforcement. The risks of failing to provide for our people are real. And the consequences will be severe.’

Dr Catacutan was speaking on the sidelines of the 6^th ASEAN Social Forestry Network Conference at Inle Lake, Shan State, Myanmar, 1–5 June 2015. As the country coordinator of the World Agroforestry Centre Viet Nam, with a wealth of experience throughout Southeast Asia and Africa, she is well placed to be sounding a warning.

At the end of 2015, the ten countries that make up the Association of Southeast Asian Nations (ASEAN) will form the ASEAN Economic Community (AEC), opening trade, investment and labour markets, supported by a new, integrated transport network through previously remote, forested areas that are home to millions of indigenous, poor, smallholding farmers.

While economic growth will likely follow, what’s not yet known is the impact on the 3.4 million hectares of treed and agricultural landscapes that represent the major sources of livelihoods for the majority of the region’s citizens and are the primary drivers of national economies. Experience from other parts of the globe suggest what’s likely to happen is more deforestation, large-scale commercial monoculture crops, extraction of natural resources, environmental degradation, income disparities, environmental degradation and a lack of resilience to climate change that will create a ‘perfect storm’ that threatens not only the region but the planet. Unless the nations work together, quickly, to address some glaring gaps.

Read full blog at Agroforestry World Blog

The path toward sustainable land use needs a new quality of private and public cooperation.

This is – simplified – the take away from a discussion of scientists involved in the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) about global governance, trade and investment, and how they impact on forests and people.

Global commodity markets shape forest landscapes and the livelihoods of people but their role cannot be over-emphasized, since several other factors mediate their actual impacts, researchers agreed. But without governments guaranteeing land tenure, infrastructure and rule of law, no development is possible.

In their discussion they shared examples underpinning the tension between these two poles.

The experience with forest certification – aimed at fostering sustainable forest management – showed that there are limitations to what the market alone can achieve, Patrice Levang from IRD (Institut de Recherche pour le Développement) and seconded to the Center for International Forestry Research (CIFOR) argued.

His colleague George Schoneveld concurred, saying that such sustainability initiatives run the risk of creating disincentives for investors to productively engage smallholders due to high costs of monitoring their compliance.

Governments could force investors to be more inclusive – e.g. through building in conditions into concession agreements – but they still need to provide support services to both investors and smallholders to help them succeed, said Schoneveld. And those governments need to make sure that smallholders who are included in investment schemes effectively integrate new cash crops into their farming systems in order to prevent conversion of forestland and competition for farmland. However, this needs to be done in a way that safeguards local food security.

Anne Terheggen from the World Agroforestry Centre (ICRAF) said that no industry can work in isolation. “They all need to use the same road, the same harbor.”

But the market would not be able to “consistently work despite the government or against the government. Because at some point they will pull out and take their business somewhere else.” She spoke out for an “economy-wide system change.”

Paolo Cerutti, CIFOR Scientist, agreed that “there are points beyond which the market is not able to bypass the need for public regulations.” So when the limitations of public and private sphere clash, a third dimension is needed that goes beyond both, he advised.

CIFOR Principal Scientist Pablo Pacheco, who moderated the discussion, spoke of new ‘hybrid’ arrangements by state and non-state institutions that can harness public and private strengths and shape governance conditions.

Schoneveld found that PPPs and cross-sectoral thinking belong together when it comes to integrated land-use planning.

Weak governments – strong corporations?

Pacheco raised the issue of weak states with strong corporate presence and the question of whether they are able to put in place more inclusive processes.

While agreeing that this poses a problem, Cerutti warned against calling them weak states because many leaders are not weak at all. It is rather that – despite knowing what would be the most effective decisions for the country – they make politics in their private interests.

So the challenge, added Levang, is to find ways of bringing together the interests of “autocrats” with those of their constituencies. And there are win-win solutions to be implemented before an economy-wide system change happens.

Policies can shape markets

Schoneveld found it difficult to give general recommendations for policies on incentives for more sustainable land-use practices. “It’s very different for different sites,” he said.

“And the mechanisms you need are very site and crop specific… We really have to think about what is relevant in each location to address very specific issues. It depends on the crop, the farming system, the land tenure situation, and the ecology,” he added.

Although participants concurred with this view, Terheggen upheld that “it is possible for policy to shape a sector and to shape a sector in a beneficial direction.” She referred to ongoing research on governments’ industrial policies in Malaysia and Indonesia for palm oil, and in China and Laos for rubber. “These industries were actually created almost from the ground up. And they still influence behavior today,” she added.

“It all boils down to what are the core government functions” that ensure why some countries are failing and others aren’t. “It’s infrastructure, it’s property rights, it’s law – it’s actually law enforcement these days.” She stressed the necessity of “digging” through the existing information.

A historical approach to understand how institutions “materialized somehow” is also favored by Paolo Cerutti.

Read the full transcript of the discussion here

By Pablo Pacheco

For our third newsletter, we asked Pablo Pacheco, Principal Scientist with the Center for International Forestry Research (CIFOR), to reflect on recent trends and perspectives of global commodity markets and the challenges of sustainability in times of climate change. He argues for new ‘hybrid’ governance approaches that go beyond traditional public-private. For the CGIAR Research Program on Forests, Trees and Agroforestry, Pacheco coordinates the focus on “Global Governance, Trade and Investment,” known as Flagship 5.

Photo on main page: Moyan Brenn (Flickr/CreativeCommons)

A path out of poverty? Think Forest Wallpaper/CIFOR

In the last decades, globalization and market liberalization have become two irreversible processes shaping development trends. They have stimulated greater interconnection of markets as well as intensified trade and capital flows. These two phenomena came with different promises:

that they would stimulate modernization and economic growth of producer countries due to efforts to compete in international markets
that benefits from accessing new export markets would ‘trickle down’ to the rural poor, thus helping to alleviate rural poverty.

In reality, trade and investment have indeed contributed to economic growth of producer countries, but they have also left their promises unfulfilled. Growth has occurred only in a few sectors, often the most capital intensive ones, and they have even placed additional threats on people and forests.

Global markets, in many cases, have stimulated the expansion of commercial agriculture, often through large-scale plantations. This expansion contributes to national earnings and increases formal rural employment, as well as the uptake of new technologies. In some instances, large-scale investments integrate smallholders, often through partnership schemes, in order to expand their supply base. This helps to distribute benefits more evenly. In other cases, global markets for high-value crops open up opportunities for smallholders to compete, which helps them to improve their income streams.

However, global trade and associated investments also lead to significant negative outcomes, mainly when they occur in context where a poor governance persists. The growth of commercial agriculture, which has even penetrated into distant forest frontiers where land is cheaper, can sometimes displace more traditional local farmers. Agribusinesses do not necessarily employ local people since they require more skilled workers to manage capital-intensive operations. In many cases, timber from forest conversion is used to finance agricultural expansion. The negative effects of deforestation are well known, especially in the provision of environmental services at the local and global scale.

Main trends in global trade and investment

The main consumer countries in the world are purchasing more food, feed, and fiber from the ‘south’, from countries where production costs and scales are competitive enough to supply distant markets. As a result, food systems are more and more characterized by increased vertical integration, from the local to the global level. Large and complex value chains are developing. Foreign investments are growing, and not only in expanding the processing of food, as was the case in the past. They also flow into upstream production. Large-scale corporations need to secure their future supply in order to handle price volatility, which lately tends to characterize main global commodity markets.

Sustainable agricultural yields. Think Forests Wallpaper/CIFOR — Sustainable agricultural yields? Think Forests Wallpaper/CIFOR

Countries that don’t produce enough food and energy themselves have put in place some incentives for emerging transnational companies to invest in producer countries, mainly in the global south. This is further stimulated by trade agreements. These investments are also supported strongly by host countries, which are increasingly interested in attracting Foreign Direct Investment (FDI) into their economies. They tend to create more conducive investment environments, sometimes by lowering the social and environmental standards that investors have to comply with. But it is hard to generalize.

Growing investments in agricultural supply are driving increased competition for land, forest, water and nutrients. At the same time, countries are also struggling to put in place more effective policy agendas to comply with their commitments to reduce greenhouse gas (GHG) emissions. This creates an important challenge on how to promote crop commodity expansion with greater sustainability.

Governments have traditionally been interested in expanding agribusiness and large-scale agriculture as an efficient production model. Yet, more recently some efforts are being put in place to modernize smallholder production systems and to strengthen public investments in supporting infrastructure. For example, sugarcane companies and other medium- and large-scale agricultural producers in Mozambique are supporting outgrower schemes to expand their supply base, which is also the case in other countries in sub-Saharan Africa where this type of partnerships in agriculture are promoted.

Nonetheless, more inclusive business models require more financial resources to be put in place given the additional demands on extension and technical assistance, and the outcomes take longer to mature. This creates another challenge on how to modernize agriculture with greater social inclusion.

Much to gain from global markets and investments, but not without risks

Global trade has given producer countries access to international markets with a growing demand for commodities, which in turn has increased the flows of private and public resources to be invested in infrastructure and production. This, in many cases, has translated into improved market logistics and social services. FDI has contributed to modernizing some segments of agriculture, mainly by improving adoption of technologies and know-how, by expanding the storage and processing capacity, and by formalizing rural labor markets. More capitalized smallholders have been able to link to those markets.

However, concentration has also increased in the value chains, stimulated by global traders and transnational companies seeking to enhance their economies of scale in both supply and marketing. Furthermore, despite growing interconnections among producers, processors, traders and retailers in these value chains, market failures and asymmetries tend to persist in the markets, mainly on the supply side. These failures often increase the risks not only for investors but also for local farmers and stakeholders, and tend to amplify some undesired social and environmental impacts.

1) Social impacts

Social impacts have mainly to do with the exclusion of traditional farmers from the value chains because they are less capable of competing—in terms of costs, quality and volumes—in more demanding markets that look for a regular supply of relatively homogeneous products. This leads to increased disparities in the distribution of benefits and fuels social stratification. Another major social issue is land appropriation by national or international corporations, often making use of political influence, when local people are not able to secure their often informal tenure rights.

2) Environmental impacts

More resiient ecosystems. Think Forests Wallpaper/CIFOR — More resiient ecosystems? Think Forests Wallpaper/CIFOR

The main environmental impacts relate to forest loss, soil erosion and water pollution. With regards to deforestation, the estimates of how much forest is converted for agricultural expansion to supply global food, feed and energy markets are still controversial. Disaggregating data is difficult as one portion of global supply originates from increasing yields in lands that are already dedicated to agricultural uses, and another portion occurs on newly deforested lands, mainly in the tropics.

It is important to take into account that in some cases, like in Brazil, there is a decoupling between deforestation and crops and livestock production. In the past years, agricultural production there continues to expand, but under lower annual deforestation rates. Other countries, like Indonesia, still follow a conventional trend since oil palm, the main tradable good, still takes over primary forests. It is noteworthy, though, that not all the supply associated with deforestation targets export markets, since an important part, as crude palm oil in Indonesia, also supplies rapidly growing domestic markets.

Tackling the most pressing challenges for trade and investment

Managing the impacts of trade and investment means tackling the first challenge mentioned above, which is promoting a growth in commodity supply while ensuring sustainability. The past years have seen some initiatives in that direction such as certification schemes or zero deforestation pledges. Less has been done in order to deal with the second challenge in terms of supporting agricultural modernization with social inclusion. It is even likely that when tackling the first challenge of moving towards more sustainable supply, it might work against social inclusion. Thus, a major emerging third challenge is making progress in the sustainability agenda but supporting social inclusion.

Interestingly, the architectures underpinning global supply of food, feed and fiber are becoming more complex over time because two major institutional dynamics are taking place:

The private sector, mainly large-scale and transnational groups, is gaining a greater role in organizing the value chains in both consumer and producer countries.
Multi-stakeholder processes with an active involvement of civil society organizations are becoming more influential in the governance of value chains at different levels.

GreenGrowth_1024x768 — A shift toward reen growth? Think Forests Wallpaper/CIFOR

In this light, an important step in making progress towards more sustainable commodity supply was made through defining sustainability standards as part of certification schemes (e.g. Forest Stewardship Council, Roundtable on Sustainable Palm Oil) with independent monitoring bodies. Yet, the adoption of certification has been relatively slow in practice. The slow progress has led some consumer countries, notably the European Union, to adopt import regulations to source goods complying with legality (e.g. EU Timber Regulation) or sustainability standards (e.g. Renewable Energy Directive).

Recently, many leading consumer goods companies, global traders, and corporate groups made explicit, time-bound, commitments to zero deforestation. Numerous industry and multi-stakeholder groups are currently defining the scope and implementation mechanisms necessary to meet their pledges to deforestation-free supply chains. Most commitments focus on oil palm, which is a leading driver of loss of tropical forest. However, major downstream consumer good companies, such as Unilever, Nestle, and Mars, are expanding their commitments to other commodities such as beef, soy, sugar, and timber. Some companies are also complementing their zero deforestation pledges with commitments to protect local land rights, and protecting peatlands. The latter is particularly important in Indonesia.

In spite of the opportunities, there are also several risks associated with the implementation of these commitments.

Commitments can lead to increased demand for non-forested lands, putting pressure on other significant ecosystems, such as wetlands and grasslands.
By focusing exclusively on reducing deforestation one may fail to adequately address the degradation of remaining forests and the restoration of degraded areas.
Many companies may be required to narrow their supply base to a smaller number of producers with the capacity to conform to more stringent production standards.

Solutions to climate change? Think Forests Wallpaper/CIFOR

Different approaches are emerging in order to reduce the risks of these commitments, some of which are not too new. For example, rights-based approaches that emerged to protect local customary rights to land and forests, are stressing the importance of securing tenure rights as a way to reduce likely growing social risks. Some argue that more sustainable business models could help integrate smallholders into the corporate value chains. That way, local farmers can also benefit from the development of more responsible consumer behaviors instead of being marginalized. Others consider that jurisdictional approaches, combining private sector and state efforts may have significant potential to reduce territorial risks of supply chains for banks, investors, and end-buyers. The latter thinking has largely been driven by a climate change mitigation agenda aimed at reducing GHG emissions,

Making governance arrangements work for sustainability and social inclusion

Currently, not a single approach on its own will be able to deal with the challenges associated with trade and investment. Yet, emerging complementary state and non-state institutional arrangements are offering some hope for change to happen. However, right now state agencies and the private sector (prodded and assisted by NGOs) are following relatively separate pathways in order to reduce GHG emissions, and ensure that commodity supply does not place additional pressure on forests.

More explicit initiatives and mechanisms for coordinating state and non-state (i.e. private sector and civil society) actions are needed. Such ‘hybrid’ forest governance arrangements and architectures might be more effective in sparing forests from being cut down, than state regulations and private-sector sustainability practices by themselves. The ‘hybrid’ approaches are still in their infancy, yet they have the potential to develop into more consolidated initiatives, arrangements and architectures that could lead to more effective ways to deal with the three challenges outlined earlier, mainly of promoting a growth in commodity supply while ensuring greater sustainability, and also larger social inclusion.

A positive example comes from Brazil and entails

a combination of clear regulations and strong enforcement of the environmental law,
along with voluntary commitments from landholders to restore the legal forest reserves,
and greater interest from soy and beef industry to support the adoption of improved production practices by their suppliers.

All this together is reducing the pressure on forests while maintaining a growing supply, yet much more efforts are needed to improve intensification and integrated land uses, as well as involve smallholders.

In Indonesia, the government is making important efforts to implement some sustainability standards for oil palm production, as well as a moratorium to protect primary forests and peatlands, and put in place a complex multilevel land-use planning. The private sector is also investing in cleaning their supply chains, mainly in the palm oil sector. However, regulations have to be adjusted to facilitate protection of High Conservation Value areas, and improved coordination is required across different levels of government.

It can be argued that ‘hybrid’ governance arrangements have the potential to increase accountability and transparency of actors in both the public and private sectors, for example, with regards to land use and traceability of commodity supply. These new hybrid models could also expand the incentives for companies to build more inclusive business models and for suppliers to adopt improved sustainable production systems and practices, with higher economic and environmental gains. Likely, sustainability and social inclusion will only be achieved through shared responsibilities and commitments, and improved coordination, between state and non-state actors at multiple levels from local to global.

Researchers from the Center for International Forestry Research (CIFOR) and the World Agroforestry Centre (ICRAF) held a discussion on the impacts of trade and investment on forests and people, which was previously the title of their research project under the CGIAR Research Program on Forests, Trees and Agroforestry (FTA). Extended to 2015-16, the project is now called Global Governance, Trade and Investment. The discussion was moderated by CIFOR Principal Scientist Pablo Pacheco, the coordinator of this so-called Flagship 5. Participants were Paolo Cerutti (CIFOR), Patrice Levang, seconded to CIFOR from Institut de Recherche pour le Développement (IRD), George Schoneveld (CIFOR) and Anne Terheggen (ICRAF). Read the blog on the discussion here

Pablo Pacheco: The main focus of Flagship 5 is understanding the negative and positive implications of global trade and investment in transforming forest landscapes. As part of this, we acknowledge the role that transnational corporations, global commodity traders and international financial institutions have in shaping investment trends. The demand for commodities places pressure on forests in multiple ways associated with food, animal feed, fiber and energy markets.

The effects that global and national markets have on local realities are not straightforward since they are mediated by complex transmission effects. In the ongoing debate, there is also the recognition that state actors in the producing countries tend to be weak in finding ways to reduce the pressures from markets on forests and local people, and addressing negative social and environmental outcomes, and harnessing the positive ones.

Given this, non-state market-based mechanisms (e.g. certification, import regulations, codes of conduct) have emerged as a serious attempt to minimize these impacts, yet their outcomes tend to be contradictory, and are not always as effective as originally expected. Recently, we are observing the emergence of corporate pledges to zero deforestation. These commitments open up a new set of questions about the effectiveness of demand-driven initiatives by the private sector in contributing to put in place deforestation-free supply chains.

Our research, on one side, assesses the drivers and the impacts of markets and investments on forests, related to some major global commodities – mainly oil palm, timber, soy, beef and sugar. On the other side, it looks at the effectiveness of different government regulations and private sector initiatives aimed at managing those impacts and trade-offs.

We look at both consumer and producer countries. Our attention is increasingly focused on understanding the opportunities and limits of efforts to build more sustainable supply chains in the context of initiatives to improve governance at the territorial level. And at assessing what are the motivations and innovations that originated from corporate actors.

Market impacts

So I would like to ask you to share some of your views about the impacts of global markets and investments on forests and people. What are the positives and the negatives? And how do we see that they translate across the different regions or countries in which we work? How do you think we are contributing to this debate?

Patrice Levang: Let me start with oil palm. The small blog on Monga Bay that we published in March is still very much up to date. Following the recent drop in palm oil prices, some large Southeast Asian companies, presently expanding their plantations in Western and Central Africa, are reconsidering their plans. While they were rather reluctant to include smallholders in their schemes in the beginning, these recent developments (increased pressure from environmental and indigenous NGOs, pressure from civil society and local governments, drop in palm oil prices) pushed the companies to change their mind. Some of them now consider outgrower schemes as the future of the sector.

Large companies are willing to reduce their share in the production subsector of palm oil, leaving more room to smallholders and independent planters to produce Fresh Fruit Bunches (FFB). They would confine most of their activity to processing palm oil and secondary products in large industrial mills, which is the subsector where they can make the biggest profits.

Considering the No Deforestation pledge, I see it more and more as a way to put high barriers to entry of competitors, rather than a strong ethical will by the companies. But the result is there.

Pablo Pacheco: George, would you like to add to Patrice’s perspectives in terms of how the implications of these investments or markets are mediated by the business models? Why do you think it is important to look across different business models to understand the impacts that this may have, not only in production but also in distribution of economic benefits?

George Schoneveld: I’m thinking there’s increasing disincentive, actually, to include smallholders. Especially with these new sustainability initiatives, integrating smallholders is becoming more and more difficult because it’s expensive to develop the traceability systems. And it’s also very expensive to start monitoring their production. So that’s something that could be an impact – increasing disarticulation of smallholders from large-scale investments and sustainability initiatives.

A family enjoy the afternoon on a smallholders farm along the BR-364 highway in Acre, Brazil. Photo: Kate Evans/CIFOR

These costs could lead investors to narrow their sourcing base to a smaller number of suppliers that have greater capacity to adopt good management practices and/or to achieve economies of scale through company owned plantations.

An interesting example is Mozambique, where there are lots of soy companies that started outgrower schemes. But, because of the risk of side-selling and the lack of a good regulatory framework to protect contracts, they’re actually moving away from smallholder inclusive models to more plantation-based models – since they were trying to target international buyers with sustainability requirements.

So these sorts of shifts, we have to be cognizant of. It might be different for different crops in different sectors, but that’s an impact I think we need to be observing carefully.

And we also need to start thinking about the types of governance arrangements that could protect smallholders and actually ensure that they participate in sustainability initiatives, instead of being alienated from them, which could lead to an increased articulating of smallholders to informal, parallel markets that are articulated more to, say, local economies than to international premium markets.

From that perspective, it’s very important to start looking at business models, and at what can be done to promote more meaningful smallholder integration, while investing in the upgrading and sustainability of their production practices.

And that can be done through financing, for instance. It can be done through integrated land use and economic planning. It can be done through public-private partnerships. That’s something that’s being trialed now in the region through these spatial development initiatives, for instance.

So, we have to start looking more at these innovative models. Also, to involve more meaningfully the states in planning investment, and to think about these technical and financial barriers to participation that smallholders face.

Anne Terheggen: I would like to add something, and I think you said it already. It might be commodity specific, right? Because when I had a look at the timber industry, for example, I saw a lot of movement actually. I think it’s important to have that commodity differentiation that George hinted at. Because, in timber, what I saw a lot was the move towards the source, because it becomes important to have a concession to be able to control the supply. If you are a buyer, and you’re depending on smallholders or other companies selling you something, you’re lost and you will not have control. So they all go back to the source.

Rubber tree tapping. Photo: Aulia Erlangga/CIFOR

And then maybe just an additional note – and this is going to be a paper we’re working on. We look at the historical context much more of industrial policy. We do that for palm oil in Malaysia and Indonesia, and rubber in China and Laos. Because these industries were actually created almost from the ground up. And they still influence behavior today.

So I’m more and more convinced that it should be an integral part of any analysis. And it is possible for policy basically to shape a sector and to shape a sector into a beneficial direction. The question of smallholders I don’t necessarily agree on. As I said, I understand why they’re there and I understand their situation. But I think the issue can only be solved when one looks at the entire economy.

One of the questions why smallholders are where they are, and why they might be stuck in agriculture or palm oil or whatever, is because they don’t have other options. Or they hold onto land because there’s no other insurance for them. So they’re forced to be there, but they will never be as productive as a big company. They just can’t.

So there are hopefully solutions, but I don’t think the silver bullet has yet been found. And I don’t think it’s in the sector. It’s in the economy and the mix of sectors offering choices. And we researchers can’t offer that. It’s the government and the industry and the market that has to do that.

Pablo Pacheco: Would you like to add, Patrice, in terms of to what extent you see that the moves you have been looking at are just an exception? Or do you think that can be the overall trend of the cases that you have been looking at, in Cameroon for example?

Patrice Levang: As George mentioned, I think that the place and role of smallholders in the value-chains is both commodity- and site-specific.

The companies are facing increased opposition by environmental and indigenous groups. Companies are facing increasing costs to meet all demands from NGOs, like free prior informed consent (FPIC) rules or excluding High conservation value (HCV) forests from their developments. Even then, they keep being criticized by activists. I get the feeling from their reaction that they are ready now to promote more smallholder schemes, which they were more reluctant to do in the past. So that’s a change.

But I also agree that this is a big problem for certification because getting palm oil certified for a huge number of smallholders is increasingly difficult. So it might happen that we have a two-way evolution of certified production: the oil by industrial estates with higher value, sold in Europe and in the States; and the smallholder production which is totally possible in Western and Central Africa, where they’re still far from being self-sufficient in oil. So they can go without certification.

Pablo Pacheco: I agree on the fact that the way in which companies tend to engage with smallholders depends on the structures of incentives. The latter is also a result of several contextual factors. However, it is interesting what George put on the table. That increasing pressure for compliance with sustainability standards leads them to leave behind the smallholders, and look for gains in efficiency by sourcing from large-scale operations.

The timber sector provides interesting examples and lessons about how smallholders can get more integrated or not when the market begins to demand higher standards. Paolo, can you elaborate more on the timber sector?

Paolo Cerutti: The timber sector follows a different model. We generally don’t have this integration of large and small scale on the same production unit. What we have now is probably not the most effective model, that is large-scale logging concessions with compulsory forest management plans, which are also starting in Brazil on one side – mostly dealing in the international timber market. And on the other side, there are small-scale, medium to small-scale, individual producers that for many reasons, including the cost to produce timber for the international market, prefer to remain largely domestic or regional.

China and India are still repositories also of this small-scale timber. But I think it’s a tiny percentage of the total. At the moment, the big problem facing small-scale producers and smallholders comes from the international calls for legality. Because now the governments and international institutions try to put a lot more focus on them, and that could lead to negative impacts on their livelihoods.

From what we found, these guys are generally well off thanks to their forestry activities. Not all of them, but it’s a big business, and they make money out of it. It’s real money that trickles down to the remote locations where positive financial impacts are needed, where the money from the industrial timber taxes generally does not go. So that’s the picture we have now.

We have also been doing a lot of work on forest certification, but unfortunately in terms of certification in the tropics we are also very much skewed towards large scale logging concessions. We still don’t have any timber certification scheme that specifically targets smallholders, and none of those that I know of that have been tested are really working.

Because, basically, the philosophy of certification is based on the market. And if the market remains the local or regional one, there is no sense in going for better, improved production. Those requests are simply not there in the demand of the local markets. That’s the picture we have.

To resume, I think our research recently has been more in the sense of creating awareness of those negative impacts that the large, international forest regimes could have on the smallholders, before trying to propose policy options that governments could adopt to avoid such negative impacts.

Incentives and policy instruments

Pablo Pacheco: Maybe now it would be interesting to move this discussion to what George put on the table in terms of what are the sort of incentives or policy instruments that could be used to rebalance these potential trends of companies, in an attempt to adopt more sustainable practices, cleaning their supply chains – how that is going to impact smallholders? I don’t think we have too many cases that show what can be the role of the state in actively trying to support adoption of sustainability practices. And, at the same time, trying to build more inclusive economies. So, to what extent are policy recommendations just ideas?

George Schoneveld: It’s very different for different sites, and the sorts of mechanisms you need are very site and crop specific, so we need to be very cognizant of that.

I think an example is the oil palm expansion in Pará, Brazil, in the case of Agropalma. It’s being done in an inclusive manner and in a sustainable manner. But why does it work in Pará? And would that model not be able to be transposed, say, to an African country?

Fact is, it’s premised on having institutional capacity that ensures enforcement of social and environmental safeguards, and it works there because of clear, individual property rights. And if you go to a situation where you don’t have clarity of property rights, a whole suite of new issues could arise from the introduction of these inclusive models – such as increased competition for land and undesirable land-use changes that could involve loss of food security and deforestation.

And that’s why you have to look at very specific issues, such as – if you introduce a cash crop, how can you prevent unfavorable land-use dynamics? How can you prevent increased competition for land? How do you create production arrangements that reduce the risk of side-selling? How do you ensure that the quality of technical support is good, and contract enforcement is good? So they’re all very specific issues that require, I think, different sorts of policy instruments and different types of governance arrangements. And, again, like the example of Brazil shows, these issues are different for every single site in every single country. So it’s very difficult to talk about standardized arrangements.

We really have to think about what is relevant in each location to address very specific issues. These issues are specific to the crops, to the farming system, and to specific ecologies. To me, it’s very difficult to say: this instrument is better than that one, and this is how we do it. It’s decidedly complex and requires approaches tailored to local realities and challenges.

Pablo Pacheco: I think that’s a good point. But if we go back to what Anne was saying in terms of how the state policies can shape the development of sectors, maybe also there’s a way to think on a macro level of policy instruments that states can apply to favor these processes. Anne, would you like to go back to what you were saying before?

Anne Terheggen: One of my favorite studies – that I’ve never done – was to actually go back to Europe, and to look at some industries there. Because Europe has been poor, or certain countries in Europe have been poor, and have been dragged along because they’ve joined the European Union. We look at Portugal, really poor, the agriculture there, really, really poor. And then they made it big because they were focusing on flowers and other horticultural products.

So I think this is what might be pushing us or helping us to think in the right direction, if we were to have more information about what policies were implemented in countries that already made it happen. Japan wasn’t long ago, South Korea didn’t develop long ago. That’s 60 years ago. That information is there. And then adjust it, obviously. It needs to be adjusted to each crop, doesn’t it? I mean, palm oil is not the same as cassava or something else.

George Schoneveld: Yes, I think about translatability from one context to another. And that’s what struck me so much about doing a similar sort of research in Mozambique, and doing the same thing in Brazil. To realize why you have such extremely different outcomes. And you really see that these contextual factors play such an important role. So I’m very reluctant to think about: okay, this worked in place X – thus, we can transpose it into case Y.

Anne Terheggen: No, you don’t just look at case X. You look at X, Y and Z. As many as you can find. And then ask, what are the core fundamentals? And that boils down to, what are core government functions? And we actually know the answer, we know why it’s failing: infrastructure.
Obviously you have to look at a number of countries, but we know what the core government functions are. It’s infrastructure, it’s property rights, it’s law – it’s actually law enforcement these days. We already know why they are failing. Paolo, you did a comparative study. I think actually there must be a lot of information already in the existing literature. It’s not a reinvention of the wheel. We need to do the digging.

Pablo Pacheco: We need to know what are the basic conditions that can explain what shapes improved behavior by the actors involved. For example, if we go to some specific contexts like Cameroon in Africa where Patrice is working, it seems that those basic conditions are not in place. States are weak or not strong enough in shaping good corporate practice. So, to what extent are governments willing – vis-à-vis the private sector – to put in place mechanisms to ensure more sustainability and social inclusion, without making them obstacles for developing the national economies?

Paolo Cerutti: Patrice, before you answer, can I say one thing? I think we should stop thinking about these states as weak states. These people are super powerful and they know very well how to do the wrong thing because of the returns to their private pockets. So they should be doing the right thing, instead of thinking only of their pockets. They have the capacity, they have the knowledge to do most of the things that researchers and other partners suggest to them to do. The problem is that it is not in their interests. So I really would not call them weak. We might find another term.

Patrice Levang: Well, what is weak in a state is not the head of the state. These autocrats have much power, that’s true. As Anne mentioned, it boils down to the same items – infrastructure, property rights, etc. We already know that. We also know that we won’t change this in a short time, so we need to find alternative ways with these weak states and strong autocrats in power.

How can we propose policies that are acceptable for the strong heads of states and for their constituencies? And that’s kind of an in-between way. For instance in Liberia, the government included in its concession contracts the obligation for the companies to reserve at least 15% of the land to smallholder development. This is something that has been working, some companies even consider increasing this figure to 30%. The reasons behind this choice might not be inspired by rural poverty alleviation. And the same with zero deforestation. Dominant companies might use this move to strengthen their position, not to fight deforestation.

George Schoneveld: I do agree with you. I think there are mechanisms, either through the financial industries or through concession agreements and conditionality being built into investment plans where you can force investors to become more inclusive. But then: inclusive business models are not always necessarily inclusive.

How can you make sure that there’s equitable distribution of benefits? That smallholders gain the technical capacity they need to be good outgrowers? That they don’t sell on the side? That there isn’t a displacement of food crops? That women are not marginalized?

So there’s a whole suite of issues that you need to address, and that requires strong institutions. It’s more than just a concession contract with conditionality or regulations. It’s about the state that is able to provide the sort of support services to ensure that investors are able to deliver on what they want to achieve, because they also face many challenges.

And also, to support smallholders in integrating these new crops into their farming systems, because it’s a huge problem if people start displacing food crops or if they refuse to displace food crops and then go to forest land. Such issues are often not the responsibility of investors and require state support to manage negative trade-offs.

So there are many, many issues. And, again, it points to institutions and a whole suite of institutional options that clearly demarcate private and public mandates and accountabilities.

Patrice Levang: I totally agree. It’s a huge problem. We won’t solve it just like that. We have many examples. If the smallholder sector developed well in oil palm, of course you will displace food crops because producing food crops doesn’t pay. In the countries we are working in, like Cameroon, the government is unable to provide the adequate extension services, so we have to count more on the private sector. That was the idea.

Public and private engagement

Pablo Pacheco: So, in that sense, may I invite you for a last round of interventions about how you see the arrangements between the public and private sector, and their potential to lead to better outcomes in terms of sustainability and inclusion. I think we have to move beyond looking separately, at public policy instruments and regulations, on the one side; and on the other side, at private sector or non-state actors’ initiatives and commitments. It makes more sense to understand how public and private actors, through diverse types of governance arrangements, will be able to trigger some effective change in practice.

Paolo Cerutti: We see it clearly in the research on forest certification. I don’t know whether it’s easier compared to the palm oil sector. The fact is: you see that certification was launched as a market instrument, a private, voluntary instrument with the capacity to bypass public policies completely. So the idea was, the state is not able to deliver anything, let’s use the market to deliver this better. Sustainable forest management, among other things.

But then we see now, after all the analysis that we have done on the real impacts, that there are points beyond which the market is not able to bypass the need for a government, exactly because there is a state. Because there is a regulation, because there are public policies. And, in those instances, when these two things clash or encounter themselves, then it’s a third dimension that we need, neither completely private nor public, but with some characteristics of one and some of the other. I would think it is this type of institution, beyond the state and beyond the market, that we need in the future to manage those sectors – to have even better outcomes.

I have no idea what that new type of institutional setting should look like. We have some ideas about the characteristics that it should have. But, at the moment, I don’t have any practical example in the world where this has already become a working reality on the ground delivering positive outcomes.

George Schoneveld: If I may add to that, I think what’s important is that we don’t think in sectoral silos. Because there are so many linkages and displacement effects and interactions between sectors that, whatever sustainability system you develop within a specific location, it has to be cross-sectoral in orientation.

So you need to think about integration the production of food crops, energy needs, and improving income generation through cash crops – all together. Therefore, research should look across various sustainability issues – indeed, at the social, environmental, and the economic side. And how you develop an integrated system like that – this is the question.

I do think there are public-private partnership (PPP) type models that are being trialed at the moment in Africa, that involve integrated development planning, integrated land-use planning and that adopt a landscape and territorial-type approaches. And we have to think more in that direction rather than narrowing in on specific impacts and specific sectors.

Patrice Levang: Well, yes, from a purely academic point of view a cross-sectoral approach would be good. But when it comes to local solutions, moving forward to something really effective, we have to keep some actions on the ground. Smaller, more site-oriented interventions, keeping in mind the broader view, I agree. But if we go too broad, we might stay at the very high pie in the sky, wishful thinking. We need some actions on the ground. I think we can find something managing both points of view.

Anne Terheggen: I wonder, should we have a lot of PPPs? Because a lot of political officers profit from logging companies or oil palm industries being in the country. That’s why they are there. Malaysians moved into Indonesia to grow palm oil exactly because they knew they could give some money to the Indonesians. And that’s the working PPP model. That’s the established model.I don’t have an answer to what the alternative is, but I completely agree with Paolo on my right and George on my left. I think there needs to be an economy-wide system change. An industry cannot work in isolation. They all need to use the same road, they all need to use the same harbor or whatever other facility. And the market itself does not have the power and the endurance to consistently work despite the government or against the government. Because at one point they will get out, pull out, and take their business somewhere else. But what to do with this knowledge, I don’t know yet.

George Schoneveld: I do appreciate what Patrice is saying about having to work on the ground and finding site-specific solutions. And obviously it’s hypothetical and there are huge practical challenges to resolve to develop a system like that.

I’m a bit more optimistic, though, if you start looking at the headway that’s being made, for instance, with more territorial approaches, jurisdiction approaches in general. Sustainability initiatives need to be embedded into more territorial and PPP style initiatives. And for which, at the moment, there’s quite a bit of momentum, especially in East Africa through Climate-Smart Agriculture Initiatives, through the different Climate Change Actions Plans, for instance, to undertake planning and sustainability initiatives at the local level.

So there are options and concrete initiatives that enable you to do develop sustainability systems that are cross-sectoral in orientation and involve a wide range of stakeholder groups.

And also, the spatial development initiatives I was talking about before, like these agricultural growth corridors in Tanzania, Mozambique and Zambia for instance. You see the sort of planning and the participatory approaches that they’re sampling. There are some interesting results coming out of that.

So I do think we have to look more clearly at those sorts of initiatives and examine those implementation challenges, and not dismiss them outright. Because there is a certain research momentum ongoing already.

Future research priorities

Pablo Pacheco: I would like to invite you for a final round of comments about the priorities for our research in the future. As it has been mentioned, new governance approaches and more integrated perspectives are emerging that embrace sustainability and social inclusion as part of broader development perspectives. We still don’t know exactly what the limits of those initiatives are, or how much those are going to make a difference. Thus, let me ask you to share your thoughts about where do you see the priorities for our future research.

Patrice Levang: Our work on the promotion of smallholder oil palm development is not finished yet. We saw that it had many positive impacts compared to large-scale development.We started to investigate the role of micro mills, which is very commodity specific, but which has many interesting impacts locally – on the organization of smallholders and cooperatives. But this is something on the ground. It’s so far not really linked to large-scale initiatives of business. Though we have contact with investors in the UK, who are looking for a way of funding the development of a dozen micro mills in Cameroon and in other places of West and Central Africa.

So we’ve been contacted to find out how they could interact for a more people-friendly development of the sector. We don’t know what’s coming out of it, but that’s what we’re focused on.

Paolo Cerutti: I think we need to understand where those kinds of institutions that we’re aiming for are coming from. And that’s a lot of historical, if you want, or ground-based research. But in some other fields we know that those institutions materialized somehow. So, for me personally, it’s very interesting to understand when and where they are coming out, and how we can help them to come out sooner rather than later. If we were a lobbying organization or something else, there would probably be more to be done now.

And, with the research, support those institutions that, at least in the timber sector, would be able to produce positive outcomes for both the industrial, large-scale sector and small-scale smallholders. Because the large-scale logging concessions are not inherently bad. But there are tensions between the two models and they need to be solved.

Anne Terheggen: I’d like to focus more on the quality issues. I’m already writing a paper on how China influences other countries’ policy. And the discussion we had earlier, I think that’s important. But what is the important key we need to turn? I would focus on China in the future.

Actually, I think we all need to look more closely at agriculture. Because, from my economist perspective, that’s the key sector that needs to turn around for a country-wide dart for change.

And the other thing I proposed for ICRAF, but it’s applicable to FTA as well, is to start classifying countries into groups so that the analysis is easier to put into a context and to be compared. Because if I go and study a poor developing country like Laos, and then I go to middle-income Brazil, I’m on different planets. And I think it needs to be specified more clearly why that is. Because if I go and study a poor developing country like Laos, and then I go to middle-income Brazil, I’m on different planets. And I think it needs to be specified more clearly why that is.

George Schoneveld: What I mentioned before about these more territorial PPPs and landscape-level approaches – I think that deserves more research. And, specifically, about how you can embed different types of international sustainability initiatives within such approaches. I am talking about zero deforestation and certification schemes, whether led by the private sector or multi-stakeholder driven. So that’s very much focused on territory-based governance arrangements.

And I think, in line with that, there is a need to improve our knowledge on the context specificity of investment-related outcomes. This will enable us to identify the demands on institutions to mitigate negative and capture positive outcomes. It’s very much looking at factors that shape sustainability outcomes.

And once we have a better handle on those processes, then you can work towards developing a decision support system that could input into designing territorial approaches that are cross-sectoral in orientation. That are able to resolve the tensions between economic development, equity, and environmental management, and involve also non-state actors in a co-regulatory capacity.

Pablo Pacheco: Let me put on the table my own list of priorities. I think is important to look more closely at what are the opportunities and the limits of emerging corporate commitments to sustainability, and if they are really going to make a difference.

Also, there is a need to question further the concept of sustainability which is behind all of these commitments, and what is the common denominator shared by the different actors, either state and non-state actors, so to have clear criteria about what are the targets that can be achieved. This also should apply to issues around social inclusion and distribution of benefits.

I agree with others that we have to put more attention on new governance approaches linking initiatives focused on ‘cleaning’ the supply chain, with others looking towards achieving more sustainable landscape management. There is a high potential in these ‘hybrid’ approaches.

Finally, I consider that there is need to look more systematically at what are the opportunities, benefits, costs and risks of moving to a greener economy, and the shared responsibilities from consumer and producer countries to make possible this transition.

Thanks to you all for joining this interesting discussion today.

To make palm oil production sustainable, the future lies in increasing yields rather than expanding plantations, argues Australian scientist Lesley Potter.

However, most governments of oil palm growing countries have ambitious plans to increase production over the next decades through expanding planted areas rather than intensifying production, Potter found in a recent review on Managing oil palm landscapes: A seven-country survey of the modern palm oil.

Favoring an expansive approach over intensification of production, bears the risk of further deforestation. Researchers from the Center for International Forestry (CIFOR) have described the expansion of oil palm as one of the main drivers of forest destruction in Malaysia and Indonesia with severe impacts on ecosystem services provision.

“When planning out the future of oil palm, too little attention is given to yield improvements or alternative ways of proceeding, such as fairer ways of partnering between plantations and smallholders,” says Potter.

Increasing crop yields – according to her – will depend to a large extent on smallholders, given the still large yield gap that exist between smallholder and industrial plantations.

A worker fertilizing on oil palm plantation in Papua, Indonesia. Photo: Agus Andrianto/CIFOR

“Smallholders can do well with a little help from outside. Even though oil palm seems attractive to many, it is not an easy fruit to start with. Farmers need technical advice, good germplasm, an appropriate amount of fertilizer, enough time to dedicate to the crop, and sufficient lands. Sufficient means at least 5 ha farms, better 10, as in Brazil. If all those factors come together they can thrive.”

Potter’s review was carried out for the CGIAR Research Program on Forests, Trees and Agroforestry and covers seven countries that contribute significantly to palm oil supply globally. These are Indonesia, Malaysia, Colombia, Peru, Brazil, Nigeria and Cameroon.

Australian national Lesley Potter is a Visiting Fellow in the Resources, Environment and Development Group at the Crawford School of Public Policy, ANU College of Asia and the Pacific at the Australian National University. She is a retired Associate Professor in Geography.

Below are some of her findings for oil palm development per country.

Indonesia

In Indonesia, oil palm has been expanding rapidly, and poses important dilemmas for the government’s plans for development and climate change mitigation. The proposed production boost to 40 million tons of crude palm oil (CPO) by 2020 collides with the moratorium on peat swamps and the need to cut greenhouse gas (GHG) emissions by 26%. This leaves the big companies with the option to grow oil palm on degraded lands or on lands that have been licensed, but remain undeveloped.

All provinces have large areas currently in ‘limbo’, says Potter, as land banks for the big companies or under undeveloped licenses. If those lands were to be taken up (and the original licenses cancelled), then that would release much suitable land. East Kalimantan is already going down that road and Central Kalimantan is thinking about it.

Oil palm plantation landscape in Papua, Indonesia. Photo: Agus Andrianto

According to Potter, “underperforming smallholders,” who could improve their yields if properly supported, present an important problem. The Indonesian Sustainable Palm Oil (ISPO) Foundation is using the province of Riau, where smallholders have a considerable share in the total production, for trials linking independent smallholders to oil palm estates in order to assist them in improving their yields.

“Often, independent smallholders struggle with poor seed, lack of fertilizer and simply ‘know how’,” Potter says. Supporting them could provide a huge increase in the supply of CPO if they succeeded in achieving higher yields.

Potter argues that the growth potential of smallholders presents a huge opportunity for Indonesia, “but at present government and big companies rather perceive it as being a problem.” Private businesses have traditionally involved a portion of smallholders through different types of partnerships, yet more needs to be done to support independent farmers, adds CIFOR Principal Scientist Pablo Pacheco, who commissioned the review.

In Potter’s opinion, a more inclusive approach would also help to reestablish trust between smallholders in their interactions with companies, and improve the poor international image that oil palm acquired as a “bad product”.

She hopes that the upcoming inclusion of smallholders in the ISPO process will improve their situation.

Malaysia

In Malaysia, the second biggest producer of CPO, the situation is different, as the country has almost exhausted its land resources, and more than two thirds of its agricultural land is already under oil palm. The palm oil sector is at the center of government plans to make Malaysia a high-income nation by 2020.

Interestingly, government plans focus on promoting gains in productivity, especially on reducing yield gaps between high-performing plantations and smallholders, says Pacheco.

But this is only one prong of its strategy. Malaysian agribusinesses, with some government involvement, have started to acquire lands abroad for expanding its supply base – for example in West Africa. In a complementary strategy, the government aims to involve large companies more in downstream activities, including processed foods, biodiesel and oleochemicals.

Colombia

Colombia wants to more than triple its palm oil production to 3.5 million tons as part of its ‘Vision 2020’. Contrary to Indonesia, the country has extensive unproductive

pastureland that can be used to grow oil palm without having to cut down forests. Yet, expansion rates that were relatively high a decade ago have started to slow down, explains Pacheco. About half of the market for CPO in Colombia is domestic consumption of biodiesel.

Different scenarios have been developed that include e.g. the expansion of an additional 930,000 ha for oil palm by 2020, half of which would replace current pasture areas.

Although government-commissioned research states that,

firstly, palm-based biodiesel can reduce Colombia’s GHG emissions by 83%
and that, secondly, expanding palm oil production will have negligible impacts on either the environment or food security,

there are concerns about a possible expansion into vulnerable ecosystems, such as remnant dry forests in the north and the species-rich wetlands in the east, Potter states.

“One should not forget that oil palm production in Colombia takes place against the backdrop of only just-resolved violent conflicts that impeded rural development for decades,” she says.

Peru

For Peru, oil palm encroaching on forest areas, particularly in the Amazon, is a bigger concern, Potter warns. The situation in Peru is different from the other analyzed countries (except Colombia), as oil palm here is promoted as an alternative to coca production, which makes it more than an agricultural commodity. However, the total area planted with oil palm is relatively small when compared to other producing countries.

Since 2000, the government sees the development of oil palm plantations as being in their national interest, for rural development and to meet national vegetable oil demand. For 2021, two different forecasts exist about oil palm expansion on the Amazon: A “controversial” study from 2009 sets the future cultivated area of oil palm at close to half a million ha, whereas the government is more conservative in its estimation of under 200,000 ha. In 2012, Peru had 33,000 ha under mature oil palm. The government has mapped around half a million ha suitable for oil palm in non-forested areas.

So far, government policies have favored largeup corporations, Potter affirms. And although Free Prior and Informed Consent to development projects from local communities became compulsory in 2011, many applications for forest clearing are pending. For example a Singapore-based American who previously grew oil palm in Malaysia has has been offered 13 different concessions for oil palm in forested areas.

Brazil

Brazil started promoting oil palm as biodiesel a decade ago and has a sustainable oil palm production program in place since 2010, under which around 30 million ha degraded and deforested land were identified for growing oil palm in parts of the Amazon. However, only some 4 million ha thereof will be developed, mostly in Pará, according to the government.

Potter is more hopeful for Brazil than for other countries. “If it really enforces the strict environmental regulations for oil palm development, Brazil has the best chances to increase production with minimal deforestation. After having seen it myself, I have to say the set up there could work.”

In spite of the big plans for oil palm expansion, however, the actual development has been relatively slow, Pacheco adds.

Nigeria

Once the biggest producer of oil palm, Nigeria today has to import crude palm oil, e.g. from Malaysia, to meet local demand. Nigerian CPO is more expensive to produce than Indonesian or Malaysian and is not competitive on global markets. The potential area available for oil palm is estimated at 24 million ha; only some 400,000 ha of those are made up by plantations.

Although the predominant traditional oil palm groves with integrated farming and agroforestry are less environmentally damaging than plantation monoculture, the downside is their low yield. Plants are old and weather patterns less than ideal, explains Potter.

A further obstacle in the way of oil palm development is weak land tenure: only 3% of the land in Nigeria is registered and mapped and the current system of placing all land under the control of individual states opens it up to the risk of graft and elites capturing that land.

Although politicians and big companies regularly speak out for oil palm development, no specific, time-bound strategy seems yet to be in place. The former president’s ‘agricultural transformation’ agenda seemed to aim at moving as quickly as possible to a position of sufficiency and then begin to export, which Potter sees as “too optimistic”, given the circumstances.

Cameroon

Cameroon is closer to meeting its palm oil demand through local production than Nigeria, but overall yields are still low and perhaps even falling. It is therefore likely that any increase in production will come from an expansion of terrain rather than from improved yields. The agriculture ministry forecasts 450,000 ha under oil palm by 2020.

In 2009, the government announced its ambitious program to make Cameroon a middle-income country by 2035. In agriculture, the plan envisaged increased productivity through intensification and ‘the dominance of large and medium-scale undertakings’.

“Recent statistics don’t make that a very likely scenario for palm oil,” says Potter. This approach has also been criticized by local people.

To find out more, read the full literature review here

Palm oil is one of the most widely used commodities in the world, present in half of the products in the average supermarket. Some developing countries see oil palm as a path to rapid economic growth; looking to follow other oil-palm producing countries such as Indonesia, which has now made it into the ranks of the G20 major economies.

Recently, Al Jazeera’s program “People&Power” took an in-depth look at the environmental consequences of palm oil plantations in equatorial Africa.

Their spotlight was on Cameroon, where the government had signed a controversial deal for oil palm development with a foreign investor. President Paul Biya has the ambitious plan of his country becoming an emerging economy by 2035.

Research on oil palm is one of the focus areas of the CGIAR Research Program on Forests, Trees and Agroforestry (FTA), particularly FTA Flagship 5 that focuses on the Impacts of trade and investment on forests and people.

For the documentary, From Africa’s Palms, Al Jazeera interviewed oil palm expert Patrice Levang, a scientist with the Center for International Forestry Research (CIFOR) and the French research institute for development IRD.

The 25-minute program shows how “the Cameroonian government struck the outlines of a deal with a US-based enterprise called Herakles Farms, granting it exclusive use of a biodiversity hotspot in south-western Cameroon – an area covering 73,000 hectares of pristine forest and farmland – in which to start plantations.”

Herakles Farms rented the land at a mere 50 cents to 1 dollar per hectare per year for 99 years and benefited from generous tax exemptions. The deal caused massive protests from environmental groups.

In Levang’s opinion, the investors had taken the Cameroonians by surprise with their offer because it was the first time they were presented with a contract of that scale.

“It doesn’t make sense,” says Patrice Levang. “It is only afterwards when they saw what they had signed that they understood they made a mistake.”

In the meantime, this mistake has been at least partly rectified, he explains. The government found a way to renegotiate the contract so that it comprises only 20,000 hectares, while the rent was increased and the tax exemptions reduced.

For more information, watch Al Jazeera’s From Africa’s Palms

See also When Wall Street Went to Africa (Foreign Policy)

By Laurène Feintrenie, CIRAD
Large-scale land-based investments in Central Africa are not new, and the first decade of the twenty-first century saw renewed interest in agriculture by foreign investors. The new rush for farm land has involved new multi-national holdings in the region and sometimes in the sector. This paper analyses the recent wave of investments in farm land, and discusses their specificity, the ways the host countries deal with investors, and the impacts of these large-scale projects on livelihoods and on forest cover.

Key points

There is growing recognition of the importance of the finance sector to forest landscapes. A number of financial service providers (FSPs) are introducing diverse “green banking” and sustainable finance initiatives to help manage the environmental impacts of their investments and clients.
Customer due diligence (CDD) protocols are important, if poorly recognized legal resources for emerging sustainability efforts among FSPs. The financial sector is increasingly pressed to ensure their investments and client services are legally compliant and unconnected to money laundering or corruption.
Most countries already require FSPs to implement CDD protocols to target terrorism financing, the drug trade and political corruption. Similar protocols are needed for addressing forest-related crimes such as illegal logging, illegal agricultural expansion and illegal wildlife trade.
Evidence from Indonesia highlights significant progress in strengthening of CDD standards, including those related to forests, and to challenges of operationalizing CDD protocols. Since 2003, only 19 formal reports linked to the forest sector have been issued.
CDD protocols in the forest sector will require FSPs to use new tools and expertise in order to access, analyze and verify forest-related transactions. They will also require corresponding action from banking regulators and enforcement bodies.
While promising strategies for targeting forest-related crime, there is a need to evaluate the feasibility of implementation, and the effectiveness of using CDD and other “green banking” strategies to strengthen forest governance.

Source: CIFOR publications

By Jack Hewson, orginally published at CIFOR’s Forests News

RS64587_Amy 018-scr — Who owns the land? Local people in Bolivia. Photo: Amy Duchelle/CIFOR

Land tenure rights have been widely considered as key to improving environmental governance. In the Brazilian state of Pará, and in Lowland Bolivia laws have been enacted taking into account the needs of local and indigenous communities. So how successful have the laws been?

A new study compares the processes of land regularization in the regions and the authors found that tenure security on its own has not necessarily resulted in better environmental governance. Much also depends on the social and political conditions.

TWO COUNTRIES, DIFFERENT OUTCOMES

“Interestingly, in both Bolivia and Pará there was a very intense process of agricultural frontier expansion by different actors on different frontiers, and the policy goals to address any problems were relatively similar, with emphasis given to regularizing tenure rights,” says Pablo Pacheco, one of the authors of the study and a senior scientist at the Center for International Forestry Research (CIFOR) . “But the way in which the two countries have sought to have achieve this is very different.”

In Lowland Bolivia, priority was given to regularize rights in lands claimed by individuals — from smallholders to large-scale landholders — and communities and indigenous people. The identification of public lands, which are often forests, occurred only after the recognition of collective and individual rights. This led to an important rush to occupy public lands, much of which ended up in private hands.

The authorities in Pará, in contrast, marked out “a mosaic” of conservation units, and made the rights of indigenous people a priority. Only after that were tenure rights granted to traditional communities and smallholders. Yet, the claims of individual landholders have not been solved, which is one of the main obstacles to full implementation of Brazil’s environmental policy.

Put simply, Bolivia approached land regularization from an agrarian perspective, while Pará adopted a more conservationist approach.

“Perhaps unsurprisingly better environmental governance has been achieved in Brazil as a consequence, yet improved social distribution of land has been achieved in Bolivia,” says Pacheco. “Both regions have experienced a different mix of failure and success.”

The approach to tenure regularization has been key to both stories, but Pacheco stresses that it is not the only factor. Clarifying ownership of land was expected to settle land conflict, reduce pressures on forests, and promote more optimal land uses — in line with economic assumptions.

Policy makers believed that clarifying tenure rights would also contribute to stabilizing agricultural expansion — in line with institutional perspectives. But the actual processes did not yield such clear outcomes.

Read the full blog at CIFOR’s Forests News

A presentation by Louis Putzel, CIFOR

Responding to multiple problems affecting governance of natural resource access and trade, governments implement formalization processes, often driven by the interests of development agencies.

In so doing, they interact with the contemporary political, social, and environmental contexts in which resources are extracted, produced, and traded. They also contend with histories of ownership, access rights, market configurations, and practices attached to resources and the lands in which they are located.

As development policy, formalization frequently materializes as top-down restructuring based on current social and environmental norms. However, its adoption is often unsuccessful and entails risks including leakage, barriers to small or poor actors, elite capture, and negative effects on women or marginalized groups. The insights herein are informative to current processes of formalization associated with the European Union (EU) timber trade regime and other resource governance efforts.

At the minimum, incorporation of adaptive approaches and user-accountable monitoring in such processes are recommended.

The deforestation-free movement (or “zero-deforestation”) has emerged recently in a context of lower state control, globalization and pressure on corporations by nongovernmental organizations (NGOs) through consumer awareness campaigns, acknowledging the essential role of agricultural commodities in deforestation. It takes the form of commitments by corporations to ensure that the products they either produce, process, trade or retail are not linked to forest conversion.
This movement has particular relevance for Indonesia. Ambitious targets have been set with concrete action on the ground, and typically go beyond forest conservation to also include peatland management and social issues. Regarding the zero-deforestation component, its implementation relies essentially on two complementary methodologies: High Conservation Value Forest (HCVF) and High Carbon Stocks (HCS).
Yet the movement is in its early stages and significant challenges remain to realize its full potential. There might be contradictions between the achievement of conservation benefits and the recognition of rights for rural populations in a context of significant pressures on the land and remaining uncertainties in land tenure. Public authorities will also have to be involved to a much greater extent to provide a supportive legal framework. Rather than relying strictly on separate commitments to clean supply chains, a complementary approach based on jurisdictions or even at a national or regional scale might be considered to tackle deforestation globally. With the main groups previously involved in huge deforestation and abuses of communities’ rights, the legacy issue should not be neglected. Impact of the movement on smallholders is another issue that deserves a lot of attention as there is a risk that these commitments will eventually prevent smallholders from accessing land and/or fragment markets.

Source: CIFOR publications

Bernard Giraud, Danone’s Senior Sustainability Advisor, talks about the relationship between the private sector and landscapes. If you want to watch more of our interviews, got to : https://www.yo…

Source: CIFOR videos

This presentation by CIFOR scientist Krystof Obidzinski was given at LEDs Asia Forum, Jogjakarta, 10-13 November 2014.

BOGOR, Indonesia—The 2014 New York Declaration on Forests has ambitious goals: halve deforestation by 2020 and eliminate it altogether by 2030.

But how feasible in practice is the declaration? Who will shoulder the heaviest burden for ensuring its effectiveness—and who will suffer the most if it doesn’t work?

Ahead of the World Bank Conference on Land and Poverty, where many of the signatories of the declaration will be present, two experts from the Center for International Forestry Research (CIFOR) spoke about implementation of the declaration, particularly with respect to the oil palm industry in Indonesia.

Watch an edited video of the discussion above; the full video can be seen at the end of this article. An edited transcript of the discussion follows.

Question: The New York Declaration on Forests seems to be a very ambitious plan to stop deforestation. What do you think are the realistic aspects of that declaration?

Steven Lawry, CIFOR Director of Forests and Governance Research: Well, of course, the declaration was signed by governments, private companies, NGOs. And a lot of the burden or responsibility for its implementation falls on the private sector because these are large companies that produce key, global economies—like oil palm, sugar, beef, and so on. And they are the ones who are having a directly significant impact on the forest landscape. And so the implementation questions that arise really fall largely to the private sector. So, what’s significant about the declaration is that a very large number of the principle commodity-producing companies in the world signed on.

What’s significant about the declaration is that a very large number of the principle commodity-producing companies in the world signed on

These are hugely ambitious kind of goals and so lots of implementation issues arise. Now, there’s been some experience over the last 10 or 15 years on the part of the companies to reduce the impact on forests of their agricultural production practices. One thing I might mention is the Soy Memorandum, a zero-deforestation pledge in Brazil that a number of companies signed in 2006 that has eliminated added loss of forests due to soy production among the companies that signed that pledge. And, of course, the incentive here for the companies is that, in signing the pledge, they get access to global soy markets. If they don’t sign the pledge, then they lose access.

Krystof Obidzinski, CIFOR senior scientist: We are talking about pledges which are not coming into effect immediately, giving us some time to kind of implement and put measures in place. Another important aspect is that the companies making these pledges, if you put them all together, represent around 60 to 70 percent of the global supply chain of trade of oil palm. So we are talking about a significant chunk of oil palm being traded globally. So, these companies are pledging zero deforestation over, let’s say, the next 15 years.

The companies making these pledges represent around 60 to 70 percent of the global supply chain of trade of oil palm

… [But] what are the implications for other players beyond this immediate, limited number of large, global players making these commitments? And this is the area … that we feel hasn’t been really looked into or examined sufficiently. Companies are making these pledges; NGOs like it [but] governments are kind of still trying to find their position on it. The question is [on] implications for other players—for small and medium-sized players, smaller companies, smallholders.

We have some preliminary concerns that implementing these pledges in practice may mean excluding or sidelining some of these small and medium-scale actors in the oil palm sector. And that has to do with cleaning up the supply chains, ensuring deforestation-free supply chains of oil palm. And drawing on the experience that we’ve had in the forestry sector, looking at how it played out in the timber sector, we see a lot of parallels with sidelining and excluding small and medium-size players. So, I think, our concern is how to ensure that is minimal, that it doesn’t happen.

Question: Given that it’s a voluntary declaration, is there a role for governments that have signed up to the declaration to be part of the process of checks and control?

Lawry: Most definitely in the kind of social economic questions arising. For instance, if a large number of small producers—whether growers of oil palm or marketing companies—if they’re excluded from these markets, then questions of where they market their product, what kind of price disadvantage they might face, what would be the consequences to their livelihoods and incomes, could be quite significant. And so here questions arise around safeguards, if you will, to ensure that smallholders and others who have secured livelihoods from forestry, the forest landscape or agriculture are not disadvantaged in participating in these markets.

If a large number of small producers are excluded from these markets, then questions of … the consequences to their livelihoods and incomes could be quite significant

This is a form of certification, really. It’s a process that’s been unfolding over the last 30 years where producers of commodities have met certain requirements with respect to sustainability, land use and resource use, but also social sustainability and values. Those have been introduced in later stages of the certification development. Here’s where considerations of social impact would come into the mix. … Consumers would be concerned about it because drivers of these sorts of pledges have been in markets.

Obidzinski: Consumers made this happen. But, of course, they don’t want to hear that, Oh, as a result of our pressure and the pledges, now smallholders or rural people, whoever, are going to suffer because of the exclusion. So almost certainly the social groups and NGOs will be pushing the governments, like in Indonesia I’m sure, to make sure there are safeguards to assist smallholders to speed up the adoption of certification measures among smallholders.

It remains to be seen how this is going to play out in the context of oil palm. We can expect that there’s going to be a lot of pressure on the government to make sure that there’s no excessive adverse effect on smallholders.

Question: What kind of research is needed to be done to make sure that the aspects of the declaration that involve deforestation actually work?

Obidzinski: In my opinion, one of the major basic pieces of research that needs to be done—a piece of research that we will be enthusiastically pursuing—is a better understanding of the small-scale sector. … We are talking about enterprises anywhere from two hectares to 150 hectares. There has been a virtual explosion of those kinds of enterprises in Indonesia over the last five years.

When we talk about oil palm, people imagine large-scale monoculture plantations, thousands of hectares, but recently there has been tremendous growth in what we call the small-scale sector. There are various estimates as to how big or how large it is, how many people it involves—some official statistics indicate that somewhere between 3 million to 4 million people are involved in this sector [in Indonesia]. It may be double that.

When we talk about oil palm, people imagine large-scale plantations, but recently there has been tremendous growth in what we call the small-scale sector

There are some basic pieces of information that we don’t have about this. … How is it distributed spatially? What are the working dynamics of this sector? The financing behind it? The political economy of it? Management practices and the links to the value chain, the supply chains … all these things need to be better understood in order to understand how we can safeguard these smallholders and growers of oil palm so they’re not adversely affected by zero deforestation.

Question: From a government perspective, the protection of those smallholders is vitally important?

Lawry: Any government would be concerned. But the government has other interests in these pledges. What are the consequences for instance for economic growth, if the adoption of the pledges means that there’s less overall production of oil palm in the country for export? Less government revenue associated with the sector, less maybe net employment as a result.

Obidzinski: There are some serious contradictions. … My sense is that the government of Indonesia is sort of caught in the middle. On one hand, yes, they would like to support the sustainability agenda of zero deforestation. On the other hand, of course, they are the leading producer and grower of oil palm.

If we look at the Indonesian law as it stands now, presumably zero deforestation is impossible in fact

And then there’s also these, indeed, contradictions in the sense that if we look at the Indonesian law, indeed, as it stands now, presumably zero deforestation is impossible in fact. Because companies legally are supposed to develop their full concession area into plantation areas. And they’re not supposed to be setting any sort of areas aside. That’s according to the letter of the law. So some parts of the legal framework would have to be changed as well if zero deforestation was to be implemented fully, effectively.

Question: We started the conversation discussing how realistic you thought the declaration was or is, and what aspects of it were more realistic than others. How would the declaration be judged a success?

Obidzinski: Well, I think one of the simpler measures of success would be precisely what Steve mentioned earlier—to keep an eye on the rates of deforestation in Indonesia. I mean, no matter how you look at it, oil palm is a major driver of deforestation. There are other drivers, other commodities, but oil palm by far is the leading one. So, if there is any progress being made in that area, you should see a drop in the overall rate.

Lawry: I want to say how potentially important these pledges are: They represent what we’re sort of characterizing as sort of a new element in the global forest governance architecture. Traditionally, forest governance has been the responsibility of the state. But in the last 20 or 25 years—and zero deforestation is the latest expression of this—we’ve seen consumers voting, if you will, in ways that have implications for how forests are used and how forest producers are treated in many, many settings.

For more information about CIFOR’s research on zero-deforestation pledges, please contact Steven Lawry at s.lawry@cgiar.org or Krystof Obidzinski at k.obidzinski@cgiar.org.

CIFOR’s research on deforestation forms part of the CGIAR Research Program on Forests, Trees and Agroforestry.

Source: CIFOR News

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