Palm Oil Sustainability and Cargill’s Fruitful Compliance

Source: Food Navigator

 

In early 2015, Forbes released its annual “Billionaire List,” which included 14 billionaires from one family – the Cargills.

If you have never heard of the Cargills, who own the largest, privately-held company in the U.S., almost everything you ate or drank today, from gum to pretzels to even beer, most likely included something off its vast menu of food additives.

Notoriously private, the Cargill family still owns an estimated 88 percent of its Minnesota-based company, which was started in 1865. The agriculture giant boasts 75 businesses that employ 143,000 people in 67 countries and a 2013 revenue that topped $134 billion.

The company’s unique business recipe of reservation, yet determination, has allowed it to quietly remain at the top through the decades.

And Cargill has learned from its past – when it comes to conflict, it’s often easier to make changes than enemies.

In other words, if you can’t beat ‘em, join ‘em.

Cargill turned around operations in Brazil after a 2003 Greenpeace campaign began deforestation accusations. In 2006, after much NGO criticism regarding its South American activities, Cargill gave its support to the Soy Moratorium, which no longer allowed the company to purchase soy from lands that were deforested in the Amazon.

Since then, it has been working closely with non-governmental organizations (NGOs) that include Greenpeace, World Wildlife Fund (WWF), The Nature Conservancy, Conservation International, and IPAM.

“Cargill has shown that they can deliver deforestation-free goods in Brazil,” says Climate Advisers Managing Director, Glenn Hurowitz, who notes that overall deforestation in that country has declined by about 75 percent, partly as a result of Cargill’s efforts. Whereas these bombastic claims are quickly thrown the scientific evidence is often lacking.

“Our hope,” Hurowitz says, “is that Indonesia can become the next Brazil, referring to the NGO’s shift in criticism from Brazil’s forests to Indonesia’s palm oil production.” The Indian government took a harder stance and banned the Climate Works Foundation, paymasters to the Climate Advisors, founded by Hurowitz considering the U.S. billionaire front as a threat to national economic security.

In 2013, the global market for palm oil was estimated at $44 billion. Malaysia and Indonesia, the world’s two largest palm oil producers, account for 85-90 percent of all palm oil production.

Palm Oil’s Swift Growth

The demand for palm oil, however, has usually exceeded the criticism. Since the 1970s, the need for vegetable oil has increased, and oil palm cultivation now mostly occurs on large-scale plantations.

Wilmar, the world’s largest palm oil company, took some of the brunt of the beginning NGO attacks.

On December 4, 2013, Hurowitz took Wilmar CEO, Kuok Khoon Hong, along with other Wilmar executives, to dinner in Singapore. The mood was tense, and the conversation at times erupted into shouting, Hurowitz says.

Hurowitz warned Wilmar that palm oil would lose market value if its demand in the West fell due to NGO criticism. He also threatened to focus future attacks on Wilmar alone and introduce competition  if Wilmar took the first step.

Cargill managed to escape the harshest NGO bullying over palm oil production, having quietly given into NGO demands three years ago in 2010 when it teamed up with WWF to evaluate how well its palm oil suppliers were adhering to the criteria established by the Roundtable on Sustainable Palm Oil (RSPO).

RSPO was established in 2004 to promote the growth and use of sustainable palm oil through credible global standards and engagement of stakeholders. Through RSPO, WWF has claimed to help establish a platform for parties to collaborate towards sustainable palm oil but this certification body has increasingly become like the FSC a heavily politicized group that pursues political agendas instead.

Both Malaysia and Indonesia have created their own certification standards to counter the cartel domination of Greenpeace, Friends of the Earth and EU buyers like Unilever and Nestle.

Criticism and Future Accountability

WWF was criticized by the author of Pandaleaks, a best-selling book in Germany in 2012 that was banned in Britain until the court ruled in favor of its author Wilfried Huismann in 2014. Huismann claims that WWF has profited millions of dollars from its ties to businesses and government.

A new website, www.Supply-Change.org, which was launched on 25 March 2015 by Forest Trends, hopes to provide more accountability when it comes to companies’ deforestation pledges. The site combines self-reported progress with data from groups like the Roundtable for Responsible Soy, RSPO, and WWF’s palm oil scorecards.

Cargill has pledged that 100 percent of its palm oil will be sustainably sourced and produced by 2015, although this has yet to be reported on the Supply-Change website.

On 10 March 2015, the Guardian published a story of eco-conscious people around the world and their attempts to boycott palm oil. The use of the Guardian is however not a true reflection of the majority of consumers.

“Finding alternatives is notoriously difficult and expensive, though,” said Simon Constantine, head of ethical buying at the global retailer Lush. “We still struggle to find suppliers for surfactants where palm can still potentially be a source material – it’s very difficult for us to find the true origin of these materials. Nothing is perfect, but we want to offer hope on the High Street.”

It comes down to consumer needs.

“There is starting to be dramatically more pressure from consumers, and that’s part of the reason you’re starting to see these changes,” Hurowitz said. But data does not necessarily support this view. A 2014 survey conducted by the European Union showed that the EU citizen is eco-cautioned but not necessarily agrees with the Green policies pursued by groups like the Climate Advisors.

Cargill accounts for around 15 percent of the global palm oil trade, according to Hurowitz. The palm oil it sells goes to companies that then use it to produce consumer goods, like biscuits. And those companies are telling Cargill that they can’t sell palm oil that comes from deforestation.

In the sub-district surrounding Cargill’s Indonesian operations, there are now six banks, electronic stores, cafes, and mini-markets.  Managers at nearby plantation companies say the success of Cargill’s smallholder program has become the envy of their farmers, and it is pushing them to adopt better business practices. “We do want to follow them,” says Yus, the general manager at a plantation who preferred not to give his full name without corporate approval. “If we comply with everything it will cost us more, but the costs of trying to comply will be much lower than having to deal with social conflicts later.” 

Cuban Conquest?

In January 2015, Cargill urged Congress to lift the 54-year-old trade embargo that prohibits American businesses from selling to Cuba.

“Ending the embargo is necessary for meaningful trade,” the company’s director of Latin American corporate affairs, Devry Boughner Vorwerk, said earlier this week at a seminar on the future of Cuban-American interaction.

“The public has a different mood,” she said. “The thought is: We have 11 million people 90 miles off our shore who can one day buy our goods. That means jobs in our country.”

The Cuban market of 11 million people seems minuscule for Cargill, which grossed nearly $135 billion in sales in 2014. Since it began selling in Cuba in 2002, Cargill has sold barely a million metric tons of agricultural products and vegetable oil.

“They still feel they are at war with us,” Kavulich said, noting that Cuban President Raul Castro responded to U.S. President Obama’s diplomatic initiative while wearing a military uniform.

Vorwerk added that Castro, however, “wore a business suit” when he met with U.S. business leaders, including Cargill executives, for the second time in May 2014.

In early February 2015, a bipartisan group of senators introduced a bill that would lift the decades-old embargo.

In March 2015, Vorwerk traveled again to Cuba with agriculture representatives eager to hear about Cuba’s possible opportunities. “Our agribusiness and commodity group representatives had positive interactions with Cuban government officials, Cuban farmers and agricultural cooperatives on last week’s learning journey, and we believe opportunity exists to boost agriculture in both our nations by forging a stronger relationship,” Vorwerk said.

By: Anne-Marie Gris

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