Making No Deforestation. Commitments Work. Event Report. Integrating REDD+ objectives in investment decisions. 1 December 2016 Het Tolhuis, Amsterdam

Transcription

1 Making No Deforestation Commitments Work Integrating REDD+ objectives in investment decisions Event Report 1 December 2016 Het Tolhuis, Amsterdam

2 Making No Deforestation Commitments Work Program 15:30 Word of welcome by Annemieke Beekmans, Director Aidenvironment 15:40 Introduction by Kristel Verhoef, ACTIAM 16:10 Case : Tracing Production to Tackle Deforestation by Petra Meekers, Musim Mas Group Panel Discussion 16:50 Case: Sime Darby and Contested Land in Liberia By Tim Steinweg, Aidenvironment Panel Discussion 17:25 Closing & Drinks 1 December 2016

3 Word of Welcome No Deforestation commitments are rapidly becoming standard practice and more than 400 commitments have been made in recent years. As these commitments involve both material and financial opportunities and risks, the challenge lies in their effective implementation. Aidenvironment already has considerable experience with putting No Deforestation on the civil society agenda and lobbying companies in the palm oil sector, and we are now working on implementing these agreements with industry leaders. Through our experience, we found that the investment community in particular has an important part to play in driving the transformation of the palm oil industry and other deforestation related commodities. As part of the Chain Reaction Research (CRR) consortium with Profundo and Climate Advisers we are targeting investors and convincing them to integrate sustainability issues into their investment decisions. In 2016 Aidenvironment received a grant from NORAD-NICFI (the Norwegian international climate and forest initiative) to develop and transfer the knowledge gained in the palm oil sector to other commodities and regions. This event aims to provide a platform where experiences, insights and ideas on the topic of Making No Deforestation Commitments Work are shared with stakeholders from different sectors.

4 Keynote speaker Kristel Verhoef Active Ownership Specialist ACTIAM

5 Keynote speaker ACTIAM is a responsible fund and asset manager, with 56 billion in assets under management. ACTIAM wants to use its responsible investment policy to contribute to a liveable world, now and in the future. ACTIAM focuses on three themes: climate, land, and water. In order to stimulate No Deforestation practices, ACTIAM engages with companies and collaborates with several organizations such as the Forest Stewardship council (FSC) to address sustainability risks and advance ESG performance. ACTIAM applauds the increase of ESG and specifically No Deforestation commitments and notes that a positive change seems to be happening. These commitments address mistrust and stimulate technical innovation and solutions that will be useful in overcoming challenges in compliance. Further recommendations to make No Deforestation commitments work are: 1. Lead by facts instead of stories 2. Reward frontrunners, support movers and punish or educate those who block change 3. Collaborate and Facilitate through partnerships and multi-stakeholder processes

6 Case Presenter Petra Meekers Director of CSR and Sustainable Development Musim Mas Group

7 Case Presentation Tracing Production to tackle Deforestation

8 Outline 1. Background 2. Traceability Process 3. Challenges

9 History of Musim Mas Group

10 Location Map of Musim Mas Group Plantations

11 Integrated Business

12 Musim Mas Sustainability Milestones

13 Musim Mas Sustainability Policy Announced on 4 th December 2014 Affirms the Group s commitment towards sustainable palm oil Bring benefits to the community No deforestation of High Conservation Value (HCV) areas and High Carbon Stock (HCS) forests No development of peatland regardless of depth Fully comply with local, national and international laws Establish traceable supply chains

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15 Main Palm growing areas Indonesia

16 Implementation Process Nov 14 Verified first third-party mill on the ground Mar 15 - Published full list of thirdparty supplier mills and implemented supplier screening procedure Jun 15 - Completed 100% traceability to mills and published supply bases for each processing facility Nov 15 Completed first third-party verification of our processing plant Mar 16 Conducted first workshop for plantation groups

17 Process Steps Supplier Questionnaire (30% returned from our 534 mills now) Mill coordinates confirmation and data base development by Aidenvironment Link direct managed plantation to mills (concession information) in the data base Refinery verification work

18 Process Steps Approach Largest suppliers by volume and risk assessment finished by third party. Group Approach to Engage Supply shed (FFB level) and the link to offtake landscape Focus on suppliers in the process to develop new concession Suppliers highlighted in the public domain (verification)

19 An Independent Mill and Supply base

20 History of Musim Mas Group

21 Challenges From tracing to transformation; how and how fast? How much involvement and responsibility will be required from each player in the supply chain? Certain issues need funding streams? (e.g. conservation of community forest, smallholder replant, restoration of areas etc)

22 Challenges Measure change; is suspension the tool? How long can an engagement last, when do you stop buying, how do you encourage? Leakage; Not all supply chain actors are on board with NDPE policies (local off take and countries with less stringent sustainability requirements)

23 History of Musim Mas Group

24 The Panel Michel Ridder Project Advisor, RVO, Netherlands Enterprise Agency Frank Wijen Associate Professor at the Department of Strategic Management and Entrepreneurship of Rotterdam School of Management, Erasmus University Rotterdam Gabriel Thoumi Senior Fellow Climate Finance, Climate Advisors, member of CRR Consortium

25 Statement A company s leverage is sufficient to make No Deforestation commitments work

26 Discussion Companies have sufficient leverage If companies would really want to achieve No Deforestation, they could be a powerful force. Within the Indonesian landscape large palm oil companies have a lot of leverage over influential stakeholders, including regional and national government. Sector-wide change has been successful in other sectors where companies came together and agreed on certain standards, for example in the salmon sector. Larger companies have the power to reach deep into their supply chains. The strength of a (value) chain is determined by its weakest link. Since you cannot determine sustainability by physical characteristics of palm oil and many other commodities, all suppliers need to be on the same page. Influential companies in the value chain could have a catalyst function in this process. Private sector leverage alone is not enough Although commitments at the level of CEOs and Boards of Directors are essential, other stakeholders need to be involved to make No Deforestation commitments work. No Deforestation practices can for example be advanced by making them financially attractive for companies. If companies would be paid for successfully implementing No Deforestation policies they would be inclined to perform better. This works better for high-value crops such as coffee than low value crops such as palm oil.

27 Discussion Pre-competitive solutions Leakage of deforestation to other areas is a prevailing issue. Increased local demand of palm oil aggravates this problem as these often require less strict sustainability requirements. Pre-competitive space could provide solutions to these kind of issues by engaging all relevant players at scale. An example where pre-competitive collaboration has been successful is the Soy Moratorium in Brazil, where civil society, private enterprise and governments came together and signed an agreement designed to ensure that traders do not buy soy grown in the Amazon on land deforested. Role of governments Governments should not neglect their role in making No Deforestation commitments work and take action in the public space where appropriate, for example by increasing minimum wages or exploring ways to include smallholders in value chains. Evolving the concept of No Deforestation Should we be talking about No Deforestation commitments if this is not actually feasible at the moment? it is necessary to evolve the concept to make it more workable.

28 Case Presenter Tim Steinweg Consultant Aidenvironment

29 Case Presentation Sime Darby and Contested Land in Liberia

30 Chain Reaction Research Independent analyst research on financial and sustainability risks In-depth case studies with empirical data 26 company profiles in the coming five years First profile under NORAD on Sime Darby in Liberia

31 Sime Darby In Liberia Concession with Liberian government signed in ,000 ha gross area; 220,000 ha for own plantation 44,000 ha outgrowers Legality has been challenged Aggressive and controversial expansion in initial years Revision of policy on Free, Prior and Informed Consent (FPIC) High Carbon Stock (HCS) moratorium on new planting

32 Developments since 2009 Customary land rights entrenched in national legislation Liberian government made deforestation commitments Partnership with Norway Declaration at Marrakesh Plethora of no deforestation commitments Increased monitoring capacity Analysts continue to assume full development

33 Contested Land

34 Buffer Zones

35 Participatory Rural Appraisal

36 Three Scenarios Scenario A: Backtrack on social and environmental commitments Forceful removal of communities, conflicts, large scale-deforestation Significant financial risks legal fines, loss of customers and financiers, property damage Scenario B: Full Concession Development With Proper FPIC, HCS, and HCV Tools Landbank significantly reduced; lengthy community negotiations required, risk of moving targets; Delays, increased costs, reduced reputational risk

37 Shift in Business Model Scenario C: A shift to 100 percent Outgrower Model Abandon large-scale plantation model; reduced risk of conflict, less strenuous community negotiations Increased cost, reduced risk of conflict and reputational damage, access to new finance Requires paradigm shift, support for customary land rights, guaranteed financial and technical support to outgrowers

38 Statement No Deforestation commitments require a shift in the business model of a company

39 Discussion Changing to Outgrower model Changing to an Outgrower model does address the root of the problem, since local communities are the primary forces driving deforestation. Smallholders are going deeper into the forest and need an incentive not to. Model based on values Forests represent various values besides financial value that are not taken into account into the current model. A new business model should include such social and environmental values in order to be successful in achieving Zero Deforestation. Yield Improvement In the financial sector a shift in taking place towards a focus on yield improvements per hectare. This implies that there is already a change in business model going on. Now that there is less suitable land available the matter has become more urgent and investors are more aware of it.

40 Discussion The business logic of No Deforestation Is it plausible to commit to No Deforestation at all within current circumstances? It is necessary to think about the business logic behind these commitments. How to change from large-scale investment approach to approaches stimulating inclusive and sustainable development. Banks in developing countries need to get involved to facilitate the change in business models. Advice for investors The presentations show how difficult the playing field is. This makes it hard to identify companies that perform well. What should investors look at when making responsible decisions? Value appropriation vs value creation; analysts are not including the right information into their forecasts. Realize that the large-scale plantation model is no longer viable

41 Closing Remarks Joint-Statement on Closure of the Ketapang Complaint Aidenvironment is pleased to have issued, together with IOI, the final Joint Statement in which we declare IOI s Ketapang complaint case closed. Click here to read the full Joint-Statement on Closure of the Ketapang Complaint and the Annex to the IOI-Aidenvironment Joint Statement 1 December 2016.

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