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Public policy and private-driven standards and commitments: synergies and antagonisms from formulation to implementation

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Presented by Pablo Pacheco in Palo Alto, 2016.

Published in: Environment
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Public policy and private-driven standards and commitments: synergies and antagonisms from formulation to implementation

  1. 1. Public policy and private-driven standards and commitments: synergies and antagonisms from formulation to implementation Pablo Pacheco Palo Alto, CA April, 2016
  2. 2. HIGHLIGHTS  Broader sustainability goals are increasingly shared among stakeholders  BUT, different understandings of what sustainable supply means in practice  There are still some tensions about what (public/private) rules to follow  Sustainability processes increasingly circumscribed to stopping deforestation  YET, solutions to halt deforestation are not enough to support sustainability  For zero deforestation to work, there is need of sustainable intensification  This may only be possible under more complex public-private arrangements  AND, by linking supply chain governance to territorial-based approaches
  3. 3. BASIC OBSERVATIONS  Different ‘policy mixes’ [carrots and sticks] lead to different outcomes  The effectiveness of market-driven mechanism is still under question  Commitments from end-buyers to specific targets have proven crucial  Commitments can be based on certification [palm oil] but not always [beef]  In some cases [Brazil], they are complemented or driven by public policy  In others [Indonesia], they are conflicting with existing policy frameworks  Much depends on what is catalyzing public and private convergence  The resultant socio-environmental trade-offs are not always clear … nor who are the actors reaping the benefits along the value chain
  4. 4. PUBLIC AND PRIVATE INTERACTIONS GLOBAL SUB- NATIONAL Incentives Regulations Policies POLICY REGIMES Upstream Downstream  Investment strategies  Procurement policies  Supply chain management  Business operations  Tenure  Land use  Zoning  Industrial  Infrastructure  Fiscal  Commercial  Financial Macro Sectoral LANDSCAPES SUPPLY CHAINS Technologies Markets Institutions MEDIATING FACTORS “Sticks, carrots and sermons” Finance and investments Global and regional trade Policies [ESG integration] Finance sector initiatives Codes of conduct Import regulations Voluntary standard systems Mandatory sustainability standards  EP  SCC  PRI Transnational processes CFS-RAI, VGGT Self-regulatory commitments
  5. 5. HOW TO UNDERSTAND AND TRIGGER CHANGE?  Polycentric systems (decision-making is distributed)  Non-linear causality (associated to complex systems)  Incremental change (at different places and levels)  Multiple feedback loops (positive and negative) For sustainability, needed to closing performance gaps  Management, investment, benefits, environmental. AND, required to address critical structural factors  Policy and implementation failures  Market asymmetries and distortions  Unequal power relationships
  6. 6. BEEF CATTLE IN THE BRAZILIAN AMAZON Total cattle population 81 Million heads Slaughterhouses 95 In the Brazilian Legal Amazon Cattle population in smallholdings 20% out of total BLA Pasturelands 60% out of total deforested lands Cattle population 38% out of total in the country Stockingratio 1.0 Head/ha 3 corporate groups control most of the supply
  7. 7. BRAZILIAN SUCCESS … STILL SOME WAY TO GO  Public sector taking the lead – yet commitment from industry was key  BUT also local territorial agreements at municipal level [green municipalities]  Public and private actions effective for reducing deforestation at large-scale  Beef industry cut out suppliers that were considered risky suppliers  BUT, unable to control leakage and laundry [as it could be expected]  AND, smallholders increased their relative participation in deforestation  Few incentives to support an agrarian transition to more intensive land uses  AND, solutions do not work in favor of medium- and small-scale suppliers  Often good practices work only for the most large-scale and capitalized ranchers  AND, solutions to intensification tend to rely too much on chemical inputs
  8. 8. A FEW CONSTRAINTS TO INTENSIFICATION  Legal and institutional obstacles to intensification: • Land tenure, a long awaited but still little realistic goal • Credit is available but conditions do not make it accessible • Technological options are based on chemical inputs Interesting land-use dynamics emerging: • Deforestation mainly occurred in areas close to rivers for cattle raising • New deforestation tends to expand in clayey soils (preferred to soy production) • Soy production tends to take over the best pasture lands [not the more degraded] Deforestation accordant to solil type in Paragominas Piketty et al. 2015 Forests
  9. 9. LESSONS FROM PUBLIC – PRIVATE ARRANGEMENTS  Clear legal frameworks and distribution of responsibilities among different levels of government  Enforce regulations consistently based on transparent monitoring open to the wider society  Governments at intermediate levels play a key role in land registration, planning and enforcement  Institutional mechanisms to make individual producers and company buyers accountable  Economic policy instruments (public credit, fiscal transfers) to support environmental regulations  Agreements among key actors (e.g. retailers, industry and state) and compliance monitoring
  10. 10. CONTRASTING DYNAMICS: BRAZIL AND INDONESIA  Brazil and Indonesia are two quite contrasting cases  Much land available in Brazil when compared to Indonesia  AND, palm oil and beef sector respond to different market dynamics  BUT, at the same time there are several commonalities • Traceability a major issue under complex supply chain networks • Smallholders left behind due to company commitments • Industry captures the benefits vis-à-vis upstream suppliers • Leakage effects expected, and indirect social outcomes  Indonesia is also a more complex case of public-private interactions  AND, disparate sustainability standards not clearly harmonized
  11. 11. 10.5 Million hectares cultivated Labor 3.0 Million people 27.8 Million tons CPO Smallholders 42% of total cultivated area ~600 Palm oil mills 25 corporate groups control most of the supply Indonesia 3.5 Tons CPO/ha/yr 53% global CPO supply PALM OIL IN INDONESIA Farmers 2.1 Million households
  12. 12. INDONESIA, PERSISTENCE AMIDST CHANGE  Palm oil production contributes to national earnings but negative environmental effects  Ambiguous sectoral policies for palm oil expansion, economic growth and poverty alleviation  Major corporate groups have been making bold commitments towards sustainability  Strong open opposition from Indonesian government to ‘zero deforestation’ movement  Some governments at the sub national level are embracing some policy innovations  Expansion of medium-scale investments and multiplication of independent mills  Smallholders filling out the spaces that were not occupied by oil palm plantations
  13. 13. MANY STANDARDS FOR THE SAME DROP OF PALM OIL  Between voluntary and mandatory sustainability standards  Many standards are adopted for the same drop of palm oil • RSPO, ISPO, ISCC  Contrasting views on definitions of sustainability [under refinement] RSPO [slow adoption but grows over time], RSPO Next [its uptake is little realistic], ISPO [implementation is also behind schedule] / RSPO and ISPO converge on several issues, but diverge in key ones  AND, also no common definitions of [high-carbon] forests • HCV under RSPO, HCS and HCS+ [being harmonized]  Harmonization is still a long way to go [but is it desirable?]  Much of the development driven by end-buyers
  14. 14. THE POLITICS OF ZERO DEFORESTATION  Bold commitments of five major palm oil conglomerates to zero deforestation: • Putting in place traceability systems [from refineries to mills] • Significant difficulties to trace third-party and independent suppliers • Important pressure from Greenpeace to make and disclose progress  Strong opposition from the government under a dual rationale: • Commitments risks excluding smallholders from markets • Foreign corporate-driven rules clash with national regulations  IPOP companies accused of collusion and anti-competitive behaviors • Alleged of using environmental standards as pretext • Violation of Law No. 5/1999 [monopoly and business competition]
  15. 15. ATTEMPTS FROM GOVERNMENT TO REFORM POLICIES  Moratoria to conversion of primary forests and peatlands [since 2011]  Measures to stop oil palm development in peatlands [Oct 2015]  Measures for peatland restoration in areas affected by fires [Oct 2015]  New measures to stop granting of oil palm concessions [Abril 2016]  BUT, at the same time: • Expand domestic market for biodiesel through subsidies • Attempts to incentivize development of downstream industry • Efforts to diversify markets [beyond China and India] • Support recognition of tenure rights for smallholders  Policy ambiguities, and tensions among levels of government
  16. 16. PUBLIC – PRIVATE INSTITUTIONAL ARRANGEMENTS  RSPO certification only comprises a few major corporate groups  Adoption of ISPO mandatory sustainability standards is still low  Not clear mechanisms for control of independent mills  No definition on tenure rights between customary and statutory  Many (illegal) smallholders not entitled to receive state support  Difficulties for monitoring given constraints to disclosure of permits  Incentives for downstream investments and expansion of biodiesel domestic markets still triggers expansion of plantations  Enough sources of finance for plantations development, much of those through national banks and informal lending systems
  17. 17. LINKING TENURE, SUPPLY AND BUSINESS MODELS  Assessing patterns of supply chains and networks across different regions and groups (based on secondary data) [3 groups, 44 refineries, ~900 mills, 2500 estates]  Mapping smallholder lands, identification of smallholder types, and analysis of business models with options for upgrading the production systems of smallholders (Riau, Central and West Kalimantan)  Assessing de facto land uses versus legal allocations to determine (e.g. smallholders within concessions, and industrial palm oil plantations outside concession lands)  Monitoring the direct (e.g. land use, GHG, employment), and indirect impacts of commitments (e.g. land use pressures, smallholder inclusion, livelihoods displacement)
  18. 18. EMERGING PERSPECTIVES  Increasing control and incentives in the supply chains - Extend the traceability from direct to indirect suppliers - Monitor and rewards for improvements in performance - Technical assistance with flexible technological packages  Lowering risk and increasing investment attractiveness - Land regularization and clarification of tenure rights - Land taxation with differentiated rates depending on use - Integrating environmental criteria in commercial lending  Jurisdictional and/or territorial arrangements - Systems to monitor social and environmental performance - Fiscal incentives to support good environmental performance - Policies of preferential sourcing by processors/industry - Assessment (and certification?) of territorial performance

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