Roundtable on sustainable palm oil

1. Can you briefly describe the innovation, in terms of the problem(s) it tries to solve and why is it necessary?

This outline describes the RSPO first, as a multi-stakeholder initiative that is addressing a governance gap in particular in land rights issues. Secondly, we focus on the Dispute Settlement Facility in the RSPO that particularly complements existing justice mechanisms to address historical land conflicts in the palm oil sector.

The RSPO is regarded as a relatively successful case of partnered governance in terms of putting a rule-system in place and sourcing sustainable palm oil to international markets. As with other multi-stakeholder initiatives in commodities sectors, it is believed that the private and voluntary character of such initiatives has the potential to alleviate poverty through a rights-based approach, by creating more participatory structures. Multi-stakeholder initiatives, such as the RSPO, are alliances that include a balanced representation of businesses, NGOs, and other interests groups, which come together to put a private rule-system in place to improve the conditions under which a crop is grown and traded. The RSPO is helping to improve the social and environmental performance of corporations in the global palm oil sector, filling the governance gap that is left by the limited capacity of national governmental regulation. Voluntary, self-regulation has evolved in the last decade, giving rise to new institutional forms, which attempt to overcome some of the limitations of formal regulation. In few words, the RSPO defines social and environmental standards, monitors compliance, promotes reporting and auditing among its members, certifies good practices, and encourages social dialogue in the palm oil sector.

In particular, the palm oil sector is threatened by a growing number of land-related conflicts usually involving local communities and businesses in producing countries. These frequent resurgence of these land conflicts poses a significant risk to the credibility of the RSPO and the palm oil sector as a whole. Land conflicts are often accompanied by serious human rights violations leading to loss of life, physical injury, and mental stress which in turn lead to internal strife, disharmony, and ostracism within local communities. In order to help mitigate conflicts, and following consultations with members, the RSPO Executive Board endorsed a working group tasked with the development of a Facility with members and other relevant stakeholders to deal with disputes in a preventive and remedial way. The Board envisaged a facility that would help disputes to be mutually resolved, without the need for invoking the RSPO Grievance Panel, and if it came to that, to assist the parties in implementing the Panel’s decision.

And so was the Dispute Settlement Facility created within the RSPO to offer a non-legal, alternative channel for conflict resolution through mediation. The two main objectives of the DSF are (1) to provide a means for achieving fair and lasting resolutions to disputes in a more time-efficient and less bureaucratic and/or legalistic manner, while still upholding all RSPO requirements including compliance with relevant legislation. And (2) to alleviate administrative and technical burdens placed on the currently existing RSPO Grievance Process.

2. What makes your innovation unique?

The RSPO is among the first sector specific initiatives that aim to transform an entire global commodity market, in collaboration between stakeholders.

Land right conflicts in the palm oil sector, notably in Indonesia, date back to a historic economic development model that converted community land for commercial export cropping. However, because oil palm is a unique crop with its 25-year planting cycle, relinquishing community land – especially if done on the basis of force or false promises – has meant that communities have committed their crucial assets for a once-in-a-generation purpose that often has not delivered. With increasing globalization and democratization these historical cases now emerge not only locally but are also associated internationally with the traders, brands and retailers that use palm oil. This has lead to the progressive, joint acknowledgement and need to address such conflicts based on international market incentives rather than through poorly functioning traditional regulatory approaches locally. 

Disputes between businesses and local communities are often allowed to grow out of proportion because of major differences in position and perspective between different players. The major parties involved in such disputes, which are notably plantation companies, mills, and local communities, are often characterized by an unequal balance of power and economic-political position. They might also have contrasting socio-cultural outlooks and attach different values to a number of thins or principles. Their responsibilities, needs, priorities, and perceptions about the other also often differ. Disputant parties often fail to find in negotiation a settlement that satisfies all parties. Although there exists a growing body of expertise on dispute settlement and out-of-court settlement (through mediation and arbitration) the palm oil sector and local stakeholders have yet to appreciate its potential. Parties in conflict need guidance on issues such as assessing facts and obtaining credible information, recognition and regulation of rights and responsibilities, issues of compensation and due process related to RSPO criteria, etc.

In this respect, the DSF plays in a important role in raising awareness and building the capacity of local communities and people facing land disputes by means of informing them about the avenues and requirements to resolve and avoid the emergence of such disputes; basic information about legal aspects; prevention of anxieties over the polarization of disputes; and so forth. For example, in Indonesia villagers are often unaware that once they relinquish customary land to be developed by palm oil companies, the land rights do not automatically fall back to the community after the period of commercial lease terminates, but most often go to the government. Such lack of information is the root cause of many conflicts between companies and local communities.

Another unique feature of the DSF is that it also plays a broker role, insulating the money assigned for mediation from the disputants. The DSF does this by making an escrow account available to which the disputant parties can transfer their payment to meet the costs of the mediator and other related expenses.
All and all, through the DSF the RSPO ensures that poor and marginalized groups have access to justice and ultimately take part in more transparent and accountable decision-making processes. Informal and traditional mechanisms of justice, which are often more accessible to disadvantaged groups, are not always effective nor result in justice.

Moreover, the novel mechanisms provided by the DSF present an way to evolve toward serving justice in such way that international human rights standards are respected and that aspects such as gender equality, non-discrimination, and due process are fully served. Because of its particular focus, assistance from the DSF helps to address key grievances that trap disenfranchised groups into poverty, such as indigenous people’s rights to ancestral domains and women’s property rights. It also helps to raise legal awareness so that local people become knowledgeable of their rights and entitlements.

3. What triggered the development of the innovation?

When various stakeholders of the global palm oil sector acknowledged the sector was facing a sustainability challenge that none of the stakeholders could resolve individually, the multi-stakeholder approach was adopted and the roundtable established.

Palm oil land-related disputes mostly result from lack of compliance with Free, Prior, and Informed Consent (FPIC), recognition of the community voice, and respect for customary rights. The RSPO Principles & Criteria 2.2, 2.3, 6.4, 7.5, and 7.6 specifically require producers to deal with issues surrounding land use and customary rights of local peoples. A crucial characteristic is that it is not the oil that gets certified but the palm oil mill with its entire supply base, i.e. the plantation land as well as the smallholder plots that supply oil palm fruits to the mill.

Furthermore, RSPO criterion 4.2.4 states that certification of a holding company is not possible when there are ongoing disputes in one of its subsidiaries. This little innovation in itself prevents that certification is restricted to only “flagships”.

A number of other factors triggered the development of the DSF innovation. First, the RSPO Code of Conduct encourages that members who wish to raise a complaint or dispute against another member regarding conformity with RSPO requirements, first seek avenues for resolution bilaterally. Recourse is ultimately available through RSPO’s Grievance Process. The addition of a DSF under RSPO attempts to fulfill the gap to address conflicts bilaterally more practically and efficiently or to implement recommendations resulting from the Grievance Process.

Second, reputational threats faced by businesses encouraged companies along the entire palm oil supply chain to accept that disputes that are left unresolved tend to create further misunderstandings, resentment, and non-cooperation from other stakeholders. The realization that these tensions can lead to employee dissatisfaction, lower production levels, public exposure, and reputational damage motivated companies from plantation level up to consumer markets to support the creation of the DSF.

4. Which persons and organisations were involved in the development and what role did they play?

The founders of the RSPO include WWF and business actors from both Malaysian producers as well as European buyers (brands and retail). Currently the organization is driven by the Secretary General, Darrel Webber and his team, overseen by the RSPO Executive Board.

The idea of creating a space for conflict management within the RSPO came in 2006 from Both Ends (represented by Paul Wolvekamp), which – inspired by the growing body of expertise from the fields of commerce, peace building, and employment – proposed the creation of a mediation facility within the RSPO to provide companies, local communities, and other stakeholders means to deal with disputes in a preventive and remedial manner.

Both Ends has collaborated with two other social NGOs, Oxfam (notably Johan Verburg) and Sawit Watch (notably Norman Jiwan) since the 1990s to address land-related conflicts accompanying the expansion of palm oil production. Sawit Watch and Oxfam’s presence on the RSPO Executive Board was key in securing the endorsement and support of the Board for the DSF.

Both Ends, Oxfam, and Sawit Watch took part in the working group that designed the DSF, along with representatives from PT Musim Mas, Pt Triputra Agro Persada, ISEAL US, MVO product board Netherlands, Global Sustainability Associates, New Britain Palm Oil, Australian National University, Wild Asia, and the Forest Peoples Programme. The working group was in charge of developing a Protocol on dispute settlement, conveying a pool of mediation experts, ensuring accreditation and training of mediators, building the capacity of parties needing it to effectively engage in dispute resolution, exploring financial mechanisms to meet costs related to dispute settlement, and monitoring the facility.

In the implementation the RSPO secretariat, notably its Secretary General (Darrel Webber) and the DSF Coordinator (Julia Majial) play a crucial role.

5. What kind of resistance have you encountered and how have you overcome it?

For RSPO in general, the resistance encountered externally has been to ambitiously but realistically communicate about a “works in progress” (to outsiders, media, campaigning NGOs) while problems in the sector continued to exist during the establishment of this initiative. Internally resistance had to be overcome between suppliers on one side and buyers on the other side, to ensure that supply and demand of certified sustainable palm oil continues to grow in balance. One way to ensure expectations are clear and are met is the requirement for all members to publish time-bound plans to achieve 100% certification or 100% sourcing targets.

Perhaps the main challenge faced by the DSF until now, has been to put in place an effective conflict resolution system to solve disputes between RSPO members, without allowing the RSPO becoming a ‘tribunal’. In other words: promote durable out-of-court resolutions. The DSF needs to be conducted in a way that it actually minimizes the likelihood of resolved disputes flaring up again after a resolution has been reached through the DSF and its resolution becomes contested. In this respect, disputants have been required to demonstrate that they diligently communicate with their constituents on a scale that is broader than their immediate members, such as to district and local levels. This communication process should occur in an ongoing manner in order to secure that acceptance of the resolution is thereby maximized.

From the perspective of the users, the challenge has been to enable RSPO members, local stakeholders and other parties to appreciate the potential of the DSF and to show how to use the DSF, including how to involve/commence mediation process, how this is conducted, what the requirements are, and how to prepare for one. For this purpose, accessible and understanding publications have been produced, as well as informatory meetings.

6. How did you make the goals realistic and attainable, and when will which quick wins be available?

In order to make the goals of the DSF realistic, a Working Group of experts from different stakeholder groups (businesses, NGOs, consultants, producers, etc) was formed to develop the facility in such way that it would address the concerns and needs of the different groups. An attainable goal of the DSF was set: to help relevant stakeholders deal with land disputes in a preventive and remedial way. This is, to help ensure that disputes can be resolved before they unavoidably lead to a grievances procedure. The DSF was designed to enable a mediation process undertaken by mutual consent of the parties involved in the dispute. The proposed avenue for mediation should not be considered as a ‘first resort’ for either party involved in a conflict; rather parties are expected to communicate directly to try to resolve issues. When dialogue fails, the mediation process offered by the DSF should come into play. The DSF is subordinate to the RSPO Grievance Process, which may be further persuaded if a party rejects the mediation process of the DSF mediated process fails to achieve a resolution. By providing diverse avenues for conflict resolution, the RSPO aims to address and resolve a wide range of types of cases which demand different types of solutions. A small number of pilot cases will be conducted to test DSF assistance (a prominent case is currently the first pilot). The quick wins will be available once process agreements have been reached between disputing parties, confirmed later when these agreements have actually materialized.

7. Will the innovation affect other organisations in the chain and if that is the case, how will it affect them?

An intended outcome of the DSF is that good practices will be established among the palm oil plantation companies to deal with conflicts in a more preventative way through their own company procedures. Moreover, through built capacities of these same companies and the communities involved, the RSPO envisions the traditional regulatory frameworks to be reinvigorated. Palm oil stakeholders will challenge their local land use authorities and justice through both the traditional as well as the new systems.

The DSF relates to the key underlying causes of land disputes, which are expected to continue surfacing as long as there is a wider policy framework reform in the palm oil sector. This requires adapted government policies, as well as improved company behavior. Largely, the potential of the RSPO is based on the opportunities and vehicles that it offers for improvements in business practices. In the realm of land allocation businesses can act as catalysts as they come in contact with governmental land policies and customary land-uses of local communities.

The RSPO acknowledged the need to work within the legal framework of each nation, but also recognizes that the legal and judiciary systems often fall short on resolving land-related disputes. Inconsistencies within and the legal system and its implementation can also contribute to complicating such disputes. Consequently, the RSPO noted a need for putting in place a non-legalistic approach, which could allow members to act more in the realm of conflict resolution and prevention rather than arbitration. The DSF, however, does not claim jurisdiction as it only offers a non-legal alternative.

8. How was the development funded and what were reasons for the financing organisation?

Until now, the DSF has been funded by NGOs and by the RSPO, based on the incomes derived from trade in certified sustainable palm oil. Each traded tonne of certified palm oil contributes one dollar to RSPO.

9. Can you name 3 to 5 characteristics of the innovation that are most essential to make it work?

1. It’s a market requirement to be free of conflicts;
2. It is independently verified on the basis of multi-stakeholder developed systems;
3. NGO watchdogs are expected to report certain worst cases and raise awareness;
4. RSPO is expected to empower, build capacities and report successes;
5. Persistence will be needed.

10. How do you measure whether it is a successful innovation?

The success of the DSF is measured by looking at how local communities and oil palm businesses utilize the RSPO system to resolve conflicts over land rights. It is safe to state that the DSF will be particularly successful if a vast majority of its cases are preventative, that is, entered voluntarily by any of the involved parties prior to certification, rather than corrective, meaning that they are entered through the grievance route.

Some indicators to measure the success of this innovation include:

• A functional and working RSPO DSF which helps prevent pending conflicts as well as mediate and resolve existing confrontations;
• Pool of available mediators which are trained and readily available (after the first phase approx. 15 mediators and in the second phase approx. 45+ mediators in total);
• Two conflict cases mediated towards a final solution through DSF assistance (pilots) and the DSF-brokered mediation for at least an additional 8 other conflict cases in progress;
• 30 Capacitated Communities in affected areas capable of successfully engaging in dispute mediation activities – either by themselves or by engaging a mediator;
• Five companies capable of effectively resolving conflicts with local communities – if needed, with assistance from a mediator.

11. How many people or organisations benefit from this innovation now?

From this innovation, 700 RSPO members have directly benefited as they have direct access to the services provided by the DSF.

Indirectly, also a large number of local communities have benefited from being able to access an additional conflict management vehicle. Indonesia’s National Land Agency calculated a figure of 7000 registered (substantial) land conflicts in Indonesia, some of them related to palm oil. Sawit Watch, a local Indonesian NGO, has made an inventory with over 600 serious conflicts over land in Indonesia as a consequence of oil palm plantation development. In Sarawak, Malaysia the judicial system is increasingly more congested by a growing avalanche of land conflicts.

Additionally, the DSF has a strong gender dimension by which the role of women in the household economy is explicitly recognized and protected.

12. How many people or organisations could potentially benefit your innovation now and in the future? (Scaling-up) Can or will the innovation be used internationally and how do you overcome cultural differences?

For the RSPO to fulfill its potential, it is essential that disputes are resolved in a way that the RSPO system does not become overburdened by having to deal with complaints and grievances stemming from polarized disputes which could have been resolved at an earlier stage.

For this purpose, the RSPO estimates that within the first years of operation the DSF will be able to have a pool of available and trained mediators; 44 communities in affected areas capacitated to negotiate solutions; and 6 companies equipped to effectively resolve conflicts with local communities.

Internationally this approach could inspire land conflict resolution in other “resource-hungry” commodity sectors such as soy, biofuels, fish farming, timber etc.

13. Can you quantify the financial benefits?

It is too early in the process to be able to quantify the financial benefits of this innovation. Yet, we estimate that the DSF will bring substantial financial benefits to local actors, who are able to preserve their land and are not forced to spend money in long legal disputes. For companies, we estimate that a decrease in land-related conflicts can bring a more positive public reputation, as well as improved relationships with local actors.

14. Is the innovation financially viable and sustainable and if yes, how?

See question 8 for the funding model. The RSPO is exploring the best possible mix of sources of funding to ensure the long-term financial viability of the DSF – which in the end is to be guaranteed by the RSPO system itself. This requires the DSF to be increasingly firmly anchored within the RSPO certification system. For the initial four years the RSPO provided 25% of the costs and sought external funding for the other 75%. In the medium term, the objective is for the DSF system to be fully funded through the RSPO system and regard donor contribution as seed money.

15. Did you receive any recognition?

n/a

16. What lessons did you learn along the way that could be useful to others?

It is still fairly early to draw lessons from the innovative idea of the DSF. The lessons learned from the RSPO in general are manifold (to be elaborated in case the focus would have to be on the broader RSPO rather than its main access to justice element DSF).