A small silver lining in the coronavirus pandemic is the environmental gains which are being noted around the world. Even in New Delhi, often singled out as one of the world’s most polluted cities, the skies have turned blue as globally implemented lockdowns have drastically cut pollution and emissions from reduced traffic and industrial production on an unprecedented scale.
A related hope is that the many different industries that have seen dramatic drops in output amidst the Covid-19 pandemic could restart with a greater focus on sustainability after the crisis has passed. Unfortunately, while some sectors may clean up their acts after quarantines end, this is unlikely to occur in the palm oil and paper industry.
Exemptions bring new opportunities
Like other industries, palm oil— a major contributor to the economies of Indonesia and Malaysia in particular—has suffered from the virus. Indonesia has reported a 19 percent drop in palm oil exports between January and February as the coronavirus took its toll on China, the main destination to which Jakarta exports the versatile oil.
The reason that this pandemic-induced downturn is unlikely to spark lasting change in the palm oil sector is simple. After fierce lobbying by the Malaysian Palm Oil Association, Kuala Lumpur moved to exempt palm oil operations from the coronavirus shutdown, effectively marking oil producers as essential business in the crisis. Meanwhile in Indonesia, the industry made it clear in early April that it has “no plans” to drive down operations or decrease manpower on the plantations, even as the country declared a public health emergency.
Profit over nature
Needless to say, such exemptions only play into the hands of palm oil and pulp producers, who are already notorious for disregarding environmental protection to maximize profits – even if their rhetoric, naturally, tries to portray a different image. A case in point is Asia Pulp and Paper (APP), which along with its parent company Sinar Mas Group belongs to the wealthy Sino-Indonesian Widjaja family – a family that has been plagued by scandal ever since patriarch Eka Tjipta Widjaja turned over control to his offspring.
Just last year, APP won the Asia Sustainability Reporting Rating award “for its economic, social and environmental commitment”, marking the company’s seventh overall win. The award unsurprisingly didn’t sit well with industry watchers. After all, APP was found in 2018 to have broken promises to make its operations more sustainable– promises which notably included a commitment to cease forest clearing. NGOs at the time celebrated APPs commitments as a major win. But rather than staying true to its word, APP continued deforestation, and even poured almost S$4 billion into the construction of its newest pulp mill, one of the biggest in the world.
Worse, APP and competitor APRIL have been implicated in the devastating forest fires that ravaged Indonesia last year, which caused $5.2 billion in economic losses and led to serious political tensions between Jakarta and its neighbors. The fact that both companies have resisted calls for years to shift their operations to less fire-prone peatlands doesn’t bode well for the future either, suggesting that Covid-19 is now likely to exacerbate deforestation and illegal land-clearing.
Meddling through Covid-19
As things stand now, the anti-coronavirus measures enacted across Southeast Asia are putting extra pressure on countries’ agriculture and forest monitoring resources. As government officials are called upon to help enforce lockdown rules, limited oversight over agricultural activities creates ample opportunity for farmers and firms to exploit the crisis for large-scaling clearing out while the authorities are overstretched.
Furthermore, although the corona-induced negative market outlook has been portrayed as the industry’s potential death knell, this couldn’t be further from the truth. In the short term, the industry will experience turbulence, as shown by the 34 percent value drop for another Sinar Mas-owned company, Golden Agri-Resources, further contributing to the the financial ills of its owners, the Widjaja family.
However, the long-run market outlook expects prices to stabilize as global demand rebounds. The industry will therefore find a way to meddle through, leaving environmental concerns in the dust and making nature the real loser in both the short and long-run. As a matter of fact, the falling palm oil price – ironically – may have a role to play in accelerating pulp and palm oil related deforestation across Southeast Asia, experts warn. That’s because as palm oil producers continue to expand capacity, they need increasing amounts of product to make production worthwhile, and resort ever more to slash and burn practices to cut costs.
As such, the post-corona palm oil industry could have expanded its farm lands, while small-scale sustainable palm oil producers, operating on smaller margins and less able to stem the reduced exports, are squeezed out of the market. As a result, Covid-19 may open the door to vast environmental damage affecting Southeast Asian societies for years to come – if left unregulated.
It’s not over yet
The situation is by no means hopeless. Several low-hanging fruit to hold palm oil and pulp producers accountable exist, but they require cooperation and due diligence from a variety of stakeholders, not least the industry sustainability certifiers. And luckily, there is movement towards greater critical engagement with companies.
For example, the Roundtable for Sustainable Palm Oil (RSPO) is currently reviewing allegations that Golden Agri-Resources engaged in bribery and land-use violations. Not only do these allegations come at a bad time for the company, which has made headlines in recent years over breaching communities’ land rights and lack of permits for its plantations. But they are an embarrassment to RSPO as well, which activists have heavily criticized for essentially being used as a front to whitewash palm oil producers’ activities. Even so, the fact that RSPO has reacted to these accusations shows that greater scrutiny can be achieved if only enough public pressure is exerted.
It’s clear that the corona crisis poses tremendous challenges to many industries, who are now under pressure to act more sustainably. It will surely be difficult to get conglomerates like Sinar Mas to change their ways, yet upping scrutiny over their actions in these vulnerable times could force much needed change in the long-run.
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