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The CEO trying to fix palm oil says he's no orangutan killer

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Carl Bek-Nielsen, who's about to give a tour of the palm oil plantations he runs in Malaysia, is reflecting on a story by The New York Times earlier this year about an orangutan that was shot 74 times and found close to death on an oil palm estate in Indonesia.

[SINGAPORE] Carl Bek-Nielsen, who's about to give a tour of the palm oil plantations he runs in Malaysia, is reflecting on a story by The New York Times earlier this year about an orangutan that was shot 74 times and found close to death on an oil palm estate in Indonesia.

"I mean, what is this?" he says. "We in the industry also take sharp objection to such crazy behaviour. It's mad. These are things which cannot go on."

But then comes the caveat. "Having said that, it's also wrong that the sceptical fraternity or the NGO (non-profit organisation) fraternity continues to paint the entire industry with the same brush," he says. "There has never been a wild orangutan in the whole of peninsular Malaysia right up to Bangkok," he says. "But yet we are painted with the same brush."

Palm oil, used in everything from pizza dough to shampoo, lipstick and biofuels, is an industry on the rise. Worldwide production has climbed about sixfold since the 1990s, according to Gro Intelligence, and use of the oil is projected to increase to more than 100 million tonnes by 2025, up 50 per cent from 2016. Plantations have grown exponentially, and now cover about 22 million hectares in Indonesia and Malaysia - an area almost the size of the UK.

But palm oil is also increasingly under fire, accused of destroying rainforests and peatlands, driving endangered animals like the orangutan, pygmy elephant and Sumatran rhinoceros towards extinction, and exploiting poor plantation workers, who often come from abroad. Mr Bek-Nielsen says that while there are "rogue players" in the industry, there are those working to clean up its act.

Mr Bek-Nielsen, a tall, thin and intense 46-year-old, is chief executive director of United Plantations Bhd, a medium-sized producer with 15 of its 19 estates in Malaysia and the rest in Indonesia. The company has two distinctions. It has one of the highest yields in the industry, in terms of the average amount of palm oil produced per hectare. And it was the first to win certification, back in 2008, from the Roundtable on Sustainable Palm Oil (RSPO).

The RSPO is a voluntary standards body with more than 4,000 members worldwide, from oil-palm producers to consumer-goods manufacturers and non-governmental organisations. Slightly less than one-fifth of the world's palm oil is certified as sustainable by this body. But the RSPO has been subject to much criticism, including that it greenwashes bad practices, isn't strict enough on deforestation, and that forced labour and child labor has occurred on RSPO-certified plantations.

Mr Bek-Nielsen has served as co-chair of the RSPO since 2014, making him one of the most prominent representatives of the sustainable palm oil movement. His message? The RSPO may not be perfect, but it's moving in the right direction towards the goal of sustainable palm oil.

"Yes, there has definitely been a backlash against palm, and quite frankly some of it has been justifiable," Mr Bek-Nielsen says. "That is why, if you look at the way forward, which we feel is an absolute necessity, then it is to commit yourself 100 per cent to sustainable palm oil."

On the Jendarata estate in northern Malaysia, Mr Bek-Nielsen seems keen to show that United Plantations is no rogue player. He points to workers' quarters, semi-detached three-bedroom, two-bathroom houses that are 146 square metres. Then there are the hospitals, the community halls, the schools and the temples and mosques. There's even an elderly persons' home, which he says is the only one on a plantation in Malaysia or Indonesia. Housing, medical care, water and electricity are all free, he says. And there are locker rooms where guest workers - who mostly come from Indonesia, India and Bangladesh - can keep their passports under lock and key and access them when needed. He produces a passport checkout book, which shows the dates when workers left the plantation, as evidence there's no forced labour.

Mr Bek-Nielsen, a Danish citizen and Malaysian permanent resident, grew up on the estate with his brother and greets employees in Tamil and Malay. All the electricity is powered by renewable energy from palm husks and fibre, and that, alongside installing biogas plants at mills and setting aside jungle reserves helps keep the company's carbon footprint 50 per cent lower than rapeseed oil produced in Europe, he says.

Mr Bek-Nielsen drives through one of the company's jungle conservation areas in Malaysia, forests bought and kept in their original state. In Indonesia, United Plantations has slightly less than half of its roughly 18,500 hectare landbank gazetted as forest reserve, even as planters in the industry grapple with land scarcity.

"I can tell you one thing," he says. "It's not easy to take care of jungle conservations today, because jungle conservations are a source of timber, and they're also a source for poachers."

United Plantations employs 13 rangers, among others, to look after the areas, he says. "Maintaining jungle reserves is a full-time job."

AHEAD OF CURVE

United Plantations is ahead of the curve in producing sustainable palm oil and committing to environmental, social and governance practices, according to Ivy Ng, regional head of agribusiness at CIMB Investment Bank Bhd. The "secret to their success", she says, boils down to a hands-on approach by management, strong agronomic practices at estates, and the close attention they pay to sustainability. Shares of the company, which are listed on the Malaysian stock exchange, were trading 1.1 per cent higher on Tuesday and are up 3.1 per cent this year.

But while Mr Bek-Nielsen has been tending to his plantations, the backlash against palm oil has grown. The region is routinely suffocated by stinging smoke from thousands of fires across Indonesia's carbon-rich peatland, which environmentalists and others say are linked to illegal slash-and-burn techniques to clear land for palm oil plantations - an allegation the Council of Palm Oil Producing Countries denies. The Copernicus Atmosphere Monitoring Service estimates Indonesian fires that spread across more than 4,000 kilometres this year pumped out more carbon dioxide than the record burning in the Amazon rainforest.

That has fuelled public anger, especially in the West, where the orangutan is symbolic in anti-palm oil campaigns. A UK supermarket chain's Christmas commercial attacking palm oil featured a cartoon orangutan in a child's room, while several NGO websites calling for palm's boycott brandish pictures of the copper-haired ape.

EU MOVE

The European Union moved this year to curb and eventually eliminate the use of palm oil in biofuel on concerns that its cultivation caused deforestation and aggravated climate change, landing a blow to producers that were already struggling to improve the perception of palm oil. Indonesia and Malaysia called the policy discriminatory and said they would lodge a complaint to the World Trade Organization (WTO). Indonesia filed a WTO lawsuit on Dec 9.

"There are rogue players out there who are doing things which are a liability to the industry and which have got a short-termism built into their DNA, which is totally wrong," Mr Bek-Nielsen says. But boycotts also punish efficient growers that can produce palm with half the greenhouse gas emissions to that of rapeseed oil, he says.

"One has to stop this indiscriminate impact of a boycott because that will hit the guilty and the non-guilty evenly and will not help to transform bad practices into good practices. Why should people move in that direction if they're going to be clobbered?"

The way forward, Mr Bek-Nielsen says, is for both producers and buyers to commit to sustainability. Growers certified by the RSPO comply with what he says are the "strictest criteria for any agriculture crop" and commit to an "NDPE" policy, which is no deforestation, no planting on peatland, and no exploitation. But take-up of certified sustainable palm has been low. Consumers are unwilling to pay more for environmentally friendly supply and less than 60 per cent of it is sold as sustainable, he said.

"If there is no demand for sustainable palm oil, then how are you going to convince more people to produce it?" Mr Bek-Nielsen says. Producers need a carrot as well as a stick, he says.

SHARED RESPONSIBILITY

To push for more consumption of sustainable oil, the RSPO endorsed landmark "shared responsibility" rules at the end of October that ask members, which include the likes of Unilever NV, Mars Inc, PepsiCo Inc and Walmart Inc, to start increasing their purchases of certified oil. That's as palm oil becomes increasingly important, with the world's middle-class population projected to reach almost 10 billion people by 2050 and demand for food estimated to soar.

Supplying that demand without sustainable palm oil is "naive" and "short-sighted" as it would require much more land, he says. That's because sustainably cultivated palm produces significantly more vegetable oil per unit area than any other competing crop, he says.

But the RSPO remains embattled by criticism - including of greenwashing and being too lenient on its members. In November, Greenpeace called certified sustainable palm oil a con and said RSPO members have been linked to fires across Indonesia since 2015.

"The RSPO standard for sustainable production is very high, but it is critical that the standard translates into practice," says Elizabeth Clarke, WWF's global palm oil lead. The RSPO needs to improve its audit and complaints mechanisms, and build on existing tools to better monitor certified plantations and their surrounding landscapes so all members are held accountable to its standards, she says. Buyers, she says, must take "urgent and accelerated" action to ensure their palm oil chains are fully certified and free of deforestation.

SUSTAINABLE PALM

Only about 20 per cent "of global palm is certified as sustainable by the RSPO, and if that volume is to increase then there needs to be confidence that sustainable palm oil means sustainable", Ms Clarke says.

On the estate, Mr Bek-Nielsen leads the way through the oil palms in a crisp blue dress shirt, trousers and shined black shoes, seemingly unaffected by the humidity or scorching sun. "Isn't it wonderful out there?" he says, gesturing at the neat rows of palm and the railway tracks - 630 kilometres in total - that run along them. "This is where I spend most of my time."

High yields are a priority for the company, which at about 54,000 hectares of planted area in Malaysia and Indonesia is much smaller than giants like Sime Darby Plantation Bhd and Golden-Agri Resources Ltd. Mr Bek-Nielsen crouches next to a three metre palm and explains that it's "very much like a human being", needing the right nutrients and attention to reach its full potential. "This is not even five years old and look at the bunches it's producing," he says, pointing at the tightly-bunched fruitlets. "This shows you the productivity of an oil palm. How can any other vegetable oil compete against this?"

As for the debate about where the industry goes from here, his message is clear.

"I'm not here to say that palm oil is God's gift to humanity. But neither am I here to say it is what the Devil has produced," he says. "There are bad practices out there. Go after those who are not doing it well, but also stop this nonsense about making blanket statements about the entire industry, and giving people the insinuation or the belief that the entire industry is into malpractices, and the entire industry is killing orangutans."

 

BLOOMBERG