Clear game rules needed to stop hazy deals

Mallika Naguran Today Online 5 Mar 14;

Singapore is tackling the haze blame game by introducing a penalty card — fine or jail sentence for errant companies that have been found to be directly or indirectly responsible for causing haze in the country.

The proposed Transboundary Haze Pollution Bill is intended to mitigate the year-after-year haze issue that enshrouds Singapore, causing immense healthcare, environmental and business-related costs.

The Bill, while timely and well-intended, fulfils only one end of the goal-keeping. A game can be played fairly and without dispute only if there are clear governing rules in the first place. No such rules exist for agriculture-based firms profiteering from stripping forests bare or burning existing plantations to make way for new ones.

Forests are home to at least 70 per cent of all land-based plants and animals, providing essential ecological benefits for human health, agricultural productivity and climate buffers. Forests help maintain soil fertility, protect watersheds and reduce the risk of natural disasters, such as floods and landslides, by regulating water supply and reducing soil erosion.

Protecting such a valuable natural resource should thus be a requirement that is worked into business regulations of agriculture-related firms registered in Singapore. Such companies, be they producers, traders or lenders, should demonstrate compliance with an international standard for sustainability, with strict environmental protection.

PRESSURE VIA THE RIGHT CHANNELS

Knowing what rules to apply can come only with the understanding of the kind of players involved and their relationship dynamics. A resource trade cycle analysis model developed by Foundation Aidenvironment in the Netherlands sheds light on this community and links between the borderless demand, supply, production and consumption of natural-resource-based products. This includes the palm-oil industry, the main sector blamed for causing the haze.

Policy leverage is important arising from sustainability-driving forces such as governmental laws, non-governmental organisation (NGO) activism, the EU Renewable Energy Directive (which governs palm-oil sustainability in biofuel trade) and intergovernmental organisations such as the International Finance Corporation.

This sphere of influence towards sustainable palm-oil production should be extended to key players involved in capital flows (such as bankers and investors) as they grease the product flow particularly between traders, plantation owners, palm-oil producers and goods manufacturers.

Financial institutions, accountable for providing liquidity in upstream and downstream ventures of agriculture-based trade, can use their leverage to prevent deforestation and forest degradation. Banks can do this with strict engagement and investment policies for the agricultural sector (including forestry) and related trading companies, covering environmental impact, labour rights and human rights. The WWF’s Palm Oil Financing Handbook is a good reference for fund, investment and credit-risk managers.

Sustainability frameworks that are in place include Forest Stewardship Council (FSC) certification for forest management and tree-plantation operations, FSC Chain of Custody certification for entire wood product and processing chain, and Roundtable on Sustainable Palm Oil (RSPO) certification. However, RSPO, being a voluntary and non-binding scheme, has revealed loopholes and limitations and, as such, must not be accepted as the ultimate green certification.

Clear regulations must exist on not siting investments in protected areas, High Carbon Stock Forests and areas with high conservation value. Along with that, respecting (land) rights of local communities and indigenous peoples is crucial. Whatever certification is chosen, an initial independent assessment of socio-environmental impact should be done to include the macro-impact of new plantations located in regions with existing ones. The Singapore Government could request for yearly compliance audit reports.

The sphere of influence causes ripple effects too. NGO activism recently pressured Kelloggs to impose stricter requirements on its suppliers to protect forests and peatlands, as well as respect community rights. Wilmar International, the world’s largest palm-oil trader and RSPO-certified member, was pressured by its buyer Kelloggs and has tightened its sustainability policies within its supply chain, for example, for oil palm planters and producers in Indonesia.

PLAYING BY THE RULES

A Greenpeace study in the Netherlands in 1999 revealed that many plantation companies that were clients of Dutch commercial banks were involved in social and environmental issues in Indonesia. The study showed that financiers were able to influence their clients’ environmental policies, but lacked internal policies to do so. Under NGO pressure in 2002, all Dutch banks signed a simple statement of intent to declare that no financial services would be made available to errant plantation firms that were involved in illegal activities, deforestation, open burning or social conflicts.

A Friends of the Earth study in 2006, however, found that Dutch banks performed poorly in implementing such policies. Commercial banks then funded BankTrack, an independent NGO, to focus on banks’ compliance with Equator Principles — a risk management framework for determining, assessing and managing environmental and social risks in projects.

The Singapore Government could likewise facilitate the setting up of a similar non-governmental watchdog here, with the support of the financial industry. Its role would be to support and monitor agri-businesses’ documentation of licences, land-concession maps, supply-chain partner lists, sustainability certifications and audits.

In tackling the haze issue, strengthening the law is one aspect of ensuring responsible behaviour by companies. A more critical element is to govern product and capital flows, so agriculture-related businesses will play according to the rules.

ABOUT THE AUTHOR:

Mallika Naguran is a university researcher on sustainability and the founder of Gaia Discovery