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This report sheds light on the environmental and social impacts of the palm oil industry, which had been the culprit in destroying the rainforests of Southeast Asia for decades. Palm oil is a type of vegetable oil commonly used throughout the world with its usage rapidly on the rise. In most cases, palm oil is produced in the industrial plantations of multinational corporations, which are robbing the Indigenous Peoples and Local Communities (IPLCs) of their homes.
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Executive summary
The world has long set foot in the unforeseen era of the climate and ecological crises. Our use of fossil fuels is filing up the atmosphere with greenhouse gases, and habitat destructions are triggering the collapse of biodiversity. These changes are particularly devastating for the Indigenous Peoples around the world, who bear the irreplaceable role of defending and nurturing our last remaining hope—forests.
This report sheds light on the environmental and social impacts of the palm oil industry, which had been the culprit in destroying the rainforests of Southeast Asia for decades. Palm oil is a type of vegetable oil commonly used throughout the world with its usage rapidly on the rise. In most cases, palm oil is produced in the industrial plantations of multinational corporations, which are robbing the Indigenous Peoples and Local Communities (IPLCs) of their homes.
Despite its obvious human rights and environmental risks, palm oil is praised as an alternative energy source to respond to climate change under the misleading name of ‘renewable fuel.’ Recently, the industry has taken its attempts to greenwash palm oil even further; at the center of such schemes are voluntary certifications, such as the Roundtable on Sustainable Palm Oil (RSPO).
Palm oil plantations drive out rainforests and their guardians
Global palm oil production has increased 50 times over the past 40 years. Between 2001 and 2015 alone, 10 million ha of forests, equivalent to the size of S. Korea, was destroyed to make space for palm oil plantations. 67% of such deforestation took place in Indonesia and 26% in Malaysia.
As industrial-scale palm oil production has entailed clearcutting of natural forests, numerous human rights and environmental issues have occurred in the process. A palm oil plantation converted from a rainforest emits 174 metric tons of carbon per ha (tC/ha). Destroying peatlands leads to even more serious consequences as they can store up 18 to 28 times more carbon than regular forests. 405 species around the world are affected by palm oil production, at least 193 of which are threatened to extinction.
The palm oil industry’s land clearing typically takes place without the consent of the local communities. Land and environmental defenders who stand up to protect their territories meet severe oppression from the industrygovernment collusion. Chemicals and wastewater from plantations pollute the soils and rivers, encroaching on the local people’s right to food and water. What’s more, labor conditions in palm oil plantations often fail to guarantee even the most basic of human rights, marked by high risk, long working hours, and low wages.
South Korea’s palm oil supply chain prioritizes growth over sustainability
S. Korea, Asia’s fourth largest economy, has directly and indirectly contributed to the human rights and environmental issues rampant in palm oil production. While S. Korea had typically used palm oil to manufacture foods and lifestyle products in the past, the Ministry of Trade, Industry and Energy’s (MOTIE) introduction of support measures for renewable energy in 2012 incurred a rapid uptick in the imports of oil palm for biofuels. Currently, palm oil and palm by-products consist 44% of the country’s transport biodiesel and bio-heavy oil for power generation.
In 2021, the Ministry of Environment (ME) categorized the manufacturing and production of biofuels—including palm oil—as ‘green economic activities’ under the K-Taxonomy program. In the name of supporting overseas agricultural and forest resources development, the Ministry of Agriculture, Food and Rural Affairs (MAFRA) and the Korea Forest Service (KFS) have provided more than 80 billion KRW (60 million USD) in loans to Korean palm oil businesses operating in Indonesia. Upon criticism that they are engaged in deforestation and human rights violations, the KFS made palm oil plantations ineligible for future loans and suggested RSPO certification as an alternative.
In the meantime, the S. Korean government’s policies to support the development and use of palm oil without any human rights and environmental standards provide no incentive for the domestic industry to strengthen the sustainability of its palm oil supply chains. Taking the food industry for example, even the RSPO members fail to source RSPO-certified palm oil at all, or their usage hardly meets a third of their total consumption. The lifestyle product industry is stuck at using RSPO palm oil certified with the mass balance (MB) and the book and claim (BC) models that do not guarantee sustainability. The biofuel industry, while sourcing palm oil from suppliers at high risk of deforestation and violating human rights, fail to take any remedial measures. Out of the five S. Korean corporations operating palm oil plantations in Indonesia, POSCO International and Samsung C&T have adopted the No Deforestation, No Peat, No Exploitation (NDPE) policy, but still face conflicts with the local communities. In a nutshell, there is not a single drop of palm oil used in S. Korea that is sustainable.
RSPO, an easy ‘get out of jail free’ ticket
As human rights and environment issues in palm oil production have increasingly gained media spotlight, the palm oil industry introduced RSPO, a voluntary certification scheme. RSPO issues producer certification to palm oil growers per the Principles and Criteria (P&C) and supply chain certification to midstream and downstream companies using palm oil based on the Supply Chain Certification Standard (SCCS).
But the RSPO standards are not to be equated with being ‘deforestation-free.’ When handing out certifications, RSPO does not account for the clearing of primary forests and High Conservation Value (HCV) areas that took place before the 2005 cut-off date. Destroying High Carbon Stock (HCS) forests, peatlands, and other conservation areas that altogether encompass wider ranges of forests does not prevent companies from receiving RSPO certification either as long as such clearing happened before 2018.
That is, even if a candidate company destroyed the aforementioned conservation areas after the cut-off dates, it is still eligible to receive certification through the Remediation and Compensation Procedure (RaCP)—which is practically a free certification pass that justifies any prior involvement in deforestation. Among Korean businesses, POSCO International obtained RSPO under the RaCP condition, all after destroying 26,500 ha of rainforests in Papua.
Meanwhile, the popular MB and the BC models adopted by RSPO supply chain members also fail to ensure sustainability. The MB model allows for any business to mix its certified palm oil with uncertified ones in any leg of the supply chain, rather than keeping the certified volume separated. The BC model essentially lets a company ‘buy’ the RSPO label even when it does not use certified palm oil at all, under the pretense that the financial contribution is made to the production of sustainable palm oil elsewhere.
RSPO’s poor implementation fails to meet its own criteria
To become certified with either the P&C or SCCS, the candidate company is directed to hire one of the RSPO-designated certification bodies to go through the auditing and review processes. However, since the auditee ‘pays’ the auditor for its service, the certification body is rendered financially dependent on the company. The conflict of interests inherent in this system likely makes the certification body hesitant to proactively identify violations or to put a high bar on obtaining certification.
Even when the RSPO Secretariat identifies or acknowledges violations, it seldom chooses to impose corrective or punitive measures. In rare cases the membership is indeed suspended, records show the RSPO Secretariat swiftly restores the certification in favor of the industry. In Indonesia alone, RSPO certified plantations equivalent to 330,000 football pitches are located in forest estate in violation of the local forestry laws—RSPO has yet to take any decisive measure on this matter.
Given this institutional limitation and insufficient implementation status, RSPO’s blanket argument of ‘sustainable’ palm oil is deceiving. Evidence suggests that RSPO is failing to resolve the chronic issues of palm oil; attempts to cover up its shortcomings are misleading for the consumers.
Regulatory efforts to clean up the palm oil supply chain
As illustrated, there exists a clear limit to rely on the private sector’s voluntary commitment to prevent deforestation and protect human rights. In light of the needs for a regulatory approach, the EU and its member states have either enacted or are in the process of introducing legislation that make it mandatory for corporations to conduct due diligence on their supply chains. A case in point is the EU’s Corporate Sustainability Due Diligence Directive (CSDD). The CSDD obliges companies placing products on the EU market to establish and implement human rights and environmental due diligence policies to inspect their supply chains. Companies subject to the CSDD are to prevent, mitigate, and improve any potential and actual adverse impacts on human rights and the environment.
The EU requires more stringent levels of environmental due diligence for commodities that are linked to deforestation and forest degradation. The Regulation on Deforestation-free Products (EUDR), which passed the European Parliament in December 2022, designates beef, soy, coffee, cocoa, timber, rubber, and their derivatives as deforestation-risk products. Companies wishing to import, export, or sell such items in the EU are obliged to demonstrate that their products are not produced from where deforestation has taken place.
Regarding biofuels, the EU has also been responding to severe environmental harms by applying sustainability criteria within the Renewable Energy Directive (RED). Despite the known shortcomings, the EU’s recognition of only the biofuels free from the destruction of the forests of high carbon and rich biodiversity signals an important direction for energy transition. In addition, the EU’s designation of palm oil and soy as high indirect land-use change (ILUC) risk feedstocks and the subsequent decision to phase them out from transport biofuels by 2030 have set an example for other countries to follow.
South Korea should take a first step to break free from deforestation
S. Korea currently does not have any legislation on supply chain due diligence, regulations on forest-risk commodities, or sustainability criteria for biofuels. Instead, the government is attempting to further expand the use of biofuels by increasing the mandatory blending ratio for biodiesel and deploying sustainable aviation fuels (SAF). Promoting SAF with no sustainability standards not only goes against the trend of restricting palm oil-based transport fuels seen in advance economies, but also greatly accelerates the domestic biofuel industry’s reliance on high-risk feedstocks. The government must recognize the social and environmental impacts of palm oil and implement forestry and energy policies interlinked with mandatory corporate supply chain due diligence.
When it comes to the private sector, its environment, social, and governance (ESG) management keeps failing to address human rights and environmental harms as companies have yet to incorporate due diligence procedures in their operations. In fact, corporations tend to outsource due diligence management and rely on ill-advised ESG policies with improper indicators. Corporate actors must take responsibility for the active implementation of supply chain due diligence. Those that handle palm oil should execute a comprehensive NDPE policy and uphold its standards to the trading partners to ensure their palm oil supply chain is free from human rights violations and deforestation.
Corporations must also respect the rights of the IPLCs throughout their operations. Relevant information must be disclosed to the people affected by palm oil production, an action considered a precursor to respecting the Free, Prior and Informed Consent (FPIC) in every stage of the business. Companies should also announce uncompromising principles to respect land and human rights defenders and proactively take measures to protect their rights.
Policy recommendations
A. Introduction of supply chain due diligence legislation
The government shall enact legislation obliging corporations to conduct human rights and environmental due diligence throughout their supply chains. The obligation should be expanded to financial and investment institutions not to be directly or indirectly linked to human rights violations and environmental harms. Administrative agencies should be able to take corrective measures against the non-complying entities, and the victims should be able to have access to remedy.B. Introduction of regulation on forest-risk commodities
The government shall designate high-risk products that contribute to deforestation and forest degradation. Administrative agencies shall end the imports and sales of products from and financial support for businesses failing to demonstrate their supply chain’s non-involvement in deforestation. Non-compliant operators shall be subject to corrective actions. It is to be noted that supply chain due diligence as the means of verification cannot be replaced with legality criteria or voluntary certification.C. Introduction of sustainability criteria for biofuels
The government shall introduce sustainability criteria as a mandatory condition for biofuels to be eligible for the government’s renewables support and inclusion in the K-Taxonomy. Sustainability criteria should include but not limited to greenhouse gas emissions savings, loss of biodiversity, and environmental degradation. Feedstocks sourced from deforested areas or associated with human rights violations must be prohibited. Compliance with the criteria is to be verified through supply chain due diligence, not voluntary certification.D. Suspension of public finance for forest-risk commodities
Government organizations and public financial institutions shall establish human rights and environmental guidelines that set the standards for financial services and investment. In case a candidate is associated with forest-risk commodity supply chain, the business entity shall conduct in advance due diligence per the aforementioned legislation. Only upon confirmation that there are no outstanding issues the support measures should be authorized.E. Implementation of corporate human rights and environmental due diligence
Corporations shall identify potential and actual adverse impacts occurring throughout their operations and take measures to prevent and mitigate them. Palm oil producers shall protect the ecosystems and respect the rights of the IPLCs. Businesses using palm oil in their supply chains shall use only the palm oil without any social or environmental risk in accordance to their comprehensive and rigorous NDPE policy.