Palm Oil; Poverty Fighter or Environmental Killer?
The rapid globalization and dismantling of trade barriers is resulting in many changes in today’s international trade environment. According to Luthans (1) globalization is the process of social, political, economic, cultural and technological integration among countries around the world. Many challenges are facing agro-food producers, but also retailers such as our company Tesda, an international supermarket based in UK, that seek to remain competitive in both local and international markets. The following article will first highlight the main issues regarding palm oil industry, and then the main stakeholders will be identified followed by an evaluation of their value and power. Finally the article will propose a strategic stakeholder management policy specific for Tesda. 1/
Food Safety and environmental requirements are becoming more stringent as a result of the increased knowledge of the risk and harm to health and environment. This is Consumer Awareness. These requirements have very important implications for trading, in particular for market access and development. Palm oil is one of the most popular vegetable oils. It is present in many supermarket products, but it also used for bio-fuel for vehicles. Palm oil is very popular due to the increasing demand of cheap food. As Primark’s Business model, palm oil is traded at low prices and high volumes. This leads to developmental, sustainability and CSR issues. Sustainability is the ability of productive activities to continue without harm to the ecological system (2). According to IISD (3) sustainable development means adopting business strategies and activities that meet the needs of the enterprise and its stakeholders while protecting, sustaining and enhancing the human and natural resources that will be needed in the future. In other words this is economic development that does not endanger the incomes, resources and environment of future generations. Daniels (4) suggests that Corporate Social Responsibility (CSR) is used to describe what some see as a company’s obligations to be sensitive to the needs of ALL of its stakeholders in its business operations and produce an overall positive impact on society. Palm Oil, which is produced from the fruit of the African oil palm, has become a major, global agricultural commodity which is used in a host of food and non-food products. The oil palm is cultivated entirely in developing countries in the humid tropics, where it often forms an important basis for local economies either as an export or as a raw material for local industries. This agriculture can stimulate further economic development and contribute to the reduction of the poverty, to a rising of standard of living in many developing countries when environmental, social and governance risks are adequately managed. Tesda, which use processed palm oil in 12% of its products but which also has a significant shareholding in a palm oil plantation based in Indonesia, has to be aware of the sector’s negative environmental and social impacts. Environmental Issues
Young reports that between 2005 and 2010, almost 353.000 hectares of peat swamp forest were cleared, a third of Malaysia’s total, largely for palm oil production (5).
Uniliver announced in May that it pledged to switch to fully traceable palm oil by 2015. This was rightly applauded by many parties of the RTSPO but “it will be too late to save some key areas of critical biodiversity” said Wood (6). In 2007 Smith (7) said that the Orang-utan could be virtually extinct within five years.
Climate change and use of chemicals, pesticides and fertilizer Some pesticides and fertilizers used to grow palm oil are responsible for pollution of water supply and flora extinction. The greenhouse gases are responsible for severe weather patterns which are linked to major climate changes.
Social and human rights issues
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