Environmental Audit CommitteeWritten evidence submitted by New Britain Palm Oil Limited

1. About NBPOL

(i) NBPOL is a large-scale integrated industrial producer of sustainable palm oil in Australasia, headquartered in Papua New Guinea (PNG). It now has over 75,000 hectares of planted oil palm plantations, a further 5,000 hectares under preparation for oil palm, over 8,000 hectares of sugar cane and a further 9,500 hectares of grazing pasture (some of which will be converted to oil palm); 11 oil mills; two refineries, one in PNG, and one in Liverpool, UK; and a seed production and plant breeding facility.

(ii) The Company is quoted on both the Main Market of the London Stock Exchange and on the Port Moresby Stock Exchange in PNG.

(iii) NBPOL is fully vertically integrated, producing its own seed (which it also sells globally) and planting, cultivating and harvesting its own land and processing and refining palm oil (both in PNG and the UK).

(iv) It also contracts directly with its end customers in the EU and arranges shipping of its products.

(v) NBPOL has high regard for the importance of its sustainability credentials and is active in proving its performance through its certification to ISO 14001 and its close involvement and support of the Roundtable on Sustainable Palm Oil (RSPO).

(vi) The Company is a certified supplier of sustainable palm oil from the entire production base in West New Britain Province, at Ramu in PNG, and its entire Solomon Islands estates, under the RSPO guidelines.

2. The Importance of High Quality, Affordable, Segregated Sustainable Palm Oil to the UK Food Industry

(i) Palm oil has become an essential resource for the food, personal care, oleo-chemical and bio-diesel sectors and is used in one in 10 products found in the supermarket such as: biscuits, confectionary and baked products, soaps, detergents and cosmetics. As demand for palm oil has grown and the industry has expanded, the sustainability of the product is becoming an increasingly important issue, which must be addressed by the UK food industry.

(ii) NBPOL seeks to provide the UK food industry with fully segregated and traceable, RSPO certified sustainable palm oil which is produced in an affordable manner. NBPOL uses only palm oil that can be traced back to RPSO certified sustainable origins, which we feel is a critical step towards mainstream sustainable palm oil use in the UK.

(iii) We are passionate in our belief that the world must produce palm oil in a more sustainable way. If we are to continue to provide the world’s population with affordable food that does not have detrimental impacts on tropical rainforests, the habitats of endangered species and the livelihoods of people dependent on those rainforests, then sustainable practices must be embraced.

(iv) We are determined to make fully segregated, traceable and certified sustainable palm oil mainstream for the UK food industry in as many ingredients and formats as possible and so we make it affordable to them. We clearly believe in the importance of safeguarding this financial connectivity and its critical role in delivering a more sustainable industry. As a result, we have committed to invest more than £30 million in making traceable, sustainable palm oil available to the UK food industry at the same price it would normally pay for non-sustainable oils.

3. Yield Growth Over Extra Planting—Helping to Keep Production Sustainable

(i) We firmly believe that the palm oil industry simply must meet the growth challenge through improvements to palm oil yields—both on estates and among smallholders and not by additional planting on critical wetlands and high conservation value forests as it has done in the past (and still threatens to do).

4. Increasing Transparency to Allow Consumers to Choose the Sustainable Option

(i) In order for the UK to properly benefit from traceable, sustainable palm oil, it is first necessary for consumers to understand the difference between it and the non-sustainable product and to be able to identify accurately which is which.

(ii) In the same way that products contain information about the nutritional value of their constituents and many give details about their origins, a system should be introduced so products containing palm oil should declare the fact and should also give accurate information on sustainability of the palm oil which is included in the product. Such a system, working in a similar manner to “dolphin friendly tuna”, would enable consumers to make positive informed choices and thus promote the uptake of sustainable palm oil and encourage food producers to only use sources which are environmentally friendly and responsible. Such labelling should not be optional but should be included on all food packaging in the UK. Clear details should also be given on supermarket shelves to ensure consumers understand the significance of the new labelling.

(iii) We believe that equally important to clear labelling and information on products is the restriction of mis-information which confuses the consumer.

(iv) GreenPalm Certificates are used by many companies in the UK to claim “support” for sustainable palm oil. However, these certificates do not indicate that products in question contain palm oil from sustainable sources. Such certificates are akin to offset certificates, meaning that companies pay a support fee to a sustainable grower, while continuing to buy their oil from any non-sustainable source. While they are endorsed by the RSPO, such certificates serve to confuse consumers and potentially restrict their ability to choose products that are truly sustainable.

(v) Today some well-known consumer goods/food companies are making public statements about the palm they purchase; suggesting half of it is from sustainable sources, when in reality they are simply purchasing GreenPalm Certificates and have little or no understanding as to the sustainability of the palm oil they are using because they cannot trace it back to individual plantations.

(vi) This creates a re-occurring cycle of non-sustainable purchasing and means that as consumer goods/food companies continue to source their oil from the untraceable commodity supply chain then it is most likely that their spending power will be going back to exactly the same kind of non-sustainable producers that they claim, by inference, not to support.

(vii) In this way, GreenPalm Certificates are not only not a true indication of sustainability, but also counterproductive both to sustainable producers and consumers interested in making informed sustainable purchases. We contend that GreenPalm Certificates are simply a cheap way for companies to claim support for sustainability while doing nothing different to what they have done in the past.

(viii) The idea and concept is predicated on the belief that traceable sustainable palm supply chains are impossible and prohibitively expensive, something that we, and others sustainable producers, have started to disprove by our practice.

(ix) Additionally, companies claiming “support” are not audited, nor are they needed to be audited about either the extent of their “support” or why they might only be buying certificates for a part of their overall palm oil use. The operators of the scheme are not audited or independently verified and the total amount of “support” is not transparent for anyone to see. The opportunity for making false or misleading claims is obvious and there is no mechanism in place to police such claims anyway.

(x) We believe that not only is this misleading consumers about what a company is doing in the name of sustainability, but it is undermining the cause of real and verifiable sustainable palm oil production. To us, the evidence is clear in that:

(a)Providing access to the UK’s palm oil spending power ahead of a non-sustainable producer is incentive enough for a sustainable producer, however, the GreenPalm Book & Claim system is obstructing that from ever happening and we think the Government should act in preventing companies from claiming such obvious and false support for “sustainable agriculture”.

(b)If this continues, sustainable palm oil will not become a reality, nearly every company’s 2015 target to buy only sustainable palm oil will be missed, more rainforest will be needlessly destroyed and more time lost without concentrating more on yield improvements – no one can afford for all of this to happen.

5. Summary of the Problem with the Green Palm Supply Chain

(i) In summary, we believe GreenPalm Certificates are like buying a green claim on the cheap.

(ii) It misleads consumers as to the genuine impact of the product they are buying and has a detrimental effect on the truly certified sustainable palm oil suppliers.

(iii) Tangible impacts include:

(a)The prevention of supply chain operators from providing and investing in low-cost traceable sustainable palm oil for our UK/EU consumers.

(b)It misdirects the flow of UK consumer’s monies back to non-sustainable producers and the consumer is left wrongly believing that they are purchasing sustainably.

(c)It is sending the message to the governments, companies and smallholders of palm producing regions that European buyers are disingenuous in their attempts at sustainability. It further suggests we are more interested in appearances than actual impacts and achievements.

6. Conclusion—Creating a Positive Cycle of Sustainable Production

(i) We feel there is a need for the UK Government to promote more effectively this issue as well as to ensure companies are making accurate claims and not misleading consumers with respect to their palm oil use or their so-called support for sustainable production. As with any industry, for it to change its ways, there needs to be a tangible financial connection that links responsible production to consumers in wealthier economies like the UK that want their food to be produced more responsibly. If sustainable palm oil is wanted , is available and affordable then it will be both consumed and produced in ever increasing quantities. This financial link not only connects a sustainable supply chain, but even more importantly, it will lead to long lasting change because it excludes any financial benefit from going to non-sustainable producers.

7. Key Facts to Consider

(i) Although the amount of palm oil production certified against the sustainable standard has grown since 2008 (c 3 million tonnes), it has not grown as fast as overall world palm oil production (c 5 million tonnes!).

(ii) The industry is producing more non-sustainable palm now than it was in 2008 when the first operations were certified.

(iii) GreenPalm Certificates currently trade at $7.50/mt for 2011’s palm oil crop but 2010’s certificates last traded at only $0.25/mt (iv) Even despite such a low price, around 40% of sustainable palm oil went unbought or “un-supported”.

(iv) The actual price of palm oil is over $1050/mt ex the plantation level.

(v) Many growers around the world are dismayed about the lack of demand for sustainable palm and how easy it is for companies to obtain a “green” claim for doing so little; the Indonesians have even set up their own standard (ISPO) because they are so disillusioned with the economics and benefits of going for RSPO certification.

(vi) We believe it is both inaccurate and misleading to consumers if companies buy a GreenPalm Certificate for $7.50 per tonne (let alone $0.25/mt) and claim they are “supporting” and, by inference, “promoting” sustainable palm production when they are still paying more than $1050/mt to a non-sustainable producer.

(vii) Parallels are often made in defence of this scheme in that it only operates like the carbon offset market in Europe. However, in addition to renewable production, carbon credits are created from taxing non renewable energy producers and energy intensive users. This and the UK ROC scheme for example, work very differently so as to ensure incentives are there but also that consumers are not being mislead. The GreenPalm system has no formal structure or checks in place to ensure a fair price is paid to “support” production.

5 May 2011

Prepared 10th May 2012