Identifying the Human Rights Impacts of Palm Oil: Guidance for Financial Institutions and Downstream Companies

This report carried out by Forest Peoples Programme for the Global Canopy compiles what is known about the human rights impacts of palm oil development and provides guidance on how to address these abuses. The study was conceived as a contribution to the Taskforce on Nature-related Financial Disclosure (TFND), an industry-NGO consortium developing a framework to ensure that financial institutions and downstream companies have a positive, not negative, effect on nature. TFND also seeks to align itself with the UN’s Sustainable Development Goals and to uphold internationally recognised human rights.

Read the full report here 

The study explores the complicated links between downstream companies and investors and impacts on the ground, from plantations to mills, traders, refineries, manufacturers and retailers, noting that the most serious challenge to traceability is between mills and actual growers. Although certification schemes like the Roundtable on Sustainable Palm Oil (RSPO) attempt to trace supplies down to field level, audits often omit independent small-and medium-growers, while the RSPO’s Mass Balance certificates allow palm oil associated with human rights violations (and deforestation) from multiple sources to be mixed with more responsibly produced palm oil.

It is a duty of States to respect and protect rights and provide remedy in the case of violations, however, the UN Guiding Principles on Business and Human Rights (UNGP) and the OECD Guidelines for Multinational Enterprises (OECD Guidelines) are clear that companies and financial sector enterprises also have a responsibility to uphold internationally recognised human rights and provide remedy even where national laws may not require this. To this end, as part of their broader human rights due diligence (HRDD) efforts, these actors are urged to undertake human rights impact assessments (HRIA) in order to avoid or mitigate negative impacts and identify needed remedies for past harms.

A searching review of the available literature shows that palm oil development is all too often associated with serious human rights abuses, including: violations of the territorial rights of indigenous peoples; the expropriation of the lands of local communities and even titled land holders; abuse of collective rights to self-determination, self-representation and free, prior and informed consent; denial of right to participation by rightsholders; destruction of both physical and intangible cultural heritage; loss of livelihoods and access to vital resources and; pollution of ecosystems essential for human health and well-being, with consequent impacts on health. Multiple sources show systematic violations of the rights of workers – notably to free, collective bargaining, fair pay, and safe and healthy working conditions. There are numerous reported incidents of: forced labour; the use of child labour; the intimidation, harassment, torture and even killings of human rights defenders; the use of paramilitaries and State security forces to suppress dissent and; discrimination against women in plantations, including exclusion from decision-making, sexual violence, and unsafe living and working conditions. Many smallholders are brought into the supply chain through untransparent agreements which burden them with unexpected debts and provide them unfair remuneration for the palm fruits they produce. Adequate procedures to address grievances and provide remedy for violations are often wanting. 

A close review of NGO and CSO HRIAs of the palm oil sector framed by the UNGPs show that HRIAs are effective at revealing all these kinds of abuses. Nevertheless, carrying out independent HRIAs is challenging, especially in terms of: negotiating permissions to carry out the studies; gaining access to rightsholders; protecting interviewees and witnesses from reprisals; assuring due attention to women and other marginalised groups and; gaining access to government and corporate information, notably of legal permits and concession boundaries. However, by following existing, published guidance for undertaking HRIAs, independent assessors can circumvent most of these problems. The report then spells out in detail the steps needed to ensure sound assessments.

Whereas HRIAs are designed to identify and address specific risks and harms in order to mitigate and address them, some investors and downstream companies with wide portfolios and diversified suppliers are challenged to carry out HRIAs of all the growers in their value chains. The review looks in detail at the advantages and disadvantages of different metrics and measures for assessing potential and actual impacts and prioritising assessments. Whereas interview-based HRIAs are necessary for identifying and addressing specific violations, human rights risk assessments and quantitative approaches are suited to initial levels of due diligence and thus targeting HRIAs at the most serious areas. Assessments can be enhanced by well-judged use of infographics and ‘traffic light’ colour coding of risks and harms.

The report explores the tension between the responsibility of companies to uphold human rights and provide remedy for violations, on the one hand, and the expectation of downstream companies and investors just to avoid risky investments and exclude suppliers linked to rights violations, on the other hand. Moving from avoiding harm to doing good requires companies to undertake full HRIAs as they provide the depth of information needed to fully understand the negative existing and potential human rights impacts of suppliers’ operations, and to take actions to address them and not just avoid them.

The final section of the report makes a series of detailed recommendations, first directed at downstream companies and financial institutions and second at TFND itself. Downstream companies and financial institutions need to adopt and mainstream their own human rights policies and procedures and install capacity to implement them. They must set out clear requirements of their suppliers, investees and borrowers of the human rights policies and standards they are expected to adhere to with the aim of avoiding human rights violations and mitigating negative impacts. Where possible, downstream companies and financial institutions should establish mechanisms to share the costs and tasks of engaging with suppliers, investees, and borrowers. They need to recruit their own teams to oversee, commission and/or carry out human rights due diligence, human rights risk assessments and human rights impact assessments, following the detailed guidance provided. They must make full disclosure of their supply chains and investment portfolios and of the findings of these assessments. And they need to adopt procedures to provide remedy for violations or directly incentivise such, including providing direct support to rightsholders.  Where serious violations are identified, divestment and cutting off suppliers should be measures of last resort when efforts to provide remedy have demonstrably failed. 

TFND itself needs to make realisation of the SDGs and the upholding of human rights a more explicit part of its aims, priorities and procedures. When TFND considers risks and impacts, this must be in terms of risks and impacts on people and environments and not just risks and impacts on investments and reputations. One important step towards this conceptualisation of risks and impacts will be to explicitly integrate the already existing responsibilities of companies and financial enterprises to respect human rights – and associated HRDD processes -  into each step of the LEAP approach.