power relationships

Observation on new power relationships in the palm oil supply chain - policy making

There appears to be some relative institutional weakness in policy making in business circles (many industry players acknowledge this) over sustainability policies that are increasingly affecting market access for commodities such as palm oil. Notably there is a regressive higher cost for smaller players to comply with rising certification standards. Relative shallow institutional depth results in asymmetry in bargaining power or effort in the de facto international trade agreement that voluntary sustainability / traceability deals represent. This is not unexpected – see the Brundtland Report. Also, the devolvement of power to NGOs may also not serve the interests of buyers in complex supply-chains such as palm oil, as some specialists observe a preference there for a level of simplicity (rather than complexity). This apparent problem is compounded by the fact that the NGO sector appears to be building new sources of income (direct and/or indirect) that are independent of corporate CSR giving, individual donations or government grants. Key observers note that NGOs have since the 2007 Global Financial Crisis (when traditional funding fell drastically) been developing as technical service providers to help resolve corporate problems – this is obvious in palm oil. This is a different and stronger power relationship for NGOs vis-à-vis their traditional corporate backers in consumption countries and even their new corporate clients and/or backers in commodity producing countries. Such NGO sector expansionism and the wider use of new technology such as social media, geo-data and remote sensing are likely to create greater issues of scrutiny for the palm oil sector.