THE PALM OIL CASE FOR ISSUES MANAGEMENT
From the outset I just want to put a disclaimer. Neither Aroca Consulting Group or myself personally are representing the views nor have any interests in the palm oil industry. I have used this industry as a way of demonstrating the importance of issues management and discuss some of the principles.
Although I have lived abroad for nearly ten years, I quite naturally still follow the news in my native Sweden. During the lockdown I came across a piece which is interesting from many angles. The piece, which was the front story of the day, was published in leading Swedish daily Expressen(https://www.expressen.se/nyheter/qs/klimat/sveriges-nast-rikaste-familj-handlar-med-illegal-palmolja/) and was headlined “Sweden’s Second Richest Family Trades Illegal Palm Oil”.
In short, the story was that AAK,a major Swedish-Danish company with a global vegetable oil business, allegedly don’t have control of its supply chain and therefore purchases illegally produced palm oil from Indonesia. The story was further spiced up by the fact that the Schörling family, one of the wealthiest industrial families in the country with ties to the Royal family, is a major shareholder in AAK.
The story followed the usual pattern in these situations. The paper hadn’t received much of a comment from the company at the time of publishing and although AAK issued a statement in the following days, the perceived silence added to the public’s suspicion, a perception further fuelled by the paper in a few follow-up stories. The day following the story, AAK had a bad day on the stock market with the share price dropping nearly 4% making the paper draw the conclusion that investors shared the concerns of the story.
This story is a reminder about the problematic perception that palm oil faces in Europe and most of the Western world. After years of a well organised campaign and one-sided media reporting, where palm oil is linked to issues such as deforestation, soil depletion, a threat to wildlife, social issues, a product unhealthy to eat, a negative contribution to global warming, palm oil has got such a bad reputation that it is bordering on stigmatization. This perception is in turn starting to result in regulatory action. A prominent example is the initiative in the European Union to phase out palm oil as a biofuel in the EU by 2030.
While there are certainly genuine and highly relevant concerns related to the production of palm oil, the industry rarely gets credit for the positive aspects of the product and the quite sizeable efforts that the industry has undertaken to address the issues. Few in Europe are aware that palm oil is an integral ingredient in a wide range of products that most Europeans use on a daily basis. Few are aware of palm oils importance to employment and economic growth in particularly Malaysia and Indonesia. And very few are aware of the programs and the commitment from the palm oil industry and the governments in Malaysia and Indonesia to minimize the environmental impact of palm oil farming and to ensure sustainable practices. One may also wonder why palm oil has received such a focus from regulators and environmental NGOs while the many similar issues of soybean production in for example Brazil seem to avoid the same level of criticism despite practices there resulting in large scale deforestation in the Amazonas. As is usually the case, there are two sides to the story.
In Aroca Consulting, we have many years of experience of issues management around complex and sometimes controversial matters. The palm oil case illustrates some of the core principles that one needs to consider to successfully manage these kinds of issues. When we in Aroca Consulting advise clients in this area, there are a few areas we tend to stress.
Understand that sustainability is no longer optional. Whether you like it or not, it has become mandatory for any company to put down a plan on paper with clear commitments on how the business can become more sustainable. There will be scrutiny on your commitments and you will be held accountable so you better make sure the objectives are ambitious, yet realistic.
· Listen to the criticism and understand what the concerns are. Make an honest assessment if there might actually be some merit in the critique. You need to understand where your critics are coming from if you are to find a way forward. Their points may be unreasonable, exaggerated or even irrelevant but you need to understand it to be able to explain the true facts and complexities to other stakeholders.
Garner support from the entire supply chain, ensure everyone understand the importance and are committed to implement the action plan to address the issues.
· Partner with Governments and NGOs to find solution to address the perceived concerns but make sure they fully understand that you have a genuine wish to address the issues and that you will take their views most seriously and that you are prepared to implement constructive proposals from their end.
Once you have a case, make sure you communicate it. Any company has the right, and in fact sometimes the obligation, to speak up on its own issues. Look for opportunities to be proactive and meet likely criticism head on rather than waiting for the scrutiny to arise and be stuck in a defensive position where you can at best hope for a draw.
Reach out to a wide range of stakeholders and tell your side of the story. Some of these stakeholders will agree with your position and actions and will be keen to support. Make sure everyone on your side sings from the same song sheet. The key to form public opinion and public perception is to have a good case that is repeated by a wide range of stakeholders over and over again.
Accept that it will be a marathon. It will take lots of time, a genuine and long term commitment, and sufficient investments to manage issues. The later one starts, the longer it will take to improve things and the more it will cost.
Every situation and every issue has of course unique features but, in our experience, the above points are some of the points that are universally relevant. The detailed action plan will be different from case to case but the fundamental principles remain the same. As always, it is the quality of the execution of a plan that in the end will make it or break it.