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Standing Committee on Economics
19/08/2011

GRAY, Ms Jennifer, Chief Executive Officer, Zoos Victoria

KERR, Mr Cameron, Director and Chief Executive, Taronga Conservation Society Australia

O'BRIEN, Ms Jacqueline, Acting General Manager of Communications, Zoos Victoria

CHAIR: I would like to take this opportunity to welcome the Taronga Conservation Society Australia and Zoos Victoria to today's hearing. I remind you that, although the committee does not require you to give evidence under oath, these hearings are legal proceedings of the parliament and warrant the same respect as proceedings of the House or the Senate. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. I understand that you have something for us to see at the start. Is that how you want to proceed? I will leave it to you to make an opening submission and we will see where we get to.

Mr Kerr : Thank you for hearing from us today. Before turning to the central matter of labelling palm oil and all the concerns that that is causing for industry, perhaps I can provide a very quick overview to indicate why a couple of CEOs representing Australian zoos are here before you today. About 12 million people a year visit zoos in Australia; over 10 million of those are Australians. Largely, they come in the company of their family, friends and neighbours. Our research tells us very clearly that they have an expectation of zoos to not only care for the animals to the highest standards but also to provide leadership and stewardship about issues affecting the world's dwindling wildlife.

Our zoos operate global programs. They preserve threatened species through science, husbandry and breeding programs on our sites. But the only chance for survival, of course, is protection of habitat. Our zoos are complex organisations. They cover the disciplines of research, education, field conservation and, of course—particularly for my colleague and me—business.

The information that we are providing to you is based on facts. Sometimes confusing information is provided and I know that a lot of information has been gone through. The information that I am providing here is all referenced and, should there be any questions, please ask as we go along or at the end.

We understand the importance of palm oil. We understand that it is a desperately needed food source in developing nations. We are not anti palm oil in any sense of the word. The facts are that we know that palm oil is more than five times more productive than all of the other oils out there. As a production crop, it also requires less fuel and fertiliser than most of the other oilseed crops. Understandably then, we have seen an eight-fold increase to over 12 million hectares under production in 2009 and a tenfold increase in production to 45 million tonnes. The World Bank estimates that, with population growth, another 28 million tonnes of vegetable oils will be required annually by 2020. So the growth is going to be quite significant.

Much of what we speak about today, of course, relates to South-East Asia, Malaysia and Indonesia, because that is where 85 per cent of today's palm oil is grown. Our request is that Australians exercise their choice as consumers to contribute to getting this industry on a sustainable footing, because we do not believe it is at the moment. This is in a way that will not harm or disenfranchise small landholders in producing countries, particularly Malaysia and Indonesia, our nearest neighbours. Past unsustainable practices in agriculture and logging across these nations has led to huge habitat loss.

Importantly, I think it is worth noting that in the case of Malaysia the terms used by the forestry organisations to describe various land uses are sometimes obscured. A report from the Malaysian Timber Council lists that, of the total forest area in Malaysia, 74 per cent of that land is allocated as permanent reserved forest. So that sounds good. However, if we look at the detail, the report lists that the majority of this permanent reserved forest—78 per cent of it or 11 million hectares—is actually allocated to a term called 'production forests' for growth and harvesting for timber export. So the landmass and the vast tracts of production forests are grouped together with the lesser areas of protected forests. This produces some confusing statistics and can cause us to misunderstand the impact on the species that rely on these habitats. The source for that information is Malaysia: sustainableforest management, March 2007, page 7, the Malaysian Timber Council. So that is the Timber Council's own understanding of how the reserved forest is split up. Other reports, of course, have estimated that less than 15 per cent of Malaysia's rainforests are available today. In Indonesia, the situation is even more dramatic. At the present rate of deforestation, it is expected that tropical forests in Indonesia will be logged out within 10 years.

As the timber resources are depleted, the timber companies are now engaging in massive palm oil business, because it is growing and it makes sense to them. The problem is that this is on rainforest and peat forests and is causing huge destruction so that that forest can never regrow.

I would like to refer now to the mission of the World Bank because the World Bank has spent a lot of time and energy studying the topic that you have been listening to. The World Bank's mission and objective is:

To fight poverty with passion and professionalism for lasting results. To help people help themselves and their environment by providing resources, sharing knowledge, building capacity and forging partnerships in the public and private sectors.

The World Bank has a genuine commitment to understanding and working with the palm oil sector. It has been involved with the palm oil sector since 1968.

Let us look at the actions of the World Bank in the last few years, in relation to their engagement with this particular sector. In 2009, following very concerning practices by a large palm oil producer, the World Bank's investment arm, the International Finance Corporation, issued a complete moratorium globally on all palm oil companies—on investing in and supporting them. It must have been a fairly significant finding for them to do that. Over the next 18 months, the World Bank reviewed the palm oil sector, including employment, income generation, poverty reduction and environmental impacts involving the sector's role as a driver for deforestation. They spoke to 2,500 stakeholders across 30 countries and they aim to place the palm oil sector on a more sustainable footing. Their deliberations suggested that stimulation of demand for certified sustainable palm oil was vital. The January 2011 report that I have here says:

The sector should move towards 100% certification. However, currently, 3.5 to 4% is certified, and demand for certified oil has been weak. In this regard, creating demand for sustainable palm oil was seen as a critical factor.

That is a quote from the report.

In April this year, the World Bank released its final strategy for engagement with the palm oil sector and set down rigorous guidelines in terms of environmental safeguards in establishing a certification scheme that would specifically benefit small plantation holders so that they could act collectively. They mandated a strict requirement for any re-engagement with the sector. The report went on to state that other groups—which may include ourselves—in the supply chain, including buyers, processors and retailers, can also be effective in encouraging palm oil growers to adopt more robust standards. I think that is very relevant to the discussion this morning.

A further report published this month, August, by the International Finance Corporation outlines its updated performance standards, with even more rigorous disclosure requirements for palm oil projects on environmental and social impacts of development. Further details of the governance systems they employ are due to be released this October. So this is a big issue. Through these means, the IFC can lead the way for responsible global investment in and engagement with the palm oil sector, understanding that the World Bank, through the IFC, builds bridges, roads, finances palm oil production plants, refining—that sort of thing.

In recent years, 72 private institutions, including Citigroup and ABN Ambro, have also adopted a set of standards for social-environmental sustainability, based on the IFC's performance standards. They have called these the Equator Principles. So if, as expected, these international investment companies follow suit, there is new hope that the palm oil standards will be applied to producers over the coming years because they will need them to get finance.

What remains is that there needs to be strong international evidence for demand for sustainable palm oil, and this is where legislation is vital. The time is right for Australia to come into line with these international trends—we are certainly not going it alone—and the practices to create an environment that rewards industry, suppliers and distributors for sourcing sustainable palm oil product. The draft legislation for truth in labelling creates a market environment that delivers these outcomes. By implementing these changes through Australian legislation, it creates an even playing field across the industry.

Some have argued that there is significant impost to industry by making changes to labelling. I have to let you know that, throughout the 1990s, I worked for three multinational organisations in consumer marketing roles, consumer health care and consumer cosmetics—Wella, Schwarzkopf and Faulding. I can confirm that, during this time, package labelling was a useful marketing tool for me and would often include short-term promotional offers for special information—'new improved' and all those sorts of things which I am sure that you see on a regular basis as you go through the aisles. Today—a luxury that I did not have when I was in the industry—we have digital technology, which has made the process even less of an impost to consumer packaged goods companies and their marketing departments.

Based on my own experience, I would have to challenge any argument that this change would cause a major impost to food manufacturers and marketing organisations generally. In fact, should the truth in labelling bill be passed, my prediction would be that, knowing the community interest in this issue, progressive marketing departments will source palm oil and use it as a competitive advantage. It will then be leveraged for market share and also promoted in their annual report as part of their corporate social responsibility positioning. Australian consumers have demonstrated their will to have a choice through the truth in labelling bill. Let us give them an opportunity to do that. That demonstration will be fleshed out more by Jenny Gray.

This is something that is meaningful. It can be done to place the burgeoning global industry on a sustainable footing and safeguard the precious wildlife that relies on the viable forests to survive. I would now like to turn to the impact of deforestation of palm oil on orangutans. It was said this morning that there is some confusion and misinformation about—

CHAIR: We are just conscious of the time that we have allocated. We want to make sure that committee members get the opportunity to ask you some questions. I note that you are reading from a prepared statement. Is it more convenient to make a number of those points and for us to take the statement as an exhibit here, just in terms of making sure that we get to ask questions? What you are saying is very interesting and it is great to have it in writing so that we can refer back to it, but I just want to make sure that people here have the opportunity to ask some questions of you while you are here.

Mr Kerr : Sure. Actually, I am on the last page.

CHAIR: Okay.

Mr Kerr : The point I would like to make here is—

CHAIR: Maybe I am warning Ms Gray then, in terms of where we might be going.

Mr Kerr : There was some questioning and discussion this morning about the impact on orangutans. The IUCN, which I think is a respectable source, has said that the population has halved in the last 60 years and they expect that decline to continue at this rate or faster because of deforestation and fires. At this point, I will wrap up. Maybe we can play our short clip after Ms Gray has spoken. I will hand over to Ms Gray.

Ms Gray : Thank you, Mr Chairman. I will be brief, bearing in mind the time constraints. Cameron has covered the scientific evidence and research, and certainly the Senate committee went through in great detail all of the evidence around palm oil and the links to habitat destruction. The key issue for Zoos Victoria was to understand what the community sentiment is around this. For years we have heard people saying: 'We love orangutans. We hear about habitat destruction; what's driving it and what can we do about it?' So we ran a very simple campaign. The campaign asked people, 'Do you want to have palm oil labelled?' and 163,917 Australians took the time to respond and say very categorically that they wanted palm oil labelled. They did it simply. They filled in cards; some of them just signed and put their details on the back of a card. Some of them—and I have some here, just a very small sample, as there are boxes of these—drew pictures, because they were not old enough to write. All of the pictures show things like someone with a chainsaw cutting down a tree. Little kids care about this issue.

Online, 70,000 people responded—and, again, I brought a small sample because the whole printout amounts to 2½ thousand pages—and each one of them took the time to write a comment that says, 'We have the right to know; we want to be able to take decisions for ourselves.' We did take out the expletives as well, because a lot of them were more forceful than just asking for the right to know. So with these two effective tools, we are able to say that consumers in Australia do want to have palm oil labelled on their food products.

In terms of what this campaign is not, this is not a beat-up on any other country. We really do not mind where the palm oil comes from; we are just saying, 'Please label palm oil.' It does not matter whether it comes from Malaysia, Indonesia, Papua New Guinea or, more recently, the DRC. It is being grown anywhere there are rainforests because they are the ideal habitat and, in order to make space for it, rainforests are destroyed. It is also not a boycott; we are certainly not asking for it to be boycotted. We are asking, as Cameron has said, for sustainable palm oil to be grown and for that to be used; and that is what all the authorities and international bodies are suggesting ought to be the route that we take. Thirdly, it is just about giving consumers choice; that is all the request is about and that is what this legislation is about.

It is an international trend and there are people who are making the moves, as they see this happening. In May, Wilmar International Ltd and New Britain Palm Oil announced that they would deliver fully segregated, traceable, certifiable, sustainable and affordable palm oil to the EU. It is by no coincidence that that happened in May, while the EU was busy debating the mandatory labelling of palm oil. As mandatory labelling comes about, as it is even brought into the public sphere of debate, producers are starting to understand that this is a serious issue. But without mandatory labelling, not all producers will move; only those with a conscience.

It is interesting also that back here in Australia, only last month Coles and Woolworths told a Malaysian trade delegation that they should produce—and I quote from a press release—'as much sustainable palm oil as possible' in response to the demand from consumers for clearer palm oil labelling.

The final point that I would make before handing over for questions is that this is not a new issue. If it were just a matter of 'we're good corporate citizens and we'll get around to doing it when the time is right', they would be doing it already. There have been massive campaigns—and we all have seen them—around the world by people wanting palm oil labelled. It is only when the spectre of mandatory palm oil labelling is on the table that manufacturers are actually moving. So consumers are saying that it is well and truly time to act and they are asking that it be labelled. We have been told for too long that it is just not feasible, it is not a health and safety issue and it is not important enough to consumers. What we have shown is that it is important enough to consumers. If 163,917 people are prepared to take the energy and effort to make a contribution to make that statement, I think it is time for us to act—and we would ask you to consider this legislation.

CHAIR: Thank you for that. I have one question to start off with, before handing over. The submission you seem to be making seems to reflect the draft legislation rather than the legislation that has come back from the Senate, in that the issue of sustainable palm oil has been amended in that process. Without wanting to go over all of those arguments again, if the legislation passed as it is now, the labelling would not distinguish between 'sustainable palm oil' and 'palm oil'. The effect of that would be contrary to what you have just stated as your view, in terms of wanting to have people know and, if they choose not to use something with palm oil in it, directing them away from sustainable palm oil as well. Isn't that the situation; and, if it is, are you asking us to go back to the original draft?

Ms Gray : We are quite comfortable with the new draft. Once it is mandatory to label palm oil on the product, the manufacturers will then have the pressure to go after 'certified sustainable' and they would label that themselves where it is, as Cam said, an interest for their consumers. About 90 per cent of palm oil goes into food products at this point, but we welcome that the other 10 per cent is covered by the rest of the amendment. So we are quite comfortable that the labelling of palm oil on the package in some way as mandatory would be enough to bring about the change in the industry.

Mr BILLSON: I am pleased to hear that because some of the evidence that has come to us is that if people have more detailed, richer information available on websites and things like that—I just sensed that there was a connection between the disclosure that there is palm oil in there and, if people want to say more about it, there are plenty of other channels to obtain that material. I also have a question about the 90 per cent and 10 per cent—the proportion of palm oil use and the idea that, if palm oil is being used, it matters wherever it is being used. Also, you touched on some of the international developments. Could you characterise, as you understand it, the degree of specificity in labelling in the North American market and also what happened on 7 July in the European Commission, in terms of what expectations or requirements have been created there?

Ms O'Brien : I can talk about the EU developments. What has happened with the EU, particularly at the time that Jenny was talking about—the Wilmar-New Britain Palm Oil deal—is that a broad range of food labelling regulations were being debated by the European Union. They have since been adopted by a plenary session and part of that is palm oil labelling; it is actually that the origin of vegetable oil has to be labelled. So at the moment it is going through a legal check of the text and it is expected to be essentially rubber-stamped by the end of October. Industry then have until 2015 to effectively label all of their products.

Mr BILLSON: That is where vegetable oil is present, to identify the nature of it—

Ms O'Brien : What the vegetable oil is.

Mr BILLSON: which aligns very much with the US model, as I understand it, where you put 'vegetable oil' and then you list a bunch of what kinds of vegetable oils you are actually talking about.

Ms O'Brien : I believe that is the case in the US, yes.

Mr BILLSON: In terms of the palm oil itself, it was put to us that the campaign and the public discourse have created a stigma around palm oil per se. Have you sensed that? I am going into the next question, where I understand that the nearest substitute is rapeseed oil, which takes about seven times the land mass to get the same yield. So, in a habitat sense, that is probably a worse outcome.

Ms O'Brien : The United Nations in 2007 actually flagged deforestation due to palm oil production as what they call an 'environmental emergency', which is quite a significant category for the United Nations to call it. A lot of people say that there is a stigma attached to it, but there is strong scientific evidence backed up by the United Nations to show that unsustainable palm oil production is environmentally devastating. So, yes, there is a stigma attached to it, but often that is because there is an issue with the way that it is produced. Certified sustainable palm oil is the industry's attempt to actually clean up the way it is being produced.

Mr BILLSON: And that is why you are seeing a lot of voluntary measures to make that case.

Ms O'Brien : Some, yes.

Mr BILLSON: It is interesting that there is a hankering to do that but not to actually say that it is there in the first place; I found that a little bewildering. Responding to the evidence to the Senate committee about the utility of the FSANZ process and its primary objectives in food labelling and issues around health and safety—that palm oil is a saturated fat but by no means the worst and all of that—and the complexities of that, having it treated as just a consumer information policy objective, are you comfortable with that? That is, having the consumer law change as a second channel and perhaps a more direct—

Ms Gray : I think the issue is that it is a consumer issue; consumers want the right to know. I think the Senate committee also said that FSANZ should not limit themselves just to health and safety and that they could consider other requirements as well. But, yes, we are very comfortable that it is a consumer issue. Certainly there are health implications, and they have been raised by other witnesses, I am sure, and they would answer that question in a more detailed way.

Mr BILLSON: With the lead-in time, under the amended bill from the Senate the obligation was to kick in 12 months after the commencement of the law for manufactured products. That would still see a 'stockpile'—if I could use that term—of shelf products out there and we have had some say that two years would be better than one. Do you have any views on the lead-in time?

Mr Kerr : I might speak to that, having worked in marketing and product labelling for many years. If you put 'new improved' on a formula, you are allowed to have it on there for only 12 months. I think it is safe to say that we are comfortable with 12 months. I think more than 12 months is not necessary, given the modern age and the stock levels that manufacturers have for their labels.

Mr BILLSON: I have one last question. It has been put to us that, understanding the policy objectives that are behind the bill, a better vehicle for implementing them would be as part of the response to the Blewett review. Do you have a view about that being, as some have argued, a more appropriate pathway to go down and also some sense of how long that is going to take? As soon as you get into this space, everything seems to move at a glacial pace and it needs a good dose of palm oil just to help slip it along a little bit. Do you have any thoughts about timing and the suitability of the Blewett response?

Ms Gray : I would. When we started the Don't Palm Us Off campaign, Food Standards Australia New Zealand wrote to me and suggested that this was not in their mandate, that they would not do it, that we should stop what we were doing and that, even if the consumers really cared about this, they would not change the way they label. I think, without an instruction from government, they will not change. We could send it back to the Blewett review and it could get bogged down for another 10 years and we could watch orangutans disappear. It is not going to happen without an instruction from the politicians.

Ms OWENS: Thank you. I have two questions, really, the first of which follows on from the chair's comments about the change to the legislation, which would seem to mean that there is not the distinction between sustainable and other palm oil. You have mentioned that you are not expecting a boycott. I am just interested in teasing out the mechanism by which you see consumers then applying pressure if this bill goes through. It seems inevitable to me that there would be a boycott and that people would have to come back to reconsider a potentially labelled product which describes itself as a sustainable palm oil product. I am just not sure how you see that playing out, because it would seem to me inevitable that there would be that boycott measure in there.

The second issue that I would be interested in hearing your views on relates to the comments that we have heard through the hearings regarding the enforceability of the bill in terms of palm oil derivatives and, really, how you see the enforceability of the bill in relation to the very many, it seems, derivatives of palm oil used in production and whether you have any reservations about the bill as it currently standards in terms of its ability to actually deal with those derivatives.

Ms Gray : I think, in terms of the sustainability question, the approach would be much more one of recognising the leaders in industry that move forward. You would really want to celebrate the people who are taking the right actions and not boycott the ones who are taking the wrong actions. The industry will move where they see the consumer sentiment going. We have seen this happen with other products. One that came to mind in the Senate committee hearings and is here is 'dolphin-friendly tuna'. We did not all stop eating tuna. We started eating tuna that was fished responsibly and more and more people moved to fishing responsibly. So it was not that we all just stopped eating tuna. We moved to different processes and that changed the industry. This has the potential to do something very similar. So it would be much more through recognising those who are taking the positive steps and not shaming those who do not. As we say, we understand that there is a need for palm oil. It is a huge product. It is used extensively. The question is that it needs to be a sustainable product and not an unsustainable one.

In terms of the second one, enforceability, I have great faith in bureaucracies, when they are given clear policy direction, to come up with the best way of doing things. Once they have a clear guideline that this is not avoidable, I think that between the industries and the bureaucracy they will be able to find a workable solution around some of the details of what is labelled, how it is labelled, when it is labelled. Those kinds of details I am not an expert on, but I would imagine that they will find ways of doing it.

Ms O'Brien : Perhaps I could just add particularly to the first point about labelling and whether or not it is a boycott. We have already seen the market move in response to particularly mandatory labelling. We have seen that in the European Union, and it is a more affordable supply line that will be going into the European Union. That really is in response to the fact that there is now going to be much greater transparency around the palm oil issue. The market will respond. Industries are great as marketing themselves and their point of difference, that being that they use sustainable palm oil or orangutan-friendly palm oil or whatever it is that they use to market it. But I think we will see the market respond to it.

Mr Kerr : Perhaps I can add to that. I think you will see a premium price for sustainable palm oil production and that will flow down the supply chain. With the World Bank's objective of getting collectives of small land holders certified, there will actually be benefits down the supply chain. The large users—I will not mention the names—have the resources to seek out and encourage the supply chain to meet what they need, as we have seen in many, many other sectors.

Ms OWENS: We have already seen the major users in Australia commit to moving to sustainable by 2015. Their argument is that there is not sufficient 'sustainable' and it will actually take that number of years to do that. With or without this bill, according to the manufacturers, we will be in an industry where most of it is sustainable by 2015 anyway. If that is true, what is the advantage of this bill now?

Mr Kerr : Perhaps I can respond to that. I do not know that it is correct to say that there will be full supply by 2015. I think that is the point that Jenny Gray is making. By introducing this bill now, it will accelerate the process so that potentially, by 2015, the Unilevers of the world and others will be able to achieve sustainable supply chains. But if we leave it now, there is no accelerated process to encourage the development of that sustainable supply chain. If we leave it to industry to go at their own pace, and they have selected 2015, there will be a lot greater loss of forest in the meantime rather than moving to that now.

Ms OWENS: Australia, I think, advises that it is three per cent or 0.3 per cent—I cannot remember, but it is very, very small.

Mr Kerr : Very small, yes.

Ms OWENS: So surely Australia's action over the next two years will not drive massive change in the Malaysian and Indonesian palm oil industry.

Mr Kerr : I think what it will do is that you will have product managers in marketing divisions within Australia saying, 'We now have a competitive disadvantage. We need, as a global organisation, to take this position.' The large organisations, the global organisations, respond to the market. It does not mean that it is the biggest section of the market, but they respond to that globally. As to the indications of what is going on in the EU at the moment, along with Australia and other countries, I think that is where the real momentum is gained.

CHAIR: I think this is probably a good time to see your show.

Mr Kerr : There were questions in some quarters about the impacts on orangutans. As I said, we have quoted the UN figures. I think the UN is a fairly reliable source. The graphic impacts of palm oil in unsustainable production, the reports by the World Bank on violence on little communities, the lack of understanding of land tenure and things like that and the lack of legal frameworks around that, as well as the impacts on the wildlife themselves, are quite incredible.

   An audio-visual presentation was then given—

Mr Kerr : Perhaps that is why there is so much consumer concern.

CHAIR: Thank you for that and for your contribution today. We appreciate it and we appreciate your time and the work that you put into your submission and presentation to us today. A transcript will available from Hansard. If there are any errors or omissions, please get those back to us as soon as you can. Once again, thank you for your contribution.

Ms Gray : Would you like me to leave these comments?

CHAIR: How much did you get through? Is there more there?

Ms Gray : No. These are the comments from the public. It is just a small sample of them.

CHAIR: If you want to give them to us, yes, we will take that document as an exhibit.