The Impact of Good Operating Practices on Corporate Performance


Renato J. Orsato, Stewart Clegg e Horacio Falcão



Article in focus:The political ecology of palm oil production

Over the last twenty years, dendê oil (palm oil) has become a controversial commodity. This raw material, which is a source of renewable energy and which is used in thousands of products, has been described as the most significant cause of deforestation and biodiversity loss in Southeast Asia. Environmental groups and the palm oil industrial chain have accordingly clashed.

In the study “The political ecology of palm oil production”, which appeared in the Journal of Change Management, FGV-EAESP professor Renato Orsato, Stewart Clegg (from the Sydney University of Technology) and Horacio Falcão (from Insead) analyze the development of this dispute in relation to palm-oil production on the island of Borneo, which has become an iconic example of environmental degradation.

Until 1997, the predatory exploitation of Borneo’s environment did not attract the attention of public opinion or politicians. However, in that year, large bush fires, which were set deliberately to increase the area available for planting palm trees, produced dense smoke that covered all of Malaysia and Indonesia and that reached Singapore, causing respiratory problems across the population. There repercussions occurred at an international level, and the media established the link between deforestation and the palm oil industry.

Environmental NGOs seized the moment to intensify their campaigns. The industry responded rapidly, organizing a coalition led by the main companies in the palm oil chain: the Roundtable on Sustainable Palm Oil (RSPO).

By analyzing the political forces surrounding the formation of the RSPO, Orsato, Clegg and Falcão demonstrate that this “green club” provided no guarantee that the disputes would be resolved. Whereas the RSPO was the “brain-child” of an environmental NGO (the WWF), which believed that it was better to be involved in the decision plan even if it had to make concessions, other NGOs, principally Greenpeace, were opposed to the formation of the RSPO.

The RSPO hoped to cool tempers with the credibility that would result from its union with environmental organizations and with its initiative for introducing certification for plantations that obeyed the criteria of sustainable management. However, Greenpeace’s opposition challenged the logic of the system under which the RSPO operated. The NGO believed that improving agricultural practices was insufficient. Additionally, the planted area would need to be limited, thereby preventing further deforestation and enabling the recovery of the native forests that had been destroyed.

In November 2007, Greenpeace published a report entitled “Cooking the climate”, which linked RSPO members to carbon emissions from the deforested areas in Indonesia. In April 2008, another campaign was launched, this time against Unilever. Under pressure, the multinational corporation tried to convince other interest groups to engage in the moratorium on deforestation that Greenpeace desired. However, this initiative only angered the palm oil producers.

According to the study’s authors, the central issue in the dispute over palm oil is related to the decision-making power: who should decide what should be done in terms of this production chain? The creation of the RSPO, which was established with the support of a substantial number of producers and environmental organizations, attempted to create legitimacy through a certification system. However, Greenpeace’s campaigns destabilized this arrangement with a different proposal regarding which technical conditions could be considered legitimate in making the chain sustainable. Greenpeace’s campaigns thus weakened the social fabric that sustained the coalition. The impasse remains. “The creation of a new institutional logic, like that of the RSPO, does not necessarily lead to stability”, conclude the researchers. The case provides an important lesson for professionals and activists who are interested in environmental issues. 

Contact the author Renato J. Orsato.
Learn more about the research conducted by Renato J. Orsato.