Chapter 2

Food Standards Amendment (Truth in Labelling—Palm Oil) Bill 2010

2.1        This chapter discusses the issues raised in the course of the inquiry, framed around the following broad concerns:

• The scope of the existing legislative framework for developing food labelling standards;
• Consumer choice and rights;
• Health considerations; and
• Environmental concerns.

Existing legislative framework for developing food labelling standards

Food standards

2.2        The current food standards development process in Australia is regulated by:

• The Food Standards Australia New Zealand Act 1991 (the FSANZ Act);
• The Food Regulation Agreement, to which the Commonwealth, state and territory governments are parties; and
• The Australia New Zealand Joint Food Standards Treaty.

2.3        The FSANZ Act establishes Food Standards Australia New Zealand (FSANZ) as the food regulatory authority and defines its function and operation. The Food Regulation Agreement seeks to create a nationally consistent food regulatory framework and establishes the Australia and New Zealand Food Regulation Ministerial Council (the Council), which provides oversight of the food regulatory system. The Australia New Zealand Joint Food Standards Treaty establishes a system of joint food standards to operate across both nations.

2.4        Specific food standards are developed by FSANZ, in accordance with Council policy and the FSANZ Act, and within the framework of the Australia New Zealand Food Standards Code (the Code). The food standards in the Code are given legal effect by state, territory and New Zealand legislation.

2.5        As detailed in the FSANZ Act, section 18:

(1) The objectives (in descending priority order) of the Authority in developing or reviewing food regulatory measures and variations of food regulatory measures are:

(a) the protection of public health and safety; and

(b) the provision of adequate information relating to food to enable consumers to make informed choices; and

(c) the prevention of misleading or deceptive conduct.[1]

2.6        In Australia, state and territory health departments are responsible for enforcing and interpreting the Code. The Code's requirements must also be read in conjunction with relevant local food legislation, and the Competition and Consumer Act 2010.

Food labelling

2.7        The two key agencies relevant to the regulation of food labelling in Australia are FSANZ and the Australian Consumer and Competition Commission (ACCC).

2.8        The ACCC's role in food labelling is contained in its wider role of administering the Competition and Consumer Act 2010 (formerly Trade Practices Act 1974). A Memorandum of Understanding facilitates cooperation and coordination between FSANZ and the ACCC in relation to areas of overlap between the Code and the Competition and Consumer Act 2010, particularly in the area of false or misleading labels.

2.9        FSANZ is responsible for the administration of food labelling requirements under the Code. In accordance with section 18 of the FSANZ Act, FSANZ states that the purpose of food labels is to provide information to enable consumers to make healthier choices and to protect consumer health and safety.[2]

2.10      The Labelling and Information Standards section of FSANZ assesses applications for new labelling requirements or changes to existing requirements under the Code. Such applications must be in the form prescribed by FSANZ, and can be submitted by any individual, organisation or company from Australia, New Zealand or another country.[3] FSANZ considers applications in accordance with available scientific evidence and its requirements relating to the consideration of a cost benefit analysis and public consultation. Subsequently, the FSANZ Board submits proposed decisions to the Council. The Council may request a review of the decision, but must ultimately accept, amend or reject the decision within an allocated time period.[4]

Structure of the Bill as drafted

2.11      FSANZ has expressed concern regarding the Bill as it is currently drafted. FSANZ notes that the Bill circumvents existing interjurisdictional arrangements relating to food regulation and thus the Commonwealth may not be able to enforce the new standard proposed.[5] As detailed above, while food standards are developed by FSANZ, they are given legal effect and enforced by state, territory and New Zealand legislation. It is therefore difficult for FSANZ to contemplate a situation in which the Commonwealth could successful introduce and enforce a food standard directly onto the jurisdictions.[6]

2.12      The Bill as drafted also bypasses existing mechanisms FSANZ uses to examine applications to modify the Code (see para 2.9), such as a cost-benefit analysis. Mr Steve McCutcheon, Chief Executive Officer of FSANZ, commented:

I think in the context of providing more information to consumers through food labels that is very much around health and safety, and the objectives of our act make that clear. Whatever mechanism would be taken to give effect to the objectives of this bill I think we would probably struggle to meet the benefit-cost test that would be applied under the Council of Australian Governments best practice regulation guidelines, in terms of the cost that would be imposed on industry to put in place the systems that would be required to underpin label statements, and then the benefits of that for the consumers who were interested in that information.[7]

2.13      FSANZ does not consider that the standard proposed in the Bill has primary health and safety implications. Mr McCutcheon stated that the Bill 'removes any consideration of public health and safety from the process of establishing a food standard', and is therefore inconsistent with FSANZ's primary obligation in developing or changing food regulatory measures—as prescribed in section 18 of the FSANZ Act—to protect public health and safety (see para 2.5). [8]

2.14      In 2008, FSANZ rejected Application A593—Labelling of Palm Oil, stating reasons including that:

The informed consumer choice reasons raised by the Application, do not extend to the supply, quality or safety of food and the objectives of FSANZ Act do not extend to choices about international environmental issues; [and]

To attempt to use a domestic food standard aimed at regulating the quality and safety of domestic food supply to achieve international reform is a purpose that goes beyond the intent and scope of the FSANZ Act.[9]

2.15      As detailed in para 2.5, FSANZ's obligations in developing or changing food regulatory measures under section 18 of its Act are listed in descending priority order, and the protection of public health and safety is listed first. However, the second obligation is 'the provision of adequate information relating to food to enable consumers to make informed choices'. Several submitters put to the Committee that the labelling of palm oil would allow them to make better informed choices, and in this respect consider their request consistent with section 18 of the FSANZ Act.[10]

2.16      The Committee's attention was also drawn to section 3 of the FSANZ Act, in particular subsection (c):

Object of Act

The object of this Act is to ensure a high standard of public health protection throughout Australia and New Zealand by means of the establishment and operation of a joint body to be known as Food Standards Australia New Zealand to achieve the following goals:

(a) a high degree of consumer confidence in the quality and safety of food produced, processed, sold or exported from Australia and New Zealand;

(b) an effective, transparent and accountable regulatory framework within which the food industry can work efficiently;

(c) the provision of adequate information relating to food to enable consumers to make informed choices;

(d) the establishment of common rules for both countries and the promotion of consistency between domestic and international food regulatory measures without reducing the safeguards applying to public health and consumer protection.

2.17      Perth Zoo, for example, considered that enabling consumers to make 'informed choices' extends to the provision of information about the sustainability of food production as well as the source, quality and safety of food.[11] Further, the Humane Society International considered that FSANZ's country of origin labelling regulations sets a precedent for labelling for reasons other than health and safety:

Country of Origin labelling has demonstrated the application of a national mandatory labelling scheme, facilitated by the FSANZ Act and incorporated into state and territory legislation, for the express purpose of 'providing adequate information relating to food to enable consumers to make informed choices'. [12]

2.18       A small number of other submitters were cognisant of the existing food regulatory framework, and oppose the Bill on the grounds that it bypasses the current FSANZ standards development process and state and territory laws. For example, the Government of South Australia's submission notes:

It is unclear whether introducing an amendment to the FSANZ Act, which undermines the current system by essentially bypassing it, is the most effective means to improve the legislation.[13]

2.19      Evidence provided in other submissions focuses more on the consumer choice, health and environmental issues raised by the Bill, which are discussed following.

Consumer choice and rights

2.20      The first part of the stated Purpose of the Act is 'to ensure that consumers have clear, accurate information about the inclusion of palm oil in foods'.[14] This section discusses the arguments surrounding what several submitters term consumers' 'right to know'. Supporters of this view wanted detailed information on food labels to be mandatory so they can use it to take ethical, environmental and health considerations into account in purchase decisions.^[15] However, other submitters considered that food labelling legislation is not the best mechanism to address these issues, claiming that consumers use labels erratically and that health and safety declarations alongside voluntarily labelling measures provides consumers with adequate information about the products they consume.[16]

2.21      A number of Australian and New Zealand zoos conducted a joint public campaign entitled 'Don't Palm Us Off', calling on FSANZ to mandate the labelling of palm oil on food products. [17] The campaign encouraged consumers to indicate their support by making submissions to the inquiry or by returning postcards to zoos. Many submissions mentioned the zoos' campaign, and zoo witnesses to the inquiry reported that 163,917 postcards were received by 19 April 2011. A photograph of one-third of these postcards is provided as Figure 2.1.

Figure 2.1—Photograph of 'Don't Palm Us Off' postcards.

2.22      Ms Jennifer Gray, Chief Executive Officer of Zoos Victoria, noted:

These 163,917 Australians are not a homogeneous group of people. They are from different backgrounds and different life circumstances and they are all motivated by different things. Some are motivated by health—the health of themselves and the health of their loved ones. Some care about wildlife and some really just want proper information to make a proper decision. But they all have one thing in common. They buy food product and right now they do not believe they have the ability to make an informed choice when it comes to palm oil. The best tool consumers have to make an informed choice in buying food is the label.[18]

2.23      A more detailed discussion of consumers' health and environment related motivations for participating in the inquiry is provided later in this chapter.

Consumer use of labels

2.24      Supporters of the Bill stated that consumers read, use and understand labels. For example, Mr Cameron Kerr, Director and Chief Executive Officer of Taronga Conservation Society Australia (Taronga Zoo), cited research undertaken at Melbourne Zoo by Professor Jill Klein from the Melbourne Business School, indicating that where clear ethics related information is provided on food labels, consumers choose to buy such products.[19]

2.25      The committee also noted a 2008 study prepared for FSANZ that asked interviewees to select a number from 1 (never) to 7 (always) to describe how often they referred to labels when purchasing a product for the first time. Results of the study indicate that most consumers refer to food labels most of the time when buying a product for the first time.[20]

2.26      According to the study, the information sought by consumers on labels was predominantly a given food's best before date, fat and sugar content, country of origin and ingredients list more generally. Relevant to the present inquiry, 50.4 per cent of respondents who referred to food labels sought information about saturated fat content.[21]

2.27      The committee heard from witnesses who considered that consumers would understand the proposed language specified in the Bill. Mr Andrew Rouse, Acting Head of Sustainability at World Wildlife Fund, told the committee that there would be 'enough [consumers] that would' understand the phrase 'CS palm oil', and that given the social and environmental concerns surrounding palm oil production, mandatory labelling is justified. [22]

2.28      However, the committee also received evidence that many consumers do not read labels, do not understand labels or do not use food label information to make purchase decisions. It was suggested that consumers make purchase decisions based on products' price differentials, despite indicating otherwise in surveys. Ms Armineh Mardirossian, Group Manager, Corporate Responsibility, Community and Sustainability at Woolworths, noted:

We have a lot of consumer research that shows us a...discrepancy between attitudes and behaviours in buying.[23]

2.29      Woolworths subsequently brought a Net Balance study to the committee's attention; its research indicated that 80 per cent of respondents thought about environmental issues when shopping, and 13 per cent of shoppers interviewed had actually purchased a product that day because of its environmental features.[24]

2.30      The study also noted that 78 per cent of consumers were concerned about the added cost of 'green' products, and that 36 per cent were willing to absorb this cost premium. Mr Kerr, representing Taronga Zoo, stated that purchase decisions were less likely to be based on price if the cost premium was not significant.[25]

2.31      While survey evidence suggests that many consumers do refer to food labels when purchasing a product for the first time (see para 2.24), the view was put to the committee that consumers may not understand the Bill's distinction between 'palm oil' and 'CS palm oil'. Ms Majella Allen, Community and Sustainability Manager, Coles, suggested, 'I do not think consumers will immediately understand any of the proposed language.'[26]

2.32      Whether or not consumers understand the difference between palm oil and certified sustainable palm oil, the question of whether it should be the role of industry or government to provide that information is explored below.

Mandated labelling as opposed to voluntary certification

2.33      The Bill proposes legislation that would make the labelling of palm oil on food products compulsory. Consumers who submitted to the inquiry citing their right to be informed consider that this right could only be guaranteed by legislation, and that government intervention is necessary. Mr Rouse of the World Wildlife Fund believed mandatory labelling is necessary because of a current 'deficiency in the way that markets work'.[27]

2.34      The committee also heard that mandatory labelling would ensure that companies who do choose to use more expensive certified sustainable palm oil are not disadvantaged in the market. Mr Cameron Kerr told the committee that while labelling is not mandatory, companies who do not source certified sustainable palm oil can offer a cheaper product while avoiding consumer criticism:

So it is not a level playing field for those companies that are choosing to be corporately socially responsible. In Australia as a developed nation that is something that we believe we should be encouraging, if legislation is required to do that.[28]

2.35      Other witnesses expressed dissatisfaction with industry-led palm oil labelling measures to date. Mr Tony Gilding, Co-founder of the Palm Oil Action Group, said:

I think it is very fair to say that voluntary labelling of palm oil is not going to work. It has not worked. There has been ample opportunity for the industry to label palm oil or vegetable oil made from palm oil, but they have not done it.[29]

2.36      Conversely, industry representatives indicated their general preference for voluntary labelling and drew the committee's attention to existing voluntary labelling measures. [30] The Australian Food and Grocery Council noted industry's non-legislated responses to consumer demand, such as the reduction of fats and sugar in foods as a result of industry participation in the Food and Health Dialogue.[31]

2.37      The committee received submissions from major supermarkets detailing their commitments to eliminate or label palm oil in housebrand products, to transition towards certified sustainable palm oil, and to join the RSPO. Examples of labels from Woolworths' and Coles' housebrand products showing palm oil in the ingredients list are provided at Figures 2.2 and 2.3.

Figure 2.2—Examples of palm oil labelling, Coles products.

Figure 2.3—Examples of palm oil labelling, Woolworths products.

2.38      While neither Coles nor Woolworths directly opposed mandatory labelling, Woolworths noted that labelling for environmental reasons—not for health or safety purposes—needs to be well-targeted to consumer demand.[32] Similarly, Coles stated that if information about a large number of environmental issues were to be contained on labels, this could start to impact negatively on the clarity of health and safety messages.[33]

2.39      Retailers Woolworths and Coles noted that food labelling changes could be effected with minimal cost impact if sufficient lead-time was given; Woolworths suggested between two and two and a half years and Coles suggested three years.[34] However, the Australian Food and Grocery Council, which has a range of small and large business members, including food manufactuers, stated that labelling change does impose extra costs on business.[35]

2.40      The Australian Food and Grocery Council told the committee that several companies are choosing to source sustainable palm oil and label it voluntarily, which is a 'very good, sensible and cost effective approach to address this issue'.[36] This preference for voluntary mechanisms is echoed by Mr Tim Wilson, Institute of Public Affairs:

It [the Bill] is excessive government interference into a problem with a market based solution. While I oppose the government mandated certification and labelling, there is a market based alternative through voluntary certification. Voluntary certification is effective and sends a clear sign to consumers who are motivated on social, environmental, economic or other ethical concerns through a form of displayed labelling that they identify and recognise as of value.[37]

2.41      The committee heard that the RSPO is developing a voluntary mechanism for the RSPO logo that member companies may display on their products.[38] The RSPO plans to launch the logo for display on packaging later this year.[39]

Palm oil as a vegetable oil

2.42      In accordance with existing food labelling requirements, palm oil can be present in a product that is labelled 'vegetable oil'. Food Standard 1.2.4, Labelling of Ingredients, requires the source of edible oils to be qualified as animal or vegetable.[40] FSANZ does not require palm oil to be listed more specifically because it does not contain allergens and thus poses no food safety risk.[41]

2.43      With respect to international food labelling standards, the Codex Alimentarius Commission's General Standard for the Labelling of Prepackaged Foods, section 4.2.3.1, states that:

Except for those ingredients known to cause hypersensitivity, and unless a general class name would be more informative, for refined oils other than olive the class name 'Oil' together with either the term 'vegetable' or 'animal', qualified by the term 'hydrogenated' or 'partially-hydrogenated', as appropriate may be used.[42]

2.44      The Codex Alimentarious Commission is the international food standards setting body recognised by the World Trade Agreements on Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT).[43] Codex Australia coordinates policy on priority Codex standards and contributes to international Codex Alimentarious Commission forums. [44] Codex Australia's secretariat is based at the Department of Agriculture Fisheries and Forestry, and food industry, academic and consumer group representatives may contribute to its policy development and representation through its stakeholder consultation process.[45]

2.45      Several submitters expressed the view that listing palm oil as 'vegetable oil' on food labels is misleading to consumers.[46] Mr Tony Gilding, for example, suggested that palm [fruit] is not a vegetable as is commonly understood, and that all oils should be listed on food labels if constituting a significant certain percentage of that food.[47]

2.46      The view that all oils should be itemised on ingredients lists is consistent with Recommendation 12 of the Review of Food Labelling Law and Policy report (see para 1.15), and also the view of other submitters who support Recommendation 12 for health reasons (see para 2.50).

Health considerations

2.47      This section discusses the arguments made by submitters who consider that palm oil should be labelled for health reasons. Submitters who hold this view point to the relatively high saturated fat content of palm oil compared to other vegetable oils, while opponents of the Bill note that saturated fat must already be detailed on the Nutritional Information Panel (NIP) on food labels.

2.48      In accordance with Food Standard 1.2.4, Labelling of Ingredients (see para 2.41), palm oil may currently be present in a food where 'vegetable oil' appears on the ingredients list. However, palm oil is relatively high in saturated fat compared to other vegetable oils. Palm oil is composed of 55 per cent saturated fat, 37 per cent monounsaturated fat and 8 per cent polyunsaturated fat; its saturated fat content is similar to that of butter (53 per cent).[48]

2.49      Most other vegetable oils comprise a lower percentage of saturated fat content than palm oil, such as canola oil (8 per cent), sunflower oil (12 per cent), olive oil (16 per cent) and peanut oil (18 per cent).[49] However, palm oil is not the sole vegetable oil with a high saturated fat content; coconut oil comprises 92 per cent saturated fat.[50]

2.50      Saturated fat intake is linked to coronary heart disease (CHD) because it raises the presence of low-density lipoproteins (LDL) cholesterol, known to be a major risk factor for CHD.[51] Several studies have demonstrated that consumption of palmitic acids (from palm oil) increases LDL cholesterol levels.[52]

2.51      Some submitters presented the argument that palm oil should be labelled because the generic categorisation 'vegetable oil' does not enable consumers to make an informed health choice due to palm oil's relatively high saturated fat content.[53] These submitters held that there is potential for consumers to consider erroneously that a product containing 'vegetable oil' is healthier than a product that contains butter or other animal-sourced oils.

2.52      An alternative argument, presented by the Ministry of Plantation Industries and Commodities, Malaysia, pointed to the absence of trans fats in palm oil, and asserted therefore that palm oil is relatively healthy. While trans fats are linked to coronary heart disease, such fats are found in animal products such as butter.[54] There is therefore no inconsistency between palm oil and other vegetable oils with respect to trans fats. The itemisation of palm oil on food labels would fail to provide consumers with any additional health information concerning trans fats because all other vegetable oils are similarly trans fat free.

2.53      Some submitters, such as the National Heart Foundation of Australia, supported the Bill but also consider that mandatory labelling requirements should be extended to the itemisation of all fats on ingredients lists. Ms Susan Anderson, Director, Healthy Weight, National Heart Foundation of Australia, told the committee:

Providing people with palm oil information is helpful, but we also need to educate them about what the problem is with palm oil and other sources of saturated fat. So this is a good opportunity, a good starting point, to talk to consumers about saturated fat sources.[55]

2.54      This view is consistent with Labelling Logic: Report of the Review of Food Labelling Law and Policy 2011, Recommendation 12 (refer para 1.15), which states that all fats, oils and sugars should be itemised in brackets after generic terms such as 'added vegetable oils'. The National Heart Foundation of Australia considers that the implementation of Recommendation 12, alongside a broader health education campaign, would change consumers' attitudes toward the consumption of saturated fats and encourage food manufacturers to source alternative oils:

We believe disclosure about palm oil will push the industry to look at the healthier alternatives.[56]

2.55      The National Heart Foundation of Australia recognised that increasing food labelling regulation is unlikely, on its own, to effect substantial change in consumer behaviour. This view is supported by evidence from Woolworths indicating that the implementation of their voluntary palm oil labelling policy resulted neither in a significant increase nor decrease in the relevant housebrand product sales.[57]

2.56       The committee also heard the view that it is the total fat content of a product, not its source, that best informs consumers' health choices. The Australian Food and Grocery Council does not support the Bill, noting that the saturated fat content of food must already be displayed on the Nutritional Information Panel (NIP) in accordance with current regulations:

Information relating to fat and other nutritional information already exists on the product nutritional information panel. In terms of consumer health, the issue relates to the overall amount of saturated fat not its source. [...]

Clearly, consumers already have the information they need on the total amount of saturated fats in the products they buy.[58]

Committee view

2.57      The committee believes that it would not be appropriate to single out  palm oil for inclusion in product ingredients lists for health reasons, because listing palm oil would not on its own provide an indication of the nutritional content of foods. Information about the saturated fat content of a food is contained in the Nutritional Information Panel, and the itemisation of palm oil on the ingredients list would not add significantly to health information. However, the committee supports the broader approach to labelling reform outlined in Labelling Logic: Review of Food Labelling Law and Policy (2011), including more detailed label information around sugars, fats and oils.

Environmental concerns

2.58      The most prominent concern raised in submissions and during public hearings was the relationship between palm oil production and deforestation, and by extension, the endangerment of orang-utans and other wildlife. These issues relate to the second part of the stated Purpose of the Act, being, 'to encourage the use of certified sustainable palm oil in order to promote the protection of wildlife habitat'.[59] This section documents the evidence presented to the committee regarding the environmental impacts of palm oil production, and the usefulness of the Roundtable on Sustainable Palm Oil and the Bill itself in addressing these impacts.

Palm oil production and deforestation

2.59      The vast majority of submitters considered that palm oil production is a primary driver of deforestation in South East Asia, particularly Malaysia, Indonesia and Papua New Guinea. Witnesses at public hearings presented statistics, studies, maps, photos, details of funding programs and personal accounts to support the argument that palm oil production is causing deforestation and a significant loss of wildlife habitat.[60]

2.60      Australia Zoo provided a study that identifies four ways in which palm oil plantations may contribute to deforestation:

(i) as the primary motive for clearance of intact forests; (ii) by replacing forests previously degraded by logging or fire; (iii) as part of a combined economic enterprise, such as with timber, plywood or paper pulp profits used to offset the costs of plantation establishment; or (iv) indirectly, through generating improved road access to previously inaccessible forest or displacing other crops into forests.[61]

2.61      Most evidence presented to the committee detailed instances in which oil palm plantations contribute to deforestation as per (i) and (iii) above. For example, several submissions quote Greenpeace, which asserts that 300 soccer fields are cleared per hour for palm oil production resulting in the death of 50 orang-utans each week.[62] Mr Giles Clark, Australia Zoo, considers that there are commercial links between the clearing of land by the pulp and paper industry and its subsequent use for oil palm plantations, for what he terms a 'double profit'.[63]

2.62      While it can be difficult to quantify the effect oil palm plantations have on deforestation across South East Asia, a 2008 update to the Stern Review of the Economics of Climate Change states that palm oil plantations account for 32 per cent of deforestation in Indonesia, 30 per cent in Malaysia and almost 50 per cent in Papua New Guinea.[64]

2.63        Evidence received by the committee suggests that strong links exist between deforestation and the loss of biodiversity. The issue of orang-utan endangerment was most prominent in submissions, likely due, at least in part, to publicity surrounding the 'Don't Palm Us Off' campaign. The United Nations Environment Programme Last Stand of the Orang-utan report observes that orang-utans are native only to Malaysia and Indonesia, two countries that together account for 83 per cent of global palm oil production.[65] The study notes a close correlation between increased oil palm plantations and orang-utan endangerment:

...the rapid increase in plantation acreage is one of the greatest threats to orang-utans and the forests on which they depend.[66]

2.64      The committee also received evidence that deforestation due to palm oil production affects a wider range of species than great apes. The World Wildlife Fund's (WWF) submission notes a study indicating that up to 80 mammal species usually inhabit intact forests in Malaysia whereas about 11 or 12 such species inhabit oil palm plantations.[67] Professor Colin Groves, who is Professor of Biological Anthropology at the Australian National University, detailed six examples of endangered mammal species that live in Indonesian and Malaysian rainforests and may become extinct if their native habitat continues to be replaced by oil palm plantations.[68] Professor Groves further noted:

These constitute only a choice selection of the large mammals which will become extinct unless the expansion of oil palm plantations is stopped, and if possible reversed. I do not write of the tremendous diversity of small mammals, birds, reptiles, amphibians, freshwater fish and invertebrates which are equally threatened by oil palm expansion.[69]

Life cycle of oil palm plantations

2.65      The committee heard a range of evidence about the sustainability of oil palm plantations and the effect of such plantations on land. Most witnesses agreed that the trend towards increased oil palm plantations has been driven by oil palm's high-yield nature and efficiency compared with other crops.[70] However, witnesses held different views on the long-term sustainability of oil palm plantations.

2.66         Mr Carl Bek-Neilsen, Board Member of the Malaysian Palm Oil Council, gave an example of an oil palm plantation that has been sustainable long-term:

The one which I work for started up in 1906 in Malaysia, and started planting oil palms in 1917. We are actually on to our fifth generation of oil palms...

On the same soil, on the same land, without any inferiority in terms of mining the soil of nutrients. Normally an oil palm has an economical lifespan between 20 to 25 years. Because it grows so tall, it is difficult to harvest. Then you push it over, and then you replant on the very same land with a new generation of oil palms.[71]

2.67      However, other witnesses stated that oil palm plantations have a range of negative impacts on the land on which they are grown.[72] The committee received evidence that oil palm plantations can result in soil loss and soil macronutrient depletion, leaving land vulnerable to the risk of pest and disease attacks.[73]

2.68      This contrasting life cycle evidence could possibly be due to variant farming practices. The issue of sustainable farming is one which the RSPO is seeking to address (see below).

2.69      The question was put to several witnesses as to whether a comparative life-cycle assessment should be made of other crops with the view to identifying a more environmentally sustainable alternative to oil palm. Neither zoo nor industry witnesses considered that such an assessment was justified, stating that oil palm can and should be produced sustainably:

Palm oil plantations are not bad. It has been stated there that palm oil is almost twice as productive, if not more, than its nearest competitor. If we were not to use palm oil, we would have to use something else. It would be unreasonable to suggest that we do not use palm oil; it would be like suggesting that we do not use petrol. We need to use something, but it is the way in which it is manufactured or processed and is brought to the market that needs to be evaluated.[74]

2.70      The committee also heard evidence relating to the carbon sequestration of oil palm plantations. The Malaysian Palm Oil Council notes that oil palm sequesters more carbon that other vegetable oil crops.[75] The Palm Oil Action Group identified data that compared the sequestration rate of oil palm plantations with that of rainforests, noting that while in its early growth stages an oil palm plantation sequesters at a higher rate than a naturally regenerating forest, over twenty years the plantation will store between 50 and 90 per cent less carbon than the original forest.[76]

2.71      With respect to the carbon emissions associated with oil palm plantations, the Palm Oil Action Group quoted European Commission research indicating that any carbon sequestration benefit of oil palm plantations is offset by the plantations' carbon emissions:

It has been estimated that producing 1 tonne of palm oil will cause carbon dioxide emissions of between 15 and 70 tonnes over each 25-year planting lifecycle due to forest clearance, fires drainage and peat decomposition.[77]

Palm oil plantations and deforestation

2.72      While relative consensus exists as to the connection between deforestation and the loss of native habitat, a number of submitters consider that palm oil production is neither a direct nor primary cause of deforestation in South East Asia. The submission from the Ministry of Plantation Industries and Commodities, Malaysia, asserted that oil palm is only grown in Malaysia where land has been previously zoned for agricultural purposes.[78] The submission presented 2005 land use statistics indicating that 20.6 per cent of Malaysian land was used for agriculture compared with 55.7 per cent forest, and further, that strict conservation policies mean that additional land is rarely released for agricultural purposes.[79]

2.73      The submission from the Indonesian Ministry of Trade provides comparable information, noting that the expansion of palm plantations into primary or high conservation value forests has been illegal for ten years.[80]

2.74      Theoretically, effective land use zoning would rule out any commercial relationship between the pulp and paper or logging industries and palm oil producers. Malaysian Palm Oil Council Chief Executive Officer Dr Yusof Basiron, responded strongly to the suggestion of a causal relationship between the logging of rainforests and subsequent oil palm plantations:

It is a flawed observation, because both in Malaysia and in Indonesia, I believe, logging or clearing forests to extract the logs is a separate exercise done by other groups. The logging industry has its own cycle of logging business. Eventually you are left with land devoid of logs—what they call degraded forest. Then it is up to the government of the country to see what they want to do with the forest, whether to replant it or to plant more productive crops, like oil palm or rubber. This is not to say that the oil palm planter gets the log money. No. This is separately tendered. The money would have gone elsewhere, and people who invest in oil palm get a free piece of land when it is already approved for agricultural use. That is how they go in. This is approved by the RSPO; that this is not containing what they call high value conservation forest and so on. This is what degraded land is all about.[81]

2.75      While the Malaysian Palm Oil Council witnesses conceded that there is always a small proportion of people who do not comply with regulation, other witnesses suggested that significant illegal logging of national parks for farming occurs in Indonesia, despite government efforts to address the issue to date.[82] Ms Susan Hunt, Chief Executive Officer of Perth Zoo, spoke about her organisation's experience in Sumatra:

From the example in Sumatra, where we have worked for some time, they [deforestation and oil palm plantations] are inextricably bound. The evidence that we hear on the ground is that people are brought from other areas of Indonesia into Sumatra and encouraged to settle around national parks, in particular, where there are a lot of a very desirable plantations. Again, this is what I am hearing on the ground; it is not documented, because it is complex. They are being encouraged to do so. The logging for pulp and paper is often on logging concessions, but those concessions are up for negotiation often, as to whether or not they will be reforested for habitat for wildlife...

Anecdotally, from people actually on the ground, we are told that, once the area is logged, they are being encouraged to plant palm oil plantations.[83]

2.76      Aside from the question of illegal land use, the committee heard from witnesses who argued that the alleviation of poverty through farming is legitimate and cannot be criticised by developed country interest groups.[84] The Institute of Public Affairs' submission asserted that deforestation cannot be attributed to palm oil production alone:

Deforestation occurs around the world as poor farmers seek to lift themselves out of poverty through the production of commodities that are in demand in domestic and international markets.[85]

2.77      Supporters of this view also maintained that the Bill may advance protectionist aims inconsistent with World Trade Organisation agreements such as the Agreement on Technical Barriers to Trade (TBT Agreement) and the General Agreement on Tariffs and Trade 1994 (GATT), or existing Australian trade policy.[86] The supplementary submission from World Growth was a legal discussion of whether a case based on TBT or GATT rules could be made by Malaysia or Indonesia against the Bill. It concluded that the Bill is potentially inconsistent with both the TBT Agreement and the GATT.[87]

2.78      Supporters of free trade pointed to the economic and social benefits of farming. Mr Vasco Sabat Singkang, Board Member, Malaysian Palm Oil Council, told the committee about the benefits palm oil production brings to indigenous communities:

With infrastructure coming in, the development of palm oil or oil palm in this case has alleviated a lot of the poverty level, and improved the education and health levels of the communities. [88]

2.79      However, other submitters considered that palm oil farming has adverse social effects. Australia Zoo, for example, asserted that unsustainable oil palm plantations are associated with 'social conflict and human rights abuses'.[89] The RSPO notes that when palm oil has not been produced according to its guidelines, there can be adverse consequences for communities:

Among the social side effects of oil palm cultivation have been displacements of communities that used to farm or live in the area and whose legal or customary rights to the land became sources for dispute. Also, there have been reports of plantations that violated the rights of workers, including those to fair payment, safe working conditions or the freedom to unionize.[90]

2.80      The committee heard differing views on the extent to which Australia should involve itself in addressing deforestation in South East Asia. Some submitters considered that Australia, as a developed, resource rich nation, cannot criticise the methods of another countries' advancement, or impose 'developed world values [on developing countries] through the market system.'[91]

2.81      An alternative argument was presented by several witnesses representing zoos, who asserted that animal endangerment is at 'crisis' point, and not something Australia can ignore.[92] Mr Giles Clark, for example, suggested that Australia could cite its own history of land clearing and subsequent environmental impacts in discussions with less developed countries, and that orang-utan endangerment is 'something to which we cannot close our eyes; it needs to be addressed'.[93]

Roundtable on Sustainable Palm Oil (RSPO)

2.82      The RSPO is a not for profit membership organisation formed in 2004 with the objective of 'promoting the growth and use of sustainable oil palm products through credible global standards and engagement of stakeholders'.[94] The organisation is based in Zurich with its secretariat in Kuala Lumpur and a satellite office in Jakarta.[95] It seeks to encourage palm oil producers throughout the supply chain to engage in sustainable practice by setting principles and criteria that member companies must comply with to achieve RSPO certification. Its voluntary membership is comprised of non-government stakeholders in the palm oil industry including growers, processes, banks and investors and conservation and development NGOs.[96]

2.83      Subsection (2) of the Bill provides that the regulations used to determine the sustainability of palm oil be based on the criteria of the RSPO. The overarching principles that these criteria are drawn from are:

• Commitment to transparency;
• Compliance with applicable laws and regulations;
• Commitment to long-term economic and financial viability;
• Use of appropriate best practices by growers and millers;
• Environmental responsibility and conservation of natural resources and biodiversity;
• Responsible consideration of employees and of individuals and communities affected by growers and mills;
• Responsible development of new plantings; and
• Commitment to continuous improvement in key areas of activity.[97]

2.84      Submitters held different views about the effectiveness of the RSPO and the usefulness of its criteria. Zoo representatives acknowledged that the RSPO criteria were 'the best available' at present.[98] Several witnesses have joined the RSPO themselves, including World Wildlife Fund, Australian Food and Grocery Council, Coles and Woolworths (has applied but is not yet a member). These witnesses consider that RSPO criteria represents, for all intents and purposes, international industry standard for sustainable practice.[99]

2.85      However, Mr Leif Cocks, President, Australia Orangutan Project, considered that the RSPO 'does not represent a credible body', suggesting its criteria are neither enforceable, nor enforced in Indonesia.[100] Mr Tony Gilding considered that the RSPO is itself is slow to address instances of non-compliance amongst its own membership, and represents a smokescreen for, rather than actual, sustainable practices.[101]

2.86      Mr Gilding also told the committee that he envisaged that a more independent role for the RSPO would be for it to develop a standard that could be then certified by independent certification companies.[102] At present, manufacturers can only receive RSPO certification from RSPO approved certifying companies.[103]

2.87      The committee heard evidence about the ease of access to RSPO certification. While multinational companies may be more likely to have the necessary resources to pursue RSPO certification, some witnesses consider that small scale leaseholders may be less likely to be able to afford to do so. Dr Yusof Basiron, Chief Executive Officer of the Malaysian Palm Oil Council, stated that his organisation supports the RSPO insofar as that it is a voluntary scheme, but that the cost of certification is prohibitive to smaller producers:

The process of auditing certification costs at least US$10 per tonne of palm oil to get certified. For the whole industry, between Malaysia and Indonesia, that is producing roughly 40 million tonnes of palm oil a year, that would be US$400 million additional on top of their normal activity to produce palm oil efficiently. So, a large proportion of this cost, as I mentioned, in our industry and also in Indonesia is owned and operated by small farmers, small holders, who own sometimes less than 10 acres of land. For them, it is impossible to get easily certified without incurring too much cost and a burden that they could not afford.[104]

2.88      However, the committee also heard evidence that in the long-term, certification is of benefit to small scale farmers. Mr Cameron Kerr noted the assistance of the World Bank in providing certification and training for small oil palm farmers:

So the World Bank and organisations like Solidaridad, which has established itself in Indonesia, will engage with the communities and small village farmers and that will create a dialogue. They will gain certification. They will also learn about improving their yields. The yields range from up to seven tonnes per hectare for a very sophisticated producer down to under a tonne per hectare for a small village farmer. It is all about agricultural techniques and this engagement will certainly balance out the playing field somewhat. The World Bank looks at that very comprehensively.[105]

2.89      The committee heard further evidence relating to the cost of RSPO certification. Ms Armineh Mardirossian, Woolworths, told the committee that Woolworths' suppliers have indicated that the approximate cost of palm oil is $1700 per tonne.[106] While Ms Mardirossian emphasised that exact figures cannot be determined due to palm oil's fluctuation as a global commodity, the certification premium on palm oil varies from approximately an additional $10 to $200 per tonne depending on which one of the four certification systems is sought.[107]

2.90      These four certification systems are, in descending cost order: identity preserved; segregation; mass balance; and book and claim.[108] 'Identity preserved' requires for certified palm oil to be traceable across the supply chain, allowing producers to claim, Contains only RSPO Certified Sustainable Palm Oil, whereas 'book and claim' provides for companies to purchase tradeable RSPO certificates, and subsequently claim, Supports the production of RSPO Certified Sustainable Palm Oil.[109]

Committee view

2.91      The committee supports industry initiatives to enhance the sustainability of, and consumer information about, food products and commends RSPO for its work to date. However, the committee did not receive sufficient evidence to determine the extent to which the RSPO is a credible, accountable, transparent and nonpartisan food health and safety organisation to a degree that would warrant the incorporation of its criteria into Australian food labelling legislation.

Usefulness of the Bill in addressing unsustainable palm oil production or deforestation

2.92      The committee received a range of evidence from submitters regarding the likely effectiveness of the Bill in addressing unsustainable palm oil production, and further, deforestation in South East Asia.

2.93      The Australian Food and Grocery Council told the committee that while palm oil is an 'important ingredient for the food and grocery manufacturing industry', Australia is a minor palm oil consumer, accounting for about 0.3 per cent of total world consumption.[110] The Australian Food and Grocery Council did not consider that there is any evidence showing that a potential change to Australian food labelling law would impact deforestation in South East Asia.[111]

2.94      However, other submitters considered that Australia, despite consuming a relatively small amount of palm oil, should be 'part of the solution' in encouraging sustainable production:

I think the industry here in Australia has a role to play, as it does in other countries which consume palm oil, and that does include countries such as Malaysia, India and China, which are major domestic consumers of palm oil. They need to be part of the solution as well.[112]

2.95      The view was also put to the committee that the Bill will help to drive industry towards the adoption of sustainable palm oil in food products. Mr Giles Clark suggested that mandatory labelling:

...will allow people to make the choice, but ultimately one would hope that the industry would drive itself.[113]

2.96      Other submitters considered that the Bill will educate consumers as to the sustainability issues surrounding palm oil production, promote discussion on sustainable production and ethical consumerism. Mr Leif Cocks, Australian Orangutan Project, while acknowledging that the Bill may not directly improve the situation of orang-utans, stated:

...we simply should have a personal choice to make that decision on our own even if it has no greater effect than us making our own ethical decisions as Australians. But I hope that in the future this will put a light on the issue. These discussions are also very important.[114]

2.97      The committee heard a range of evidence relating to the accessibility of certified sustainable palm oil. The RSPO stated that of a world total of 46 million metric tonnes of palm oil produced per year, 4.5 million comprises certified sustainable palm oil.[115] 

2.98      The World Wildlife Fund considers that given Australia's consumption of palm oil is relatively low (based on 0.3 per cent of world consumption, this would be approximately 138,000 million metric tonnes per year), the supply of certified sustainable palm oil is sufficient for Australia's requirements.[116] However, Ms Jennifer  Gray, Chief Executive Officer of Zoos Victoria, spoke of the lack of clarity on the availability of certified sustainable palm oil:

It is very hard to get information out of anyone about how much sustainable palm oil is available and where they secure it. But our understanding is it is very low coming into Australia.[117]

2.99      Witnesses representing the major supermarkets stated that obtaining certified sustainable palm oil can be challenging to their suppliers. Ms Majella Allen,  Coles, stated:

I would like to highlight to the committee that access to certified sustainable palm oil is a challenge for us and other food manufacturers. Only five to 10 per cent of all palm oil produced is certified sustainable at the moment, and of that around half is put into mixed supply, which means that it ends up being certified and uncertified together and access is lost. So far, through our investigations, we believe that there are only a small number of suppliers of certified sustainable palm oil in Australia.[118]

2.100         Woolworths noted that the demand for certified sustainable palm oil is increasing, causing a supply-demand imbalance:

We have already heard from various discussions that certified sustainable palm oil is only about seven to eight per cent of the total global supply at the moment. All the major fast moving goods brands as well as retailers globally have committed to a 2015 date [to move to certified sustainable palm oil], so that indicates the volume of demand. If the supply does not catch up with demand we will see very large premiums.

2.101         Other submitters considered that the Bill will not necessarily encourage increased consumption of certified sustainable palm oil, but rather an overall consumer boycott of palm oil. [119] The view was presented to the committee both in relation to campaigns such as 'Don't Palm Us Off' as well as the Bill itself. Mr Tim Wilson, Director, Institute of Public Affairs, asserted that the Bill was designed to 'foster consumer boycotts', and would encourage manufacturers to replace palm oil with more expensive replacement oils, which would result in cost increases for consumers.[120]

2.102         Witnesses from the Malaysian Palm Oil Council agreed that the zoos' campaign was 'anti-palm oil', and that the Bill itself would have no effect on deforestation or orang-utan endangerment and a detrimental effect on Malaysian economic development:

The greatest impact of this bill will be to single out palm oil as the only product in Australia to have labelling mandated for reasons other than health or nutrition and to severely hinder the Malaysian government’s attempts to utilise palm oil as a means for alleviating poverty in our country. [121]

2.103         However, witnesses from zoos and the Palm Oil Action Group explicitly stated that their opposition is to unsustainable palm oil plantations, not palm oil per se.[122] Mr Tony Gilding, Co-founder of the Palm Oil Action Group, emphasised, 'we are not against palm oil. We are not calling for a boycott of palm oil.'[123]

2.104         Mr Andrew Rouse of the World Wildlife Fund also reiterated his organisation's support for sustainable practices rather than the avoidance of palm oil in general, 'from our point of view—and I stress this point—it is not to move industry away from palm oil but to move them towards sustainable palm oil.'[124]

Other measures to improve food labelling

2.105         Some witnesses who considered that the Bill may not achieve its objectives suggested other ways to increase consumer awareness of palm oil in food products or encourage sustainable palm oil production.

2.106         Some submitters suggested that the report of the present inquiry, alongside related reports such as Labelling Logic: Review of Food Labelling and Policy (2011), be considered together for discussion and response by the Australia and New Zealand Food Regulation Ministerial Council.[125]

2.107         Other submitters considered that the Australian food regulatory framework and subsequently food labelling law requires significant reform.[126] For example, the Heart Foundation of Australia proposed the development of a 'comprehensive, national, whole of government food policy' that could be used as a reference point to inform labelling and other decisions.[127] Given the Trans-Tasman nature of FSANZ and the existing framework, this approach would be limited in its application unless wider reform was deemed necessary and implemented.

2.108         The suggestion was also made that other avenues could be explored, apart from food labelling legislation, to make information about sustainable palm oil available. These avenues could include the provision of information about palm oil sustainability on company websites, or via the display of the RSPO logo (once available).

Conclusion

2.109         The committee is not convinced that the issues surrounding the presence of palm oil in food products justify circumventing the existing food regulatory framework in the manner envisaged in this Bill. The committee considers that widespread and robust support from consumers, industry and conservation groups would be necessary to justify such intervention. However, almost every argument presented to the committee was countered by alternative evidence from other witnesses. Divisions were evident between industry bodies, between industry and consumer groups, and in some cases even between different conservation groups.

2.110         The committee is also concerned that, even were there strong support, intervention in this manner would cut across the current FSANZ standards development process and state and territory laws. It would be preferable to address any issues within this framework. It is also worth noting that evidence received by the committee appeared to indicate that there is progress being made in the adoption of the CS palm oil labelling under existing voluntary arrangements.

2.111         However, the committee does recognise that there is considerable consumer use of and support for food labelling information. The evidence in this area received by the committee was compelling, and particularly pertinent to a product such as palm oil: most consumers refer to food labels most of the time when buying a product for the first time; half are particularly looking at information about fats; and 13 per cent of shoppers interviewed in one study had actually purchased a product that day because of its environmental features. The level of public interest in the committee's current inquiry, and campaigns such as the zoos' 'Don't Palm Us Off', shows a particularly active desire for information about palm oil to be made available.

2.112         The committee supports FSANZ's focus on the protection of public health and safety, but notes that it also has a responsibility to facilitate provision of product information to enable consumers to make informed choices, independent of the public health and safety requirement. Thus, FSANZ does have a mandate to facilitate labelling that is not solely for health and safety purposes.

2.113         The committee accepts the benefit-cost test approach that FSANZ indicated they adopt under the COAG best practice regulation guidelines. However, the range of issues identified in the case of palm oil, and the evidence of widespread interest in this product, suggests that there may now be stronger public benefits to palm oil labelling than would be implied by the rejection by FSANZ of Application A593 in 2008. The committee also notes the evidence of retailers Coles and Woolworths that the cost of a labelling change would not be great, given a sufficient lead time, though this view is not shared by the Australian Food and Grocery Council, which has food manufacturer members.

Recommendation 1

2.114         The committee recommends that

• FSANZ consider whether paragraph 18(1)(b) should be read independently of paragraph 18(1)(a) of its Act in assessments of food labelling applications; and
• In the case of palm oil labelling, that evidence placed before this committee be taken by FSANZ as one indication that a cost-benefit analysis may identify significant community benefits that would be gained from the provision of sought-after food labelling information, while possibly involving limited costs.

2.115         The committee wishes to be clear that, in making this recommendation, it is not suggesting that FSANZ's 2008 decision was flawed. Rather, the committee believes that the weight of evidence and available information may have changed since that time.

2.116         The committee also wishes to be clear that it is not implying that a future FSANZ decision should necessarily come down in favour of separate identification of palm oil as an ingredient. Only FSANZ, with the full array of information before it, can reach an appropriate judgement. The committee merely wishes to indicate that the evidence it has received indicates both some potentially significant community benefits to labelling, and that these benefits potentially may be achieved by imposing limited costs.

2.117         While the previous recommendation addresses a possible future application around palm oil in particular, the committee notes that there are broader issues being considered in relation to food labelling. The committee notes the Review of Food Labelling Law and Policy (2011), and in particular its Recommendation 12, which endorses more detailed labelling of added sugars, fats and oils.

Recommendation 2

2.118         The committee recommends that the government fully consider Recommendation 12 of the Review of Food Labelling Law and Policy (2011).

2.119         The committee understands the intention behind the Bill, but believes that voluntary actions, together with the recommendations made above, are preferable courses of action to the one in the Bill.

Recommendation 3

2.120         The committee recommends the Bill not be passed.

 

Senator Claire Moore

Chair

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