The following article will first highlight the main issues regarding palm oil industry, and then he main stakeholders will be identified followed by an evaluation Of their value and power. Finally the article will propose a strategic stakeholder management policy specific for Tested. 1/ Food Safety and environmental requirements are becoming more stringent as a result of the increased knowledge of the risk and harm to health and environment. This is Consumer Awareness.
These requirements have very important implications for trading in particular for market access and development. Palm oil is one of the most popular vegetable oils. It is present in many supermarket products, but it also used for bio-fuel for vehicles. Alma oil is very popular due to the increasing demand of cheap food. As Primary’s Business model, palm oil is traded at low prices and high volumes. This leads to developmental, sustainability and CARS issues.
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Sustainability is the ability of productive activities to continue without harm to the ecological system (2). According to KIDS (3) sustainable development means adopting business strategies and activities that meet the needs of the enterprise and its stakeholders while protecting, sustaining and enhancing the human and natural resources that will be needed in the future. In other words this is economic development that does not endanger the incomes, resources and environment of future generations.
Daniels (4) suggests that Corporate Social Responsibility (CARS) is used to describe what some see as a company’s obligations to be sensitive to the needs of ALL of its stakeholders In its business operations and produce an overall positive impact on society. Palm Oil, which is produced from the fruit of the African oil palm, has become a major, global agricultural commodity which is used in a host of food and non- food products. The oil palm is cultivated entirely in developing countries in he humid tropics, where it often forms an important basis for local economies either as an export or as a raw material for local industries.
This agriculture can stimulate further economic development and contribute to the reduction Of the poverty, to a rising Of standard of living in many developing countries when environmental, social and governance risks are adequately managed. Tested, which use processed palm oil in 12% of its products but which also has a significant shareholding in a palm oil plantation based in Indonesia, has to be aware of the sectors negative environmental and social impacts.
Environmental Issues ; Deforestation Young reports that between 2005 and 201 0, almost 353. 000 hectares of peat swamp forest were cleared, a third of Malaysia’s total, largely for palm oil production (5). ; Biodiversity loss Unlived announced in May that it pledged to switch to fully traceable palm oil by 2015. This was rightly applauded by many parties of the ART SOP but “it will be too late to save some key areas of critical biodiversity” said Wood (6). In 2007 Smith (7) said that the Rang-tan could be virtually extinct within five years. Climate change and use of chemicals, pesticides and fertilizer Some suicides and fertilizers used to grow palm oil are responsible for pollution of water supply and flora extinction. The greenhouse gases are responsible for severe weather patterns which are linked to major climate changes. Social and human rights issues ; Land use rights and land acquisition In Honduras 23 palm oil farmers has been reported killed in a dispute with the owners of I-IN-accredited palm oil plantation this year. 8) ; Treatment of local and indigenous communities Some tribes such as Colombian Nuke people (9) or Paean tribes in Borneo (10) are struggling to survive due to deforestation, guerrillas and corruption. Smallholders Issues are remaining regarding independent smallholders who are free to sell any mill but the market access is very few assured. Supported smallholders face problems with land acquisition and customary rights. Most of them are struggling to pay the debt to the company who support them regarding the title of the land (11). Fairness of labor, working conditions and child labor In 2010 1. 5 million of children between 10 and 17 were working in palm oil plantation. The working conditions are really poor as they are exposed to extreme temperatures, pesticides and organic dusts. Governance issues Corruption Law said (12) that plantations continue to be opened up that flout the laws. “Corruption flourished”. Local communities are being marginal’s, habitats terribly degraded. Indonesia is trying to crack down on illegal foresting, but corruption is rife hundreds of miles from Jakarta (13). Lack of independent and transparent monitoring of environmental impacts and human rights Despite the environmental and social issues affecting palm oil industry, most stakeholders also point the current and potential benefits of palm oil production. Being the most productive vegetable oil per hectare, due to the vapidly growing food demand, there are obvious environmental benefits. For national and local economies, communities and smallholders, there are also some significant economic benefits.
Gator Iranian, research director at Indonesian Ministry of Agriculture said “Stop demising palm oil” (14) palm oil is a “gift from nature” that provides a sign efficacy economic boon for the country, where it is “helping to eradicate poverty”. 2/ As we quoted earlier CARS is concerned with the responsibilities organizations have to all stakeholders including the local community, wider society and the environment. According to Marabous (15) a stakeholder is an individual or group which affects and is affected by an organization.
Managers who ignore their stakeholder groups are vulnerable to pressure group action and may lose employees and investors. According to Body (16) and previous lectures, there are two kinds of stakeholders affecting executive management of a company, primary’ and secondary stakeholders. Primary stakeholders are concerned with production, supply chain and management Of a company. Such as, dominant shareholders, suppliers, creditors, customers, corporate partners and employees. Secondary stakeholders are stakeholders affected by the business environment in which a business operates.
Such as National regulators, international organizations, consumers, nearby residents, host communities and trade unions. The next paragraph will identify the stakeholders with urgent and legitimate claims on Tested with respect of the issues highlighted in the first part. Stakeholders affected by environmental Issues ; Local communities and Indigenous communities Deforestation has affected indigenous communities such as in Borneo (10) or Amazonian by destroying their living place. To plant palm oil trees, burning of forest was necessary. This affects both local and indigenous communities and leads to severe health problems.
The use Of chemical pesticides and fertilizers leads to water pollution which affect communities but also biodiversity. ; Environmental non-governmental organizations, Medias and International Institutions Palm oil production is responsible for biodiversity loss and climate change. Engross such as WFM, Greenback or Conversation International and Medias are affected by those environmental issues. In 201 0, Nestle was announcing his collaboration with Forest Trust (17) to ensure its sourcing of palm oil was not contributing to illegal rainforest’s and peat land clearance.
Medias and Social Networks are also stakeholders affected by those issues. In 201 0 angry fans swarm Nestles backbone page in response to Greenback palm oil campaign. Stakeholders affected by Social and Human Rights Issues ; Workers, independent and supported smallholders, Palm oil growers and producers, Palm Oil suppliers Deforestation and land conflicts in developing countries directly affect those stakeholders. There are still some big issues regarding how companies and governmental agencies obtain consent for acquisition of lands. Palm oil supply chain players, retailers, Social Nags, and Trade Unions In 2009, Milliner was announcing suspending purchases of Palm oil from a major Indonesian supplier, following allegations by environmentalists the company was engaged in widespread illegal deforestation and human rights issues (18). Stakeholders affected by Governance Issues ; Governments (Malaysia, Indonesia, E), government agencies, Political Groups, Competitors, Policy makers and International Organizations Those stakeholders are more likely to be affected by issues such as trading rules, corruption, illegal deforestation, child labor and working conditions.
All those stakeholders quoted above have urgent and legitimate claims on Tested. 3/ Mitchell (19) suggests that “the question of stakeholder salience, the degree to which managers give priority to competing stakeholders claims, goes beyond the question of stakeholder identification”. What is needed is a theory of stakeholder salience that explains to whom and to what mangers actually pay attention. The stakeholder salience theory proposes that the stakeholders can be identified by their possession or attribute possession Of one, two or all three of the following attributes. ; The stakeholders power to influence the firm. The legitimacy of the stakeholders relationship with the firm. ; The urgency of the stakeholders claim on the firm. Civil Society Organizations (ENG, SONG, International organizations) and Medias According to the stakeholder salience theory, those organizations are stakeholders with more importance to Tested as they posses two attributes; power and urgency. And they have the power to influence Tested. Organizations such as Greenback use their notoriety either on site or online, and that can have an effect on a company reputation. This power of influencing can be exercised through campaigns and manifestations.
In 2008 bout 40 members of Greenback entered Milliner’s factory in Wirier, while about a dozen dressed in rang-tans outfits demonstrated outside its London headquarters (20). In 2009 newspaper The Independent was publishing the article “The palm oil scandal: Boots and Waitress named and ashamed”, this illustrates how Medias can have influence and pressure on companies such as Tested (21) palm Oil Producers, palm Oil Supply chain players, Competitors and Governments. According to the stakeholder salience theory, those stakeholders are important because they possess three attributes: Power, Legitimacy and Urgency (for Governments).
The legitimacy of the corporation as an institution, its “license to operate” within society, depends not only on its success in wealth creation but also on its ability to meet the expectations of diverse constituents who contribute to its existence and success. These constituencies and interests are the corporation’s stakeholders-??resource providers, customers, suppliers, alliance partners, and social and political actors. Consequently, the corporation must be seen as an institution engaged in monopolizing resources to create wealth and benefits for all its stakeholders. Alma Oil Supply Chain players, NC and retailers can eave a major influence on companies like Tested. In 2009 (18) Milliner suspends purchase of palm oil with one of its major Indonesian supplier. This is likely to affect retailers and supermarket companies. The commitment of competitors for sustainable palm Oil such as Mark and Spencer has the power to affect and influence Tested ethics. Governments can easily influence regulation of Palm oil trading by establishing trading standards and moral obligations.