Global Network Case Study Examines the Complexities of Palm Oil

In 2010, Golden Agri Resources Ltd. adopted commitments to producing palm oil without adding to deforestation in Indonesia. Environmentalists cheered, but the new policies presented the company with numerous political and economic challenges.

These challenges are the subject of a new Global Network for Advanced Management case study co-authored by the Yale School of Management and the National University of Singapore Business School.

Palm oil production has boomed in recent decades. The versatile substance can be used in food preparation, personal care products, and even as biofuel. However, palm oil plantations in Indonesia (the world's leading producer of palm oil) have been carved out of the tropical rainforest. Environmentalists have condemned the way palm plantations have pushed carbon into the atmosphere and decreased the habitat of rain forest species.

In 2005, Greenpeace launched a campaign against Golden Agri Resources, Indonesia's leading palm oil producer. After a series of face-to-face meetings between Golden Agri and Greenpeace, Golden Agri in 2010 announced a new policy that satisfied Greenpeace and other environmental NGOs. Golden Agri agreed not to develop palm plantations in virgin rainforest or on high value forest and peat land. The company also agreed to consult with local communities and international organizations concerning sustainability guidelines.

In implementing the policy, Golden Agri faced varying expectations from a number of stakeholder groups. An existing industry trade group had already proposed a sustainability standard that was not as comprehensive as that of Golden Agri, leading to potential confusion in the marketplace. But even palm oil certified as sustainable was not selling at much of a premium compared to regular palm oil. The lack of demand for sustainable palm oil was making it difficult to convince other palm oil producers to adopt expensive commitments to grow palm oil without cutting into the rain forest. In addition, Indonesians were concerned that extensive commitments to sustainability in palm oil production would hurt development efforts. Palm oil was an important cash crop in rural areas.

The case study asks students to take on the role of consultants called in to help GAR manage its sustainability program. GAR needs a strategy to engage the stakeholders from business, government, and NGOs to make its environmental sustainability program viable.

Befitting its global subject matter, the case was produced by a team composed of scholars and researchers at both Yale and NUS. Kenneth Richards, the Musim Mas Professor of Sustainability at NUS, directed efforts to interview GAR officials in Singapore and Indonesia. "We were very lucky to have a team with just the right set of skills—in the field, working with the subject corporation, in the office writing, and in the production studio," Richards says.

Jaan Elias, Yale SOM's director of case study research, led the SOM team. "Putting together this case shows the incredible power there is in collaboration across the Global Network," Elias says. "We were able to draw on the diverse expertise of Ken and his collaborators at NUS to present a case about a corporate dilemma originating in Indonesia but with global implications."

The case debuted in the Aspen Institute's Business & Society International MBA Case Competition this spring and will be used in MBA classes at NUS later this year. It will also be made available for use at other Global Network schools.