1. TITLE: When Corporate Strategy Meets Public Policy: The Case of the Brazilian Palm Oil Industry

2. KEYWORDS: Agropalma, palm oil, foreign policy, public policy, production cost, transaction cost, property rights, labor standards, environmental standards, rent dissipation, enforcement, compliance

3. JUSTIFICATION/MOTIVATION:

Agropalma is Brazil’s largest producer of palm oil, and has been widely recognized as a brazilian leader in addressing negative social and environmental impacts in the industry. Agropalma’s sustainability model largely follows the brazilian labor an environmental legislation and also complies with the principles and criteria established by the Roundtable on Sustainable Palm Oil (RSPO), the transnational private institutional arrangement in which the company is a founding member.

4. RESEARCH PROBLEM:

Compared to expanding production in Asia and Africa, the Brazilian palm oil global market share is a miniscule 4%. However, Agropalma dominates the industry in Brazil, as it owns 62% of the country’s total planted area. Brazil’s strict environmental and social legal codes make production and transaction costs higher than in the less regulated production environments of Asia and Africa which results production costs in Brazil meets around USD 750,00 ton, against USD 220,00 in Malasya and USD 180,00 in Indonesia.

5. METHODS:

5.1. Using field and desk research, the general features of the palm oil industry and its sustainability concerns in Asia and in Brazil were identified; 5.2. Rational institutional analysis and transaction costs approaches were employed to identifie the transnational private arrangements as the answer to regulate labor and envioronmental standards as the case of RSPO and other private governance mechanisms; 5.3. Agropalma’s sustainability practices were thoroughly understood through field visits, observation and core interviews with high level company representatives; 5.4. an in-depth examination of the corporate strategy were identified in order to explain the high production costs in Brazil; 5.5. Brazilian public policy for palm oil is considered under foreign policy analysis in order to disclosure the implications for Agropalma corporate strategy worldwide; 5.6. based on the preceding steps, key lessons could be identified from the case of Agropalma that are pertinent for the future of palm oil in Brazil, and for sustainability standards for palm oil industry everywhere.

6. DISCUSSION:

How does the government could encourage responsible investment in agriculture? Does the brazilian palm oil policy is a good solution? Does Agropalma model is the most sustainable, economically, environmentally and socially? What role should governments and the private sector play in sustainable development in the developing world? Does Agropalma model could compete with the production costs of Malaysia and Indonesia? Do Multi-stakeholder mechanisms like the Roundtable on Sustainable Palm Oil (RSPO) that have emerged in last years could regulate palm oil industry worldwide in higher labor and environmental standards? What are the challenges for Agropalma in terms of corporate strategy? Why does a company with a low market share has a proeminent role in the RSPO? Why does the company has dozen of labels and certificates for sustainable palm oil?

7. EXPECTED RESULTS:

7.1. Evaluate the implications of overlapping public policies and corporate strategies in the palm industry when there´s a company with over 60% of market share;

7.2. Look at the competitiveness of Agropalma in the foreign markets;

7.3. Consider the impacts of labor and environmental standards as transaction costs in the value chain;

7.4. Understand the role of RSPO as an standards setter and enforcer at transnational level;

7.5. Evaluate the meaning of dozen labels and certificates that Agropalma complies as the way to capture the value dissipated and set up new dimensions of property rights;

7.6. Answer the question about the sustainability of palm oil industry in Brazil and everywhere.