Switch to sustainable palm oil just a matter of time, industry figures say

Jakarta Globe: Nivell Rayda | November 02, 2012

Singapore. The Roundtable on Sustainable Palm Oil has often been met with resistance, suspicion and lack of government support in Indonesia since its establishment in 2001. But former Indonesian Agriculture Minister Bungaran Saragih believes this will change within five years.

Although Indonesia supplies 43 percent of the world's certified sustainable palm oil (CSPO), only 12 percent of palm oil companies in the country have obtained certification from the group.

"There are [palm oil] companies that have been doing bad things for many years and are now struggling to meet the criteria [set by the RSPO]," the former minister told the Jakarta Globe on the sidelines of the 10th Annual Roundtable Meeting on Sustainable Palm Oil in Singapore.

"The criteria is basically the same [as stipulated by Indonesian laws] because they are based on common sense. But it takes a change in mind-set and a change of culture for some," he said. "Right now we [Indonesians] haven't reached that tipping point yet but it takes time and we will get there."

Bungaran predicts that the way Indonesia's palm oil companies do business will be greatly transformed by 2015, when major consumer goods companies begin buying only certified palm oil products.

The RSPO has attracted several multinational consumer goods companies, such as Procter & Gamble and Unilever, and retailers such as Wal-Mart and Carrefour, which have all pledged to use only certified palm oil by 2015.

"Once that happens, [Indonesian palm oil] companies will have no choice. I say in 2017 we will see a lot more companies joining RSPO," he said.

Cherie Tan, Unilever's global procurement director for renewables and smallholder development, said her company was ahead of the curve by purchasing 100 percent certified palm oil this year.

As of May, only three million metric tons out of 25 million tons of palm oil produced in Indonesia received RSPO certification, which means selling Indonesian palm oil to multinational manufacturers like Unilever, which alone buys 3 percent of the worldÆs palm oil, would be almost impossible.

Convincing palm oil producers in Indonesia to acquire sustainability certification from the RSPO has proven to be a daunting task, said the body's vice president, Edi Suhardi.

Edi, who is also the head of sustainability at palm oil producer Agro Harapan Lestari, said only 68 oil palm growers, processing and trading companies and users in Indonesia were certified. And 14 of them, including Unilever, were international companies operating in Indonesia.

"There is some skepticism and suspicion from [Indonesian] business associations and the government," he said.

Desi Kusumadewi, director of RSPO Indonesia, confirmed that some palm oil companies were hesitant to get RSPO certification, with some even accusing the group of acting on behalf of foreign agendas.

The Indonesian government has been reluctant to recognize the environmental standards set by the RSPO, which is used by many European buyers. Instead, Indonesia created its own standard aided by the Indonesian Palm Oil Producers Association (Gapki), which exited the RSPO last year after its members expressed frustration at the tough environmental standards set.

President Susilo Bambang Yudhoyono has defended uncertified palm oil companies, urging developing countries to review restrictions on trade beyond tariff walls at the World Export Development Forum in Jakarta last month.

Desi said since the market was turning its attention to sustainable palm oil, Indonesian palm oil companies would soon have little choice but to adopt RSPO standards.

"There are some [companies] that are hesitant but there are those that have already met the criteria but lack documentation," she said.

Then there are the smallholders - small, independent palm-oil growers - who cannot afford to pay auditing firms, a key requirement for an RSPO certification. Desi said the RSPO has plans for the smallholders, who make up around 38 percent of Indonesia's palm oil output.

"The RSPO has earmarked 10 percent of its income to help these smallholders acquire certifications. We are now deliberating the exact procedures and requirements, but I can tell you now that we won't cover 100 percent of the [certification] costs to give them a sense of ownership," she said.

Desi said she hoped that most of the earmarked money, which had already reached $951,000, would go to Indonesian smallholders.

"It's a worldwide amount but as the largest CSPO producer we should get a significant portion of it," she said.

Bungaran said Indonesia was moving in the right direction to meet the world's need for sustainable palm oil. "Even today we have major palm oil companies joining RSPO and we are the number one producer of sustainable palm oil."