Will sustainable palm oil transform the market?

CSR Asia: 30 November 2011: Rikke Netterstromrnetterstrom@csr-asia.com

The ambition of the Roundtable on Sustainable Palm Oil (RSPO) was always to bring sustainable practices to the mainstream. Not content with being a standard for niche products, the multistakeholder organisation has long engaged large producers and buyers, moving the palm oil giants of the world towards the production and use of palm oil which is mindful of biodiversity, human rights, community development and environmental protection. The RSPO’s newly launched vision of the Roundtable on Sustainable Palm Oil (RSPO) crystallises this by setting out an ambition to transform the market - moving 50% of global palm oil use to a certified source by 2020.

What are the obstacles to this ambitious vision? The RSPO is certainly seeing progress: 5.5 million tonnes of RSPO certified sustainable palm oil (CSPO) is now available - around 10% of world production. Last week the 9th Roundtable on Sustainable Palm Oil (RT9) was held in Sabah, Malaysia, and saw around 1000 people from all over the world attend. A brief check of the attendance list showed that the event is no longer limited to palm oil producers and NGOs, but increasingly attended by buyers and users as well. Many big brands from Europe and the US were there, as were a number of prominent banks and institutional investors.

On the face of it, the RSPO appears to deliver both on production volumes and buyer interest. Unfortunately, the latter is still in question. Despite strong policy commitments to the contrary, sales of CSPO reached only 40-50% of production in 2011. So whilst plantations are investing heavily in changing their business models, brands and retailers are still holding back.

During RT9, WWF produced their second “Palm Oil Buyers’ Scorecard”, ranking the world’s leading retailers and consumer goods manufacturer on their commitments and use of sustainable palm oil. The good news is that many had made great commitments to support CSPO. The bad news is that these commitments are slow, and limited to a dedicated few leaders. It was notable how Scandinavian companies were clear laggards – surprising given the finger-wagging on green issues so often coming from this region.

Many brands have committed to a target of 2015, at which date they will be sourcing 100% CSPO. For some, this date is set after a phased strategy with clear milestones and ongoing improvements, but for many, the date appears to be considered a “best practice date”, which allow buyers to simply do nothing before taking action. At RT9, some manufacturers and retailers pointed to the complexity of their supply chains which makes it difficult to incorporate physical CSPO in products. However, this seems a feeble excuse, when the “book and claim” system set up by RSPO allows manufacturers to cover use with certificates (similar to green energy), and when WWF’s scorecard points to many examples of good practice.

The disincentive the situation provides for new producers to take up the standard cannot be underestimated. At the RSPO General Assembly last week, one leading producer expressed his exasperation of this trend, warning that the fast changes taking place at plantation level might start to evaporate without the tangible and monetary support from buyers.

Cost is not the issue: CSPO certificates can currently be bought at a premium of USD 1.5 per tonne, and off-market deals for segregated palm oil can be had for a very low premium as well. With palm oil prices hovering around the USD1000 mark per tonne, it is indeed shocking that the current production isn’t being snapped up.

Companies wishing to help transform the market towards sustainable practices need to act now. There is no excuse to wait. The RSPO has made it easy and cheap. The standard is not perfect, and the coming year will see a number of reviews of the processes involved. But ultimately, it is the best show in town, and it is making a huge difference to people and forests across the entire tropical belt of developing and emerging economies. Responsible companies must support the initiative: there is no excuse not to.


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