In his closing speech at the 16th meeting of the Roundtable on Sustainable Palm Oil (RSPO), held in Sabah on Nov 15, Co-Chair Dato’ Carl Bek-Nielsen issued a call to industry to rise to the challenge of bringing about market transformation.

Just over 300 years ago, on a foggy night in 1707, English naval officer Admiral Cloudesley Shovell grounded four British warships on the rocks of Scilly. Two thousand lives were lost – they had fallen victim to faulty navigation.

Legend has it that a sailor had warned the Admiral earlier that day that his fleet was dangerously off course. Shovell hanged the sailor on the spot for mutiny. A few hours later, the ships ran aground and Shovell and his men perished in the cold waters. The incident was recorded as one of the greatest maritime disasters in British history.

However, this tragedy inspired a tremendous leap forward in terms of innovation. Just seven years later, it resulted in solving the conundrum of longitude. So, from 1714, both longitude and latitude could be determined, thus minimising the risk of faulty navigation.

Many of us who have come together here in Sabah see the RSPO as a journey of innovation by ‘sustainabilising’ an important commodity.

When consumers, NGOs and public opinion turned to the palm oil industry and said ‘your navigation is faulty – you are off course!’, we could have closed our eyes, blocked our ears and looked the other way. Or like Admiral Shovell, we could have hanged those who spoke up. However, those behind the formation of the RSPO acted differently – they listened.

They took the first difficult steps to acknowledge that change was not just required, it was necessary. Status quo was no longer tolerable. The rest is history, as they say, and here we are 14 years later, with more than 4,000 members committed to this multi-stakeholder approach.

But the RSPO must continue to evolve if it is to remain relevant and achieve market transformation, all the while stimulating the spirit of inclusivity and continuous improvement. With this in mind, I want to touch on the recent Principles & Criteria (P&C) review.

First, a vote of congratulations to all stakeholders who have been involved in this process, for much work, time and effort has gone into this – 18 face-to-face events in 13 countries, six physical Task Force meetings and over 11,500 individual stakeholder comments received.

What’s the net result?

Halting deforestation, protecting and conserving peatland, mitigating greenhouse gas emissions, strengthening human rights, labour rights and obtaining of free, prior and informed consent – these are just some of the key improvements implemented in the draft P&C 2018.

However, much more needs to be done. To be credible and remain relevant, we must also be realistic and not shy away from the fact that we still have a long way to go if we’re to achieve market transformation.

For a moment I therefore wish to be the ‘canary in the coal mine’, so to say – and, like the sailor on Admiral Shovell’s ship, warn all on board this ‘RSPO ship’ that there are signs of us falling victim to faulty navigation.

The Roundtable on Sustainable Palm Oil (RSPO) was established in 2004, in response to attacks on the industry on environmental and social grounds. Members include growers, traders, financiers and end users, as well as concerned NGOs. Its aim is to ‘transform markets to make sustainable palm oil the norm’ and to ‘advance the production, procurement, finance and use of sustainable palm oil products’.

The objectives are admirable, but palm oil certified as sustainable by the RSPO constitutes less than 20% of world production, and users have failed to take up more than half the certified oil. Here, I give an outsider’s view on the RSPO’s development, and what the future may hold for the RSPO.

A set of Principles and Criteria (P&C) was adopted by the RSPO General Assembly in 2007, and has been revised twice since then (this paper was written before the 2018 revision was published). Individual plantations and mills are audited against these criteria and, if they meet the requirements, their annual production is certified as sustainable. RSPO membership is voluntary, but on joining, growers have to agree to a ‘time-bound plan’ to become fully certified. Palm oil users can buy certified oil, and mark their products as ‘containing certified sustainable palm oil’ (CSPO).

In 2009, the RSPO adopted a New Planting Procedure (NPP), which requires social impact, environmental impact, high conservation value (HCV) and greenhouse gas (GHG) assessments to be undertaken before a new development. Free, prior and informed consent (FPIC) by local communities to any development is essential.

For sustainable palm oil to become ‘the norm’ a major proportion of palm oil must be sustainably produced and, if the RSPO is to be the vehicle for this, the majority of producers should be members. The reality is that the certified area peaked at 2.77 million ha in 2015 (just under 20% of the global oil palm area), but has since declined. In 2017, the RSPO had 170 member-growers but only 76 were certified.

When the RSPO was established, growers expected that demand for CSPO would be high, and that it would therefore command a premium price. However, in 2014, the premium was only about US$2 per tonne, about 0.3% of the selling price. In 2016, 12.1 million tonnes of palm oil was RSPO-certified, equivalent to 18.3% of world production; but less than half (5.6 million tonnes, 8.5% of world production) was actually taken up. Thus it appears that more than half of the CSPO would have incurred all the costs of certification, but had to be sold without earning even the very small price premium.

With certified area static or declining, and less than 10% of world palm oil production actually being sold as certified, the RSPO has not so far been very successful in transforming the market. Many companies have not joined because they see certification as a cost, without corresponding benefits. Costs have been estimated at US$4-10 per tonne of oil, much more than the current price premium. Several companies have claimed to see increased yields and improved profitability as a result of adopting the RSPO ‘best practices’. However, these practices could be adopted and the improvements obtained without the costs of membership and certification.

Difficulties for smallholders
Globally some 40% of palm oil comes from smallholders, and smallholder development has been a major contributor to poverty reduction in many countries. The RSPO has developed specific smallholder certification procedures, but these were something of an afterthought to the P&C, and independent smallholders in particular are not well catered for. The RSPO has recognised this, and is working on a simplified standard. Worldwide, a total of 295,000 ha of smallholdings have been certified; the majority are in Southeast Asia but, as Table 1 shows, certified smallholders constitute only 3% of the total smallholder area in this region.

Source: 
1 www.rspo.org, Nov 2017
2 2016, including Felda – www.mpob.org.my
3 From Corley & Tinker, 2016
4 JH Clendon, pers. comm. , 2017

RSPO member-companies involved in ‘nucleus estate’ schemes are obliged to help the associated smallholders become certified, but many smallholders are not in such schemes. In Malaysia, over 40% are independent. In Thailand, the vast majority of the 300,000 smallholders are independent.

Independent smallholders are supposed to be covered by ‘group certification’. This requires the formation of a group or cooperative, with the RSPO specifying that there must be a group manager who is responsible for certification. This adds a significant cost, but the RSPO operates a ‘smallholder support fund’, and companies buying smallholder fruit may contribute. One study found that independent smallholders in Malaysia were keen to participate in a certification scheme, provided that there was a price premium and the costs were reasonable.

Problems with certification for independent smallholders in Indonesia include lack of land titles, difficulty obtaining good quality seedlings, safe storage and use of pesticides, lack of finance for fertilisers and of knowledge about best use, and inadequate documentation.

The NPP is a significant problem for independent smallholders, as it requires social impact, environmental impact, HCV and GHG assessments. The assumption is that smallholders will be in organised groups or in company schemes, in which case the group manager will arrange the NPP, but not all smallholders are organised in this way.

The NPP must be applied to conversion from other crops (e.g. rubber), as well as from forest. This seems quite unnecessary; any adverse effects of replacing a few hectares of rubber with oil palm will be trivial. An area limit could relieve the majority of individual smallholders of the need to follow the NPP.



Malaysia’s newly-minted Minister of Primary Industries, the Hon. Teresa Kok, delivered the keynote address at the European Palm Oil Conference in Madrid, Spain, on Oct 4. Among the key points was that sustainability is more than about preserving forests.


 

Judging from the presence of participants from many parts of Europe and Asia, this is indeed a hallmark platform for a balanced debate on the many challenges associated with palm oil today. It is encouraging to see various stakeholders present, and I am glad to be in your esteemed company.

In Malaysia, we are in the midst of creating a new, more dynamic and sustainable era supported by new governance policies, and with many areas being redefined by the current popular government. Among items with top billing is palm oil, a major commodity and a significant contributor to annual GDP.

The organisers suggested that my address should dwell on sustainability goals and challenges, not only within Malaysia and its palm oil industry, but also incorporating the United Nations Sustainable Development Goals (SDGs).

As a nation, we have already expressed our SDG commitments on issues ranging from climate change and poverty eradication to women’s empowerment. On this note, I am proud to say that these goals are intricately woven into our palm oil industry.

Malaysia has been proactive about sustainability in the palm oil supply chain. One of our plantations was the first to achieve RSPO certification, in August 2008. Malaysia currently accounts for nearly 42% of global production of certified palm oil. This has been volunteered generously by industry members; but, despite our best efforts, the noise of anti-palm oil sentiments continues to ring loudly throughout Europe.

We have stepped up the game and are now marching towards the goal of mandatory certification of our entire palm oil supply chain by end 2019, using the Malaysian Sustainable Palm Oil certification scheme as the national standard. So, when the Amsterdam Declaration kicks in from early 2020, I hope you will look to Malaysian palm oil for your needs.

The SDGs do not mince words when they prioritise poverty eradication. In Malaysia, we could not imagine achieving this primary sustainability goal without palm oil. We have 650,000 small farmers who operate 40% or 2.3 million ha of the oil palm planted acreage of 5.8 million ha. This surprises most people, who assume that the Malaysian palm oil industry is run by business corporations.

Our small farmers depend on oil palm for their livelihood and to meet basic needs. They face a very grim future when NGOs like Greenpeace brand palm oil as ‘dirty’. Many activists also have a tendency to tar all sources of palm oil with the same brush.

To the government, oil palm cultivation is synonymous with poverty eradication. Since Malaysia’s independence in 1957, the poverty rate has fallen from over 50% to below 5%. According to the World Bank, less than 1% of Malaysian households live in extreme poverty.

We plan to support the communities and businesses that have made this a reality over the past 60 years. There is more to do. Thus we ask you, especially end users in Europe, to join us in the poverty eradication goals by using sustainable Malaysian palm oil.

How do we achieve this?

Please work with us to improve the productivity of small farms, and adopt small palm oil cluster certifications as part of your corporate social responsibility. When productivity increases within the small farmers’ community, there will be little need to expand into new land for oil palm cultivation. I know that Europe is passionate about rainforests and their mega biodiversity. Being passionate alone will not save these forests – actionable activities will.

Malaysia is talking with the European community, and many positive programmes should fall in place soon. As such, I urge continuous support and collaboration from all – don’t hamper our genuine efforts toward the sustainability of palm oil.

The European Commission (EC) has released the findings of its ‘Study on the environmental impact of palm oil consumption and on existing sustainability standards’, which had been requested by its Directorate General for Environment. Published on March 16, 2018, it appears to be motivated by the EC’s initiatives with respect to environmental protection and policy measures against deforestation.

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Reports indicate that, by November, the Roundtable for Sustainable Palm Oil (RSPO) is set to release revised Principles and Criteria (P&C) for the production of sustainable palm oil. This will bring new standards into force.

At the same time, the European Parliament is pushing for the creation of a ‘Eurocentric sustainable palm oil standard’. This is beginning to encroach on the standardisation work of the RSPO and of the two biggest palm oil producing countries.

In addition to its P&C on the production of sustainable palm oil, the RSPO develops and maintains a number of documents and standards. They include those relating to the supply chain, internal and external certification systems and processes, and other relevant guidance for its members. On June 14, 2017, the RSPO Board of Governors (BoG) approved revised versions of such documents. These in part help set the foundation for the upcoming P&C.

On July 4, 2017, the RSPO Secretariat published the revised Certification Systems for P&C. The document entered into effect on July 1, 2017, but all members and certification bodies have been given 12 months to bring their systems into compliance.

The document sets out the requirements for the systems that must be followed in the implementation of certification against the requirements of the P&C and/or its National Interpretations. Although most of the document will apply from July 1, 2018, Clauses 4.10 and 4.11 entered into force on Sept 1, 2017.

Clause 4.10 addresses reporting and communications. The certification body must prepare a peer-reviewed certification audit report, including a public summary report, and submit it to the RSPO by the deadlines set. Clause 4.11 pertains to the certificates that the certification body must complete and send to the RSPO Secretariat within the stipulated time-period.

The RSPO Secretariat has also published a revised Standard Operating Procedure (SOP) for Standard Setting and Review. This document, also approved at the June meeting, took effect from July 1, 2017. It sets out the procedures and describes the processes by which the RSPO standards are to be set and reviewed.

In general, two standing committees are charged with the oversight of the standards: the RSPO Standards & Certifications Standing Committee (S&C SC); and the Trade & Traceability Standing Committee (T&T SC).

The S&C SC is responsible for documents describing and relating to the RSPO P&C, while the T&T SC is responsible for documents describing the RSPO supply chain certification standard.

The SOP is particularly relevant as the S&C SC finalises the new P&C. The RSPO standards are reviewed at least once every five years. The existing standard from 2013 is being reviewed for continued relevance and effectiveness, including through the assessment of results of ongoing monitoring and evaluation by the RSPO.

The S&C also decides to what extent it is necessary to conduct stakeholder engagement during the revision process; whether a task force is required; and the extent of public consultation. The Terms of Reference of the S&C SC include:

  1. The definition of sustainable palm oil production through stakeholder expertise and research;
  2. The development of P&C that, both individually and in aggregate form, reflect the definition;
  3. The construction of measurable indicators for the various criteria;
  4. The adaptation of criteria and indicators for the various socio- environmental conditions under which palm oil is produced, without compromising the criteria and definitions;
  5. The provision of support to the Secretariat to organise a credible mechanism for scrutinising and recording the production of RSPO-defined sustainable palm oil in the various environments, including where deemed necessary, through engagement with governments; and
  6. The provision of support to the Secretariat to strengthen the capacity to produce palm oil sustainably and to set aside the resources to support monitoring.

Once developed, revised standards are to be field-tested so as to assess their feasibility and the extent to which the requirements can be audited. Pilot tests can take place in multiple locations to assess differences in geographical regions. Once endorsed by the BoG, the revised standards are voted upon by the RSPO General Assembly, where a single majority of a fixed quorum of ordinary members is required for adoption.

There are as yet few details of the new RSPO P&C. In terms of the three main roles of the S&C SC – stakeholder engagement; task force creation; and public consultation – reports indicate that the stakeholder engagement process was launched in May 2017.

In addition, on May 26, 2017, the RSPO announced the formation of a Labour Rights Task Force. It is expected that addressing labour rights will be an important part of the revised P&C.

It is also expected that the revised P&C will take steps to improve the ability of smallholders to meet the sustainability criteria, in the hopes of recruiting more of them into the RSPO membership.

Falie is a typical rural Liberian settlement with a population of around 1,500, roughly 24km off the nearest covered road. The houses are rough and ready, using local timber, mud and corrugated iron. No running water, no sewerage, no electricity, no health clinic, no school, no shop. Not much, in effect, apart from a tightly-knit community spirit and intense loyalty to the Zodua Clan, made up of Falie itself and two similar settlements, Gohn and Karnga – 4,760 people in all, and what seems like a long way from the capital, Monrovia.

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Land development for agriculture has been part and parcel of economic growth in Malaysia’s largest state Sarawak, which embarked on this process in the 1970s. The policy is geared toward reducing poverty in rural areas, increasing food production, and generating revenue for the state.

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France has tested the use of front-of-pack nutrition labelling schemes in four regions: Auvergne-Rhône-Alpes, Île-de-France (the Paris metropolitan area), Haute Normandie and Hauts-de-France. Sixty stores in the Casino, Carrefour Market and Simply Market chains took part in the trial, during which 2 million labels were attached to about 1,200 food products.

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Recent media reports have praised yet another sustainable palm oil standard and label, called ‘Palm Done Right’. The standard was started by Natural Habitats, a business organisation formed by various operating companies and which has offices in Ecuador, Sierra Leone and the Netherlands. Natural Habitats produces, collects, processes and trades organic, fair trade and sustainable palm oil.

Currently, only two companies supply palm oil under the standard developed by Natural Habitats and Dr Bronner’s, a US-based personal care company with operations in Ghana. But it appears that any company that sources palm oil within the ‘Palm Done Right’ supply chain may use the logo on its products and marketing materials.

The presence of yet another palm oil sustainability standard complicates the market for businesses and operators in general. Natural Habitats prefers to refer to ‘Palm Done Right’ as an education programme, but has developed its own sustainability standard and has trademark rights to a logo to be placed on products.

In particular, the standard is for ‘conflict-free palm oil’, which it believes means that such palm oil is produced organically – using natural pest management, multi-cropping and composting – in a vertically integrated supply chain. Moreover, the oil palm must only be cultivated on existing crop land or on degraded land, be handpicked, and preferably be transported using animal labour.

Natural Habitats is of the view that its standard goes beyond other certification schemes, such as that of the Roundtable on Sustainable Palm Oil (RSPO), which is the most widely-used internationally.

Another popular certification standard is by the Palm Oil Innovation Group. Its Charter is intended to build upon the RSPO’s ‘Principles & Criteria’ with regard to deforestation, carbon stocks, biodiversity, greenhouse gas emissions, pesticide use and social relations.

At the national level, the best-known and well-structured sustainability standards and related certifications naturally come from the two countries that produce the most palm oil: Indonesia and Malaysia.

  • The Indonesian Sustainable Palm Oil (ISPO) standard is a mandatory system. It recognises the differences in capability between large plantations and smallholders, and thus does not serve as an overly burdensome standard on smallholdings around the country.

     

  • The Malaysian Sustainable Palm Oil (MSPO) standard is still voluntary, but has come as a welcome addition for small- and medium-size oil palm growers who cannot afford the cost of RSPO certification. The MSPO is intended to become mandatory in future.

Even more sustainability schemes relevant to palm oil exist, including the International Sustainability and Carbon Certification (ISCC); the certification by the Rainforest Alliance/Sustainable Agriculture Network; the Roundtable on Sustainable Biomaterials; the Sustainable Palm Oil Manifesto guidelines; and the High Carbon Stock Approach, which itself is built into other schemes.

The Centre for International Forest Research (CIFOR) recently asked the question: What will it take to make sustainable palm oil the norm?

This is also a question that NGOs ask. And when they do, it’s a loaded question. It is directed at western companies and policy makers. It goes hand in hand with assumptions that:

  1. Oil palm growers are a large, homogenous group.
  2. Oil palm growers are mostly part of large corporations.
  3. Everyone everywhere considers environmental sustainability to be the No. 1 priority.
  4. Western developed markets are the only markets that matter.
  5. ‘Sustainable’ means all aspects of sustainability – including poverty reduction – are covered.

Anyone who has a basic understanding of palm oil production and palm oil markets knows that none of these assumptions are true. But there is such great misunderstanding in the debate over palm oil that western NGOs have been able to move it in the opposite direction.

Consider how the NGOs are pushing for tighter, more expensive standards that are completely out of reach for small farmers, and which exclude them from supply chains.

The most egregious example of this is the ‘zero deforestation’ traceability model. This was the model that resulted in Unilever having to cut 80% of its smallholder suppliers from its network.

What this underlines is that most of the NGO arguments around sustainability are simply a string of western moral arguments about the environment. These have little to do with balanced perspectives or producing strong social and economic outcomes on the ground.

The CIFOR research bears out these fallacies – but don’t expect NGOs and campaign groups to leap on the findings.

Take this from the report’s executive summary in relation to uptake of certified sustainable palm oil and ‘zero deforestation’ commitments by major companies:

‘… oil palm growers are a diverse group, operating in a range of contexts; this means that current high profile signs of change by large multinational companies may not be representative of the entire sector.’

Or on the importance of sustainability among smallholder growers:

‘In regions such as Sumatra with long-established oil palm sectors, the number of independent smallholder farmers is growing rapidly. These smallholders have access to an escalating number of independent mills, which offer competitive pricing opportunities. These mills rely heavily on fresh fruit bunches purchased on the open market and often do not have corporate purchasing policies or checks in place for legality and sustainability concerns.’

And on the importance of western markets:

‘…growers are catering to rapidly growing import markets in China and India, which place much less focus on environmental and social principles, compared to western markets.’

 
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