The Netherlands is of supreme importance to palm oil and its producers. It serves as a processing and redistribution hub, and is by far the largest importer of palm oil in Europe (Figure 1).
The Dutch economy is highly trade-oriented. Innovation, the geographical location, the Port of Rotterdam (Europe’s largest), good infrastructure, plus a well-trained, multilingual and highly productive workforce make up the country’s strengths.
Trade has driven the economic engine for centuries. However, due to a reliance on exports, the economy is highly susceptible to global booms and busts such as the current crisis brought about by the Covid-19 global pandemic. This has put an abrupt end to six years of uninterrupted expansion, including a rate of 1.8% in 2019. Analysts now predict the Dutch economy to contract by almost 7% in 2020.
A decline in Dutch exports is expected in 2020. This will be accompanied by falling imports due to reduced domestic demand by both consumers and the export industry, which uses imports as preliminary products. Imports will decline by more than 10%, according to forecasts by the European Commission. A recovery is likely to begin only in 2021.
Backing sustainability
The Netherlands benefits significantly from its trade in palm oil. Consequently, its voice of opposition to palm oil is much weaker than, say, in France which produces most of the EU’s rapeseed – a direct competitor to palm oil.
In late 2019, the European Union (EU) adopted legislation to effectively phase out palm oil as a component of biofuels by 2030, under the revised Renewable Energy Directive. In February 2020, Biofuels Digest posted a report headlined ‘Netherlands adamantly against EU ban on palm oil even when it’s sustainable’. This can be described as the country’s official attitude. The Dutch government outlines its reasons for using palm oil on the website Netherlandsandyou.nl (Figure 2).
Against this backdrop, the Dutch government supports the Malaysian Sustainable Palm Oil (MSPO) standard through the National Initiatives for Sustainable Climate Smart Oil Palm Smallholders (NI-SCOPS). The Initiative also works in Nigeria, Ghana and Indonesia. The goal in Malaysia is to increase the share of certified sustainable independent smallholders (Figure 3).
The commitment to sustainable palm oil in the Netherlands goes beyond political lip-service. Unilever, a Dutch-British multinational company and one of the world’s three largest consumer goods producers, is banking on sustainable palm oil as well.
On Aug 19, 2020, Food Ingredients reported that Unilever is using satellite data, geolocation, the blockchain and artificial intelligence to make its supply chain fully transparent. To that end, the company is teaming up with the Rainforest Alliance and using the PalmTrace platform of the Roundtable on Sustainable Palm Oil. The goal is to find out the origin of fresh fruit bunches supplied to palm oil mills.
Are such investments worth the effort? More and more stakeholders think so. Sustainable palm oil, with its versatility and superior productivity, is just too precious a commodity to be banned. Switching to the use of sustainable palm oil production is not a short-term proposition. But the awareness is growing that it will ultimately protect sales and margins in the European market.
In the words of Marc Engel, Chief Supply Chain Officer at Unilever: “Better monitoring helps all of us to understand what’s happening within our supply chains. By companies coming together and using cutting-edge technology to carefully monitor our forests, we can all get closer to achieving our collective goal of ending deforestation.”
Malaysia’s path toward mandatory certification has not been easy. A substantial amount of resources has been expended on the process, and more will be needed. Despite initial scepticism, the progress in certified land area has been impressive. Independent smallholder certification remains challenging, but efforts like NI-SCOPS will help change that.
Governments like that of the Netherlands are beginning to recognise what has been achieved in Malaysia. In February 2020, building on a previous agreement between the Dutch and the Malaysian governments, the Malaysian Palm Oil Board (MPOB), IDH – The Sustainable Trade Initiative, and Solidaridad signed a Memorandum of Understanding in the Netherlands. It is a further step towards a sustainable palm oil supply chain into Europe.
Such developments make it plain that, with the MSPO, Malaysia has hit the nail on the head. It is right to take this path because certified sustainable palm oil is what European customers want. Without it, the future for palm oil in the EU would be bleak.
Palm oil in numbers
In 2019, five producer countries, led by Indonesia and Malaysia, jointly accounted for 90% of Dutch palm oil imports (Figure 4). Compared to 2015, the volume exported by Papua New Guinea, Colombia and Honduras has grown – Papua New Guinea and Honduras by factor 7.2 and 3.4 respectively, while Colombia’s share has almost doubled.
The Netherlands imported about 35% more palm oil in 2019 compared to 2015 (Figure 5).
In 2019, Malaysia was the largest supplier of palm kernel oil to the Netherlands for the fifth consecutive year (Figure 6). However, Papua New Guinea is catching up fast. Also, with Guatemala – which could triple its share – a new player has arrived in this market.
Palm kernel imports grew by around 30% between 2015 and 2019 (Figure 7).
The dominance of Indonesian palm kernel meal is striking. Malaysia’s share of imports has dropped since 2017. In 2019, Germany exported more of the product than Malaysia to the Netherlands (Figure 8).
Dutch imports of palm kernel meal went up by 20% between 2015 and 2019 (Figure 9).
The Netherlands re-exports some 40% of palm oil imports, with more than half going to the three EU buyers (Figure 10).
The MPOB registered 670,207 tonnes of palm oil exports to the Netherlands from January to July 2020. This was an increase of more than 32% over the corresponding period in 2019. The year 2020 could have marked a milestone for sustainable palm oil, but this has been derailed by Covid-19.
However, if Malaysia pursues its sustainability goals through the MSPO and succeeds in convincing buyers that its palm oil is the sustainable choice, it will not be long before the benefits are reaped.
MPOC Brussels
