The Growing Pains of Sustainable Palm Oil

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The Growing Pains of Sustainable Palm Oil
James Fox

Although palm oil is an almost omnipresent ingredient in products in supermarkets and households around the world, it suffers from a desperate image problem, particularly in the Western world. Despite its prevalence and importance, those googling the term “palm oil” find that the very first result calls for a boycott, decrying the product’s environmental impact. However, the webpage itself hints at a solution, both to the oil’s PR problem and its ecological and social issues; sustainable palm oil. Demand for sustainable palm oil has grown as consumers and corporations along the supply chain have reacted to campaigns by NGOs and other groups, with the formation of the Roundtable on Sustainable Palm Oil (RSPO) in 2004 marking a watershed.

The RSPO is the leading industry body that certifies palm oil as sustainable; with nearly 2000% growth in the amount of crude palm oil certified since 2008, 10.8 million tons per year are now certified by the body, accounting for around 20% of global production. Its standards and criteria seek to address the ecological and social problems associated with palm oil production. However, its efforts have divided the environmentalist community, as critics accuse it as a mechanism to “greenwash” the issue: Friends of the Earth are a strong critic; Greenpeace and the Rainforest Action Network offer qualified support while criticising specific members’ practices; the WWF was instrumental in its establishment and continues to promote it, at least as a first step.

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Global demand for palm oil continues to grow, outstripping other vegetable oils.

Credit: RSPO

These NGOs are keenly aware of the value of their endorsements. Not only do their public pronouncements drive awareness, and thus demand for sustainable palm oil both among consumers and suppliers, but the rewards of making the industry more sustainable are potentially enormous; reducing the impact of climate change, reducing slave labour and human trafficking in developing economies, and protecting species in some of the most crucial areas of biodiversity on the planet where palm production is concentrated. These are all stated aims of the RSPO. However, the colossal value of the palm industry, both for global corporations and local people in South-East Asia, means that sustainability is often side-lined by the need to turn a profit from the high-value crop.

Enforcement of the RSPO’s standards has been historically patchy, but recent interventions driven by some of the biggest players in the $61 billion a year industry have propelled sustainable palm oil and the RSPO into the spotlight, and gone some way to reversing its toothless reputation. The most dramatic was the suspension of certification for the IOI Group in April this year in response to ongoing concerns about deforestation and suspect labour practices on its plantations. Food giants Nestlé, Mars Inc and Unilever, the worlds’ single largest buyer of palm oil, immediately cancelled their contracts with IOI, one of the founding members of the RSPO, which operates over 235,000 hectares of palm plantations operating across Indonesia and Malaysia. Hershey’s, Colgate-Palmolive, Johnson and Johnson, and Procter and Gamble would later join them, along with Cargill, one of the so-called “ABCD” traders that dominate the global food trade. Cargill had issued an ultimatum to IOI, demanding that it develop a new plan to meet its requirements by July; IOI initially responded by attempting to sue the RSPO, eventually dropping the lawsuit. As of the 5th August, the RSPO has lifted the suspension after four months, citing “good progress” now that IOI has revised its sustainability policy and published an action plan, but has emphasised that the implementation of these will be independently monitored over the next year. It remains to be seen if these moves, backed up by the threat of another suspension, are enough to win back IOI’s lost customers.

Although environmental campaigners welcomed the move, they have long bemoaned the loopholes that allowed IOI and other companies to flout the spirit of the agreement. In 2015 they were joined by a group of institutional investors and companies representing $5 trillion in assets, who penned an open letter to the RSPO. Concerns include the standard’s lack of protection for High Carbon Stock forests and peatlands, human rights violations and conflict with indigenous groups on plantations, and loopholes in the auditing process. The open letter noted that many member companies had resorted to implementing their own sustainability standards out of frustration – more recently, Felda Global Ventures, the gigantic Malaysian producer with deep ties to the Malaysian government, voluntarily suspended its RSPO certifications for its 58 domestic mills to address sustainability issues with smallholders, who produce about 30% of the company’s palm oil. However, this may have been pre-emptive to avoid reprimand by the RSPO.

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Recently planted palm oil plantation on rainforest peatland in Central Kalimantan, Borneo, Indonesia.

Credit: glennhurowitz, Flikr

The greenwashing allegation against the RSPO is therefore somewhat justified, especially when the achievements of the various industry sustainability standards and programmes (of which the RSPO is only the largest of a patchwork of competing legal and voluntary criteria) are measured against their stated aims. Deforestation and illegal plantations remain rampant, with black market palm finding its way into supply chains. In March, Geospatial Insight’s palm oil tracking product, PalmLight, which uses satellite data to identify and measure oil palm acreage, estimate crop age and derive estimated yield,  revealed that the there was around a third more palm oil being grown in Malaysia’s Johor province alone than was registered. Given that the industry in Malaysia is more tightly regulated than Indonesia, the need to develop a more complete picture of how the oil palm industry is developing is clearly a major priority.

Although sustainability efforts have focused on the industry’s supply chain, demand is what primarily limits the growth of sustainable palm oil. Although importing western companies and governments, concerned for their image and more receptive to lobbying by environmental groups, stipulate the need for sustainable palm oil to access their lucrative markets, global consumption is highest in Asia, and in particular India and China, which the USDA has forecasted to import over 15 million metric tons of palm oil between them this market year. While IOI’s exposure to European markets (51% of its revenue base) made RSPO suspension an effective punishment and deterrent to other similarly exposed producers, Asian companies and consumers are less unconcerned with sustainability. Given the profits to be made from booming populations there, incentives to prevent ecological and social abuses in palm producing areas are slim. Furthermore, with the palm industry being responsible for 9% of Malaysian GDP in 2012, and employing 41% of Indonesia’s agricultural workers, the most visible and immediate incentive for governments in the region to clean up the industry is the now annual public health crisis caused by the haze from burning rainforests.

Looking to the future, there’s little doubt that sustainable palm oil can and probably will be at least part of the solution to climate change, deforestation and food security. Boycotts are often touted by some environmental groups, but this is actively discouraged by others. Palm is an extremely high yielding oilseed crop compared to competitor staples like soyabean, rapeseed and sunflower oil, producing 34.7% of the global vegetable oil crop while taking up just 4.8% of the land devoted to producing vegetable oils. This efficiency can reduce the amount of land needed for food and biofuel production globally, potentially reducing food poverty and deforestation. In fact, a recent report based on remote sensing data by the Austria-based International Institute for Applied Systems Analysis (IIASA) suggests that the area of palm oil plantations worldwide could double in palm producing areas in Southeast Asia, Africa and Latin America without damaging protected areas or sensitive forests. Furthermore, for the growing populations of the urban areas of Asia (and increasingly in Africa), palm oil is a cheap and vital staple, and will continue to be so however environmentally discerning western consumers respond.

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The WWF was instrumental in establishing the RSPO, and continues to promote sustainable palm oil.

Source: WWF, Twitter

There have been attempts by various industry players in 2016 to tighten up implementation and encourage the production of more sustainable palm oil. Indonesia’s president announced a temporary ban on granting new land for palm oil development, mainly to prevent a repeat of last years’ haze, while the RSPO has attempted to further empower its auditors, and introduced a set of voluntary rules addressing loopholes, under the name RSPO NEXT, which prohibits deforestation, peatland development, burning, use of the herbicide Paraquat and violations of smallholders’ and workers’ rights. However, sustainability remains a secondary consideration in the industry at best, and while great strides have been made, there is nothing to indicate that sustainable palm oil will become the industry standard, even in the long term; the industry is simply too large, profitable and opaque.

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