MARKET DEVELOPMENT
Securing Green Credentials
Securing Green Credentials
30/10/2013 (Jakarta Post) - Is renewable energy environmentally friendly? Yes, if it is managed in a sustainable way. This is simple logic but many have failed to recognize it.
Yes, palm oil is a sustainable product due to its renewable nature, incomparable yield and productivity, economic efficiency and versatility of use in food and energy compared to other agriculture commodities. However, the process for producing palm oil should be conducted in a sustainable way.
Look at the latest Asia-Pacific Economic Cooperation (APEC) Summit in Bali, held October 2013. Indonesia failed twice to have Crude Palm Oil (CPO) added to the APEC Environmental Goods List during the summit.
Indonesia’s proposal was supported by China and Papua New Guinea, but it was vehemently rejected by APEC members from Europe and the United States due to the belief that the majority of palm oil is not managed in a sustainable way, which make it ineligible for being called an environmentally friendly product.
It was quite interesting that the proposal was not co-sponsored by Malaysia as the second largest global palm oil producer.
This reflects either an unwillingness ot fight for a common agenda or Malaysia’s recognition that palm oil is an environmentally harmful and controversial commodity. It is also noted that internationally Malaysia is seen as more committed in the sustainable palm oil movement, ahead of Indonesia.
The EU member countries have aggressively campaigned for stringent standards for commodities, products and consumer goods entering the EU markets.
One of key commodities is crude palm oil, which has become a contentious subject among producing countries in Southeast Asia and in EU markets. Despite relentless skepticism and criticism, the Roundtable on Sustainable Palm Oil (RSPO) is the only viable platform for the growers and markets to set up the standards. The RSPO Summit on Sept. 3, 2013, in Berlin reiterated and confirmed EU commitment to purchase only certified sustainable palm oil (CSPO) by 2015.
Indonesian growers are facing a dilemma, since government is currently introducing a mandatory sustainability standard called ISPO (Indonesia Sustainable Palm Oil). Since this is a mandatory scheme, this duplicate certification adds cost for growers.
The RSPO itself is currently working on developing a common framework to reduce compliance costs from dual standards, such as auditing costs. The main difference between these standards is principally the drive for sustainability. The RSPO is more market-driven, strengthened by consumers in the Western economies. The tangible incentive of CSPO lies in the premium price, ranging from US$2 to $4 per ton.
On the other hand, the ISPO principles are based more on government-sponsored standards, made in consultation with growers, but without the participation of the consumers. This has caused the ISPO to be regarded as less credible and entirely unilateral, since it is not engaging consumers, NGOs and other stakeholders.
Certification for both the RSPO and ISPO can actually be aligned and simultaneously implemented with little cost duplication. However, the main gap that is difficult to reconcile between the two schemes lies on the focus and robustness of standards.
The RSPO puts more emphasis on stringent environmental and social responsibility standards that go beyond government regulations. On the other hand, ISPO strives to balance all three bottom line aspects of economic, environmental and social aspects on the basis of existing regulations and government-set standards.
So far, the market and public only recognize the RSPO as the most common platform for green credentials in palm oil. Making ISPO a globally recognized green credential will be a long and bumpy road.
Indonesia is the world’s largest producer of CPO and of CSPO, accounting for 40 percent of the CSPO produced worldwide. The challenge now is to increase the market uptake of the CSPO supplied to the market which is still negligibly small.
Pressures for more stringent standards on new development will directly affect Indonesian growers, as the country has about 10 million hectares of land suitable for oil palm plantations. Some Indonesian growers are more comfortable with the ISPO since it gives more room for new development of plantations.
Given that European companies absorb around 20 percent of Indonesian palm oil exports, its sustainability commitment is very likely to negatively impact palm oil exports from non-RSPO members in Indonesia.
Traditionally, our main palm oil markets have been in emerging economies such as China and India, and in smaller ones such as Pakistan, as well as in some European andAfrican countries.
But we have seen the clear sign, as provided by APEC members who also have pushed for green standards for palm oil.
In order to succeed in penetrating the green market in the EU and gaining the inclusion of palm oil on APEC’s list of environmentally friendly products, it is imperative to build credibility for Indonesian palm oil either through adoption of the RSPO standards or by boosting market confidence in ISPO.
The government and all palm oil stakeholders in the country need to encourage the palm oil industry to adopt globally accepted sustainability standards to secure access to current and future international markets.
__________________
The market and public only recognize the RSPO as the most common platform for green credentials in palm oil.
_______________________
The writer is the vice president II of the Roundtable on Sustainable Palm Oil (RSPO). The views expressed are his own.
Yes, palm oil is a sustainable product due to its renewable nature, incomparable yield and productivity, economic efficiency and versatility of use in food and energy compared to other agriculture commodities. However, the process for producing palm oil should be conducted in a sustainable way.
Look at the latest Asia-Pacific Economic Cooperation (APEC) Summit in Bali, held October 2013. Indonesia failed twice to have Crude Palm Oil (CPO) added to the APEC Environmental Goods List during the summit.
Indonesia’s proposal was supported by China and Papua New Guinea, but it was vehemently rejected by APEC members from Europe and the United States due to the belief that the majority of palm oil is not managed in a sustainable way, which make it ineligible for being called an environmentally friendly product.
It was quite interesting that the proposal was not co-sponsored by Malaysia as the second largest global palm oil producer.
This reflects either an unwillingness ot fight for a common agenda or Malaysia’s recognition that palm oil is an environmentally harmful and controversial commodity. It is also noted that internationally Malaysia is seen as more committed in the sustainable palm oil movement, ahead of Indonesia.
The EU member countries have aggressively campaigned for stringent standards for commodities, products and consumer goods entering the EU markets.
One of key commodities is crude palm oil, which has become a contentious subject among producing countries in Southeast Asia and in EU markets. Despite relentless skepticism and criticism, the Roundtable on Sustainable Palm Oil (RSPO) is the only viable platform for the growers and markets to set up the standards. The RSPO Summit on Sept. 3, 2013, in Berlin reiterated and confirmed EU commitment to purchase only certified sustainable palm oil (CSPO) by 2015.
Indonesian growers are facing a dilemma, since government is currently introducing a mandatory sustainability standard called ISPO (Indonesia Sustainable Palm Oil). Since this is a mandatory scheme, this duplicate certification adds cost for growers.
The RSPO itself is currently working on developing a common framework to reduce compliance costs from dual standards, such as auditing costs. The main difference between these standards is principally the drive for sustainability. The RSPO is more market-driven, strengthened by consumers in the Western economies. The tangible incentive of CSPO lies in the premium price, ranging from US$2 to $4 per ton.
On the other hand, the ISPO principles are based more on government-sponsored standards, made in consultation with growers, but without the participation of the consumers. This has caused the ISPO to be regarded as less credible and entirely unilateral, since it is not engaging consumers, NGOs and other stakeholders.
Certification for both the RSPO and ISPO can actually be aligned and simultaneously implemented with little cost duplication. However, the main gap that is difficult to reconcile between the two schemes lies on the focus and robustness of standards.
The RSPO puts more emphasis on stringent environmental and social responsibility standards that go beyond government regulations. On the other hand, ISPO strives to balance all three bottom line aspects of economic, environmental and social aspects on the basis of existing regulations and government-set standards.
So far, the market and public only recognize the RSPO as the most common platform for green credentials in palm oil. Making ISPO a globally recognized green credential will be a long and bumpy road.
Indonesia is the world’s largest producer of CPO and of CSPO, accounting for 40 percent of the CSPO produced worldwide. The challenge now is to increase the market uptake of the CSPO supplied to the market which is still negligibly small.
Pressures for more stringent standards on new development will directly affect Indonesian growers, as the country has about 10 million hectares of land suitable for oil palm plantations. Some Indonesian growers are more comfortable with the ISPO since it gives more room for new development of plantations.
Given that European companies absorb around 20 percent of Indonesian palm oil exports, its sustainability commitment is very likely to negatively impact palm oil exports from non-RSPO members in Indonesia.
Traditionally, our main palm oil markets have been in emerging economies such as China and India, and in smaller ones such as Pakistan, as well as in some European andAfrican countries.
But we have seen the clear sign, as provided by APEC members who also have pushed for green standards for palm oil.
In order to succeed in penetrating the green market in the EU and gaining the inclusion of palm oil on APEC’s list of environmentally friendly products, it is imperative to build credibility for Indonesian palm oil either through adoption of the RSPO standards or by boosting market confidence in ISPO.
The government and all palm oil stakeholders in the country need to encourage the palm oil industry to adopt globally accepted sustainability standards to secure access to current and future international markets.
__________________
The market and public only recognize the RSPO as the most common platform for green credentials in palm oil.
_______________________
The writer is the vice president II of the Roundtable on Sustainable Palm Oil (RSPO). The views expressed are his own.