MARKET DEVELOPMENT
Sustainable Palm Oil Sector Key to Cutting Emissions
Sustainable Palm Oil Sector Key to Cutting Emissions
24/01/2014 (Jakarta Globe) - Many commentators see the Roundtable of Sustainable Palm Oil (RSPO) certification scheme as a positive step in introducing greater sustainability into the palm oil sector. (EPA Photo)
For Indonesia, reducing emissions means making palm oil more sustainable. Rather than a costly burden, committing to sustainable palm oil can be a win-win for both the government and producers.
In 2009, the Government of Indonesia pledged to reduce emissions by 26 percent from 2005 levels by the year 2022. Indonesia’s palm oil industry, the largest producer of palm oil in the world, has often been blamed for the destruction of the prime forests and increases in carbon emissions as well as for causing social unrest over land rights issues. A recent Greenpeace report found that the palm oil sector was the single largest driver of deforestation in Indonesia between 2009-2011, accounting for a quarter of the country’s forest loss.
Across the world the private sector is embracing sustainability. From Barclays, who started community cycling in London, to enthusiastic clean-technology start ups in China, the private sector’s growing interest in sustainability is a response to the environmental consciousness of their customers, who according to PwC, use sustainability as a key factor in their purchasing decisions.
For businesses, sustainability can bring price premiums. In the palm oil sector, producers that achieve Roundtable of Sustainable Palm Oil (RSPO) certification, the current international standard for sustainable production, are able to charge higher prices for their product than non-certified firms. With more than 40 percent of palm oil producers now certified, for many, the benefits far outweigh the cost of implementation. In fact, the significant financial gains generated by RSPO certification are driving competition between producers to adopt the standards.
Although many commentators see the RSPO certification scheme as a positive step in introducing greater sustainability into the palm oil sector, there remain major concerns about its effectiveness. According to Greenpeace, RSPO standards are inadequate for reducing deforestation, lack transparency and are poorly enforced. The lax criteria on third-party supply chains enable companies to cheat at points throughout the palm oil supply chain. In fact, Greenpeace considers the standards to be even more harmful than business as usual.
In 2012, claiming that the RSPO scheme is biased towards consumer countries, expensive and hard to comply with due to frequent changes in audit processes, Indonesia launched its very own palm oil standard called the Indonesian Sustainable Palm Oil (ISPO) system.
Unlike RSPO, ISPO certification is mandatory for all producers in Indonesia. However, the ISPO system represents something of a backwards step.
Although ISPO standards seem to be more inclusive of community responsibility, they are believed to be even weaker than the RSPO standards. For example, unlike the ISPO regulations, RSPO standards include the recognition of customary rights and allow communities to give or withhold their consent to operations planned on their lands.
The relative weakness of ISPO standards is also reflected in the numbers. 20 Indonesian companies are in the process of ISPO certification whereas only 14 have been RSPO certified.
While the RSPO scheme as it is currently configured will not significantly reduce emissions, coming up with lenient and weak standards seems like valuable time and energy spent in not only reinventing the wheel but also paying lip service to sustainability. It undermines current standards and the tangible efforts of several private companies who are relentlessly committed to sustainable palm oil. It also raises questions about Indonesia’s credibility and commitment to sustainability.
Other recent steps taken by the government, such as the proposal made to APEC to treat sustainable palm oil as a ‘green good’ to gain tariff reductions, have also lead many to question their commitment. Such a move would drain resources needed domestically and lead to even more deforestation.
If Indonesia is serious about creating a sustainable palm oil sector, it must focus on making the ISPO system more robust than the RSPO scheme.
To strengthen ISPO standards, a more holistic approach must be taken. A stronger framework would include an indicator that constantly monitors the life cycle sustainability of palm oil. Coming up with a legitimate indicator in itself is challenging since it involves valuing goods that are either intangible or cannot be easily quantified such as trees, community rights and indigenous ownership and making a series of ethical choices.
In strengthening the ISPO standards the government must work closely with producers, in particular with those that have shown a strong commitment to sustainability. They must also learn from successful sustainability initiatives undertaken by private firms.
One such pioneer is the palm oil producer, NBTOL, which has successfully increased transparency by keeping certified palm oil separate from uncertified palm oil. Moreover, their whole supply chain is certified from the small holders to the fruit base. Another example is The Palm Oil Innovation Group, which champions the conservation of secondary forests over and above the RSPO forest clearance ban. Extolling the virtues of sustainability to other producers must also be a part of the government’s strategy.
To ensure that producers abide by these stronger standards, clear penalties for non-compliance must be set and contracts put in place with communities to mutually enforce penalties. Incentives can be given in the form of tax breaks, with the recycled revenue used to make the entire supply chain sustainable.
Finally, to create demand for sustainable palm oil, labeling at consumer level should be initiated. This will offer consumers a choice and give environmentally-conscious consumers the opportunity to support sustainable palm oil production. Raising awareness though labeling could also empower the public to drive the change towards sustainable palm oil.
Now is the time to tackle the problems in the palm oil sector. Mindsets must change regarding sustainability, a win-win for producers and government.
Leela Raina is Assistant Director at Strategic Asia, a consultancy promoting cooperation between Asian nations. She can be contacted at leela.raina@strategic-asia.com.
For Indonesia, reducing emissions means making palm oil more sustainable. Rather than a costly burden, committing to sustainable palm oil can be a win-win for both the government and producers.
In 2009, the Government of Indonesia pledged to reduce emissions by 26 percent from 2005 levels by the year 2022. Indonesia’s palm oil industry, the largest producer of palm oil in the world, has often been blamed for the destruction of the prime forests and increases in carbon emissions as well as for causing social unrest over land rights issues. A recent Greenpeace report found that the palm oil sector was the single largest driver of deforestation in Indonesia between 2009-2011, accounting for a quarter of the country’s forest loss.
Across the world the private sector is embracing sustainability. From Barclays, who started community cycling in London, to enthusiastic clean-technology start ups in China, the private sector’s growing interest in sustainability is a response to the environmental consciousness of their customers, who according to PwC, use sustainability as a key factor in their purchasing decisions.
For businesses, sustainability can bring price premiums. In the palm oil sector, producers that achieve Roundtable of Sustainable Palm Oil (RSPO) certification, the current international standard for sustainable production, are able to charge higher prices for their product than non-certified firms. With more than 40 percent of palm oil producers now certified, for many, the benefits far outweigh the cost of implementation. In fact, the significant financial gains generated by RSPO certification are driving competition between producers to adopt the standards.
Although many commentators see the RSPO certification scheme as a positive step in introducing greater sustainability into the palm oil sector, there remain major concerns about its effectiveness. According to Greenpeace, RSPO standards are inadequate for reducing deforestation, lack transparency and are poorly enforced. The lax criteria on third-party supply chains enable companies to cheat at points throughout the palm oil supply chain. In fact, Greenpeace considers the standards to be even more harmful than business as usual.
In 2012, claiming that the RSPO scheme is biased towards consumer countries, expensive and hard to comply with due to frequent changes in audit processes, Indonesia launched its very own palm oil standard called the Indonesian Sustainable Palm Oil (ISPO) system.
Unlike RSPO, ISPO certification is mandatory for all producers in Indonesia. However, the ISPO system represents something of a backwards step.
Although ISPO standards seem to be more inclusive of community responsibility, they are believed to be even weaker than the RSPO standards. For example, unlike the ISPO regulations, RSPO standards include the recognition of customary rights and allow communities to give or withhold their consent to operations planned on their lands.
The relative weakness of ISPO standards is also reflected in the numbers. 20 Indonesian companies are in the process of ISPO certification whereas only 14 have been RSPO certified.
While the RSPO scheme as it is currently configured will not significantly reduce emissions, coming up with lenient and weak standards seems like valuable time and energy spent in not only reinventing the wheel but also paying lip service to sustainability. It undermines current standards and the tangible efforts of several private companies who are relentlessly committed to sustainable palm oil. It also raises questions about Indonesia’s credibility and commitment to sustainability.
Other recent steps taken by the government, such as the proposal made to APEC to treat sustainable palm oil as a ‘green good’ to gain tariff reductions, have also lead many to question their commitment. Such a move would drain resources needed domestically and lead to even more deforestation.
If Indonesia is serious about creating a sustainable palm oil sector, it must focus on making the ISPO system more robust than the RSPO scheme.
To strengthen ISPO standards, a more holistic approach must be taken. A stronger framework would include an indicator that constantly monitors the life cycle sustainability of palm oil. Coming up with a legitimate indicator in itself is challenging since it involves valuing goods that are either intangible or cannot be easily quantified such as trees, community rights and indigenous ownership and making a series of ethical choices.
In strengthening the ISPO standards the government must work closely with producers, in particular with those that have shown a strong commitment to sustainability. They must also learn from successful sustainability initiatives undertaken by private firms.
One such pioneer is the palm oil producer, NBTOL, which has successfully increased transparency by keeping certified palm oil separate from uncertified palm oil. Moreover, their whole supply chain is certified from the small holders to the fruit base. Another example is The Palm Oil Innovation Group, which champions the conservation of secondary forests over and above the RSPO forest clearance ban. Extolling the virtues of sustainability to other producers must also be a part of the government’s strategy.
To ensure that producers abide by these stronger standards, clear penalties for non-compliance must be set and contracts put in place with communities to mutually enforce penalties. Incentives can be given in the form of tax breaks, with the recycled revenue used to make the entire supply chain sustainable.
Finally, to create demand for sustainable palm oil, labeling at consumer level should be initiated. This will offer consumers a choice and give environmentally-conscious consumers the opportunity to support sustainable palm oil production. Raising awareness though labeling could also empower the public to drive the change towards sustainable palm oil.
Now is the time to tackle the problems in the palm oil sector. Mindsets must change regarding sustainability, a win-win for producers and government.
Leela Raina is Assistant Director at Strategic Asia, a consultancy promoting cooperation between Asian nations. She can be contacted at leela.raina@strategic-asia.com.