Certification key for smallholders as demand for sustainable palm oil surges — RSPO
29/11/2022 (The Edge Markets), Kuala Lumpur - Roundtable on Sustainable Palm Oil (RSPO) certification adoption is still very low in Malaysia, at less than 1% or the equivalent of 1,700 smallholder oil palm farmers certified to date.
Speaking to the press at the RSPO Annual Roundtable Conference on Sustainable Palm Oil (RT2022), themed Scaling Up the Sustainable Palm Oil Value Chain Through Collective Action, on Tuesday (Nov 29), the organisation’s chief executive officer Joseph D’Cruz said that while big and mid-cap plantation companies have adopted RSPO standards, challenges still persist when it comes to onboarding smallholders due to structural issues such as costs, skill and legal requirements, which remain a barrier to meeting certification standards.
However, he added that certification such as Malaysian Sustainable Palm Oil (MSPO) has proven to be beneficial for oil palm smallholders as it has laid the bedrock for farmers to adopt higher universal standards like RSPO.
D'Cruz said that national schemes such as MSPO raise the standards, or the acceptable minimum requirement, for sustainability. "I do not see MSPO certification in Malaysia as a barrier to RSPO. I see that in the way the Malaysian government requires this minimum standard, you are actually making the job of becoming an RSPO member a lot more easier,” he said.
The national standard for palm oil production, the MSPO, was made mandatory by the government in 2020.
Data from MSPO shows that to date, 96% of Malaysian palm oil production including industrial stakeholders, small and medium enterprises (SMEs) and smallholders are MSPO certified.
However, data on the number of both RSPO and MSPO certified smallholders was not available at the time of writing.
“The way palm oil is produced with RSPO standards reduces environmental impact. But beyond that we at RSPO also continue to look at how we can make sustainable palm oil production model more profitable for smallholders," he said, adding a number of sustainable pilot studies have been adopted by the groups his organisation works with.
Some of the models being explored for pilot studies are carbon credits and regenerative agriculture into the smallholders module so that the entire module becomes more productive, said D’Cruz.
“There may be opportunities for them to sell carbon credits. The RSPO themselves do not get involved in carbon pricing or credits, but we certainly see that being one additional value stream our members can benefit if they want to.
“They can benefit [from] this both in plantations and mills where there is a tremendous amount of value to capture carbon and reduce [carbon dioxide] emissions,” he added.
Big appetite for sustainable palm oil from price-sensitive countries
In both critical markets of China and India, RSPO sees tremendous potential for an increase in the demand for sustainable palm oil.
“We are seeing strong interest from both markets to engage with us on how we can ensure that their supply is actually sustainable and we look forward to seeing that percentage increase in the years to come,” said RSPO’s D'Cruz.
United Plantations Bhd CEO Datuk Carl Bek-Nielsen said the world’s three largest consumers — India, the European Union and China — make up a substantial portion of the total 76 million tonnes of palm oil consumed annually.
However, China and India’s uptake of sustainable palm oil is still relatively low at 8% and 3% respectively.
“In the future, the demand for sustainable palm will grow in these economies where demand is enormous — and that will be fuelled by big consumer goods manufacturers who are members of RSPO,” said Bek-Nielsen.
He added that demand from these price-sensitive countries are also strong, especially since crude palm oil (CPO) is trading at a significant discount to soybean oil, of US$650 (RM2,930.52) to US$700 per tonne vs an average of US$355 in the past year, based on data compiled by Bloomberg.
While D’Cruz said that the RSPO has yet to establish specific numerical targets over the next few years in relation to the uptake of sustainable palm oil, it is currently working with its partners in these countries to make the case for why sustainable sourcing of palm oil is so critical for these countries.
“The focus of sustainability within China and India — from citizens to policymakers — is growing. So connecting that desire to be sustainable to the sourcing and consumption of palm oil is what we need to do in the next few years,” he explained.
Europe still holds the key to changing the narrative about palm oil
With Europe accounting for about 90% to 93% of total palm oil imports that are RSPO certified, the conversation about promoting sustainability really has to start there, said D’Cruz.
Despite being the biggest consumer of RSPO-certified palm oil, consumer products companies in the EU still refuse to use the trademark in their packaging due to the crop’s poor reputation in the region.
Very few manufacturers want to draw attention to the fact they are indeed using palm oil in their products, sustainable or not.
He observed that as the largest buyer of sustainable palm oil, Europe is not taking an active part in promoting it and yet constantly punishes planters on the credibility of their production process.
“Manufacturers who produce products like lipsticks and biscuits use RSPO-certified palm oil, but they don’t say so. The marketing side of these companies steer clear away from even using palm oil entirely because they are battling a consumer sentiment that associates palm oil with something dirty."
D'Cruz said that RSPO expects manufacturers to do a better job in promoting palm oil, as many companies seem much more willing to tell their consumers they are palm oil-free.
“Consumers who are at the moment avoiding palm oil are trying to do a good thing, but with the wrong information. So we need to give them the right information.”
Based on RSPO Roundtable’s Impact Report, over the last two decades, it has increased global certified area from 125,000 hectares in two countries in 2008 to 4.5 million hectares across 21 countries.
Some 301,020 hectares have been conserved and protected through RSPO certification, while an estimated half a million workers in estates and mills around the world are now represented under the RSPO Principles and Criteria (P&C) through certification.