With EUDR Deadline Looming, Is Malaysia’s Palm Oil Industry Ready?
27/06/2024 (Business Today) - The MPOC collaborated with the European Forest Institute (EFI) and key stakeholders to discuss preparations, challenges, and solutions for EU operators and Malaysian exporters to comply with the EU Deforestation Regulation (EUDR). With the compliance deadline of December 30, 2024, approaching, EU operators and traders must ensure that products entering the EU are deforestation-free and produced according to relevant local laws.
The European Forest Institute (EFI), represented by Technical Expert Dr. Josil Murray, presented the latest updates in Malaysia’s effort to improve the Malaysian Sustainable Palm Oil (MSPO) certification scheme, particularly in the areas of deforestation-related definitions, legality, geolocation, and traceability in palm oil production. This is to ensure that the certification scheme is fully aligned to the EUDR requirements and facilitate Malaysian exporters’compliance. She also acknowledged Malaysia’s commitments in meeting the EUDR requirements, despite the many uncertainties faced by the industry due to insufficient clarity in interpretating the EUDR requirements.
Mr. Ku Kok Peng, Chief Sustainability Officer of Kuala Lumpur Kepong Berhad, spoke about the implications from these challenges, particularly the risk of smallholder exclusion, limitation of compliant supply to EU and at higher costs, as well as the need for the EU to urgently resolve the many uncertainties faced, as exporters will need to prepare its EUDR-compliant shipments to the EU by September or October this year. The situation also disincentivises businesses frominvesting in EU, which could adversely impact employment and the economy in the EU.
Daphne Hameeteman, General Manager Sustainability, External Engagement, Wilmar International highlighted Wilmar’s preparations for EUDR, their efforts in engaging relevant stakeholders, their experiences in participating in the EUDR information system pilot testing, as well as challenges faced in meeting the EUDR requirements, interpreting the requirements and the sheer amount of information and documentation involved in the due diligence process. She stressed on the need for the EU Information System to be improved, and raised the possibilities that EU operators may not have sufficient volume (of EUDR-compliant palm oil) by 2025, due to these challenges faced.
Henriette Faergemann, First Counsellor for Environment, Climate Action and Digital Cooperation at the European Union Delegation to Indonesia and Brunei Darussalam highlighted that the EU is supportive of the role of national sustainability certification schemes such as the MSPO. While the schemes cannot replace the due diligence statement, the information supplied by MSPO can assist the EU operators and traders’ efforts in conducting its due diligence obligations.
Belvinder Sron, Chief Executive Officer of MPOC said, “Malaysian exporters have made significant financial and technical investments to meet the EUDR requirements, focusing on geolocation, legality information, and supply chain traceability. However, many small farmers in the palm oil supply chain face difficulties and risk exclusion from the supply chain. Despite these efforts, providing the necessary due diligence information remains challenging due to the complexities of the palm oil supply chain.”
EU imported 2.66 million tonnes of palm oil and palm products from Malaysia in 2023 and is also a significant export market for Malaysian palm oil (ranking third after India and China). MPOC said EU has been and will continue to be an important market for Malaysia, but the EUDR is increasing the cost of doing business in Europe. T
MPOC said the Malaysian palm oil industry will explore opportunities in other global markets that are more accessible and equitable, especially for smallholders.” She urged the EU to promptly address the lack of guidance and uncertainties faced by the Malaysian palm oil industry before the EUDR enforcement date of January 1, 2025, and reaffirmed the industry’s readiness to collaborate with the EU to address these uncertainties and bottlenecks.