14/10/2024 (The Edge Malaysia) - The Malaysian palm oil industry is undergoing a transformative journey towards sustainability. Having faced criticism in the past, the sector has been making great strides in prioritising environmental, social and governance (ESG) factors through a range of pioneering initiatives that go beyond regulatory compliance.

Malaysia’s approach to EUDR compliance

With the European Union Deforestation Regulation (EUDR) deadline just months away, the Malaysian Palm Oil Council (MPOC) is focused on ensuring Malaysia is recognised as a “low-risk” country under the new law’s country benchmarking assessment. Reports from the FAO Forest Resource Assessment 2020 and the World Resources Institute’s 2023 report demonstrate a positive trend, with Malaysia’s deforestation rates declining and forest areas expanding since 2010. Meanwhile, Global Forest Watch (GFW) has hailed Malaysia as a “success story”, stating, “Palm oil is no longer a driver of deforestation”.

All this underscores the effectiveness of existing measures such as the nationally mandated and independently audited Malaysian Sustainable Palm Oil (MSPO) certification scheme. At the same time, MPOC has been instrumental in driving industry-wide sustainability efforts, by engaging in dialogue with stakeholders, while expanding market access and recognition of the MSPO. As a result, Malaysia is emerging as a global leader in efforts to combat deforestation, demonstrating that the concerted efforts of government, industry and other stakeholders are effective.

Recognising the significant role of smallholders, the country is advocating for an exemption for its oil palm farmers from the EUDR’s stringent requirements, thus protecting their livelihoods while supporting them in the adoption of sustainable practices. In addition, Malaysia collaborates with other palm-oil-producing nations to bolster its negotiating position with the EU.

Industry stakeholders are pushing for a transitional period to adapt to the EUDR’s requirements. A webinar jointly organised by MPOC and the European Forest Institute (EFI) highlighted the need for clearer EU guidance. EFI technical expert Dr Josil Murray outlined Malaysia’s progress in enhancing the MSPO certification scheme, including refined deforestation-related definitions and improved traceability. Meanwhile, Henriette Faergemann from the EU delegation to Indonesia and Brunei Darussalam reaffirmed the bloc’s endorsement of the MSPO as a valuable due diligence tool.

It is the industry’s hope that the EU will acknowledge the MSPO as a pathway towards meeting the EUDR requirements. After all, the Trade and Agriculture Commission (TAC), an expert advisory group to the UK government, has issued an official report concluding that Malaysian palm oil is sustainable and that a zero-tariff rate for Malaysian palm oil would be beneficial, news that has undoubtedly been received well by stakeholders in the sustainable Malaysian palm oil industry. In the report, TAC experts assessed that “Malaysia operates a mandatory deforestation-free standard [MSPO]”, and so, “there is a low risk that Malaysian palm oil exported to the UK would come from land that was deforested”.

Balancing economic growth with ESG stewardship

Thanks to its commitment to sustainability, Malaysia has become the preferred producer of the vegetable oil. It contributes 23% of the world’s palm oil production and 30% of total palm oil exports. The sector is a significant pillar of the Malaysian economy, generating a staggering RM105 billion in export earnings last year. Its impact is far-reaching, creating jobs and supporting the livelihoods of millions of Malaysians, particularly in rural areas.

To nurture future palm oil industry leaders and promote awareness of the sector’s economic contributions and sustainability efforts, there are also initiatives such as MPOC’s Edupalm Programme, which offers students and educators educational field trips and interactive learning experiences.

By prioritising sustainability, supporting smallholders, engaging with stakeholders and empowering future generations, the Malaysian palm oil industry is successfully demonstrating that economic growth and ESG can go hand in hand. This commitment solidifies Malaysia’s position as a sustainable global palm oil leader, backed by the unwavering support of the MPOC.

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