26/04/2008 (The Star Online) - WITH crude palm oil prices camping well above the RM3,000 per tonne level for several months now, many people must surely be sorely tempted to venture into the plantation sector. After all, coaxing a middling yield from an oil palm holding isn't rocket science, and selling a commodity in a hot market can't be too hard either.

However, this ignores the fact that the palm oil business is no longer primarily about maximising estate and mill performance, and getting the best prices for the output.

Palm oil has become a truly global commodity and there are many stakeholders to address these days. The strong growth of the demand for palm oil has heightened concerns about the industry's impact on the environment and the communities near the plantations.

In particular, non-governmental organisations (NGOs) in Europe and the United States have been strident and dramatic in blaming palm oil players for the ills caused by deforestation in Southeast Asia.

Last Monday, for example, Greenpeace activitists in orangutan suits staged protests in England, the Netherlands and Italy at the business premises of Unilever.

This coincided with the NGO's release of a report that targeted the consumer goods giant. The title says it all – How Unilever palm oil suppliers are burning up Borneo.

Such acts are designed to rouse consumers and to pressure governments and businesses to act against those accused by the NGOs. And these tactics often work. This has become a very real element of the palm oil business, and players who choose to ignore it will one day find themselves backed into a corner.

A key response was the formation of the Roundtable on Sustainable Palm Oil (RSPO) four years ago. The aim is to “promote the growth and use of sustainable palm oil through co-operation within the supply chain and open dialogue with its stakeholders”.

Among the members are oil palm growers, palm oil processors and traders, consumer goods manufacturers, retailers, banks and investors, and NGOs.

An early priority for RSPO was the formulation of the principles and criteria (P&C) for sustainable palm oil production. These will in turn serve as the basis for a certification scheme, a pivotal step in convincing people that palm oil players are adhering to practices that minimise harm to society and the environment.

The final document for the P&C was adopted last November, and what's next is to agree on the national interpretations for Malaysia, Indonesia and Papua New Guinea so as to take into account the unique circumstances in each country.

Once this stage is cleared, the certification process will kick into high gear. According to RSPO, several oil palm growers have indicated their intention to undergo audits of their estates and mills.

These include all the big Malaysian names: Kuala Lumpur Kepong Bhd, United Plantations Bhd, PPB Oil Palms Bhd, Sime Darby Bhd, IOI Corp Bhd and New Britain Palm Oil Ltd (a subsidiary of Kulim (M) Bhd that has operations in Papua New Guinea). The sole Indonesian company in this pioneering group is PT Musim Mas.

This is not meant to be a race between Malaysia and Indonesia, but nevertheless, it's important that a large and respected Malaysian-owned grower be the first to receive certification.

The Malaysian oil palm industry has always seen itself as the leader in technology, innovation and good practices. We have lost the No.1 palm oil producer status to Indonesia but we are still considered the best.

Certification by independent parties will go some way in reinforcing that.

The point to being first is that it reflects conviction in the RSPO's P&C and the belief that the certification mechanism brings value to the company and the industry. Also, given the Malaysian palm oil industry's long history and established structure, passing muster shouldn't be too tough a challenge.

Sure, the certification process will not be a quick affair – indeed, it's only right that it'll be thorough and consultative – and there are many factors that determine the length of the audits.

Ideally, a company should seek certification of its entire palm oil operations. Otherwise, it risks being perceived as showcasing only a selected portion of its business. However, some oil palm growers may simply be too large to cover in a single audit; such an exercise will be costly, time-consuming and potentially disruptive.

In such cases, perhaps the best solution is for the companies to commit to a schedule for full certification. For those who are not ready to be audited, it's time to get their houses in order.

At the same time, let's be realistic. The RSPO certification system is not a magic bullet that will instantly convert sceptics into believers. There are many out there who have zero faith in what RSPO stands for. It's no accident that the Greenpeace report centres on Unilever, whose representative is the president of the RSPO executive board.

It's hard, of course, for RSPO to engage with those who opt to take an adversarial stand. For that matter, getting its various members (who represent diverse interests) to stay on the same page and to pull in the same direction is a constant challenge.

However, the next-best goal is to reach a good compromise and that's perhaps what the P&C is all about.

What must be done now is for the palm oil industry to demonstrate again and again that it's serious and sincere about wanting to solve the problems linked to the plantation sector.

Malaysia has a number of companies that are in a position to do exactly that – and the sooner they do so, the better it is for everybody.