The Star Online (11/12/2017) - Certification to be the basis for branding Malaysian CPO in international market

GLOBALLY, the palm oil industry has been subjected to much scrutiny by various parties, primarily driven by concerns on the environmental degradations claimed to be caused by oil palm plantations.

While Malaysia’s very-own oil palm industry has not been spared from criticisms, the Government and local plantation players have continued to be proactive in ensuring a sustainable oil palm industry.

The country’s oil palm industry, which celebrated its 100th year of anniversary this year, has come a long way since the first commercial oil palm plantation at Tennamaram Estate in Batang Berjuntai, Selangor.

In line with the Government’s aspiration to shape a responsible and sustainable oil palm industry in Malaysia, the Malaysian Sustainable Palm Oil (MSPO) certification was introduced in 2015 as a voluntary measure for oil palm planters and mills.

The MSPO is the third such certification standard in the world for palm oil, after the Indonesian Sustainable Palm Oil (ISPO) launched in 2011, and the multi-stakeholder grouping Roundtable on Sustainable Palm Oil (RSPO) set up in 2004.

Come end-2019, the scheme will be made mandatory across-the-board to elevate the oil palm industry to meet sustainability requirement.

In short, the MSPO certification will be the basis for branding Malaysian palm oil.

According to Malaysian Palm Oil Certification Council (MPOCC) chairman Datuk M. Nagarajan, the MSPO certification is a crucial milestone in the industry as it involves the Government in the continuous monitoring and improvement of sustainable palm oil production.

“The MSPO scheme is rather unique compared to RSPO, as the former is a national standard. The Government takes great concern in the sustainable production of palm oil and such certification will play an important role in ensuring all planters and processing facilities are in line with globally-accepted environmental requirements.

MSPO journey

“Similar to all existing food crop certifications, it will be an ongoing journey where we will continuously strengthen our standards in line with global requirements, moving forward. To put it into context, MSPO aims to certify Malaysian palm oil for the world,” he said in an interview with StarBiz.

MPOCC is an independent non-profit organisation established in December 2014 to develop and operate the MSPO certification scheme.

The MSPO standards contain seven principles which form the general requirements of a management system framework, based on the three pillars of sustainability – economically viable, socially acceptable, and environmentally sound.

As of October 2017, only about 5% or 285,691.91 ha of total planted oil palm areas have been certified under the MSPO scheme. Of this, about 4,004.19 ha and 3,868.34 ha are owned by individual and organised smallholders respectively.

In comparison, nearly 974,482 ha of oil palm plantations in the country are certified under the RSPO scheme as of October 2017. Globally, about 2.55 million ha have been certified, according to the RSPO website.

With regard to MSPO-certified plantation companies, up to 19 oil palm companies received MSPO certification. As for mills, a total of 26 units are MSPO-certified by end-October this year.

When asked whether the MSPO certification will be redundant with the more internationally-recognised RSPO, Nagarajan said planters and mills operators can pursue certification by RSPO if they prefer.

“The MSPO scheme is not established to compete with RSPO but instead to co-exist. It must be understood that RSPO is voluntary and is based on a business-to-business arrangement.

“MSPO, on the other hand, is a national standard with a growing acceptance globally. In short, all domestic palm oil producers must be in compliance with the MSPO standards, while RSPO can be an additional certification if needed,” he said.

The mandatory timeline for plantation industries that already have the RSPO certification is Dec 31, 2018, while the timeline for those without any certification is on June 30, 2019.

On the other hand, smallholders would have to get their MSPO certification done by Dec 31, 2019.

Sustainability

Taking a reality pill, Nagarajan admitted that while certifications are good for environmental sustainability and good practices in the industry, planters and mill operators will have to face additional costs in order to be MSPO-certified.

“However, the Government is mindful of this situation and has allocated a total of RM150mil to subsidise audit costs related to the MSPO certification. For smallholders, the Government will absorb the entire compliance cost to be MSPO-certified.

“Apart from that, as for the bigger plantation players, the Government will defray around 30% to 70% of the total audit cost,” he said, adding that the one-off subsidy would be available until December 2019.

He added that the certified entities would need to fork out audit cost for subsequent renewals, following their MSPO certifications.

“In order to help the independent smallholders to defray the compliance cost for MSPO, we will group them into clusters known as the Sustainable Palm Oil Clusters. These respective clusters will then establish cooperatives to create additional revenue for the smallholders through the sale of oil palm fruits.

“This additional revenue could be used to finance the auditing cost for MSPO certification renewals,” stated Nagarajan, assuring that costs related to MSPO certification would be cheaper as compared to the RSPO scheme.

Under the MSPO scheme, a man-day cost ranges between RM2,500 and RM3,000, while the cost for a RSPO-certified planter is usually higher at more than RM3,000.

To note, a man-day cost refers to the cost incurred by planters when an auditor enters the plantation to audit certification compliance.

According to Nagarajan, apart from the higher man-day cost, RSPO receives a contribution of US$1 per tonne for the trade of RSPO-certified palm oil.

However, no such cost will be imposed on the Government-initiated MSPO certification.

Moving forward, MPOCC is cognisant of the challenges awaiting the MSPO scheme for a greater acceptance among palm oil producers and buyers worldwide.

“Undeniably, we have a lot on our plate in pushing MSPO as a globally-accepted certification. We have started to promote the scheme globally, particularly among major markets and also among other governments.

“On top of that, we will be reviewing the principles and criteria of MSPO to make sure that the scheme is compatible with international requirements.

“We are doing this via an inclusive approach, whereby the MPOCC’s board and technical working committee are well-represented by various parties including environmental activist groups such as the World Wildlife Fund,” he said.

On anti-palm oil lobbyists, Nagarajan said there is a hidden agenda aimed at destabilising the oil palm industry globally, despite continuous efforts to foster sustainable practices in the industry.

“With palm oil being the most productive and efficient plant-based oil, many are working towards sabotaging the industry. However, this will not hamper our initiatives to grow oil palm sustainably, going forward.

“Eco-tourism is a significant revenue contributor to our country. It is illogical to claim that Malaysia develops its oil palm industry at the expense of its environment,” he said.