Friday, 23 November 2007

Sustaining palm oil markets

Sustaining palm oil markets
since its first meeting in Kuala Lumpur, the Roundtable on Sustainable Palm Oil yesterday unveiled a certification system which will see certified palm oil hit the markets in the first quarter of next year.

By Rupa Damodaran
Published: 2007/11/23 Business Online

DESCRIBED as a benchmark event, the Fifth Roundtable Meeting on Sustainable Palm Oil or RT5 attracted a lot of interest globally – from legislators in Europe to the grocery shopper in the UK right down to the simple smallholder eking out a living in a small kampung.

Now the challenge is to implement the standard for the commodity — to ensure mechanisms to move the RSPO-Certified Sustainable Palm Oil through the supply chain which will enable consumers to tell the difference between certified and non-certified palm oil.

The roundtable concept was introduced to ensure equal rights to the stakeholders who come from the seven sectors of the industry – growers, processors and traders, consumer goods, manufacturers, retailers, banks and investors and environmental and social NGOs.

As palm oil finds its way into food, soaps, detergents, cosmetics, plastics and now, as a renewable alternative to fossil fuel or biofuel, it has raised concerns and expectations, and attracted the scrutiny of all these stakeholders within the supply chain.

Some growers have proven during the trial implementation over the past one-and-a-half years that elements in principles and criteria of sustainability can be demonstrated in the plantations and oil mills.

Sustainability was simplified to cover people, planet and profits, and the eight principles and 39 criteria that were developed in the RSPO , engulfs all three pillars.

IOI Corporation, one of seven volunteer companies that has been constantly improving its CPO yield per ha to its current 5.71 tonnes per ha (way above the national average of 3.93 tonnes per ha), said there must be policies, plans, standard operating procedures, communication, implementation and monitoring systems to be successful in sustainable palm oil.

Sustainable palm oil engulfs good agricultural practices, environmental protection and social responsibility, and IOI has shown that this can be done by improving the diesel usage for mini tractors in mechanised fresh fruit bunches collection.

ProForest, the independent consultant which developed the criteria, described the development of the certification as a major achievement and compared favourably with the specification scheme of other sectors.

Its director Neil Judd said the key is the implementation, and RSPO is now at the start of that process.

“It will be critical for RSPO to ensure that the quality of audit matches the rigour in the document,” he said, adding that the initial stages are critical in establishing the credibility of the certificates.

With the pent-up demand for certified palm oil especially in Europe, he is expecting a massive rush for certification applications. People who can supply in the early stages are going to have a lot of buyers for sure, he says.

“With RSPO, it is critical to ensure that smallholders are not marginalised and the obvious route for independent smallholders to be certified is through group accreditation scheme,” Judd added.

With group certification, the auditors can visit a small sample of growers for which the total cost can be shared. A lot of certification schemes have used the approach, as seen in other commodities such as coffee, timber and cocoa.

Proforest, which has previously worked with timber, has also embarked on a certification process for soya.

RSPO president Dr Jan-Kees Vis, meanwhile, said the palm oil supply chain is too complicated to expect an answer to every problem, and he says one must expect to find gaps in the system as the certification is implemented.

“It is the best framework we could devise in the time we had, with the resources we had available,” he said.

He said it is unrealistic to expect the RSPO capable of stopping deforestation, ending rural poverty and providing access for palm oil to European energy markets or to save the orang utan.

As a voluntary business-to-business initiative, it cannot expect to dictate change, although Vis said the executive board has agreed to develop close ties with governments in order to embed in legislation.

This includes areas like land use policies to steer palm oil expansion away from High Conservation Value Forest and towards deforested areas, and legal frameworks to safeguard land titles and traditional land use.

Among the challenges identified by RSPO going forward is managing the expectations of the many stakeholders with their varied agenda and manage a credible certified sustainable palm oil (CSPO). Continuous engagement is necessary to address NGO criticisms and climate change issues such as greenhouse gases and peatlands (carbon dioxide emissions).

Challenges still remain as it is not only the question of resistance to change, but there are also cost implications to look out for.