Winning 'em over with clean green.

It is good to see some people and companies are responding to public/consumer pressure. BUT. We need to keep in mind that as a country Malaysia is a big importer of illegal logs from Indonesia - and some palm oil companies in Malaysia have financial interests in similar companies across the border in Indonesia.

2008/09/07

Winning ’em over with clean green

RUPA DAMODARAN

Oil palm from trees at United Plantation estates have received the RSPO ‘green’ certification.

The insidious campaign against palm oil by Western ill-informed non-governmental organisations will have to take a back seat with the emergence of ’green oil palm’, writes RUPA DAMODARAN

M.R. Chandran says consumers were beginning to consider the environmental impact of products they buy.

THE good news for palm oil is that Malaysian oil palm plantation companies can wear their responsibility on their corporate sleeves and on their products — the “green” certification.

Issued by the Roundtable for Sustainable Palm Oil (RSPO), this sustainable-accredited palm oil will be offered to European buyers and the global fats and oils market soon by the Malaysian palm oil industry.The first such accreditation was issued to United Plantations Bhd, one of the country’s top plantation companies, late last month.

Can Malaysian palm oil companies now command a premium for this “green oil"?

“Water has a way of finding its level. The premium will, on an industry scale, reflect what additional good the industry has put in, minus whatever they ought to have put in in the first place,” says industry consultant M.R. Chandran.

“It is the ’additionality’ factors or aspects that will matter.”One industry source indicates this will be “in the range of five to 10 per cent of the company’s CPO (crude palm oil) production cost".“Initial cost premiums are always going to be higher with the early adopters, until the market settles and certification becomes the norm, rather than the exception,” he said.

The additional costs incurred by plantation companies in seeking these new standards, specifically related to those above the ISO 14001 general environmental standard, should provide handsome returns.The real, long-term benefits will be from courting investors and shareholders, collateral selling of carbon sequestration credits and variants of Reduction of Emission from Deforestation and Degradation (REDD), says Chandran.

Malaysia has announced that it is ready to supply at least 2.5 million tonnes of this certified palm oil to buyers in Europe and elsewhere.Concern that not all palm oil is being sustainably produced heightened when it was found to be a renewable alternative to fossil fuel.

This prompted global buyers from 140 countries, spearheaded by non-governmental organisations in Europe, to ask for the certification. This came out of the concern that oil palm had adversely affected the natural habitats of orang utans, the need for preservation of virgin forests, the loss of biodiversity as well as increased greenhouse gas emissions.

Palm oil-importing countries, particularly from the European Union, now insist on some kind of guarantee that the palm oil they import comes from plantations and mills with sustainable practices.Dr Vengeta Rao, the secretary-general of the Zurich-registered RSPO, based in Kuala Lumpur, says getting acknowledgement by using RSPO sustainable-accredited palm oil is now the key.

As to whether this form of accreditation was enough to dispel the negative perception that European governments, NGOs and consumers have towards palm oil, Rao says this would depend on how RSPO develops and conducts itself.

“With increasing concerns over climate change and global warming and human impact on natural resources, consumers are, more than ever, considering the environmental impact of products when making purchasing decisions.

”The RSPO, through its multi-stakeholder engagement process over the past half decade, has developed a robust standard for its certification. RSPO stakeholders hail from seven sectors— oil palm growers, palm oil processors and traders, consumer goods manufacturers, retailers, banks, investors, and environmental and social NGOs.This simply means that it is very much up to RSPO to ensure claims that palm oil is “sustainable", “environment-friendly", “green", “carbon-neutral", etc, are genuine.

“RSPO at the outset adopted stringent technical substantiation for such claims by formulating a pragmatic set of eight principles, 39 criteria and nearly 120 guidance indicators as the standard to strengthen the accreditation and certification process.

”Rao indicates that 10 more companies are likely to be accredited through the certification of some or all of their production units, which include mills and fruit supply base (plantations which supply fresh fruit bunches or FFB).This certification process covers a physical audit, the preparation of audit reports and peer review of the reports, all of which can be time consuming.

The lengthy process has prompted some plantation companies to engage more than one certification body to certify their certification units.The RSPO has approved four certification bodies in Malaysia — Control Union Certifications, SGS Malaysia Sdn Bhd, BSI Management Systems Singapore and Sirim QAS International Sdn Bhd.When RSPO announced the principles and criteria this year, a number of Malaysian companies had already conducted several audits.

United Plantations has focused on environmental awareness and responsibility for decades in its 12 plantations, both oil palm and coconut, covering 40,813 hectares in Malaysia. UP also operates six palm oil mills and the Unitata refinery.

The company tries to strike a balance between economy and ecology within the plantation eco-system.It is also strongly committed to its social corporate responsibilities within and around its plantations, which include group hospitals, clinics, housing facilities, creches, schools, places of worship, bakery and an old folks’ home for its more than 6,500 employees and families.UP, which received the Migros Certification by ProForest in 2002, fine-tuned its work culture across its companies’ RSPO Roundtable 5 meeting in Kuala Lumpur last November.

Three business units were created within its oil palm plantations, comprising six oil mills and nine estates, incurring 28,000 man-hours.Sirim QAS International is well-experienced in this regard, having gained the respect from large local and international companies for its certification process.

It has the edge due to the years of involvement in certification in the palm oil sector and its knowledge of local laws, regulations and issues such as the environment, occupational health and safety workers’ rights and issues affecting the local communities as well as agronomy and ecology of oil palm plantations and milling.

Its managing director, Datuk Mariani Mohammad, said audits have been conducted in the oil palm sector according to various management system standards for the past 10 years, with more than 100 companies involved in the palm oil business having been certified.

This makes its task of assessing the RSPO principles and criteria or the supply chain requirements much easier as it would complement their other types of recognition. Sime Darby expects 10 out of its 65 strategic operating units from its 208 oil palm estates in Malaysia and Indonesia to be RSPO certified by the end of the 2007/2008 financial year and the remaining by 2011.Other plantations are also seeking such certification.

Representatives from various plantation groups faced up to the challenges posed by the NGOs and parliamentarians last year while accompanying Plantation Industries and Commodities Minister Datuk Peter Chin to Europe on a mission to counter the smear campaign against palm oil and dispel public misgivings.

Chin leads another mission to Europe today, this time with members of both the palm oil and timber councils, armed with pride that Malaysian plantation companies have taken up the European challenge and met their stringent standards.

It will also raise awareness in the EU that producers, in seeking wider market access for their products, are also concerned about their agronomy, labour laws and pesticide footprint, etc. Rao sees bringing smallholder production under RSPO sustainability-certification as one of the most important challenges ahead.Malaysian plantation companies operating estates in neighbouring Indonesia or Papua New Guinea will also have to face up to this challenge to meet environmental standards by obtaining proper certification.

Palm oil is a major revenue earner for the country. As world population increases, there will be an increasing demand for this versatile wholesome commodity. The industry needs to understand the conflicts involved in production and develop global partnership mechanisms to meet future challenges.