What is sustainable palm oil?

Versatile, cheap, and useful, palm oil is the most widely used vegetable oil in the world. But it has also caused deforestation and community conflict in the tropical countries where it is cultivated. A better way is possible – Eco-Business explores the rise of sustainable palm oil.

palm oil plantation krabi thailand
A palm oil plantation in Krabi, Thailand. The industry has been widely linked to deforestation and in Indonesia, to fires that cause Southeast Asia's annual haze crisis. Image: Shutterstock

It is almost impossible for most consumers to go a day without using or eating something that contains palm oil, one of the world’s most controversial ingredients.

The most widely used vegetable oil there is, palm oil is found in everything from snacks to household cleaners to cosmetics. About 58.84  million tonnes of palm oil are produced every year, with Indonesia and Malaysia accounting for 85 per cent of total output.

Palm oil, along with other agricultural commodities like soy, rubber, coffee and cocoa, has been blamed for destroying the environment and violating the rights of communities and workers in areas where it operates. This has led consumers and NGOs to pressure palm oil firms to clean up their act, while others have suggested boycotting products which contain the substance. 

Is boycotting palm oil the solution? Or can the palm oil industry—which is expected to be worth US$88 billion by 2022 — grow without taking a further toll on fragile ecosystems? What does sustainable palm oil cultivation look like? And how can consumers identify and support sustainable palm oil? Eco-Business explains. 

1. What’s the issue with palm oil?

In the palm oil industry’s early decades, companies freely cleared rainforests in Indonesia and Malaysia to expand their plantations. The World Wide Fund for Nature (WWF) has suggested that about 300 football fields of forest are cleared every hour to make way for palm oil plantations, more than 2 million hectares per year.

The problem is especially acute in Indonesia, the world’s biggest producer of palm oil, where a large proportion of agricultural concessions palm oil plantations are situated on peat, a swampy, waterlogged soil that must be drained before companies can plant crops on it. Dry peat is extremely flammable. Given that many smallholder oil palm farmers can only afford to clear land by burning it, massive and uncontrollable peat fires engulf Southeast Asia in a choking haze every year. 

Palm oil cultivation is also rife with social challenges, such as conflicts with indigenous communities living on company concessions, as well as worker exploitation and labour abuses on oil palm plantations. These challenges,unfortunately, are all too common in the global food and agriculture sector. Similar violations have been documented in Italy’s tomato sector, Thailand’s shrimp industry, and fruit and vegetable farms in Australia and the United States, to name a few.

This laundry list of problems associated with palm oil has led some consumer, retailers, and environmental advocates to suggest boycotting products with palm oil altogether. Efforts include the Say No to Palm Oil initiative, consumer guides to “palm oil free’ products, and laws requiring food manufacturers to clearly label palm oil as an ingredient so that consumers can avoid them. 

However, even the most committed environmentalists agree that boycotting palm oil is not the answer. Palm oil is cheaper and more resource efficient than other vegetable oils.

The sector also employs about 6 million people worldwide, about 2.2 million of whom are smallholder farmers, who often live at the edge of poverty and rely on palm oil to feed, shelter, and educate their families. 

2. How can palm oil be grown sustainably?

In a nutshell, sustainable palm oil does make businesses profitable while not harming people or the environment. To achieve this, palm oil majors have in the past few years adopted policies that promise no deforestation, no peat development, and no exploitation (NDPE). Companies with NDPE policies in effect include Singapore-based Musim Mas, Golden Agri-Resources (GAR), Wilmar International; American agribusiness firm Cargill, and Indonesian grower Asian Agri. 

These policies are usually applicable across the company’s supply chains, including third party suppliers and smallholders. They require farmers to stop burning land to clear it, assess land for high carbon stock and high conservation value before developing new plantations, and obtain land use permission from communities using a process known as ‘Free, Prior and Informed Consent’.

Many of these requirements are reflected in what is widely considered to be the industry’s most comprehensive way to identify sustainable palm oil: the Roundtable on Sustainable Palm Oil’s (RSPO) certification system. 

RSPO, founded in 2004, brings various players in the palm oil sector to a common discussion table to develop and implement standards for sustainable palm oil. Its stakeholders include plantation companies, processors and traders, consumer goods manufacturers, retailers, financiers, and civil society groups from countries that produce, as well as use, palm oil.

The standards, which are finalised through consensus among these stakeholders, are called the RSPO Principles and Criteria (P&C). They consist of eight principles and more than 40 criteria that growers need to fulfil to prove adherence to the criteria.

RSPO’s Principles and Criteria for certifying sustainable palm oil. Image: RSPO.org

Gregory Bardies, market transformation manager, WWF, says that the RSPO certification is “the best in class among standards” when it comes to certifying sustainable palm oil. 

Stefano Savi, global outreach and engagement director, RSPO, adds: “We are an international, multi stakeholder, consensus driven platform that can provide local solutions to local challenges, in the context of an international market.”

3. How does RSPO certification work?

RSPO certifies sustainable palm oil growers, and the companies in the supply chain. The latter refers the companies that refine, process, and transform palm oil. 

For palm oil companies, auditors assess and certify the plantations that supply fresh fruit bunches (FFBs) to a mill. From the mill, oil extracted from FFBs passes through the hands of transporters and refiners before reaching food and consumer goods manufacturers.  

Depending on the way the palm oil is handled through the supply chain, manufacturers can claim they sell one of four possible types of certified sustainable palm oil (CSPO): 

  • Identity Preserved (IP): Palm oil from a single plantation is kept physically separate during the transport and refining process. The refinery has been certified by RSPO as capable of doing this, and the end user can trace the unit of palm oil to a single certified supply base. 

  • Segregated (SG): FFBs from multiple certified plantations are combined at the mill. The resulting CSPO is kept physically separate through the supply chain, but cannot be traced back to a single plantation. 

  • Mass Balanced (MB): The mill takes in FFBs from certified and non-certified plantations, and processes it together. The resulting oil is not physically linked to sustainable plantations, but the miller keeps track of how much sustainable palm oil it is producing and selling. 

  • Book & Claim (B&C): Manufacturers do not have to buy physical CSPO, but can pay for ‘RSPO Credits’ in an online marketplace to claim sustainability credentials. The funds from these sales support farmers to implement sustainable farming practices.

While the four types of certification vary significantly in strictness, Savi stresses that “for every certificate that is linked to your product, you will have pulled one tonne of CSPO into the supply chain”. 

4. Who’s growing sustainable palm oil?

CSPO makes up 21 per cent of the world’s total palm oil supply, or 12.07 million tonnes. About 69 growers are RSPO members, and the association maintains a list of their progress towards achieving certification on its website. 

GAR, for example, has RSPO certification for about half of its total palm oil output; the company intends to get this to 100 per cent by 2020. Meanwhile, about 20 per cent of Musim Mas’ palm oil supply is CSPO. 

However, several palm oil giants are not yet RSPO members, as this transparency scorecard by the Zoological Society of London shows. 

A key group that RSPO and companies hope to engage on sustainable palm oil cultivation is smallholder farmers, who often lack the resources to adopt responsible practices such as mechanical land clearing. They also tend to have much lower crop productivity levels than commercial plantations. 

RSPO certification is a key tool to help smallholders improve their yields and incomes, as well as to help them access new markets. To help smallholders access the certification without the costs, RSPO puts 10 per cent of the profits from CSPO certification into a fund that can support smallholder certification projects and audits. 

5. Where can I find sustainable palm oil products?

The RSPO trademark, which is found on products which contain certified sustainable palm oil. Image: RSPO

Several consumer goods firms have made public commitments to sourcing sustainable palm oil. Unilever, the world’s largest palm oil buyer, wants 100 per cent of its palm oil to be from physically certified sources by 2019 while P&G has committed to a deforestation-free supply chain by 2020 without explicit reference to RSPO certification. Colgate-Palmolive plans to purchase 100 per cent certified palm oil and palm kernel oil by the end of this year. 

RSPO helps consumers find products that contain sustainable palm oil through its website as well as a mobile app buying guide for global supermarkets. 

Consumers can also refer to WWF’s Palm Oil Buyers’ Scorecard. Launched in 2009, the scorecard assesses 137 retailers, manufacturers and food service companies on whether they are RSPO members, have made a public commitment to buying CSPO, and the extent to which they have already done so. 

While most firms had some level of public commitment to buying only sustainable palm oil, only three companies used 100 per cent segregated palm oil in 2015: Italian confectioner Ferrero, Australian biscuit maker Arnott’s, and French food manufacturer Danone. 

A spokesperson for Ferrero, the company behind Ferrero Rocher chocolate and Nutella spread, said that it has been committed to buying all its palm oil from RSPO-certified sources at the Roundtable’s inception. It achieved its target in January 2015, a year ahead of target.

“However, the group’s effort of sustainability is beyond achieving 100 per cent RSPO segregated certified palm oil,” says the spokesperson. In November 2015, the company joined the Palm Oil Innovation Group (POIG), a group of organisations that have developed standards known as the POIG Charter.

These go beyond RSPO requirements to include peatland protection and HCS assessment requirements. Similar to what happens in the RSPO system,  companies can engage third party auditors to verify claims that they comply with these higher standards.

WWF’s Bardies acknowledges that companies may struggle to rapidly transform their sourcing practices so that they use only physical CSPO. “But at the very least, companies should start by purchasing RSPO credits to support sustainable palm oil production,” he adds.

6. Does RSPO certification mean palm oil is truly sustainable?

Despite RSPO’s efforts to certify sustainable palm oil, green groups and investors have routinely criticised it for failing to provide a credible assurance that CSPO is truly sustainable. Commonly raised issues include the fact that the current principles and criteria do not require companies to stop expanding onto peat or stop clearing forests as per the HCS approach. The auditors that verify company compliance to RSPO standards have also been accused of malpractice and corruption

Activists have also criticised the speed and effectiveness with which RSPO investigates and resolves complaints made against its members: some have taken years to resolve, while other companies have been let off the hook too easily, according to some. 

Savi acknowledges that the current RSPO P&C might fall short of some stakeholders’ expectations, noting that the standards are revised every five years—the next review is in 2018—to ensure that they are constantly improved. 

But fundamentally, the process of developing the standards is just as important as the end result, he notes. The consensus and consultation-driven process that brings everyone in the industry to the same table is essential, he says, adding that the RSPO system provides a level of transparency into company operations that is not available in the rest of the industry or in other approaches aimed to deliver sustainability that might seem better on paper. 

Alienating companies by enforcing standards that there is no consensus on, may be counterproductive, as it would cause people to disengage from the discussion and simply sell to less scrupulous buyers, he adds. 

“You shouldn’t be fooled into thinking that the part of the industry that is discussing the issue has more problems than the part that isn’t,” he says. “The standards are constantly revised, and the screws of the system are tightened regularly.”

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