Sustainable Palm Oil Emerges from Roundtable Process and Heads to Market

By Daniella Malin, June 17, 2008

Palm oil doesn’t show up on most shopping lists but it rarely escapes the shopping bag. At 37 million tons per year, this hidden mega crop, used to make margarine, cooking oil, shortening, soaps, detergents cosmetics and found in baked and processed goods of all kinds, as an industrial lubricant -- and increasingly biodiesel -- is both ubiquitous and ecologically devastating.

Almost 90 percent of palm oil production is in Indonesia and Malaysia where widespread destruction of tropical rainforests and peat lands are contributing to climate change and devastating prized species such as the orangutan, Asian elephant and Sumatran tiger. Soaring demand for palm oil, along with rising returns from paper and pulp, is driving much of the land change. 

In Asia rising incomes and interest in processed foods are fueling the increase in demand for palm oil, and in the U.S., manufacturers and consumers are increasingly seeking out palm oil as a replacement for partially hydrogenated oils that create artificial trans fats with known health risks.

For a small but growing group of companies, the dark side of palm oil isn’t news. Almost 10 years ago, companies started having to face the difficult choice between taking a defensive stance, trying to deny or minimizing their part in the palm oil big picture that includes tropical rainforest destruction, species extinction and climate change, or getting active. They chose to get active. The result was a multi-stakeholder Roundtable on Sustainable Palm Oil (RSPO) that approved a global standard in November, 2007 and will have a product on the market in the second half of this year.

Palm oil is one of many land-based agricultural commodities with a roundtable process ongoing but it is the first to emerge from the process with tested and approved principles, criteria, indicators and guidance and with verification procedures in place. Other commodities such as those in cotton, soy and sugar may follow.

Large scale consumer goods companies are among the RSPO signatories including Unilever, H.J. Heinz, Nestlé, Johnson & Johnson and Cadbury Schweppes. These companies joined 200 others in a consortium made up of the seven sectors of the palm oil industry: oil producers (or growers), processors or traders, retailers, banks and financiers, environmental organizations, development organizations and consumer goods manufacturers. Together these organizations account for 40 percent of palm oil production and trade worldwide, making agreements by this group, globally credible.

Palm oil is a wonder crop of sorts. The highest yielding and highest energy-producing oil crop in the world, it produces 6 times more oil per hectare than any other plant according to Oil World, and 2-3 times more energy per unit of energy input than any other oil . Palm oil is also GMO-free, uses relatively little pesticides and as a perennial crop provides year-round ground cover to help protect the soil from erosion. Smallholders account for over 30 percent of palm oil production in Asia and 90 percent in West Africa.

But the humid tropics, where oil palm grows well, is also home to the highest conservation value areas (HCV) on Earth. As recently as 1950, Indonesia was still 77 percent covered by dense tropical forest (the land mass was once almost entirely covered). But land development policies have changed these massive reserves of biodiversity and carbon. In the 12 years from 1985 to 1997, developers cleared 60 percent of Indonesia’s richest tropical habitat, the lowland Kalimantan rainforest, primarily for oil palm, according to a report by the World Bank. Sumatra’s central province Riau also lost 65 percent of its forest over the last 25 years researchers at World Wildlife Fund (WWF) say. Elephant populations in the same area declined accordingly, by 84 percent, from about 1,300 to 210.

The peat lands of Kalimantan and Sumatra, where much of the clearing occurs, also store more carbon per unit area than any other ecosystem and represent one of the earth’s largest reservoirs of carbon. This is why the combination of deforestation and peat decomposition and burning has placed Indonesia third, after China and the USA, for total annual greenhouse gas emissions according to WWF. Land clearing also causes land conflict as developments infringe on the way of life of native people living in the forest.

The RSPO solution is to establish ethical and ecological standards for palm oil production that are acceptable to all sectors of the palm oil industry and a system for verifying and certifying palm oil that meets these criteria. Palm oil from plantations that replaced primary forest after November 2005, the month negotiations on the certifications system started, is excluded from certification altogether.

Independent certifying bodies such as SGS Malaysia Sdn Bhd, audit producers to verify compliance with the principles and criteria defined at the producers’ expense. To date, 6 certifying bodies have been approved and 5 more are in process. An independent accreditation authority governs the certification approval process and uses a generic accreditation procedure that is supplemented by RSPO specific requirements.

Once certified, RSPO palm oil must be traceable and the RSPO has contracted UTZ Certified (UTZ) to manage traceability of certified palm oil globally. Buyers will be able to choose from three supply chain options. 1. Segregated palm oil will enable end products to make the claim that they contain RSPO certified palm oil. 2. Mass balance allows mixing of certified and non-certified palm oil while actual volumes or relative percentages are preserved. The RSPO is still finalizing allowable claims by the end products under this mass balance approach. 3. Book and claim enables buyers to buy tradable certificates of certified palm oil sold by producers through brokers. This allows buyers to make the claim of supporting the production of sustainable palm oil.

Sustainable palm oil sounds like a good solution but critics say that the RSPO provides cover for member companies while the destruction continues. They claim that even as negotiations take place, RSPO members continue to rely on palm oil suppliers known to be destroying rainforests, converting peat lands for plantations and performing illegal land seizures. Greenpeace International, one of palm oil’s strongest critics, is calling for a moratorium on palm oil from newly converted forests.

Indeed, even once certified palm oil is available, none of the member companies except Unilever have pledged to convert 100 percent of their supply chain to palm oil from sustainable sources, leaving powerful drivers to land use changes in place.

Jan Kees Vis, head of Unilever's sustainable agriculture program, president of the RSPO and one of the founding members of the Food Lab, says the RSPO is necessary but not sufficient. “There are a number of issues only governments can change: land use rights for example.  In a business-to-business initiative we can agree on whatever we want about not converting forests but as long as governments give out cheap concessions in High Conservation Value areas, deforestation will happen.”

Unilever is the single largest buyer of palm oil in the world. The company purchases about 3 percent of global production and has its origins in a business arrangement made for the purpose of purchasing palm oil cheaper at larger volumes. Soap and edible fats made up 90 percent of the company profits at that time.

On May 1, 2008 Unilever committed to using certified palm oil as soon as it becomes available, growing to cover the total palm oil volume globally by 2015 and targeting 2012 to have all its straight palm oil used in Europe “fully traceable.” Speaking at the Prince of Wales’ May Day Climate Change Summit in London, Unilever’s CEO Patrick Cescau also announced support for an immediate moratorium on deforestation for palm oil in Indonesia. “We are committed to doing this because we believe it is the right thing for the people who use our products, for the environment and the communities in and around which palm oil is grown, and for our business and our brands.”

As demand for palm oil continues to rise, current and predicted expansion is taking place on forested peat lands even though large areas of land are already cleared and unused. This is because plantation developers prefer to clear mature forest and use the capital to cover development costs.

Though the conflict is strong, the roundtable process is built on the idea that proponents and opponents are in a better position to plot a way forward by working together than by staying in conflict. It is a proposition whose premise is being tested.

Dr Vengeta Rao, Secretary General of the RSPO, acknowledges the imperfect and generative nature of the work. He said, “Despite the vociferous calls for environmental protection, it must be noted that sustainability is a path little trod before.  Although individual issues may be clear, no one quite knows what the totality of it means.  It may be necessary to stumble our way forward. Palm oil mills are being certified on how environmental their production is.  But, from ignorance rather than any purposeful omission, there may yet be pitfalls in the process, leaving the RSPO open to criticism.”

The Roundtable on Sustainable Palm Oil (RSPO) started with ten founding members in 2004 spent the last four years, defining and testing a set of principles and citeria, for sustainable palm oil and adapting them to national legislation in different countries.

The RSPO principles include eight broad concepts such as commitment to transparency, responsible development of new plantings, compliance with applicable laws and regulations and responsible consideration of employees. Specific criteria give each principle greater definition and in addition, indicators provided with each criterion name specific pieces of evidence that are acceptable as proof of compliance with the criterion. For example principle 4, “Use of appropriate best practices by growers and millers,” is further defined by criterion 4.2, “Practices maintain soil fertility at, or where possible improve soil fertility, to a level that ensures optimal and sustained yield.” The indicators acceptable include evidence of periodic tissue and soil sampling to monitor changes in nutrient status and a nutrient recycling strategy in place. Throughout the document specific provisions are made for smallholders for example by providing them ways to meet compliance with less documentation.

“One of the tenets of RSPO is to operate in as open and transparent a way as possible.  Thus, not only members but anyone else is welcome to put forward their criticisms, although it is rather hoped that they will be constructive rather than destructive, with suggestions for alternative action to be taken instead.  It is in this vein that we would like to invite all and sundry to come forward to help us progress.  We are kindred in our common needs and hopes,” Rao said.

Like the Food Lab itself, the RSPO is a multi-stakeholder process trying to reduce the footprint of a supply chain at a large scale, in the face of growing demand and a growing human population. Not an easy proposition but one that may help to bring the human family together. “The true value facilitation of these processes brings out is the realization of a shared goal and of shared values that comes with a multi-stakeholder platform,” Vis said.

An animation of the mass balance palm oil supply chain option can be viewed at: http://www.utzcertified.org/rspo/. For more information about how to buy Greenpalm certificates see http://www.greenpalm.org/.