When the first batch of palm oil certified as sustainably produced arrived in Europe last November, Greenpeace and Wetlands International accused the producer, United Plantations Bhd, of not meeting the requirements set by the Roundtable on Sustainable Palm Oil (RSPO). According to Greenpeace, the RSPO’s system of certifying palm oil producers failed to address issues such as deforestation, peat land clearance and land conflicts.  United Plantations responded with a point-by-point rebuttal against what it claims as serious and unwarranted allegations by Greenpeace.

The RSPO, the global, multi-stakeholder initiative set up to promote the growth and use of sustainable palm oil, has its fair share of criticisms too, with allegations of “green washing” thrown at it. But it was the pressure from environmental groups and other non-government organisations, plus a convergence of events, that led to its formation in 2004.

Its secretary-general, Vengeta Rao, explains that the occurrence of El Nino and forest fires in the late 1990s, coupled with the expansion of oil palm estates, led to the establishment of RSPO. At that time, the planting of oil palm in Indonesia was expanding rapidly, raising concerns over encroachment of native land rights and deforestation although the industry claims expansion had been made in logged rainforests, not virgin jungles.  

“The fires were the most visible symbol of these concerns and NGO pressure was starting to build up in Europe, the biggest buyer at that time. Naturally, consumers wondered if the products they bought were contributing to the suffering,” says Rao in giving the background to RSPO’s formation.

While the environmental movement gained momentum during the 1980s, concern then spread to the area of sustainability, encompassing the integration of environmental, economic and social spheres during the 1990s or the three Ps of people, profits and planet. In 2002, a few concerned key players — including the World Wildlife Fund and Unilever — approached the Malaysian Palm Oil Association and all agreed that the way forward was to organise the oil palm industry to ensure that it conducted itself in a responsible and sustainable manner.

The need for self-regulation became obvious, especially when supervision and enforcement of local laws and regulations had not been strong due to various reasons such as inadequate laws or lack of regulatory staff force. RSPO was formally established in 2004.

The organisation went about setting its principles and criteria (P&C) for sustainable palm oil production. These were completed and accepted in 2005 and field-tested between 2005 and 2007. Subsequently, national interpretations were formed for local application.

The next step was to decide who would conduct the audits and certification. Rao explains this is done by third party certification bodies to enhance transparency. At the moment, there are a dozen certification bodies approved by the RSPO to avoid the creation of a monopoly which would lead to a high cost of certification.

He declines to say how much it costs to audit a plantation but explains that it depends on various factors, including the size of the plantation, its geography and the number of oil mills being audited. The premium that certified palm oil fetches may be reason enough for producers to get themselves certified. According to a Reuters report, certification can add a premium of US$50 per tonne of palm oil on the wholesale market.

The audit for certification is based on a sampling of the estates. Where the unit of certification is the mill, the mill and its fruit base will be inspected. A company with many mills may submit one mill for inspection to start with but it must provide a timeline for the certification of its other mills.

“This is to prevent accusations of green wash where they are said to just do a showcase of the one mill that was certified. Of course the company will claim it has been certified but the trade would know that only the volume from that mill is certified. At the end of the day, the money is in the trade, not in these announcements though it may be nice PR,” Rao explains.

Smallholders have not been left out either. Rao says that the roundtable is now forming the rules and criteria specifically for the certification of smallholders given their large numbers in both Indonesia and Malaysia. The RSPO encourages the participation of smallholders through lower membership fees. To keep costs low, smallholders need not be certified individually; instead it is sufficient for them to be audited to be compliant. Smallholders can come together for group certification. Similarly, independent millers may opt for a group certification scheme of their supply base.

Those who have been certified to be in conformance with RSPO P&C include United Plantations, Kulim, Sime Darby, Perlis Plantations, IOI Corp and Kuala Lumpur Kepong in Malaysia; PT Musim Mas and PT Hindoli in Indonesia and New Britain Palm Oil and Hargy Palm Oil in Papua New Guinea. So far, 1.5 million tonnes of certified palm oil has been produced and the volume may reach two million by June this year.

The response to the RSPO has been mixed, says Rao.

“The initiative will be seen as still relatively new in the market. The first tonne of sustainable palm oil only came out late last year. The response is a bit of a bell curve. One part hails it as something good, the other extreme says it’s green wash. The largest group will say let’s see,” he says.

Amidst the negative publicity about palm oil in the West, the RSPO will be stepping up its communications efforts to counter anti-RSPO sentiment now that the foundation and systems for the roundtable have been laid. Rao is confident its efforts are already returning dividends.

“It’s no accident that nowadays, you see much less haze. I suspect it’s because so many companies have come onboard the RSPO. One criterion of RSPO P&C is no burning but it doesn’t mean it doesn’t happen because only 40% of production (in both Malaysia and Indonesia) is from RSPO members,” he says.

Nevertheless, the RSPO has its work cut out, especially in Europe, where there appears to be a mounting “green campaign” against palm oil. In addition, the EU’s Renewable Energy Directive sets strict sustainability criteria on materials used to produce biofuels. These materials would include palm oil, creating a trade barrier of sorts.

“Consumers demand sustainability but will they pay, will they equally demand the same from other sectors and of themselves? The challenge for RSPO is to try and manage the different expectations,” Rao says.

This article appeared in Corporate page of The Edge Malaysia, Issue 752, April 27-May 3, 2009.