Upcoming talk: What next for palm oil certification?

With the expanding options available in certification of sustainable palm oil, we look at some of the rationales and issues.

Khor Reports will be presenting its views at Palm Oil Refiners’ Association Malaysia’s (PORAM) upcoming annual forum on 22 November 2013:
o #1 Are sustainability standards helping or hampering growth / market access?
o #2 Is the RSPO’s market position wobbling?
o #3 Who’s involved in setting trade policy & market access for palm oil?

We have also been interviewed by Indonesia industry magazines on this topic, specifically on the market chatter that the Malaysia Palm Oil Association (MPOA) taking a similar track to Indonesia’s GAPKI in walking out the RSPO. We have a client update on this, in a question & answer

The state of palm oil sustainability certification is now in high flux. Please call us for more insights and intelligence.


Q. RSPO doesn’t seem to be a full solution for palm oil companies trading with the EU and the USA, what do you think?
A. It ironic that the RSPO, which early on stated that it sought to help the palm oil industry to maintain market access has shifted. It turned to lobbying to limit market access for non-certified (i.e. non-RSPO members) to the big developed and developing markets. RSPO representatives have been sking big markets to put up tariff differentials against non-RSPO palm oil. This is unfortunate, as it  would hit smaller producers’ market access more than the big plantations. RSPO has been very focused on larger producers; putting into practice WWF’s strategy that tackling the biggest players will do the most to “transform the market” whereas working with individual consumers and small  producers is just not effective. As a development economist trained to care about improving circumstances for the less advantaged players and seeking “first-best” policy options, I have to question the rationale of the RSPO. Why is it designed to mainly support the biggest companies? Smallholder development has been a side-show so far. As a result of this skewed approach and its policy to promote trade barriers, the RSPO approach is de facto regressive i.e. disadvantageous to smaller palm oil producers and farmers who are not their core target members. Organizations like the International Trade Centre (set up by the WTO and the UN) ask whether private standards are “boom or bust” for producers; without terribly encouraging findings for producers.

Q. If both Indonesia and Malaysia stop participating in the RSPO, what would be the impact?
A. If you mean the withdrawal of big plantations from their RSPO membership, that would be quite a move that would startle the RSPO. They would have to fall back to national certifications such  as ISPO and MSPO or new private standards such as ISCC-Plus. They would have to ensure buyer acceptance of these certification schemes. What is interesting is that big buyers themselves are paving the way for alternatives to RSPO. It is well known that buyers are fast launching in-house sustainability protocols or standards that straddle multiple private certifications, one being the RSPO. After all, they do have to deal with the procurement of many products. What is also promising is the  role of multilateral organizations in capacity building in the palm oil sector. The World Bank was attacked by NGOs campaigning against palm oil, but they can be there to help. The United Nations Development Program (UNDP) is now assisting on a study of ISPO and RSPO. Notably, the UNDP has a Sustainable Palm Oil effort funded by some big global buyers. This should be a good thing for the promotion of ISPO, and a possible challenge to RSPO’s first-mover monopolistic position. The future will see further improvements of sustainability in palm oil. But I think that some of the overly narrow NGO approaches will be challenged by the expanding role of the multilaterals. They are likely to bring in a more holistic approach that is also caring of smallholder development and their market access. Khor Reports has always believed that sustainability schemes have to be cost-effective as well as inclusive of small players, to be internally as well as externally sustainable. Crucially, there also needs to be benchmarking against other schemes, such as that for soybean oil, a key competitor vegetable oil. Palm oil is a basic commodity. Being too adventuresome in allowing unpredictable cost escalation (even for a good thing like sustainability) will not serve the industry or global consumers well. There are many ways to do the right thing. The options are expanding.