Sustainable Palm Oil
Sustainable Palm Oil Roundtable (RSPO)
The RSPO was established by WWF in 2002 with the objective of promoting the growth and use of sustainable palm oil products through credible global standards and engagement of stakeholders. It is a non-profit, multi-stakeholder organisation that is comprised of palm oil producers, manufacturers, retailers, banks, investors and NGOs. Periodic audits of plantations and mills are conducted by independent certifiers.
The first members of the RSPO were Aarhus United UK Ltd, Karlshamns AB (Sweden), Golden Hope Plantations Berhad, Migrso, Malaysian Palm Oil Association, Sainsburys and Unilever (the Netherlands). There are now over 500 members from more than 25 countries (Figure 13). RSPO members account for approximately 35% of the palm oil produced worldwide.
Figure 13. The proportion of different members of the RSPO. Source: Author (2010). Statistics extracted from: Jordan Nikoloyuk, Tom R, and Reinier de Man, ‘The promise and limitations of partnered governance: the case of sustainable palm oil’ (2009) Corporate Governance 10 (1).pp.59-72.
The RSPO Sustainability Criteria
In 2003, the RSPO established criteria to measure the sustainability of palm oil plantations and refineries. These include:
Principle 1: Transparency
Transparency requires companies to disclose information to other stakeholders regarding their environmental, social and legal issues. This allows NGOs to gain a more comprehensive understanding of the company’s operations.
Principle 2: Compliance with local, national and international ratified laws and regulations
Compliance with local, national and international laws ensures companies respect adat rights, thus mitigating disputes between corporations and local communities.
Principle 3: Use of best practices by growers and millers
The application by millers and growers of the best-known method (BKM) helps to maintain soil fertility, water quality and minimize agrochemical usage.
Principle 4: Environmental responsibility
In order to be environmentally responsible, the company must identify any negative impacts of their operations on the ecosystem and endangered species. These impacts must then be addressed in the company management plans and operations. In addition, companies should use renewable energy sources wherever possible and adopt recycling and waste disposal practices.
Principle 5: Appropriate work labour practices
Appropriate work labour laws are essential in order to ensure plantation workers are paid in accordance with industry standards. Any negotiations for land use with indigenous communities must be transparent to mitigate corruption.
Principle 6: Development of new plantings.
New plantations cannot be established on primary forest and controlled burning may not be utilised as a mechanism to clear land.
Adoption of Best Management Practices
In addition to compliance with these principles, RSPO members must show a commitment towards the SPPO through the adoption of Best Management Practices (BMP). By adopting BMP, companies must use Integrated Pest Management (IPM), rather than agrochemicals like pesticides to control insect populations. IPM involves the use of barn owls to control rat populations rather than pesticides or the planting of leguminous crops to minimize soil erosion. BMP of waste management strategies include reusing palm oil’s EFBs as fertilizer and using the fibre for pulp and paper production.
Stages of Certification
There are five main stages in the RSPO certification system. The first stage is the ‘mainstreaming process’ in which the staff are briefed on the RSPO Principles and Criteria (P&C) and make a commitment to follow these guidelines. The second stage is the ‘baseline audit’, which identifies the gap between the company’s current performance and the standard required by the RSPO. This audit may be performed by an in-house review panel, an independent consultant, or a certification body. The third stage is the ‘preparation for certification’, in which a certification task force is established to close the gaps identified in the previous stage. Activities may include High Conservation Value Forest (HCVF) assessments, identification of potential environmental impacts, restoration of riparian buffer zones and installation of boundary markers for land holdings. Following preparation, the RSPO hires a certification body to undertake a pre-audit. The final stage involves the actual certification audit, in which a team of specialists assess each RSPO P&C to measure the company’s performance. They also assess all the other plantations owned by the company to ensure there are no ‘major breaches’ of the RSPO P&C. Certification will only be awarded when all major non-compliances have been addressed.
Achievements of the RSPO
The first sustainable palm oil certification was awarded in 2008. There are now 351 ordinary members, 78 affiliate members and 10 supply chain associates. Ordinary members include palm oil producers, processors, traders, manufacturers, retailers, banks, investors and NGOs. Affiliate members are organisations which are not as actively involved as the ordinary members, but have an interest in the RSPOs objectives and activities.
In July 2009, approximately 4% or 1.5 million tonnes of the palm oil produced was RSPO certified. Since certified palm oil became commercially available in December 2008, approximately 250,000 tonnes of palm oil has been HYPERLINK “http://www.rspo.eu/docs/091030_rspo_press_release.pdf” purchased. Over the last year, certified producers sold approximately 22% of their palm oil at a premium price. In September and October (2009), market uptake rose to approximately 50% with over 100,000 tons of certified palm oil purchased globally. By January 2010, RSPO certified plantations were able to supply 1.76 million tonnes of sustainable palm oil annually, which is approximately 13 times the amount imported into Australia every year.
In October 2009, the president of the RSPO, Jan Kees Vis, stated that “six years after the foundation of the RSPO, we are witnessing the first stages of a viable market for sustainable palm oil, now is a great time for more producers and users of palm oil to join the endeavour, so that one day all palm oil will be produced in a socially and environmentally sustainable way.”
Problems with the RSPO
Although the RSPO has had some success in promoting the SPPO, there are still a number of significant issues that must be resolved. Firstly, some of the criteria are still weak because they lack operational meaning and are thus difficult to monitor and audit. Practically implementing the principles is also problematic due to a general lack of company knowledge, motivation and effective corporate governance. Principle 5 and 6, concerning the social criteria and the development of new plantations have proven to be the most difficult to implement.
Moreover, the plantations that have become certified are generally already well established. Newer companies that have recently been granted logging licences have proven much less inclined to adopt the RSPO P&Cs. Another issue is that preservation areas established for conservation purposes are not necessarily protected from loggers. The RSPO cannot guarantee the long term safety of such nature reserves. Furthermore, the RSPO has not successfully marketed the certified palm oil product. Consequently, awareness about the impacts of UPPO remains limited. Nikoloyuk et al speculate that the abundance of technical experts on the RSPO executive board has led to the under representation of marketing issues that are crucial for corporate motivation.
Criticisms of the RSPO
There are a number of NGOs that remain critical of the RSPO certification system. Greenpeace is one such organisation and has published numerous reports targeting RSPO members, particularly Unilever and Unilever suppliers. In 2007, they published a report called ‘Cooking for the Climate’, in which the RSPO was heavily criticized. More recently, Greenpeace launched a campaign against Nestle for sourcing palm oil from Sinar Mas, which has been accused of clearing primary rainforest to establish plantations. This has had a negative impact on the RSPO as Sinar Mas has been a member since 2005. Ian Duff, a Greenpeace campaigner, stated publicly that the RSPOs conditions of membership are “not strong enough and not policed.”
Friends of the Earth (FoE) have also criticized the RSPO for having low standards and not properly sanctioning its members. They have further criticised them for allowing that sustainability certification on a ‘plantation-by-plantation’ basis, thus allowing a company to obtain a ‘stamp of approval’ based on only one sustainable plantation. In October 2007, they demonstrated their disagreement with the RSPO by staging an installation of synthetic tree stumps outside a RSPO meeting in Brussels, Belgium (Figure 14).
Barison comments that “although the RSPO has progressed towards formulating a set of principles and criteria for sustainable production, [it] has yet to implement a scheme to enable SPPO to be certified with full traceability. It is not easy to implement such an ambitious scheme, since maintaining the chain of custody for traceability purposes will be difficult and expensive.” Other critics refer to the RSPO as “Really Slow Progress Overall” and have stressed the need for harsher penalties for offending companies. Although Vengeta Rao, a secretary general of the RSPO state that membership will be terminated if auditors find evidence of non-compliance, not a single company has had their membership revoked. Moreover, the RSPO has not yet implemented an effective action on the greenhouse gases associated with palm oil plantations.
Such a substantial body of negative publicity has become a deterrent to companies considering RSPO certification. Nikoloyuk et al. point out that “producers who largely joined the initiative to combat negative publicity now see the leading certified companies becoming targets for future attacks.”
Improvements to the RSPO
There are a number of potential improvements that could be adopted by the RSPO in order to rectify current flaws that have become focal points for public criticism. Perhaps the most pressing amendment to the RSPO criteria should be a condition whereby all plantations owned by the major company must be certified to obtain membership into the RSPO. If this process presents too great a deterrent to be practically implemented, there should at the very least be specifications that state that a company must be transparent and forthright about only certifying a fraction of its subsidiaries. Moreover, the RSPO should ensure they monitor and enforce the RSPO P&C at every stage of production. Palm oil has a very complex supply chain; it must be grown, farmed, crushed, refined and processed (Figure 15).
Production of Palm Oil Chart
Figure 15. The production of palm oil products from FFB. Source: Further Informants: Who is behind the palm oil industry? accessed 19 May 2010.
Nikoloyuk et al. argue that in order for the RSPO scheme to be effective, the RSPO criteria must be incorporated into Indonesian legislation. They stress that the initiative should be seen as a “precursor to legislation rather than an alternative to government regulation.” However, incorporating these standards into legislation does not mean they will be enforced. Corruption is pervasive in Indonesia and would most likely impede the proper implementation of this legislation.
Darrel Webber – Business Unusual For A Global Commodity