by Kavickumar Muruganathan
Having pumped in billions of dollars into the economies of countries such as Malaysia and Indonesia, the palm oil industry is estimated to be worth about US$88 billion dollars by 2022. An extremely versatile ingredient, palm oil is found in consumer products ranging from chocolates to cosmetics.
On the flipside, the economically lucrative industry has been blighted with issues of deforestation, climate change, human rights abuse and invasion of community spaces over the past years.
With a recent report by Amnesty International highlighting the plight of child workers working under dangerous conditions in the fields, the call for greater transparency and traceability within the supply chains has gathered significant momentum.
Consumers and companies must understand where products are being sourced from in order to comprehend the accompanying potential impact. This allows companies to identify and prioritise areas of high environmental and social risks and allocate resources to minimise risks in these areas.
Achieving traceability poses significant challenges due to the high complexity within the palm oil supply chains. But while traceability is a necessary first step in ensuring sustainability, it does not necessarily equate to sustainability in the entirety of the business. Traceability to plantations is crucial; traceability to sustainable plantations is even more crucial.
To date, the certification administered by the Roundtable on Sustainable Palm Oil (RSPO) remains one of the most robust and comprehensive seal of endorsement for sustainably sourced palm oil. However, while Certified Sustainable Palm Oil (CSPO) volumes, which stand at about 12 million tonnes currently, continue to increase year on year, only 17% is RSPO certified.
The low uptake of certification can be primarily attributed to it being voluntary and the demand for CSPO in consumer markets being low. Businesses find it tough to attain economies of scale for small volumes of CSPO.
This ideal state of creating total end-user public visibility, from plantations to mills to retailers, is operationally and financially massive. It requires tremendous logistical effort and commands a significant audit fee that is borne by companies themselves. And while making more information publicly available bridges and strengthens trust between manufacturers and consumers, not all companies are receptive to scrutiny. Information such as the locations of their concession areas, smallholder and mill sites, can challenge geographical sensitivities, face under-pricing by competitors and see watchdogs and civil societies hound their operations.
Consumers must therefore play their part if the movement towards CSPO is to chug ahead with full steam. For CSPO to infiltrate the market, consumers must stake claims and support by demanding the right to information on the source of origin of products, apart from attributes such as product quality and price competitiveness. Companies must and can do their part to make CSPO attractive to consumers as well.
Engaging consumers on CSPO continues to remain a key challenge to the palm oil industry. The value in championing CSPO and exercising the right to information on product origin will get companies to improve their sustainability practices and play the indirect role in mitigating climate change and unethical labour practices.
As far as developed countries are concerned, the lack of consumer knowledge and preference for CSPO remains a key missing link towards getting more of the global palm oil production to be certified. How this gap is bridged remains to be seen. Education and concerted outreach efforts would most certainly be crucial. How CSPO discourses are framed to suit the right target audience would be equally important as well.
The Singapore Alliance for Sustainable Palm Oil was recently formed to champion sustainable palm oil with five founding members. To progress from its infancy, it would require a more diverse pool of stakeholders on board. It should include major manufacturers and producers as well as human rights groups, financial institutions and consumers, with financiers ensuring that palm oil investments comply with the principles of sustainability, transparency and the protection of human rights.
Specific key performance indicators (KPIs) would also be useful in helping such alliances meet their end goal. The mandatory sustainability reporting requirements for Singapore-listed companies is a tool that could potentially aid in the alliance meeting its goals.
The alternative is perhaps, to take the interventionist approach and harness legislative muscle of government bodies to mandate progressively the supply of CSPO into consumer markets leaving consumers with a plethora of price competitive choices. The implications of such a move remains unknown.
What remains paramount would be for consumers and businesses to attain a common consensus that sustainable palm oil provides a win-win situation for people and planet.