Competition heats up in palm oil certification

By Chan Quan Min

The RSPO may have been the first sustainable palm oil certification body but it is not the only one now. Recent years have seen the proliferation of competing certification standards apparently circumventing the incumbent RSPO standard. In part three of this week’s series, KiniBiz closes in on the competing upstarts and uncovers the instigators behind a heightening of sustainability standards.

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Competing sustainable palm oil standards are nipping at the heels of the world’s first sustainable palm oil certification and promotion body founded a decade ago, the Roundtable on Sustainable Palm Oil (RSPO).

In place now are two sustainable palm oil certification standards in competition with the RSPO, full details of which have been made public. A further two new sustainable palm oil standards are on the drawing board, one of which is likely to be announced as soon as next month.

Of the two sustainability standards already announced and well ahead in implementation, is a new producer-buyer vertical partnership that could lock up close to half the world’s palm oil supply and a nation-wide sustainability standard soon to become mandatory for Indonesian growers.

With up to five competing palm oil sustainability standards by the end of the year, and possibly more in the years to come, of which two are sanctioned by national governments, palm oil buyers after a ‘sustainable’ product will be spoilt for choice. In the face of competition, the big question is how will RSPO stay relevant?

In comparison to some of the new standards, in particular the Wilmar-Unilever vertical partnership, the RSPO now looks “weak,” independent researcher Khor Yu Leng told KiniBiz.

“The RSPO is looking second, third rate now… many if not the biggest clients find it not good enough right now,” she said in benchmarking the various sustainable palm oil standards on their stringentness.”

 Circumventing the RSPO

 Wilmar International Ltd, the world’s largest processor and trader of palm oil, announced a groundbreaking policy change last December. The company pledged to adopt perhaps the most stringent (on paper) sustainability standard for any agricultural commodity.

By some measures thought to control close to 45% of the world’s palm oil supply, Wilmar pledged to a far-reaching ‘no deforestation, no peat, no exploitation’ policy purportedly under pressure from environmental lobby groups. The policy will apply to Wilmar’s suppliers too, with a deadline of Dec 31, 2015.

Wilmar’s green pledge was announced just after Unilever, its largest customer and world’s second biggest consumer goods multinational, revised its policies to use only traceable palm oil by end-2014.

The ‘no deforestation, no peat, no exploitation’ policy document was hashed out during “months of discussions between The Forest Trust (TFT), Climate Advisers, Wilmar and Unilever,” environmental NGOs (non-governmental organizations) TFT and Climate Advisers proudly exclaimed in a joint statement.

Of particular interest, the Wilmar multi-stakeholder deal did not involve the RSPO in any way, despite both Wilmar and Unilever counting as members to the organization. Instead, a competing environmental interest in TFT was engaged.

The RSPO maintains close links to founding member the World Wildlife Fund (WWF), which is reportedly suspicious of an alleged alliance between Greenpeace and TFT, often seen to be more militant environmental activist groups.

“They are responding to market pressure, not exactly calculated gain,” said Khor weighing in on Wilmar’s green pledge. “Perhaps they want to be at the forefront to influence policy direction (since) it’s hard to do it through the RPSO.”

Unprecedented in its scale, Wilmar’s green pledge could potentially convert a massive 45% of global palm oil supply to a certified sustainable product. In comparison, RSPO certified sustainable palm oil accounts for only 16% of global production and an even smaller 8% of palm oil transacted globally.

Malaysia’s richest man Robert Kuok (and family) famously controls a 32% stake in the company worth a total of S$21.9 billion (RM56.6 billion) in market capitalization on the Singapore stock exchange.

Several other major plantation players were initially expected to join Wilmar in a concerted effort to introduce a sustainable palm oil product above and beyond RSPO standards, a source with links to environmental lobby groups told KiniBiz. Latest industry talk points to a manifesto signed by four unnamed plantation companies, fewer than the eight companies earlier rumoured.

Aside from Wilmar’s sustainable palm oil standard, Indonesian Sustainable Palm Oil (ISPO) is the only other currently available certification option in competition with the incumbent RSPO standard.

The long-awaited Malaysian Sustainable Palm Oil (MSPO) standard is due to be announced next month, reports claimed, while the rumoured alliance of major plantation players, the second of two known sustainable palm oil standards on the drawing board, could be announced anytime now.

RSPO not adverse to competing standards

Darrel Webber, the RSPO secretary general told KiniBiz the proliferation of sustainable palm oil standards would only be “complementary” to RSPO’s own decade-old standard.

He praised Wilmar for taking a bold, far-reaching step towards fully sustainable palm oil in their green pledge and vertical partnership with Unilever despite the deal completely circumventing RSPO processes.

“Wilmar has enough market intelligence to tell you, especially in China and India, where the market is going,” Webber said. “We shouldn’t take lightly how much into the future Wilmar is looking at, because no one knows the business better than they do, in terms of market trends.”

On the threat of the ISPO, a national government mandated standard completely replacing the RSPO standard in Indonesia, Webber said the ISPO was “there to raise the floor” which ultimately “helps growers jump over the bar;” the bar being the more stringent RSPO sustainable palm oil standard.

Data provided by the RSPO showed an improvement in Indonesian membership numbers and volume of certified palm oil produced in the archipelago even after GAPKI (Gabungan Pengusaha Kelapa Sawit Indonesia), the country’s largest growers association left the RSPO soon after ISPO was launched in 2011.

When asked how many members have left the RSPO to date, Webber said it was not a number that he keeps track of, preferring to count how many members join rather than how many depart.

Environmentalists play mind games

Recent years have seen the major environmental NGOs attempting to one-up each other to tie up major buyers and strike a claim as the most sustainable palm oil standard out there.

For fear of a broad simplification, the WWF and RSPO are often pictured in reports as one faction of sustainable palm oil activism with the opposing faction composed of the more militant Greenpeace and TFT.

“The talk among NGOs is that Greenpeace and TFT have a good cop / bad cop routine going,” environmental consultant Fred Pearce wrote in Environment 360, a Yale University publication. “When companies mauled by Greenpeace’s reputation-wreckers plead for mercy, the rainbow warriors advise them to go and have a chat with Poynton.”

Scott Poynton is the founder and executive director of TFT. He has been profiled by US media outlet Environment & Energy Publishing as the latest “go-to-man for companies that get in trouble with environmental groups.”

Poynton’s latest coup is none other than Wilmar. According to Pearce, “the pledge from Wilmar did not come out of the blue” but likely followed strenuous NGO smear campaigns most likely coming from Greenpeace against its main customers.

Below the surface, the sustainable palm oil debate is not quite the clear-cut issue it seems. Environmental protection may not be the paramount interest in the cut-throat world of feuding environmental activists and plantation companies’ vested interests.

Yesterday: The trials and tribulations of RSPO certification

Tomorrow: Plantation companies have a ‘reason’ to be in the RSPO