{"id":71979,"date":"2021-06-04T15:44:49","date_gmt":"2021-06-04T15:44:49","guid":{"rendered":"https:\/\/chinadialogue.net\/?p=71979"},"modified":"2021-08-11T15:23:37","modified_gmt":"2021-08-11T15:23:37","slug":"who-gets-to-define-sustainable-palm-oil","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/food\/who-gets-to-define-sustainable-palm-oil\/","title":{"rendered":"Who gets to define sustainable palm oil?"},"content":{"rendered":"\n

Very few commodities are more geographically concentrated in their production than palm oil. In 2020, Indonesia and Malaysia produced 59% and 26%<\/a>, respectively, of the world\u2019s palm oil. Sometimes referred to as \u201cred gold<\/a>\u201d, the naturally reddish vegetable oil is widely used in cooking, food processing, cosmetics, chemical production and as a biofuel.<\/p>\n\n\n\n

Palm oil is an important source of economic growth and livelihoods in both countries. But it has also been associated with environmental degradation and human rights abuses. As a response to growing consumer awareness of these issues in the US and Europe, in 2004, the World Wildlife Fund (WWF), Malaysian Palm Oil Association and a few multinational companies including Unilever started the Roundtable on Sustainable Palm Oil (RSPO), a voluntary initiative that promotes sustainable production of the commodity through certification schemes and standards.<\/p>\n\n\n\n

Western users of palm oil have long been putting pressure on their Asian suppliers to improve sustainability practices. In 2009, the EU applied restrictions on Asian palm oil biofuel imports. Lim Keng Yaik, former Malaysia\u2019s Minister of Primary Industries, called it \u201cgreen neocolonialism<\/a>.\u201d<\/p>\n\n\n\n

The RSPO tries to apply pressure from consumers in affluent Western markets to producers in Asia. But in recent years, governments and industry groups in Indonesia and Malaysia increasingly see the RSPO as too demanding and having too much say in the global supply chain.<\/p>\n\n\n\n

\u201cSometimes I use the word \u2018cartel\u2019 [to describe RSPO],\u201d says Dr. Ahmad Parveez Ghulam Kadir, director-general of the Malaysia Palm Oil Board (MPOB).<\/p>\n\n\n\n

Turning the table, both countries initiated their own national certification schemes: in 2011, the Indonesian Sustainable Palm Oil (ISPO) standard was born. Four years later, Malaysia unveiled its equivalent, the Malaysian Sustainable Palm Oil (MSPO) standard. Since then, both countries have been campaigning globally to win recognition of their standards, and the right to define sustainable palm oil on their own terms.<\/p>\n\n\n\n

\u2018Green\u2019 palm oil: who should decide?<\/h2>\n\n\n\n

RSPO has strong buy-in in the European market with 86%<\/a> of non-biofuel palm oil imported by the then 28 EU member states and Switzerland being RSPO-certified in 2019. Globally, however, RSPO certified palm oil only accounts for 19% of total annual production, most of which is sold to Europe. In stark contrast, in the world\u2019s top two importing countries, India and China, RSPO makes up only 3% and 4% of the market, respectively.<\/p>\n\n\n\n

Dr. Parveez said that in order to gain RSPO certification, producers have to cut profits, which is not really sustainable. \u201cWhat I feel uncomfortable about is [that the RSPO] keep on changing their goalposts, keep on making it more difficult, more stringent, adding more features.\u201d<\/p>\n\n\n\n

As national standards, ISPO and MSPO are rapidly advancing in their home markets. By the end of 2020, the Indonesian Palm Oil Association (GAPKI) issued 682 certificates covering a total of 3.78 million hectares of land or 27% of Indonesia\u2019s planted palm oil area. The adoption of MSPO is even more impressive. The agency claims that by the end of 2020, about 88% of Malaysia\u2019s total oil palm planted area<\/a> was covered by MSPO certification.<\/p>\n\n\n\n

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The standards are making inroads at a time when the EU continues to ask tough questions on the commodity\u2019s sustainability. In 2019, the updated EU Renewable Energy Directive declared palm oil-based biofuel inconsistent with the EU\u2019s environmental policy due to its deforestation risks. The European Commission designated palm oil as a feedstock of high \u201cindirect land use change\u201d(ILUC) risk and announced a phase-out of palm oil as a biofuel<\/a> by 2030.<\/p>\n\n\n\n

The move triggered strong responses from Indonesia and Malaysia as half of the EU\u2019s imported palm oil is used as biofuel. In December 2019, Indonesia put forward a formal complaint against the EU at the World Trade Organization (WTO), the world\u2019s first WTO palm oil trade dispute case. Indonesia\u2019s director general of foreign trade, Indrasari Wisnu Wardhana, said the EU\u2019s policy would not only impact Indonesia\u2019s palm oil exports to Europe, but would also tarnish the image of palm oil products globally<\/a>.<\/p>\n\n\n\n

Malaysia quickly followed suit and filed its own complaint to the WTO\u2019s Dispute Settlement Mechanism. The two countries also launched a global media campaign<\/a> to rebuild the image of Southeast Asian palm oil. The disputes add urgency to the promotion of ISPO and MSPO as an effort to regain the right to define what constitutes \u201csustainability\u201d in palm oil production.<\/p>\n\n\n\n

\"crude<\/div>
Screening crude palm oil in North Sumatra, Indonesia (Image: YT Haryono \/ Alamy)<\/div><\/div><\/div><\/div>\n\n\n\n

Two steps forward, one step back<\/h2>\n\n\n\n

As national standards, both ISPO and MSPO are backed by government enforcement to raise the level of sustainability in palm oil production. Like the RSPO, both cover general themes<\/a> on legality, environmental accountability, social responsibility and business practices, but are less stringent in most of those aspects. A comparison of seven palm oil sustainability standards ranks the RSPO at the top and MSPO and ISPO at the bottom<\/a>, with the ISPO lagging far behind others.<\/p>\n\n\n\n

Over the years, the two countries have attempted to strengthen the standards. In 2014, Indonesia made ISPO certification mandatory for all producers other than smallholder farmers. In 2016, it set up a special working group asking multiple stakeholders to help update the standard in order to increase its international recognition. The group added human rights protection and traceability and transparency principles to the framework and later set out to have independent monitoring of certification implementation. The final aim was to make certification mandatory for smallholders.<\/p>\n\n\n\n

In 2020, Indonesia and Malaysia produced 59% and 26%, respectively, of the world\u2019s palm oil<\/blockquote><\/cite><\/div><\/div>\n\n\n\n

The openness was short-lived. Procedures to update the ISPO became less transparent after 2016 and ended up excluding many stakeholders from the process. In March 2020, a new presidential regulation on ISPO was issued with added articles about transparency and mandatory smallholder certification by 2025. However, articles on human rights protections, traceability and independent monitoring that appeared in earlier drafts disappeared from the final regulation, to the general dismay of NGOs<\/a>.  <\/p>\n\n\n\n

Joko Sarijito, manager of WWF Indonesia\u2019s sustainable commodities project, told China Dialogue that \u201cISPO standards require all growers and factories to have minimum legal requirements as mandated by Indonesian law\u201d, but some sustainability standards related to natural resources conservation and indigenous people rights should be strengthened.<\/p>\n\n\n\n

Though less stringent than the RSPO, mandatory national standards are \u201cbetter placed to achieve full national coverage of produced volume\u201d, points out<\/a> a 2020 United Nations Development Programme report. It also highlights that, as a private scheme, RSPO faces resistance from some stakeholders for its certification costs and perceived inadequate price premium.<\/p>\n\n\n\n

The biggest challenge to \u201cfull national coverage\u201d comes from smallholder farmers who manage roughly 40% of Malaysia and Indonesia\u2019s oil palm-planted areas. Their per hectare yield can be 50% lower<\/a> than that of large-scale commercial farms because of lack of knowledge and access to high-quality agricultural inputs such as fertilisers, while  incomplete and inefficient harvesting<\/a> also play a role. Their response to the yield gap is to cut down forest to plant more palm trees. While rolling out certification schemes, helping smallholders to boost their per hectare yield on existing land is a crucial step toward sustainability.<\/p>\n\n\n\n

Low education and income are often barriers for smallholder farmers to certify their palm oil. Land ownership is another hurdle. RSPO, MSPO and ISPO all require proper record of land ownership as a prerequisite for certification, a condition that many multi-generational smallholder farmers often cannot meet.  <\/p>\n\n\n\n

The role of smallholders<\/h2>\n\n\n\n

Bringing in smallholder farmers has been central in Malaysia and Indonesia\u2019s push to expand coverage of their national standards. Dr. Parveez, the MPOB director-general, told China Dialogue that one of Malaysia\u2019s strategies is to create \u201csustainable palm oil clusters\u201d consisting of 1,000\u20131,500 smallholder farmers. MPOB has designated officials to manage such clusters and cover certification fees for farmers. Under the scheme, certification costs per hectare are between $30 and 35, much lower than the $87\u2013215\/hectare for the RSPO, as estimated by a 2016 study<\/a>.<\/p>\n\n\n\n

In Malaysia, where about 88% of areas planted with oil palm have been MSPO-certified, smallholders remain the most challenging segment. Smallholders (both organised and independent) only account for about 22%<\/a> of all certified planted areas, while they cultivate over 30% of planted land<\/a>. The government has mandated that all remaining smallholder farmers will have to be certified by the beginning of 2022 or face suspension or termination of their licences.<\/p>\n\n\n\n

In 2019, the Indonesian government published a National Sustainable Palm Oil Action Plan<\/a>  aimed at accelerating smallholder certification by coordinating the actions of 14 government agencies. But Indonesia is lagging behind in certifying smallholders largely because of the land-ownership issues. As of October 2020, only 0.21% of oil palm planted areas controlled by smallholders were ISPO-certified.<\/p>\n\n\n\n

\"palm-oil-smallholder\"\/<\/div>
Harvesting the crop of a small-holder in Sumatra (Image \u00a9 Greenpeace \/ John Novis)<\/div><\/div><\/div><\/div>\n\n\n\n

\u201cIndonesia is too big. Its palm oil is produced in so many different areas, which makes certification more difficult,\u201d Robert Hii explains. Hii was born in Malaysia and runs CSPO Watch<\/a>, an independent industry monitoring website. He argues that Malaysia\u2019s heavier reliance on palm oil exports, makes it more sensitive to the sustainability demand of downstream buyers. But Indonesia consumes 30-35% of its own palm oil, so the motivation to get certification is low. \u201cWhat Indonesia says is we have enough certified palm oil to satisfy the European and US market, why do we need to certify the rest?\u201d Hii said.<\/p>\n\n\n\n

Support for the small farmers<\/h2>\n\n\n\n

Boosting the average yield of smallholder farmers is one of the reasons why the governments are guiding them through the certification process, which tends to raise their knowledge and improves planting techniques. Higher efficiency reduces the pressure on land and deforestation.<\/p>\n\n\n\n

Malaysia has banned the conversion of primary forests and carbon-rich peatland into oil palm plantations and has committed to put a cap on planted areas, stipulating that they must not cover more than 6.5 million hectares in 2023. In 2019, total planted area in Malaysia has already reached 5.9 million hectares but the 2023 cap means annual growth needs to shrink to below 2% after 2019. By comparison, between 2001 and 2016, the annual growth rate of oil palm plantation was over 9%. <\/p>\n\n\n\n

Since 2011, Indonesia has also permanently banned the exploitation of primary forests and peat swamp forests for palm oil, pulp and timber production, although Greenpeace claims that deforestation still happens<\/a>.<\/p>\n\n\n\n

Dr. Parveez told China Dialogue that despite the cap on total planted area, Malaysia is still aiming to increase yield per hectare by another 50% through improved breeding techniques aided by genome technology, tissue culture, mechanisation and other means.<\/p>\n\n\n\n

The potential for smallholder farmers to increase yield is very high. \u201cJust boosting their production by one additional tonne per hectare per year, you will get an extra 2 million tonnes out of Malaysia\u2026 and 5-6 million tonnes out of Indonesia,\u201d said Hii. Combined, this increased yield constitutes 10% of the total 2020 global production.<\/p>\n\n\n\n

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Training smallholder farmers has become central to certification efforts in Malaysia and Indonesia. According to MPOB, the Malaysian government not only shoulders all the certification costs of farmers, provides personal protection equipment and storage space for chemicals, but also runs training sessions, road shows and social media campaigns to raise awareness among the smallholders.<\/p>\n\n\n\n

GAPKI has also organised workshops and good agricultural practice trainings to increase smallholder capacity and competency on sustainable plantation management and assist them in certifying and implementing ISPO. Sometimes it also helps with fertiliser procurement and transportation.<\/p>\n\n\n\n

Due to a lack of research, the effectiveness of certification schemes such as RSPO, ISPO and MSPO in delivering sustainability improvements on the ground is still debatable. A study<\/a> looking at Indonesian Borneo (Kalimantan) discovered \u201cno significant difference\u201d between RSPO and non-RSPO plantations in terms of sustainability metrics. However, it did find that certified plantations tend to achieve greater yields.<\/p>\n\n\n\n

The impact of wider adoption of MSPO and ISPO is also under-studied. A recent report<\/a> from Global Forest Watch shows that primary forest loss in Malaysia has dropped by 60.5% in the last four years, from 185,000 hectares in 2016 to 73,000 hectares in 2020. Dr. Parveez attributes the decline to the expansion of the MSPO scheme in the country which now covers 5.19 million hectares, that\u2019s 4.3 times the planted areas certified by RSPO.\u00a0\u00a0<\/p>\n\n\n\n

Winning over the buyers<\/h2>\n\n\n\n

Lately, both Malaysia and Indonesia have been actively publicising their efforts to improve palm oil sustainability, hoping that more international buyers will accept their sustainability standards. The Tokyo Olympics has included MSPO and ISPO, along with RSPO, as acceptable certificates in its Sourcing Code for Sustainable Palm Oil<\/a>.<\/p>\n\n\n\n

In 2018, the Indonesian Palm Oil Board signed a tripartite Memorandum of Understanding (MOU) with the Solvent Extractor Association, India\u2019s largest industry group for plant-based oil, and Solidaridad, a Netherlands-based NGO, to recognise ISPO as a \u201clegitimate sustainable framework for palm oil production and trade between Indonesia and India,\u201d along with India\u2019s own standard, India Palm Oil Sustainability (IPOS). The following year, MPOB followed suit with a similar MOU aiming at aligning MSPO with IPOS for joint promotion. <\/p>\n\n\n\n

When signing the MOU with MPOB, Atul Chaturvedi, president of SEAI, said<\/a>: \u201cTime has come to prepare countries for having their own national standard, rather than looking elsewhere.\u201d<\/p>\n\n\n\n

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China, the world\u2019s second largest palm oil importer, bought 7.6 million tonnes<\/a> of the oil in 2019 \u2013 13% the world total. But the Chinese government, businesses and the general public has yet to warm up to the idea of palm oil sustainability. No sustainability requirements are imposed on imported palm oil and certified products have close to zero visibility in the Chinese market.<\/p>\n\n\n\n

Nevertheless, China will not be able to stay out of the sustainability debate for long. As India readies itself for the recognition of ISPO and MSPO, industries in Malaysia and Indonesia have turned their attention to China.<\/p>\n\n\n\n

Malaysia has engaged Chinese counterparts to prepare the entrance of MSPO to the Chinese market. In 2019, MPOB signed an MOU with the China Green Food Development Center<\/a> (CGFDC), aimed at allowing CGFDC to incorporate the MSPO scheme in its certification of the Green Food label, providing an entry point for Malaysia\u2019s own certified palm oil into China.<\/p>\n\n\n\n

When China\u2019s foreign minister, Wang Yi, visited Malaysia in October 2020, he issued a joint statement<\/a> with his counterpart Dato\u2019 Seri Hishammuddin Tun Hussein acknowledging \u201cthe significance and importance of the trade in commodities, especially that of palm oil.\u201d Both sides agreed to strengthen cooperation in promoting sustainability requirements for palm oil products which adhered to the MSPO and China\u2019s Green Food label.<\/p>\n\n\n\n

Dr. Parveez spoke highly of China\u2019s recognition of the MSPO, even though so far there\u2019s no sustainability requirements for imported palm oil in China. \u201cWe want the positive image for Malaysian palm oil to be spread in China\u2026 one day, it won\u2019t be surprising that buyers in China will demand sustainable palm oil. When that time comes, we are already there.\u201d He says.<\/p>\n\n\n\n

The MPOB is also cultivating a relationship with the Beijing Winter Olympics 2022. \u201cThis will be another milestone for us, for the recognition of our MSPO. Just like Tokyo Olympics,\u201d Dr. Parveez said.<\/p>\n\n\n\n

Indonesia’s GAPKI puts equal emphasis on exploring cooperation with China. Bandung Sahari at GAPKI\u2019s sustainability department told China Dialogue that they hope ISPO will become part of those recognised sustainability standards with the same acknowledgement as the RSPO when the Chinese market imposes sustainability requirements through certification.<\/p>\n\n\n\n

Meanwhile, a conversation<\/a> about setting up China\u2019s own domestic palm oil sustainability standard has already begun<\/a>. Experts have told China Dialogue that if China does produce its own national standard, the question of which overseas standard to recognise will remain open.<\/p>\n\n\n\n

If major palm oil markets accept ISPO and MSPO, will the more stringent RSPO be sidelined? Benjamin Loh, manager of WWF Malaysia\u2019s sustainable palm oil project, is not that worried. \u201cWe would like to see MSPO to be widely accepted as the norm in the global supply chain, especially in India and China,\u201d he told China Dialogue.<\/p>\n\n\n\n

\u201cMarkets that currently do not demand certification would benefit from MSPO as a starting point towards enhanced sustainability in the future. This will also eventually lead to increased sustainability requirements within the MSPO standard as we all know that sustainability is an ever improving initiative,\u201d he said.<\/p>\n\n\n\n

Correction: An earlier version of this article stated that the percentage of MSPO-certified planted area at the end of 2020 was about 96%, when it’s in fact about 88%. This has been corrected.<\/em><\/p>\n\n\n\n

This article is part of our ongoing series on palm oil. Explore the series to date here.<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Leading palm oil producers Indonesia and Malaysia are actively promoting their own standards of sustainable palm oil production <\/p>\n","protected":false},"author":1072,"featured_media":71986,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[763],"tags":[531,576,20000237],"hashtags":[],"country":[50040717,50040718],"class_list":["post-71979","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-food","tag-deforestation","tag-palm-oil","tag-sustainable-development","country-indonesia","country-malaysia"],"acf":[],"yoast_head":"\nWho gets to define sustainable palm oil? | Dialogue Earth<\/title>\n<meta name=\"description\" content=\"Leading palm oil producers Indonesia and Malaysia are actively promoting their own standards of sustainable palm oil production\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dialogue.earth\/en\/food\/who-gets-to-define-sustainable-palm-oil\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Who gets to define sustainable palm oil?\" \/>\n<meta property=\"og:description\" content=\"Leading palm oil producers Indonesia and Malaysia are actively promoting their own standards of sustainable palm oil production\" \/>\n<meta property=\"og:url\" content=\"https:\/\/dialogue.earth\/en\/food\/who-gets-to-define-sustainable-palm-oil\/\" \/>\n<meta property=\"og:site_name\" content=\"Dialogue Earth\" \/>\n<meta property=\"article:published_time\" content=\"2021-06-04T15:44:49+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-08-11T15:23:37+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/dialogue.earth\/content\/uploads\/2021\/06\/oil-palm-plantation-in-Malaysia_2CXA6FR-scaled.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2560\" \/>\n\t<meta property=\"og:image:height\" content=\"1715\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Lushan Huang\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/dialogue.earth\/en\/food\/who-gets-to-define-sustainable-palm-oil\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/dialogue.earth\/en\/food\/who-gets-to-define-sustainable-palm-oil\/\"},\"author\":{\"name\":\"Lushan Huang\",\"@id\":\"https:\/\/dialogue.earth\/en\/#\/schema\/person\/0c346145d8caa19f208165af1cb3210b\"},\"headline\":\"Who gets to define sustainable palm oil?\",\"datePublished\":\"2021-06-04T15:44:49+00:00\",\"dateModified\":\"2021-08-11T15:23:37+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/dialogue.earth\/en\/food\/who-gets-to-define-sustainable-palm-oil\/\"},\"wordCount\":2725,\"publisher\":{\"@id\":\"https:\/\/dialogue.earth\/en\/#organization\"},\"image\":{\"@id\":\"https:\/\/dialogue.earth\/en\/food\/who-gets-to-define-sustainable-palm-oil\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/dialogue.earth\/content\/uploads\/2021\/06\/oil-palm-plantation-in-Malaysia_2CXA6FR-scaled.jpg\",\"keywords\":[\"Deforestation\",\"Palm oil\",\"Sustainable development\"],\"articleSection\":[\"Food\"],\"inLanguage\":\"en\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/dialogue.earth\/en\/food\/who-gets-to-define-sustainable-palm-oil\/\",\"url\":\"https:\/\/dialogue.earth\/en\/food\/who-gets-to-define-sustainable-palm-oil\/\",\"name\":\"Who gets to define sustainable palm oil? 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Shares in Malaysian palm oil firm Felda Global are expected to rise sharply on their trading debut on Thursday, underscoring the pent-up demand generated in the world's second largest IPO after Facebook's rocky initial offering. Picture taken June 22, 2012. 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