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Growing pressure for stricter palm oil standards

19 January 2014

According to Greenpeace, “many confectioners are sidestepping responsibilities on sustainable palm oil by only ensuring that products meet ‘inadequate’ RSPO standards.” Greenpeace argues that RSPO standards “fall short of protecting rainforests and reducing greenhouse gases”. Greenpeace is seeking to encourage major confectionery industry players to “go beyond RSPO standards and to procure from ‘truly sustainable’ sources”. This position was supported by the London-based Environmental Investigation Agency (EIA), which maintains that “membership of the RSPO does not necessarily equal sustainability.”

Some confectionery industry players are responding. According to the website Confectionerynews.com, “Ferrero recently committed to achieving 100% traceable segregated, RSPO certified palm oil by the end of 2014 and has pledged that its suppliers will not clear high carbon stock forests or use fire to clear lands.” For its part, “Nestlé has pledged not to be associated with deforestation and has a responsible sourcing policy in place.” Mondelez International, meanwhile, “plans to publish an action plan… that will detail steps to eliminate by 2020 palm oil supplies that are produced on illegally held land.” Confectionerynews.com reported that the action plan will commit the company to procuring palm oil that “does not destroy forests or peat land” and that “respects human rights”. Mars has gone so far as to publicly agree with Greenpeace that “RSPO standards are not enough,” and has pledged to introduce a new policy on palm oil in 2014.

The response from Hershey, however, was deemed by Greenpeace staff to be “not enough”, while United Biscuits maintained that “RSPO standards are enough”, observing that it already uses 100% certified palm oil.

Greenpeace is supporting the Palm Oil Innovation Group that assesses progressive producers and recommends the most sustainable suppliers. This includes the ACP’s leading palm oil exporter, New Britain Palm Oil Limited (NBPOL), which is based in Papua New Guinea.

The EU, where concerns over sustainability are strongest, takes around 15% of global palm oil production: EU use of palm oil rose “by 40% between 2006 and 2012, from 4.5 to 6.4 million tonnes”. Banking group HSBC, accused by the EIA of providing loans that fund “some of [the palm oil industry’s] worst elements”, has highlighted how supplies of sustainable palm oil outstrip demand, reporting that “48% of certified sustainable palm oil was unsold in 2012.” HSBC maintains that this reflects the different priorities in emerging markets, where 80% of palm oil is consumed, and where consumption decisions are based more on price than on sustainability considerations.

The issue of sustainability of palm oil production, however, is not just an issue of private certification standards. The website Foodnavigator.com reported in November 2013 that the United States Environmental Protection Agency implemented rules on palm oil in 2012 that were “designed to punish the crop”, while the Agency said that the rule “was designed to protect the global environment”. This can be seen as reflecting the concerns of the American Soybean Association, which has for a long time seen “a looming threat from palm oil” to the dominance in the edible oil market enjoyed by soybean oil. 

Editorial comment

The campaign of Greenpeace is symptomatic of the growing pressures related to sustainable sourcing that are being placed on manufacturers serving developed country markets. While the rapidly growing demand for palm oil in emerging markets means that there is a ready market in the short term for non-certified palm oil (85% of the market), consumer purchasing priorities are likely to change as incomes grow in emerging markets.

In the longer term, therefore, it would appear important for new palm oil production in ACP countries to build evolving standards into investment plans. This is important not only for producers targeting OECD markets, but also for the competitive position of palm oil on global oil markets, given the bad press enjoyed by the product on environmental grounds.

Improving the overall perception of palm oil by moving progressively to more sustainable and environmentally less damaging patterns of palm oil production would appear to be important in ensuring that growth in palm oil consumption in major OECD markets continues, and that palm oil is not relegated, on environmental grounds, to the role of an oil of last resort.

The uncertainty surrounding future standards and the impact this can have on producer investment decisions and returns suggests a need for greater dialogue on the future evolution of sustainability standards, so as to ensure their transparency and predictability.


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