Speaking at the European Roundtable on Sustainable Palm Oil (RSPO) summit in Berlin in early September 2013, French, German, Austrian and Swiss palm oil industries and users announced plans to move to using exclusively palm oil certified as being from sustainable sources from 2015. However, it was acknowledged that it may take longer to meet this target (i.e. the end of 2016). The head of the French Alliance for Sustainable Palm Oil argued that “concerns about the health profile of palm oil [need] to be addressed alongside sustainability issues.” These moves follow the commitment by the Netherlands and Belgium to use only sustainably sourced palm oil by 2015.
The Dutch commitment, made in 2010, has seen the percentage of national consumption met from sources certified as sustainable increase from 21% in 2011 to 41% in 2012. Despite this progress, there remains “a lot of work still to be done” to hit the 2015 target.
There is a growing debate in OECD countries over “the book and claim mechanism” of sustainability certification, since this method does not guarantee end users the physical presence of sustainably produced palm oil in their final product. This is seen as being an important shortcoming when addressing consumers’ sustainability concerns. There is reportedly “a strong preference for ‘segregated’ palm oil”, which is certified, stored, refined and shipped separately from all other sources of palm oil, to avoid blending with non-certified palm oil. This method of certification, however, involves additional costs and is critically affected by economies of scale. In recent years, “the volumes of segregated oil have increased, primarily in the European market, where there has been sufficient demand and volume to achieve economies of scale.” It is maintained that “as volumes grow, and critical mass is achieved, the transition to a segregated supply chain can then be achieved in a cost-effective and efficient manner.”
Despite national and corporate commitments to the use of sustainably sourced palm oil, it is increasingly recognised that India and China will need to join this process of transforming palm oil production if long-term objectives are to be met, since these countries “represent almost 30% of global palm oil consumption”. To date there has been “minimal uptake” of oil certified by the RSPO in these markets, where palm oil is primarily used for cooking.
With a growing number of palm oil users moving to source all palm oil sustainably, it would appear important for any new investments in palm oil development across the ACP to build compliance with sustainability requirements into their design. In addition, with growing end user scepticism over the “book and claim” certification mechanism, it would appear necessary to build up the capacity for segregated certification within any new palm oil investments. (For palm oil sector investment interest in Africa see Agritrade articles ‘ New era dawning for palm oil producers’, 6 February 2012 and ‘ The fast-growing palm oil sector defends itself against an attack by lar...’, 9 September 2012.) This has not always been the case, with some American investors in palm oil development in Africa pulling out of the RSPO scheme (see Agritrade article ‘ Sustainable palm oil set for expansion if challenges can be overcome’, 9 December 2012).
The pending expansion of demand for segregated palm oil poses challenges for existing ACP palm oil suppliers who currently use the “book and claim” certification mechanism. This in turn could pose particular challenges for smallholder-based palm oil production systems, where the unit costs of verification and certification of segregated palm oil could be disproportionately high, and raises important questions related to the distribution of the costs and benefits of sustainability certification of palm oil.