The document discusses various approaches to improving the sustainability of palm oil production, including certification schemes and industry initiatives. It notes that while progress has been made through certification programs like RSPO, there are still issues with the pace of decision making and concerns that certification has not fully addressed deforestation. Multiple strategies beyond certification are now being explored, but experts disagree on the best path forward and balancing environmental and social concerns remains challenging.

1. PAGE 19
oil," says Katie McCoy, head of the forests
programme at Carbon Disclosure Project. "I
think we can be positive about the momentum
and attention it has received but we need to
be cautious because clearly things are not yet
quite right."
Supply/demand gap
Morley agrees that there remains much work
to be done. "Today only half of the palm oil
certified as sustainable is sold as such and
there remains a gap between supply and
demand. It also remains the case that certain
markets are further ahead than others in
terms of the amount of sustainable palm oil
they use," she says.
However, despite the focus on the
problems of palm oil cultivation, "it’s not
an evil crop", says Keller. In addition to its
versatility, palm oil is also very productive, she
points out. The yield (amount of oil produced
per hectare per year) is far greater than for
other vegetable oils, while production costs
are lower, mainly due to low labour costs in
the countries in which palm oil is grown.
"The problem is with how it is produced,"
Keller says, but she says that a boycott is not
the answer. "If we were to substitute all the
palm oil we use with other oils, we would
need nine times as much land, which would
make the deforestation problem even worse."
RSPO too slow?
RSPO wants more consumers to demand
products made with sustainable palm oil. The
group has set a target in Europe to achieve
100% sustainable palm oil by 2020, supported
by targets of 50% in Indonesia, 30% for India
and 10% for China.
But despite the progress RSPO has made,
it has been criticised for the slow pace at
which it makes decisions. As a result, many
companies are looking to move "beyond
certification".
In part this has come about as a result
of pledges by industry groups such as the
Palm oil is, in many ways, a victim of its own
versatility. The oil, mainly grown and produced
in Indonesia and Malaysia, is found in
approximately 40-50% of household products
in countries such as the United States, Canada,
Australia and England. These range from
cosmetics to cakes, while in other markets
such as India, it is a popular cooking oil.
The oil comes from trees mainly grown in
tropical forests, which hold the greatest diversity
of life on earth. Its production has contributed
to deforestation and climate change, as well as
habitat degradation, animal cruelty and abuse of
indigenous peoples' rights.
To tackle these problems, the Roundtable
on Sustainable Palm Oil (RSPO) was created
in 2004. It now has more than 2,400 members
and represents 40% of the global palm oil
industry, including producers, processors,
buyers, retailers and civil society groups. The
organisation certifies 11.64m tonnes of palm
oil, equivalent to 20% of global production,
says Danielle Morley, RSPO’s European
director of outreach and engagement.
Mass balance and beyond
There are three main certification approaches
– the most basic is Green Palm Certificates,
which allow companies to buy certificates for
sustainable palm oil equivalent to their own
palm oil purchases. Then there is a "mass
balance" approach, where sustainable palm oil
is blended with other supplies.
"What we are encouraging, though, is a
third approach where companies buy segregated
supplies of sustainable palm oil from a dedicated
supply chain. If supplies are ‘identity-preserved’
there is very sophisticated traceability so
the buyer knows what mill the palm oil
comes from," says Emma Keller, agricultural
commodities manager, WWF-UK. "There is
lots of activity going on against a backdrop of
significant movement from companies to find
sustainable sources of supply."
"Of all the forest risk commodities,
progress to date has been strongest for palm
SECTOR SNAPSHOT – PALM OIL
Palmoil’smultiplechoicesolutions
Campaigners have long called for the palm oil industry to cut its links with deforestation. Numerous strategies –
not always complementary – are being adopted to improve standards across the industry’s complex supply chain
Essential insight
• Palm oil is one of the most widely-used
vegetable oils: as a basic cooking oil and
as an ingredient in products ranging from
lipstick and toothpaste to ice cream and
biscuits.
• The industry is linked to deforestation and
climate change in the countries where it is
produced.
• Starting with the Roundtable on
Sustainable Palm Oil, a number of
initiatives are developing more sustainable
palm oil.
• Experts disagree on the best approaches,
including on whether certification actually
works and how to identify valuable forests.
Roundtable on Sustainable
Palm Oil
ESTABLISHED
2004
2,475 members
11.64m TONNES –
20% of world palm oil
production – RSPO certified
2.56m HECTARES
palm oil production area
RSPO certified.
SUPPLY CHAINS IN FOCUSSUPPLY CHAIN RISK & INNOVATION

2. PAGE 20
are also concerns that China and India will
try to expand their own palm oil industries
by creating plantations on areas of high
conservation value.
For some, the whole certification process
is a failure. Scott Poynton of forests group TFT
says that "over the last 20 years, certification
has not really worked".
"If you look at the state of the world’s
forests and other natural resources where
certification is in operation, things look
pretty grim – and they are getting worse," he
adds. He says certification is a "command
and control" response to a problem that does
not stand still but is moving all the time. As
a result, it stifles the innovation that such a
complex problem requires, he argues.
government policy and the political will to
enable these companies to make good on their
commitments.
Changing demands
Another big challenge in years to come will
be in Asian markets, particularly India and
China, which are currently the two biggest
importers of palm oil. "They are very different
markets from those in the west," she adds. "In
India, for example, the highest proportion
of palm oil is used by the poorest sectors of
society as a basic cooking oil. It will be a huge
challenge to engage with the small traders
who sell to them."
WWF in India is working to raise
consumer awareness of the sustainability
issues around palm oil as well as engaging
with large consumer goods companies. There
Consumer Goods Forum, which in August
2015 published the first Sustainable Palm
Oil Sourcing Guidelines, which it hailed as
"an important step in helping the consumer
goods and retail industries to achieve zero net
deforestation by 2020, as outlined in the CGF’s
Deforestation Resolution".
Another important driver – or at least
it should have been – is the 2014 New York
Declaration on Forests, which commits
signatories from companies, government and
NGOs to halve deforestation by 2020 and
completely eliminate it by 2030.
Brendan May, chairman of sustainability
experts Robertsbridge, argues for more
and faster progress. Around the time of
the declaration’s launch "there was rhetoric
aplenty from governments and companies
about cutting deforestation. Since then,
however, what have we seen in terms of action
plans and concrete commitments? Not a lot.
We need to inject some pace – transformation
of business models that we need is simply not
happening fast enough."
Elsewhere, in Europe, EU food labelling
regulation that requires all palm oil in food,
which had hitherto been a hidden ingredient,
to be identified has also played a part in
awareness raising and increasing supply chain
transparency.
However, while buyers profess their
willingness to go beyond certification, they
are not yet prepared to pay the extra costs this
incurs – and nor are producers, either the large
producers or the many smallholders in the
sector, who do not have the resources to do so.
There is also concern that "most of the
action is coming from western multinationals",
Keller argues. Certainly this has been the case
until recently – though now there has been more
pressure from grower countries.
May highlights that in terms of progress
on deforestation it is "big producer companies
in the developing world – from sectors
such as palm oil – that are now leading the
charge". The challenge, May argues, is for
FOUR
PILLARS:
• improve environmental
stewardship;
• strengthen policy
and regulations;
• expand social benefits;
• improvecompetitiveness
ofIndonesianpalmoil.
MISSION:
“Create an environment
in Indonesia which
enables and promotes
the production of
sustainable palm oil
that is deforestation
free, expands social
benefits, and improves
Indonesia’s market
competitiveness”.
FIRST
SIGNATORIES:
Wilmar, Golden-Agri
Resources, Cargill and
Asian Agri. Musim Mas
signed in 2015.
INDONESIAN PALM OIL PLEDGE
Private sector collaboration
signed first in 2014
SUPPLY CHAINS IN FOCUSSUPPLY CHAIN RISK INNOVATION

3. PAGE 21
This has proved to be the case.
Greenpeace has accused the coalition of
greenwashing but others argue that the
original limit was too restrictive. Recognising,
perhaps, the risks from developing potentially
confusing competing definitions of what is
and isn’t sustainable palm oil, there are people
from both sides keen to develop a common
approach.
Meanwhile, the RSPO has responded to
the development of the HCS Approach by
introducing RSPO Next, a new voluntary
addendum to its standard that allows
members to adopt a best in class approach to
sustainable palm oil production.
The multiplicity of approaches illustrates
the complexity of the problem, but also the
fact that more and more industry participants
see the need for change as unavoidable. ★
they contain. Greenpeace, TFT and Golden
Agri-Resources (GAR), the largest Indonesian
palm oil producer, started work on an HCS
definition in 2011, which has evolved into
what is now known as the HCS Approach.
HCS spat
This initially defined HCS forests as those
containing more than 35 tonnes of carbon per
hectare. More recently, a coalition of palm oil
companies led by Malaysia’s Sime Darby has
proposed that a line be drawn at 50 tonnes per
hectare. This alternative proposal, backed by a
new high carbon stock study would allow the
carefully planned conversion of some forest
to oil palm. Understandably, this suggestion
may – initially at least – alarm supporters of
current HCS policies, the group’s consultation
report says.
On-the-ground improvements
While certification and other schemes focus
on demand for palm oil, there have been
significant developments in producer regions
as well, in part because of increasing concern
about the pollution problems caused by
fires that are used to clear land for palm oil
cultivation.
The Indonesian Palm Oil Producers
Association says it will expel members
found to have caused forest fires while the
environment and forest ministry has revoked
the licences of three palm oil producers for
illegal land clearing.
A number of producers have committed
to a high carbon stock (HCS) approach,
which identifies areas of forest that should
be preserved because of the amount of
carbon that they lock up and the biodiversity
• Comply with existing RSPO principles and criteria, or equivalent standards.
• Protect high conservation value (HCV) areas.
• Involve no burning in the preparation of new plantings, re-plantings or any
other developments, including the management of existing plantations.
• Respect human rights, and endorse and support the Universal Declaration
of Human Rights.
• Engage in free prior and informed consent of indigenous and local
communities concerning activities on their customary lands where
plantations are planned for development.
• Operate an open, transparent and consultative process to resolve
complaints and conflicts.
In addition to these, companies should consider developing an approach for
addressing the following criteria (which go beyond current RSPO certification
standards):
• Protect high carbon stock (HCS) forests.
• Do not establish new developments on peatlands regardless of depth.
CONSUMER GOODS FORUM
– SUSTAINABLE PALM OIL
SOURCING GUIDELINES
SUPPLY CHAINS IN FOCUSSUPPLY CHAIN RISK INNOVATION