Business

Certification fails to transform the palm oil industry – what next?

The RSPO’s standards are a flagship in the drive to make palm oil sustainable. But much more is needed to truly bring change.
A worker on an RSPO-certified plantation in Malaysia sprays diluted herbicides around a young oil palm to keep weeds down. Combining industrial with more environmentally friendly farming techniques, the nitrogen-fixing cover plant, Mucuna bracteata, is left to grow nearby. This reduces the use of chemicals by helping to control weeds, and also improves soil fertility. (Image: Mike Kahn / Alamy)
A worker on an RSPO-certified plantation in Malaysia sprays diluted herbicides around a young oil palm to keep weeds down. Combining industrial with more environmentally friendly farming techniques, the nitrogen-fixing cover plant, Mucuna bracteata, is left to grow nearby. This reduces the use of chemicals by helping to control weeds, and also improves soil fertility. (Image: Mike Kahn / Alamy)

In 2004, a new entity was formed with big goals to end deforestation, stop environmentally harmful practices and improve ethical sourcing in the palm oil industry, which was increasingly being linked to widespread fires, habitat loss and human rights violations in Southeast Asia.

That entity was the Roundtable on Sustainable Palm Oil (RSPO), founded by leading industry actors together with the World Wildlife Fund for Nature (WWF). Sixteen years later, despite measurable progress and continuous efforts to improve the practices of its certified producers, the organisation has been criticised on many levels. It has been accused of being beholden to industry, enabling greenwashing and for being slow to act when alerted to violations by its members. Some believe the path forward is to improve the RSPO from within, but others believe alternative models may be a better route to ensuring sustainability in the palm oil industry.

“A multifaceted approach is what we need to drive change in the industry,” said Michael Guindon, global palm oil lead with WWF in Singapore. “Certification is one element that’s going to lead to widespread transformation of the palm oil sector.”

THE RSPO’S STANDARDS

The RSPO’s standards aim to ensure sustainability, human rights and worker safety wherever palm oil is grown, both on smallholdings and large plantations. To achieve RSPO certification, growers are assessed against these standards once every five years, with annual checks for continued compliance also carried out. The assessments are conducted in the field by independent, third-party certification bodies. In theory, certification can be revoked if a grower fails to meet the standards, but in practice this is rare.

RSPO certification allows growers to sell to brands that only accept certified palm oil, a potential price premium, and access education and resources that can help increase yields and improve farming practices.

Most companies cannot source directly from the farm, so to ensure that palm oil from certified growers reaches consumers, the RSPO also certifies supply chains. As long as companies buy their palm oil from a certified supply chain, they can use the RSPO logo on their products.

(All graphics: Ed Harrison / China Dialogue)RSPO standards_Centre

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RSPO standards_Prosperity

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While the RSPO is the largest and most recognisable standard, there are in fact many other approaches. Some attempt to utilise several certification schemes, while others focus on empowering smallholders, or take a “landscape” approach, covering all commodities grown within a particular area. Companies across the palm oil supply chain are also making independent efforts to better map their palm oil sourcing. Despite this, whether or not palm oil can become a fully sustainable industry will depend on deepening the impact of existing entities like the RSPO, along with more collaboration by major actors along the supply chain.

THE PALM OIL SUPPLY CHAIN

Oil palm is grown on smallholdings and large corporate plantations in dozens of countries around the world, with Indonesia and Malaysia cultivating the lion’s share. Once harvested, oil palm fruit is sent to mills for crushing and processing into crude palm oil and palm kernel oil. Some mills only handle fruit grown on plantations owned by their parent company, but most receive fruit from a number of smallholdings and other plantations. This means fruit from various different sources is often collated at the mill and processed together. From the mill, the crude palm oil is sent on to refiners and ports, becoming part of much wider trade flows.

The crude oil can be refined into hundreds if not thousands of different by-products or “derivatives” that are sold across the world – Indonesia is the biggest consumer, followed by India, the European Union and China. Palm oil derivatives have a wide range of uses, from processed foods to cosmetics and biofuels. Sometimes the manufacturing companies that purchase these derivatives are not even aware that they are made from palm oil.

Because fruit and oil can be mixed at each stage along the chain, and there are so many different end uses of palm oil and its derivatives, the palm oil supply chain can be incredibly complex. Ensuring that certified palm oil is segregated and traceable from palm to consumer is a real challenge.Palm oil supply chain(Graphic: Ed Harrison / China Dialogue)

Challenges for the RSPO

Despite strengthening standards, major concerns with the RSPO centre around its enforcement mechanism and auditing system.

“[The] RSPO has an appropriate standard, but the system is inadequate at upholding that standard,” said Robin Averbeck, forest programme director at Rainforest Action Network (RAN), an environmental non-profit organisation based in the United States.

For example, it took the RSPO nearly 2.5 years to suspend the certificates of Indofood after being presented with evidence of sustainability and labour rights violations by RAN and its partners in late 2016. Similarly, it took three years to follow up on labour abuse allegations on plantations run by FGV Holdings Berhad (FGV), one of Malaysia’s largest palm oil companies, which led to a partial sanctioning in 2018. The RSPO then conditionally lifted this in August 2019, only to have it reinstated the following January. In the end, FGV saw itself subject to a withhold release order from the US Customs and Border Protection authority due to the same labour violations – a move over which the RSPO “expressed reservations”.  

In 2008, Indonesia's leading environmental advocacy NGO, WALHI, staged a protest outside a meeting of the RSPO in Bali. One of the issues they wanted to draw attention to was illegal deforestation in West Kalimantan by agribusiness giants like Cargill, who also run several RSPO-certified plantations in the province.
In 2008, Indonesia’s leading environmental advocacy NGO, WALHI, staged a protest outside a meeting of the RSPO in Bali. One of the issues they wanted to draw attention to was illegal deforestation in West Kalimantan by agribusiness giants like Cargill, who also run several RSPO-certified plantations in the province. (Image: Brihannala Morgan / Rainforest Action Network)

“We haven’t seen the RSPO play the role that it should yet, because [they] have repeatedly allowed bad actors to be RSPO members,” said Averbeck.

A report entitled “Who Watches the Watchman? 2” released by the Environmental Investigation Agency and Grassroots in late 2019, found that little has changed since 2015, when their first report accused the RSPO of “extensive fraud as well as sub-standard and underhand assurance processes”. They found the action taken by the RSPO since the first report to be “severely lacking”.

Sustainability is still a long way off

Another issue is that the RSPO has yet to achieve its goal of transforming the industry and making sustainable palm oil “the norm”. Only 19% of palm oil produced globally is RSPO certified, meaning the vast majority is at risk of being connected to deforestation, fires, human rights abuses and other environmental and land-use issues.

Even companies that are RSPO members, and have committed to achieve full RSPO certification across their supply chains, are not guaranteed to be producing palm oil that is deforestation free. Wilmar International is estimated to control 40% of the global palm oil supply chain through its subsidiaries, but it purchases palm oil from third-party suppliers, increasing the risk of “leakage” – palm oil linked to deforestation finding its way into the certified supply chain.

THE RSPO’S SUPPLY CHAIN CERTIFICATES

The RSPO has four models to endorse supply chains that handle certified palm oil. Manufacturing companies buying palm oil from the end of any of these supply chains can use the RSPO logo on products. However, these models offer very different levels of assurance as to what proportion of palm oil comes from RSPO-certified plantations. Only the first two models can guarantee all of it does. The third only guarantees that some palm oil comes from certified sources. And the fourth allows companies to buy RSPO credits but none of the palm oil used in end products is from certified sources.

Out of the four models, only the first can guarantee that palm oil is traceable to the individual plantation on which it was grown. Traceability is a key part of ensuring accountability. But many companies, particularly smaller ones, use the last two supply chain models because they are cheaper, simpler and less labour intensive. As such, the likelihood of their end products containing non-certified palm oil is higher.

Another issue is that while 19% of the world’s palm oil is grown on RSPO-certified plantations, the lack of demand from brands and consumers means about half of this certified oil ends up being mixed with and sold as regular palm oil.

Pushing for wider use of strict supply chain models and increasing demand for sustainable palm oil, particularly from high-growth markets such as India and China, will be key to improving livelihoods and preventing further environmental destruction.

(All graphics: Ed Harrison / China Dialogue)

Identity Preserved

RSPO supply chain certificates_Identity Preserved

The Identity Preserved (IP) model is the strictest, requiring palm oil grown on individual RSPO-certified plantations be kept separate at all stages of the supply chain. To be certified, each stakeholder – from mill to refinery to manufacturer – needs to prove that they keep the oil separate from non-certified oil. This model is not widely used, which severely limits routes to market. It usually only happens under the umbrella of a vertically integrated company that controls everything from the plantations to the refinery, selling on to manufacturers for a high premium. At the end of this supply chain, the palm oil in each product can be traced back to a single RSPO-certified grower.

Segregated

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Under the Segregated (SG) model, certified palm oil is separated from non-certified palm oil at all stages of the supply chain. However, at the mill, fruit and oil from different certified plantations is mixed. So, while it’s not possible to trace the oil back to an individual grower, this model still ensures that palm oil delivered to the end user only comes from RSPO-certified plantations.

Mass Balance

RSPO supply chain certificates_Mass Balance

The Mass Balance (MB) model allows certified and non-certified palm oil to be mixed along the supply chain. It is most commonly used by stakeholders that handle large volumes of palm oil but have also made sustainability commitments. Refineries operating under the MB model often source from hundreds of mills, but only some of these mills need to be certified. While the refinery must be transparent about the mills it sources from, it does not have to disclose the total volume of palm oil it handles. This means that only a proportion of palm oil in the final product will come from an RSPO-certified plantation – and sometimes it’s a very small percentage. Manufacturing companies using MB palm oil in their products must add the word “MIXED” to the RSPO logo on their packaging.

Book & Claim

RSPO supply chain certificates_Book and Claim

The Book & Claim model allows companies to purchase certified palm oil credits, but does not require them to buy the oil they use from a certified supply chain. The idea behind Book & Claim is to help support and fund growers who may be newly certified according to RSPO standards, but do not yet have access to a certified supply chain. The model does have an important role to play in the RSPO’s goal of promoting sustainable practices. At the end of the supply chain, the palm oil used in products is unlikely to have been grown on certified plantations, but manufacturing companies can use the RSPO logo on their packaging, as long as they add the word “CREDIT”.

The lack of progress over 16 years and the RSPO’s shortcomings, together with high-profile NGO campaigns using the plight of charismatic animals such as the orangutan to highlight deforestation and demonise palm oil production, have led some brands to choose a dramatic form of certification: palm oil-free.

“Protecting the world’s rainforests will only be achieved by many conservation groups and companies making more palm oil-free products, consumers reducing their demand for palm oil, NGOs fighting for rainforests, [and] companies who choose to use palm oil only using identity preserved certified sustainable palm oil,” said Bev Luff, co-manager of the Palm Oil Free Certification Trademark.

One of the concerns is that growth in sustainable production in one place could result in shifting unsustainable production elsewhere through a spillover effect. A study released in June 2020 and published in Environmental Research Letters found that in Indonesian Borneo, while RSPO certification reduced forest loss in some areas, it increased deforestation in adjacent areas. It concluded that “while certification has reduced illegal deforestation, stronger sector-wide action appears necessary to ensure that oil palm production is no longer a driver of forest loss.”

Deforestation for Palm Oil by Bumitama in Indonesia
With a vast swathe of established plantations already RSPO certified in Indonesia’s Central Kalimantan, the deforestation frontier has moved elsewhere. In this photo from 2013, excavators clear intact peatland forests in a new palm oil concession to the south of the established swathe and next to the Tanjung Puting National Park, home to numerous endangered species including orangutans. (Image © Kemal Jufri / Greenpeace)

According to Luff, about 40 companies have been certified by their palm oil-free standard so far, including Illumines Skin Care, Earth Sense and Meridian. Many more are in various stages of the assessment process. Part of this involves educating brands about palm oil use through derivatives they might not even be aware of.

“It is very difficult for the company wanting to make palm oil-free products to know which ingredients contain palm oil derivatives,” said Luff. “If after assessment we conclude a company is unknowingly using a palm oil derivative, then we try to help them find a palm oil-free replacement ingredient.”

Emerging alternative models

For the most part, palm oil does not often have readily available alternatives. And when it does, these can have their own detrimental environmental impacts. In order to address the shortcomings of the RSPO, there are several NGO- and industry-led alternatives, most of which see themselves as complementary, or building upon, RSPO certification.

The Palm Oil Innovation Group (POIG) was founded in 2013 with the goal of going beyond the RSPO through stronger standards and better verification.

“We undertook a process to create a verification approach that would address a number of the gaps that we were seeing,” said Averbeck. This includes requiring that the entire company – not just specific plantations – be certified, and a more robust auditing system with stronger social and labour standards. In fact, many of POIG’s innovations were adopted by the RSPO when it updated its standards in 2018.

“POIG demonstrating that ‘no-deforestation, no-peat and no-exploitation’ standards were possible was influential,” said Averbeck. “We were able to both advocate and demonstrate that better practices and responsible production were possible.”

Meanwhile, in Latin America, Palm Done Right started as an effort not to transform the whole industry, but to work with smallholder farmers in Ecuador to implement sustainable practices, starting with organic certification.

Palm Done Right
Palm Done Right combines and builds on a collection of standards, including those of the RSPO; the organic certification programmes of the USDA and the European Union; Fair for Life; and the Rainforest Alliance (Graphic: Ed Harrison / China Dialogue)

“When we talked to mission-driven brands and buyers, there was a need to progress beyond organic,” said Monique van Wijnbergen, spokesperson for Palm Done Right. “That’s when we started to work with the RSPO, Fair for Life [and the] Rainforest Alliance, all of which helped us improve and progress on environmental and social sustainability.”

In fact, van Wijnbergen saw value in having several certifications, rather than just one.

“There’s a lot of overlap, but it helps us in what we are doing,” she said. “Organic stands out due to the practices and natural interventions. Fair for Life has a strong community check, and with the new RSPO standards, there’s the high-carbon stock approach. There are different values in different standards.”

Currently, Palm Done Right works with 200 independent organic growers in Ecuador, who in total grow oil palm on about 10,000 hectares. That feeds into the 550,000 tonnes of palm oil produced globally that is certified by the Rainforest Alliance (RA) under their Sustainable Agriculture Standard, which works for other commodities too, such as coffee, bananas and cacao. These are often grown alongside or with oil palm on smallholder plantations, a particular focus for the organisation.    

“Smallholders are also an important piece here. They are on about a third of the land cultivated for palm oil,” said Paula den Hartog, sector lead for palm oil at the RA. “That is why we’re prioritising engaging with smallholders to improve their resilience and livelihoods, and to link them to global markets to set the stage for them to implement more sustainable practices.”

While the RA’s standard is separate from the RSPO’s, it is a member and does work with it on traceability.

A smallholder in Peru uses a traditional, low-carbon method to transport his oil palm fruit to the mill
A smallholder in Peru uses a traditional, low-carbon method to transport his oil palm fruit to the mill. Smallholdings account for roughly a third of all the land cultivated for palm oil, and are often more biodiverse and sustainably managed than large plantations. (Image: Juan Carlos Huayllapuma / CIFOR, CC BY NC ND)

The RSPO’s limitations in working with smallholders were a reason that Traidcraft Exchange, a United Kingdom-based social enterprise, decided to have their smallholder palm oil producers in Africa be certified by Fair for Life, a fair trade certification entity and the only one currently working in the palm oil sector.

“The RSPO doesn’t seem to be a model that fully embraces smallholder production,” said Alistair Leadbetter, supply chain development and business support manager at Traidcraft. “We were much happier to go with Fair for Life. We’re not against the RSPO, but it wasn’t for us, because we wanted to focus on smallholders.”

In the fair trade model, brands pay a premium for fully traceable palm oil grown based on a range of labour, community and sustainable standards. The premium goes directly to local farming communities. At present, however, palm oil seems to be a very small segment of global fair trade commodities.

Companies taking independent action

Another emerging trend is large multinational corporations, with either a significant palm oil footprint or complex supply chains, working to verify their sources independent of certification schemes.

COFCO International, which imported 11% of China’s palm oil in 2018, has a strong sustainable palm oil sourcing policy that requires all their palm oil suppliers and sub-tier suppliers to comply with their Supplier Code of Conduct. This means their commitment to the RSPO is just part of their sourcing efforts.

“We see certification as being one way towards sustainable sourcing, but not the only way,” said Wei Peng, global head of sustainability at COFCO International. “Our supply base mapping and risk management is our primary way to ensure we deliver on our commitment.”

The company is working with ProForest, an NGO, to map its entire supply chain in detail to help analyse risks. They’ve even committed to releasing a list of their supplying mills every year. Other big brands, such as Unilever and Mondelez International, also release their mill data.

The Olenex edible oils refinery in the Dutch port of Rotterdam. A joint venture founded by Archer Daniels Midland and Wilmar International – two of the world’s leading agricultural commodities businesses – the refinery is RSPO certified and is one of many included on Unilever’s most recent list of palm oil suppliers. (Image: Frans Lemmens / Alamy)

Unilever is one of the world’s largest consumer goods companies, and it procures palm oil from at least 150 refineries and oleochemical plants, which in turn source from at least 1,500 mills. While the company has committed to buying from RSPO- and RA-certified mills, they also saw a need to better understand which plantations were selling oil palm to their mills, and whether or not they were following the company’s sourcing policy. To do that, they partnered with Orbital Insight, a California-based geospatial analytics start-up.

“We look at billions of pings of mobile phone data,” said Zac Yang, director of solutions engineering at Orbital Insight. “That data in aggregate results in a pattern of traffic, which says: this is your actual sourcing footprint, based on the patterns of movements of truck drivers.”

This allows Unilever to address one of the key challenges with certification: tracing that first mile from plantation to mill. Mills often source from several plantations, and the oil produced is often a mix sourced from sustainable and unsustainable plantations. This type of technology could enable much broader mapping and understanding of the palm oil supply chain in real time, and Orbital Insight is looking at working with other major global food and beverage brands.

“Where we’re going is a method that works with big data and AI algorithms that can process and analyse this at scale,” said Yang. “It’s inherently much more cost effective and scalable to run around hundreds and thousands of mills.”

Unilever, along with PepsiCo, are two of the early partners in a new approach being piloted by IDH (the Dutch acronym for The Sustainable Trade Initiative), a social enterprise based in the Netherlands, to certify particular jurisdictions as Verified Sourcing Areas (VSAs).

“If you are sourcing from that area, you know exactly what is happening in sustainability in that area, and you also know that people are working to improve it,” said Guido Rutten, senior manager at IDH. “There’s a huge demand for new solutions for supply chain sustainability, and for landscape approaches in particular, from companies in the West, but also in other demand markets like in India and China.”

2020_restoration nursery 1_Aceh Tamiang_c IDH
An IDH-supported “restoration nursery” in Aceh, Indonesia, where local palm oil smallholders and communities are working together to turn degraded lands into biodiverse agroforestry farms. Thirty hectares of productive trees like durian, propagated in this nursery near the village of Tenggulun, have already been planted. (Image: IDH)

IDH’s current pilot projects are in Indonesia’s Aceh and southern India. The VSA approach is focused on the landscape, meaning that any commodity grown in a verified region – oil palm, cacao, coffee – all comes under the same standard.

Beyond certification

There are concerns that certification may have reached a limit. After strong growth in its initial years, the RSPO’s figure for certified sustainable oil has been stuck around 19% for the last few years. Getting to 100% looks as distant now as it did when the organisation was founded in 2004.

“You’re never going to see all of global palm oil be certified,” said the WWF’s Guindon.

Part of the challenge, according to Guindon, is growth in Asian demand, which now accounts for 60% of all palm oil consumption. There’s far less demand for certified sustainable oil in India, China or Southeast Asia compared to the European Union, where already 86% of palm oil bought by the food industry is certified.

Building demand for it in Asia is one path forward, but Guidon sees greater opportunity in improving the standards for companies that are already RSPO members.

“RSPO members, if you look at the traders, they cover 90% of palm oil trade,” he said. “If we put requirements beyond sourcing sustainable palm oil, that could have widespread impacts.”

activists with the Rainforest Action Network placed a banner under a famous Pepsi-Cola sign in New York
In 2016, activists with the Rainforest Action Network placed a banner under a famous Pepsi-Cola sign in New York, part of a long-running campaign to pressure snack-food giant PepsiCo to stop buying palm oil from sources linked to conflict and deforestation. Since then, the company – one of the world’s biggest buyers of palm oil – has taken numerous steps to improve its palm oil sourcing strategy, including partnering with IDH to restore forests and support smallholders in Indonesia. (Image: Walter Hergt / Rainforest Action Network)

Averbeck, of the Rainforest Action Network, believes that the burden lies with companies to expand their efforts, especially after recent reports that many have either failed, or are on track to miss, their own zero deforestation goals.

“Companies have put their commitments out there, yet they haven’t invested resources in actually implementing those commitments,” she said.