Malaysian palm oil futures fell to their lowest in nearly three years on Friday evening in a fourth session of losses, tracking declines in related edible oils.
KUALA LUMPUR: The global watchdog for the palm oil industry must strengthen its standards to require all members to commit to ending deforestation - or risk becoming irrelevant, an increasing number of growers, investors and green experts say.
The Kuala Lumpur-based Roundtable on Sustainable Palm Oil (RSPO), comprising producers, buyers, consumers and advocacy groups, is conducting a review of its standards.
It aims to publish new guidelines in November that will cover the next five years.
Presently, the RSPO demands its members should not cultivate oil palm trees on land designated as primary forest or forest with a "high conservation value", which includes important biodiversity, ecosystems and sacred sites.
"The standards are strong and tough, but that doesn't mean they can't be made stronger or tougher," said Carl Bek-Nielsen, chief executive director of United Plantations, which grows oil palm in the world's top-two producers, Malaysia and Indonesia.
Bek-Nielsen, who also co-chairs the RSPO, called for "a total commitment" by all its members to zero deforestation.
"If they can address that big elephant in the room, they will not just take a big leap forward - it will be a giant leap forward and show a level of commitment unseen within the commodity sector today," he told the Thomson Reuters Foundation.
Palm oil is the world's most widely used edible oil, found in everything from margarine to cookies, and soap to soups.
But the industry has come under unprecedented scrutiny in recent years - not only from the mounting influence of activists, but also from consumers - and has been blamed for deforestation, forest fires and exploitation of workers.
Faced with such pressures, many large palm growers have made pledges to slow or end deforestation, while major buyers like Nestle, PepsiCo and Unilever have committed to zero deforestation and to source only sustainable palm oil by 2020.
The RSPO faces the tough task of trying to please members with different interests at a critical time for the industry.
INVESTOR PRESSURE
Ramping up the pressure, earlier this month about 90 institutional investors, including banks and pension funds, representing more than $6.7 trillion in assets under management, called on the RSPO to ban deforestation and clearing of peatlands, and to strengthen provisions for workers' rights.
"RSPO is at a critical junction," said Julie Nash, director of food and capital markets at U.S.-based sustainability lobby group Ceres, which coordinated the letter.
"As we look at the trajectory of companies, we see... increasing commitments to zero deforestation."
Nash said investors want an assurance of no deforestation from the RSPO because of reputation and market risks.
Without it, buyers would have to look for alternative ways of monitoring their supply chains to meet deforestation pledges, which could be costly and time-intensive, she added.
As a body encompassing a wide range of interests, with its infrastructure already in place, palm oil experts said the RSPO is unlikely to be replaced, even if some members drop out.
The RSPO has faced challenges in recent years, including advocacy groups withdrawing support and criticising its stance on human rights abuses and its complaints panel.
In June, Nestle's membership was suspended for three weeks after it failed to submit a report setting out how it would ensure the use of certified sustainable palm oil.
Earlier this year, British supermarket chain Iceland pledged to remove palm oil from its own-brand food by the end of 2018, saying it did not believe there was a sustainable form.
But companies working outside the RSPO umbrella could struggle to deal quickly with any problems in their supply chain, while credibility would also be an issue, experts said.
"Investors really want RSPO to succeed," Nash said. "It is a Catch 22. If the standard no longer meets the prevailing needs of the buyers, it is hard to be able to grow market share."
CREDIBILITY
Established in 2004 and backed by major buyers, the RSPO's focus has been mostly on making large and medium-sized palm oil companies more sustainable, but in recent years it has begun to look at ways to work with smallholders.
While many RSPO members are pushing for tougher standards, some industry officials warn this could exclude palm companies that have yet to join, especially smaller growers who cannot afford to adhere to its standards and achieve certification.
Anne Rosenbarger, Southeast Asia commodities manager at World Resources Institute Indonesia, said RSPO has a vision to make sustainable palm oil the norm and transform the industry.
But it is trying to find a balance between making zero deforestation mandatory, and smoothing potential negative effects for poverty alleviation and rural development, she said.
Rosenbarger, who is working with the RSPO on the review, said the palm oil sector has a history of environmental and social impacts which have attracted international media and political attention in recent years.
"Now is the time where we really need to have the credibility in place to show that palm oil can be done sustainably - and to change that image," she said.
Experts also said major palm oil buyers that have made deforestation commitments need to maintain demand for RSPO-certified palm oil, which accounts for about 20 percent of global production at 12.3 million tonnes.
With so many issues at stake, the review of the RSPO standards has attracted a high level of interest. Public consultations have so far resulted in more than 10,000 comments.
"The push to improve and better the standards is something we are listening to," said Stefano Savi, RSPO's outreach director.
"But we need to make sure we don't set the bar so high that we allow other people who are not within the standards to go below it." - Reuters
Subscribe now and receive FREE sooka plan for 1 month.
T&C applies.
