Saturday October 8, 2011
The beginning of the end for RSPO?
A Question of Business by P.GUNASEGARAN
Indonesia’s palm oil growers pulling out of the Roundtable on Sustainable Palm Oil has grave implications if Malaysia responds to unite producers
WHICHEVER way one looks at it, the move by the Indonesian Palm Oil Association (GAPKI) to move out of the Roundatable on Sustainable Palm Oil (RSPO) en masse is a major blow to the RSPO.
True, RSPO membership is on an individual basis but more likely than not members of GAPKI are likely to follow the lead set by their own association and move in favour of the Indonesian standards, Indonesian Sustainable Palm Oil or ISPO.
The move has send reverberations through Malaysia. While Malaysia is not pulling out of RSPO yet, producers are saying that they should not increase the amount of palm oil which is RSPO certified until there is enough uptake for certified palm oil.
The RSPO was formed after pressure by non-governmental organisations (NGOs), mainly environmental groups and wildlife conservationists, on large palm oil consuming multinationals in developed countries such as Nestle and Unilever who came under systematic attack by the NGOs.
The main allegation was that palm oil was produced from deforestation and therefore destroyed habitats of animals such as orangutans, was an environmental threat and displaced indigenous people. The NGOs threatened to get consumers to boycott products containing palm oil.
Palm oil growers were annoyed by the blanket attack against all palm oil and alleged discrimination and thinly veiled protectionism. They pointed out that in the long run other oils such as soybean, sunflower and rapeseed degraded the environment more because they were not perennial crops, had much lower yields and needed much more fertiliser.
Still, bowing to pressure from the NGOs and consumers, palm oil growers acceded to a system of certification for palm oil under RSPO which eventually came to be an organisation dominated by NGOs, consuming multinationals, traders and intermediaries with growers having just four seats, the same as NGOs in a council of 18.
In return for certification – a process which says the oil was produced without deforestation, with due care taken of indigenous people, no exploitation of workers etc - palm oil consuming multinationals such as Unilever and Nestle pledged to purchase the certified palm oil instead. Presumably this removes the threat by NGOs to urge a boycott of these products.
But Malaysian growers, many of whom jumped on the RSPO bandwagon because they were seduced to believe that they will get a competitive edge over their Indonesian brethren, are now finding out that the premium for certified palm oil is so low that it is not even covering certification costs.
The Malaysian producers are now saying that they may not increase the amount of certified palm oil produced unless there is demand for them, which taken together with the Indonesian move may stall the RSPO certification process.
Meantime, Malaysia is also in the process of implementing its own standards for certification. And in the marketplace, the demand for palm oil continues to increase because of rising affluence and an increasing population.
All of these will combine to put considerable pressure on the RSPO but ultimately, what will determine the demise or otherwise of RSPO is whether palm oil producers remain united in the face of adversity instead of allowing their ranks to be riven by false promises and expectations and the unfortunate human desire of getting the better of another.
If Malaysia and Indonesia, which produce 85% of the world’s palm oil, can work together for the benefit of the industry and to remove threats to the usage of the oil jointly, much can be achieved.
Palm oil producers, taking into account the legitimate demands of the marketplace, must determine the standards. And they must demand that other oils meet similar standards. If they don’t the fair thing for them to do is drop certification.
Its all fine and dandy for Europeans to say no more forests must be cleared when they have cleared all of theirs. Countries like Indonesia have a burgeoning and large population which needs land.
Deforestation is an economic necessity.
The NGOs should focus on how the forests can be cleared to cause as little impact as possible on the environment. Planting palm oil in deforested areas is one way of ensuring that there is some green left while at the same time providing income to impoverished people. Instead NGOs penalise palm oil produced from deforested areas.
If Indonesia and Malaysia can jointly agree on common standards which are in consonance with the legitimate and reasonable demands of the marketplace, it will be a step in the right direction.
But, they need to slow the pace to give other oils and other products a chance to become sustainable as well. In a right and correct world there is no reason why ALL products should not be certified to say that they are sustainably produced.
What palm oil producers must never do is to submit to the blackmail of some of the NGOs, whose very existence depends on them raising emotive issues among the public such as orangutans losing their habitat to get their own funding.
Above all, they must attain and keep unity.
> Managing editor P Gunasegaram is a firm believer in this old adage: United we stand, divided we fall.