Malaysian Palm Oil Board director general Dr Ahmad Parveez Ghulam Khadir.
Petaling jaya: The second cycle of the Malaysian Sustainable Palm Oil (MSPO 2.0) certification, which came into effect on Jan 1, will inevitably translate to higher cost for oil palm planters but it will be minimal.
The MSPO 2.0 improves upon the original MSPO 2013 standard by adopting stricter and more comprehensive requirements, aligning with current global standards and expectations for environmental, social and governance (ESG) practices.
Director-general of the Malaysian Palm Oil Board (MPOB) Datuk Ahmad Parveez Ghulam Kadir acknowledged that the palm oil supply chain will be under more stringent measures that will help prepare the industry to be more ESG-compliant.
“This would entail higher costs, especially in the area of audit. Most of the industry is already ready and certified, now it is just a matter of going through another round to look at other aspects. I don’t think there will be much of an issue for the companies to comply with the MSPO 2.0,” Ahmad Parveez told StarBiz.
The new regulations are being increasingly viewed as necessary, given the continued green agenda and ESG goals that have now become more prevalent on the international trade scene.
It also helps to keep the country’s palm oil industry competitive even as the European Union Deforestation Regulation (EUDR), which is now delayed, kicks in by Dec 30 for large companies and June 30, 2026 for micro and small enterprises.
But industry insiders also expressed reservations since there is a limit as to how many of these ESG rules can the agriculture industry adopt before it becomes uncompetitive or unappealing as a business venture.
“This will also raise the compliance cost for the industry and eventually cost to the end-consumer. The MSPO 2.0 needs to also be practical as well.
“A more practical approach should take into account the industry’s total cost and impact on the supply chain,” said an industry insider.
Malaysian palm oil exports to the European Union (EU), the region that is now being seen as the biggest proponent of the global green agenda, makes up about 5% of total palm oil exports.
According to Ahmad Parveez, most countries generally do not impose ESG regulations around critical industries, including palm oil, as these are deemed crucial for production of basic items and involves the food industry.
He said based on the data now, most of the country’s industries are already ready and certified.
“It is just a matter of going through another round to look at other aspects. New areas include high conservation value studies and the greenhouse gasses calculator, which will entail additional costs.
“I don’t think there is much of an issue to comply although this may increase the cost of auditing. This may pose transient and initial challenges to industry players, but they will be a very short-term one,” he explained.
One area that will need to be looked at under the MSPO 2.0 is the fresh fruit bunch (FFB) dealers, who have never been certified even under the earlier version of the MSPO.
“For FFB dealers to be certified, I think it will be a challenge and this starts July 1,” he said.
Meanwhile, Ahmad Parveez said contrary to popular perception, the MSPO 2.0 is an entirely internal government initiative and is not being formulated due to pressures from the EUDR.
“The EU only makes up 5% of our exports and most countries do not have such regulations,” he said.
The main destination of palm oil exports from Malaysia are India, China, Kenya and Turkiye, while countries that have seen notable growth in exports in recent times include Saudi Arabia and Japan, data by the Observatory of Economic Complexity or OEC revealed.
The Bursa Malaysia Plantation Index fell by 0.34% to 7,623.43 yesterday in line with overall declines on the broader market and the FBM KLCI, which fell 0.58% or 9.46 points to 1,632.87.
One of the key points of the MSPO 2.0 is the retrospective part where certification is only given for areas not deforested after Dec 31, 2019.
To this matter, Ahmad Parveez said there will be mitigation steps for companies if they would like to get certified.
“We, as the board, are trying to come out with a plan. What is being suggested is a penalty so that they will be able to be licensed. It will be evaluated on a case-by-case basis,” he said.
Under the MSPO 2.0, audits are conducted by independent, third-party certification bodies to ensure integrity and credibility.
Enhanced measures include comprehensive traceability mechanisms and mandatory dealer certification to extend sustainability across the supply chain.
