Alan Rownan, Ethical Labels Analyst, Euromonitor International12.17.15
Malaysia and Indonesia have recently announced plans to formally establish a bilateral council aimed at regulating palm oil production. The Council of Palm Oil Producing Countries (CPOPC) will attempt to regain sovereignty of palm oil regulation from industry led voluntary frameworks such as the Roundtable on Sustainable Palm Oil (RSPO), which has led the march toward certified sustainable production since 2004. So what will this mean for the future of sustainable palm oil?
Essentially, the formation of CPOPC could force companies into making difficult decisions regarding their palm oil purchasing policy. With many global leaders historically choosing RSPO as their marker for sustainably sourced palm oil, the new regulation is intended to supersede this voluntary framework, which currently certifies around 20% of global palm oil production, the majority of which is sold in developed markets where palm oil can demand a premium given the controversy surrounding its production.
From a corporate social responsibility (CSR) perspective, companies that have relied on RSPO to adequately deliver sustainable palm oil (93% of which is sourced from Malaysia and Indonesia) could be affected by this state intervention, and the likes of Mars, Mondelez and Pepsico may end up realigning their palm oil sustainability commitments in accordance with the new guidelines as the RSPO framework bends under the weight of CPOPC.
CPOPC’s Actions Speak Louder Than Words
CPOPC has offered assurances that the council will incorporate comprehensive sustainability strategies into the new framework; however, the industry remains skeptical. Directly conflicting with these assurances, the CPOPC has requested that palm oil companies roll back plans to enforce the 2014 Indonesian Palm Oil Pledge (IPOP), which set about curbing deforestation in palm oil production, setting off alarm bells in developed markets where this target has long since been a critical objective, sparking further unrest among non-governmental organizations (NGOs) aiming to prevent further deforestation.
Uncontrollable slash and burn fires associated with clearing forests for palm oil plantations have been raging in Indonesia for more than two months and have been called a “crime against humanity” by Sutopo Puro Nugroho, the spokesperson for the Meteorology, Climatology and Geophysics Agency (BMKG), with reports claiming the toxic haze has forced more than 120,000 people in Malaysia and Indonesia to seek medical attention. With Indonesia facing universal criticism on the back of this, the arrival of CPOPC couldn’t have come at a more precarious time.
To add to the litany of environmental concerns is the current economic uncertainty of palm oil, with the storm climate cycle El Niño threatening to massively inhibit palm oil output in 2016. In light of these threats to production, CPOPC’s primary goal will be to act as a price stabilizing mechanism through the challenging times ahead.
The environmental and public health concerns could force CPOPC to strike a balance between developed market’s sustainability standards and palm producing countries’ economic goals, which remain focused on enhancing the ability of smallholder palm farmers to increase their yield.
Weighing Concerns: Economy or Ecology?
The RSPO demanded premium is justified by providing extensive levels of traceability and offers the assurance that RSPO palm will not contribute to rainforest destruction. CPOPC standards, however, aren’t likely to be commensurable with major companies’ current CSR goals and targets; CPOPC’s focus largely remains on economic stimulation and its sustainability strategy remains mired in ambiguity.
For this reason it’s difficult to see the formation of CPOPC as anything other than a means of declining the role of NGOs in sovereign matters, however, the far ranging implications caused by reimagining the industry praxis may cause more damage not just to the burning forests in Sumatra and Kalimantan, but to the long-term value of palm oil in developed markets. A regression in sustainable sourcing is a risky step considering the mounting pressure on global leaders (public and private) to make environmental protection a core component of their CSR strategy and CPOPC will do well to not become an anachronistic voice in the new age of responsibility.
For further insight, contact Ewa Hudson, Global Head of Health and Wellness Research at Euromonitor International, at ewa.hudson@euromonitor.com.
Essentially, the formation of CPOPC could force companies into making difficult decisions regarding their palm oil purchasing policy. With many global leaders historically choosing RSPO as their marker for sustainably sourced palm oil, the new regulation is intended to supersede this voluntary framework, which currently certifies around 20% of global palm oil production, the majority of which is sold in developed markets where palm oil can demand a premium given the controversy surrounding its production.
From a corporate social responsibility (CSR) perspective, companies that have relied on RSPO to adequately deliver sustainable palm oil (93% of which is sourced from Malaysia and Indonesia) could be affected by this state intervention, and the likes of Mars, Mondelez and Pepsico may end up realigning their palm oil sustainability commitments in accordance with the new guidelines as the RSPO framework bends under the weight of CPOPC.
CPOPC’s Actions Speak Louder Than Words
CPOPC has offered assurances that the council will incorporate comprehensive sustainability strategies into the new framework; however, the industry remains skeptical. Directly conflicting with these assurances, the CPOPC has requested that palm oil companies roll back plans to enforce the 2014 Indonesian Palm Oil Pledge (IPOP), which set about curbing deforestation in palm oil production, setting off alarm bells in developed markets where this target has long since been a critical objective, sparking further unrest among non-governmental organizations (NGOs) aiming to prevent further deforestation.
Uncontrollable slash and burn fires associated with clearing forests for palm oil plantations have been raging in Indonesia for more than two months and have been called a “crime against humanity” by Sutopo Puro Nugroho, the spokesperson for the Meteorology, Climatology and Geophysics Agency (BMKG), with reports claiming the toxic haze has forced more than 120,000 people in Malaysia and Indonesia to seek medical attention. With Indonesia facing universal criticism on the back of this, the arrival of CPOPC couldn’t have come at a more precarious time.
To add to the litany of environmental concerns is the current economic uncertainty of palm oil, with the storm climate cycle El Niño threatening to massively inhibit palm oil output in 2016. In light of these threats to production, CPOPC’s primary goal will be to act as a price stabilizing mechanism through the challenging times ahead.
The environmental and public health concerns could force CPOPC to strike a balance between developed market’s sustainability standards and palm producing countries’ economic goals, which remain focused on enhancing the ability of smallholder palm farmers to increase their yield.
Weighing Concerns: Economy or Ecology?
The RSPO demanded premium is justified by providing extensive levels of traceability and offers the assurance that RSPO palm will not contribute to rainforest destruction. CPOPC standards, however, aren’t likely to be commensurable with major companies’ current CSR goals and targets; CPOPC’s focus largely remains on economic stimulation and its sustainability strategy remains mired in ambiguity.
For this reason it’s difficult to see the formation of CPOPC as anything other than a means of declining the role of NGOs in sovereign matters, however, the far ranging implications caused by reimagining the industry praxis may cause more damage not just to the burning forests in Sumatra and Kalimantan, but to the long-term value of palm oil in developed markets. A regression in sustainable sourcing is a risky step considering the mounting pressure on global leaders (public and private) to make environmental protection a core component of their CSR strategy and CPOPC will do well to not become an anachronistic voice in the new age of responsibility.
For further insight, contact Ewa Hudson, Global Head of Health and Wellness Research at Euromonitor International, at ewa.hudson@euromonitor.com.
