Sustainability = People + Planet + Profit

Sustainability is an all-encompassing, hard-to-define term that is acquiring fuller meaning for the palm oil industry as it prepares to ship the first certified sustainable palm oil to European markets.
By Susanne Retka Schill | July 14, 2008
Palm oil has taken the lead in world production of vegetable oils in recent years and is now poised to lead in another area. It is the first commodity to develop a certification program to meet the emerging market demand for sustainable production. This concept is not new to the food industry-certification systems have existed for years in niche markets such as organic, kosher and halal. Certified sustainable palm oil is charting new territory for commodity crops, however, by expanding the areas of concern far beyond environmentally friendly production practices to include corporate social responsibility, and conservation of natural resources and biodiversity.

Developing the criteria for sustainable palm oil production in a matter of four years is no small feat. In 2001, the Roundtable for Sustainable Palm Oil brought all the stakeholders to the table-including nongovernmental organizations (NGOs) that have been severely critical of the industry. The process began when the World Wildlife Federation hired a Dutch consultant to explore the possibility of creating what is now the RSPO. The palm oil industry got involved at the start of the process. The 2003 inaugural meeting held in the Malaysian capital, Kuala Lumpur, attracted 200 people from 16 countries. The goals of the RSPO were to develop definitions and criteria for the sustainable production and use of palm oil, and to facilitate implementation of sustainable best practices. The RSPO executive board members reflect the varied stakeholders in the process: four represent palm growers, two processors or traders, two manufacturers, two retailers, two bankers or investors, two NGO representatives for environmental or nature conservation issues and two NGO representatives with social and developmental concerns. By 2005, the preliminary principles and criteria were ready for a dozen oil palm plantations to test the applications on the ground. The revised principles and criteria were adopted in November 2007 at Roundtable 5, witnessed by 540 delegates from 28 countries. The RSPO stage that is currently unfolding is the development of national implementation plans applying the general principles and criteria to each palm-oil-producing nation's individual situation. The national plans are made available for stakeholder comments and approved by the executive committee. Similarly, certification agencies submit their operational plans to be approved as a certifier for RSPO.

The Eight Principles
The final document developed by the roundtable includes eight general principles that are further explained in subpoints termed criteria. The first RSPO principle calls for a commitment to transparency. Oil palm growers and millers are asked to provide adequate information to other stakeholders on issues relevant to RSPO criteria. Secondly, the industry is required to demonstrate compliance with applicable laws and regulations, a requirement partly aimed at land-use issues. Complying with environmental and, material handling regulations are also included in the criteria.

Players in the Sustainable Palm Oil Supply Chain

The third and fourth principles won't require a big change for businesses, as they are based on common contemporary agricultural practices. Principle three calls for a commitment to long-term economic and financial viability, which is demonstrated by a three-year business or management plan. (Individual small landholders are exempt from the third principle.) Principle four calls for the use of appropriate best practices by growers and millers. This involves keeping fertility management records, creating strategies for fragile soils, managing water quality, using integrated pest management, and developing occupational health and safety plans.

The next three principles reflect the interests of the NGO stakeholders, who have long advocated for consideration of conservation and social issues. The palm oil industry has taken a beating from NGO critics who decry the loss of tropical rainforests, publicize the plight of the endangered orangutan whose native habitat has been planted to oil palm and advocate for displaced indigenous people. Principle five calls for environmental responsibility and conservation of natural resources and biodiversity. Oil palm growers are being asked to identify the environmental impacts of their management plans, and to develop plans to mitigate negative impacts and promote positive ones. High conservation value habitats must be identified and protected. Waste is to be minimized and the use of renewable energy maximized.

Principle six calls for the industry to act responsibly toward employees, individuals and communities affected by the production and milling of palm oil. The RSPO extends this principle beyond employee relations such as nondiscrimination, fair pay and working conditions, to include social impacts on communities. Much like the environmental impact assessments called for in principle five, oil palm growers and mills are asked to evaluate the impact of their operations on communities and to develop a process where the community is involved in the evaluation and any resulting mitigation plans.

Principle seven calls for the creation of a comprehensive independent social and environmental impact assessment before the establishment of new oil palm plantings. While new plantings are not banned, the criteria lays out the need for an analysis of the impact on communities, indigenous populations and impacts on the watershed and the identification and protection of high-value conservation areas.

Lastly, the eighth principle calls for a commitment to continuous improvement in key areas of activity which include such things as reducing chemical use, pollution, emissions and waste, and improving environmental and social impacts.

Preparing to Comply
Because of the comprehensiveness of the RSPO principles, some large oil palm plantations believe it may be years before they can fully comply across all of their operations. The biggest challenge may be in small landholders getting certified, most of whom have 20 acres or fewer. Educating the small landholders and helping them develop the necessary recordkeeping is expected to take time. Their contribution to total production is not insignificant. In Malaysia, 40 percent of the nation's palm oil production comes from those small landholders, many of whom participate in processing and marketing cooperatives. However, many plantations comingle small landholder fruit bunches for processing and will be required to document adherence to the principles and criteria for certification.

In April, the Malaysian Palm Oil Council sponsored the first International Palm Oil Sustainability Conference to highlight new research and developments on environmental issues and to continue the dialogue within the industry on the challenge of complying with the principles and criteria which they helped to write. Speakers at the conference boiled down the RSPO principles and criteria, indicators and guidance statements that make up the 53-page document into this catch phrase: sustainability means people, planet and profit. In one sense, the RSPO certification process is calling for a system of documentation and auditing analogous to the accounting standards followed by most businesses today, where certified public accountants audit the books. The RSPO expands the concept into new fields of expertise. Sabarinah Mazurky, certification executive with the Malaysian firm QAS International Sdn Bhd, says the RSPO scheme will likely require an ecologist to verify that the areas of high-conservation value have been properly identified and the management plan is complete. Sociologists may also be needed to evaluate the company's approach to handling community issues. She described her organization's approach to setting up a certification system for the RSPO at the sustainability conference.

Other speakers at the conference addressed the challenges of complying with the standards. Many of the plantations participating in the RSPO are 50 to 100 years old and have long incorporated British sensibilities on social issues inherited from the colonial period, says Joshua Mathew, senior manager of agronomy at the IOI Corporation Bhd.'s research center. "However, these old estates have no documents for environmental and social impact assessments, and action plans to mitigate negative impacts." He says preparing the required documentation for the RSPO certification process will be a "mammoth task" and believes there should be flexibility in applying the new standards. "One cannot expect perfect procedures to be in place in every aspect of plantation management," he says. "A minimum benchmark lower than perfect is required, at least at this early stage of the certification process of RSPO oil, followed by continuous improvement programs as stated in principle eight." Mathews predicts oil palm expansion will be hampered because of the lack of personnel with experience and practical expertise to create the impact assessments required by principle seven.

Over its 150 year history, Sime Darby Bhd. has continually made improvements, says Senior Vice President Syed Mahdhar Syed Hussain. With a recent round of mergers, Sime Darby is the world's largest palm oil producer employing 102,000 people in its offices and plantations covering 560,000 hectares (1.4 million acres) in Malaysia and Indonesia. Most of the improvements Hussain detailed in his presentation at the sustainability conference dealt with agronomic advances in palm oil production. The palm oil industry has been roundly criticized for its use of burning to clear and replant land, which Hussain admits his company practiced some 30 years ago. Once the negative impacts became clearer and burning was outlawed in Malaysia, the practice was discontinued. "Now we know," he says. "The biggest sin is knowing and not doing anything different." Sustainable practices adopted in recent years at Sime Darby include integrated pest management measures such as encouraging owls for rodent control, water management and effluent treatment to protect water resources and the recycling of mill byproducts for energy or fertilizer. Since June 2007, the company has created conservation areas in each of its plantation estates, setting aside 18,000 hectares (44,000 acres). The company has also established a 400-acre Heritage Park to house a gene bank of the 3,000 tree species found in peninsular Malaysia.

Like Sime Darby, Wilmar International Ltd. has set aside 5 percent of its planted area, or about 10,000 hectares (25,000 acres) for conservation, according to Simon Siburat, coordinator of RSPO initiatives for Wilmar. Additionally, the company has adopted a zero-burn policy for replanting acres and is utilizing biomass for energy. The company has three Clean Development Mechanism projects in Indonesia registered with the United Nations Framework Convention on Climate Change which are generating carbon credits. The projects include biomass energy plants using waste products from palm mills. New projects are in development to trap methane from oil mill effluent pods for power generation.

Corporate social responsibility needs to go far beyond looking after plantation and mill workers' welfare through the provision of housing and amenities, recreation, and health and safety programs, Siburat says. Wilmar, and other plantation companies, are building schools for the children of migrant workers and providing free education. Wilmar has a pilot project to convert flood-prone land to paddy fields for rice cultivation for local food production. In another project, plantation harvesters can purchase buffalo at subsidized rates to increase their work productivity, and thus their incomes.

Siburat says that the harsh reality of being in business today is the loss of public trust. There is a growing outrage with corporate behavior, he says. "The community license to operate is no longer automatic." Even bankers are beginning to include sustainability performance as criteria for investment decisions. Hussain agrees that corporate social responsibility is important, but adds, "if we don't make money we are dead. We are proud of our achievements, but we know this is a very long journey."

As the palm oil industry begins its journey towards full sustainability, the rest of the biofuels industry will be watching to see how the RSPO framework influences the other efforts to define sustainable biofuels worldwide.

Susanne Retka Schill, a Biodiesel Magazine staff writer, was hosted by the Malaysian Palm Oil Council on a tour of the Malaysian industry. Reach her at or (701) 738-4962.
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