There are a range of sustainability standards in the palm oil sector. The main standard was set by the Roundtable on Sustainable Palm Oil (RSPO) in 2005, and it has seen a slow but steady uptake since then. It covers about 21% of the total supply of palm oil, mainly from major corporate groups. Given the criticisms of the effectiveness of the RSPO, RSPO NEXT was recently launched. It includes more stringent standards.
Some companies have also adopted the International Sustainability and Carbon Certification (ISCC) standard to be able to export to the EU biodiesel markets as stipulated by EU sustainability criteria.
In addition to the international standards, the Indonesian Sustainable Palm Oil (ISPO) is a mandatory certification scheme, while the Malaysian Sustainable Palm Oil (MSPO) is voluntary. One of the aims of the recently created Council of Palm Oil Producing Countries aims to harmonise ISPO and MSPO as a way of counteracting the private sector’s sustainability initiatives.
A recent joint study between ISPO and RSPO found that there is significant scope for alignment. However, the main differences are the definition and treatment of high conservation value (HCV) areas and the rules to follow for developing new plantations – the RSPO’s are more stringent.
Bold commitments to sustainability
Growing pressure from civil society led several major manufacturers to go beyond the sustainability standards, particularly RSPO, and pledge to delink their supply chains from deforestation.
This was followed by pledges such as the Sustainable Palm Oil Manifesto (SPOM) and the Indonesia Palm Oil Pledge (IPOP). These involved the main corporate groups (involved in production and processing) and traders, which control a significant portion of global supply of palm oil. As of December 2015, Supply Change estimated that 188 companies had made commitments to support sustainable supply in the palm oil sector, 61 of which included commitments to zero deforestation.
The zero-deforestation commitments go beyond the HCV concept. They make implementation more difficult as companies are still divided over a definition of forests and a methodology for designating ‘go’ and ‘no-go’ areas. The latter are defined as high carbon stock (HCS) thresholds.
There are difficult politics involved in the implementation of these commitments. The Indonesian government has strongly opposed IPOP, based on the concern that smallholders might be excluded from the palm oil supply chain. Although less visible, corporate commitments have also included pledges to protect local people’s rights and include smallholders in the supply chains.
Stimulating positive interactions between standard systems
There is a need to increase the alignment of the different standards, which could reduce the adoption and verification costs, but this is unlikely to happen. The adoption of more stringent standards may only widen the gap between companies already complying with higher production and environmental standards and small- and medium-scale growers.
Mandatory standards are less stringent and likely to be less acceptable to consumers. It would therefore be desirable for governments to incentivise the adoption of the stricter voluntary standards, while ensuring compliance with minimum regulatory standards.
Company commitments, notably those to zero deforestation, may require strong state support if they are to achieve their targets while also upgrading the production systems of smallholders. Yet critical factors remain to be solved, such as those relating to land registration and legalisation of tenure rights.
In short, while important efforts have been made to define and implement sustainability standards, much is needed to create an enabling institutional environment that facilitates the adoption of those standards and supports more positive interactions between them.
