The need to act NOW on sustainable palm oil

Posted on 14/04/2014

Palm-Oil-300x200.jpgAndy Green, Sustainability Sales Manager at BM TRADA, warns suppliers and manufacturers to act now on RSPO certification or risk being frozen out of the supply chain.

It is often said that 12 months is a long time in the world of politics. Well, the same could be said for sustainable palm oil.

In light of growing concern over the significant environmental impact of palm oil cultivation — a key driver of deforestation and biodiversity loss — the majority of UK retailers have made a voluntary, time-bound commitment to sourcing 100 percent certified sustainable palm oil (CSPO) in their own brand products by 2015.

Real progress is now being made in establishing certified sustainable palm oil and the UK is therefore very much at the forefront of what is starting to look like a revolution.

In the past — even just a year ago — we were still talking about the need for British businesses to buy into sustainable palm oil, and bemoaning the relatively low uptake. Now things are finally happening.

Though this progress is to be welcomed, operators within the food and personal care sectors that rely on palm oil and its derivatives need to ensure that they don't just allow this to happen around them without getting involved.

There is a growing awareness of the need for certified palm oil, but companies in the supply chain are not necessarily moving as fast as they should be. This is a genuine concern as the clock is ticking loudly for British firms to show their commitment to responsible palm oil and it is no exaggeration to say that those who fail to prepare will suffer the commercial consequences.

Commitment to sustainable palm
UK retailers have a time-bound commitment to source 100 per cent sustainable palm oil in own-brand products, which constitute around half of their sales, by the close of 2015. The time-frame differs between retailers, some have brought this deadline forward to end of 2014 and many are already pushing their suppliers to get audits booked now so that they can buy products that are certified to the RSPO standard— the only globally-recognised standard that guarantees the sustainability of palm oil.

Similarly, the UK Government now has a procurement guideline for sustainable palm which states that any palm oil purchased has to be sustainable by the close of 2015. The Government will accept GreenPalm Certificates, although this RSPO approved certificate trading scheme was always only meant to be a stop gap whilst wider support for sustainable palm oil gained momentum; it does not guarantee that a specific product contains sustainable palm oil, and therefore does not give retailers or consumers an assurance of transparency and traceability in the supply chain. As such, it comes under fire from NGOs and pressure groups. If a Government department is comparing suppliers and one is fully RSPO-certified while the other is relying on GreenPalm Certificates then they are likely to favour the former. The truth is that they don’t want to be on the receiving end of a high profile campaign by groups such as Greenpeace, a situation which they have found themselves in before, very publicly, when the provenance of responsibly sourced timber was questioned. Those in the food service and personal care sectors are only going to find themselves pushed more and more for sustainable palm oil certification.

With momentum gaining rapidly, there is a distinct possibility, at least in the short term, of a potential shortage in the supply of RSPO-certified palm oil. When it comes to the time when manufacturers and suppliers HAVE to start buying sustainable palm oil, the supply may be limited.

There are two main reasons for this.

Firstly, the biofuel industry is now very interested in sustainable palm oil. All EU member states have an obligation to meet a 10 per cent renewable energy target by 2020 and since April 2013 the RSPO-RED Supply Chain certificate is EU Renewable Energy Directive-approved. This means that renewable diesel produced from RSPO RED certified palm oil now counts towards emission reductions – making it a very attractive commodity.

Add to this that palm is trading fairly cheaply compared to diesel, and it's no surprise to learn that major fuel companies represent significant competition for supplies.

The second factor that could contribute to a shortage in palm lies in the way that palm oil suppliers operate. These companies tend to sell contracts in advance, booking out sales of future sustainable palm on the basis of current availability. Their predictions of limited future stock may mean limited stock becomes a reality.

In addition, there is the question of whether stock will be in the right place at the right time. Companies need to be planning ahead to ensure the palm oil will reach the UK in time.

If you, or your supply chain, are not engaging with palm oil suppliers in the next 6 to 12 months then you could find yourselves in a very difficult situation when it comes to securing sustainable palm oil. Though globally there is unlikely to be a shortage, the fact that it is a seller's market leaves firms open to premiums.

The bottom line
One of the issues raised in the past surrounding certification was the cost involved, but it is now widely acknowledged that the value of certification far outweighs the cost. Companies will find it very difficult to trade without certification going forward, not only nationally but internationally. In Europe, there are similar national commitments to sustainable palm oil in for example, Germany, The Netherlands, and France, while America is becoming more active in the pursuit of sustainable palm oil.

And even in those countries where sustainable palm is not an issue domestically, anyone with a requirement to supply to international markets will need certification to a recognised standard if they want to win business.

But by far the biggest consequence of not acting now will be finding yourself excluded from the supply chain of all the big UK retailers. If you want to maintain your position as preferred suppliers then you need be ensuring that you have certified sustainable palm oil in your products and are yourself certified to be able to pass that claim on.

Aside from the ability to trade, there is also the reputational issue to consider. With rising awareness of the environmental and social impact of palm oil production, sustainable palm oil is now very close to the public's heart.

Though big business, the production of palm oil comes at a heavy cost. Since the 1990s, the area of land used for cultivation in equatorial regions has increased by over 40 percent, accelerating deforestation with an area roughly equal to the size of Greece now cleared every year for its cultivation.

The effect on wildlife has been huge. The Sumatran elephant is now critically endangered while the Sumatran tiger and orangutan are expected to be effectively extinct in the wild by 2025 — largely down to the expansion of non-sustainable palm oil plantations. It goes without saying that no company wants be associated with the demise of the last elephant or tiger.

The good news is that becoming RSPO-certified is relatively straight forward and pain-free. In most of our clients’ experience the certification process is neither particularly difficult nor expensive. So the advice is... become certified, the sooner the better. Lead your supply chain. If you are the first in your supply chain to become certified the others will follow.

By doing so, you are sending a clear message to your suppliers that you are serious about certified sustainable palm oil. You will find that your supply chain will quickly move from non-certified to certified, and you will be equipped to meet all your customers' sustainable palm oil needs.

More information about RSPO certification.

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Andy Green, Sustainability Sales Manager at BM TRADA, warns suppliers and manufacturers to act now on RSPO certification or risk being frozen out of the supply chain.