Buoyed by growing green palm oil production, an industry body will use a meeting this week in Jakarta to persuade top vegetable oil consumers India and China to start buying.
The Roundtable on Sustainable Palm Oil (RSPO), which created voluntary standards that include pledges to preserve forests, has certified more than seven percent of 45 million tonnes in global annual output in over two years.
But RSPO’s efforts risk being overshadowed by squabbles among its stakeholders — planters, buyers, lenders and green groups — over adding carbon emission targets to the green standards and tighter financing.
“What we hope to get, is that there is still a movement forward,” said Jan Kees Vis, global director of sustainable sourcing for consumer goods giant Unilever.
“We need to get the Indian and the Chinese market involved, which is difficult to do. Both markets have only recently opened up to retail,” added Vis, who is also the chairman of the RSPO.
Vis is one of many industry watchers warning that European demand for green palm oil may not be enough to keep up the momentum and China as well as India, which soak up 40 percent of global output, must get on to the bandwagon.
Indian traders have asked the government to cut its tax on eco-friendly palm oil imports to boost demand and the RSPO will probably brainstorm with a trade delegation from China at the meeting to consider similar steps.
Walking away
Lingering issues such as calculations about greenhouse gas emitted by plantations and stricter financing rules remain unresolved, which may see the group lose some momentum.
While planters and green groups agree estate expansion at the expense of forests and processing palm oil emits climate-warming carbon dioxide, they are divided on how to interpret the CO2 data and set standards.
“Last year, if we had passed a members’ resolution to adopt greenhouse gas principles, a large part of the plantation community would have walked away,” said Ian McIntosh, president of the British unit of Swedish oils processor AAK.
Environmentalists say the standards should be implemented now to shore up RSPO’s credibility but officials say figuring out how to set the calculations for CO2 emissions from palm oil firms’ operations remains a work in progress.
Even established RSPO standards are a problem. Some standards and their adoption as a covenant for financing will further slow the industry’s growth, planters say.
Kuala Lumpur-listed Genting Plantations said a new RSPO policy that required community feedback prior to opening up new lands would disrupt its operations and it plans to support a bid to postpone the policy at the four-day meeting.
The Indonesian Palm Oil Producers’ Association (GAPKI) will also question the World Bank at the gathering over what it calls a discriminatory plan by the body’s global financing arm to supply credit only to RSPO-certified planters.
But the World Bank is following in the footsteps of lenders such as Standard Chartered and Rabobank, who say adopting the standard helps to assess clients.
“As awareness of the environmental impacts of the industry has increased, financing has, indeed, tightened,” said Yulanda Chung, head of sustainable business with Standard Chartered.
HSBC’s Climate Change Fund this year stopped investing in Singapore’s Golden Agri after environmental group Greenpeace accused the firm’s Indonesian unit, SMART TBK, of destroying forests.
Greenpeace’s social media campaign against SMART, which also set off a consumer backlash, environment audits and a grievance panel against the planter set up by the RSPO, still rankles some in the industry.
Other palm oil firms such as Kulim, which has certified estates in Papua New Guinea and southern Malaysia, reckon adopting standards could spur expansion.
“If becoming green differentiates us from our rivals in getting financing and winning clients over, we are all for it. It all boils down to good, old-fashioned business investment,” said Kulim Chief Operating Officer Zulkifli Ibrahim.
