Making palm oil more sustainable

                                                                            Palm oil has long been a major economic backbone of Southeast Asian economies, notably Indonesia, Malaysia and Thailand. But the undeniable environmental impact of extensive deforestation, haze and forest fires caused by oil palm plantations has given the industry a bad reputation that has been hard to shake.

To pave the way for greener practices and greater economic benefit from the palm oil sector, policymakers, businesses and consumers have key roles to play in supporting sustainable palm oil by demanding it, experts say.

Part of the solution is to help small-scale farmers adopt more responsible practices, which will make it possible for them to obtain global certification standards and gain improved access to international markets.

“Mobilising investments in knowledge and microfinance capacity for oil palm smallholders to shift toward sustainable palm oil production is essential for improving local livelihoods and the global food supply while reducing the climate and environmental impact,” said Matthias Bickel, director of the Agriculture and Food Cluster at Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH.

The Thai unit of the German international development agency works with the Department of Agriculture, Department of Agricultural Extension and private partners to promote sustainable palm oil production in Thailand, in line with globally recognised standards set by the Roundtable on Sustainable Palm Oil (RSPO).

The alliance has organised a series of ongoing training sessions to enhance smallholders’ capacity for sustainable practices to achieve RSPO certification.

GIZ recently co-hosted a business forum, “Road to Transforming the Sustainable Palm Oil Market in Thailand”, in Bangkok together with the RSPO under their Sustainable and Climate-friendly Palm Oil Production Project (SCPOPP).

“Through the SCPOPP, we aim to train over 3,000 oil palm smallholders in sustainable practices, as well as reduce 9,600 tonnes of greenhouse gas emissions from oil palm cultivation and cut production costs by 20%, within 2022,” Dr Bickel said.

According to participants at the forum, many palm oil producers are sensitive to the criticism the industry receives, and some question why other large-scale agricultural ventures in the region do not receive similar scrutiny.

For example, they say, corn planting in northern Thailand has also caused massive deforestation. As well, sugarcane plantations in Thailand and Cambodia have contributed to environmental devastation from fires set during the harvest season.

PEATLAND UNDER THREAT

They said the biggest environmental concern of the palm oil industry is the expansion of cultivation to rainforests and peatland, known not only as a source of biodiversity but also a major storage point for carbon emissions. Wetlands International, the Netherlands-based conservation group, says that 20% of oil palm planting, especially in Indonesia, takes place on peat soil, which used to be covered by peat swamp forests.

The drainage of these carbon-rich organic soils for plantations leads to massive carbon dioxide emissions, soil subsidence, and ecological and social problems. Carbon emissions from unsustainable cultivation are massive.

Key players in the palm oil industry have heeded the criticism and have been making steady progress in improving practices. Their most high-profile initiative is the RSPO, which was established in 2004.

“Ensuring greater inclusion of smallholders in sustainable solutions that positively impact their livelihoods has long been a goal of the RSPO secretariat and our members,” said Beverley Postma, the chief executive officer-designate of the RSPO.

“We recognise the important role smallholders play in market transformation and we see this as a shared responsibility that all players in the palm oil supply chain must commit to supporting.”

Thailand, for example, has the capacity to produce up to 3.7 million tonnes of palm oil per year. A majority of palm oil products come from small and medium-scale companies. Yet they lack supportive policies such as cheap loans, capacity training and access to modern technology, she pointed out.

“Last year, our membership adopted the RSPO Independent Smallholder (ISH) Standard, which aims to help more smallholders achieve certification through a stepwise mechanism, while adhering to the key sustainability requirements,” said Ms Postma.

“Although 2020 has been a challenging year for all with the global pandemic, we are seeing positive progress toward ISH certification and we hope to see Thai smallholders attain this in the near future.”

At present, RSPO-certified palm oil represents 19% (17.11 million tonnes) of the total global supply. In Thailand, just 2.8% of the country’s total supply is certified.

Prakarn Verakul, an adviser to the National Bureau of Agricultural Commodity and Food Standards, said adoption of RSPO guidelines will enable oil palm smallholders to effectively manage their plantations and improve the overall sustainability of the supply chain.

The majority of palm oil production in Thailand is for domestic consumption and the country has not faced as much criticism related to environmental, labour and human rights issues as Indonesia and Malaysia, which together account for 86% of global supply.

However, RSPO certification is still essential for Thailand as long as the country exports consumer products such as frozen chicken, instant noodles, and soaps which use palm oil in the manufacturing process.

“International markets are moving toward environmentally friendly products, and commitments to transparency and best farming practices,” said Mr Prakarn, a former chairman of the RSPO National Interpretation Working Group.

“If consumer product makers switch to use palm oil that is manufactured based on RSPO principles, we can certainly increase the productivity and competitiveness of the entire value chain, and eventually oil palm smallholders’ production costs will be reduced,” he added.

“Moreover, smallholders could earn additional income from RSPO certification. One smallholder group in Krabi has already earned approximately 700,000 baht from selling RSPO credits.”

GREENING PRODUCTION

Sanin Triyanon, managing director of Pathum Vegetable Oil Company Ltd, agreed that unlike its neighbouring producing countries, Thailand’s palm oil industry does not face the same international pressure related to environmental concerns.

“There is room for the sustainable palm oil market to grow in Thailand and more consumers in major consuming countries are demanding sustainable palm oil products that support communities and safeguard the environment,” said Mr Sanin, who is also the chairman of the Thai Biodiesel Producers Association.

However, it is still vital that palm oil businesses work with oil palm smallholders in the supply chain to enhance their productivity and improve livelihoods. Besides, raising public awareness about sustainable palm oil consumption is essential for market competitiveness at both the domestic and international levels.

“Collaboration with not only policymakers in setting direction and implementation guidelines, but also the private sector in working directly with small-scale oil palm growers and consumers are key steps to transforming Thailand’s palm oil production to meeting the international standard,” he said.

Pathum Vegetable Oil was the first Thai company certified by the RSPO for responsible oil palm plantation management in 2012. The certification asserts that the company’s business has complied with global demand for sustainable palm oil production.

One of the big challenges facing corporations is tracing palm oil through a massive and complicated supply chain. The use of new technology such as drones is helping, but more is needed.

Easier access to loans is required to help small and medium-sized producers acquire the technology that will make traceability of the palm oil supply chain more reliable and affordable.

Salinla Seehaphan, corporate affairs director of the retail giant Tesco Lotus, said the company has been part of the Thai economy for 20 years. It is promoting Thai exports in growing markets such as Malaysia, after the success in exporting Thai products through more than 6,500 Tesco stores in Britain, Central Europe and Asia.

“Apart from exporting fresh food, Tesco Lotus is working closely with Thai manufacturers to develop high-quality products for export. As one of the world’s leading retailers, we hope to use our expertise to help Thai businesses successfully enter the global market,” she said.

Tesco Lotus is pioneering in using 100% certified sustainable palm oil in its own-brand cooking oil in Thailand. “With this attempt, we wish to deliver good quality products to consumers while safeguarding the environment,” she added.

“Innovation can help oil palm smallholders, millers and refineries improve operational efficacy as consumer behaviour is changing rapidly, and support the lifestyle needs and demands of customers in the digital era.”

SHARED RESPONSIBILITY

Khor Yu Leng, a political economist and agribusiness analyst at the London School of Economics, who has been tracking sustainability of certification practices, said palm oil players could move toward having more than one type of certification to meet different market needs.

Malaysia, for instance, has set up its own certification body, the Malaysia Sustainable Palm Oil (MSPO), which is a mandatory national standard. It is aimed at improving the accountability of local palm oil products as well as promoting domestic consumption of sustainable palm oil.

Nowadays, more and more buyer brands in Asian countries such as Japan, India and China are aware of sustainable palm oil and are demanding it. But production of sustainable palm oil in Thailand is relatively low and thus the country is not well-placed to meet this growing demand.

However, she believes producers in Thailand will still take the principal RSPO standards into account. Achieving RSPO certification requires high investment cost and can be time-consuming for smaller-scale producers.

Buyers and other stakeholders including retailers and consumers need to share the costs, commitment and responsibility for the sustainable palm oil journey if sustainability is the ultimate goal.