Sustainability in the palm oil sector

Palm oil is the most produced and traded vegetable oil in the world; it is an important ingredient for food, feed and fuel or oleo chemical products. The oil is pressed from the orange pulp of the fruit of the oil palm tree, which contains about 30-35 per cent oil. Although palm oil makes up 40% of worldwide vegetable oil consumption, it only occupies 7% of agricultural land dedicated to vegetable oil production. Palm oil has the highest yield compared to other oil crops per hectare of land. This high yield and the wide variety of usages of palm oil make it an essential resource in ensuring global food security and combatting rural poverty. 

Since 2000, the production of palm oil has doubled and it is expected to grow even more in the future as worldwide demand for vegetable oils is still rising. If not carefully managed, increased production could come at the expense of forests and biodiversity and ignite social conflict. However, a sustainable management and production of palm oil with environmental protection and socio-economic benefits is very possible.

Sustainable palm oil inforgraphic

What is sustainable palm oil?

Sustainable palm oil production involves policies that commit to no deforestation, no peat development, and no exploitation. There are several global and local bodies that promote the growth of the sustainable palm oil sector. Within Malaysia, Malaysia Sustainable Palm Oil (MSPO) certifies grower and mills through national standards and encourages growth of the sustainable sector. On a global scale, the Roundtable on Sustainable Palm Oil (RSPO) is the leading certification body. RSPO was established in 2004 with the goal of promoting the growth of the sustainable palm oil sector through credible global standards and engagement of stakeholders. Both the MSPO and RSPO have developed a set of environmental and social criteria which companies must comply with in order to produce certified sustainable palm oil. When they are properly applied, these criteria can help to minimize the negative impact of palm oil cultivation on the environment and communities in palm oil-producing regions.

Certification criteria for MSPO and RSPO

It is important to note that both MSPO and RSPO criteria state no primary forests or areas which contain significant concentrations of biodiversity (e.g. endangered species) or fragile ecosystems, or areas which are fundamental to meeting basic or traditional cultural needs of local communities (high conservation value areas), can be cleared for palm oil production. Other principles stipulate a significantly reduced use of pesticides and fires; fair treatment of workers according to local and international labour rights standards, and the need to inform and consult with local communities before the development of new plantations on their land. By adhering to the principles stipulated by RSPO and MSPO, the negative influences of palm oil on the environment and communities can be significantly reduced.

As per 2019, 19% of palm oil globally is certified by the RSPO. Within Malaysia, 63% of growers and 76% of mills are certified sustainable under MSPO. Malaysia aims to certify the whole sector in 2020. MSPO certification is mandatory.

MSPO and RSPO certification grades

Smallholders

Smallholders are farmers who grow palm oil on small scale, often alongside other crops. The family generally provides the majority of the labor and the farm provides the principal source of income. Compared to large plantations, smallholders are at a disadvantage because they often have to cope with inadequate information and knowledge in growing palms and selling oil. With fewer resources at their disposal they often also lack the means to invest in high-quality seeds and fertilizer. These factors result in markedly lower yields compared to commercial plantations, which reduces smallholders’ incomes.

This inequality in resources and knowledge influences the share of smallholders that are certified sustainable. While the overall MSPO certification grade for Malaysian palm oil growers is at 63%, only 9.6% of smallholders holds a certification. To help smallholders meet certification standards, different actors such as the MSPO and RSPO, large palm oil cooperations like Sime Darby, and government agencies offer support in improving management practices, ensuring better quality produce, increasing yields, and accessing markets. The RSPO Smallholder Support Fund (RSSF), for example, makes it possible for palm oil smallholders around the world to achieve RSPO certification without incurring the cost. Including smallholders in sustainability certification programs is important because it will reduce the negative consequences on communities and the environment for the sector as a whole, as well as enable smallholders to increase their yields and income and access new international markets.

MSPO certification grades for different types of growers in Malaysia

In a bid to empower smallholders and increase the sustainability of the palm oil sector, the Netherlands governments funds the National Initiative for Sustainable Climate Smart Oil Palm Smallholders (NISCOPS,) a program implemented by Solidaridad and IDH – the sustainable trade initiative. This program has been designed to provide support to communities, local governments and companies that want to protect and restore landscapes in which oil palms are an important economic activity. Improved  productivity and incomes of smallholders and workers is envisioned to go hand in hand with protection and restoration of forests and water. For smallholders, the project encourages sustainable development by offering technical assistance to farming communities and their workforce.

The Netherlands commitment to sustainable palm oil

The Netherlands is committed to move towards a sustainable palm oil supply chain. The Dutch Alliance for Sustainable Palm Oil is a collaboration between numerous food and feed industry associations, which aims to move towards 100% sustainable palm oil in the Netherlands by 2020.  The Dutch Alliance was the first of its kind, and has created a momentum of other alliances in Europe, North America and South-East Asia. These developments are important because we need global demand for sustainable palm oil to transform the entire supply chain.

Commitments have also been made on the European level, under the Amsterdam Palm Oil Declaration in 2015. Eight national and three European sector organization signed this declaration and work together and support each other as partners in transforming towards a 100% sustainable palm oil supply chain in Europe in 2020. Europe is the third largest global import market for palm oil and within Europe the Netherlands is the biggest importer. As such, Europe can be an important ‘game changer’ when it comes to a sustainable palm oil supply chain.

The percentage of RSPO certified palm oil processed in the Netherlands has been steadily increasing over the last years from 74% in 2014 to 88% in 2017, and this trend continues. 100% if palm oil in the Netherlands is traceable to mill and covered by no deforestation, no peatland development, and no exploitation policies.