Palm Oil Producers Say Green Efforts Not Paying Off

Arti Ekawati, The Jakarta Globe 31 May 09;

It seems that the European preference for green products only goes so far.

While many palm oil plantations and farmers are struggling to get certificates proving their palm oil is produced in a sustainable manner, others that have the certificates are complaining that buyers in Europe don’t want to buy their products because they are too expensive.

Now, the local palm oil industry would like to see the Europeans put their money where their mouths are.

Derom Bangun, the vice chairman of the Indonesian Palm Oil Board, said that there was a tendency among some European buyers not to buy certified crude palm oil because it costs more than noncertified CPO.

“The producers go through the certification process to fulfill requirements set by the European Union,” Derom said on Friday. “However, once they get it, they complain that buyers from EU countries don’t want to buy the certified palm oil because the price is higher.”

The Roundtable on Sustainable Palm Oil certificate is a kind of green passport that indicates a company’s palm oil plantations do not harm the environment.

In order to meet the organization’s criteria, companies must demonstrate a commitment to managing plantations in a sustainable way and acting responsibly as a custodian of the environment and as an employer.

The RSPO’s audits and inspections are undertaken by independent third parties to avoid charges of “green-washing,” or bogus environmental certification.

The EU is in the process of requiring all palm oil producers to certify both crude palm oil and derivative products. Companies that do not obtain certification by 2010 will not be allowed to sell to EU countries.

In the meantime, however, European consumers still have a choice between certified and noncertified CPO products.

Derom said it was to be expected that certified CPO would trade at a higher price because it was sold as a premium-quality product and producers had to pay certification fees.

Local CPO producer PT Musim Mas, for example, spent about $600,000 to certify its plantations and two palm oil processing factories in February.

“At present, the certification fee is about $20 per hectare,” Derom said. “That is cheaper than when the certification process first began, when it cost $50 a hectare.”

Derom urged CPO buyers, and especially those in the EU, to prioritize buying certified CPO. He said that buying certified palm oil was an important way to encourage other producers to manage their plantations sustainably.

Vengeta Rao, the secretary general of RSPO, said that there were two main reasons why buyers were not choosing certified palm oil. First, he said, a drop in CPO demand amid the global economic crisis had pushed buyers to save money by dropping certified oil in favor of the cheaper alternative. And second, buyers were continuing to sign new contracts with CPO companies that have not been certified.

Rao added, however, that there did not necessarily have to be a difference between the price of certified and noncertified products.

“The more efficient the company is, the less money it needs to spend for certificate,” he said. “This means there is less of a price difference.”

At present, Rao said that his organization “tolerated” the fact that EU buyers were accepting noncertified CPO, but he reiterated that this would have to change starting in 2010 once the bloc’s new import rule kicks in.

Moves to certify palm oil began amid a boom in CPO trading during the mid-1990s. At the time, because of the widespread clearing of forests for new plantations, many began to worry about the reductions in biodiversity that forest clearing would cause.

In response, palm oil producers in Malaysia and Indonesia — along with buyers, industry experts and environmentalists — formed the RSPO in 1994.

The group’s efforts, however, have sometimes drawn criticism. When the first batch of RSPO-certified palm oil arrived in Europe in November 2008, the company involved, Malaysia-based United Plantations, was accused by environmental organizations Greenpeace and Wetlands International of not actually meeting the RSPO’s requirements.

United responded with a detailed rebuttal of the allegations, but Greenpeace maintains that the roundtable’s system fails to adequately address issues like deforestation, peatland clearance and other land-related conflicts.

There could be even more problems ahead for the RPSO, with reports emerging of a mounting green campaign against palm oil in Europe.

Despite this, local CPO companies are still applying for RSPO certification, though only a few have so far been approved.

Of the group’s 94 member companies worldwide, only 11 have obtained certificates. Just three Indonesian companies have earned the distinction: PT Musim Mas, PT London Sumatra Plantation and PT Hindoli.

Ten other significant local players expect be certified by the end of this year, including state-owned PT Perkebunan Nusantara III and PT Sinar Mas.