How can illegal oil palm be weeded out of the supply chain?

Reuters 22 Sep 09;

(Reuters) -- About five percent, or two million tonnes of the expected crop of 40 million tonnes of Crude Palm Oil produced in 2009 is expected to be certified as sustainable this year, environmental standards watchdog, the Roundtable on Sustainable Palm Oil (RSPO) estimates.

However, only a small percentage of this 'green palm oil' has actually found buyers, mainly due to the premium attached; making it harder to keep illegally-grown palm oil out of biscuits, chocolate bars, soaps and thousands of other products, Jutta Poetz, Biodiversity Coordinator at the RSPO Secretariat in Kuala Lumpur, told Reuters in this interview.

WHY IS PALM OIL SO ATTRACTIVE TO ILLEGAL OPERATORS?

Its combined assets of being a cash crop with high yield, high marketability, versatility and promising future, invites desperate moves in order to share the spoils.

WHERE DOES ILLEGAL OIL PALM TYPICALLY ENTER THE SUPPLY CHAIN?

At the level of the individual farmer. Legal and illegal fruit bunches are mixed, as illegal and legal plantings are often contiguous, or at least close to each other. The problem is exacerbated in areas where there are no proper boundary surveys.

HOW DO REGISTERED COMPANIES GET DRAWN IN?

Mills require multiple permits to operate -- almost all are owned by law-abiding companies. However, to be economically viable many of them process the fruits of other growers and farmers as well as their own.

They have neither the capacity nor the legal mandate to trace the origin of all the fruit that reaches their mills.

SO IT'S CORRECT TO SAY THAT, AT PRESENT, THE GLOBAL SUPPLY CHAIN CANNOT EXCLUDE ILLEGAL PALM OIL?

There are still many uncertified mills. These mills accept both legal and illegal crop.

AND CERTIFIED PALM OIL CAN'T CURRENTLY BE SEGREGATED OUT, TO GUARANTEE ITS PROVENANCE?

Commercial supply operations do not traditionally bother about the origins of the oil. All sources are pooled and processed by refineries and then shipped and distributed.

Segregation means additional work, containers, etc all adding to the processing costs at each step in the chain.

With the market's current, discouraging, unwillingness to buy certified oil, due to the premium attached, a further price increase due to segregation is out of consideration.

CAN THE INDUSTRY LEAD A CRACK DOWN?

Palm oil is a commodity that pervades most spheres of the everyday life of everyday people around the entire globe.

The failure to address illegal activities is not based on apathy or fear, but simply the realization that it also needs commitment by governments, to address prevailing social inequalities, corruption, and outdated legislation.

Also, until consumers (together with the supply chain and producers) consciously prefer not to benefit from products that are cheap, and disregard their origins and production methods, the problem will not go away.

SO HOW CAN THE PROBLEM BE SOLVED?

Support for certified palm oil is the most potent driver that can stop, or at least minimize illegal activity. Once the majority of mills are certified, and do not accept illegal crop, its entry into the supply chain would stop. As the volume of certified oil increases the cost of segregation becomes cheaper.

Illegal growers would then either need to go illegal all the way, increasing their own risk factor, convert their activities to legal (which is unlikely), or cease operation, which opens the cultivated land for potential rehabilitation.

WHAT'S A REALISTIC TIMEFRAME FOR THIS?

We expect certification volume to bite in from the second year ... If the markets can weigh-in by providing a clear incentive for RSPO certification there will be very different palm oil industry within 20 years.

Source: Reuters

(Reporting by Gillian Murdoch; Editing by Megan Goldin)