Palm Oil certification & related issues

Priyanshu
Pre-work for today’s class
Mandatory:
1. Case: Gotong Royong: towards sustainable palm oil, HBR, 9-316-124 – Read
carefully and discuss in groups (be ready to present/argue in class)
2. Pye, 2019: Commodifying sustainability: Development, nature and politics in the
palm oil industry, World development, 161: 218:228

Recommended:
1. https://www.ethicalconsumer.org/food-drink/rspo-criticisms-investigated
2. https://rspo.org/wp-content/uploads/RSPO-Impact-Report-2022.pdf

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Preliminary Questions

• Why is ‘palm oil’ important enough to merit a separate

certification framework?

• What are the major sustainability concerns associated

with palm oil?

• Who are the major stakeholders in the ‘palm oil’

sustainability debate? What do they want?

• How do you bring about real changes towards

‘sustainability’ in the palm oil industry?

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 Palm Oil
▪ World’s most versatile vegetable oil
– 36% of global crop-based oils
▪ Used in countless products
▪ Widely used cooking oil
▪ ~50% of supermarket products
▪ Soap, toothpaste, detergents,
lipsticks, to chocolate, ice
creams, pot noodles
▪ Biofuel for vehicles
▪ Much higher yields than other
vegetable oil plants : 4-10x
▪ Smooth & tasteless
▪ Holds colour well
▪ Can stay solid at room temperatures
▪ Removes oil & dirt
▪ Moisturise hair & skin
▪ Makes soaps & detergents bubbly

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 Major Concerns with palm oil
▪ Contributed 2.3% of
global deforestation; (5%
of tropical) – European
Commission
▪ Endangers rainforest
species; ~10% of world’s
unique fauna in Indonesia
▪ Deprives indigenous
people of native lands
▪ GHG emissions due to
slash & burn practices
▪ Forest fires
▪ Reduces soil health, water
pollution – mill effluents
could damage entire
aquatic ecosystems
▪ India one of the largest
importers
https://palmoilalliance.eu/palm-oil-deforestation/ 5
 Major Concerns with palm oil

https://palmoilalliance.eu/palm-oil-deforestation/ 6
 Palm oil : Economic and social considerations

▪ Disruption of traditional industries like honey, rubber, fruits

▪ Low wages & dangerous & abusive work conditions of workers in oil
plantations
▪ Child labourers
▪ Disease & air pollution

Source: European Parliament

https://www.europarl.europa.eu/RegData/etudes/ATAG/2020/659335/EPRS_ATA(2020)659335_EN.pdf
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Challenges of collective action
• Diverse composition (manufacturing competitors, retailing customers,
etc) made discussions “ferociously difficult”
• Anti-trust concerns meant all discussions had to be scrutinized by
lawyers
• “acted very slowly moving at the speed of its most conservative
members” - Greenpeace
• “It was the NGOs that made us do better….But do the NGOs know what
they want? Not really, they came from ideal thinking, not from the real
world.They don’t talk about costs or future expansion” - GAR
• “all of our suppliers have technically infringed either RSPO standards or
Indonesian law…. Industry almost certainly has to go through fundamental
change” - Unilever
• “transformational change in the palm oil market would require industry to go
beyond collectively and to engage actively with governments”

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Principles & framework for Collective Action
• Ostrom’s 8 design principles for governing commons
– Boundaries of users and resource are clear
– Congruence between benefits and costs
– Users had procedures for making own rules
– Regular monitoring of users and resource conditions
– Graduated sanctions
– Conflict resolution mechanisms
– Minimal recognition of rights by government
– Nested enterprises
• Polycentric governance - self-organized institutions can be
layered and scaled to manage global problems

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Overview of RSPO

https://www.youtube.com/watch?v=0Lev1mnonUM
How can Palm Oil be more Sustainable?

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Roundtable on Sustainable Palm Oil (RSPO)

▪ RSPO is a global, multi-stakeholder initiative

on sustainable palm oil established in 2004 and
operates from a secretariat in Kula Lumpur

▪ Its vision is to “transform the markets by

making sustainable palm oil the norm"

▪ Members include plantation companies,

traders, processors consumer goods
manufacturers , financial institutions and
environmental and social NGOs

▪ RSPO-certified growers account for around

19% of global palm oil production

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RSPO Evolution

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RSPO Standards
▪ Based on three pillars of Prosperity, People and Planet

▪ PROSPERITY: Competitive, resilient and sustainable

sector
▪ Principle 1. Behave ethically and transparently
▪ Principle 2. Operate legally and respect rights
▪ Principle 3. Optimise productivity, efficiency, positive impacts and
resilience

▪ PEOPLE: Sustainable livelihoods and poverty reduction

▪ Principle 4. Respect community and human rights and deliver benefits
▪ Principle 5. Support smallholder inclusion
▪ Principle 6. Respect workers’ rights and conditions

▪ PLANET: Conserve, protect and enhance ecosystems that

provide for the next generation
▪ Principle 7. Protect, conserve and enhance ecosystems and the
environment
Source: RSPO Principle & Criteria (P&C) 2023 13
 RSPO Governance
▪ General assembly designates Board
of Governors comprised of

▪ The Board of Governors is

assisted by Secretariat and
supported by various standing
committees, working groups
and task forces

▪ Members include
▪ Corporations like Coca cola,
Walmart, Ikea, Tesco, Lidl,
Olam international
▪ Investors like ABN Amro, HSBC,
Standard and chartered,
Credit Suisse, IFC;
▪ NGOs like WWF, WRI,
Conservation international,
Wetland international

Source: https://rspo.org/who-we-are/governance/ 14
 RSPO Governance

Source: https://rspo.org/who-we-are/governance/ 15
 RSPO Certification
▪ Standard: RSPO Standard is based on Principles and
Criteria developed and revised every five years. The
standards setting process is done following best practices
as stipulated by ISEAL.

▪ Accreditation: to ensure that the organisations which

undertake certification assessment —the Certification
Bodies —are competent to undertake credible,
consistent audits.

▪ Certification Process: process for establishing whether

or not a set of requirements (i.e. the Standard) has been
met and is carried out by an accredited Certification Body.
Supply chain actors are audited against the RSPO Standard
and certified for five years
Source: https://rspo.org/as-an-organisation/certification/ 16
Palm Oil Supply Chain

Source: https://www.palmoilinvestigations.org/palm-oil-supply-chains.html
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Different Supply Chains for RSPO certification
• Identity Preserved - RSPO Certified Sustainable Palm Oil from a
single identifiable certified source that is kept separately from
ordinary palm oil throughout the supply chain.
• Segregated - RSPO Certified Sustainable Palm Oil from different
certified sources that is kept separate from ordinary palm oil
throughout the supply chain.
• Mass Balance - RSPO Certified Sustainable Palm Oil from certified
sources that is mixed with ordinary palm oil throughout the supply
chain.
• RSPO Credits / Book & Claim - Manufacturers and retailers can
buy RSPO Credits and RSPO Independent Smallholder Credits from
RSPO Certified growers, crushers and independent smallholders.
– a proof that one tonne of certified palm oil was produced by an
RSPO certified company or independent producer, and has
entered the global palm oil supply chain
– Trade in credits ensures extra premium & incentivises producers
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RSPO Small Holders
• More than 3 million smallholders grow oil palm along with other
subsistence crops
• Account for 40% of global palm oil production
• have crop area less than 50 ha, hence there are scale and cost issues
• RSPO helps them with improved management practices, better
yield and access to markets
• Smallholders have to form a group with an Internal Control
System (ICS) for group management
• The group has to ensure compliance with RSPO Principles &
Criteria
• Group joins RSPO as a member and get certified
• RSPO has a smallholder support fund the facilitate the capacity
building and certification of smallholders

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 RSPO Palm Trace
▪ It is RSPO’s traceability system for certified
oil palm products. It is part of the RSPO
certification program
▪ RSPO certified members register their physical
sales and processing activities of palm oil, palm
kernel and its fractions under different supply
chain models
▪ Offers a marketplace and the possibility to
register off market deals - managed by Rainforest
Alliance
▪ For certified oil palm products, a volume-based
RSPO administration fee applies. This fee is
invoiced once in the supply chain –for physical
shipments to the first buyer from the mill and
for RSPO credits to the credit buyer –and is
partly for the RSPO and partly for
Rainforest Alliance’s traceability services.
▪ Fee for CSPO (certified sustainable palm oil) is
USD 1.45/MT, and for CSPK(certified
sustainable palm kernel), its is 0.65/MT

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 RSPO Impacts

Source: RSPO Impact Report 2022 21

Major criticisms of RSPO
• Does not adequately audit companies
• Slow to penalise members that break the rules
• overly influenced by its members – dominated by companies & large
Northern NGOs with little representation of workers or impacted
communities
• Enables greenwashing – acts as a shield that deflects greater scrutiny of
its members’ practices
• Standards are not high enough
• Loose categories under claims – mass balance and book & claim
• May not make a difference – no evidence of decreased fire hotspots or
better retention of orangutan populations
• may not be well-suited to smallholders - depended on “extensive
external support” from NGOs in order to get RSPO certification
• Palm oil vs conservation
• Food security issues
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Will Palm Oil ever be sustainable?

https://www.youtube.com/watch?v=wPsciABkvHE

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Pre-work for next class
Mandatory:
1. Case: SC Johnson and the Greenlist backlash, (read and discuss in
groups; be ready to present & argue)

2. Delmas M. and Burbano V, 2011: The Drivers of Greenwashing, CALIFORNIA

MANAGEMENT REVIEW VOL. 54, NO. 1, 64-87

Recommended:
1. https://globalecolabelling.net/look-closer-campagin/
2. https://hbr.org/2022/07/how-greenwashing-affects-the-bottom-line

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Case – SC Johnson Greenlist Backlash
• Why would SC Johnson put a green label on its
products?

• Is SC Johnson greenwashing?

• Should it abandon the Greenlist process?

• Why didn’t it pursue a third-party certification

originally? Should it do so now?

• Is there any value to pursuing internal

product/process improvement without
marketing it as such?
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THANKS!!

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