The Roundtable for Sustainable Palm Oil (RSPO) set a target that 100% of European palm oil would come from sustainable sources by 2020, but despite industry efforts, this target has been missed. Meanwhile, global certification has stagnated, at about 19% of total supply. According to RSPO’s Global Director of Market Transformation Inke van der Sluijs, collective action is needed.
“RSPO believes that sustainability should be the norm but transformation cannot happen in isolation,” she said. “Governments should build on the voluntary initiatives from the private sector by implementing binding rules to ensure companies follow high standards to act responsibly and address social and environmental issues.”
Meanwhile, the use of palm oil in Europe is on the decline, as many consumers aim to dissociate themselves from its links with deforestation and habitat loss. However, the RSPO claims that reduced demand for palm oil could reinforce unsustainable practices, leading to less sustainably sourced palm oil, while also diverting consumption to other vegetable oils. The issue with mass uptake of alternative oils is that they yield 4-10 times less oil per hectare than palm, meaning that even more deforestation may be needed to meet growing demand.
“Positive campaigns are crucial in changing the mindset of consumers and in letting them see how the palm oil sector is working to make it more sustainable,” van der Sluijs said. “Consumers have the power to drive demand for sustainable palm oil. If consumers demand that the products they buy only contain certified sustainable palm oil, consumer goods manufacturers and retailers will be encouraged to switch to certified sustainable palm oil.”
Oversupply of certified sustainable oil
Despite only 19% of global palm oil being certified as sustainable, there is still an oversupply of certified sustainable palm oil on a global level. Van der Sluijs argues that a more concerted effort from developed nations is needed to shift the needle, such as requiring suppliers and manufacturers to commit to time-bound strategies that move them toward 100% sustainable production.
“Even if it is certified sustainable, a significant part of CSPO is sold as conventional palm oil,” she said. “This creates a concerning lack of demand, which could really undermine the incentive for growers to continue committing to sustainable practices.”
In addition, van der Sluijs says it is crucial to include smallholders in the RSPO system, considering that they account for about 40% of all global palm oil production.
“Smallholders need opportunities to access microfinance programmes, skills and knowledge about sustainable farming, and certification standards, which would enable them to access global markets,” she said.
To this end, the RSPO introduced a step by step programme in 2019 to help more smallholders achieve certification while adhering to the key sustainability requirements.
Financing smallholder schemes like these is one way in which the finance sector can play an important role in making the market more sustainable. And investment organisations can make – and have already made – a significant impact when they use their financing decisions to drive change. In 2013, for example, Norway’s public investment fund – the world’s largest – pulled funding from 23 Southeast Asian palm oil companies, claiming they produced palm oil unsustainably. The decision spurred some major producers to improve the sustainability of their oil and end deforestation.
“Financial institutions have an important role to play in driving change,” said van der Sluijs. “Their financing decisions can encourage companies to meet their social and environmental responsibilities.”
She claims that pressure from all sides – governments, consumers, food manufacturers and financial institutions – will be needed to make sustainably sourced palm oil the norm.
“Without pressure and demand for sustainable palm oil from developed nations, the likely outcome is more unsustainable palm oil,” she said.