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Swinburne University of Technology Sarawak Campus

Balancing sustainability and profit in the palm oil industry

September 28, 2016

By Dr Daniel Tan L.T.

The frequent publicity on the Roundtable for Sustainable Palm Oil (RSPO) in the local newspapers recently was somehow negatively portrayed for the organisation’s four-month suspension of a Malaysian oil palm conglomerate’s RSPO certification.

Founded in Switzerland in 2004, the aims and goals of the RSPO are simple, namely the production and use of RSPO certified sustainable palm oil.

Ironically, the recently suspended conglomerate is one of the RSPO’s co-founding members. While it may appear that it is turning on its own, the issue boiled down to “sustainability” and how RSPO defines or certifies a sustainable oil palm production based its eight principles and 39 practical criteria (P&C).

Hypothetically, a violation of any of the P&Cs could get a member’s certification suspended. For instance, in the abovementioned case, the alleged violation were non-compliance with national laws and regulation (Principle 2), not observing new planting procedure (Principle 7), and planting on fragile soils including peat (Criteria 7.4).

Sustainability, in broader sense, can be defined as 3Ps: people, planet and profit, a concept derived from the 1987 Brundtland Commission. Planting oil palm can be sustainable because it fulfils all the three Ps: the local population get jobs; the planet will not be harmed if suitable agricultural practice is put in place; and the oil palm companies can definitely make a profit.

Following a suspension though, the livelihood of those working in the oil palm sector may be adversely affected. The long term repercussions could be difficult to gauge as major consumer goods giants may continue to shun the conglomerate supplying the palm oil. According to the Malaysian Palm Oil Board, about 2.26 million people depend on the oil palm industry for their livelihood. The prolonged and unsettled issue of a suspension, or the threat of a suspension, will not do any good to either the industry or those who depend on it to put food on the table.

Nonetheless, everyone can agree that sustainability is certainly important for the future of the oil palm industry. In fact, many other parties are advocating sustainability. RSPO is therefore not alone in this.

Oil palm companies can also take the initiative on sustainability. Felda Global Ventures Holdings Bhd had voluntarily withdrawn from RSPO certification recently. The move was to allow time for its 58 mills to learn to comply with the RSPO’s P&C (New Straits Times, May 9, 2016) and to avoid foreseeable risks in the supply chain (The Star, May 3, 2016).

In December 2013, consumer goods giants Unilever Plc signed a “No Deforestation, No Peat, No Exploitation” pledge with a Singapore-based agribusiness group. As a consequence, they issued a statement that a halt could be possible from 2016 onwards in the sourcing of palm oil from farmers who have planted their trees in areas of “high carbon stock” and peat swamps in Sarawak. The pledge also dictated to planters in Sarawak that it will stop buying their palm oil if there are allegations of land grabbing (New Straits Times, October 17, 2015). Nonetheless, this policy was later said to only apply to new plantations and not the existing plantations (Borneo Post, 7 April 2014).

The government may also drive the sustainability issue. Like many of our national targets, it could be pegged to Vision 2020, but may not be realistic for Sarawak which is still in the developing phase of her economy.

Under the National Key Economic Area (NKEA), all oil palm mills in Malaysia will have to be equipped with bio-gas capture facilities by 2020. This policy might not be favourable for Sarawak. In Peninsular Malaysia, electricity generated from bio-gas plants will be supplied to the main grid for tariff payment. In Sarawak this has yet to be fully implemented. As such, Sarawak Oil Palm Plantation Owners Association had requested the government to grant the industry in Sarawak a further five years for the implementation (The Borneo Post, November 5, 2014).

The heightened requirements for sustainability can be taken in good light. At least all parties may now work harder to improve the sustainability of the oil palm business. The HCS+ Science Study, for instance, was established by a group of several major oil palm growers and their partners. The aim is to find a new way to solve the problems arising from the conversion of tropical forests to oil palm plantations.   

There was also the implementation of our own Malaysian Sustainable Palm Oil certification standard for all oil palm stakeholders in Malaysia. In time, the level of sustainability awareness in the oil palm industry in Malaysia should improve with the efforts of all parties, and hopefully the industry can continue to be profitable for the long run because sustainability is also for profit.

Dr Daniel Tan is a lecturer with the Faculty of Engineering, Computing and Science at Swinburne University of Technology Sarawak Campus. His research interests are in the application of bio-fertilizers and beneficial micro-organisms for agriculture and forestry. He is contactable at ltdtan@swinburne.edu.my