Bridges Trade BioRes • Volume 9 • Number 14 • 21st August 2009

Sustainable Palm Producers Fear Plummeting Demand

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Less demand for premium products, resulting from the economic crisis, is having a devastating effect on the sustainable palm oil industry. Vengeta Rao, secretary general of the Roundtable on Sustainable Palm Oil (RSPO), says that recent estimates show the premium paid for sustainable certified palm oil has fallen to $10-15 a metric tonne - down from $50 in November when certified oil was first made available to markets.

While Rao says the global economic crisis is partly to blame for the downturn, he urged buyers to show more commitment to sustainability. If consumers don’t distinguish the sustainable palm oil as being ‘green’, certification efforts may slow, Rao said.

“We have been led down the path of false hope in selling environmentally-certified palm oil,” said Tan Sri Dr Yusof Basiron, CEO of the Malaysian Palm Oil Council, which aims to improve the image of palm oil throughout the world. The council argues that they now believe buyers are not willing to pay a premium for the sustainable product.

This point was illustrated recently in New Zealand when a consumer protest strong-armed chocolate maker Cadbury into pulling new products containing palm oil from shelves, promising consumers it would return to its original cocoa butter recipe. Cadbury is a member of the RSPO and uses only sustainable certified palm oil.

The RSPO is a non-profit, multi-stakeholder forum that was spearheaded by WWF in 2001.The organisation’s standards include eight principles, 39 criteria and 144 indicators, which stipulate legal, economic, social and environmental requirements for appropriate management and operations. However, several NGOs have criticised the standard for not being stringent enough (See Bridges Trade BioRes, 17 April 2009, http://ictsd.net/i/news/biores/45209/).

In an effort to boost accountability within the RSPO and increase consumer confidence in the certification, the WWF has made plans to publish a ‘buyer’s scorecard’ that would list companies that support sustainable palm oil, as well as those that have not fulfilled their commitments to buy (See Bridges Trade BioRes, 15 May 2009, http://ictsd.net/i/news/biores/46654/).

Moving forward, Rao was optimistic that global demand for sustainable palm oil would increase. In July, major China-based producers and users of palm oil announced their intention to support the use of sustainable palm oil. Given recent challenges, a WWF representative welcomed the news saying that, “any move China makes towards using sustainable palm oil will have a big influence on protecting tropical forest resources in South East Asia and other areas.”

China, along with India, is one of the world’s top buyers of vegetable oils; together they import some 40 percent of global palm oil output, which stands at over 28 million tonnes annually.

Over the past two decades, areas under palm cultivation have grown by about 43 percent, according to RSPO - mostly in Malaysia and Indonesia, where deforestation pressures are high.

ICTSD Reporting; “Cadbury dumps palm oil after consumer protests,” MONGABAY.COM, August 17, 2009; “Smaller premiums to slow green palm oil certification,” REUTERS, August 11, 2009; “Consumers shun ‘green’ palm oil,” BUSINESS TIMES. August 7, 2009; “Palm oil gets boost in China,” WWF, July 14, 2009