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Beyond Label: Unpacking Transparency, Traceability and Sustainability in Palm Oil

Written By: Michelle LIE

Verified By: Albert SUTANTO


Image from iStock Photo


Palm oil is everywhere, finding its way into products ranging from breakfast cereals to personal care items. Palm oil’s advantages—high yield, land efficiency, versatility, and its role in providing affordable vegetable oil—make them a vital component of global agriculture. Additionally, its potential for carbon capture through biofuel cultivation and the use of its by-products like biochar across industries highlight significant growth opportunities. As the most widely used edible oil, its production and consumption have significant implications for both the environment and society. This dual impact raises a critical question for businesses: How can high-yield palm oil production meet growing sustainability demands?


This article will explore the complexities of sustainable palm oil, emphasizing the importance of transparency in developing responsible practices.  The discussion extends to the differences between certification standards, such as the Roundtable on Sustainable Palm Oil (RSPO), country-specific like ISPO or MSPO, and International Sustainability and Carbon Certification (ISCC) in transforming an industry often criticized for its environmental impact. The key question is whether the palm oil sector can find its transition from being labeled a contributor to climate change concern to becoming a leader in sustainable development.


What does genuine sustainability in palm oil production entail?


Accurate reporting of ESG, which stands for Environmental, Social, and Governance is essential for businesses striving to improve sustainability outcomes. This includes greenhouse gas (GHG) emissions reports, Standards Operating Procedure transparency, and traceability from cultivation to distribution. Yet, the complexity of palm oil supply chains—comprising independent mills, dealers, and smallholder farmers—poses significant challenges to transparency and traceability. The widespread use of palm oil and its derivatives across various industries further complicates efforts to maintain clear oversight.


Sustainable Palm Oil Certifications


One of the ways to address traceability and transparency in sustainable practice is the adherence to certification schemes like Roundtable Sustainability Palm Oil (RSPO), International Sustainability and Carbon Certification (ISCC), and country-specific standards like Indonesia's ISPO and Malaysia's MSPO that have been established to address these challenges. These certifications aim to mitigate the environmental and social impacts of palm oil production. However, a lack of awareness and understanding of what these certifications signify continues to hinder the sustainability of supply chains.


Table 1. Comparison of Different Sustainable Palm Oil Certifications

RSPO

ISPO/MSPO

ISCC

The most widely recognized and comprehensive global standard for sustainable palm oil

A Country-specific certification that adopts global principles while tailoring them to fit the country's goals and circumstances

A global certification system applicable to all kinds of biomass, including third-party verification for GHG criteria

Emphasizes ethical transparency, compliance with laws and regulations, public welfare, workers’ rights and conditions, responsibility towards the environment, and conservation of natural resources and biodiversity

 

Focuses on plantation management, labor guidelines, environmental management and monitoring, and workers’ responsibilities

Covers sustainability, traceability, and greenhouse gas (GHG) emissions savings

More general standards, with certain aspects follows country regulations like waste/water disposal and treatment, with the addition of Free, Prior, & Informed Consent (FPIC) for land usage and development requirements

Focuses on improving the competitiveness of local palm oil in national and international markets

Focuses on the entire supply chain, from the cultivation of raw materials to the product, ensuring sustainability and carbon reduction

Mandatory in global palm oil market especially in Europe

Mandatory in country of origin

Required in the global palm oil market, particularly in Europe

 

The distinctions between certifications reflect tailored approaches to achieving sustainable palm oil production. Each certification’s principles and criteria highlight the specific priorities and goals they aim to address, from environmental preservation to social equity.

Certifications are a critical tool for demonstrating a company's commitment to sustainable palm oil, ensuring that production is economically viable, environmentally responsible, and socially beneficial. However, despite these advantages, some companies remain hesitant to prominently disclose their use of palm oil in their products. This reluctance stems from perceived controversies, assumed greenwashing fronts, or a desire to avoid drawing attention to the presence of palm oil, regardless of its sustainability status.


While certification is a strong foundation, transparency and traceability are fundamental components of truly sustainable practices. They are just the beginning. Continuous progress toward more efficient, effective, and environmentally and socially responsible practices is equally important. By embracing transparency and accountability, companies take the first step toward full disclosure and honesty with consumers. Not only does this commitment build trust but also highlights areas where improvements are needed, enabling businesses to prioritize and enhance their sustainability efforts, thereby gaining valuable support from stakeholders and consumers alike.


Carbon Credits in Palm Oil Industry


In addition to these efforts, the palm oil industry is looking into carbon credit initiatives to reduce its carbon footprint. By incorporating its nutrient recycling and zero waste practices into carbon credit frameworks, the industry can further its sustainability goals.  Projects such as methane capture and biogas utilization from wastewater treatment, and composting of processed fruit bunches (Empty Fruit Bunch or EFB), can greatly reduce waste and greenhouse gas emissions. The composted material can then be used as fertilizer, and the biofuel from methane obtained from microbial digestion of these materials can be harnessed for power generation.


The long-term success of these initiatives will depend on factors such as transparency, verification, and the overall effectiveness of carbon offsetting. Ensuring these elements are in place will be key to transforming the palm oil industry into a model of sustainable development.


Conclusion


The palm oil industry stands at a crossroads, facing the dual challenge of maintaining its economic advantages while addressing growing global demands for sustainability. Certifications like RSPO, ISPO, and ISCC are crucial tools in this transition, offering frameworks for sustainable production that can help mitigate environmental and social impacts.


For the palm oil sector to truly transform from a contributor to climate issues to a leader in sustainable development, it must embrace transparency, accurate ESG reporting, and robust certification standards. Companies should move past hesitations about disclosing their use of palm oil and instead focus on demonstrating their commitment to sustainability. By doing so, the industry can meet and exceed the growing demands for sustainable practices, ensuring its long-term viability and positive contribution to global agriculture.

This transformation isn't just about better farming; it’s also about leveraging carbon credits to offset emissions. Mt. Stonegate offers unparalleled expertise in navigating carbon markets, helping businesses turn carbon reduction efforts into assets. Discover how integrating carbon credits with sustainable palm oil practices can unlock new opportunities, drive growth, and contribute to a net-zero future. With Mt. Stonegate, we guide you to a greener tomorrow.



References:

  1. Lutteridge, C. (2023, April 2). Palm Oil - the facts explained. Wildlife & Welfare. https://www.wildlifeandwelfare.org/news-blog/palm-oil

  2. Chong, T.; Loh, L. Innovating ESG Integration as Sustainable Strategy: ESG Transparency and Firm Valuation in the Palm Oil Sector. Sustainability 2023, 15, 15943. https://doi.org/ 10.3390/su152215943

  3. Onn, H. W. (2021, August 6). How the palm oil industry is transitioning to net-zero. World Economic Forum. https://www.weforum.org/agenda/2021/08/how-palm-oil-industry-is-transitioning-to-net-zero/

  4. Abhishyant Kidangoor, S. W., Kotzé, P., Mukpo, A., Damasio, K., Ojwang, J. A., Smalley, H., Castagnino, R., Delgado, A. L., Wenzel, F., Dulisse, A., & Joshi, A. R. (2019, December 18). What’s preventing palm oil investors from going green? Mongabay Environmental News. https://news.mongabay.com/2016/01/whats-preventing-palm-oil-investors-from-going-green/

  5. Golden Agri. (2020, June). Indonesian-sustainable-palm-oil-ISPO-fact-sheet. ... https://goldenagri.com.sg/wp-content/uploads/2020/06/Indonesian-Sustainable-Palm-Oil-ISPO-Fact-Sheet.pdf Efeca. (2020, March). Palm Oil Certification Schemes: ISPO. https://www.efeca.com/wp-content/uploads/2020/03/Certification-Scheme-ISPO-Infobriefing-5-Part-2-Final.pdf Roundtable on Sustainable Palm Oil. (2018, November 15). 2018*. https://rspo.org/wp-content/uploads/rspo-principles-criteria-for-production-of-sustainable-palm-oil-2018revised-01-february-2020-with-updated-supply-chain-requirements-for-mills.pdf

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