- India is the biggest palm oil-importing country in the world, and many say it holds the key in driving sustainability.
- NGOs advise lowering the high sourcing costs of certified sustainable palm oil.
- Distribution companies are starting to work together to share knowledge of the certification process.
This is the second of a two-part series on palm oil in India. Read the first part here.
Love it or hate it, palm oil is likely here to stay. It is the cheapest edible oil to produce, refine and purchase, and a key ingredient in thousands of products, ranging from lipstick to packaged bread.
It’s also increasingly in demand. According to the U.S. Department of Agriculture, global palm oil production grew 20 percent between 2010 and 2014. This uptick in popularity has contributed to widespread deforestation in Indonesia and Malaysia and increased greenhouse gas emissions, among other social and environmental concerns.
Conservationists see palm oil as a crop in need of a sustainable solution, and Asian markets led by India, Pakistan and China, which purchase 55 percent of Indonesia’s palm oil exports, have a key role to play. As the world’s leading importer of palm oil, India in particular holds great potential to tip the global scale in favor of sustainability.
While the number of Indian companies receiving sustainability certifications via the Roundtable on Sustainable Palm Oil (RSPO) is growing, incentive to drive the market towards sustainability in India remains low.
Although there’s certainly no easy path forward, several of the industry’s stakeholders have suggested long and short-term solutions to increase the uptake in sustainable palm oil.
Prohibitive costs
One of the greatest challenges to certified sustainable palm oil in India is the high cost associated with sourcing it. “The challenge is for both the markets in China and India is not only getting the certified palm oil, its (sic) actually the shipping and infrastructure and demand for sale,” Nandikesh Sivalingam of Greenpeace India told Mongabay.
The cost of segregated certified palm oil – i.e., fully traceable palm oil certified throughout the entire supply chain—remains prohibitively high and logistically complex.
A distribution company such as Hindustan Unilever, which hopes to source only certified sustainable palm oil by 2020 as part of its Sustainable Living Plan, would, at present have trouble pushing through the logistics of supplying segregated CSPO, according to Philip Tapsall, Director of Sustainable Business at the World Wide Fund For Nature (WWF) India, a founding member of RSPO.
In the current market conditions, if Hindustan Unilever wishes to import a small amount of palm oil, it must ensure this supply is entirely segregated throughout the process, from shipping to refining. “Suppliers will need to process it separately and flush their systems from the previous run, so no unsegregated residue is present,” Tapsall told Mongabay. The segregated nature of the purchase and its relatively small size adds cost, which most companies find to be prohibitive at present.
The most logical way to clear this hurdle would be to create higher volumes of sustainable oil so the need for a segregated supply chain falls away, he added.
Business-to-business outreach
Several short-term solutions have been proposed to create interest in sustainable practices.
“Focusing on business to business engagement and on pushing large multinational companies to commit to their global procurement policies, and implement them at a regional level in India, will be the best way to reach our market transformation goals,” said Stefano Savi, Global Outreach and Engagement Director of the RSPO.
Global sustainability commitments by multinational Fast Moving Consumer Goods companies (FMCGs) appears to be having a cascading effect on the Indian market, pressuring their local suppliers to be certified through the RSPO. Already, the number of certified companies has grown from 4 to 44 in just the past five years, according to a recent WWF report, with most having received certification to supply Mass Balance CSPO in the past year.
While not yet the norm, the business-to-business engagement Savi mentioned is already taking place.
M.S. Sriganesh of Galaxy Surfactants Ltd. formed the Indian Surfactants Group along with fellow RSPO members to share knowledge about the certification process and importance of sustainability practices. Along with Kamani Industries, Galaxy was the first Indian company to supply Mass Balance Certified Sustainable Palm, and one of few Indian companies that envision sustainability as the future of the Indian market.
“I want to be idealistic on an agenda like this,” Sriganesh told Mongabay. He feels the key to seeing industry-wide change lies in sharing knowledge, even amongst competitors. “It’s not a way of saying we know best, it’s a way of saying we want to get our system right,” he added.
The group held the inaugural roundtable meeting in April, which included information on conservation, social justice and environmental concerns linked to palm oil cultivation. They also presented information on RSPO and certification processes, and allowed members of the surfactants group to share their experiences in the industry. Although response has been minimal, according to Sriganesh, the group will continue to plan events, inviting speakers, as well as industry stakeholders such as WWF, Malaysian Palm Oil Board and others.
Industry players aside, consumers also have an important role to play.
“Consumer awareness is a basic starting point in itself,” said Tapsall, who suggests consumers need to be demanding the product. This requires greater levels of awareness and education, which are presently far removed from the day-to-day realities of many Indian consumers.
Solutions for long-term sustainability
Looking at the bigger picture, stakeholders have proposed several long-term solutions for bringing about sustainability in India.
The RSPO’s Jurisdiction Certification model, for example, may have positive impacts on the Indian market, and could potentially be used as a blueprint. Last month, the government of Indonesia’s Central Kalimantan province introduced jurisdictional certification, granting RSPO certification to the entire region, thereby diminishing some of the cost for smallholders. Darrel Webber, Secretary General of RSPO, called it “a role model to not only other provinces in Indonesia that are producing palm oil, but to all palm oil producing nations as well.”
The increased prevalence of jurisdictional certification in Malaysia and Indonesia would make greater volumes of certified palm oil available to the Indian market, according to WWF’s Tapsall, a sustainability expert. He said the major buyers and traders in the Indian market could consider a similar joint certification commitment to sustainable palm oil. “This would make it easier for the supply chain to provide CSPO in greater volumes and scale, and reduce cost,” he suggested.
To support this, the government could offer favorable tariffs on sustainable palm oil as a means to incentivize short-term change. “Once volumes reached a critical mass then the tariff structure could fall away,” Tapsall explained, cautioning that such large-scale solutions are in reality “a long way off.”
Presently, the Indian government has placed emphasis on domestic palm oil growth as a means to reduce the country’s reliance on imports. As for its potential as a sustainable crop, palm oil production “could be sustainable in parts of India where the terrain is conducive and water availability and security for local communities is not a big problem,” Dr. Shankar Raman of India’s Nature Conservation Foundation told Mongabay. “It could bring in cash income for farmers, provided the subsidies and support from the government continues.”
Unfortunately, domestic palm oil’s current trajectory in India seems set to do more harm than good, according to Raman. “Going by present practices and thrust areas for oil palm in India, the crop is unsustainable and likely to detrimentally affect local communities and biological diversity in most areas,” he claimed, citing the forested hill tracts of the country’s northeast and the mountainous Western Ghats as areas of particular concern.
We have to be very careful not to replicate Indonesia,” echoed Nandikesh Sivalingam of Greenpeace India. Deforestation for palm oil plantations contributed to Indonesia’s loss of more than 6 million hectares of natural forest between 2000 and 2012, of which 840,000 hectares were cleared in 2012 alone.
While the RSPO is currently setting the bar for sustainability standards in India, some feel their efforts are not enough. “The question is whether RSPO standards are enough to end deforestation caused by the sector,” Sivalingam said, mentioning initiatives pushing the boundaries of the RSPO, such as the Palm Oil Innovation Group (POIG).
“The need of the hour is time bound action to end deforestation,” he said. “Many Indian companies have been members of RSPO for years but have yet to take a single step towards ensuring their supply chain is deforestation free.”
Follow Sarah Hucal on Twitter: @SarahHucal
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