Organic and Fair Palm Oil Production – Assessment Project

Summary

Over the last 15 years, global palm oil production has more than doubled. Indonesia and Malaysia alone produce more than 80 % of all palm oil today. Being the cheapest vegetable oil available on the world market - thanks to high hectare yields of oil palms - both demand and supply for palm oil continue to grow. Particularly, the further expansion of monocultures set in place by big companies is critical, as there is strong evidence that palm oil production goes hand in hand with deforestation, biodiversity losses, land tenure conflicts, and negative social impacts. In this regard, also the different palm oil specific certification schemes, including RSPO, have being criticized for not effectively encountering the (mentioned) negative environmental and social impacts. In Switzerland, Coop assessed the situation of palm oil use in around 1300 own-brand products and developed its own palm oil vision during 2018, stimulated by the growing number of customers and NGOs questioning and disapproving the use of palm oil. According to this vision, all palm oil in own-brand food products must be replaced either by Bio Suisse certified palm oil or by other oils and fats—if feasible from a sensory and technical point of view. In regard to the former, two questions emerged: “To what extent can Bio Suisse certified palm oil claim better ‘sustainability effects’ than non-organic palm oil?”, and “Will there be a sufficient supply base for Coop to source Bio Suisse certified palm oil in the near future?” In order to answer these two questions, FiBL was tasked to implement an ‘assessment project’. SECO agreed to cofund the study for sharing the concern in finding ways to increase the ‘sustainability performance’ of palm oil production, in general. SECO increased the special interest to clarify, as part of the study, to what extent smallholders are and can be involved in ‘sustainable palm oil production’. For this reason, different productions sites of the SECO-supported ‘Sustainable West Africa Palm Oil Programme’ in Ghana were included in the study. This ‘smallholder perspective’ was also of greatest relevance for Bio Suisse’s standard development work, aiming to strengthen the social impact with additional, smallholder-specific certification criteria.
Project methodology & company sample
As a means to explicitly assess the ‘sustainability performance’ of different palm oil production schemes - relating to conventional, RSPO, fair trade, and organic certification—FiBL developed the so-called ‘palm oil hotspot analysis’. This qualitative tool guided FiBL experts in their work to consciously reflect 22 explicit ‘sustainability hotspots’ when visiting different palm oil producing companies and interacting with their staff and supplying farmers. This methodological tool was first applied and tested in 5 companies in Ghana: 3 did not have any certification (i.e. conventional), 1 had RSPO certification only, and 1 had both a fair trade (Fair for Life) and organic (EU Regulation) certification. Later, the 3 only companies that are Bio Suisse certified were visited and assessed as well, located in Brazil, Colombia, and Madagascar.
Main findings & conclusions
The assessment reveals important ‘sustainability performance’ differences among the visited companies. Conventional farms have a much lower overall ‘sustainability scoring’ despite of playing a key role in creating essential income in rural areas, owing to the fact that they have a high share of (smallholder) farmers supplying fresh fruit bunches (FFBs) to their mills. Compared to all other companies involved in the assessment, they face the strongest financial constraints. Often being of smaller size, conventional companies are mainly competing in the national market, and their efforts go mainly into expanding both the FFB sourcing and the mill’s capacity. With this priority and facing financial constraints, they are not doing the required investments to score high in different meaningful ‘sustainability hotspots’. While the ‘RSPO only’ company receives average scores—partly due to the common use of chemicals (i.e. mineral fertilizers and herbicides), which imply lower environment-related scores - all organically certified companies, being also either fair trade or RSPO-certified, receive ‘good’ and ‘very good’ scores. They are in a position to claim higher prices in the international market for their quality oil. For paying higher FFB prices to their outgrower farmers, making considerable social investments, and relying on organic practices (i.e. no use of chemicals), they score high in all impact areas: ‘land use’, ‘oil quality’, ‘environmental impact’, and ‘social impact’.
The findings also reveal that the involvement of smallholder farmers is common and feasible in all palm oil business models - but it requires considerable investment in order to be ideal. In fact, there are big differences in the quality of cooperations between palm oil companies and FFB supplying farmers. Certified companies (organic, fair, RSPO) have clearly better cooperation mechanisms with supplying farmers. Not only are prices paid for FFB higher, but the services provided to farmers are of better quality, i.e. improving access to loans, extension services, harvesting tools, production inputs, and FFB transportation.
Interestingly, RSPO certification adds important value to organically certified companies: while organic certifications boost environmental performance, the RSPO standard provides an interesting incentive to perform well in ‘social accountability’ and ‘transparency’. Especially ‘transparency’ efforts lead to proactive and open communication, which ultimately enhances fruitful stakeholder interaction, functional learning, and the company’s image - all contributing to further improve the company’s performance.
Final reflection
These findings impel that the ‘sustainability discussion’ about palm oil must continue. The good ‘sustainability scoring’ of organic and fair trade companies leads to the premise that “yes, palm oil can be produced sustainably”, so that consumers together with retailers, development agencies, and policy makers should rather work towards forcing the industry to comply with strict(er) certification rules instead of substituting palm oil with other oils and fats. The latter requires between 2.5 and 7 times more land for producing the same amount of oil. Furthermore, other monocultures (e.g. cocoa), annual crops (e.g. soy, cotton), or cattle raising - tend to have a worse overall ‘sustainability performance’ than organically produced palm oil.
From a development perspective, the explicit inclusion of smallholders in organic certification schemes is desired, thus creating an even stronger incentive to boost smallholders’ yields through ‘ecological intensification’, including improved fertilization practices relying on good cover cropping with Pueraria1. Increased FFB yields are key to boost farmers’ profits, increase rural employment, and reduce the pressure for the further expansion of production areas. At the level of mills, most important is to help companies enhance their oil extraction rates to achieve higher profit margins while reducing the environmental damage through palm oil mill effluents (POME). As these cause large quantities of greenhouse gas emissions, certification schemes should ideally force companies to innovate and either use POME to produce electricity (with a biogas plant, burning methane) or for organic fertilizer production (with a good composting).