‘Profitability and Sustainability in Palm Oil Production’ is a first-time study that comprehensively examines the financial costs and benefits of producing sustainable palm oil under the guidelines set out by the Roundtable on Sustainable Palm Oil (RSPO).
Growing demand for palm oil
Palm oil is increasingly becoming one of the world’s most popular vegetable oils. Used in food products, detergents, cosmetics and biofuels, global production of palm oil has doubled over the last decade.
Worldwide demand for palm oil is expected to double again by 2020. New plantations are being developed and existing ones are being expanded in Indonesia, Malaysia and other Asian countries, as well as in Africa and Latin America.
While contributing to the growth of emerging economies, this expansion comes at the expense of tropical forests – which have been cleared to make room for vast monoculture oil palm plantations – destroying critical habitat for many endangered species, including rhinos, elephants and tigers.
As the palm oil industry has expanded, so has its public profile, resulting in intense scrutiny from society. Palm oil has been the subject of consumer, activist, and media campaigns in buyer markets, as well as frequent demonstrations and campaigns from local communities in production regions.
As a response to these pressures, the Roundtable on Sustainable Palm Oil (RSPO) was founded in 2004. It is a multi-stakeholder organisation, including producers, civil society, governments and buyers who work together towards a global supply of palm oil that is produced in a socially and environmentally responsible way.
Benefits of certified sustainable palm oil
Certified sustainable palm oil has been available since November 2008 and now up more than 10% of the global palm oil market. It provides assurance that valuable tropical forests have not been cleared and that environmental and social safeguards have been met during the production of the palm oil.
While many firms were initially attracted to this Roundtable on Sustainable Palm Oil (RSPO) certification for the price premiums commanded by certified sustainable palm oil, the larger financial gain often turned out to be resulting improvements in operations, documentation systems, labor relations, and other internal factors.
Produced jointly by FMO, CDC, and the World Wildlife Fund (WWF), the report shows that the business benefits gained from achieving RSPO certification typically outweigh the costs of implementation – in many cases significantly – yet often through unexpected and indirect channels.
Good business sense
Many firms who switched to producing sustainable palm oil made a significant return on their investments. The report draws on direct operational experience of eight major palm oil producers in Indonesia and Malaysia, as well as West Africa. The firms represent a range of large, midsized, and small operators whose certified palm oil and palm kernel oil outputs total 54% of all RSPO certified production. The findings demonstrate how improvements to sustainability performance and financial returns go hand-in-hand.
WWF, CDC and FMO aim to demonstrate the bottom line benefits of sustainable business and this research does just that by showing how sustainable practices, even in a high impact industry like palm oil, can result in net financial benefits to producers – providing gain for people, the planet and the bottom line.
Picture: © Jürgen Freund / WWF-Canon