Posted on 03 October 2022
A new study released today commissioned by WWF (World Wide Fund for Nature) to provide information on the price premium paid by palm oil growers and buyers for certified sustainable palm oil (CSPO) in the different Roundtable for Sustainable Palm Oil (RSPO) supply chains. The overarching aim of the study is to present a business case for CSPO and subsequently increase its uptake in the Asian market.
Key findings showed that economic benefits that accrue for growers and buyers outweigh the financial costs involved in ensuring sustainable palm oil operations. According to the interviewed stakeholders, some of the financial costs are minimal per unit basis and tend to become negligible in the grand scheme of things. The study therefore breaks the myth that adhering to sustainable business practices generates a higher net cost.
The study included 43 stakeholder interviews across the palm oil supply chain representing growers of different sizes, millers/crushers, refiners, processors and traders, derivative manufacturers, consumer goods manufacturers and retailers. These stakeholders operate in different geographies - Indonesia, Malaysia, Singapore, India, EU, UK, and USA. The RSPO has a set of principles & criteria (P&C) that lays out the sustainability criteria to be met for the palm oil to be sustainably certified. There are a number of costs associated with complying with RSPO P&C and to get certified which the study analysed.
Along with premium for CSPO, the study also provides information on the price premium paid by palm oil growers and buyers for certified sustainable palm kernel oil (CSPKO), and associated fractions and derivatives. Various factors impact the prices of CSPO which the study elucidates. The study also examined additional costs associated with RSPO-compliant operations that includes RSPO membership, audits, staffing and training among others.
According to WWF’s 2021 report, the market signals in Asia for sustainability are not as developed as markets in the west, and therefore the uptake of CSPO is only ~3-4% of overall palm oil consumption in the region. Given that Asia consumes 60% of the world’s palm oil, there is a pressing need for clarity on the business case for sustainable palm oil in Asia. In the past conversations, ecological and moral grounds have been used to make a strong case for adopting sustainable business practices. This study puts forth a strong business case to compliment existing efforts and to persuade industry players to pursue sustainable practices.
The study showed that the monetary and non-monetary benefits associated with the use of CSPO outweigh the costs for sustainable palm oil which can often be subsumed through in-house resources. The stakeholders in the palm oil supply chain that use CSPO are able to gain more benefits from opportunities like increased market access and green finance. The standards and certifications like RSPO make businesses profitable by reducing exposure to financial, market and regulatory risks that are linked with conventional business practices. Furthermore, the study highlights business opportunities that open up to companies that embrace CSPO and other sustainably sourced products.
The study fills the gap around sustainability costs and therefore serves as a guide for decision-making and planning for CSPO as these stakeholders in the palm oil value chain confront the dynamic challenges and opportunities of the sector going forward.
Prachi Jadhav, WWF’s Global Palm Oil Communications and Advocacy Manager said,
“Our research study has demonstrated that a price premium on sustainability which in the long term has a positive impact on the people and environment reaps significant returns on investment and thereby makes a stronger business case. Stakeholders have shared in the study how mainstreaming sustainable business practices results in accessing newer business opportunities.”
To make the palm oil industry more resilient, it is essential for businesses to switch to sustainable palm oil. Regulatory provisions, enhanced consumer awareness on sustainable palm oil, higher collaboration between downstream and upstream actors to get more growers certified, innovative business arrangements, and easy access to affordable finance can further help facilitate this transition.
WWF engaged with other NGOs and the palm oil industry to launch the RSPO in 2003. Since then, WWF has worked to ensure that the RSPO standards contain robust social and environmental criteria, including a prohibition on the conversion of valuable forests. CSPO has been available since November 2008 and now makes up more than 19% 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. Support WWF in its efforts to mainstream sustainable palm oil production, trade and consumption.
For more information, please contact:
Prachi Jadhav, Manager, Communications and Advocacy, WWF-Singapore, firstname.lastname@example.org
Megan Sim, Executive, WWF-Singapore, email@example.com