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GreenPalm: Kick-Starting Sustainability in China and India

Abstract

Whilst businesses in the West are making big strides to support the sustainable production of palm oil, large volume users in India and China are yet to get on board. If the movement is to be a global success and achieve its aims, food service companies, retailers, and other volume users in Asia need to engage with this issue. This is easier said than done, and currently, complex supply chains and prohibitive costs are seen as barriers that could halt the spread of sustainable palm oil, preventing a market for segregated sustainable materials from developing in either country.

Keywords: emerging markets, supply chains, supply and demand, future strategy

Background situation

GreenPalm is an RSPO (Roundtable on Sustainable Palm Oil) approved alternative supply chain option that supports certified sustainable palm oil production. It is a certificate trading programme that enables food service companies, retailers, and end users to offset their use of palm oil products by funding the production of an equivalent volume of oil by an RSPO-certified producer. The producer receives a premium for their produce, which then helps to encourage an increase in sustainable production at the source.

Unlike alternative RSPO-approved methods—the purchase of segregated sustainable materials, and mass balance—GreenPalm can be implemented without any changes to existing palm oil supply chains; therefore, companies working towards sourcing sustainable palm oil can express their support by directly rewarding producers for implementing best practices for the production of sustainable palm oil, wherever it is used or sold.

The current situation
At the moment, there is very limited availability of RSPO-certified sustainable palm oil in China and India, and very few businesses are supporting sustainability via GreenPalm or any other RSPO-approved methods. Demand for palm oil is rising in both countries, and participation and support from India and China are vital for the wider success of the global sustainability movement.

Barriers:
The supply chain issue
In the current supply chain, the mixing of sustainable and non-sustainable materials occurs at multiple stages, making it very difficult and costly for users to get hold of segregated 100% certified sustainable palm oil.

This was the initial problem with introducing segregated sustainable palm oil to Europe, and whilst dedicated supply chains were eventually created, it took several years for the first consistent shipments of large volumes of segregated materials to reach users. The problem in India and China is very similar, though on a much larger scale, and this will need to be overcome if a market for segregated sustainable materials can be created.

Supply and demand
Whilst the consensus of opinion is that a move towards segregated sustainable palm oil should form a core part of any long-term strategy, in the short term, it simply isn’t viable.

With both economies growing and diets changing as people become more prosperous, palm oil use in India and China is on the increase. Currently, the global market simply doesn’t produce enough sustainable material to supply every user in Asia, and a relatively moderate increase in demand for segregated materials from India and China has the potential to drive up global prices and destabilise the wider sustainability movement.

Options and action

Whilst there are many challenges associated with sustainable palm oil in China and India, economic growth and globalisation are beginning to create the favourable conditions needed for the sustainability movement to succeed.

International support for environmentally friendly initiatives is on the increase, and economic prosperity in India and China has seen a rise in ethically conscious consumers. Over time, this broader understanding and concern about the issues surrounding the production of palm oil will invariably lead to an increase in demand for food manufacturers and retailers to support sustainable production.

Multinational businesses are also beginning to encourage the growth in demand for sustainable palm in Asia. Unilever has announced a 2020 target to use 100% sustainable palm oil across all of its global operations, and it is expected that other global volume users will make similar commitments over the next year.

Outcomes and conclusion

The real challenge now is encouraging price conscious businesses in China and India to see the wider benefits of sustainable palm oil and to take the first steps towards supporting its production. Pressure to do so needs to come from a number of sources, from the international community to internal consumer demand, but supporting sustainability also needs to be seen as attractive, by making it as easy and affordable as possible.

Currently, GreenPalm certificates are one of the most cost-effective and viable methods for businesses in China and Asia to take the first steps towards sustainability and support RSPO-certified sustainable palm production. As a company, we’re already starting to engage with forward-thinking businesses in both countries, and we want to build on these relationships to stimulate more trade. The purchase of GreenPalm certificates from businesses in India and China will, in turn, serve to stimulate an increase in the overall production of certified sustainable materials. Over time, this will have the added benefit of improving the availability of segregated sustainable materials, so that sourcing of fully traceable, 100% sustainable palm oil becomes a more viable option.

In order for multinational businesses to achieve their ambitious targets on sourcing sustainable palm oil, new supply chains into Asia will have to be developed, which will make it much easier for native businesses to gain access to segregated sustainable materials. However, re-engineering the supply chains is not a simple process and will take time. In the interim, GreenPalm could be easily adopted by businesses across India and China, providing them with an easy, cost-effective route to supporting sustainable production.

Further information on palm oil and the benefits of sustainability can be found at www.greenpalm.org. Alternatively, visit the RSPO (Roundtable on Sustainable Palm Oil) website at www.rspo.org.

Prepared by: Bob Norman
Position: General Manager
Organisation: GreenPalm
Email: bob.norman@greenpalm.org
Date: August 2012