Olam in sustainable palm oil first
Published: October 12, 2016
Olam International’s Awala palm oil plantation in Gabon has achieved RSPO certification, the world’s flagship certification of sustainable palm oil. In doing so it is the first new development to become RSPO certified in Africa, and, according to industry experts, will have a far-reaching impact on supply of the product going forward.
The certification by RSPO – the Roundtable on Sustainable Palm Oil – of Awala has boosted Africa’s total certified production hectares by 30% from 21,666 hectares, Olam says in a statement.
The Awala plantation was Olam’s first venture into upstream palm plantations in a joint venture with the Republic of Gabon. When development began in 2011, it was the first in Africa to comply with the RSPO New Planting Procedure verification, a set of requirements for new palm plantation development for RSPO members after January 1, 2010.
Ranveer Chauhan, global head of palm oil and natural rubber at Olam, says the process of ensuring the certification of Olam’s plantations in Africa “makes sound business sense”.
“Africa is the home of palm oil and many think it does not have the necessary infrastructure or governance to support high international standards. This certification shows what can be achieved for any new or old palm plantation development on the continent,” he says.
The plantation in Awala is one of two major projects for Olam Palm Gabon in the country, the other being the Mouila plantation, which is expected to achieve RSPO certification in 2017.
Speaking to GTR, Jean-Francois Lambert, founding partner of Lambert Commodities and former head of commodity trade finance at HSBC, says that while most of the RSPO-certified plantations are to be found in Indonesia or Malaysia, Olam’s certification in Africa is a sign that RSPO best practices are spreading across the globe. “This is going to strengthen the ability and credibility of a major trading house like Olam to reinforce its position vis a vis buyers and, beyond, the consumers,” he says.
He adds that although sustainability of the palm oil sector is an important issue, especially in the West, certified sustainable palm oil production is still just a fraction of the overall production of palm oil worldwide. In fact, only about 17% of the world’s palm oil is certified by RSPO. Yet, with a growing customer demand, companies failing to adhere to environmental standards will increasingly face the risk of being side-lined in the market.
“As the production of sustainable palm oil grows, it will marginalise the non-sustainable palm oil,” Lambert says. “It is not yet the case, but this is bound to happen. Then a player who has not invested in sustainable certified palm oil will find himself in a very difficult position. He will struggle to get access to finance and eventually he simply might not survive.”
Founded in 2004, RSPO has today 2,500 members worldwide from across the supply chain of the palm oil industry – from producers and traders to retailers, investors and NGOs.
Earlier this year, one of RSPO’s founding members, palm oil supplier IOI Group, came under fire when RSPO ruled that the Malaysian company was not meeting the body’s standards and suspended its certification. The ruling led a wave of major international companies, including Nestle, Unilever, Kellogg’s and Mars, to stop buying from IOI. The case has, according to Lambert, demonstrated the significance of the certification – and reinforced the credibility of RSPO.
“The fact that large supply chain managers decided to stop purchasing palm oil from a company which is a founder of the RSPO initiative shows the strategic importance of the sustainability dimension. Producers should take this very seriously, as major trading houses and their customers have done so,” he says.
He says the main question, now, is how long it will take for the Chinese and Indian buyers of palm oil to value sustainability as much as their western counterparts. “As we see, the consumers in China are getting more and more sophisticated. They are urbanised and therefore much more demanding in terms of food quality. Sooner rather than later, demand for sustainable palm oil will emerge there. It’s a matter of time.”
This article was first published in Global Trade Review AFRICA / 12-10-16 / BY SANNE WASS