Today (Nov. 4), the seventh annual Roundtable on Sustainable Palm Oil (RSPO) and the sixth General Assembly ended in Kuala Lumpur after the participants met for three days. Amid an ongoing slump in commodity prices, members of the roundtable are putting their hope in this fateful event. For Indonesian palm oil producers (or growers), a diverse group consisting of corporations and farmers, the meeting was very important. Decisions of the RSPO will strongly influence the future of the industry.
In 2010, palm oil plantations are expected to cover 8.12 million hectares of land, with a capacity to produce 23.19 million tons of crude palm oil. This figure is expected to increase in 2020, covering 9.12 million hectares of land with a production capacity of 40 million tons.
The RSPO is a multi-stakeholder forum established in 2003 and consists of members from every level of the palm oil supply chain, including producers, processors, traders, manufacturers, retailers, consumers, financial institutions and even NGOs. Most producers sitting on the membership come from Indonesia and Malaysia, whereas traders, manufacturers, retailers and consumers are mostly from European countries and USA.
Under the RSPO scheme, a producer has to meet eight principles, 39 criteria, and 139 indicators to qualify in selling Certified Sustainable Palm Oil (CSPO). However, meeting all of them is an arduously demanding task. It is therefore not a surprise that, currently, only three RSPO members from Indonesia are certified sustainable palm oil producers.
At the international level, only around 5 percent of the total crude palm oil products are CSPO. Besides the burdensome terms and requirement, the implementation of RSPO's Principles and Criteria (P&C) and certification brought an added unwelcomed consequence for companies that sought them. These companies must bear an added expenditure of US$20-40 per hectare, and this burden completely falls on the producers.
This week's meeting was expected to amend the P&C. One planned amendment that has recently become a point of contention is the one regarding Green House Gas emissions (GHG). The addition of GHG emission in the P&C would add the requirements the producers have to meet, further burdening them in the process. If this amendment is approved, producers have to monitor and report all sources of GHG emissions.
In new plantations, producers have to gauge the area's carbon storage, as they are restricted to plant in lands with carbon storage of more than 35 tons per hectare. Fines are imposed for those that built plantations on land with more than 35 tons per hectares carbon stored. Furthermore, lands with carbon storage of 70 ton per hectares and peat lands are strictly off limits. This may undermine and halt necessary expansion in Indonesia's palm oil industry.
There is an impression that the RSPO is acting above the law, since Indonesia already has a strict ministerial regulation on peat-lands. Ironically, the support for the addition of GHG emissions comes from within the RSPO. RSPO is a large family in which the palm oil producers are treated unfairly by other members of the family.
Since the inception of the RSPO, producers are asked to comply with the P&C, which was actually drafted by the other stakeholders. The producers are forced to fight a "lonely battle" to meet the P&C, to foot all of the costs required to achieve the certification.
Even worse, having their products certified does not guarantee appreciation from the other members. The promise of a premium price given to certified palm oil is not even a guarantee. Certified producers, instead, will receive added demands from other members, such as to halt expansion and restriction to develop peat lands. If the producers do not conform and go against the will of the other members, the RSPO will decide on the basis of vote counts. Of course, since producers are a minority, they will lose in vote counts.
In sum, producers are thrown in an uphill struggle against the other supply chain that has a dominating influence over every decision. Outside of RSPO, these producers also have to address varying and even more challenging demands from other parties. The current RSPO is expected to address whether there is hope for producers in RSPO.
The writer is Secretary General of GAPKI (Gabungan Pengusaha Kelapa Sawit Indonesia or Indonesian Palm Oil Association) and participant at the Seventh Roundtable Meeting on Sustainable Palm Oil and the Sixth General Assembly, Kuala Lumpur 2-4 November 2009.
