Green palm oil and Indonesia Inc. 2015
The Jakarta Post
The Netherlands has recently decided that from 2015 it will be committed to only using sustainable palm oil, a step that has significantly boosted the standing of the Roundtable on Sustainable Palm Oil (RSPO).
At this stage The Netherlands is the only European country to have made such a commitment, but later it could snowball as other US and European companies have thrown their weight behind it and are likely to also adopt such steps.
Given the fact the Netherlands is one of the largest importers and exporters of palm oil in Europe,
which absorbs around 30 percent of Indonesian palm oil exports, its sustainable commitment is very likely to negatively impact palm oil exports from Indonesia, unless Indonesia reviews its policy on palm oil sustainability.
The Indonesian government, with support from Indonesian palm oil firms, has been at odds with several international non-governmental organizations (NGOs) and European multinational companies (MNCs) due to application of its own sustainability policy, the Indonesia Sustainable Palm Oil (ISPO) certification standard.
It said the ISPO was aimed at certifying palm oil business according to national regulations
and standards. Many, however, see it as a means to sidestep the RSPO standard.
But while we need to highly appreciate the level of government support, we also need to rethink the position of the national standard and align it with the recent positioning of the internationally recognized standard from the RSPO.
Barry Nalebuff and Adam Brandenburger, in their masterpiece Co-Opetition, contend that business in the past was like a state of war; “outsmarting the competition, capturing market share, making a killing, fighting brands, beating up suppliers and locking up customers”.
However, business is no longer solely attributed to war. Businessman have to listen to customers, work with suppliers, creat teams, and establish strategic partnerships, even with competitors. That
doesn’t sound like war. It sounds like partnerships.
“RSPO operates beyond regulations, trying to satisfy market demands.”
Palm oil business also involves cooperation when creating a pie and competition when it comes to dividing it up. Nalebuff and Brandenburger called this simultaneous war and peace — competition and cooperation at the same time.
Therefore, we need a new type of partnership in working for sustainability: economic, social, and environmental partnership.
This is where the RSPO and ISPO have their meeting point — partnerships to help each player perform more efficiently in the palm oil business, while providing a common platform for all.
By working together, all players can develop a bigger pie and target bigger markets, not just the traditional Indonesian markets for palm oil.
The total production of Indonesia and Malaysia accounts for more than 80 percent of the world’s total palm oil production.
However, Malaysian companies have been more aggressive in their technological advancement and market development, especially in regards to issues of sustainability.
They actively participate and shape standards in the RSPO and actively apply for branding and licensing of the green palm label. That is why some analysts have say Malaysia will be better prepared to enter the new era of green palm in 2015 than Indonesia.
Traditionally, our main palm oil markets have been in emerging economies such as China, India and smaller ones such as Pakistan, as well as some European and African countries.
Yes, the non-European markets — and to some extent the US — are currently not interested in any green palm certification. But will they remain like this in the future? If not then are we ready to deal with such a change?
Recently, the RSPO Board Meeting in Kuala Lumpur transformed to accommodate voices of Indonesian oil palm growers. The latest RSPO meeting resulted in a number of new positive developments for Indonesia.
First, it has re-acknowledged the consensus as the basis for decision-making. My last article in The Jakarta Post in December 2010 underlined the urgency to strike a balance between parties in RSPO decision making, and now it is becoming clearer that the balance has been maintained.
Second, Indonesia will get another voting seat and right. This clearly shows the recognition of the importance of Indonesian growers.
Third, and perhaps the most importantly, market recognition of green palm oil will pay off.
Growers can secure premium prices and incentives from the palm oil market.
European companies have voiced their plans to adopt the incentives scheme. The RSPO acknowledges that its vision is to transform the market in line with the changing of the world’s focus toward
sustainability. RSPO operates beyond regulations, trying to satisfy market demands.
Now, with the new developments in RSPO, what should we do?
The year 2015 is just around the corner. Can Indonesia reap the advantages of being a first mover (in adopting the RSPO) in front of Malaysia? Management strategists believe that the first mover can gain huge profits, before competitors follow suit.
The market is the key factor in developing palm oil business. In terms of sustainability, the international market is familiar with the RSPO certification standards, while ISPO will need some time and perhaps a longer than expected to get even a small foothold to promote itself as a sustainable standard in the international marketplace.
At the same time, we need to secure a bigger piece of the pie for Indonesian oil palm growers. I think, considering the new developments, the viable option for Indonesia is to integrate ISPO well into the RSPO framework.
Let’s abandon our long-standing misunderstandings, misperceptions, and shift from mutual subversion
to a new form of symbiosis: Co-Opetition.
The writer is the head of sustainability at Agro Harapan Holdings. The views expressed are his own.
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