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Sustainable palm oil: Market leakage remains a challenge
Palm oil producers are finding sufficient buyers in Indonesia and abroad for whom sustainability is a minor consideration, which is limiting pressure on the sector to adopt environmental practices.
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Members of the Indonesian Palm Oil Farmers' Association (Apkasindo) rally outside the Office of the Coordinating Economic Minister in Central Jakarta on May 17. They said they were not reaping the benefits of the skyrocketing price of palm oil. (Antara/Rivan Awal Lingga)
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onsumer demand for sustainably-sources products is seen as fundamental to the adoption of environmental practices in the palm oil sector, but market leakage is limiting the pressure on firms to adapt.
Indonesia and other countries are perceived as leakage markets and thus are capping the pressure to create sustainable palm oil products, an environmental expert has said.
Bukti Bagja, senior manager for smallholders and livelihood transformation at World Resources Institute (WRI) Indonesia, said pushing for sustainable practices in the palm oil sector was challenging, because demand for sustainable palm oil products was very limited in both the domestic and international market.
“Very few are willing to bear the [additional] cost for sustainability at both private and public plantations,” he told The Jakarta Post on Tuesday.
Most Indonesian palm oil is sold abroad, he noted, but demand for sustainable products was largely limited to the EU and US markets.
“The Asian and African markets, and the rest of the world, are still considered leakage markets, which […] do not demand sustainable palm oil products,” he said.
For instance, only seven of the top ten suppliers of Indonesian palm oil for China had committed themselves to a no-deforestation, no-peat, no-exploitation (NDPE) policy as of January 2021, according to a report from sustainability think tank Chain Reaction Research.
