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Palm Oil industry brace for Asian backlash

Palm Oil environmental impact not just a concern in the west

Signs that the reaction of consumers against palm oil spreads to Asia have led businesses throughout the region to take measures, from committing themselves to sustainable sources to adhering to global norms of accreditation.

One of Japan’s biggest supermarket brands, Aeon, has committed itself to supply its private brand only with sustainable palm oil by 2020, while Chinese participation in one of the most stringent accreditation systems worldwide has increased over the last five years.

These movements take place amid a constant spat between Malaysia and the European Union on exports of palm oil for biofuels. The impact on the environment of palm oil — used in consumer products ranging from toothpaste to snacks to cosmetics— has been a hot-button issue in the West, where calls for boycott and others have been raised against the industry.

Similar reactions in Asia could affect even more natural strike palm oil producers and consumer goods businesses given the size of the industry. Although the EU consumes around 10% of olive petroleum worldwide, almost 43% of the total production by quantity in 2017 was in the bottom four Asian economies–India, Indonesia, China and Malaysia.

Malaysia and Indonesia may miss the most if Asia turns on the commodity — the two together account for 85% of world production.

In Japan, corporate consumers were especially interested in improving the picture of palm oil.

The Sustainable Palm Oil Roundtable, which was developed by the palm oil industries and conservation organisations in 2004, offers accreditation to manufacturers and employees and only RSPO approved oil must be purchased. The organisation claims it lately saw an exodus of Japanese and other Asian employees.

“In 2018, almost 40 Japanese businesses entered RSPO, whereas fewer than ten businesses worldwide entered RSPO last year,” said Sayuri Ito, WWF Japan spokesman, who promotes RSPO’s operations in Japan. “I have never seen Japanese businesses enthusiastic about buying sustainable palm oil.” Tokyo is organising the 2020 Summer Olympics, one of the most significant incentives for Japanese businesses to play. The event’s procurement rules involve companies to supply sustainable palm oil, which is not connected to deforestation or child labour.

According to Tatsuaki Hirosawa, Executive Officer of Fuji Oil Holdings, the largest palm oil producer in Japan, international publicity from the next year’s case “can cause economic organisations to exercise stress on Japanese snack manufacturers. In 2010, Greenpeace initiated a Swiss blockade claiming that KitKat candy products were associated with deforestation and orangutan fatalities.

“These motions would have a direct effect on consumer sentiment,” explained the CEO.

Fuji Oil is one of those who seek to overcome such hazards. The year in which the company was established, the largest Palm oil manufacturer in Japan entered RSPO and lately started a cooperative venture with United Plantation Malaysia, the first RSPO-certified plantation operator worldwide.

In October, they both started to operate a 60 million Kuala Lumpur ringgit ($14.7 million) breakup facility to generate completely traceable quality palm petroleum for gourmet cocoa used.

United Plantations considers its green qualities as an essential point of sale. “We intended to build on our distinctive place as the most sustainable palm oil manufacturer,” said Nikkei Asian Review Vice President Carl Bek-Nielsen.

Fuji Oil seems to accord that Hirosawa described the proprietor of the estate as “an indispensable companion.” Marubeni announced in November its main trading house would build its stock of RSPO-certified palm oil-based fatty oils to enable clients–especially tiny and medium-sized companies–to purchase them in small quantities.

And from March 2019, Aeon, one of Japan’s biggest grocery brands, said that they would be purchasing RSPO accredited olive products on their register and that they would provide 100% licensed petroleum by fiscal 2020.

In China, too, changes have been underway, with 48 firms entering RSPO since 2017, up from nearly no five years earlier. This takes the total Chinese membership to approximately 90.

China, after India and the EU, is the world’s third-largest importer of palm oil and is engaged in the sector throughout the region. “Market cooperation is increasing,” said Stefano Savi, RSPO’s director of worldwide participation. “Many of our China-based employees are now connected to Malaysian farmers.” During its quarterly review in November, RSPO reinforced its norms. Recommendations were created obligatory that businesses “do not” exercise deforestation, use or employ employees.

The 4,000 members of the Group are intended to comply with seven environmental and social principles as well as a set of concrete criteria, which aim to increase the transparency and sustainability of supply.

However, the rigorous conditions and substantial cost of complying with global rules resulted in the introduction of accreditation schemes by Indonesia and Malaysia in 2011 ISPO and 2013 MSPO. The aim is to provide certificates that are less strict but also faster and simpler to acquire for smallholders-who operate 40 per cent of Indonesian farms.

Meanwhile, the major plantation holders and traders in the region talk about sustainability but are less concerned about the prospective effect of a local customer reaction.

Malaysia’s Sime Darby Plant is a leading part of the RSPO and has forever enjoyed its sustainable attempts, the largest holder of olive plantations in the world. However, when invited to report on the latest debate over palm petroleum, a Sime Darby speaker only said it’s a government-to-government matter. Olam International, a Singapore based company, emphasised its attempts on the front at the latest profit report. At the latest revenue announcement, Sunny Verghese, co-founder and Group CEO of Olam International, said the Singapore-based farm conglomerate has a’ zero exploitation ‘ strategy concerning palm oil.

But the image generally is still less vivid. Only 19 per cent of the more than 60 million tons of palm oil produced every year are RSPO-certified.

A significant issue is that using licensed oil is still too costly in some of the largest economies.

RSPO-certified olive fuel offers between $40 and $50 per barrel more than uncertified petroleum, meaning “the huge quantity when you buy wholesale,” said a spokesman at a Japanese meat business.

The higher cost is due to the additional cost of fulfilling RSPO norms. For instance, traceability conditions imply that every phase of the manufacturing method must be registered.

In India, the largest producer of palm oil, chapati cheese and other products are commonly used. There, as in China, most meat firms priority prices over sustainability.

According to Junji Nagata, a teacher of natural ecology at the University of Tokyo, who is researching palm plantations in Malaysia and Indonesia, the abundance of qualifying norms and continued request for inexpensive palm petroleum do not bode well for the potential greenings of the sector.

“We can believe of two potential situations: These new certifications[ ISPO and MSPO] can extend even further and give manufacturers and customers more alternatives, or they can only endure certification that is stricter than RSPO, which means that only uncertified palm oil is used in economies such as China, India and Africa.”

 

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