Deforestation-Free Palm Oil Supply Chain Ready For The EU
- To fight climate change and biodiversity loss globally, Environment MEPs want only deforestation-free products to be allowed on the EU market.
- Establishing a deforestation-free palm oil supply chain to meet the EU’s Corporate Due Diligence requirements can be easily accomplished
- Two decades of intense focus on the palm oil industry has prepared it for this day
- But will the EU ambition to stop deforestation in third world countries succeed?
The global palm oil industry from Southeast Asia to Latin America is ready to meet the European Unions demands to reduce tropical deforestation under its Corporate Due Diligence law.
Trade statistics show that 86% of palm oil imported by EU nations were sustainably produced. Ramping this up to 100% import of sustainably produced palm oil is easily achievable as there is an oversupply of certified sustainable palm oil. This report on certified sustainable palm oil from Bloomberg is good reference for understanding the background stories.
"Seventeen climate summits ago, one of the world’s first sustainability efforts in global food production was set up to stop palm oil plantations from destroying the rainforest. Yet more than 80% of the market remains untouched by the effort because no one wants to pay for it."
The EU’s proposed legislation in Corporate Due Diligence has the influence to ensure that EU imports of palm oil are 100% certified as sustainable as the EU law stipulates that:
"The new law would make it obligatory for companies to verify (so-called “due diligence”) that goods sold in the EU have not been produced on deforested or degraded land. This would assure consumers that the products they buy do not contribute to the destruction of forests outside the EU, including of irreplaceable tropical forests, and hence reduce the EU’s contribution to climate change and biodiversity loss globally."
This can be easily achieved by the various palm oil certification schemes as outlined by the European Palm Oil Alliance (EPOA). FMCG companies can rely on the RSPO for certification of deforestation free supplies while energy producers can count on the ISCC System.
However, certified sustainable palm oil can be tainted in the Mass Balance supply. This is where certified palm oil is blended with uncertified palm oil but the overall volume gets certified. This leads to a loss of transparency and accountability which groups like ISEAL have identified. It is a quality issue that affects not only palm oil but also other complex supply chains like soy, where better produced US soy, for example, may get mixed in with Brazilian soy to be sold in the EU.
However, even though the global palm oil industry may be ready to meet the deforestation-free requirements of the EU under Corporate Due Diligence, palm oil may not receive the free pass it deserves by the EU. This is not due to any problems in the quality of palm oil supplies for the EU but rather the fact that other vegetable oils for the EU market are not similarly prepared to meet the EU legislation. How is this a problem?
The epitome is multinationals like Wilmar International which trades and processes palm oil, soy, rapeseed among others. Wilmar can easily address any questions on the sustainability of its palm oil especially with the inclusion of national certification schemes in the MSPO and ISPO, which work in tandem with schemes like the RSPO and ISCC. This feature is glaringly absent for the other commodities it trades in.
According to Solidaridad, since the inception of the Roundtable on Sustainable Soy in 2006, a mere 1% has been recorded as certified. Solidaridad highlights the problem with the certified portion as:
"A total of 3.95m tonnes of certified RTRS was bought in 2019, the vast majority through credits, independent from the actual physical flow. In the 10 years of RTRS (2010 to 2019) the global soy production increased from 265m tonnes to as much as 337m tonnes, with only a very small part certified."
The news gets worse for other commodities targeted by the EU.
The Commission’s proposal covers cattle, cocoa, coffee, palm-oil, soya and wood, including products that contain, have been fed with or have been made using these commodities (such as leather, chocolate and furniture). Parliament wants to include pigmeat, sheep and goats, poultry, maize and rubber, as well as charcoal and printed paper products, and bring the cut-off date one year forward, to 31 December 2019.
These are noble goals for planetary health and sustainable consumption but the fact remains that none of these commodities will be ready to prove their sustainability to the EU on the same level as that of palm oil.
US soy and beef may make a strong case but cocoa, coffee and wood from other source countries will have a difficult time in meeting the EU’s requirements and timelines.
As an overachiever against other commodities, the global palm oil industry has to be more assertive in claiming its place as a sustainable commodity. This report from Deutsche Welle shows that presenting the facts against "baseless accusations" works. But all the certification efforts into proving that palm oil produced in Indonesia and Malaysia is sustainable, may not be enough as the EU could yet impede the flow of certified palm oil should the Union designate palm oil producing countries as "High Risk" of further deforestation.
Palm oil, even with the rigorous audits prior to certification by ISCC System, remains an outcast in the EU's subsidies for renewable biofuels. This has led to keen anticipation of demand growth for rapeseed/canola from Australia and Canada which are also certified by the ISCC in order to qualify under EU rules. It will be questionable if the EU designates Australia and Canada as "Low Risk" countries despite the fact that Australia and Canada are high risk countries for continued deforestation. Connecting deforestation in these countries to rapeseed production maybe complex until they are seen in the light of development. As developed countries, there should be no reason why the threats to species extinctions continue to be so high for Australia and Canada. Will the EU policy makers be able to justify biofuel subsidies for imported rapeseed from high deforestation countries?
The big questions now are how will the EU respond when its ambitions to reduce imported deforestation clashes with the sustainable development needs of palm oil producing countries? Can the EU withstand the political influence of US when it caved in previously?
Published July 2022. CSPO Watch