Recent RSPO Certification Suspension Sets a Precedent in Palm Oil Supply Chains

May 26, 2016 EcoVadis

In 2015, Indonesia became the worldwide number one palm oil producer. Indonesia also hosts large tropical forests sheltering endangered species directly threatened as forests are converted for palm oil production. As of May, 6,401 of its animal species are currently listed on the IUCN Red List. According to the WWF web page on palm oil, “Until the mid-1980s, the Tesso Nilo forest complex covered 1.6 million ha. Today, due to deforestation for oil palm and pulpwood plantations, only about 80,000 ha of natural forest remain”. Unprecedented environmental impacts from palm oil plantations led to the foundation of the Roundtable on Sustainable Palm Oil (RSPO) in 2004, with the aim to set the standard on sustainable palm oil. Introduced in 2008, the Certified Sustainable Palm Oil (CSPO) scheme certifies producers/growers and also grants chain of custody certification along the value chain.

Slow Response from RSPO, Immediate Response from the Market

On April 1st, the certification of Malaysian company IOI GROUP was suspended over three of its subsidiary operations in Indonesia’s West Kalimantan province, following a violation of the RSPO principles, criteria, and procedures on the ground of fraudulent statements. This came after a complaint submitted in April 2015 by Aidenvironment (a sustainability consulting organization) alleging the company did not live up to basic standards in terms of non-deforestation and peatlands protection.
The market has reacted unfavourably to this event with companies fearing a ripple effect on their reputation and even disruptions. IOI clients, such as Unilever (one of the largest buyers of palm oil in the world), Kellogg and Mars (and other like Hershey’s, Colgate-Palmolive, Johnson & Johnson, Procter & Gamble, SC Johnson, Yum Brands and Nestlé) have announced that they would disengage with this supplier, put corrective action plans in place or not source their palm oil from IOI as long as the suspension remained valid. The RSPO responded that a corrective action plan has been submitted.
How could such situation occur knowing that the company was already flagged six years ago for similar alleged wrongdoings?, This 2010 report published by the NGOs Milieudefensie and Friends of the Earth Europe condemned the actions of IOI GROUP in Katapang district, West Kalimantan (the same area scrutinized by Aidenvironment), and a grievance against the IOI Group was addressed directly to the RSPO. The RSPO has faced criticism over its particularly slow complaints system. Long-standing denunciations from NGOs have indeed targeted its “loose” compliance mechanisms, including its non-rigorous certification scheme. This new case is an additional reason for its discredit.

The RSPO at a Turning Point?

Is it time for the RSPO to adopt additional more binding compliance mechanisms, a more efficient complaints panel and ask more from its members? The RSPO needs to reinforce its governance mechanisms and become more binding if it wants to keep its social licence to operate. The RSPO being perceived as a soft initiative, its incapacity to treat allegations of non-compliances and the recent withdrawal of one of its founding members’ certification (member since 2004) are signs that its rules must be redefined to mitigate the already disastrous environmental consequences of unsustainable palm oil. So far, members could only be suspended or terminated if they did not fill out their Annual Communication of Progress (ACOP) within 2 or 3 years. As such, 15 members have been terminated until now. The withdrawal of a member certification sends a strong message for all its other 2862 existing members that being certified may not be a sufficient safeguard against non-compliance. The recent suspension may act as a catalyst for change not only within the RSPO but also the entire palm oil supply chain.

Mark Dubreuil, CSR Analyst, EcoVadis

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