The Oil Palm

CEO of MPOC: The Added Value of MSPO

Approximately one year ago at a meeting in Kuala Lumpur, Malaysian officials gave an impressive overview of the progress being made on the Malaysian Sustainable Palm Oil (MSPO) standard.

In 2014, a pilot programme was undertaken, and towards the end of the year, a number of large companies had become certified.

One year on, things have progressed further. Auditors are being trained and awareness sessions are taking place across the country. More plantation areas are being certified.

Why is this significant?

Establishing a standard was an important first step for the Malaysian industry, but now significant steps have been taken to ensure there is the capacity for the standard to be implemented and verified in an efficient manner. This means that MSPO can be adopted by the market in a cost-effective manner, further adding to the growing sense that MSPO will play a major role in the future of palm oil certification.

This development of capacity on the ground is essential. If the capacity doesn’t exist, it’s similar to a government setting safety standards for road vehicles, but not having the budget to let car manufacturers and the public know of the changes, nor to deploy a police force to enforce compliance.

Similarly, if the safety standards implemented are too strict, meaning that the only cars that are compliant are beyond the reach of most consumers, it won’t actually improve safety nor the functioning of the transport system. It will simply mean that most cars on the road won’t meet the safety standards.

This is precisely what gives MSPO a point of difference with the private-sector initiative that is the RSPO.

Simply, it is the ability to have a large number of producers meet a broad range of standards that provide an assurance of sustainability.

RSPO is an important and valuable player in palm oil certification, but at time it has proven to be simply too broad and too expensive for most small farmers to meet. In this regard the pressure that is being placed on the supply chains or palm oil to meet certification standards – and a specific certification standard at that — is unusual. There are few other commodities where this occurs.

Rice, for example, does not have any similar standards. However, rice does have a relatively large greenhouse gas emission footprint because of methane emissions associated with wet rice farming. Consider the outcry around the world if small rice farmers were forced to meet demanding environmental standards around rice that potentially negatively affected their incomes and livelihoods.

Coffee, which unlike rice or vegetable oil is not a food staple, does not have anything like the levels of pressure to meet certain certification standards. Sure, some standards do exist, such as Fair Trade and Rainforest Alliance certification, but the uptake for both is relatively small and for the most part confined to Western consumer markets. There is a general acceptance of specialty coffees to meet demands based on taste – and that is the overriding factor in coffee production.

Regardless of the reasons for the pressure being placed upon the palm oil industry for the adoption of standards in production, there is no reason to consider that it will go away. It is effectively the expression of an activist-driven desire in Western markets for assurance that products be produced in a certain way.

But what happens when those standards don’t exist or those standards are too expensive for most producers?

There has to be a level of realism and consensus in the construction of standards. That is why, for example, national standards – such as MSPO – go through a lengthy standard-setting procedure that adheres to international norms in standard setting. This avoids standards heading into a world of ideal benchmarks, standards and procedures that are simply not practical for most market participants.

So MSPO effectively represents two things.

First, it represents the fact that certification for palm oil is maturing and consolidating. RSPO has not been around for particularly long in the grand scheme of things. But it serves a particular market and a particular need, and it does it well.

Other benchmarks – such POIG and GAR’s HCS – are also emerging. POIG suits a certain number of companies that are able to take that leap, and similarly GAR’s HCS suits GAR and other large vertically integrated producers like it. MSPO, on other hand, suits the Malaysian industry and the specific national conditions, which leads to the second point.

Second, MSPO represents the qualitative difference between Malaysian palm oil and palm oil from other countries. Just as there is a level of quality assurance that can be seen in, say, Australian beef, Japanese manufacturing and American innovation, there is a level of assurance in what can only be identified in the brand that is Malaysian palm oil. This assurance extends from the well-recognised ‘Malaysian model’, underpinned by the idea that smallholder producers are benefiting from oil palm cultivation, and that high-quality downstream products and produced, and marketed in markets across the globe.

By Dr Yusof Basiron, CEO of MPOC