- The EU Deforestation Regulation could undermine RSPO certification
- The EU is the only significant market interested in RSPO-certified palm oil
- If the EU ‘norm’ for palm oil is meeting the regulations, RSPO may no longer be effective
- RSPO will need to correct course, or face the Doldrums for years to come
- Huge moment for national certifications systems, ISPO and MSPO
In the lead up to the RSPO Roundtable, we present a two-part series on whether RSPO can meet the new regulatory challenges facing agricultural commodities.
First up is the EU’s Deforestation Regulation. The EU proposal has rattled developing economies across the globe – and some developed economies too.
EU Parliamentarians are calling for a very high level of evidence for the regulation. This includes full traceability of oil, kernel oil and derivatives to the plantation, not just the mill – and utilizing satellite data. In trade parlance, this is a non-tariff barrier. They exist in everything, from automobiles to apples. Some are legal under WTO rules, some are illegal. Some have a legitimate purpose and some are just protectionist.
Some will allow for the use of a voluntary standard or certification to demonstrate compliance. For example, under the EU RED, there are a number of schemes that will certify that a product meets the EU rules. RSPO had its own certification for RED until that expired – and before palm oil was banned under RED II.
RSPO has spent around a decade introducing new rules to ensure deforestation is effectively prohibited in its supply chain, from the first New Planting Procedure though to the introduction of the High Carbon Stock approach.
But under RSPO’s current systems not everything that is ‘certified’ will meet the EU benchmark.
The RSPO has four types of certified product. Two of those (identity preserved and fully segregated) keep palm oil from fully audited operations separate from everything else. The other two (mass balance and ‘book and claim’) effectively put palm oil from certified and non-certified operations into a pool, and a limited proportion of that pool can be considered certified.
This could mean that in the eyes of EU lawmakers, only ‘identity preserved’ or fully segregated supply chains for palm oil and other commodities will suffice – and the mass balance and book and claim systems won’t.
About 20 per cent of all palm oil is certified globally. Only half of that is sold as RSPO certified.
Around half of the palm certified by RSPO is through certificates and mass balance. But it also means there is a greater supply than demand for RSPO certified.
The European market – and to a minor extent the US — is the only market that has any interest in RSPO certification. This interest has limits. RSPO is not a significant ‘brand’ in EU markets, because many manufacturers are reluctant to state they are using palm oil at all.
So, the question is whether simply meeting EU requirements will become the norm in the EU, or whether if meeting EU requirements via certification will be the norm.
First, governments like Indonesia’s are keen to have its national standard – ISPO – recognized by the European Union. And it will have significantly more economic and political leverage than RSPO in any discussions.
Second, it may simply come down to cost, as we pointed out in our conversation with Food Navigator last month. If companies can introduce their own compliance systems and reporting systems – without the RSPO’s bureaucratic and political headaches – it could mean a bigger decline for RSPO.
Third, RSPO appears late to the party on this, and there seems to have been an assumption that RSPO was a shoo-in.
In our view, RSPO’s big problem was that it attempted to distance itself from other non-certified palm oil. Remember the Good vs Bad palm oil campaigns? But at the same time, it was seeking to be the face of palm oil in Europe. Attacks on palm oil – certified or not – became attacks on RSPO by default. RSPO allowed it to happen because they believed it would increase uptake of certified palm. It did not attempt to extol the social and economic virtues of palm oil, even non-certified.
It has meant that all palm oil has been tarred by the same brush.
The strategy was a total blunder.
Our Take:
1) RSPO’s new CEO is facing a new and difficult regulatory environment in the EU. The organization will need to make a 180 degree turn, shed the anti-palm oil partners and consultants, and make a full-throated defence of palm oil – and producing countries and their people – going forward; and
2) This is a huge moment for national certification systems – ISPO and MSPO. If they get this right they can relegate RSPO to the Doldrums and meet EU requirements as they are backed by internationally accepted norms in standard setting.
Later this week we’ll look at the other shadow hanging over RSPO certification: labour.