ICELAND GETS COLD ON PALM OIL
The news generating the most headlines this week is that UK supermarket chain Iceland has decided to remove palm oil from its private label (own brand) products.
The move has gained considerable news coverage for the supermarket chain, which specialises in frozen goods. This is surprising given the relatively small market penetration of the group. It represents about 2 per cent on the UK grocery market, so can definitely be considered niche. Its palm oil purchases are around 500 tonnes, representing approximately 0.001 per cent of annual global production.
Given the small numbers involved, this looks more like a marketing stunt than a business unit decision. Going ‘palm oil free’ gives Iceland a tiny point of marketing difference in a crowded and competitive market.
We’ve seen this previously, when French retailers launched a palm oil free chocolate spread to compete with Ferrero’s Nutella. It did not really make a dent in Nutella’s market share, but it did provide a niche option for a niche market.
This goes hand-in-hand with the policy rationale the company is using, where it is stating that it does not believe palm oil can be sourced sustainably. Anyone who has had anything to do with sustainability certification – whether MSPO, RSPO, ISCC or ISPO – would beg to differ.
INDONESIA RATTLES THE SABRE ON RED
The European Union Parliament’s proposed ban on palm oil in the Renewable Energy Directive continues to generate waves in the European Union and across the globe.
At the European end, the trilogues between the Council, Parliament and Commission are ongoing. The objective of the trilogue is to reach a compromise position for the final Directive, which then needs to be approved. This isn’t just on palm oil; it covers the entire gamut of European renewables programs. There has been some jockeying for policy preferences over the past week, but European NGOs are currently focused on having carbon capture programs excluded from the RED. NGOs probably see their job on biofuels as complete; they have convinced the Parliament to take their position, and now it’s up to the Parliament to carry this through.
At the ASEAN end, Indonesia is deploying its resources to both rebuff the EU and gain greater international support.
One of the tricks Indonesia has up its sleeve is the difference between its bound and applied tariff rates. An applied rate is the current tariff on a good; a bound rate is the maximum tariff they can apply to that good. Most applied tariffs in Indonesia are well below the bound rate. This means that Indonesia can place a much higher tariff on a product coming from Europe and still be within WTO rules.
Indonesia has also been rallying in the region, calling on Malaysia to coordinate their positions, and calling on Nigeria – the world’s third-largest palm oil producer – to join the Council of Palm Oil Producing Countries.
The additional wildcard here is the proposed EU-Indonesia free trade agreement. The last negotiating round was completed in February. Palm Oil Monitor has heard from reasonably good sources that the Indonesians were considering postponing the next round, which the EU has slated for June but remains unconfirmed.
ZERO DEFORESTATION POLICIES: NOT SO SUSTAINABLE?
As noted last week, Greenpeace recently called out food companies on their ‘zero deforestation’ commitments. Now CIFOR has joined the fray.
CIFOR’s work is often robust, and this is no exception.
What they discovered is that no companies made commitments to either: maintain marketing relations with the smallholders in their supplier base; or ensure commitments do not adversely affect food security because of changing land use patterns.
The upshot is that – as some people had suspected – smallholders were very much being left out of the ‘zero deforestation’ equation. CIFOR sums it up as follows:
“Many companies may be required to narrow their supply base to a smaller number of producers who have the capacity to conform to more stringent production standards in order to reduce transaction costs. This may then further exclude smallholders from participating in profitable commodity chains.”
For practitioners interested in the wider definition of sustainability this can’t be considered acceptable. Anyone with the most basic understanding of sustainability certification or stakeholder relations knows that the local community – and their welfare – is paramount. This truly underlines the difference between a corporate or NGO commitment and a sustainability standard.