The case for Malaysian Sustainable Palm Oil

The Malaysian palm oil industry is a 100 billion ringgit industry that is home to more than 450,000 small farmers.

Sustainability is an important issue when it comes to palm oil. As the world’s most consumed vegetable oil, the consistent, high-yield production of palm oil draws the attention of market competitors and observers alike to potential irregularities that could provide an unfair advantage. While not surprising or reasonable, it has become an opportunity for discriminatory treatment of palm oil producers who question their production practices.

The European Union (EU) has imposed regulations on palm oil, specifically banning its use in biofuel production. The United States (USA) has also – via the US Customs and Border Protection (CBP) – banned palm oil imports from selected companies, such as the Withhold Release Order (WRO) against Sime Darby Plantations. These are some of the more stubborn treatments that the global palm oil industry faces. Other treatments include restrictive regulations and guidelines on palm oil imports by the EU, as well as requiring labeling of the content of all their vegetable oil products. The latter requirement is also shared by Australia, which has also promoted the use of certified sustainable palm oil to help protect wildlife habitat.

Aside from these legislative measures, there are also ongoing anti-palm oil campaigns. Previously, US soybean lobbyists had linked claims of high cholesterol to the saturated fats in palm oil. European environmental NGOs openly receive EU funding to actively advocate for rapeseed and sunflower oil in developing countries while trying to improve their environmental practices.

On the one hand, we can take a holistic view of these campaigns and legislative actions from these established markets and address the arguments they make. Labor was the justification for the US bans – the 2016 Human Trafficking (Malaysia) Report released by the US Department of State is a key document for these measures. The EU argued against it on deforestation – oil palm is an important crop for all countries producing it, with most of the palm oil yield coming from commercial plantations, which account for a large percentage of agricultural land use in these countries.

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The European market is a very critical market for plantation forests as it implies the clearing of natural virgin forests to make way for large scale palm oil plantations. Europe has been very vocal against deforestation since the 1980s, as shown by its support for the various anti-timber industry campaigns during that time. This attitude has continued to this day, leaving a lasting impact on the global timber industry in the form of the 2003 EU Action Plan on Forest Law Enforcement, Governance and Trade (FLEGT). This firm stance is necessary in the face of climate change. However, it must be reiterated that although oil palm plantations are plantation forests, plantation forests are not necessarily oil palm plantations, and the EU’s firm stance has helped this overlap between oil palm plantations and plantation forests tend to be overlooked, leading to persistent – and sometimes outdated – treatments and Rough guidelines.

Palm oil is a perennial plant with a lifespan of 30 years.

On the other hand, these legislative measures seem cumbersome. Along with the active campaigns, such as those by US soybean lobbyists and green European NGOs, it seems as if the larger markets are asserting their presence and exerting market and political pressure through legislation and global campaigns.

As the main crop in Malaysia, oil palm accounts for 68% of agricultural land use (5.9 million ha) in 2020, according to the Department of Statistics Malaysia, with the majority of that land (72%) being plantations. But land use size is not the primary reason palm oil is the world’s most consumed vegetable oil. Oil palm is a perennial crop whose trees produce economically viable quantities of fresh fruit bunches (FFB) over a 30-year lifespan. A mature oil palm produces clusters of fruit weighing about 20 kg about 15 times a year.

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These high-yielding properties already guarantee a profitable return, but what sets palm oil apart from other vegetable oils such as soybean, canola and sunflower seed (the next three most consumed vegetable oils in the world) is its superior economic competitiveness. The yield of palm oil is 3.49 tons/hectare, 5 to 8 times more productive compared to other vegetable oil crops. For reference, rapeseed oil yield is 0.78 ton/hectare while soybean oil yield is 0.46 ton/hectare. This comparison brings many things to light, but most importantly, it claims that canola and soybeans require a much larger and more extensive use of land just to produce the same yield as palm oil.

These economies of scale provide a meaningful context for the sentiments behind EU, US and Australian legislation and campaigns.

The truth about the sustainability of palm oil lies somewhere between the arguments behind the above actions by Western markets and the actual actions taken. But focusing on that alone will not solve or address sustainability concerns in palm oil production; it’s not a zero-sum game because there’s more to it than just winning an argument against established markets like those mentioned above. The way forward would be to strike a balance between these markets’ issues and maintaining palm oil’s environmental and economic contributions.

The Malaysian palm oil industry is a 102 billion ringgit industry that is home to more than 450,000 small farmers. Malaysia is the research and development center for the global palm oil industry. We have made great strides in yield improvements through genomic mapping, clonal work and mechanization. We have also used palm oil biomass to produce biofuels and oleochemicals, both of which are profitable by-products that have contributed to the palm oil value chain. All of this is definitely a great place to start the conversation about sustainable palm oil.

For Malaysia at least, discussion within the industry had started around 2015 with the development of the Malaysian Sustainable Palm Oil (MSPO) program. Like many certification schemes that start out as a voluntary scheme, the MSPO was one of the efforts of the Malaysian palm oil industry players to compete in the global market. Developed by the Malaysian palm oil industry in conjunction with the Malaysian Palm Oil Certification Council (MPOCC), MSPO is a set of standards to ensure sustainable palm oil production in Malaysia. It consists of the Oil Palm Management Certification (OPMC) and the Supply Chain Certification Standards (SCCS), both of which are effective and practical approaches to help the industry achieve a green and ethical – sustainable – palm oil industry.

At the time of writing, MSPO implementation in the Malaysian palm oil industry has reached 96%. Launched in November 2019, the MSPO Trace has been further improved following user and stakeholder feedback, with its compliance mandatory to maintain certification status since September 1, 2020. Document retention is a major certification hurdle. Despite these positive advances, Greenpeace and the EU are critical of MSPO, as the Destruction: Certified report claims certification is a weak tool against global deforestation and ecosystem destruction.

The same report also stressed the need for greater cooperation between governments in tackling global deforestation beyond the EU. In that sense, the MSPO can be groundbreaking – it is regularly reviewed by bodies that openly invite the whole world to contribute to its ever-evolving standards. It is a national level certification with legal support and an initiative that has started to show the shortcomings of voluntary certification schemes like RSPO. This is a precedent that should bring the global palm oil industry and markets together and remains evidence that Malaysia is asserting its position as a major global palm oil producer by taking the lead in developing a set of standards that can help create a to create a more sustainable world palm oil industry worldwide.