Investors Demand Better Standards for Sustainable Palm Oil Certificati…


Institutional investors, increasingly concerned about the risks of deforestation on their investment portfolios, have called for stronger provisions for certifying the sustainable production of palm oil. More than 90 investors, representing more than $6.7 trillion in assets under management, sent a letter to the Roundtable on Sustainable Palm Oil (RSPO) to strengthen its draft standards for certifying palm oil so as to include more robust protections for peat lands, high carbon stock forests and labor concerns.
The RSPO is the multi-stakeholder sustainability certification body for the palm oil industry, tasked with providing assurance that palm oil has been produced sustainably.

Companies need assurance that their palm oil supplies are deforestation-free. Without that, their businesses are vulnerable to reputation and market risks, explains Julie Nash, director of food and capital markets at Ceres, the nonprofit organization that coordinated the letter.

Rapid expansion of the $37 billion palm oil industry has contributed to the destruction of rainforests, drainage of carbon-rich peatlands, and land conflicts with local communities. Palm production continues to be a leading driver of deforestation, which causes 10% of global GHG emissions. In fact, new data from the University of Maryland indicates that last year was the second-worst on record for tropical tree cover loss.

Investors Increase Focus on Sustainability

As Environmental Leader has reported several times over the last year, investors are increasingly demanding that companies commit to – and report on – environmental, social and governance (ESG) efforts. In fact, investors say that ESG profiles have become a key driver of their decision-making, according to a report from S&P Global published last fall.

The report also found that nearly all (95%) of respondents plan to engage with companies they invest in about issues related to the Sustainable Development Goals (SDGs).

But Palm Oil Certification Is Far from Simple

With palm oil found in nearly 50% of all packaged goods, sustainable sourcing of the ingredient is vital to reducing environmental risks for manufacturers as well as for investors. In many regions, oil palm cultivation has caused – and continues to cause – deforestation. Additionally, some palm oil plantations were developed without consulting local communities over the use of their land, and others have been responsible for forcibly displacing people from their land. Violations of workers’ rights to fair payment and safe working conditions and other malpractices have also occurred.

But ensuring that the product has been sourced sustainably is a challenge. The palm oil supply chain is long and complex. In order to develop environmental and social criteria for sustainable palm oil, the RSPO must pull together stakeholders from seven sectors: oil palm producers, processors or traders, consumer goods manufacturers, retailers, banks/investors, and environmental and social non-governmental organizations.

Today, just 19% of the world’s palm oil is RSPO certified. But despite widely-reported malpractices in the industry, a growing number of players in the palm oil industry have committed to adopting more sustainable practices. “The result of this gradual transition is an increasing amount of palm oil in our products that has been produced and sourced in a sustainable manner,” the RSPO says.

The RSPO has more than 3,000 members worldwide who represent all links along the palm oil supply chain. They have committed to produce, source and/or use sustainable palm oil certified by the RSPO.


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