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The Roundtable on Sustainable Palm Oil: Existing Challenges and Future Opportunities

Due to its low cost and versatile properties, palm oil remains the most consumed vegetable oil globally and ubiquitous within a wide array of products and industries ranging from cosmetics, pharmaceuticals, biofuel to food. Given rising global demand, the yearly production of palm oil is forecasted to reach 240 million tonnes by 2050, approximately two-fold that produced in 2009. The majority of this production will likely originate in Indonesia, which accounted for approximately 56% of global output in 2018.

While the rainforests of Indonesia are vital for mitigating climate change, the production of palm oil has required and resulted in widespread deforestation. Deforestation neutralises the forests’ carbon-curbing potential and contributes substantially to global GHG emissions. Additionally, the resulting loss of biodiversity and its vital ecosystem services poses further threats to indigenous and local communities who are reliant on the cultural ecosystem services of the rainforest and its resources for their livelihoods. Due to these negative externalities, governments and international organisations have turned towards “sustainable” palm oil as a mitigatory solution.

The Roundtable for Sustainable Palm Oil and Its Challenges
The Roundtable for Sustainable Palm Oil (RSPO) was formed by palm oil industry stakeholders in 2004. Currently, it is the global standard and certification scheme of “sustainable” palm oil. It enables companies to sell their products under the RSPO brand as Certified Sustainable Palm Oil (CSPO)—and is supported by the Sustainable Palm Oil Investor Working Group (IWG), representing assets of greater than US $1.4 trillion.

Multi-stakeholder initiatives such as the RSPO, aiming to develop and implement a framework for sustainable practice, indicate a shift from self-governance frameworks to that of private meta-governance. This shift is defined by the universalisation of sustainable practice standards rather than individualised corporate visions of and initiatives towards sustainable practice. Both decision-making and the delineation of sustainability standards are skewed towards the actors holding the most power within global supply chains, which tend to be larger corporations in the global North. As a result, there are existing challenges within the RSPO scheme leading to the greenwashing of CSPO, as the following examples illustrate.

The Certification of Deforestation
An imagery and time-series analysis examining land-system change between the years of 1984 and 2020 undertaken by Gatti and Velichevskaya evidences that the majority of certified plantations in Borneo and Sumatra are located on land that less than 30 years ago was tropical rainforest. As the RSPO considers the state of plantation land only at the time of verification, a cycle results whereby deforestation and palm oil production are deemed “sustainable,” largely because forests that are logged “today” in reality only existed “yesterday,” but are still certified as sustainable “tomorrow or the day after.” In essence, this cycle obfuscates the actual effects of palm oil production—in this case, long-term forest degradation—as products may be certified as CSPO even if a forest was deforested less than a year ago.

The Exclusion of Smallholders
Research has found that smallholding systems are more biodiversity-friendly than large-scale plantations and that the resulting rural incomes promote food security and poverty reduction while hindering rural-urban migration. While Indonesian smallholding accounts for 40% of land-use coverage, only 3.8% of these are certified as CSPO and integrated into global markets. The most notable barrier to their integration is the financial inaccessibility to the RSPO certification scheme. Smallholders necessitate higher resource input and labour expansion to meet the standards, face higher transaction costs, are limited in collective and individual capacity building, and also face political and legal challenges such as land title possession. Thus, large-scale systemic efforts are necessitated to overcome the existing structural disadvantages.

Opportunity for the RSPO: Strengthening the Certification Process
In light of growing pressure from civil society and NGOs, both of whom have released reports evidencing the current issues within the RSPO, the RSPO necessitates systemic reforms. On the environmental front, such reforms may include revising standards and implementing stronger regulations on the temporality of deforestation to ensure that land deforested a year ago cannot be utilised to produce CSPO. Additionally, by fostering the integration of smallholders into the RSPO more environmentally sustainable practices may be adopted, equitable benefit sharing may be promoted, and smallholders may gain more agency within decision-making; such efforts will require innovative collaborations between governments, the private sector, and civil society. Given that ESG is a growing priority for businesses and consumers, systemic reforms within the RSPO can reassure investors and consumers of the legitimacy of CSPO, thus allowing for greater capital flows.