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Following a pilot programme in 2014, a number of large plantation companies have received certification this year under the Malaysian Sustainable Palm Oil (MSPO) standard.

And there has been further progress. Auditors are being trained and awareness sessions are taking place across the country. More plantation areas are being certified.

Why is this significant? Establishing a standard was an important first step, but significant measures are being taken to ensure there is the capacity for the MSPO to be implemented and verified in an efficient manner.

This means that it can be adopted by the market in a cost-effective way, adding to the growing sense that it will play a major role in the future of palm oil certification.

This development of capacity on the ground is essential. Its absence would be akin to a government setting safety standards for vehicles, but not having the budget to let manufacturers and the public know of the changes, or to deploy an agency to enforce compliance.

And if safety standards are too strict, it would not improve the functioning of the transportation system. Most vehicles on the road would not meet the standards. Those that do, would be beyond the reach of most consumers.

This is precisely what gives MSPO a point of difference with the private-sector initiative that is the Roundtable for Sustainable Palm Oil (RSPO). Simply, it is the ability to have a large number of producers meet a broad range of standards that provide an assurance of sustainability.

The RSPO is an important and valuable player in palm oil certification, but its standard has at times proven to be simply too broad and too expensive for most small farmers to meet.

Unusual pressure on palm oil

In this regard, too, the pressure on the palm oil supply chain to meet certification standards – and a specific standard at that – is unusual. There are few other commodities where this occurs.

Labour-Palm-oil-2-2015Rice, for example, does not have any such standard, even with its relatively large greenhouse gas footprint because of methane emissions associated with wet rice farming. Consider the outcry around the world if small rice farmers were forced to meet demanding environmental standards that potentially affect their income and livelihood.

Some standards exist for coffee, such as Fair Trade and Rainforest Alliance certification, but the uptake for both is relatively small and mainly confined to Western consumer markets. There is a general acceptance of specialty coffees to meet demands based on taste – and that is the overriding factor in coffee production.

Regardless of the reasons for the pressure on the palm oil industry to adopt standards in production, there is no reason to consider that it will go away. It is effectively the expression of an activist-driven desire in Western markets for assurance that products be produced in a certain way.

But what happens when those standards don’t exist or those standards are too expensive for most producers?

Realistic standard

There has to be a level of realism and consensus in the construction of standards. That is why national standards – such as the MSPO – go through a lengthy procedure that adhere to international norms in standard setting. This avoids standards heading into a world of ideal benchmarks and procedures that are not practical for most participants.

So, the MSPO effectively represents two things.

First, it represents the fact that certification of palm oil is maturing and consolidating. The RSPO has not been around for particularly long in the grand scheme of things. But it serves a particular market and a particular need, and it does it well.

Other benchmarks – such that of the Palm Oil Innovation Group (POIG) and Golden Agri-Resources Ltd (GAR) on High Carbon Stock (HCS) – are emerging. POIG suits a certain number of companies that are able to take that leap; GAR’s HCS suits itself and other large vertically integrated producers. The MSPO similarly suits the Malaysian industry and specific national conditions.

Second, MSPO represents the qualitative difference between palm oil from Malaysia and the output of other producers. Just as there is a level of quality assurance that can be seen in, say, Australian beef, Japanese manufacturing and American innovation, there is a level of assurance in what can only be identified in the brand that is Malaysian palm oil.

This assurance extends from the well-recognised ‘Malaysian model’, underpinned by the idea that smallholders are benefiting from oil palm cultivation, and that high-quality downstream products are produced and marketed across the globe.

Dr Yusof Basiron

CEO, MPOC

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