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Palm oil sector moving towards climate action

Updated: Mar 29, 2021

by Dr Kalanithi Nesaretnam

Thoughts on the palm oil webinar “Progressing from sustainability to climate action" held on 3 March 2021, with the keynote from YBhg. Datuk Ravi Muthaya.

The palm oil sector is an industry which provides a product that is efficiently produced, accessibly priced for a large number of people in the developing world and used responsibly a safe and nutritious food source for many. In addition, it is an adaptable and versatile product that is also used in many of our homes. It has helped to raise hundreds of thousands of households out of poverty since the 1960s. All that is not without cost.

Dr Kala Nesaretnam in her welcome address talked about her passion for palm oil having been involved with the Palm oil industry for over 30 years. She remarked on the tremendous growth in its sustainability practices, over the last twenty years. Despite the progress, she said we are constantly under scrutiny and sometimes bullied because Malaysia and Indonesia are deemed third world producers. She said we should look at this positively and continue to strive and transform the industry to one that all of us and our future generations can be proud of.

Whilst many have embraced RSPO and the mandatory MSPO we still have some who have failed to do so. We hope this webinar will persuade them to do the right thing.

In 2020, CPO prices hit a nine-year high and yet this was not reflected in the share price of listed palm oil companies. Analysts believe that investors are now looking for companies who are ESG compliant. Therefore, in the interest of shareholders, palm oil companies need to be ESG compliant and also move from sustainability to climate action. Dr Kala also forewarned companies about the possibility of carbon border taxes and the upcoming challenges facing directors which are climate accountability and biodiversity loss.

Moderator Tunku Dr Alina then discussed how sustainability is today understood as being able to deliver financial and societal value, in a way that does not create harm to the environment.

The environment, E of ESG, in its totality, is the climate and the natural capital resources that are our biosphere, novel entities, biogeochemical flows, oceans, land systems, freshwater, stratosphere and atmosphere.

After so many years of humans having taken environmental factors as a free resource, they are now are in danger of being depleted or compromised, to such an extent that will change the temperature of this planet upwards by at least 1.5C and thus making life for humans unbearable. We are only now beginning to take steps to halt this. “I don’t know if it is too late, but we have no choice but to try” she said.

Businesses are now asked to operate as problem solvers, and not as contributors to the problem. It is a collective responsibility that we have to discharge. Her take home message from the webinar were as follows:

1) how does our action/activity impact or depend on the climate or natural capital?

2) How material is this? your stakeholders will determine the materiality to your business.

3) what is our carbon footprint from this activity? The RSPO has a good PalmGHG calculator that can help with carbon footprint calculations.

4) where in the business’s value chain is a response required.

Finally, what is the appropriate response and here, the panellists offered a menu of mitigation and adaptation responses:

-Dato Lee of IOI shared the reduction of GHGs within IOI’s value chain through their Climate Change Action initiative. The other important adaptation measure, as shared by Datuk Lee is good agricultural practices – with objective of better yields and more productivity with less dependence on natural capital. In other words, financial value as well as benefit to the environment;

-Mr Juan Aranols talked about Nestle’s Net Zero by 2050 , incorporating traceability tools to verify and measure their supply chain actions for veracity and Carbon sequestration through their Project Releaf to plant 3 million trees by 2023;

-Dr Yatela explained about forest conservation, rehabilitation and reforestation and how this addresses reduction of carbon emission. She also illustrated that protection of local or rural Community and including them in such efforts is good; and

-One method is Natural Capital Asset maintenance. For the PO industry, maintaining Biodiversity (small scale or large scale) will provide ecosystem support that benefits producers. Dr Marc has shared that biodiversity promotes soil health and protects water supply.

Watch this webinar again here and read the keynote by YBhg. Datuk Ravi Muthaya:

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Download D • 61KB


Responses to Questions asked during the Webinar

Question 1: The MSPO certification was done in a rush. How has this emphasis on meeting quantity targets affected the quality of the certification?

The Government, in May 2017, agreed to implement the MSPO certification scheme on a mandatory basis beginning 1 January 2020. Considering the implementation of the MSPO scheme voluntarily in 2015, the MSPO certification scheme is now in its sixth year. With that, the palm oil industry has had ample time to adapt to the requirements of the MPSO and obtain MSPO certification. The definition of Quality is “the degree to which a set of inherent characteristics of an object fulfils requirements”. Additionally, it also means “conformity – meeting specification or industry standards”. Thus, in terms of quality of the certification, there are no cuts. In place are a set of rules that provides technical requirements on conducts of audits and competency requirements of the auditors as well as the accreditation programmes to ensure a credible audit and system to govern the MSPO certification scheme. Fundamentally, there are proper governance, with checks and balances in place for the Certification Bodies (CBs), the certified entities and the entire certification process. Nevertheless, there could be a potential risk on the compliance by certified entities against the MSPO standards. As we do not compromise with the credibility and the integrity of the 2 certification scheme that is also a reason why the MSPO certification has still not achieved 100%. In addition, the MSPO certification scheme is currently undergoing a Standards Review process with the participation of a range of stakeholders. Through this, we hope to enhance and strengthen its current principles and criteria to meet the ever-evolving global demands for sustainability. We are also putting in place traceability systems and technologies for greater transparency and accountability of the MSPO certification scheme, moving forward.

Question 2: Although oil palm plantations are able and already been studied for carbon sequestering or act as carbon sink. However, it is not as efficient compared to the forest. Saying oil palm plantations are enough are quite inappropriate since oil palm plantations can't support biodiversity.

Dr. Marc Ancrenaz: OPP support far less biodiversity than natural forest. They also sequestrate less C. However, they are more efficient for C sequestration and biodiversity conservation than annual crops, such as soy or corn for example. The OP landscapes could support more species if patches of natural forest were retained within the landscape. Agroforestry and mosaic landscapes are always more efficient for C sequestration and Biodiversity than monoculture. In addition, monoculture plantations are impoverishing the soils and responsible for low water quality. The bottom line is that a mosaic landscape will always be better for biodiversity, C sequestration and people than a monoculture. What we need is to design a network of protected forests and to improve management practices of agricultural landscapes: retaining at least 20% of the land under forest cover in these non-protected areas would go a long way to achieve our goals of fighting climate changes and supporting biodiversity.

Question 3: Do we have the knowledge of what are tree species best suited for the different site-specificiness in plantation landscapes?... and how best can we initiate mass collection and establish raising the nurseries for the tree saplings? Noted works by TRCRC and other models. Would be good to learn from them. Tqvm.

Dr. Yatela Zainal Abidin: The kinds of tree species to be planted in plantation landscapes depends on the objective of the enrichment programme – for example, if preserving Endangered, Rare and Threatened (ERT) trees, we would focus on planting ERT trees and mixed with endemic pioneer trees to act as a canopy for the more fragile ERT ones before we start to plant them. For stepping stones projects, we try to plant those species endemic to the area of the plantation estate.

I have been informed by SD Plantation, our partner, that they are guided by available documentations and work closely with knowledgeable related agencies (research institutions, universities and NGOs). As a guide, they have informed me that the following are the usual good species of trees to be planted at riparian and hilly areas, with the focus on a mixture of trees that are fast growing, or can act as canopy, as well as those good for wildlife consumption:

For SD Plantation estate tree planting projects, we allocate sites to establish the nursery and raise the saplings within the plantation estate areas. However, we engage experts to collect and germinate the seedlings, as different species have different kinds of characteristics which require different types of treatment.

Question 4: We talk about Palm Oil in relation to deforestation, climate change, etc though palm Oil is in the forefront with respect to sustainability compared to other crops. Instead of only targeting palm oil, can big corporations, scientist, NGO's also encourage developed countries to re-forest and bring their forested land to 50%?

Dr. Marc Ancrenaz: Most countries in the West have a positive gain for forest cover. However, the impact of forest loss on biodiversity and climate are worst in the tropics since these ecosystems are far richer than the forest ecosystems in temperate countries. Tropical deforestation occurred in the last 70 years while deforestation in Europe and North America have spanned across centuries. But I fully agree that all countries should be part of the effort to reforest our Earth. In many countries, patches and corridors of forest are created within agroindustrial landscapes to improve local and global conditions.

Question 5: Could you speak on how oil palm companies are addressing food security (i.e. converting areas of oil palm to food crops)?

Do you also see oil palm plantations replacing certain areas of oil palm into other commodities in the future (i.e. tree plantations for timber)?

Dr. Marc Ancrenaz: OPP may expand in new frontiers: this industry could become a partner for climate change if the No Deforestation moto is applied throughout.

Question 6. Understand that Nestlé is a RSPO member, and we are glad to hear that Nestlé is committed to source sustainably produced Palm Oil. What is your opinion on RSPO members, who are consumers or producers, that have “No Palm Oil” label in their products? Do you think this is counterproductive?

Mr. Juan Aranols: Palm oil is a very widely-used vegetable oil in the F&B industry, is cost competitive and highly versatile. We believe that when produced responsibly, it can support millions of livelihoods and mitigate pressure on forests and sensitive ecosystems. Unfortunately, the reality is, palm oil is perceived very negatively in certain parts of the world. For instance, in Switzerland, 64% of the population is negatively influenced by the presence of palm oil and they look for “No Palm Oil” products. For some consumers in these countries, the presence of palm oil becomes an important element in their decision-making, due to their negative perception on palm oil’s impact on the environment or health. In order to change this negative perception, the palm oil industry needs to engage more effectively in correcting any existing misconceptions and provide evidence when addressing these concerns.

Question 7. Nestlé does not have a good rep in the past & still now, especially regarding their bottled water business which buys water at a very low rate, then selling it back to the consumers at a much higher price, while causing environmental degradation like plastic pollution & water scarcity in the process. Would Nestlé advocating for sustainable palm oil be harmful to the image of palm oil instead?

Mr. Juan Aranols: Nestle is committed to responsible water management. Whenever we bottle water, we adhere strictly to the local regulations. We believe that supporting the use of sustainable and responsibly sourced palm oil is the way forward to correctly address the negative perceptions on this ingredient, and we are willing to support the palm oil industry’s advocacy efforts on this subject.

Question 8. How does Nestlé deal with carbon emissions released by these palm oil transportations?

Mr. Juan Aranols: We recognise that climate change and CO2 emissions cannot be solved only with one action as it requires work on many levels. For instance, our Chembong and Kuching Factories will soon have a biomass boiler facility that will use palm oil waste materials to generate energy. This will help contribute to the processing of waste from palm oil farms. Additionally, we are working to have renewable energy in our factories, as well as green cars and truck fleets. We also have adopted state-of-the-art technologies to optimize logistics and further reduce transportation carbon footprint.

Question 9. My question is Nestlé and several Oil and Gas companies are setting out 2050 to be the year of becoming carbon neutral. Yet, it seems 2050 is the point in which climate change effects will no longer be reversible. Therefore, isn't 2050 too late to be carbon neutral for such large businesses in order to create the needed supply chain effect?

Mr. Juan Aranols: Our commitment to become carbon neutral by 2050 is our ultimate objective. However, by 2025 we should have already achieved a reduction of 25% in our CO2 emissions and 50% by 2030. These commitments are both measured against our 2018 numbers. So clearly, this is much more demanding than the very far away 2050 might suggest.

Question 10 Mr Aranols mentioned earlier that there is a need to reframe the palm oil narrative and we know this needs a collective effort. Which organisation or stakeholder group will lead to address the root causes of negative perceptions? How can we accelerate to stop further damage to the reputation of palm oil?

Mr. Juan Aranols: The palm oil industry must lead the advocacy effort and bring together all the stakeholders that can support this effort. Advocacy needs to be accompanied by demonstrable improvements. We must tackle deforestation across all palm oil supply chain. Additionally, the industry must tackle all human rights and labour-related issues.To do this, suppliers need to have better traceability to provide evidence on No Deforestation, more transparent monitoring, and understanding who’s in their supply chain. Lastly, to be more proactive in tackling consumers’ concerns and provide proof points of palm oil as a fully acceptable ingredient in food product recipes and formulation; at least, in the same level of acceptability as any other vegetable oil. It is however, an ingredient that needs to be produced in a responsible manner.

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