The use of palm oil in food manufacturing has risen dramatically over the last ten years, thanks to its versatility, low cost and high yields per hectare. This growth is predicted to continue – environmental charity WWF estimates that, compared to levels in 2000, demand is predicted to more than double by 2030 and to triple by 2050.
But there are concerns about the deforestation the industry causes in tropical climates. In this month’s just the answer, Sam Webb discusses the future of the industry, as well as the move towards ethical production with Alan Chaytor, executive director of Papa New Guinea-based sustainable palm oil producer New Britain Palm Oil.
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just-food: Why is demand for palm oil so high?
Chaytor: Palm oil is an extremely flexible ingredient used in many products. A lot of manufacturers like to use it because the end result is exactly what they want in terms of flavour, consistency and shelf life. It doesn’t have trans fats and it’s also very attractive in terms of price, it’s still cheaper than rapeseed and soya.
just-food: Why has demand spiked in the last two years in particular?
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Chaytor: The four major oils are palm oil, soya, rapeseed and sunflower. The growth of the other three have been limited by land, which is getting scarce. They produce eight to ten times less per hectare than palm oil does.
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By GlobalDataDemand for vegetable oil is linear and increases 3-5% per annum. All the vegetable oils have to meet that 3-5% growth but the one that is able to do it is palm oil. There are other drivers too, such as awareness of trans fats in America. Three years ago it used a very small amount of palm oil, this year the US will use a million tonnes.
just-food: Why is demand for sustainable palm oil growing?
Chaytor: In terms of sustainable palm oil, it’s reached people’s consciousness that something needs to be done. We will need more food, but can we do it without being detrimental to the environment? The demand for sustainable palm oil is a tricky question because there are two sides to it. One, more sustainable palm oil is produced than purchased and two, you have a situation where producers are becoming disenfranchised because they say the vast majority of purchasing is done through GreenPalm certificates (Editor’s note: GreenPalm is a scheme where producers of the raw material who are certified by the Roundtable on Sustainable Palm Oil – a body formed in 2003 to promote sustainable production – are given one GreenPalm certificate for each tonne of palm oil they sustainably produced. Manufacturers and retailers then bid for and buy the certificates online as a means of helping the production of sustainable palm oil.)
just-food: Why are they disenfranchised?
Chaytor: It costs far more to produce sustainably, so it’s a bit of an unfair process. A lot of customers don’t use it and I don’t think the consumer buys into the concept.
just-food: Why do palm oil consumers not use them?
Chaytor: It is our view that certificates are an offset and consumers have little or no confidence in offsets as they see them as potentially greenwashing. All research shows that the consumer wants comfort that the products that they are buying contain physical certified sustainable palm oil. Under this scheme buyers have little idea where their oil actually comes from and the cast majority is from uncertified sources. The manufacturers therefore don’t want to buy them, the price falls to ridiculously low levels and then producers don’t want to sell them.
The whole process is also unaudited and therefore open to obvious abuse. Furthermore, it is also not transparent, for instance it is not possible to confirm what the average price the certificates have been sold at since they came into being.
just-food: What needs to be done to improve the scheme?
Chaytor: Not a lot really. If interim targets were put in place for physical certified oil and then buyers and consumers would honestly see that green certificates were a means to an end, the price may increase to the point whereby it shows real commitment rather than just lip service.
Claims by palm oil buyers should also be more open and honest and it should be clear whether companies are really buying green certificates or traceable, segregated certified sustainable physical oil? The WWF scorecard (Editor’s note: The WWF scorecard is a league table of retailers and manufacturers’ commitment to sustainable palm oil) makes no distinction here between a buyer paying US$1 for a green certificate and the buyer who makes the effort to buy true physical RSPO certified sustainable palm oil. It is also not surprising that the purchases of certificates shot up substantially just prior to the WWF scorecard (this year and two years ago) and most if not all recent RSPO meetings and then like now declines.
just-food: Manufacturers are buying more sustainable palm oil, why is that?
Chaytor: A lot of companies, such as household brands and supermarkets, have made commitments to sustainable palm oil (Editor’s note: many major companies have pledged to source 100% sustainable palm oil by 2015). That’s the challenge, there needs to be interim targets so there’s a clear pathway to getting what everybody wants.
just-food: What are the challenges in getting emerging markets to use sustainable palm oil?
Chaytor: It’s part of a growing stage. If you look at Europe four or five years ago sustainability was a little-known word and a little-known thought. Here you’re talking about countries where their biggest concern is feeding the population. How it is grown and processed is not their worry. Rightly or wrongly, they have to ensure there is enough. However, I can see that it’s just a question of time.
There has been a lot of confusion in the press about governments using import tariffs to get it into China and other developing nations, but most of these countries don’t have import tariffs. I have to question import tariffs.
just-food: Bunge recently entered the sector with a partnership with PT Bumiraya Investindo. Will more multi-nationals enter the market?
Chaytor: When you mix a greater need, the environment and a complicated world-wide trade system, people are going to invest their knowledge base.
I think we can see them realise that to get the supply chain you need to go back to how it’s grown. Integrated supply chains and integrated producers like ourselves are probably going to be the way forward.
just-food: What does the next two years hold for sustainable palm oil?
Chaytor: There are challenges going forward, but there has been a lot of breaking of inertia. Companies are seeing the benefit of buying sustainable oil.
