Roundtable on Sustainable Palm Oil

Roundtable on Sustainable Palm Oil Frequently Asked Questions Page 1 Palm oil 2 2 Sustainable palm oil 3 3 The Roundtable on Sustainable Palm Oil (RSPO) 5 4 Certification & Control 7 5 Markets and Claims 9

1 Palm oil Q: What is palm oil? Palm oil is an edible vegetable oil produced from the fruits of oil palms. Oil palms can grow 20 meters tall with leaves up to 5 meters long. They bear clusters of fruit all year long, with each fully matured cluster weighing up to 50 kilograms. The fruits contain about 50 percent oil. Oil palms are highly efficient oil producers, requiring up to ten times less land than other oil-producing crops. Q: What is palm oil used for? Palm oil is among the world s most used ingredients. It is currently being applied in about half of all packaged food products, often in combination with other vegetable oils. Because of its distinct properties, it can be applied in a wide range of food products such as margarine, chocolate, ice cream, and cookies. Palm oil derivatives are also used in soaps and cosmetics. More recently, palm oil has also been used to make fuels for transportation and power plants. Q: Where does palm oil come from and how is it grown? Oil palms are cultivated on both large-scale plantations and small-scale family farms. Palm oil is pressed from palm fruits that grow from oil palms in heavy bunches. Bunches are cut to harvest monthly and year-round, transported to palm oil mills and crushed for oil. Oil palms only grow in the tropics. Indonesia and Malaysia, the world s primary exporters, together produce about 85 percent of the world s palm oil. In most palm oil-producing countries, including Nigeria, Thailand, Colombia, Ecuador, Papua New Guinea, Ivory Coast and Brazil, palm oil trade has the potential to contribute significantly to economic growth and poverty reduction. In Indonesia and Malaysia together, 4.5 million people earn a living from palm oil. World palm oil production has grown steadily in recent years. Last year, palm oil accounted for one third of the 130 million tonnes of vegetable oil produced worldwide. Palm oil has recently surpassed soy oil as the world s most popular vegetable oil. Q: Who are the main importers of palm oil? About one quarter of the palm oil produced worldwide is used domestically, three quarters is exported. Asia, the European Union and Africa are the main importers of palm oil. Within Asia, China and India are major importers. Of the estimated 29.4 million tonnes of palm oil exported in 2007, 18 percent went to China, 16 percent went to the European Union, 13 percent went to India and 12 percent went to Africa. Q: What is the role of smallholders? About 20 percent of oil palms is grown by smallholders, the rest is produced by private or governmentowned plantations. Indonesia has close to 3 million smallholders, Malaysia about 150,000. 2

2 Sustainable palm oil Q: What is sustainable palm oil? The Roundtable has defined 8 principles and 39 practical criteria to define sustainable production of palm oil. They ensure that fundamental rights of previous land owners, local communities, plantation workers, small farmers and their families are respected and fully taken into account, that no new primary forests or high conservation value areas have been cleared for palm oil production since November 2005, and that mills and plantation owners minimize their environmental footprint. A full listing of principles, criteria and indicators is given in the RSPO document Principles and Criteria for Sustainable Palm Oil available at the Roundtable s website (www.rspo.org) under Key documents. Q: Do we need sustainable palm oil? Oil palms only grow in the tropics, where their cultivation can have negative side effects for local populations or the environment. Among the social side effects of growing oil palm cultivation have been displacements of communities that used to farm or live in the area and whose legal or customary rights to the land became sources for dispute. Also, there have been reports of plantations that violated the rights of workers, including those to fair payment, safe working conditions or the freedom to unionize. Expansion of oil palm plantations has led in some cases to the cultivation of land previously covered with peat-swamp forests, primary forests or other high conservation value areas. Such areas, already under pressure from other factors such as commercial logging, are often highly valued for their biodiversity and their capacity to sequester carbon dioxide. Forest parcels are sometimes cleared by fires, which can burn out of control. Q: Which environmental problems are addressed by RSPO? The environmental criteria for plantations are directed at preventing further loss to primary forests or other high conservation value areas, reducing negative impacts on soil, habitats of endangered species and overall biodiversity, and development of water and energy-efficient production methods. Q: Which social problems are addressed by RSPO? Palm oil production employs and supports millions of plantation workers, small farmers and their families. The social criteria for plantations are directed at strengthening local poor people s livelihoods by preventing conflicts about the rights to use land, providing income security to workers, small oil palm farmers and their families, protecting health and living environments, ensuring human and labor rights, and supporting legal compliance. Q: Who has developed the RSPO Principles and Criteria for sustainable palm oil production? The RSPO Principles and Criteria were drafted through an open and intensive dialogue between oil palm growers, palm oil processors and traders, consumer goods manufacturers, retailers, banks/investors, environmental/nature conservation NGOs and social/developmental NGOs. Also, public consultation rounds were held to gain additional input. Q: Do RSPO Principles, Criteria and Indicators only cover primary rainforest and not peat lands or forests that are in the process of rehabilitation? No. The RSPO Principles, Criteria and Indicators extend far beyond just conserving primary rainforest. They require a comprehensive, independent social and environmental impact assessment, which includes soil types and other high conservation values important for biodiversity. So-called National Interpretation Working Groups have specified local types of growth and soils that must be avoided by new plantings. 3

Q: What impact will adherence to the RSPO Principles and Criteria have on palm oil productivity levels? It is widely assumed that oil palm s genetic potential will enable further increases in productivity. By applying good agricultural practices, as recommended in the RSPO Principles and Criteria, growers should be able to significantly increase average yields per hectare. Q: Does sustainable palm oil production make the use of palm oil as a biofuel fully sustainable as well? RSPO s certification systems are limited to the production of palm oil and to its subsequent supply chain. They do not address potential sustainability issues of specific applications of palm oil. 4

3 The Roundtable on Sustainable Palm Oil (RSPO) Q: What is the Roundtable on Sustainable Palm Oil (RSPO)? The Roundtable on Sustainable Palm Oil (RSPO) is a multi-stakeholder initiative dedicated to promoting sustainable production of palm oil worldwide. RSPO s more than 340 members include palm growers, oil processors, traders, consumer goods manufacturers, retailers, investors and social and environmental NGOs. Through co-operation and open dialogue, they work to put on the market certified palm oil that is produced in a sustainable way, and to maximize the amount of palm oil that can be RSPO-certified. Q: What does RSPO want to achieve? The Roundtable aims to ensure that no primary forests or other high conservation value areas are sacrificed for new palm oil plantations, that oil palm plantations minimize their environmental footprint and that basic rights of local land owners, farm workers and indigenous people are fully respected. About 40 million tonnes of palm oil is produced worldwide. Roundtable members represent about half of that volume, so the RSPO s efforts can potentially have a large impact. While in due course the RSPO aims to see all palm oil certified, initial volumes of sustainable palm oil will be relatively small. By the end of 2008, RSPO-certified production capacity is projected to be about 1.5 million tonnes per year, about 4 percent of total capacity; one year later, at least double that capacity can be expected. Ultimately, the Roundtable aims to have all the world s palm oil produced in a sustainable way. Q: When did RSPO start? The journey of RSPO started in 2003 as an informal co-operation among Aarhus United UK Ltd, WWF, Golden Hope Plantations Berhad, Migros, the Malaysian Palm Oil Association, Sainsbury s and Unilever. In 2004, RSPO was legally registered in Switzerland as a non profit organization and set up offices in Kuala Lumpur (Malaysia) and Jakarta (Indonesia). Between 2004 and 2008, the Roundtable has worked to develop a code of conduct and principles and criteria for sustainable palm oil production, and to devise schemes that can certify palm oil that is produced according to the criteria. Q: What have been RSPO s results so far? The Roundtable has agreed on principles and criteria that define sustainable palm oil production. They include standards for palm oil plantations on dealing fairly with employees and impacted communities, conserving natural resources and biodiversity, and developing new plantings responsibly. The Roundtable has also set up certification schemes to assure oil processors and consumers that the sustainable palm oil they purchase indeed supports plantations that operate in a sustainable way. Independent, well-established, RSPO-approved certification bodies carry out the audits at the mills and plantations. The first sustainable oil palm plantations have recently been certified. The RSPO has also formulated communication guidelines for processors and users of sustainable palm oil. Q: Where is the RSPO based? RSPO s formal seat is in Zurich, Switzerland. The RSPO Secretariat and the Secretary-General are currently based in Kuala Lumpur, Malaysia. Q: What are the obligations of RSPO members? Members of the Roundtable on Sustainable Palm Oil subscribe to its mission and principles and adherence to its Code of Conduct. Among the principles are commitment to transparency, environmental responsibility and conservation of natural resources and biodiversity, responsible 5

consideration of employees, smallholders and of other individuals and communities affected by growers and mills, and responsible development of new plantings. The RSPO Code of Conduct requires that all members work proactively towards the production and promotion of sustainable palm oil. Breaching the Code of Conduct can ultimately result in cancellation of membership. Q: How does RSPO deal with complaints and grievances? Complaints about RSPO members can be submitted to a grievance panel. The panel does not pass judgment but provides recommendations to the relevant parties. Q: Does RSPO support the production of palm oil for use as a biofuel? RSPO promotes sustainable ways to grow oil palm and produce palm oil. The various ways in which sustainable palm oil can be applied by end-users are not part of the RSPO s mandate. Q: Does RSPO prevent other crops from expanding at the cost of primary forests or other high conservation value areas? RSPO promotes sustainable ways to grow oil palm and produce palm oil. RSPO does not address potential indirect effects of palm oil production on the cultivation of other crops. Q: Who manages the RSPO? The RSPO is managed by an Executive Board comprising of 16 members. They are elected by a General Assembly for two-year terms. Executive Board seats are allocated as follows: oil palm growers (4), palm oil processors and/or traders (2), consumer goods manufacturers (2), retailers (2), banks / investors (2), environmental / nature conservation NGOs (2) and social/developmental NGOs (2). RSPO s Secretary-General is responsible for operational management and the RSPO Secretariat. Q: Who can join the RSPO? RSPO has Ordinary Members in 7 categories (i.e. oil palm growers, palm oil processors and/or traders, consumer goods manufacturers, retailers, banks/investors, environmental/nature conservation NGOs and social/developmental NGOs). New Ordinary Members have to belong to one of these sectors. RSPO also has Affiliate Members. Affiliate Membership is open to organizations and individuals who do not belong to any of the seven ordinary membership categories and want to support RSPO s objectives and activities. Current affiliate members include donors, academics, research organizations, professional associations, and government agencies. The RSPO Secretariat receives membership inquiries or applications. Q: Why can t governments or academic/professional research organizations join RSPO as Ordinary Members? RSPO s sees government agencies and research organizations as important stakeholders. However, the Roundtable was set up as a voluntary organization of primary players in the palm oil supply chain. Just like ordinary members, affiliate members are able to contribute to the RSPO s work. 6

4 About Certification & Control Q: How does the certification scheme prevent producers from only certifying the best plantations and not more controversial ones? An organization with more than one plantation can only be certified if: it is a member of the RSPO, and it presents a robust, time-bound plan to certify all its remaining units at the time of their first certification audit, and there are no significant land conflicts or labor disputes that are not being resolved through an agreed process, and there have been no replacements of primary forests or other high-conservation value areas since November 2005, and there is no evidence of non-compliance with the law in any of the non-certified holdings. Q: Who can certify sustainable palm oil production? The RSPO has approved third-party certification bodies, a listing of which is posted on the RSPO website. The certification bodies issue certificates to audited organizations that comply with the RSPO Principles and Criteria, which are available at the RSPO s website. Q: How long is a certificate valid? A certificate is valid for five years, during which maintenance audits are held every year. Problems shall be brought to the attention of the certification body or to the RSPO. Q: Will companies be able to produce only part of their palm oil on RSPO-certified plantations? An organization with more than one plantation can only be certified if it is a member of the RSPO and if it presents a robust, time-bound plan to certify all its remaining production units. Q: How does the RSPO prevent small farmers from being pushed out of the trade? The RSPO Smallholder task force is in the process of developing a tailored smallholder version of the RSPO standards. The onus is on the mill to ensure that its full supply base, which can include associated smallholders, meets RSPO standards. To be certified, a company has to submit a plan that ensures that 100 percent of associated smallholders are of certifiable standard within 3 years. Q: What else is the RSPO doing to protect the interests of smallholders? The RSPO Smallholder task force promotes the interests of smallholder within the RSPO. The task force also raises awareness for sustainability issues among smallholders, and is developing adaptations to the RSPO standards and procedures tailored to smallholders, including a group-certification protocol. Q: What kind of certification systems have been developed? The Roundtable has set up certification systems to assure palm oil processors and consumers that the sustainable palm oil they purchase indeed supports plantations that operate in a sustainable way. The systems include third-party certification of sustainable production and subsequent verification of the requirements for the palm oil supply chain. Q: Who can be certified? For production, the unit of certification is the palm oil mill and its supply base. To certify a mill, its supply of oil palm fruits must be certified. Certification includes estates managed by the mill and 7

estates managed by other suppliers, including smallholders. Certified mills have to have a plan that ensures that 100 percent of associated smallholders are of certifiable standard within 3 years. Q: What is required for mills and their supply base to get certified? Oil mills and their supply base are audited against the RSPO Principles and Criteria (including accompanying indicators and limited adaptations for National Interpretations which are approved by the RSPO). Criteria and Principles not only involve good agricultural practices but also fair treatment of workers and communities as well as proper acquisition of land and care for the environment and for biodiversity. Q: What is the certification assessment procedure? The certification assessment procedure includes documentation review, field checks and interviews with external stakeholders (statutory bodies, indigenous peoples, local communities, worker organizations, local smallholders and national NGOs) to ensure that all relevant issues concerning compliance with the RSPO Criteria and Principles are identified and assessed. If a certificate of conformance is issued, a public summary is included that outlines the main findings of the certification assessment, including non-compliances identified or issues that were raised by stakeholders. This summary will be available on the RSPO website. Q: What are the costs of certification? Costs are agreed between a mill and its certification body. The RSPO has approved third-party certification bodies, a listing of which is posted on the RSPO website. Competitive bidding should keep the cost down. Q: Can smallholders be independently certified? Yes, several smallholders will be able to organize and apply for group certification. Q: How is the delivery of palm oil through the entire supply chain verified? The RSPO has set up four Supply Chain Certification Systems to verify the integrity of the trade of RSPO-certified palm oil. These systems ensure that all parties in the supply chain comply with requirements and that claims of end-users are true. Q: How are supply chain requirements for sustainable palm oil verified? Processors or users of RSPO-certified sustainable palm oil can claim the use or support of sustainable palm oil when they adhere to the requirements specified by the RSPO Supply Chain Certification Systems. There are four supply chain certification systems, and requirements differ for every one of them. Companies that deliver RSPO-certified palm oil to another party in the supply chain must enter information about the transaction in the RSPO Supply Chain database hosted by Utz Certified to enable tracking and tracing of certified products as well as facilitate input/output calculations by RSPO. Q: In the first year, an interim approach is used for certification of the supply chain. Why is that, and how does it work? In order to speed up introduction of RSPO-certified palm oil, the RSPO has adopted an interim approach that facilitates progress in meeting the requirements of the RSPO Supply Chain Certification Systems. For a limited time, parties in the supply chain, such as shippers and processors, may provide self-assessments on their compliance with the requirements. After that, third-party certification bodies will verify compliance. For more information, please see the RSPO Supply Chain Certification Systems document that is available at RSPO s website under Key documents. 8

5 Markets and claims Q: When will sustainable palm oil be available on the market. In what quantities? The first sustainable oil palm plantations have recently been certified by RSPO-approved certification bodies. First shipments of RSPO-certified palm oil are expected to arrive in Europe by the end of 2008. At that time, the RSPO expects certified plantations and mills to be able to supply 1.5 million tonnes per year, representing about 4 percent of total world production. One year later, the capacity can be expected to have doubled. Ultimately, however, the Roundtable aims to have all the world s palm oil produced in a sustainable way. Q: When will mainstream consumer products contain sustainable palm oil? The first sustainable oil palm plantations have recently been certified. By the end of 2008, RSPOcertified plantations are projected to be able to supply 1.5 million tonnes of sustainable palm oil per year, or about 4 percent of total world production. One year later, the capacity can be expected to have doubled. It will take some years before sustainable palm oil can find its way to many mainstream consumer products. Q: How can consumers know whether companies use sustainable palm oil? Since in most products palm oil is just one ingredient, not many product packages will probably carry extensive claims. Instead, manufacturers or retailers may use websites or brochures to tell customers about their involvement with the RSPO. The RSPO has formulated specific Guidelines on Communication & Claims for on-pack communication, product communication and corporate communication. These guidelines are available at the Roundtable s website (www.rspo.org) under Key documents. Q: How can consumers know whether a product contains actual RSPO-certified palm oil? If products contain palm oil that can be traced back to RSPO-certified mills and plantations, producers may use the word RSPO (in orange) together with either one of two claims. If virtually all palm oil in the product is sustainable, they may say that it contains only RSPO-certified sustainable palm oil. If only part of the oil was produced sustainably, the claim may read something like this product contains 50% RSPO-certified sustainable palm oil. Q: How can consumers know that a company actively supports sustainable palm oil even though it does not track the oil all the way back to plantations? If producers adhere to an RSPO supply chain certification system that does not include the tracking of sustainable oil all the way back to plantations, they may use the word RSPO (in orange) together with the claim that they support the production of RSPO-certified sustainable palm oil (equivalent to..% of the palm oil utilized). The percentage will reflect actual amounts. Q: Can anyone use the RSPO logo? No, the RSPO logo is protected by copyrights. Only RSPO members who fulfill the requirements can use the RSPO logo for their on-pack, about-product or corporate communications. Image files for web or print applications can be obtained from the RSPO Secretariat. Q: Who will buy sustainable palm oil? At present, more than 340 organizations subscribe to the Roundtable s principles and criteria. Together, they represent about half of the palm oil that is traded worldwide. The RSPO expects that 9

many companies (buyers as well as suppliers) will join a trend towards sustainable palm oil. However, it is difficult to make firm projections. Q: In 2009, the volume of RSPO-certified sustainable palm oil will cover only a fraction of the world palm oil market. Will the RSPO really be able to make palm oil production more sustainable? By the end of 2009, the RSPO expects certified plantations and mills to be able to supply more than 3 million tonnes per year, or about 8 percent of total world production. With a growing number of approved certification bodies, the number of RSPO-certified plantations and mills will grow as well. Current members of the RSPO together represent almost half of the world s volume of palm oil, and the Roundtable ultimately aims to have all the world s palm oil produced in a sustainable way. Q: Will there be demand for sustainable palm oil in China and India? China and India are among the world's biggest importers of palm oil. At the same time, they export palm oil-containing products to Europe. Such international trade flows will likely increase demand for sustainable palm oil in China and India. One large China-based importer of palm oil is already a member of the RSPO. There are no guarantees, but the Roundtable ultimately aims to have all the world s palm oil produced in a sustainable way. Q: If world demand for palm oil keeps growing, will supply be able to keep up if its production needs to be sustainable? It is hard to make firm projections on world demand for palm oil. At present, large areas in palm oil producing countries lie fallow. Also, it is widely assumed that oil palm s genetic potential will enable further increases in productivity. By applying good agricultural practices, as recommended in the RSPO Principles and Criteria, growers should be able to significantly increase average yields per hectare. Q: Will sustainable palm oil be more expensive? Prices will be determined by market forces. If demand exceeds supply, a price premium is to be expected. Palm oil plantations and mills cover the costs of auditing and certification. However, companies supplying sustainably produced palm oil will also be able to benefit from improved market access and increasing demand from manufacturers and retailers that want to operate responsibly. Q: How is sustainable palm oil traded? In order to maximize options for manufacturers and retailers, and encourage many in the market to move towards sustainable palm oil, two claims have been developed for companies that like to get involved. If manufacturers and retailers want to reassure their clients that the actual palm oil they buy came from sustainably producing plantation(s), they can do so by saying that their product contains [only/..%] RSPO-certified palm oil. Two different supply chain certification systems may underpin this claim: Identity Preserved, where it is possible to trace sustainable palm oil back to a specific plantation, or Segregation, which permits mixing of RSPO-certified palm oil from various RSPOcertified plantations. Alternatively, manufacturers and retailers can tell their customers that they support sustainable production of palm oil without having proof that the actual oil in their own products came from RSPOcertified plantations. Two supply chain certification systems can underpin this broader claim. The Mass Balance system allows for mixing of RSPO-certified and uncertified palm oil at various points in the supply chain provided that the quantities of certified oil going into the chain are administratively monitored and never exceed the amounts that are claimed. The Book and Claim system does not 10

track oil through the supply chain but instead lets suppliers and end-users trade sustainability certificates through an online trading system. Q: Under which conditions can be claimed that a product contains [only/..%] RSPO-certified sustainable palm oil? In order to make such a claim, oil from sustainably producing plantations has to be kept apart all the way, at the mill, in trucks, in vessels, in processing lines and in storage tanks. Manufacturers who purchase oil at the end must be able to trace it all the way back to RSPO-certified plantation(s). Companies may claim a product contains only sustainable palm oil if at least 90% of the oil has indeed been acquired this way. Utz Certified, an internationally recognized expert in the field, has set up an online track and trace system for RSPO. The system gives all shipments of sustainable oil unique numbers, and a worldwide database tracks where they go. For more information about Utz Certified, please visit their website at www.utzcertified.org. Q: Under which conditions can be claimed that a company/brand/product supports RSPO-certified sustainable palm oil production? In order to make such a claim, palm oil can be purchased from a mix of RSPO-certified and conventional plantations, provided that quantities going into the supply chain are carefully monitored and controlled. This Mass Balance model is constructed in such a way that volumes of RSPO-certified products sold into the supply chain never exceed volumes that are claimed by end-users. All shipments of sustainable oil must be registered in the Utz online track and trace system, which gives them unique numbers and uses a worldwide database to track where they go. The claim can also be underpinned by the Book and Claim system, which does not track oil through the supply chain. Instead, producers sell certificates for RSPO-certified palm oil through an online transaction system hosted by GreenPalm, where end users can purchase them to support claims for specific volumes of oil. Every ton of oil sold as produced sustainably corresponds with one ton of RSPO-certified oil, without the need for costly tracking and tracing. For more information about the GreenPalm system, please visit its website at www.greenpalm.org. 11