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Growing Pains: Why Companies Need to Learn to Eat Their Vegetables and Move Beyond GreenPalm Certificates

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The Roundtable on Sustainable Palm Oil (RSPO) was formally established in April of 2004, meaning that earlier this year it celebrated its 10th birthday. Happy birthday, RSPO! Yet many companies at the roundtable party want the RSPO to stay just the way it is, without moving towards greater sustainability. On this blog, we have often focused on the RSPO’s refusal to adequately strengthen forest and peatland protections. But there’s another relict of the RSPO’s infancy that companies are still clinging to like an old, ratty teddy bear –GreenPalm certificates.

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Happy 10th birthday, RSPO! Time to blow out your candles and wish for higher sustainability standards. Photo: flickr/Micheal J

How it works
GreenPalm certificates (sometimes called Book & Claim) are a kind of offset that companies buy as a step towards sourcing RSPO-certified palm oil.  Using this scheme, an RSPO-certified palm oil producer may register its palm oil through this program, with one GreenPalm certificate awarded for every RSPO sustainably grown metric ton of palm oil. This palm oil is then processed and mixed with “conventional” palm oil, which companies can buy as they would normally would. Then, those companies who want to show their support for sustainable palm oil pay extra to buy, on an auction, the GreenPalm certificates, giving the producer money for the additional protections afforded by following RSPO regulations. For more information you can see their website.

I like to think of it as paying your little sister to eat your lima beans. You can claim some credit for the vegetables getting eaten but you’re not going to get any healthier. The problem with this system is that consumers want to know that the products they buy don’t contribute to forest or peatland destruction or put the lives and livelihoods of indigenous peoples and workers at risk. GreenPalm certificates provide no such guarantee.

The cost of growing up
While GreenPalm once was an important component of transitioning towards the production of more responsible palm oil by providing some incentive for producers to change their practices, it has become a tool for inaction.

One reason for this is because GreenPalm certificates are really cheap. As of the writing of this piece, a GreenPalm certificate for palm oil is being sold for approximately $1.60 (a cost separate from the palm oil itself). Keep in mind that this fee is supposed to reimburse the producer for all the additional environmental and labor protections that the RSPO requires. On the other end of the spectrum, RSPO-certified palm oil which is kept separate throughout all the steps in the process is quoted by one vegetable oil refiner as around $200 (presumably Australian dollars so around $186.30 US) extra per metric ton.

(UPDATE: After this post was published, I found another price estimation for the RSPO-certified crude palm oil premium. At $20-45 per ton, this estimate is much lower than the $186.30 quoted by the first source. Yet even this lower price is still 12-28 times higher than the price for GreenPalm, so the point stands.)

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This GreenPalm logo signifies support for RSPO-certified palm oil, but does not guarantee that the oil found in the product has not contributed to primary forest loss.

It is that difference in cost that makes GreenPalm certificates so appealing to consumer companies. They pay $1.60 to put a GreenPalm logo on their product and make claims about supporting sustainable palm oil. But it is the difference between the two, that other $184.70 (although it varies with market prices and exchange rates) that is a better estimate for the true cost of ensuring sustainable palm oil. While part of the price likely reflects additional costs for the separation, it also ensures that the palm oil does not contribute to primary forest destruction, managing water tables closely on existing plantations on peat soils, minimizing plantings near waterways, avoiding the use of fire in most situations, and providing decent wages to laborers (among a host of other requirements). $1.60 for all these services may seem too good to be true, because it is.

Time to grow up, mostly
Now that the RSPO is ten years old, it is time that companies stop expecting to be babied. They can’t eat one bite of Brussels sprouts and claim it’s an achievement. A 10-year-old needs to eat the vegetables on its plate. Likewise, when RSPO certification was in its infancy, it may have been that GreenPalm certificates were the only way to even get a “taste” of better palm oil.  But that time has come and gone. There is now a surplus of RSPO-certified palm oil on the market that is sitting on the plate going cold.

In some cases, companies may need extra time for some products. I get it; I still couldn’t eat a plate of zucchini by age 10. In the world of palm oil, the hard-to-swallow vegetables are palm kernel oil and palm derivatives. To form derivatives, palm oil undergoes additional processing to gain specific chemical and physical properties. They are found quite regularly in many personal care products, for example. Because the refining process is more complicated, with many more steps, there are derivatives that are difficult to obtain with the same standards that are now available for plain old palm oil. In this case, one bite of zucchini, or GreenPalm certificates, might still be the best option.

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Eating this zucchini salad doesn’t look too difficult. Photo: flickr/jpellgen

But in sectors such as fast food, where the majority of the palm oil used is neither palm kernel oil nor derivatives, the use of GreenPalm is still widespread. For example, McDonald’s corporate social responsibility and sustainability report states, “As a first step in our journey, we now believe that one of the best ways today to support sustainable palm oil production is through the purchase of GreenPalm certificates, also called the “Book and Claim” system.” Yet in reporting to RSPO for its 2012 operations, McDonald’s listed that it only uses palm oil, not palm kernel or derivatives. And our analysis this spring showed that at that time, McDonald’s was only sourcing just under 13% of its total palm oil from either RSPO Mass Balance or GreenPalm certificates. With huge volumes of palm oil usage and no reason they cannot move beyond GreenPalm certificates right now, McDonald’s palm oil sourcing practices are unacceptable (let them know that here).

In contrast, because of the nature of the products they produce, the personal care sector does sometimes legitimately need to use GreenPalm certificates when the types of derivatives they use are unavailable through segregated supply chains.  But one must always remember that this is an allowance and GreenPalm certificates cannot be a company’s permanent solution.

One day, hopefully in the near future, there will be no more need for GreenPalm certificates.  It can be done. Last week, I ate a zucchini salad and it wasn’t terrible.

Posted in: Tropical Forests Tags: , , , , ,

About the author: Lael Goodman is an analyst with the Tropical Forest and Climate Initiative at UCS. She conducts research and analysis to support reducing tropical deforestation as a way to mitigate climate change. Specifically, Ms. Goodman focuses on deforestation caused by the palm oil industry and protecting tropical peatlands. See Lael's full bio.

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  • Robert Hii

    Always good to have industry experts like Don Grubba speak on this issue. Great points made here but I do have to disagree with encouraging brands that have not started on the road to start now with certificates. Certificates were only useful in the early days when certified palm oil was not available. Growers and producers have invested effort and funds into making sure that this supply was available.

    Consumer goods companies like Pepsico really have no excuse to not leap frog the certificates and get straight into the use of physical certified palm oil.

    • Lael Goodman

      Thanks for reading and sharing your opinion, Robert!

  • Don Grubba

    A well done and generally accurate report on the issue and the need for transition to more secure supply chain options. I agree, the time is now for all to move forward.

    At the inception of RSPO supply chain systems, certificate trading was indeed intended to provide a starting point for those who had committed to support the RSPO sustainable palm platform. It was envisioned that the logical transitional path to a fully sustainable palm supply chain would indeed be: Certificates-> Mass Balance-> Segregated and fully traceable palm, as users became more comfortable with the system and as volumes of RSPO certified palm oil expanded. It was also recognized that some products and some end use applications would be more difficult to convert to a RSPO Segregated fully traceable supply chain than others and would necessitate this transitional approach over a reasonable time period. However, many who started with Certificates as a first step have simply remained with this platform as it is cheap, easy and seems to generally appease those demanding support of sustainable palm.

    Your information on pricing for Segregated palm is also reasonably accurate. Although, the $200 you have referenced is likely for a specialized multi-fractionated component of low volume. More commonly used and higher volume palm products would be in the lower range you report or perhaps even below that. It is correct to point out that as the volumes of traceable Segregated RSPO palm increase in proportion to the conventional palm the costs of handling segregated components will fall.

    The issue of the complexity of the palm kernel derivatives used in soaps, shampoos and other health and beauty items is real and presently is quite difficult to address without substantial additional costs. This segment would be best served by Certificates until the larger palm oil supply chain makes more headway toward traceable Segregated volumes.

    A continuing and substantial issue in the market dynamic is that, despite the very low cost of Certificates, only approximately half of all RSPO sustainable palm supply is purchased today. The market incentive for producers to push forward with more RSPO Certified capacity is therefore quite low. And, until the uptake more closely matches the produced volume driving produced volume increases, it will be less likely to see costs of fully traceable Segregated RSPO palm oil drop to more manageable levels.

    For those that are using palm oil and are members of RSPO the time is now to, at a minimum, move your supply chain to 100% coverage with Certificates. Costs are low and the methods are simple. For those that have already made the first step, congratulations and the time is now right to show additional leadership and move forward with a more secure supply chain under the Mass Balance and/or Segregated RSPO models. For those that consume products that contain palm oil (essentially all of us) it is time to make your favorite brand aware that you expect more from them. Now.

    Don Grubba
    Past RSPO Executive Board Member
    Past Chair, RSPO Supply Chain Certification Systems

    • Lael Goodman

      Thanks so much for this thoughtful response, Don. It’s great to see outlined some of the thinking behind the different options for RSPO-certified palm oil, and the need to move beyond certificates for palm oil. And a good note as well on the likely reasons for price discrepancies. Thanks for reading and adding to the discussion!

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