FNA InnovATE: Palm Oil

‘Not the most practical approach’: Stricter palm oil regulation will have serious food supply and cost implications – RSPO

By Pearly Neo

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The implementation of stricter regulations for palm oil will lead to major supply and cost implications in APAC and beyond, says the RSPO.
The implementation of stricter regulations for palm oil will lead to major supply and cost implications in APAC and beyond, says the RSPO.

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The implementation of stricter regulations for palm oil, one of the food sector’s most essential commodities, will lead to major supply and cost implications in APAC and beyond, says the Roundtable on Sustainable Palm Oil (RSPO).

The palm oil sector is bracing itself for the full implications of the EU Deforestation Regulation (EUDR) after it came into force earlier this year.

It is expected to lead to increased challenges for producer markets exporting palm oil to the EU – one of the biggest destinations for the commodity.

Industry leader RSPO has largely maintained a neutral stance throughout the debate while working to help industry players acclimatise to the new regulations. But the organisation still has concerns over the potential long-term implications to not only palm oil sector but also for consumers.

“The EU is aspiring to a supply chain​ where they can certify and guarantee the traceability of crops entering the market down to the plantation of location where these are grown - It's a great idea, and many of the largest corporations we work with will have no problem complying with this,”​ RSPO CEO Joseph D’Cruz told FoodNavigator-Asia​.

“The issues lie first in the industry for the smallholders in emerging markets, who​ will struggle because they don't control or manage the supply chain in a way that allows them to demonstrate that chain of custody that the EU is requiring [even if] they are in compliance with sustainability schemes such as MSPO or ISPO (Malaysia/Indonesia Sustainable Palm Oil) standards, which means they might get pushed out of the European market simply because of the documentation.

“The second big concern is much broader – It’s very hard for me to conclusively predict what will happen with pricing as the palm oil supply chain is very complex, but there will definitely be costs to comply with the legislation [combined with] ongoing supply chain disruptions due to various socioeconomic factors.

“So at this point, trying to segregate supply chains and impose stricter conditions on some products and not others is not necessarily the most practical approach - Every time we impose more restrictions, more regulations, more red tape even for the right intentions, this is creating barriers that may have food availability and cost implications for consumers in those markets, even though these may be unintended.

The potential impacts for the food industry are particularly significant given how widespread the use of palm oil already is in the market.

“Palm oil is one of those commodities that's vastly more important than most people realise because it's more or less invisible in many of our food systems​ despite​ powering a lot of what we take for granted in the food sector,”​ he added.

“As a consumer having lived both in Asia as well as in Western countries, I think the big difference is that in Asia we deal with palm oil face to face in our hands, using it for cooking and so on whereas in many Western European markets, it is embedded almost invisibly.

“The vast majority of consumers of pizza bases, ramen noodles, cookies or cakes in those markets don't realise how integral palm oil is to those products [so] I get a sense that attitudes here are based on this misunderstanding, so if people have a deeper appreciation for this then maybe we can have a much more informed conversation.”

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Related topics Commodities Sustainable Sourcing

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