Sustainably produced palm oil can curb environmental impacts, report says

Ottawa, April 28, 2020 – Environmental damage linked to palm oil production has led to consumer boycotts and import restrictions in some markets, but a new study says adhering to voluntary sustainability standards (VSSs) can mitigate some of the worst environmental impacts of producing the world’s most consumed edible oil.

“Producing VSS-compliant palm oil is one of the most readily available approaches to protect biodiversity, mitigate greenhouse gas emissions, and reduce deforestation,” says Cristina Larrea, study co-author and Lead, Sustainability Standards with the International Institute for Sustainable Development (IISD).

“VSS bodies, such as the Roundtable on Sustainable Palm Oil (RSPO), work with farmers and palm oil plantations to develop accessible production standards and support systems to help them grow more sustainable, environmentally friendly, and economically beneficial palm oil,” Larrea says.

“As part of a continuous improvement approach, VSS criteria encourage palm oil producers to protect critical peatlands and forests, as well as rare, threatened, and endangered species,” Larrea says. “Sustainable production also supports improved worker conditions, discouraging forced labour and promoting worker-involved decision making.”

Virtually non-existent a decade ago, VSS-compliant palm oil accounted for at least 17.4% of global production in 2016, the year of reference for the study, which was funded by the Government of Sweden. RSPO says that number is 19%, as of February 2020.

Because palm oil is affordable and nutritious, it plays a crucial role in food security in many developing regions, especially in Asia, where it is popular in household cooking and restaurants.

Palm oil’s retail market value is at least USD 65 billion, adding USD 39 billion to global gross domestic product and USD 4.3 billion to tax revenues. Indonesia and Malaysia produced 85% to 90% of the world’s palm oil in 2016.

The overall sector is projected to have a compound annual growth rate of 5.7% from 2019 to 2024, largely due to the increased demand for affordable edible oils and fats, especially in Asia, which is the fastest-growing consumer of palm oil and accounts for two thirds of global consumption.

Demand for VSS-compliant palm oil is growing, but it remains below supply, estimates say. Demand is concentrated in Europe and the United States, where supply chain actors use targets to source VSS-compliant palm oil to manage both reputational risk and supply disruptions. Developing demand for VSS-compliant palm oil in Asia is crucial for the sector to grow. Both India and China have committed to increasing their total VSS-compliant palm oil consumption to 30% and 10%, respectively, by 2020.

“Palm oil crops have superior yields of five to 10 times that of other vegetable oil crops, and can benefit regions battling food insecurity,” explains Larrea. “Producers should follow sustainability standards to limit their negative impacts, while VSS bodies, supply chain actors, and governments should coordinate to monitor enforcement of local regulations and standards requirements.”

ABOUT THE SUSTAINABLE COMMODITIES MARKETPLACE SERIES

This report is the fifth in IISD’s Sustainable Commodities Marketplace Series, which presents sustainable production and consumption market information on agricultural commodities to foster transparency, knowledge, and strategic decision making for sustainable development. The first four reports, focused on coffee, cocoa, tea, and sugar, are available online. Future reports will focus on the production of bananas, cotton, and soybeans.

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The International Institute for Sustainable Development (IISD) is an independent think tank that delivers the knowledge to act. Our mission is to promote human development and environmental sustainability. Our big-picture view allows us to address the root causes of some of the greatest challenges facing our planet today – ecological destruction, social exclusion, unfair laws and economic and social rules, a changing climate. With offices in Winnipeg, Geneva, Ottawa, Toronto and Beijing, our work impacts lives in nearly 100 countries.

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