The growth of IP palm

With increased scrutiny on the sustainability of palm oil, the identity preserved supply chain model

is considered the highest standard Photo: Adobe Stock

There are three main supply chain models to follow when it comes to producing certified sustainable palm oil, with Identity Preserved (IP) demanding the most stringent standards as it provides complete traceability back to the plantation Barnaby Patchett

Global businesses are under increasing pressure to improve their sustainability credentials and cut carbon footprints.

As the world looks to decarbonise, governments are strengthening legislation and introducing mandatory reporting measures, and organisations are pledging to slash their carbon use and achieve net zero emissions in the coming years.

Staying compliant with strengthening legislation and achieving these ambitious targets will be a real challenge. It is no longer enough for businesses to look at their own operations – there is an increasing expectation that sustainability policies must cover the entire supply chain.

Legislative push

For palm oil users, quantifying the impact of their palm oil use can be difficult but Identity Preserved (IP) solutions could prove to be integral to achieving sustainable change.

Sustainable palm oil specialist, Judith Murdoch, of Murdoch Associates and Efeca, explains:

“Governments across the world are all moving in the same direction on sustainability – towards passing legislation designed to prevent deforestation and protect biodiversity.

“There’s a push for more accountability from businesses, who will need to prove they are making the right purchasing decisions. We’re already seeing it in the UK with a proposed new Environment Bill, and the EU is considering similar regulations.

“For businesses that use commodities such as palm oil, the message is clear – sustainability is no longer optional. You need to do your due diligence on your supply chains, to ensure that the ingredients you are sourcing are truly sustainable.”

The legislative changes could be further influenced by the United Nations (UN) Climate Change Conference (COP26) from 31 October to 12 November later this year in Glasgow. As the world’s governments agree to take action – this is likely to put further pressure on global businesses to move forward with targets to reduce greenhouse emissions.

Ensuring traceability

Palm oil has been controversial as a result of the historic clearance of tropical rainforests, the impact on endangered species and the displacement of indigenous people across Asia.

Over the past 15 years, organisations such as the Roundtable on Sustainable Palm Oil (RSPO) and the Rainforest Alliance have helped to transform the industry, setting out clear standards and expectations for sustainable, ethical production.

The industry has come a long way over the past decade and today, certified

sustainable solutions are widely available across the world.

“Certified sustainable” is a broad label – it covers any palm oil produced to standards set out by one or more different certifying bodies including the RSPO, and can cover a number of different supply chain models, including: • Mass Balance – sustainable palm oil mixed with non-certified palm oil (with the quantity of sustainable oil sold as certified sustainable). • Segregated – sustainable palm oil from different sources. • Identity Preserved (IP) – sustainable palm oil, fully traceable from a single certified source.

Of the three models, IP is considered the highest standard of sustainability.

The sustainability benefits of choosing IP solutions can be significant as they provide complete traceability back to the plantation – enabling buyers to effectively vet their suppliers to ensure that the production methods, business ethics and sustainability credentials match their own.

Astrid Duque of DAABON UK, a global leader in sustainable palm oil, explains what this can mean in practice:

“Buying IP provides customers with visibility and control over their supply chains – they know exactly where their palm oil is coming from and how it’s produced.

“Customers who buy IP palm oil from DAABON can prove to customers and stakeholders they are getting a truly sustainable, ethical product.

“All the palm oil we produce is organic, identity preserved certified sustainable. Our palm operation is deforestation free, and supports more than 500 family smallholders across northern Colombia. The palm operations are net zero, and we export clean methane that provides power for the Colombian national grid.

“We hold certification with global bodies including the RSPO, Rainforest Alliance and the Palm Oil Innovation Group (POIG), and we’re consistently rated as a top producer by SPOTT, which tracks the transparency of sustainability programmes.”

Choosing IP palm oil also makes gathering accurate data on supply chain emissions and social metrics easier – essential for any business looking to quantify Scope 3 (supply chain) emissions, report on Streamlined Energy & Carbon Reporting (SECR) or track progress towards sustainability/net zero goals.

For many businesses, supply chain emissions make up the bulk of their carbon emissions – accounting for up to 80% or more of the total. Taking steps to reduce these is essential if these businesses are going to cut their carbon footprints or achieve net zero emissions.

Purchasing IP palm oil provides businesses with full traceability – so they can effectively quantify the scale of these emissions.

Daniel Usifoh, sustainable procurement specialist and founder of sustainability tracking and reporting platform, AXIOM, explains: “Collecting data and tracking metrics is an essential part of any effective sustainability programme – businesses need to know where they stand, where they are heading and what they need to focus on. When purchasing commodities such as palm oil, this can be challenging. In many cases, businesses are purchasing products from multiple sources, with no dependable data on how these were produced.

“Purchasing identity preserved solutions provides clarity and makes collecting essential data easy – whether it’s carbon emissions or social metrics. Instead of estimating or taking an industry average, businesses can get an accurate picture of their supply chain. This is particularly useful for businesses required to report under SECR, those wanting to achieve net zero or those looking to meet pledges u

u made as part of their UN Sustainable Development Goals (SDG).”

Rise of IP palm oil

Buyers are becoming increasingly aware of the potenti al benefi ts of IP, although there is sti ll plenty of scope for growth, as there is across all forms of certi fi ed sustainable palm oil. Although 17.96M tonnes of palm oil (around 19% of global producti on) carries some form of sustainability certi fi cati on, only around half of this is sold as certi fi ed sustainable.

The fi rst palm oil sold under the RSPO ‘identi ty preserved’ label was in 2015 – and the quanti ti es sold have increased year-on-year. During the fi rst full year of trading (2016), around 1.2M tonnes of palm oil was sold as identi ty preserved. By 2019, this fi gure had grown to more than 2.7M tonnes worldwide.

This growth has been mirrored in the palm kernel oil (PKO) market – with volumes of IP PKO up from around 500,000 tonnes in 2016, to more than 1M tonnes in 2019.

It is especially impressive when compared to the overall growth in sales of RSPO certi fi ed sustainable palm, which grew from around 5.6M tonnes in 2015 to just over 7M tonnes in 2019, with PKO sales moving from around 1.8M tonnes to 2.6M tonnes in the same period.

The global COVID pandemic saw growth of IP soluti ons slowing signifi cantly, with volumes only up marginally year-on-year.

Gary Lewis, head of business development for Oils and Fats at KTC Edibles Ltd, and president of the UK Nati onal Edible Oil Distributors’ Associati on (NEODA), explains why:

“IP carries a cost premium over other supply chain opti ons. In 2020, prioriti es changed, and for many businesses, sustainability took a back seat. Customers were focused on survival and responding to the pandemic – many simply didn’t want to take on the additi onal costs associated with moving to IP.

“As restricti ons ease, we’re seeing buyers prioriti se sustainability again. At KTC, an increasing number of our customers are moving over to RSPO membership. Customers who have been hesitant to buy sustainable palm oil are now ordering segregated sustainable. Those customers who were already buying segregated palm are beginning to switch to identi ty preserved.

“Going forward, we’re expecti ng the growth in IP to conti nue. In 2020, we launched our fi rst IP product for the UK market and, following the success, we’re set to launch a number of new IP soluti ons, including palm olein and high oleic palm.”

IP is also proving to be popular with buyers who have been considering switching from palm oil to another vegetable oil, as Lewis explains:

“The big issue with moving from palm is that all of the alternati ves are more expensive. Although IP commands a price premium, it’s sti ll more cost eff ecti ve than palm alternati ves. At the same ti me, it off ers far bett er traceability and higher sustainability credenti als.”

Source: RSPO

Growth potential

Although there is signifi cant potenti al for growth in the supply of identi ty preserved soluti ons, it is unrealisti c to expect the global palm oil supply chain to move to 100% IP.

The complexiti es of the producti on process and supply chains in key producing countries such as Malaysia and Indonesia will ulti mately cap the quanti ti es of IP palm oil available worldwide.

As things stand, however, there is sti ll an oversupply of IP palm oil – to the point that some of it ends up being sold as segregated. There is plenty of opportunity for businesses that want to get ahead of the curve and make meaningful changes, before they are forced to do so by consumers and legislati on.

For those who cannot, or for whom IP is prohibiti ve from a cost perspecti ve, choosing segregated sustainable provides the best compromise. ● Barnaby Patchett is managing director of One Nine Nine Agency, UK