With certification, smallholders will get a seat in the global palm oil market
Smallholders account for up to 70 percent palm oil produced in Nigeria, like many other places in Africa. However, with developed economies increasingly expressing preference for products from certified sources, there is a need for small producers to step up, just as the big players are doing. Elikplim Dziwornu Agbitor, technical manager – Africa, Roundtable on Sustainable Palm Oil (RSPO), in a Skype interview with Caleb Ojewale from his Accra base, discussed the benefits of being certified, and a free path to certification being offered for smallholders in the palm oil value chain. Excerpts:
What is RSPO all about?
Roundtable on Sustainable Palm Oil (RSPO) is a not-for-profit membership-based organization. It is made up of members with various stakes within the palm oil supply chain and it started in 2004 when there was a realization that in Southeast Asia, particularly, Malaysia and Indonesia, the palm oil production was associated with a number of issues, mostly environmental and social issues.
What RSPO does is to set the standards for sustainable palm oil production globally. When we talk of sustainability, it is three key pillars: one is the environmental sustainability, ensuring that palm oil is produced in a way that is not damaging to the environment as much as possible. The second pillar is the social pillar, that palm oil is produced in a way that is socially equitable and local communities benefit from the palm oil production. The third is the economic pillar that focuses on ensuring that those operating in the sector operate their businesses in a way that is economically viable, that they have a medium to long-term business plan and that they clearly articulate how they are going to sustain the business. Also, that they are not engaged in bribery, corruption and being transparent as much as possible.
Benefits of being a member
The first is market access; certification according to RSPO standards gives access to markets that organizations would otherwise not have access to. Up until this point, a number of the European buyers still purchased some uncertified palm oil probably because there isn’t enough production to meet the demand but most of them have made commitments to say that by 2020 they would buy only hundred percent certified palm oil. This means, very soon, if you are not certified and Europe is one of your markets, you might not be able to sell.
The second one is more of attracting Investments. For instance, a lot of investment financing institutions like the International Finance Corporation (IFC) would require a palm oil grower seeking credit facility to conduct some due diligence assessments. IFC has their standard for due diligence, which is an environmental and social due diligence standard. In addition to that, they require such a credit seeker to have a baseline assessment against the RSPO standard.
IFC is just one an example, there are others such as the African Agricultural Development Company (AGDEVCO). There is also the Netherlands Development Finance Company, called FMO. A lot of the financial institutions are happy to say; if an organization is an RSPO member then it means they’ve met at least the minimum best practice requirements. It is helping to reduce the amount of due diligence that the investors may have to do.
The third is about corporate image because a lot of these companies in the sector are operating across different continents and do not want to be seen as doing the right thing in America, for instance, and doing the wrong thing in Africa. Therefore, for corporate image purposes, a lot of them become members and it helps with their own internal checks and balances.
Is RSPO the only certification body or are there others?
RSPO is not a certification body; rather, we set the standard. There is also ISPO, which is Indonesian Sustainable Palm Oil, exclusive to Indonesia, and MSPO, Malaysian Sustainable Palm Oil, exclusive to Malaysia. RSPO is at the moment the only global standard for sustainable palm oil production.
There are independent certification bodies who are the auditors. They are not aligned to RSPO, they are independent, and they are accredited independently by an accreditation institution. Therefore, to be certified, an organization would have to bring the certification body or these auditors to come to their operations and they will audit those operations against the RSPO standard. If from their audit, it is clear that you have met the standards, you get certified. If you do not meet the standards, you do not get certified.
Presently, how many member countries do you have in Africa?
In Africa, we have grower members in 11 countries. But together, the growers and the supply chain, we have 15 countries. To break down, we have 70 members in 15 countries.
Is Nigeria among these countries?
Yes. Nigeria is among them.
Are there certified growers or supply chain players in Nigeria?
In September, Siat Nigeria Limited in Rivers state became the first grower to be certified. There are also two Palm Oil Supply Chain Certificate holders in Nigeria, both of which were also secured this year. These are; Certain bvba, getting certification for its Nigerian operating unit as Perfetti Van Melle Nigeria Limited in Agbara Industrial Estate, Ogun state, and Beiersdorf AG in July, with a certified Nigerian operating unit named Beiersdorf Nivea consumer products Nigeria Limited in Ilupeju, Lagos.
One thing I have noticed from everything you have mentioned so far, the memberships and the certifications seem to apply more to the big multinationals. Is there any rule or provision for smallholder Farmers or producers in RSPO?
In Africa, smallholders account for about 70 percent of the palm oil output. The vision of RSPO is to transform markets so that sustainable palm oil becomes the norm. Therefore, we cannot be concentrating on the ‘big guys’, who are just about 30 percent, and ignoring the smallholders who are at least 70 percent.
We have a standard that is specifically tailored for certifying smallholders. Before now, the smallholder just mirrored what was applicable to the big growers, which was very similar. Moreover, we know that the dynamics are very different, so we wouldn’t expect smallholders to get certified to the same standards as the big holders. Currently, we have developed specific standards for certifying independent smallholders. This does not certify smallholders as individuals; it certifies them as a group.
In addition, smallholders may not have the financial wherewithal to get certified because the certification could be quite expensive and also, they may not have the technical know-how to be able to implement the standards. Therefore, RSPO decided to have a support mechanism tailored for small holders. We came up with the RSPO Smallholder Support Fund (RSSF). We have been using this fund to support smallholder groups to become certified. Otherwise, our fear is that the way things are going, in a few years time, companies who even buy from smallholders may not want to buy from them anymore because the smallholders are not certified. Then, we do not want smallholders excluded from the supply chain because for them, it is a matter of livelihood and so we cannot afford to have that.
We have been using the RSPO support fund to enable smallholders to get certified. At the moment, we’ve had five supported projects in Africa, one of which is in Nigeria, in Cross River State.
What is limiting more players in Nigeria’s palm oil value chain from getting certified?
Okomu, for instance, their membership was approved just in April this year, so they are new members. Because they are new members, they are now putting their house in order to get certified. For Wilmar, most of their plantations are quite young, and so again, they are also pretty new. The ones that have been in the system longer are SNL and Presco.
SNL is already certified. For Presco, they had a certification audit already, just awaiting the final decision.
However, I would not restrict low level of certification only to Nigeria. I think it is a general issue in Africa as to why there are very few certified growers. I think at the moment, the demand for certified sustainable palm oil in Africa is quite low. Yet, to get certified, you would incur a number of costs. If the demand is not too high, yet having to incur quite some costs, this could be a reason why the pickup in the region is quite slow.
A lot of these companies are selling locally, only few export. Even those who export in Africa, they export to other African countries. They are not exporting it outside of Africa. So if the demand is generally low, then the incentive to get certified is not too high. It could also be some bottlenecks during the process of getting assessments done.
For instance, in Nigeria, for the environmental impact assessment, you are required to do it in the rainy season and in the dry season. What it means is that it will take you one whole year to complete just the environmental impact assessments.
QUOTE: our fear is that the way things are going, in a few years time, companies who even buy from smallholders may not want to buy from them anymore because the smallholders are not certified.