Earlier this year, IOI Corporation’s certification was suspended by the RSPO
, due to allegations of deforestation and other misconduct by its Indonesian subsidiaries, including alleged non-compliance with RSPO’s principles and certification systems.
At around the same time, the Felda Group requested an immediate withdrawal of its RSPO certification
for its 58 mills located throughout Malaysia, due to sustainability issues in its supply chain.
Between them, the two producers supplied around 21% (639,000 tonnes) of the total available volume (3.07 million tonnes) of RSPO-certified sustainable palm kernel. Felda plans to “progressively recertify” its mills within three years, and IOI says it is working with its stakeholders and RSPO to voluntarily adopt the more stringent certification system starting from the end of this year.
Due to the complexity in the palm kernel supply chain, RSPO certified segregated palm kernel oil is still hard to source. Consequently, the drop in supply will have a severe impact on buyers seeking physical palm kernel oil, either Segregated or Mass Balance.
One grower that has benefited from the overall drop in certified palm supplies is Kuala Lumpur Kepong Bhd (KLK) in Malaysia. Previously, about 30% of its product was sold with a CSPO premium, but that figure has now risen to almost 50%
On the GreenPalm market
, certificate prices are increasing in response to the crisis. Indications are of a continuing squeeze on certified physical supplies, particularly palm kernel oil. However, buyers still have the option to support certified palm and palm kernel oil production via GreenPalm for their 2016 sustainable claims.
Bob Norman, General Manager at GreenPalm, said: “This is good news for sellers of GreenPalm certificates, who can command a higher premium as competition for certificates intensifies. But it’s less promising for buyers committed to sourcing physical certified material, or for those who do not act quickly enough to beat the price increases.”