High costs thwart drive to clean up palm sector

Palm oil buyers remain reluctant to pay up for ecologically-friendly palm oil despite high-profile campaigns against the likes of Sinar Mas and Ferero, producers have warned, as environmental champions meet in Brazil.

Demand for sustainable palm oil, "although improving, still remains slower than first expected", Sipef, the Belgian-based plantations group, said.

"End buyers are still hesitant to start right away," the group added, noting that many buyers were delaying until 2015 the date they planned to switch over to supplies registered as sustainable.

About 70% of Sipef's palm oil production is certified as sustainable by the Roundtable on Sustainable Palm Oil, which is spearheading the campaign to minimise the social and environmental harm caused by the industry.

Costly process 

Separately producers in Indonesia, the top palm oil state, that sustainable supplies were earning a premium of only $10 a tonne, compared with the $50 a tonne which some observers have cited.

This premium was "insufficient" to cover the costs of winning RSPO approval, the Indonesian Palm Oil Producers Association said, noting that only about 40 of its 380 members had gained certification.

Indeed, producers were bearing an undue burden of the costs of improving the industry's sustainability record, the association's secretary general, Joko Supriyono, said.

"Other key players along the palm oil supply chain do not want to share the added cost for sustainable certification. It is too expensive for many producers to bear all these added costs," Mr Supriyono told Malaysia's Star newspaper,.

Sustainability conference 

The comments come as RSPO members are gathered at a four-day conference in Brazil, where speakers include representatives of the United Nations, Fuji Oils and the Brazilian government.

And they follow a concerted campaign by Greenpeace against Sinar Mas's palm oil producing division, PT Smart, over allegations of clearing forests and peatland to make way for plantations.

Some other groups caught up in palm oil controversies, including Cargill and chocolate makers Ferrero and Nestle, have pledged support for sustainable supplies.

Cargill has four palm oil mills amongst the 58 approved by the RSPO, which has also certified 44 supply companies.

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