Palm oil, climate and sustainability: Adapt, disclose and improve

The 11th of November 2024 was a busy day in the sustainability world – it was simultaneously the launch of the Roundtable for Sustainable Palm Oil (RSPO)’s 21st annual roundtable conference in Bangkok, and the launch of the United Nation’s 29th Climate Change Conference (COP29) in Baku, Azerbaijan. There are parallels between the two processes that go beyond a shared launch date this year. With the 29th COP having confirmed the deadline for updated NDCs by February 2025, the RSPO process provided some potential lessons learned for how we approach climate adaptation. 

The RSPO was established 20 years ago, with the objective of ‘promoting the growth and use of sustainable oil palm products through credible global standards and engagement of stakeholders.’ The objective aligned the impetus of business growth of standardised production of an agricultural commodity, to the oversight provided by a multistakeholder approach. The voluntary coming together of the biggest companies in the palm oil sector happened partly because they received the brunt of the blame off the back of the devastating El Niño fires that blanketed Southeast Asia in haze in 1998, but also partly because the sector was prepared to take the effort to pull together to adapt to the changing expectations of stakeholders on sustainability. 

Crucially, stakeholders not directly involved in palm oil production (i.e., the non-growers, including NGOs, banks, processors, and retailers in the value chain) were prepared to contribute both resources and time to get the process going. This shared commitment and the constructive nature of the roundtable approach enabled RSPO to develop an international, sector-wide standard for the sustainable production of palm oil. The establishment of the first RSPO Principle and Criteria (P&C) standard in October 2007 marked a three-year journey that began in November 2005, when the RSPO P&C was initially adopted for a two-year pilot implementation period by 14 companies. The following year, the first oil palm grower was successfully certified against the standard. The 2007 P&C was built through a comprehensive process involving public consultations, meetings, feedback from various national level oil palm country representatives (called national interpretations), smallholder representatives, and input from pilot field trials. This reiterative and inclusive approach ensured the standard evolved to represent the shared objectives and a common goal by the different stakeholders.  

Inclusivity drives constructive improvements: In today’s increasingly polarised world and political arena, it is hard to imagine that 20 years ago, a multistakeholder approach could prove to be so decisive. The RSPO borrowed its model from sustainable forest certification – notably the Forest Stewardship Council (FSC) – where the inclusion of environmental and social NGOs, as well as the downstream value chain, were built into the process from the development stage. From the outset, the multistakeholder approach has ensured that the standards align with RSPO’s objective while remaining practical and implementable on the ground. As RSPO has evolved, it has demonstrated adaptability by responding to the industry's changing sustainability needs through ongoing consultation and active listening, always recognising opportunities for further improvement. It also created a culture of accountability amongst the companies in the palm oil sector, creating a genuine drive for sustainability transformation and adaptation.  

Similar to the RSPO, the COP process has increasingly embraced inclusivity by expanding its focus beyond government delegations and negotiations to actively involve a broader range of stakeholders, such as indigenous peoples and NGOs. Notably, at the recent Convention on Biological Diversity (CBD) COP 16 in Cali, Colombia, a historic milestone was achieved by integrating indigenous decision-making into biodiversity governance. For the first time, a subsidiary body was established to give indigenous peoples a direct voice in biodiversity decisions. This marks a significant advance in promoting collaborative and sustainable environmental stewardship.

Built in incentives for meeting sustainable standards and simplifying access: The development of the RSPO supply chain standards included a direct acknowledgement of premiums for sustainable production – which is important to ensure that the implementation of sustainable certification could be incentivised. The RSPO conversation recognised that the initial period of certification would need to consider an approach that might not see immediate physical flows of sustainable palm oil, but still needed a way to facilitate the awarding of incentives for sustainable implementation. The development of the Book & Claim supply chain option meant that downstream value chain players could pay premiums to purchase equivalent claims of sustainable palm oil. This system also enabled direct support in the form of price premiums to smallholder producers. 

One of the challenges of climate adaptation is that while developed nations have provided funds for developing nations for emissions reductions, these funds are very difficult to access. There is an urgent need to mobilise sufficient funds to support the countries most affected by climate change, and to help fast-growing countries in the adoption of lower-emission pathways. This involves ensuring that the debt burdens of smaller countries, which are not paused even during climate-related emergencies, are not exacerbated, and ensuring direct financial access, including for loss and damage.  

Last month, COP29 in Baku concluded with a dramatic, last-minute deal of US$300 billion a year in climate finance for developing countries. Though this was not the total amount that the developing countries were initially seeking, this was an increase to the previously agreed US$100 billion a year. It is important to point out that it came off the back of a walkout by the Alliance of Small Island States and the Least Developing Countries bloc. While the negotiations were intense, the agreement shows that there is still a joint urgency from all countries on the shared objective of addressing climate change, and a recognition that improvements in the right direction are certainly more important than waiting for the perfect outcome. There is expected to be enough momentum to be built upon at COP30 in Brazil. 

In addition to the last-minute deal, there were also agreements designed to help create practical flow of funding, such as Article 6.2 which allows voluntary bilateral agreements to trade carbon credits known as Internationally Transferred Mitigation Outcomes (ITMOs).  

While the commitment of US$300 billion a year in climate finance falls short of the US$1.3 trillion that developing countries had hoped for, the agenda is scaling up finance to developing countries from both public and private sources to US$1.3 trillion per year by 2035. Many delegations recognised the 'Baku breakthrough' as a positive step toward addressing the urgent challenges of climate change and ensuring increased financial flows.  

For the RSPO, with the adoption of the updated certification standard on 13 November, the Principles and Criteria (P&C) 2024, the organisation’s membership makes clear their commitments for sustainable production of palm oil. Notably the P&C 2024 includes: an improved approach to addressing deforestation and environmental impacts; introduction of human rights due diligence; the strengthening of smallholder inclusion; and better auditability and implementation. 

This aligns with expectation of sustainability disclosure requirements, for example as set by Malaysia’s National Sustainability Reporting Framework (NSRF), which emphasises the importance of how companies are reporting their sustainability efforts. This is especially related to how data is gathered and metrics setting. While it cannot be denied that the oil palm companies are generally strong in ground implementation – including in the implementation of emissions reductions efforts – the mandatory disclosure requirements, which specify IFRS S1 and S2 – does require more details and rigour in data collection. There are also opportunities for oil palm companies and the wider sector to integrate climate adaptation strategies within their sustainability reporting, which would help align with country level NDCs and ensure sufficient focus on regulatory requirements on climate reporting. 

The RSPO P&C 2024 exemplifies how a shared commitment made 20 years ago can lead to improved sustainability implementation and disclosure, so long as the objectives of the stakeholders remain firm and aligned.  However, as we look ahead, several key questions remain:

• How can we ensure that incentives deliver the intended economic and societal value, fostering positive change across supply chains and the industry? 

• What more can be done to support smallholders and indigenous communities, ensuring their rights and livelihoods are central to sustainability efforts?

• What opportunities exist for innovation in R&D, such as higher-yielding palm varieties that are resilient to climate change, improved waste management systems and solutions to combat deforestation and emissions?

These questions serve as a reminder that while progress has been made, the journey towards truly sustainable and inclusive palm oil production continues. Addressing these challenges will require not only alignment among stakeholders but also a renewed commitment to collaboration and innovation.

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