Unilever’s move to cut ties with Indonesia’s Sinar Mas could prompt Malaysian planters to comply with rules set by the Roundtable on Sustainable Palm Oil (RSPO) before the commodity can be exported.
RSPO, is a producer, consumer, supplier and non-governmental organisation that requires oil palm from Malaysia and Indonesia to be sustainably produced.
The rules are meant to protect the environment and include provisions for not cutting down virgin forests for planting.
AmResearch said the intense scrutiny by environmental organisations means that palm oil producers that export their products would now have to ensure their estates or mills comply with the guidelines.
“The other repercussion on plantation companies is they may now have to either reduce or slow down their planting programmes.
“For instance, instead of planting 30,000ha of land with oil palm annually, plantation companies may now only develop 10,000ha to 20,000ha of land,” AmResearch said in a note to investors.
“We maintain a neutral on plantations as inventory levels are expected to remain high on back of rising production of vegetable oils,” said AmResearch.
Unilever last week cut ties with Sinar Mas, one of Indonesia’s largest plantation firms.
Unilever acted after being shown photographs of Sinar Mas clearing rainforests in protected areas, including reserves meant for Indonesia’s endangered orang-utan population.
It also cancelled its STG20 million (RM110.4 million) annual contract with Sinar Mas after learning that Greenpeace was about to publish a dossier of evidence.
Unilever had said that it would only buy certified palm oil from 2015 onwards.
“We understand that complying with certain RSPO guidelines is not expensive. Plantation firms only have to incur cost of auditing.
“We gather this cost is between RM7 a tonne to RM10 a tonne. We believe that the risk lies in unmonitored workers or natives, who may use fire to clear the forests and their estates may be located close to estates of the plantation companies,” AmResearch said.
In Malaysia, about 157,000ha of land producing more than a million tonnes of palm oil has been certified as “sustainable”.
Wilmar has certified three palm oil mills in Sabah, which produce 123,0300 tonnes a year of crude palm oil while Indofood Agri has roughly 140,000 tonnes of palm oil certified.
Six of IOI Corp Bhd’s oil palm estates and one palm oil mill in Sabah are RSPO-certified while all of Kulim’s estates in Papua New Guinea are certified. Source: Business Times