Increasing Demand for Sustainable Palm Oil
The growing demand for sustainable palm oil is bringing both opportunities and challenges to the industry. Palm oil suppliers are sourcing increasing volumes of sustainable palm oil to comply with growing demand from food and consumer goods manufacturers. Rabobank forecasts that global demand for palm oil certified by the Roundtable on Sustainable Palm Oil (RSPO) will double in five years, growing from 5.3 million tonnes in 2014 to ca. 11 million by 2020. In the report titled ‘Many Flavours of Sustainable Palm Oil’, Rabobank shows how traders and growers of palm oil are already responding and adopting sustainable sourcing requirements.
The RSPO’s criteria aim to guarantee conservation of natural resources and biodiversity, and to support local communities and is the most used certification programme in the palm oil industry. Demand for certified palm oil is showing strong growth and Rabobank forecasts demand for RSPO-certified palm oil to grow to over 11 million tonnes by 2020, ca. 15 percent of expected global palm oil demand.
Palm oil suppliers and traders in the EU and US currently account for 80-90 percent of certified palm oil sales, but the demand is also growing in Asia.
Rabobank expects diversity in sourcing criteria to further increase over the coming years as companies develop their own additional and tighter standards on top of those required by RSPO, in efforts to be ‘sustainability leaders’ as traders battle to match customers’ demands with the right levels of traceability.
“The trend towards sustainability is an opportunity for niche players and dedicated suppliers with vertically integrated supply chains who specialise in highly traceable palm oil. Niche or small volumes will prevent economies of scale and result in premiums for sustainable palm oil with more stringent criteria,” Kumar says.
For many suppliers, creating, maintaining and controlling different certified and traceable supply chains remains an inventory challenge, and the focus will therefore be on efficiency: making sure all purchased palm oil matches client interests.
Darrel Webber, Secretary General of RSPO said "Since its inception in 2004, the RSPO has worked on an inclusive model that meets companies where they are and pushes them towards continuous improvement. It's good to see that this approach is not slowing us down in moving towards our 2020 targets and market transformation."
Rabobank recommends these developments in palm oil should be watched by other commodity markets such as soybeans and sugar, where food manufacturers are also starting to shift to more sustainable purchasing requirements.