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Commodities

Farming without destroying the land that feeds Asia

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Smoke from slash-and-burn farming spreads near a palm plantation in Indonesia.   © Reuters

TOKYO -- Efforts to reduce environmental destruction caused by agriculture are gathering pace in Asia, spurring more companies to consider sustainability.

Global population growth and ever-expanding demand for farm products are creating a serious sustainability challenge. Palm oil, a less expensive alternative to soy and other edible oils, is one focus. In key producers Malaysia and Indonesia, the obliteration of tropical forests and smoke pollution from slash-and-burn farming have become grave issues.

At the FT Commodities Asia Summit 2016, held in Singapore on Sept. 5, Olam International CEO Sunny Verghese spent half his 40-minute keynote speech on environmental problems. Olam, a leading agribusiness based in the city-state, deals in palm oil. Verghese's conclusion was that for businesses, getting serious about agricultural sustainability is a matter of survival.

Some big-name companies are doing just that. The Roundtable on Sustainable Palm Oil, a nonprofit organization in Malaysia, issues certificates for palm oil produced in a planet-friendly manner. In the U.S. and Europe, companies are keen to obtain RSPO-certified products, because the organization's seal of approval tells consumers they are conscious of the environment. Unilever, the Anglo-Dutch consumer goods conglomerate, Nestle of Switzerland and others have committed to using RSPO-certified products.

The certification has yet to catch on widely in Japan. Since the program is not well-known in the country, "it is extremely difficult to pass related costs on to product prices," an official at a fat and oil processor said.

RSPO certification enhance brands but bumps up product prices, due to the premiums paid to growers. In some cases, certified products cost about 5% more than uncertified ones. Many Japanese companies shun the certification for this reason.

But times are changing. Kao, which makes cosmetics and other personal care products, dropped Malaysia's IOI as a palm oil supplier because it failed to meet RSPO standards and was stripped of its certification. 

IOI regained the certification in early August. However, Priscillia Moulin of Dutch environmental consultancy Aidenvironment said the suspension was lifted too early, since there are still problems with the company's environmental performance.

Kao, which chalks up some 40% of its total sales abroad and counts foreign investors among its shareholders, began procuring RSPO-certified oil before many of its Japanese peers. The company has said it will not procure palm oil from IOI until an RSPO-appointed inspection team signs off on its practices.

Nongovernmental organizations, meanwhile, continue to raise corporate awareness in Japan. On Sept. 26, six NGOs set up a website to guide companies on palm oil procurement.

(Nikkei)

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