Market insights

New Singapore alliance to push for sustainable palm oil

06 February 2017 by Padmakshi Rana and Jessica Cheam
 Caption: Palm fruits at a plantation, which are used to derive palm oil. WWF Singapore launched a multi-stakeholder, sustainable palm oil alliance on June 2016. Image: WWF/xcalibrephoto

International non-profit World Wildlife Fund (WWF) has launched a new alliance in Singapore that aims to boost demand for sustainable palm oil and help tackle the haze pollution plaguing the region for many decades.

This alliance “sends a clear signal to consumers about which companies are committed to sustainability”, said WWF Singapore chief executive officer Elaine Tan at the launch of the alliance at Marina Bay Sands on June 27.

The five founding members of the alliance are consumer goods giant Unilever, Singapore manufacturer Ayam Brand, food and beverage specialist Danone, home furnishing retailer IKEA, and Wildlife Reserves Singapore.

The network aims to emulate similar alliances in Europe that support sustainable palm oil, and seeks to connect players in the palm oil industry, retailers and manufacturers to tackle deforestation and haze.

The practice of burning peat or forest land, commonly used among Indonesia’s farmers as the cheapest way to clear land, has over the decades caused habitat loss, severe environmental impact and air pollution.

Tan said the formation of this alliance was prompted by the public outcry over last year's prolonged haze pollution, which hit record highs as it shut down most outdoor activities, and even schools, throughout affected areas in Indonesia, Singapore and Malaysia.

The alliance, which is open for any company based in Singapore to join, will complement the work of the Roundtable on Sustainable Palm Oil (RSPO), an industry association headquartered in Kuala Lumpur which certifies sustainable palm oil, said WWF.

Business motivations

Panelists who spoke at the launch of the alliance unanimously agreed on its potential to transform the palm oil and wider consumer industry.

Jeanne Stampe, WWF’s Asia Finance and Commodities Specialist, noted that the network is a “pre-competitive move by the industry to come together to send strong signals to producers and traders that there is a declining market for unsustainable palm oil”.

By creating a “soft buy-in commitment”, producers will see that there is sufficient demand for sustainable palm oil and this will give them confidence to invest in the physical supply chain, she said.

“As (we) move towards such national alliances, Asia stops becoming a dumping ground for such unsustainable commodities or a second tier region for fast moving consumer goods (FMCG) products that use less sustainable materials,” she added.

Herve Simon, group marketing director, Ayam Brand, shared that the motivation for joining the alliance is simply that “we want to offer a good brand to consumers”.

Although Ayam Brand is an SME that uses only 200 metric tonnes of palm oil per year, it can play a constructive role in bringing transparency to the market, said Simon.

The company sources for only sustainable palm oil, and the ingredient is clearly stated on all of Ayam Brand product labels, he said. “SMEs can play a role in fighting the haze, and that it is not only big companies that can make a difference.”

Simon observed that in the food industry currently, having ISO certification on food standards is a pre-requisite to do business.  Similarly, in the future, “I hope it will be the same for palm oil, meaning if you are not certified, then no one will buy from you”, he said.

IKEA Singapore’s head of sustainability Lee Hui Mein Lee echoed this view, saying that the furniture giant has committed to 100 per cent sustainable palm oil because “we believe this is the right thing to do”.

She noted that the issue was important and relevant as it “affects everyone - from small holders who produce palm oil in the neighbouring countries to all our co-workers and consumers who live and work in Singapore”. 

Underscoring the business case, WWF’s Stampe stressed that eventually, businesses that do not behave responsibly will suffer “lower pricing power and potential loss of sales on the volume side”,

“These have a direct impact on the bottom line, shareholder returns and credit profile,” she said.

Opportunities for business

While raising sustainability standards might pose an initial challenge for companies, the opportunities for improving brand impact, increasing transparency and changing consumer behaviour are huge, said the panellists.

“Most of the value of the company is from the brand, so if you are building a brand with good principles, sustainable supply chain, anti-corruption and respect for minority and gender, for example, you make your brand stronger and business model more durable in the future,” said Ayam Brand’s Simon.

Cherie Tan, head of sustainable sourcing at consumer giant Unilever, shared that in recent years, sustainability has become “very ingrained” in the company.

“It’s the way we do our business… we take responsibility for all the raw material we source and that they are produced sustainability,” she said.

Unilever is one of the largest consumers of palm oil in the world – consuming 3 per cent of all palm oil produced – and it has a “no deforestation, no exploitation of people” policy, she added.

“Our commitments on traceability and transparency… are two areas where we think we‘ll make a large impact in the environment,” she said.

Acknowledging that change will not happen overnight, she underscored the importance of companies working together through initiatives such as the new alliance.

“We believe the formation of this alliance is needed for the business community to join forces together, for the good of consumers and for the environment. We look forward to working with the founding members,” she said.

Sonja Luz, the director of conservation and research at the Wildlife Reserves Singapore (WRS), who also spoke at the panel, highlighted that the consequences of business inaction would be irreversible damage to wildlife, biodiversity as well as human health.

She stressed the importance of the alliance for building stronger messages, demanding proper product labelling and providing member companies with a platform to make the commitment towards sustainable palm oil.  

This would provide consumers with the information on products and companies committed to the use of sustainable palm oil, and they can in turn vote with their dollar to support responsible companies.

WWF’s Tan echoed the views of the panel when she said: “The global demand for sustainable palm oil at the moment is driven by European and American markets, but there is no reason why Asian markets cannot be strongly demanding for it too.”

Edited by Jessica Cheam and Stanley Tang