Palm oil is a vegetable oil used all over the world for cooking, in foods and everyday products like cosmetics, shampoos, and detergents. Typically grown in tropical areas, oil palm is a ‘wonder crop’ with long life-span and high yields, requiring less input than many other oilseeds. Its production also brings considerable social benefits and contributes to the economic development of producer countries like Malaysia and Indonesia. Palm oil is a vital part of India’s food scenario and the country is its largest importer, capturing over 20 percent of global supply.
Oil palm is not without its impacts and in recent times a number of stakeholders have sought to find a balance between economic benefits and the environmental and social cost of clearing tropical rainforest to make way for its cultivation.
At the forefront of this effort has been the Roundtable on Sustainable Palm Oil – a coalition of business and civil society that has established principles and guidelines for the cultivation and trade of sustainable palm oil. Over 20% of all palm oil production is now certified under RSPO’s standards and in many European markets it is considered the minimum requirement for consumers.
In India much remains to be done to transform the market to a more sustainable footing however some businesses are leading the way – committing to positive change and setting a benchmark for others to follow. Among those is Galaxy Surfactants, a global leader in supplying a wide range of products to some of the world’s most famous FMCG brands.
Galaxy Surfactants attained certification under the Roundtable on Sustainable Palm Oil (RSPO) in 2014, making them one of the first companies in India to achieve this standard. Today, Galaxy has certified all its relevant manufacturing plants and can now supply RSPO-approved Mass Balance Certified Sustainable Palm Oil (CSPO) to any of its global customers.
The RSPO mass balance system allows for mixing of RSPO certified palm oil and other palm oil at any stage in the supply chain provided that overall company quantities of each are known and the volume of non certified palm oil does not exceed the volume of certified sustainable palm oil. The model allows flexibility in situations where precise traceability of certified palm oil through a segregated supply chain may not be possible, whilst still allowing companies the ability to achieve more responsible sourcing practices.
Galaxy’s move is a significant milestone in the Indian market, reflecting similar developments by companies in overseas markets and a general trend of increasing certification in the Indian market. Two years ago just one company had RSPO certification in India – now there are nine.
WWF-India spoke with Galaxy’s Chief of Operations K Natarajan and MS Sriganesh, the company’s Head of Sourcing, to understand the reasons, challenges and opportunities behind this investment in sustainability.
What made you switch to sustainable palm oil with an international standard like RSPO?
Sustainability is a critical pillar of our strategy signed off by the senior team of Galaxy. As a business we are part of a global supply chain reaching out to thousands of customers in more than 100 countries. Environment and sustainability are societal issues which impact every one of us and as a responsible participant in the palm value chain, we are clear that we need to be part of the solution. We got initiated into the RSPO through our global customers and considering that it was a multi-stakeholder forum working to address the concern areas, we joined as a member. Over the years our understanding of the subject has improved and as a result we have a committed roadmap to meet the 2020 targets.
Where is this demand coming from? Is it driven by India’s consumption or global demand?
Demand for certification is coming from global customers who are leading this initiative in our Industry. However, we believe that the trickledown effect to regional and local customers will happen with a lag. As a vendor to all of them, our agenda is to be ahead of the curve in this journey, keep communicating with our customers on the developments and look to have a larger base of customers as this is a differentiated capability we have vs. our competitor.
Are customers asking for Mass Balance or Segregated RSPO certified sustainable palm oil?
Currently, we are seeing traction emerging in Mass Balance and are already selling Mass Balance surfactants as there is wide availability of MB based oleo chemicals at reasonable premiums. Segregated based raw material availability is still limited and the premiums quoted are high, holding back the buyers from trying. We see this as part of the evolution and with more plantations getting certified, easier availability of Segregated palm oil will emerge and push down the premiums to levels comfortable for customers to adopt.
What is your customer base like? Is there emerging demand beyond MNC customers?
We connect with customers all over the globe in more than 100 countries which is a mix of global, regional and local players. The current traction is largely from global MNC customers who have the advantage of better understanding on this and are driving their own traceability initiatives. Across developed geographies we see even smaller customers speaking of certified materials. At the regional and local level the awareness is low. As the information starts to trickle down, considering the nature of the personal and home care industry, we see other customers also making a shift.
What were the challenges faced during and before the certification process and how long did it take to get certified?
Understanding the process of certification was a challenge initially due to us being located in India and there were no references for us to work with. It required a considerable amount of time and effort to understand the system, for which we travelled to Malaysia, met up with companies leading in this front, understood the process and then created our own. As a result our first certification took two years. Basis this learning our second certification took just three months and the third round of certification just a week. This is why we feel it’s important for all early adopters like Galaxy to work with WWF to create awareness and educate the market. Using industry platforms to share the learning and getting experts to speak on the subject will facilitate customers to understand the relevance and support the same.
If we look at the edible oil industry, the largest segment of palm oil in India, the problem of demand for sustainability lies in the nature of the market. Unless there is demand from consumers or government and policy level intervention on certifications, sustainability in edible oil industry is difficult. If big players like China, India, Indonesia and Malaysia come to a consensus on sustainable palm oil, change can happen in edible oil sustainability.
What were the required changes in terms of governance at the organizational level to get RSPO certification? Was it a top down method? How was it played out in terms of the process?
We became an RSPO member in 2012. The process involved assessing our value chain in a detailed manner and engaging with suppliers. Our first plant was certified in 2014. This required a top down approach with cross-functional team sourcing from our manufacturing, quality and IT. We attended trainings with David Ogg & Partners (an RSPO-endorsed Auditor and Trainer) for a deeper understanding of the process, spoke to core players in the segment and started our auditing process. We have come a long way over the last couple of years and now have a 2020 target to attain complete traceability.
What was the financial side of this?
Our plan for certification is part of our committed journey of being prepared ahead of what our customers are seeking from us. While the costs are getting incurred now when adoption rates are low, we believe that business will follow with a lag.
How was the reception to RSPO certification from the industry in terms of impact, inquiries, clients etc.?
Since we were one of the first companies in our Industry to get a certification with this scope, curiosity was the first response from our customers. In terms of impact we see positive responses from global customers who understand the relevance and context. We’re also aware that certification is one aspect of our customers’ agenda – many global customers have their own system of traceability. If we can help with this as well, then we are well positioned in the market.
Based on your experience, what are the key lessons you can share with other companies to adopt sustainability practices?
There is inadequate understanding on sustainable practices and companies tend to have a skewed view that it is increasing costs. The management of every company in this value chain needs to understand the fact that it is now an industry survival issue and not participating has the potential to impact the future.
Certified palm oil actually enhances long term supply. Through joint initiatives, there can be many solutions for companies to gradually move towards responsible production and sourcing of sustainable palm oil and the cost is actually manageable, particularly if more companies sign on and volumes increase.
At the origin level, jurisdictional approaches to certification of palm oil production are an interesting development. Using location and point-of-origin to improve traceability based on the knowledge that large production areas have been certified will remove cost barriers to sustainability. Satellite mapping of high priority hotspots of deforestation and a separate production and sourcing plan for those areas would also help to remove supply chain risks for companies.
How have you externalised RSPO and communicated about it to your various stakeholders?
We believe in the power of industry collaborations to share knowledge and practical expertise. Galaxy as a first mover will help design solutions and give required guidance for similar companies in India. We will continue to engage different stakeholders and all parties along the value chain to promote sustainable palm oil. Now with RSPO looking to reestablish itself in India, we are confident that the way forward is positive.
Director – Sustainable Business, WWF-India