MPOC Says More Sustainable Challenges Await Palm Oil Industry

Published on: 13 September 2022
by KnowESG
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According to Malaysian Palm Oil Council (MPOC) chief executive officer Wan Aishah Wan Hamid, the focus on sustainability problems does not appear to be waning, and the palm oil industry faces new challenges.

Wan Aishah says that the palm oil industry has had a lot of issues with sustainability over the last few decades. These problems include accusations of deforestation and the loss of endangered wildlife, as well as global warming, the sustainability of palm-based biofuels, and the recent forced labour issues raised in the US.

The introduction of new international climate change and deforestation-related legislation, which could create trade barriers, is one of the challenges for the palm oil business.

She said these laws are the outcome of countries aiming to offset the adverse effects of climate change by decarbonising, reducing global warming, and achieving carbon neutrality or net zero by 2050.

Wan Aishah, in her speech during the International Palm Oil Sustainability Conference (IPOSC) 2022, said: 

"A number of legislative developments have emerged, for example, the European Green Deal in 2021, which include the Carbon Border Adjustment Mechanism, designed to impose levies on imported goods produced with high GHG (greenhouse gas) emissions."

Furthermore, Wan Aishah stated that the EU's planned Regulation on Deforestation-Free Products, as well as the US Forest Act Bill, will penalise products with deforestation elements in their supply chains.

“These policies and legislation could form an indirect trade barrier, as developing nations like Malaysia will incur a higher cost of compliance to gain market access. Palm oil will be one of the few commodities under scrutiny due to its perceived role in driving deforestation,” she said.

Wan Aishah stated that, in addition to climate change and deforestation-related legislation, corporate investors, trust funds, and financial institutions have begun to enforce environmental, social, and governance (ESG) factors in their investment and financing requirements.

Nonetheless, green financing is now at the forefront of sustainable and responsible financing, as banks place a greater emphasis on supporting business models and initiatives incorporating sustainable, carbon-neutral, and ESG-compliant investments.

“These developments will greatly impact the way companies operate, as corporations with better sustainability commitments and efforts will gain an edge over its corporate peers.

“However, industry stakeholders without sufficient financial, technical, and manpower support will be adversely affected. This is especially true for independent smallholders in Malaysia, which have struggled to achieve 100% certification for sustainable palm oil certification schemes, and will now be burdened with these additional sustainability requirements,” Wan Aishah added.

Source: The Edge Markets

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