Benefits of getting certified in the palm oil value chain
Getting certified as a player in any segment of the palm oil value chain could be an expensive process. However, it has some benefits, and it should also be noted that provisions are being made for smallholders to get certified through a less cumbersome process, that also comes at no cost (at least for the initial one).
When Agribusiness Insight had a Skype interview with Elikplim Dziwornu Agbitor, technical manager - Africa, Roundtable on Sustainable Palm Oil (RSPO), he explained that getting certified offers palm oil producers access to markets previously inaccessible to them. “For instance, most European buyers have made commitments that by 2020 they would buy only 100 percent certified palm oil. Meaning very soon, if a producer is not certified and Europe is one of the target markets, such a person might be unable to sell,” he said.
The second benefit is for attracting Investments. As the RSPO technical manager explained, for some investment financing institutions like IFC, if a palm oil grower approaches them for a loan or any other form of credit system offered, would request some due diligence assessments are conducted. According to Agbitor, while IFC has standards for due diligence, in addition to that, it would require a prospective credit seeker to have a baseline assessment against the RSPO standard.
Based on the assessment, IFC is able to see what gaps exist, and which RSPO requirements are not being complied with. Based on those findings, it can then make a decision as to whether or not to give funding. Agbitor emphasised that RSPO is increasingly becoming a due diligence standard for investments in the palm oil industry. While he says IFC is just one an example, there are others such as the African Agricultural Development Company (AGDEVCO). There is also the Netherlands Development Finance Company, called FMO, and while he couldn’t say with certainty, hinted that Export
Development Canada (EDC) is also making investments in the palm oil sector and like others, requires at least as a minimum, that a prospective fund seeker is an RSPO member. Furthermore, one that is committed to getting certified, if not already certified.
RSPO membership, in essence, gives an opportunity to attract investments. One of the reasons this is possible as he further explained is that before an entity becomes an RSPO member, the RSPO secretariat will conduct some checks and balances. Invariably, “a lot of the financial institutions are happy to say that if an entity is a member then it means they’ve met at least minimum best practice requirements,” he said. Therefore, it is helping to reduce the amount of due diligence that the investors may have to do.
The third benefit is about corporate image as he says a lot of companies in the sector are operating across different continents and do not want to be seen as doing the right thing in America, for instance, but doing the wrong thing in Africa. Therefore, for corporate image purposes, some of such companies become members and it helps with their own internal checks and balances. However, for any entity to become certified, it first has to be a member of RSPO, which says it is a nonprofit entity.