Animal feed producers and traders, meat and dairy producers, as well as retailers have the opportunity to catalyse change by asking their suppliers whether the feed, feed additives or milk replacements are sourced sustainably, and if not, how they plan to address this. 

Francesca Morgante
Senior Manager, Europe
RSPO

Every actor involved in the food supply chain has a role to play in stimulating the demand for sustainable products. The animal feed sector acts as a vital intermediary between sustainable agriculture and sustainable meat consumption, as the choices we make in animal feed eventually get into the overall food supply chain.

Palm oil is used in animal feed for ruminants and poultry. Classified as an energy source for animals, it can likewise be used as a supplement for dairy cattle. In addition, the highly fibrous and nutrient-rich palm kernel expeller – also known as “palm cake”– is suitable for dairy and beef cattle feeding, swine, and fisheries, and can be used as a filler to increase the bulk of the feed for non-ruminants.

Though hidden from consumers’ radar in the feed sector, the use of palm oil and its derivatives is no exception. However, with the complexity to source sustainable derivatives, it raises the question of the appropriate model for the feed supply chain to implement.

RSPO STANDARDS FOR SUSTAINABLE PALM OIL PRODUCTION

Well-managed and responsibly produced palm oil is fundamental to creating a sustainable supply chain. When grown unsustainably, oil palm potentially poses risks of deforestation, loss of natural habitats, and human rights violations against workers and Indigenous communities.

In response to these critical challenges, the Roundtable on Sustainable Palm Oil (RSPO) was established to ensure that oil palm production does not lead to environmental and social harm. At the heart of the RSPO are three certification standards. The RSPO Principles and Criteria (P&C) serve as the global guidelines for the production of sustainable palm oil and apply to large producers. The RSPO Independent Smallholder (ISH) Standard strikes a balance between promoting greater inclusion of smallholders (small-scale farmers with a production area of less than 50 hectares) and upholding core sustainability requirements. For downstream actors, the RSPO Supply Chain Certification Standard (SCCS) ensures the integrity of the sustainable palm oil trade, so that palm oil sold as Certified Sustainable Palm Oil (CSPO) has indeed been produced by certified plantations. These systems involve audits by independent third-party certification bodies. Such rigorous certification standards considerably reduce the risks of negative impacts of palm oil production.

INCENTIVISING SUSTAINABLE PRACTICES THROUGH RSPO CREDITS

According to the latest report, “Sustainable Palm Oil: Europe’s Business,” in 2021, only 5% of the 1.76 million metric tonnes of Palm Kernel Expeller (PKE) used in the European feed sector were certified sustainable by the RSPO Standard. This figure is extremely low compared to those of the other palm oil products, with CSPO uptake being the highest (93% of the imports for food, feed and oleochemicals are certified sustainable), followed by Certified Sustainable Palm Kernel Oil (CSPKO) (62%). 

The physical trade of Certified Sustainable Palm Kernel Expeller (CSPKE) is still in its infancy; the first recorded physical shipment of CSPKE to Europe was only in 2021. This shows that the market is still primarily relying on compensations for conventional purchases through the RSPO Credit system. There is currently not enough market demand for CSPKE, prompting producers of certified palm kernel expeller to sell their certified products as conventional. To compensate for this, they are able to trade their certified volumes as RSPO Credits, thereby collecting a premium on top of the sale of their physical supply.

The RSPO Credits mechanism is an excellent model to support sustainable production in emerging markets. Importantly, it is a way to remunerate farmers directly for their efforts towards sustainability. 

Buyers of RSPO Credits support the farmers that have certified their plantations as sustainable by paying a premium directly to the certified farmers through the purchase of RSPO Credits. Independent smallholders depend on these credits to fuel their livelihood, helping them pay for audit costs, certification maintenance and best practices training. In rural Indonesia, smallholder farmers have used RSPO credits to improve their plantations, build offices and businesses, provide educational facilities for children of Indigenous Peoples, and even medical and ambulance services during the COVID-19 pandemic. In the Tanjung Jabung Regency, Indonesia, RSPO Credits incentivised smallholders to protect and restore their river ecosystem, clearing up the waters and inviting fish to return in abundance.

Conversely, sellers of RSPO Credits can be mills or growers for CSPO, or crushers for CSPKO and CSPKE. A crusher builds up volume by purchasing RSPO Certified Palm Kernels from mills. When credits are sold by independent smallholders, they are identified for the different products as I-CSPO, I-CSPKO and I-CSPKE. 

To make credit trading fast, user-friendly and uncomplicated, RSPO developed the trading platform PalmTrace, an online marketplace and traceability system where credits can be purchased to cover a company’s annual palm (kernel) oil or derivatives usage, either entirely or partially. In order to access PalmTrace, a company needs to first become an RSPO Member and register as an RSPO Credit buyer in the system. 

BEST-IN-CLASS PRACTICES FOR THE FEED SECTOR

Countries such as the UK and the Netherlands which are at the forefront of sustainable palm oil sourcing have developed best-in-class business practices for the feed sector. Nevedi, the Dutch Association for the Animal Feed Industry, was the first group to venture into the collective purchase of RSPO Credits in the feed sector for domestic consumption and has now moved further towards a 100% coverage of the total palm oil footprint, national consumption and export. Considering that two-thirds of the country’s production is reaching consumers outside the Netherlands, this move represents a bold step in the right direction.

To help the UK feed sector play its part in meeting the UK Government’s target of using only sustainably-sourced palm, the Agricultural Industries Confederation (AIC), joined the RSPO as a member and soon after created a new scheme to assist Members’ environmental ambitions. The scheme purchases RSPO Credits for palm and its derivatives on behalf of AIC Members or assurance scheme participants, giving the feed sector a way to support the production of sustainable palm using a Book and Claim system.

While European uptake of CSPKE is currently in the single digits, the contrastingly high uptake of other certified sustainable palm oil products is evidence that the region can stimulate the market for more sustainable products in the feed sector. Increasing the purchasing of CSPKE, albeit via RSPO Credits, will also have a ripple effect in encouraging more palm kernel crushers to join the RSPO and become certified.

Strict regulations can be the necessary push for agro-commodities to ensure they are free from deforestation. Advanced certification systems such as those of the RSPO can play a crucial role in helping companies be better prepared in meeting those requirements.

Animal feed producers and traders, meat and dairy producers, as well as retailers have the opportunity to catalyse change by asking their suppliers whether the feed, feed additives or milk replacements are sourced sustainably, and if not, how they plan to address this. Choosing to source RSPO Certified sustainable material shows that companies are taking concrete actions to benefit people and the planet.