Get documents about "A model for managing sustainable palm oil production
Document Sample
Sustainability
A model for managing sustainable palm oil production
I
n November 2005, the Roundtable on Sustainable Palm Oil systems pertaining to the society, the economy, and the
(RSPO) adopted Principles and Criteria (P&C) for ecosystem.
Sustainable Palm Oil Production to provide the foundation
for the sustainable production of palm oil. These take into In business, this is translated to the ‘Triple Bottom Line’ – the
consideration long-term economic viability, environmental economic bottom line, environmental bottom line and the social
protection and conservation, and recognition of the rights of bottom line. In the broader sense, the term is used to capture the
workers and local communities. whole set of values, issues and processes that companies must
address in order to minimise any adverse impact resulting from
While the P&C are designed to guide individual plantations their activities and to create economic, social and environmental
towards sustainable production of palm oil and provide the basis value (Elkington, 1997).
for product certification, they could also be used to develop a
system for driving the entire enterprise towards achieving
corporate excellence in sustainable production of palm oil. This
paper describes a management model to achieve this objective.
The P&C consist of eight principles (see Box) supported by 39
criteria (details available at www.rspo.org).
Pilot testing of the P&C is currently being done by producer-
members of RSPO. Based on the results of these trials and
national interpretations by the palm oil producing countries, the
P&C are scheduled to be reviewed at the 5th Roundtable Meeting
on Sustainable Palm Oil in November 2007 and adopted as the
basis for certification.
Business case for sustainable palm oil
The P&C provide the definition of sustainable palm oil During the course of development of the P&C and after its
production comprising ‘legal, economically viable, adoption for pilot implementation, a recurring concern,
environmentally appropriate and socially beneficial management particularly among producers, has been the cost of compliance
and operations’. This is essentially in line with the definition of with the various criteria.
sustainable agriculture and the concept of sustainable
development which is characterised by three inter-related value Two trends of thought have emerged; one supports the view that
GLOBAL OILS & FATS BUSINESS MAGAZINE • VOL.4 ISSUE 4, 2007 9
Sustainability
implementation of the P&C would of the issues are relatively new to social aspects, would assure the long-term
improve operational efficiencies, lower producers and there is naturally much viability of the enterprise.
costs and enhance market access. apprehension over how to comply with
Compliance, particularly with regard to them. Proposed management system
legal and regulatory requirements, would Although the P&C will be used for
also secure the company’s licence to In our opinion, the requirement for the certification of sustainable palm oil, it will
operate. producer to be economically viable and not be possible to differentiate the end
successful is under-appreciated or even product in the market by physical or
The opposing view is “there are certain taken for granted. The fact that Principle chemical attributes. The focus and
components in the P&C that require 3 and Principle 8 have only one emphasis will be on how the palm oil is
significant additional costs to implement supporting criterion each may give an produced against the P&C, many of which
because they are extraneous to normal incorrect perception of the importance of stipulate the need for processes or
costings of estate operations and there the economic bottom line. procedures to be put in place, then
should be premiums to offset these costs” documented and communicated. Thus,
(Incorporated Society of Planters, 2006a). An effort has been made to establish the these are essentially sub-processes which
business case for sustainability in the oil can be organised into a holistic business-
The second line of thinking appears to palm industry with regard to the Triple driven Management System for Production
reflect the sentiments of many in the Bottom Line (Teoh, 2003). Analysis of of Sustainable Palm Oil (MS-SPO).
plantation industry, as seen from the published information of plantation
presentations and discussion at the companies listed on Bursa Malaysia When developing the MS-SPO,
International Planters Conference 2006 showed that among the three bottom inspiration is drawn from the benchmark
and other recent meetings (Rao, 2006 and lines, there is considerable scope for the total quality management excellence
Incorporated Society of Planters, 2006b). oil palm industry to improve its economic models, namely the Baldrige Criteria for
Besides the additional costs, the other bottom line, particularly with regard to Performance Excellence (National
concern expressed was the ‘dilution of the large productivity gap in terms of FFB Institute of Standards and Technology,
management time’ as planters have to yield per ha and OER performance. 2007) and the Framework of the
respond to the requirements set in the European Foundation for Quality
P&C. Increasing the land productivity and Management Excellence Model (EFQM,
processing efficiency would have a www.efqm.org).
If pessimistic thinking prevails, then the positive impact on the environmental
P&C may not make business sense as it bottom line in that it could reduce the It can be seen that the RSPO principles are
apparently puts the environment and pressure on opening new land for generally consistent with many of the core
people ahead of profits. The P&C are seen plantation development. values and concepts embodied in these
as a prerequisite for trade in sustainable models that have driven the top performing
palm oil and it would become the de facto Based on experience from independent companies in the US and Europe. The
global standard for certification of palm assessments of some plantation companies P&C can be organised in a manner to
oil. Thus, compliance invariably involves in Malaysia and Indonesia, there are likely provide an integrated framework for
costs, mainly, for the audit and to be opportunities for improvement in managing sustainability in the oil palm
certification process, and expenditure to the economic bottom line arising from industry. The building blocks for the
address the non-compliances identified. effective implementation of the proposed MS-SPO are shown in Figure 1.
requirements of Principles 1 and 8 as well
Most of the concerns raised to date have as Principle 4. This, along with The major components of MS-SPO are
been on the requirements relating to the improvements in the company’s presented in Figure 2 and then described
social and environmental aspects, as many performance in the environmental and briefly.
10 GLOBAL OILS & FATS BUSINESS MAGAZINE • VOL.4 ISSUE 4, 2007
Drivers under this principle requires ‘an The need for robust strategic planning is
For a management model to make implemented plan to achieve long-term also a key requirement in the Baldrige
business sense, the economic bottom - line economic viability’. This entails the criteria and EFQM model. Successful
should be the key driver for the company’s development and deployment of a implementation of the company’s
endeavour towards sustainable corporate strategic plan including: strategic plan requires a strong
production of palm oil. • Corporate vision and mission commitment to continuous improvement
• Corporate values in key areas of its operations covering
Hence, Principle 3 is regarded as the • Key strategies economic, environmental and social
primary driver for the proposed • Strategic goals aspects.
management system. The single criterion • Operational goals
GLOBAL OILS & FATS BUSINESS MAGAZINE • VOL.4 ISSUE 4, 2007 11
Sustainability
Principle 8 would be the second driver in audits, assessments according to supply- demonstrated to work effectively in a
the corporation’s thrust towards achieving chain requirements as well as business- wide range of industries and sectors in
long-term sustainability. Criterion 8.1 related assessments such as customer APO member-countries.
requires ‘growers and millers to regularly satisfaction, analysis of market share and
monitor and review their activities and benchmarking. In the oils and fats sector, application of
develop and implement action plans that the GP methodology for refining of
allow demonstrable improvement in key Enabler soybean oil in India resulted in a 20%
operations’. The overarching critical Results of assessments would provide the overall improvement in productivity of
success factor is the leadership provided opportunity to set objectives and targets the refinery at M/s Rama Phosphate Ltd
by top management to implement the for improvements in the spirit of Principle (Oil Division) (National Productivity
whole system. 8 (Driver 2). A systematic approach Council of India, 2002).
would have to be taken to diagnose the
underlying reasons or root causes of sub- Production of crude palm oil (CPO) was
optimal performance, and identify and used as the case study for the GP
implement appropriate remedial Practicum Training Courses for Trainers
measures. The enabler could be based on conducted by APO and INTAN in
total quality management principles and Malaysia. Although the palm oil mill
approaches such as the W Edwards selected for the study had been certified
Deming Plan-Do-Check-Act cycle and against the ISO 14001 environment
Photo: IJM Plantations the Japanese concept of continuous management system, course participants
improvement called Kaizen. were able to identify several areas for
Assessments improvement using the methodology
Strategic planning would enable the Golden Hope Plantations Bhd has used (APO, NPC and INTAN, 2003).
company to set its vision on what it the methodology for quality improvement
aspires to achieve in future. However, it is developed by Juran Institute (Teoh, 1998 Processes
necessary to determine the company’s and Khairudin Hashim and Siti- Major processes in producing palm oil can
current performance and identify gaps for Norralakmam, 2005 ). A broadly similar managed under these RSPO principles.
improvements in order to achieve the and alternative approach is the Green • Principle 2: Compliance with applicable
long-term objectives and targets. Internal Productivity (GP) methodology laws and regulations
and external assessments are conducted developed by the Asian Productivity
for this purpose. Organisation (APO) (http://www.apo- This requires the company to put in
tokyo.org/gp/index.htm). place processes or procedures to identify
Internal assessments include SWOT legal requirements and how well they
analysis on the organisation’s Strengths, GP is a strategy for enhancing are being implemented. The company
Weaknesses, Opportunities and Threats productivity and environmental should also have mechanisms to
as well as self-assessments on the level of performance for overall socio-economic demonstrate its legal right to use the
compliance with the P&C. For the latter, development through the application of land and that the legal and customary
self-assessments could be conducted using appropriate methodology, tools and rights of others are not diminished
tool kits developed by Thomas and Lord techniques. The methodology consists of ‘without their free, prior and informed
(2006) and Gan (2006). External six steps with 13 specific tasks (APO, consent’ (FPIC).
assessments could include third-party 2005 ). Introduced in 1995, GP has been
12 GLOBAL OILS & FATS BUSINESS MAGAZINE • VOL.4 ISSUE 4, 2007
• Principle 4: Use of appropriate best The presence of any rare, threatened or • No discrimination of any kind
practice by growers and mills endangered species or high conservation • No sexual harassment
value habitats should be identified; if
The criteria require procedures and they exist, their conservation should be For external stakeholders and local
practices on plantation and milling included in the management plan. communities, practices and documented
operations with regard to: procedures must be implemented with
• Maintenance or improvement of soil On the operational aspects, management regard to:
fertility should implement practices and • A mutually agreed and documented
• Minimisation and control of soil erosion procedures to ensure: complaints and grievance procedure
• Maintaining the quality and availability • Effective waste management and disposal • Open and transparent methods of
of surface and ground water • Efficient use of energy and maximum communication
• A p p l i c a t i o n o f I n t e g r a t e d Pe s t use of renewable energy • A documented system on negotiations
Management • Non-use of fire for waste disposal and on compensation for loss of legal and
• Safe and effective use of agrochemicals land clearing customary rights that allows indigenous
• Implementation of an occupational • Reduction of pollution and emissions, people, local communities and other
health and safety plan including greenhouse gases stakeholders to express their views
• Training of staff, workers, smallholders through their representatives
and contractors • Principle 6: Responsible consideration • Fair and transparent dealings with
of employees and of individuals and smallholders and local businesses
All operating procedures have to be communities affected by growers and • Contribution to local sustainable
appropriately documented and there mills development
should be a system to monitor that all
practices are consistently implemented. The 11 criteria deal with the responsible • Principle 7: Responsible development
relationship between the company and of new plantations
• Principle 5: Environmental responsibility its internal and external stakeholders.
and conservation of natural resources The first requirement is for management
and biodiversity to undertake a social impact assessment
of its operations and implement a
mitigation plan to address any negative
impacts identified.
With regard to the internal stakeholders
(mainly employees and staff), practices Photo: United Plantations
and procedures must be in place to
ensure: This calls for pro-active and participatory
Photo: MPOC
• A mutually agreed and documented planning to ensure that the proposed
complaints and grievance procedure development would not have significant
Plantation and mill managers are • Fair pay and conditions social and environmental impacts. Results
required to conduct assessments on the • Respect of the right to freedom of of the impact assessment would have to
potential impact of the operations and association and collective bargaining be incorporated in the management
implement appropriate mitigation plans. • Non-use of child labour and operational plans.
GLOBAL OILS & FATS BUSINESS MAGAZINE • VOL.4 ISSUE 4, 2007 13
Sustainability
So i l s u r v e y s a n d t o p o g r a p h i c a l management and functional heads in implementation of the management
information must be used for the the core business units and be used as system to all relevant stakeholders.
planning of new plantations. New inputs for future strategic planning Effective communication should cover
plantations must not be developed from (Principle 3) and to identify all phases of implementation.
primar y forests or areas of high opportunities for improvement Information should also be made
conservation value. Extensive planting (Principle 8). publicly available through the company
on steep land or marginal and fragile soils website, among others. The company
such as deep peat should be avoided. Results would need to have a system for
During the land preparation stage, use The performance of the company would responding to requests for information
of fire must be avoided. be gauged against a scorecard consisting from stakeholders.
of:
The company should establish a • Level of legal compliance Implementation of system
documented system to deal with use of • Economic or financial results The Musim Mas Group
land belonging to local communities, • Environmental performance (www.musimmas.com), a fully
with FPIC and a process for fair • Social performance integrated oil palm-based corporation
compensation. The concept of FPIC in Indonesia that is involved in
should be appreciated and followed Clear key performance indicators upstream and downstream activities in
when dealing with indigenous peoples, should be identified and used to allow the palm oil supply chain, recently
local communities and other stakeholders objective measurement of the announced that it is implementing the
on land acquisition; negotiation for company’s achievements. A range of MS-SPO in its Plantation Division
compensation; and other social issues indicators that could be used to assess (Tan, 2007).
covered under this principle as well as the compliance against specific RSPO
in Principle 6. criteria is given in the Guidance Recognising the vital role of top
Document for the P&C that was issued managers in driving the initiative,
FPIC is a participatory approach to in March 2006. Musim Mas set up a Steering
enable the affected stakeholders to Committee on Sustainability, headed
express their views freely and make Most of these indicators are objective and by the President Director. The
informed decisions. Through this process, measurable. For example, monitoring of mission is to provide leadership,
the occurrence of social conflicts over the fossil fuel used per tonne of CPO strategic direction, resources and
land issues and related issues could be produced provides a measure of the formulate policies and procedures to
minimised and it ensures the company’s efficiency of energy use; and records of support the commitment to
social licence to operate. Lost Time Accident rates could give an production of sustainable palm oil. A
indication of the effectiveness of the dedicated Department on
Monitoring and evaluation implementation of an occupational health Sustainability spearheads concerted
The performance of all key processes and safety plan. and co-ordinated implementation of
must be monitored and evaluated the MS-SPO.
regularly and formally so that the Commitment to transparency
organisation would have a high As Principle 1 requires companies to be As Musim Mas has many plantation
probability of reaching its strategic committed to transparency, it is vital to companies in various regions in
goals. Results should be reviewed by top communicate progress of Indonesia, it has decided on a phased
14 GLOBAL OILS & FATS BUSINESS MAGAZINE • VOL.4 ISSUE 4, 2007
Related docs
