In June 2013, air pollution levels in Malaysia and Singapore reached record highs, closing businesses. The cause? Thousands of fires set by both plantation managers and small farmers in neighboring Indonesia to clear land to plant oil palm trees (see map).

Explosive growth in world demand for palm oil has spurred these land-clearing practices, especially in Indonesia and Malaysia where 85-90% of palm is produced. As the world's largest source of vegetable oil, palm oil serves both as a renewable chemical feedstock for a wide variety of household products (e.g., laundry detergents, shampoos) and an ingredient in many foods. Imports into the U.S. alone have increased 1000% since the mid-90s.

RSPO: A Decade On

To stop such rampant forest destruction, as well as child labor and other human rights abuses, the World Wildlife Fund (WWF) joined with leading companies to set standards for responsible palm oil production. In 2004 they established the multi-stakeholder Roundtable for Sustainable Palm Oil (RSPO). The aim was to develop both standards and a market for sustainable palm through certification of palm produced with responsible practices. A decade later, how effective have RSPO's efforts been in changing industry practices?

In 2012, RSPO certified only 15% of palm oil production as meeting its sustainability standards – progress, certainly, even if not as much as many RSPO participants had hoped for. More troubling, producers were only able to sell half of that oil as certified (with as much as a 7% price premium); the remainder had to be sold as standard commodity palm oil at standard market price. So, the premiums for acting responsibly were lost, along with the incentive for more producers to adopt practices that lead to measurable social and environmental improvements.

To spur certified sustainable palm oil (CSPO) market development, RSPO has promoted two alternatives to direct CSPO sales:

• Mass balance: Many of the mills that process palm oil are not able to segregate CSPO from standard commodity palm oil during production; all palm oil is mixed in a single vat. The resulting mixture can't be sold as CSPO. But some of these mills now keep exact records of the percentages of certified and non-certified palm oil in each batch. Buyers can take credit for purchasing the percentage of sustainable palm oil in the mill's output. Producers of CSPO who sell to these mills receive some premium (roughly in the 1-3% range), even though smaller than for segregated CSPO.
• Certificates: Producers meeting RSPO standards, but unable to sell their produce as CSPO, can sell certificates for the CSPO on the GreenPalm exchange. Producers receive some premium (currently less than 0.5%) through sale of the certificates, and companies can buy certificates (with added fees, currently about 0.6% of the commodity price) to cover their purchases of non-CSPO palm oil.

As the percentage of unsold CSPO makes clear, the demand for RSPO certified palm oil has been weak. But the market for CSPO may be on the verge of expanding. Companies like Walmart, General, Mills, and Avon among others have pledged to purchase 100% CSPO by 2015. For the most part, these companies plan to meet their commitments, at least initially, with GreenPalm certificates. A few companies, however, are going further. Unilever, the largest single worldwide buyer of palm oil (though smaller than 5% of the total in the highly fragmented palm oil market), already buys GreenPalm certificates for 100% of its palm oil. But it has also promised to buy 100% fully segregated CSPO by 2020.

Another important challenge is ensuring that the RSPO stimulates measureable environmental and social improvements. A step forwards, the recently revised RSPO standards are more stringent than the original requirements in some respects.

• Companies must use stringent new standards and tools for accurately measuring greenhouse gas (GHG) emissions during the oil palm life cycle, including any effects from changes in land use to expand small farms or plantations; they must report emissions annually to the RSPO.
• Companies must adopt, and communicate to all managers and workers, a human rights policy, which includes bans on forced labor.

But some of the leading non-profits have been vocal in claiming that the new standards remain inadequate. The Rainforest Action Network, for example, protested that ambiguous requirements in the new standards “will continue to allow palm oil producers who destroy natural rainforests and peatlands for palm oil plantations to be certified as 'sustainable.'"

Requirements that get to meaningful environmental improvement are still inadequate. WWF has lobbied for additional changes that would:

• Ban new plantings on peat soils (plantings that result in major greenhouse gas (GHG) emissions).
• Require reductions in GHG emissions from both new and existing plantings.
• Safeguard against use of dangerous pesticides.
• Report GHG emission immediately.

What Can Companies Buying Palm Oil Do?

The good news is that you can take action:

• Start buying palm oil and derivatives from RSPO certified stocks. Making the RSPO system work more effectively is still the most promising way to establish a worldwide CSPO system.
• While fully segregated CSPO is a long-term objective, by buying GreenPalm certificates now you can help to stimulate the market and demonstrate demand for CSPO.

• Participate actively in the RSPO and support WWF's call for more protective standards and greater public transparency about performance.

Collaboration is critical. No single company – not even the largest palm oil user, Unilever – controls the palm oil market. Whatever the RSPO's flaws, working together to make RSPO more effective, not abandoning it, provides the best route forward to sustainable production that protects businesses, workers and the environment.