In India, much remains to be done to transform the palm oil market
to a more sustainable footing. However, some businesses are leading the way -
committing to positive change and setting a benchmark for others to follow.
Among those is Galaxy Surfactants, a global leader in supplying a wide range
of products to some of the world's most famous FMCG brands
Palm oil is a vegetable oil used all over the world for cooking,
in foods and everyday products like cosmetics, shampoos, and detergents.
Typically grown in tropical areas, palm oil is a 'wonder crop' with
a long life-span and high yields, requiring less inputs than many other
oilseeds. Its production also brings considerable social benefits and
contributes to the economic development of producer countries like Malaysia
and Indonesia. Palm oil plays a vital role in India's
food industry. The
country is its largest importer, capturing over 20 per cent of the global
supply.
In recent times, a number of stakeholders have sought to find a
balance between the economic benefits and environmental and social cost of
clearing tropical rainforest to make way for palm oil cultivation. At the
forefront of this effort has been the Roundtable on Sustainable Palm Oil - a
coalition of business and civil society that has established principles and
guidelines for the cultivation and trade of sustainable palm oil. Over 20% of
all palm oil production is now certified under RSPO's standards and in
many European markets it is considered the minimum requirement for consumers.
Galaxy Surfactants attained certification under the Roundtable on
Sustainable Palm Oil (RSPO) in 2014, making it one of the first companies in
India to achieve this standard. Today, Galaxy has certified manufacturing
plants and can now supply RSPOapproved Mass Balance Certified Sustainable
Palm Oil (CSPO) to any of its global customers.
The RSPO mass balance system allows for mixing of RSPO certified
palm oil and other palm oil at any stage in the supply chain provided that
overall company quantities of each are known and the volume of non certified
palm oil does not exceed the volume of certified sustainable palm oil. The
model allows flexibility in situations where precise traceability of
certified palm oil through a segregated supply chain may not be possible,
whilst still allowing companies the ability to achieve more responsible
sourcing practices.
Galaxy's move is a significant milestone in the Indian
market, reflecting similar developments by companies in overseas markets and
a general trend of increasing certification in the Indian market. Two years
ago, just one company had RSPO certification in India - now there are nine.
Progressive Grocer spoke with Galaxy's Chief of Operations K
Natarajan and MS Sriganesh, the company's Head of Sourcing, to
understand the reasons, challenges and opportunities behind this investment
in sustainability.
What made you switch to sustainable palm oil with an international
standard like RSPO?
K Natarajan: Sustainability is a critical pillar of our strategy.
As a business we are part of a global supply chain reaching out to thousands
of customers in more than 100 countries. Environment and sustainability are
societal issues which impact every one of us and as a responsible participant
in the palm value chain, we are clear that we need to be part of the
solution. We got initiated into the RSPO through our global customers and
considering that it was a multi-stakeholder forum working to address the
concern areas, we joined as a member. Over the years our understanding of the
subject has improved and as a result we have a committed roadmap to meet the
2020 targets.
Where is this demand coming from? Is it driven by India's
consumption or global demand?
MS Sriganesh: Demand for certification is coming from global
customers who are leading this initiative in our industry. However, we
believe that the trickle-down effect to regional and local customers will
happen with a lag. As a vendor to all of them, our agenda is to be ahead of
the curve in this journey, keep communicating with our customers on the
developments and look to have a larger base of customers as this is a
differentiated capability we have vs. our competitor.
Are customers asking for Mass Balance or Segregated RSPO certified
sustainable palm oil?
KN: Currently, we are seeing traction emerging in Mass Balance and
are already selling Mass Balance surfactants as there is a wide availability
of MB-based oleo chemicals at reasonable premiums. Segregated base raw
material availability is still limited and the premiums quoted are high,
holding back the buyers from trying. We see this as part of the evolution and
with more plantations getting certified, easier availability of segregated
palm oil will emerge and push down the premiums to levels comfortable for
customers to adopt.
What is your customer base like? Is there an emerging demand
beyond MNC customers?
KN: We connect with customers all over the globe in more than 100
countries, which is a mix of global, regional and local players. The current
traction is largely from global MNC customers who have the advantage of
better understanding on this and are driving their own traceability
initiatives. Across developed geographies we see even smaller customers
speaking of certified materials. At the regional and local level the
awareness is low. As the information starts to trickle down, considering the
nature of the personal and home care industry, we see other customers also
making a shift.
What were the challenges faced during and before the certification
process and how long did it take to get certified?
KN: Understanding the process of certification was a challenge
initially due to us being located in India and there were no references for
us to work with. It required a considerable amount of time and effort to
understand the system, for which we travelled to Malaysia, met up with
companies leading this front, understood the process and then created our
own. As a result our first certification took two years.
Based on this learning our second certification took just three
months and the third round of certification just a week. This is why we feel
it's important for all early adopters like Galaxy to to create awareness
and educate the market. Using industry platforms to share the learning and
getting experts to speak on the subject will facilitate customers to
understand the relevance and support the same.
If we look at the edible oil industry in India, the largest
segment of which is palm oil, the problem of demand for sustainability lies
in the nature of the market. Unless there is demand from consumers or
government and policy level intervention on certifications, sustainability in
edible oil industry is difficult. If big players like China, India, Indonesia
and Malaysia come to a consensus on sustainable palm oil, change can happen
in edible oil sustainability.
What were the required changes in terms of governance at the
organisational level to get RSPO certification? How was it played out in
terms of the process?
MSS: We became an RSPO member in 2012. The process involved
assessing our value chain in a detailed manner and engaging with suppliers.
Our first plant was certified in 2014. This required a top-down approach with
cross-functional team sourcing from our manufacturing, quality and IT. We
attended trainings with David Ogg & Partners (an RSPO-endorsed Auditor
and Trainer) for a deeper understanding of the process, spoke to core players
in the segment and started our auditing process. We have come a long way over
the last couple of years and now have a 2020 target to attain complete
traceability.
What was the financial side of this?
KN: Our plan for certification is part of our committed journey of
being prepared ahead of what our customers are seeking from us. While the
costs are getting incurred now when adoption rates are low, we believe that
business will follow with a lag.
What was the reception to RSPO certification from the industry in
terms of impact, inquiries, clients etc.?
MSS: Since we were one of the first companies in our industry to
get a certification with this scope, curiosity was the first response from
our customers. In terms of impact we see positive responses from global
customers who understand the relevance and context. We're also aware
that certification is one aspect of our customers' agenda - many global
customers have their own system of traceability. If we can help with this as
well, then we are well positioned in the market.
Based on your experience, what are the key lessons you can share
with other companies to adopt sustainability practices?
KN: There is inadequate understanding of sustainable practices and
companies tend to have a skewed view, which is increasing costs. The
management of every company in this value chain needs to understand the fact
that it is now an industry survival issue and not participating has the
potential to impact the future.
Certified palm oil actually enhances long term supply. Through
joint initiatives, there can be many solutions for companies to gradually
move towards responsible production and sourcing of sustainable palm oil, and
the cost is actually manageable, particularly if more companies sign on and
volumes increase.
At the origin level, jurisdictional approaches to certification of
palm oil production are an interesting development. Using location and
point-of-origin to improve traceability based on the knowledge that large
production areas have been certified will remove cost barriers to
sustainability. Satellite mapping of high priority hotspots of deforestation
and a separate production and sourcing plan for those areas would also help
to remove supply chain risks for companies.
How have you externalised RSPO and communicated it to your
stakeholders?
MSS: We believe in the power of industry collaborations to share
knowledge and practical expertise. Galaxy, as a first mover, will help design
solutions and give required guidance for similar companies in India. We will
continue to engage different stakeholders and all parties along the value
chain to promote sustainable palm oil. Now with RSPO looking to reestablish
itself in India, we are confident that the way forward is positive.
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