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Sustainable Practices In Palm Oil Industry To Accelerate India’s Green Recovery And Atma Nirbharta

The food processing industry is one of the country’s largest, worth an estimated INR 24,665 billion in 2018 and expected to double by 2024.

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In these pandemic times, India has witnessed a cleaner environment but with huge costs to our economy and society. The sudden lockdown has had a severe impact on millions of people, especially those in the informal sector who get by on daily or weekly earnings. The Centre for Monitoring the Indian Economy estimated that about 122 million people lost their jobs in April, pushing the unemployment rate up to 26 percent from 8 percent before the crisis. 

In response, the Prime Minister announced an economic package of INR 20 lakh crores for ‘Atma Nirbhar’ or ‘self-reliance’, which aims to expand India’s role in the global economy. Special attention will be paid to 12 economic sectors, including textiles, industrial machinery and food processing.

It is this last sector that I want to consider. The food processing industry is one of the country’s largest, worth an estimated INR 24,665 billion in 2018 and expected to double by 2024. Can we use the financial leverage in the economic stimulus package to achieve environmental goals and nudge the industry in a more sustainable direction?

Palm oil is one of the most heavily used raw materials in the food industry. It has become a vital and ubiquitous ingredient thanks to its natural preservative effect, heat stability, and smoothness. These functional properties improve the taste, texture, and the shelf life of products, creating a win-win situation for both producers and consumers. Additionally, no other vegetable oil is available in sufficient quantities at such low cost.

India is the second largest consumer of palm oil, accounting for approximately 19% of the world’s palm oil imports. Of the 9.3 million metric tonnes consumed in 2019, 94% is for food use such as cooking oil, snacks and processed products. This represents a 200% increase in domestic consumption over the last 20 years. The boom mirrors India’s economic trajectory. With steady growth over the past fifty years, more and more households are able to afford food items that contain palm oil.

Despite its many benefits, the palm oil industry has garnered attention over its harm to the environment. Deforestation, biodiversity loss and exploitation are wide-scale problems. They are rooted in a lack of responsible production and, perhaps more crucially, a lack of public pressure. To meet the high demand at low cost from the likes of India, exporting countries are pressured into continually raising yields. Practices such as deforestation and land clearance by burning are often adopted to speed up production and keep costs down. Palm oil workers may also face exploitation in the form of harsh or unsafe working conditions, unfair pay, or even human trafficking.

With our clout as consumers – in one of the largest markets globally – we are in a position to effect positive change. We should use this power to demand structural changes in palm oil supply chains.

Though systemic change is a challenging process, businesses will thrive in the long-term by adopting sustainable sourcing and production practices.

More consumers want to buy products from companies that have business policies focused on sustainability. In recent years, there has been a leap in consumers seeking sustainable goods in India.

According to a study by the Mahindra Group in 2019, around 83% of respondents expressed an interest in making lifestyle changes to curb climate change. Likewise, a study of Indian college student’s perspectives on ethical consumerism revealed that consumers showed positive purchasing behaviour if they are aware of a manufacturer’s ethical reputation.

Since the ‘Atma Nirbhar’ policy looks to increase domestic manufacturing, there is an opportunity for the government to promote the sustainable production of goods and services.  

Sustainability should be embedded in the core of every business, just like the marketing or finance functions. We, at the Roundtable on Sustainable Palm Oil (RSPO), seek to promote sustainable business practices up and down the supply chain. This is not only the right thing for society but also good business sense. According to a recent study by Climate Advisers, companies committed to sustainable palm oil have stronger equity returns. It showed that RSPO members outperformed non-members by 24% in the period 2012-19.

The Government’s ambition to green the economy is vital as it can nudge industries in the right direction by sending appropriate market signals. This should be coupled with public pressure on businesses to source sustainable palm oil. After all, our economic recovery path should consider interventions that can reduce risks from pandemics as being a worthwhile investment in our future – rather than aiming solely for higher growth.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Kamal Prakash Seth

Country Head, India, Roundtable on Sustainable Palm Oil (RSPO)

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