Dive Brief:

• The Roundtable on Sustainable Palm Oil (RSPO) suspended Nestlé last week for failing to pay dues and meet annual reporting requirements.
• Nestlé had not submitted its progress report for 2016 and had submitted a report without a time-bound plan for 2017, RSPO said in a release. RSPO also claimed that Nestlé has overdue membership fees of €2,000 ($2,350).
• Nestlé respects RSPO's decision but has a different approach to palm oil certification and sustainability within its supply chain, Benjamin Ware, Nestlé's global head of responsible sourcing, said in a letter.

Dive Insight:

Nestlé's fall from grace with RSPO sheds light on a murky disagreement over the value of supply chain certification in harvesting palm oil, a ubiquitous product used in everything from food to make-up to fuel.

Because of its suspension, the company's facilities will lose RSPO Supply Chain certification, and it can't claim use of certified sustainable palm oil on its products, RSPO said. RSPO granted Nestlé 30 days to notify its customers, "allowing them to seek alternatives."

But Nestlé claims another side to the story. Citing "fundamental differences" between its approach and RSPO's toward a sustainable palm oil industry, Ware countered that Nestlé's palm oil supply chain is sustainable, and that RSPO's requirements do not set the ultimate standard.

"We believe in achieving traceability to plantations and transforming supply chain practices through interventionist activities instead of solely relying on audits or certificates," Ware wrote. "We also believe that in order to achieve genuine industry change, we need to embed the true cost of sustainable production into supply chain procurement practices, rather than focusing on premium mechanisms only."

Nestlé's sustainability effort "goes beyond" the RSPO requirements, Ware said: "It includes explicit Nestlé Responsible Sourcing Provisions achieved for focus areas including the protection of peatland and high-carbon stock land, which are critical in combating deforestation, and for preventing social conflict arising from potential disputes over land rights and land acquisition."

Moreover, Ware claimed that Nestlé had tried to submit a report for 2017, but RSPO told the company to change its submission to "No Action Plan" because it did not list achieving 100% RSPO palm-oil certification as one of its goals.

RSPO has itself drawn skepticism. A recent study from Proceedings of the National Academy of Sciences found that RSPO certifications correlated with reduced deforestations in Indonesia but did not seem to reduce fire or peatland clearance, rendering more certification and monitoring necessary. And a 2014 blog post by members of the Palm Oil Awareness Initiative, while affirming that RSPO has made "important contributions," raised concerns over its vague language and lack of enforcement. 

Nestlé will "dedicate more time to dialogue with the RSPO board, in order to see how the Nestlé group can better contribute to the Roundtable and hopefully re-qualify for the membership and leadership they are demanding of us," Ware promised.

But some question how much the company really wants to realign with RSPO.

"Supply chain certification schemes have always been dogged by complicated arguments over which criteria should be used and whether it is more credible for a company to embrace industry wide standards or try and develop its own approach," wrote James Murray for Business Green. "It will be fascinating to see if Nestle does return to the RSPO fold, not to mention whether it even wants to, or whether those 'fundamental differences' prove too large to overcome."