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Sustainability certificates for palm oil plantations can have unintended consequences

Analysis of independent satellite data shows a decrease in the efficiency of palm oil plantations in Malaysia after they received sustainability labels. This could have negative repercussions for the environment.

Sustainability certificates are inherently beneficial. The label on the packaging ensures that specific environmental and social standards are upheld during production. Many consumers take notice of this and are willing to pay a little more for it. However, research indicates that certificates can lead to unintended consequences. "If too much emphasis is placed on environmental factors, social aspects may be neglected, and vice versa," explains Nina Zachlod.

The doctoral student analyzed palm oil plantations in Malaysia using satellite data. The research team, which included Charlotta Sirén, Michael Hudecheck, and Gerard George, found that certification processes can sometimes lead to unexpected declines in efficiency. The paper is in Communications Earth & Environment.

Palm oil is used in a wide range of products, including food, animal feed, cosmetics, cleaning agents, and biodiesel. Global demand continues to rise, driven in part by the growing consumption of processed foods containing palm oil.

In 2002/2003, global consumption stood at around 30 million tons. This year, it is projected to reach nearly 80 million tons. To meet this demand, vast areas of rainforest in Southeast Asia have been irreversibly destroyed over the past few decades to make room for oil palm plantations.

Numerous sustainability certificates now aim to dilute the negative impact of such plantations on the environment and public welfare. Palm oil producers from more than 100 countries have joined the independent "Roundtable on Sustainable Palm Oil." The non-profit organization has issued a certificate to all major manufacturers in Malaysia, the world's largest palm oil producer after Indonesia.

Sparser plantations on satellite images

Zachlod and the wider research team chose to analyze the productivity of palm oil plantations in Malaysia using satellite images from the European Space Agency (ESA), which are freely available for research purposes.

"Satellite data holds great potential, yet it remains underutilized in economics," says co-author Charlotta Sirén, Director of the Institute of Responsible Innovation at the University of St. Gallen (HSG). One major advantage is that this method doesn't rely on companies sharing their data or publishing accurate figures.

For the project, the team focused on the visibly covered areas of the plantations as an indicator of efficiency. Their working theory was that a higher percentage of oil palm coverage correlates with greater productivity. Using satellite imagery, they measured oil palm coverage across 144 plantations on the northern tip of Borneo. They analyzed data from 2017 to 2023 spanning the period before, during, and after certification.

About half of the observed plantations belonged to a large manufacturer, while small producers owned the other half. The analysis of the images revealed a steady decline in plantation coverage since 2018 when the certification criteria were announced. Furthermore, the changes could not be attributed to events such as water shortages or price fluctuations.

"It seems that measures were taken to prepare for certification, which ultimately led to reduced production efficiency," Zachlod concludes.

Adjusting the label criteria

Reduced efficiency is not written into sustainability certificates, but it may be an unintended consequence of restrictions on the use of fertilizers. The certificate documentation does not contain any references or considerations regarding this potentially foreseeable outcome.

Zachlod is concerned that losing efficiency may push producers to "establish new plantations to compensate." An increase in cultivated land could offset the long-term production loss. While producers cannot do this in protected tropical rainforests, they can in areas that still possess substantial biodiversity.

"Naturally, that's not the effect a certificate like this is meant to have, especially since the new plantations may not be certified," says Zachlod. Small-scale producers may also encounter unforeseen financial difficulties if their productivity declines due to certification.

The findings from these analyses could help mitigate unintended consequences, for example, by adjusting the criteria for sustainability certifications. In the case of oil palm plantations, it is important to assess whether the requirements for fertilizer application or plantation management need to be updated "to see if this can prevent the plantations from expanding into previously untouched areas," says Zachlod.

Additionally, small-scale producers should be adequately informed in advance about the potential yield losses that may arise from certification. This way, they can make more informed decisions about their participation. "Research should, therefore, continue to investigate these unintended effects."