RSPO adoption process in the Colombian palm oil growers

147 Pages·2017·2.1 MB·English

by  Felipe Rueda

RSPO adoption process in the Colombian palm oil
growers: What are the obstacles and how to
overcome them?
Thesis Report

Felipe Rueda Seidel
Master in Management, Economics and Consumer Studies
University of Wageningen and Research Center

Master thesis MST chair group
First Thesis Supervisor: Jacques Trinekens
Second Thesis Supervisor: Domenico Dentoni
October 2016 – April 2017

ABSTRACT
Sustainability has become in the last decades a big concern for consumers in all sectors. This has
motivated the creation of sustainable standards for consumer products, including the RSPO
certification for palm oil production. Colombia, being the 4th biggest palm oil producer in the world,
has only 10.7% of the crops certified with RSPO standards, involving only big producers on it. The
aim of this research was to investigate the dynamic of the certification process in Colombia, to
analyze the barriers to achieve the certification for farmers, especially medium size farmers (from
50ha to 500ha), and propose changes to the promotion strategy of the standard. Therefore, a
qualitative research was conducted in the central zone as case study, using open ended
questionnaires with a sample of 15 stakeholders in the industry. Results showed that the main
barrier present for producers is the knowledge gap to the standard and the process of adoption. In
addition, the lack of incentives to producers to get certified, mainly driven by the low market
pressure and the uncertainty of the price premium, and the barrier for the agrochemicals usage,
represent the biggest challenges for the process of standards adoption.

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EXCECUTIVE SUMMARY
Sustainability has become a big concern for consumers in the past decades (Asthana, 2014). Today
there are more than 465 ecolabels present in the market that show when products comply with
different ecological standards, including sustainability (Ecolabel Index, n.d.). One of these standards
addresses particularly the palm oil industry, and it is the RSPO standard.
The RSPO was created in 2004 and in 2008 the Principles and Criteria certification (P&C) was
approved (RSPO, n.d.). This standard was created to improve the sustainability of the palm oil
industry worldwide. Until 2016, Colombia, being the 4th biggest palm oil producer in the world after
Indonesia, Malaysia and Thailand, had only 6 certified growers. This slow adoption process
motivated this research to be performed with the objective of identifying the barriers in the
adoption process in Colombia, and proposing changes in the strategy of promotion to overcome
these barriers.
This research uses a qualitative approach to analyze the problem by the development of open ended
interviews, which questions derived from a literature review, with different stakeholders in the
industry. This empirical research was performed in the central zone of Colombia (also called the
Magdalena medio region) as a case study. In total 15 interviews were performed and analyzed,
including 5 mills, 6 producers, Fedepalma, the RSPO institution, an NGO and a consultancy company.
The responses of the interviews were used to provide an overview of the standard adoption dynamic
and to identify the main barriers that stakeholders perceive from this process.
Results of the empirical research showed that there are four big barriers for the adoption of the
RSPO standards in Colombia. The main problem found is that there is a large knowledge gap of
several aspects of the certification that holds back stakeholders in the process of adopting the
standards, especially about the costs, documentation requirements and adoption process. Second,
the lack of incentives compared to the costs of the certification creates a barrier for growers,
especially medium size growers to adopt the certification standards. Third, the restriction on the
use of agrochemicals is found as a barrier for the implementation because farmers, including
growers and mills, do not have permitted alternatives to fight certain pests that affect the palm
trees. And last, the cultural problem created by the documentation requirements and the usage of
safety equipment for the agricultural activities creates a problem for the implementation phase that
delays the adoption.
Recommendations for the RSPO institution and Fedepalma as responsible entities for the standard
adoption process in Colombia are, to focus more resources in the communication process, in order
to transfer the knowledge in a more effective way. This include the involvement of educational
institutions like universities and the SENA in the process, the use of more massive communication
and the motivation of more mills to start the adoption process with the supplier base. Additionally,
to continue with the creation of the new compliance rules for the certification of growers group that
allow fresh fruit producers to certificate without the support of the mills and with a lower
investment. Last, to continue in the process of improving the demand of CSPO, especially in the local
market.
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Table of content

ABSTRACT ............................................................................................................................................. I
EXCECUTIVE SUMMARY ...................................................................................................................... II
1. INTRODUCTION ........................................................................................................................... 1
2. LITERATURE RESEARCH ............................................................................................................... 3
2.1 Change process and innovation .............................................................................................. 4
2.1.1 Change management ...................................................................................................... 4
2.1.2 Innovation diffusion ........................................................................................................ 7
2.1.3 Resistance to innovation ................................................................................................. 9
2.2 Implementation of the RSPO certification ............................................................................ 10
2.2.1 Impacts of the certification ........................................................................................... 11
2.2.2 Barriers for the adoption of the standards ................................................................... 13
2.3 Strategies for successful standards implementation ............................................................ 15
2.4 Theoretical framework .......................................................................................................... 18
3. RESEARCH METHODOLOGY ....................................................................................................... 20
3.1 Research strategy .............................................................................................................. 20
3.1.1 Research methods ..................................................................................................... 20
3.1.2 Sampling method ...................................................................................................... 20
3.2 Operationalization of the interview guideline .................................................................. 25
3.3 Data analysis ...................................................................................................................... 26
4. EMPIRICAL RESEARCH ............................................................................................................... 27
4.1 Farmers characteristics ..................................................................................................... 27
4.2 Compatibility ..................................................................................................................... 30
4.3 Perception of costs and benefits ....................................................................................... 35
4.4 Relations with other stakeholders .................................................................................... 41
5. DISCUSSION AND CONCLUSIONS .............................................................................................. 56
5.1 Discussion .......................................................................................................................... 57
5.2 Conclusions ....................................................................................................................... 60
6. PROBLEMS AND LIMITATIONS .................................................................................................. 61
7. RECOMMENDATIONS ................................................................................................................ 62
8. REFERENCES .............................................................................................................................. 64
9. APPENDIX A ............................................................................................................................... 68
10. APPENDIX B – INTERVIEWS TRANSCRIPTS AND TRANSLATIONS .......................................... 82
Table list
Table 1 - Interview list details ........................................................................................................... 22
Table 2 - Answers of producers on knowledge capacity of adoption ............................................... 28
Table 3 - Answers of producers on economic capacity of adoption ................................................. 28
Table 4 - Answers of producers on previous experiences with certification processes ................... 29
Table 5 - Answers of mills on previous experiences with certification processes ............................ 29
Table 6 - Answers of producers on documentation compatibility .................................................... 31
Table 7 - Answers of producers on importance of documentation .................................................. 32
Table 8 - Answers of producers on pesticide usage .......................................................................... 33
Table 9 - Answers of mills on pesticide usage ................................................................................... 33
Table 10 - Answers of producers on impact of land restitution law ................................................. 34
Table 11 - Answers of mills on impact of land restitution law .......................................................... 34
Table 12 - Answers of mills on certification costs ............................................................................. 36
Table 13 - Answers of mills on impact of the certification in operation ........................................... 37
Table 14 - Answers of producers on impact of the certification on motivation of employees ........ 38
Table 15 - Answers of mills on impact of the certification on motivation of employees ................. 39
Table 16 - Answers of producers on expectation of price premium................................................. 40
Table 17 - Answers of mills on expectation of price premium ......................................................... 40
Table 18 - Answers of producers on communication of the need for change .................................. 42
Table 19 - Answers of producers on the perception of need ........................................................... 44
Table 20 - Answers of mills on the perception of need .................................................................... 44
Table 21 - Answers of producers on the recognition of RSPO as a solution ..................................... 46
Table 22 - Answers of mills on the recognition of RSPO as a solution .............................................. 46
Table 23 - Answers of producers on motivation for change ............................................................. 47
Table 24 - Answers of mills on motivation for change ...................................................................... 48
Table 25 - Answers of producers on barriers for the adoption of the certification .......................... 52
Table 26 - Answers of mills on barriers for the adoption of the certification ................................... 53
Table 27 - Answers of other stakeholders on barriers for the adoption of the certification ........... 55
Table 28 - Theoretical framework detailed ....................................................................................... 69
Table 29 - Operationalization questionnaire 1 ................................................................................. 73
Table 30 – Operationalization questionnaire 2 ................................................................................. 74
Table 31 - Translate of the questionnaire 1 to Spanish .................................................................... 78
Table 32 - Translate of the questionnaire 2 to Spanish .................................................................... 79
Table 33 - Costs of the certification process according to the consultant ........................................ 81
Figure list
Figure 1 - Number of RSPO members in Colombia by sector by 2016 (RSPO, n.d.-c)......................... 2
Figure 2 – Research framework .......................................................................................................... 3
Figure 3 – Theoretical Framework .................................................................................................... 18
Figure 4 - Relations between variables ............................................................................................. 60

Map list
Map 1 - Geographic location of the palm oil crops and mills - Adjusted from SISPA (Fedepalma,
2015c) ................................................................................................................................................ 24
1. INTRODUCTION
In the last decades, people have developed a behavioral change towards sustainability. Consumers
are every day more concerned about social and environmental responsibility, and give higher value
to products that are produced in that way (Asthana, 2014). This change, together with the desire of
obtaining quality food have increased their attention to consume better products (Verbeke, 2005).
The interest in sustainability has impacted important actors in the development of the world
industry, motivating them to be part of it. Organizations like The United Nations and The World Bank
have developed their own framework to achieve a sustainable development (United Nations, 2016;
The World Bank, 2012). Moreover, this sustainable trend has reached all levels of the agricultural
food chain, increasing the interest in achieving a sustainable production and consumption (Vermeir
& Verbeke, 2006).
In the case of agriculture, several standards for sustainable production have been created and
adopted by the industry. Fairtrade, Rainforest Certified, Organic and UTZ Certified are some of the
most popular certifications that can be found in the market, especially on coffee products (Courville,
2008). The case of the palm oil has one certification that has grown across the whole industry, which
is the Roundtable on sustainable palm oil (RSPO) certification (RSPO, 2012).
The RSPO is a non-for-profit organization that clusters 7 different stakeholder types in the supply
chain of palm oil to get a sustainable production. These include palm oil growers, processors and
traders, consumer goods manufacturers, retailers, banks and investors, environmental/nature
conservation organizations (NGOs), and social/development organizations (NGOs) (RSPO, 2015b).
In 2008, RSPO developed a group of criteria regarding social and environmental aspects that
stakeholders in the palm oil industry must follow to produce Certified Sustainable Palm Oil (CSPO)
(RSPO, n.d.-a). This certification is present in most palm oil producing countries, including Malaysia,
Indonesia, Papua Nueva Guinea, Brazil and Colombia, reaching nearly 17% of the total world
production (RSPO, 2015a).
Governments in Southeast Asia have incremented their support towards environmental standards,
especially the RSPO certification (World Bank, 2011). As Indonesia and Malaysia produce more than
85% of the world palm oil (53% and 32% respectively) (USDA, 2016), the palm oil industry is
proceeding to adopt the sustainability standards established by the RSPO. This shift represents a
risk to small producers of losing their market share if they don’t implement these standards (World
Bank, 2011).
Palm oil producers have a high interest of reaching international markets and therefore they need
to fulfill international standards like RSPO. Even though the aim behind sustainable certifications is
environmental and social, the adoption of these practices is driven by economic reasons.
Additionally, this is strongly motivated by the bad image that has grown around palm oil, which has
been tackled by the creation of sustainable certifications, like RSPO (Boons & Mendoza, 2010).
The palm oil industry has been developed around the high usage of this commodity in several
different industries. In European countries, this product has been stimulated to be used in electricity
generation, food usage and even in the cosmetic industry. Based on this, it was determined that the
growth on this industry has been strongly motivated by customers and it’s a buyer driven market
(Boons & Mendoza, 2010). On a buyer driven market, producers react to the conditions that are
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established by the buyer side of the supply chain (Raikes, Friis Jensen, & Ponte, 2000). In the case of
palm oil, this may lead to the adoption of certain standards, like RSPO, which is the case of the
Colombian industry (Boons & Mendoza, 2010).
The palm oil tree (Elaeis guineensis) was introduced to Colombia first in 1932, but only after 1950 it
spread though most of the national territory, promoted by the national policies of the countryside
land usage (Fedepalma, 2016a). The main regions where this crop expanded are the Caribbean plain
region (North of Colombia), the Eastern plains (East of Colombia), the valley of the Magdalena river
(Center of Colombia) and the southeast region of the country (Fedepalma, 2016a) (See map 1).
Between 1970 and 1980, the crop area grew in 200% and it consolidated itself as the main oilseed
material in the national supply chain of oil and fat production (Fedepalma, 2016a). Today, palm oil
and kernel oil represent for the national market 94.1% of the total production and around 60% of
the national consumption of oils and fats (Fedepalma, 2016a).
The distribution of the crops on the entire national territory is about 13% in small farms (less than
50 ha), 30% in medium size farms (between 50 and 500 ha) and 57% in big size farms (more than
500 ha) (Fedepalma, n.d.-a). There are 67 mills in the territory which cluster the plantations and
create the nucleus. One nucleus is the group of the palm oil plantations together with the mill that
process the fruit produced in the plantations into oil and other byproducts.
Moreover, during the last years RSPO expanded in the Colombian industry, involving stakeholders
in the early stages of the supply chain (growers, processors and manufacturers) as is shown in figure
1. From 2012 to 2016, 25 new companies have joined the RSPO, increasing the number of Colombian
companies in 600% (from 5 to 30 members) (RSPO, n.d.-c). Nevertheless, from all the Colombian
members of RSPO at 2016, only 12 of them are palm oil producers and only 6 of them are certified
growers (producers of CSPO) according to the web page of RSPO, with a certified capacity of 135.012
MT/year (RSPO, n.d.-b).

Figure 1 - Number of RSPO members in Colombia by sector by 2016 (RSPO, n.d.-c)
This growth on the adoption of the RSPO standards shows a degree of acceptance among palm oil
stakeholders in Colombia. However, the extension of the certification is still too slow on producers,
especially in medium size producers (less than 500 Ha). Colombia has more than 450.000 ha of palm
oil planted (Fedepalma, 2015a) and only 48.000 Ha are certified (RSPO, n.d.-b); from which all
belong to 6 plantations bigger than 500 Ha (8.000 Ha in average) (RSPO, n.d.-b).
The objective of this project is to help increase adoption of the RSPO certification in medium size
producers (<500 Ha) by investigating the implications of the certification, the perceived obstacles of
its implementation and how to overcome the obstacles on the palm oil industry in the central zone
in Colombia. To develop this project, the main research question was: What are the implications of
the RSPO certification in Colombian palm oil producers, the perceived obstacles for its
implementation and how to overcome them?, and the specific research questions to support the
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general research question were: (1) How do Colombian palm oil growers perceive the impact of the
RSPO certification regarding economic performance, social interaction with employees and
community, and relations with other supply chain stakeholders (e.g. mills, consumer goods
manufacturers and financial institutions)? (2) What obstacles do Colombian palm oil growers
experience on the adoption process of the RSPO certification? (3) Which strategies have been used
by RSPO and other certification standards to promote their implementation in successful scenarios?
(4) What has been the strategy that RSPO used to promote their certification in Colombia, what has
been the role of other stakeholders and how can be implemented a different and more successful
strategy?
The research framework that was used to develop this project is shown in figure 2.

Figure 2 – Research framework
2. LITERATURE RESEARCH
RSPO certification for sustainable palm oil production is a voluntary certification program that aim
to incentivize the agricultural industry of the palm oil, while improving the sustainability of the
activities needed for the production (Winters et al., 2015). It is part of the so called non-state market
driven governance systems which are governance structures that aim to enhance the environmental
and social standards of the markets, and are driven by stakeholders interested on the performance
of those markets, and not the state or law makers (Cashore, 2002).
RSPO certification is part of the 465 ecolabels present in 199 countries and 25 industry sectors
(Ecolabel Index, n.d.). Literature in this field name this phenomena as the certification revolution
(Conroy, 2007) and the rise of civil regulation (Vogel, 2008). Most of the literature available
addresses the performance of these certifications in big corporations and large stakeholders, and
most recently also focuses on the impact of these standards on smallholders, but there is very few
information about how those certifications impact the medium size companies.
This literature research was used to find the most important aspects that play a role in the dynamic
of the certification adoption process and later, use these aspects to create the research instruments
(research questionnaires). They were clustered in five main concepts named (1) Farmer´s
characteristics, (2) Compatibility, (3) Perceived costs and benefits, (4) Relations with other
stakeholders, and (5) Willingness to adopt the certification standard. Each subchapter of the
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