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About Certification

Purchasing commodities that do not drive deforestation is easier said than done. Supply change starts with knowledge, but admittedly few large commodity buyers can currently trace commodities from store shelves back to their origins. Long before companies can map the commodity "chain of custody" for even one of their product lines, they are likely to owe their stakeholders - including shareholders - evidence of progress against their commitments.

Enter commodity certifications such as those administered by multi-stakeholder roundtables - like the Roundtable for Sustainable Palm Oil (RSPO) or Round Table on Responsible Soy (RTRS) - or other entities such as the Rainforest Alliance, all of which provide avenues to market and transact certified commodities. While some companies self-define sustainable purchasing criteria, at least 85% of companies rely on third-party commodity certifications to identify commitment-compliant commodity supply.

In turn, the transacted volume of certified palm oil and soy products increased substantially from 2011 to 2015, though it still represents from 20% to less than 1% of the global palm oil and soy markets, respectively.

 

CERTIFIED PRODUCTS AND CREDITS

In addition to physical certified commodities, companies can purchase credits - each representing 1 ton of certified soy or palm oil - that are not delivered directly to the certificate holder, but do nonetheless enter the market.

Purchasing credits such as GreenPalm (palm oil) and RTRS Credits (soy) enables companies to support sustainably grown commodities without modifying their procurement practices to take physical delivery of certified volumes. Producers receive credits in return for generating one tonne of certified commodities. Credit buyers might not ever take ownership of the actual certified products, but the credit purchase nonetheless rewards the producer for certification. It also lowers the buyer's barriers to certification in the absence of widely accessible certified commodity supply.

From 2011 to 2014, 69% of all "certified tonnes" of palm and soy have been transacted as credits or certificates, while the actual certified commodities are combined, transported, and transacted with non-certified volumes.

Some organizations criticize the exclusive use of credits, as this enables companies to continue using palm and soy from non-certified sources, keeping unsustainable producers in business. In response, a number of companies have struck middle ground by making near-term commitments to purchase credits, while working on a longer-term solution to efficiently find and purchase physical certified volumes.

As a result, companies are transacting a growing volume of physical certified commodities as the chains of custody for certified products - from producers to purchasers - are increasingly transparent and accessible.

 

See any omissions or discrepancies? Let us know at info@supply-change.org

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