Segregated Supply and Uptake Working Group

Background on NASPON and the Working Group 

The Segregated Supply and Uptake Working Group aims to support and oversee identifying if/how a segregated supply chain can help to transform the industry and impact communities on the ground. To achieve this goal, this working group is engaging in activities to:

  1. build a baseline understanding of segregated demand in U.S. as well as challenges and opportunities to sourcing SG
  2. analyze economic/market factors to understand how scale and demand of SG affects the market
  3. influence the market to increase supply and uptake of SG material 
Below are the first of the tools and resources created, which include a list of frequently asked questions, a summary of the results from a survey sent out to all RSPO members in North America, and a map showing all facilities in North America that are RSPO Supply Chain Certified for Segregated. These resources are a result of everyone in the working group exploring these questions and the subject matter together, and we don’t have all of the answers nor do we always consensus! As we continue to engage in dialogue and research to build our baseline understanding together, we encourage your feedback and contributions by emailing info@NASPONgroup.org.

Why Segregated (SG)? 

Introduction to the RSPO Segregated (SG) supply chain: 

The Segregated (SG) supply chain model assures that RSPO certified oil palm products delivered to the end user come only from IP certified mills. It permits the mixing of RSPO certified oil palm products from a variety of certified sources, but the oil palm products that are mixed are always RSPO certified, meaning the end product containing SG certified palm oil is 100% Certified with no mixing of conventional, non-certified palm oil and any stage of the supply chain.  

The Segregated approach requires that RSPO certified oil palm products are kept separate from non-RSPO certified oil palm products at every stage of production throughout the supply chain, from the growers, to processing, to refining, and all the way to the manufacturing of the finished product. This model allows mixing of any RSPO IP and/or SG certified oil palm products from various certified sources. Physical certified oil palm products delivered to the end user will be traceable to a list of RSPO certified mills. As detailed below, each RSPO certified supply chain has different ways of benefiting communities, the environment, and sustainable supply chains. Below are just a few of the examples that the NASPON Segregated Supply and Uptake Working Group has identified that the segregated supply chain can provide some benefits. 

Benefits of the RSPO SG Supply Chain 

First, it is important to note that all of the RSPO Certified Sustainable Palm Oil supply chains (Identity Preserved, Segregated, Mass Balance, and Book and Claim) provide positive impacts and contributions to communities and the environment. The flexibility provided through the four supply chains helps to ensure all actors, such as smallholders, are included in these benefits. For example, in countries where oil palm is grown by mostly smallholders, establishing a segregated supply chain presents unique challenges due to needing each smallholder supply to a mill to be certified to maintain the segregated supply chain. This could risk leaving many smallholders out, which could have negative impacts on communities. Conversely, with the mass balance supply chain, certified smallholders can mix their fresh fruit bunches with other smallholders still working to achieve certification while maintaining the certified mass balance supply chain, ensuring benefits are still more largely shared. Additionally, in developing markets, the proper infrastructure may be lacking to maintain a supply chain that provides the proper separation all the way through to the manufacturing of the finished good, further highlighting the importance of multiple certified supply chain options. 

Therefore, it is important to identify what your goal or mission is when determining which certified sustainable supply chain is best for your organization. While all of the supply chains offer benefits to communities, the environment, and oil palm growers, the segregated supply chain does offer some unique benefits

The RSPO Segregated (SG) supply chain directly links product to mills and growers that produced oil palm products according to the RSPO Principles and Criteria. The SG supply chain provides a higher level of guarantee that all participants of the value chain are meeting the requirements of SG, including establishing infrastructure to ensure non-certified oil palm products are not mixed into the product at any stage of the supply chain. This leads to a  higher level of assurance that your product does not include risks such as deforestation, human rights, and other issues as stated by the RSPO Principles and Criteria.

The SG supply chain has potential to increases transparency by decreasing the number of mills you are exposed to. This also increases opportunities to trace your supply chain to the mill and plantation level. This can be helpful when seeking to establish partnerships for impact programs in grower regions by identifying the mills and plantations in your supply chain. 

From a stakeholder perspective, being RSPO Certified for SG provides an opportunity to highlight that you are complying with higher standards. Being certified for Segregated (or Identity Preserved) permits you to use the “RSPO Certified” trademark. This on-product label provides a unique story and improves the guarantee that the product contains only certified palm oil.  

Being RSPO Certified for SG could help to achieve deforestation targets, human rights targets, and other company policies due to a higher level of assurance that the palm oil/palm kernel oil in your supply chain complies with the RSPO Principles and Criteria. 

Companies are facing increased pressure to address potential risks that are present in palm oil supply chains. SG provides an opportunity to address these risks, therefore protecting your organization of reputational risks. However, as mentioned, if supporting smallholders is a reputational priority, additional measures may need to be taken with an SG supply chain to ensure you are able to include smallholder support. 

Survey Results Summary 

  • In 2019, the NASPON Segregated Supply and Uptake Working Group surveyed 60 RSPO members based in North America to get a baseline understanding of challenges and opportunities for utilizing the RSPO Segregated supply chain. The results are summarized below: 

Responses from Consumer Goods Manufacturers: 

  • 53% of respondents indicated their organization is working on traceability to the mill level for direct operations and/or suppliers 
  • 32% of respondents indicated their organization is working on traceability to the plantation level for direct operations and/or suppliers 
  • Only 27% of respondents have attempted to source segregated material for their North American operations 
  • Only 19% have received supply of segregated material for their North American operations 
  • Most respondents indicated that cost to build the necessary infrastructure and paying higher premiums was a significant barrier to sourcing segregated material for North American operations 
  • Some respondents indicated that due to sourcing complex Palm Kernel Oil based ingredients, the segregated supply chain is not feasible at scale at this time in North America 
  • Most respondents indicated that their suppliers would also need significant investment to build their infrastructure for segregated material, adding to additional barriers 
  • 62% identified cost as a barrier 
  • 62% identified infrastructure and supplier capability in North America as a barrier 
  • 33% identified a lack of customer demand for segregated material in North America as a barrier 
  • 36% identified lack of availability of segregated material in North America as a barrier 
  • 64% of respondents identified increased traceability as their reason for wanting to source segregated material 
  • 42% identified outside pressure on their organization as their reason for wanting to source segregated material 
  • 30% identified organizational goals as their reason for wanting to source segregated material 
  • 30% identified a desire to use the RSPO Certified Trademark as their reason for wanting to source segregated material 

Responses from Processors and Traders: 

  • 29% of respondents indicated their organization is working on traceability to the mill level  
  • 38% of respondents said that they “never” receive requests for segregated material from North American based customers 
  • 23% of respondents said that they “rarely” receive requests for segregated material from North American based customers 
  • 23% of respondents said that they “sometimes” receive requests for segregated material from North American based customers 
  • 8% of respondents said that they “often” receive requests for segregated material from North American based customers 
  • 8% of respondents said that they receive requests for segregated material from North American based customers “on a regular basis” 
  • 92% of respondents indicated that they do not have any minimum volume requirements for purchasing segregated material in North America 
  • Only 33% of respondents said they sold segregated material in North America in 2019 
  • 27% of respondents indicated they have dedicated infrastructure for segregated material in North America 
  • For the 73% that indicated that they did not have dedicated infrastructure for segregated material in North America, the top reason identified for not having dedicated infrastructure was a lack of desire from customers to pay added premiums 
  • 42% of respondents identified cost as their biggest challenge 
  • 50% identified infrastructure and supplier capability as their biggest challenge 
  • 50% identified a lack of customer demand as their biggest challenge 
  • 17% identified a lack of availability as their biggest challenge 
  • 75% of respondents said that they would utilize the segregated supply chain more often and/or invest in infrastructure building activities if they saw an increase in demand from customers 
  • Only 44% of respondents believe there is likely to be a critical increase in demand from customers 
  • There appears to be a disconnect between suppliers and consumer goods manufacturers. While consumer goods manufacturers stated there is a lack of supply and availability to meet their demand, processors and traders indicated there is a lack of demand and willingness to pay higher premiums.  

Frequently Asked Questions about Segregated Supply and Demand

With the current market in North America, downgrading SG to Mass Balances can lower cost and makes it more economical when fractionating palm for specialty fractions. 

Yes – There is an oversupply of SG palm, but demand is still not matching.  As detailed below, another challenge is that the infrastructure in the North American market is not always in place to ensure that the certified oil palm products can be properly separated. Although your supplier may have access to supply of SG material, you may need to establish further partnerships to build out the infrastructure needed to maintain the SG chain of custody for your product. 

Yes – If there is more demand, then the supply that is available and the establishment of proper infrastructure will follow. Due to a current over supply of SG, there is capacity in the upstream, but there is a clear disconnect that is keeping supply and demand from matching up and still a need for increased infrastructure to maintain the SG supply chain in the downstream. 

  • Segregated Pricing and Costs– There is a higher premium for SG. Costs are spread out across the supply chain (Shippers, refiners, etc.). Infrastructure such as separate tanks (inbound, intermediate, finished product tanks), piping (flushing and cleaning), etc. are needed but are often shared by supply chain actors. Cost vary depending on location and partnerships, so it is important to collaborate with your suppliers and customers. 
  • Infrastructure Challenges and Opportunities–Infrastructure in the North American market is not always in place to ensure that the certified oil palm products can be properly separated during transportation, storing, processing, alteration, etc. to prevent any opportunity of leakage of conventional palm oil. Although your supplier may have access to supply of SG material, you may need to establish further partnerships to build out the infrastructure needed to maintain the SG chain of custody for your product. Establishing these partnerships to build out the need infrastructure will have upfront costs but provide an opportunity to have increased assurance and input in your supply chain. 
  • 42% of respondents identified cost as their biggest challenge 
  • 50% identified infrastructure and supplier capability as their biggest challenge 
  • 50% identified a lack of customer demand as their biggest challenge 
  • 17% identified a lack of availability as their biggest challenge 
  • 75% of respondents said that they would utilize the segregated supply chain more often and/or invest in infrastructure building activities if they saw an increase in demand from customers 
  • Only 44% of respondents believe there is likely to be a critical increase in demand from customers 
  • There appears to be a disconnect between suppliers and consumer goods manufacturers. While consumer goods manufacturers stated there is a lack of supply and availability to meet their demand, processors and traders indicated there is a lack of demand and willingness to pay higher premiums.  
As we observed from the 2019 survey results (insert link to survey), there is a disconnect between the upstream (suppliers) and downstream (manufacturers, consumer goods companies, etc.). The global supply for SG is well established, and the demand in North America is increasing. However, to establish a more robust SG supply chain in North America, actors across the supply chain need to work together in partnership to share the costs to establish the needed infrastructure to maintain the chain of custody for SG.   Additionally, it is important to reflect on what the overall goal for your organization is when deciding which supply chain is best for you. Each supply chain provides benefits to local communities where oil palm is grown, as well as the environment, but an SG supply chain can sometimes run the risk of excluding some global markets or smallholders. Additional partnerships and programs may be needed to ensure your SG sourcing can maintain inclusivity for all communities and actors.

Mapping Certified Segregated Facilities in North America

To show the capacity for RSPO Segregated in North America, NASPON has mapped all RSPO Members that are currently certified for RSPO Segregated. This does not directly indicate the available supply of RSPO Certified Segregated (SG) ingredients from this facility, but rather shows that this facility has the capability to provide SG ingredients. Please note that this may require partnerships with suppliers to build out additional infrastructure or to establish additional capacity to meet your demand. It is advised to contact potential suppliers to discuss the capacity to meet the potential of utilizing the SG supply chain. Additionally, although they aren’t indicated on the map here, there are some producers of palm oil/palm kernel oil that have the ability to supply SG material directly from their regions of production. 

This map is intended to address the gap that the Segregated Survey (mentioned above) discussed, which was the gap in knowledge regarding capacity for SG supply and demand. As demand for SG increases along with the supply and the capacity to provide supply, the NASPON Segregated Supply and Uptake Working group will continue to develop resources to help link supply chain actors that have interest in utilizing the RSPO Certified SG supply chain.

To navigate the map, please click on the box in the top left to filter the results shown on the map and to view the map legend. Clicking on pinned locations will reveal additional information about the certified facility.