14/05/2009 (Forbes), Kuala Lumpur - The British unit of Swedish oils and fats manufacturer AarhusKarlshamn (AAK) may have to offer discounts on a consignment of eco-friendly palm oil that is too expensive for consumers, an official said on Thursday.
The slow uptake of palm oil sourced from estates in top producers Malaysia and Indonesia that do not clear rainforests and destroy wildlife reflects the difficulty in persuading price conscious shoppers to think green in the global economic crisis.
And manufacturers who want to use palm oil certified by the Roundtable for Sustainable Palm Oil (RSPO) have to additionally invest in building separate storage tanks and processors, said Judith Murdoch, marketing controller for AAK UK.
'We imported the first consignment of certified sustainable palm oil last year and, due to sluggish take up, we are now considering downgrading that oil in order to be able to sell it on the open market,' Murdoch told Reuters in a statement but did not specify the amount or which planter sold the palm oil.
'This is clearly disappointing.'
Murdoch was responding to environmental group WWF's plans to assess and grade major palm oil buyers like Unilever, Colgate-Palmolive ( CL - news - people ), L'Oreal, Nestle ( NSRGY.PK - news - people ) and Cadbury ( CBY - news - people ) over the next six months and welcomed the move.
The group will publish 'a buyers' scorecard' that would show companies that support sustainable palm oil and those that have not fulfilled commitments to buy it, in a bid to encourage more buying.
But the economics are not very promising. Palm oil undergoing the RSPO-driven ethical certification process trades at a $50 premium to wholesale prices, currently at $802 a tonne, which in turn have reduced their discount to rival soyoil.
Analysts have said less than 100,000 tonnes of certifiable palm had traded so far although 100,000 tonnes is available each month and 1.5 million tonnes of palm oil processing capacity is regarded as environmentally friendly.
Murdoch said the premium will reduce over time as supply of 'green' palm oil increases but segregation costs will remain and curb demand for RSPO certified palm oil for some time.
'The sums will add up and RSPO-certified material will be the right answer,' she said. 'But for the 60 or 70 percent of palm oil users here in the UK who use palm oil derivatives rather than refined palm oil, it's unlikely to be for some time.
Buyers in Britain, who use palm oil in products ranging from biscuits and chocolates to lipstick, take up 1.1 percent of the global annual supplies of 45 million tonnes, Murdoch said.