Differences of the MB & Segregated oleochemical products

With the launching of the RSPO logo RSPO President Jan Kees Vis said: “We have come a long way since the RSPO was founded in 2004, with currently around 9% of all palm oil produced in the world being RSPO certified. It is also true however we still have a long way to go.” Indeed this is true in the context of sustainable oleochemicals and its derivatives.

The RSPO Home and Personal Care (HPC) Derivatives Working Group worked under the Trade and Traceability Standing Committee to propose the Book and Claim rule for oleochemicals and derivatives. The rule was subsequently approved by the RSPO Executive Board in November 2011 and served as the sole rule governing the trade of sustainable oleochemicals and derivatives. Under circumstances then where it is not yet feasible to have physical segregation and traceability the GreenPalm programme works by eschewing the physical supply chain completely. It is a straightforward, flexible and easily implemented system that allows our end consumer manufacturer customers to support RSPO and communicate to their customers their support of the production of sustainable palm oil. That however is changing.

In line with compliance to Principles and Criteria of RSPO in plantations and refineries, many integrated palm industry players took the advantage to extend sustainability compliance to include downstream oleochemicals processing via the Supply Chain Certification System (SCCS). The certification provided accessibility to the Mass Balance and Segregated oleochemicals which has these notable advantages to the Book and Claim system:
i) There is actual physical delivery (uptake) of certified oil to the oleochemical manufacture.
ii) There is traceability of sustainable oleochemical products through the SCCS.

Ironically though with all advantages above the uptake of these grades of sustainable oleochemicals is very slow. The lack of understanding and guidance led to misconception of prohibitive cost and low availability of such sustainable oleochemicals. Whilst this may be true for the Segregation system which is governed by actual processing yields therefore higher inception cost, provisions can be made in the Mass Balance System to arrest these factors.

Rules are currently being developed to guide the physical transition of sustainable oleochemicals. The established rules on the Segregation system for oils indicate strict adherence to stoichiometric yields and the isolation requirement of certified from non-certified materials and this rule is likely preserved and extended to the oleochemical derivatives. The Mass Balance rules are however flexible with economical provisions and the author highly anticipates this feature to be fully capitalize in the new rules for oleochemical derivatives to make the Mass Balance oleochemical derivatives more accessible and economical to entice the switch from Book and Claim. Whilst the rules for oleochemicals are yet to be finalized, one can logically assume that it will not only be wholesome but yet simple enough to facilitate the uptake of certified sustainable through the lowest possible cost and have minimal impact on the way that business is currently conducted.

Faced with mounting pressure from civil society, many producers are committed to feature the use of sustainable material in their products. Prevailing market demand for sustainable oleochemicals is for the Segregated and even the elusive Identity Preserved grades. These demands may stem from the idealism of full traceability and esteemed claim of sustainable source product content. Unfortunately, the supply side for Segregated and Identity Preserved material may not be readily available. The higher premium of Segregated oil does not augur well with buyers wish for lower cost entry … the supply side is quick to clarify “Oleochemicals and its derivative unlike oils are majorly sold as fractions. The stoichiometric yields of these fractions (could be lower than 1%) may result in prohibitive cost for the buyer”. That is not all; another contributing factor to the scarcity of Segregated oleochemical derivatives include feasibility of manufacture. “Segregated material entails full segregation along the supply chain, current volumes simply could not justify a minimum economical run quantity.” added another. These comments fundamentally summarize the supply-demand dilemma of sustainable oleochemical derivatives – it is a vicious cycle that stifles the growth of sustainable oleochemical derivatives market.

The Mass Balance system seems to offer the best compromise and seen as a likely solution to bridge the gap of the Segregation system. There will be compromise on full traceability but the fact that there is physical transition of sustainable oil in the Mass Balance system is already an upgrade from the Book and Claim system which many buyers may be already adopting. The real gain from the Mass Balance system is seen in terms of accessibility and cost impact over the Segregation system in that it does not involve processing yields. The supply side see this option favourable too in terms of segregation hassle and ability to offer volumes without a minimum economical order quantity nor worry about production schedules … “It does not involve the manufacturing process, merely paper stock balance”.

As promulgated above, the Mass Balance system may indeed be the interim solution, a bridge to achieving full traceability systems. It is seen as a facilitator to enable the market to upgrade from Book and Claims system with minimum disruption to cost and accessibility. And as the market for the sustainable oleochemicals grows, the Mass Balance system has succeeded in its role and it too will eventually be displaced with the Segregation system – the pondering question then would be when and at what market saturation level should this replacement take place? But for now, the first step has to be taken towards the path of full traceability – to nurture the growth of sustainable oleochemicals market through the Mass Balance system.

For additional information on buying and processing sustainable palm oleochemicals and the services of IOI Oleochemicals, please contact your sales manager.