Palm Oil Sustainability Certification and Firm Performance: Is There a Conflict Between RSPO and MSPO?

Abstract

Malaysia is very proactive in governing its palm oil industry. As the second largest world exporter of palm oil it must not jeopardize its export earnings. The current requirement imposed on developing economies to export only RSPO-certified palm oil to the Western countries has raised concerns among the industry players. RSPO stands for Roundtable on Sustainable Palm Oil. It was initiated in January 2003 by a non-profit, private-sector organization. In Malaysia, RSPO certification is still voluntary and a debatable issue. Malaysia has implemented its own system known as Malaysian Sustainable Palm Oil (MSPO). Companies are also encouraged to practice environmental disclosure in the annual reports. This paper discusses the principles of sustainability certification for RSPO and MSPO. The effects of sustainability certifications, environmental disclosure, export earnings and palm oil technology are also studied. A total of 103 companies participated in the research. The study suggests that both certification systems use similar principles. 72.8% of the companies is export-oriented, 54.4% is currently RSPO-certified while 29.1% is MSPO-certified. 70% of the companies view that both certifications should be mandatory. However, neither RSPO nor MSPO has significant effect on firm performance. Similarly, export earnings and environmental disclosures also show no impact on performance. Only palm oil technology contributes positively to performance (p-value < 0.01). Thus, investing in the palm oil technology is the key to further promote palm oil sustainability. The paper concludes with suggestions to strengthen efforts in environmental and sustainability issues including the adoption of non-financial performance measures and integrated reporting.



Author Information
Noorhayati Mansor, Universiti Sultan Zainal Abidin, Malaysia
Wan Amalina Wan Abdullah, Universiti Sultan Zainal Abidin, Malaysia
Asniati Bahari, Universitas Andalas, Padang, Indonesia
Alif Falni Hassan Shukri, Universiti Sultan Zainal Abidin, Malaysia

Paper Information
Conference: EBMC2016
Stream: Business Administration and Business Economics; Marketing; Accounting

This paper is part of the EBMC2016 Conference Proceedings (View)
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