POINTERS: Challenges & Opportunities for the Palm Oil Industry in the areas of Biodiesel, Sustainability & Food Safety.

By: Mr. U. R. Unnithan

Education Background ❖A Master’s degree holder in Chemical Engineering and Distinguished Alumnus from ICT (India’s Premier Chemical Technology Institute) ❖Gold Medal Winner at the APEX MBA program from NUS ❖Advanced Management Program Graduate from the Harvard Business School. Professional Background ❖Co-Founder & CEO of DIBIZ PTE LTD- A Blockchain powered Digital Platform. ❖Founder & CEO of SUMWIN Group- a Technology Company specialized in value added Food, Feed, Oleo-chemicals, Neutraceuticals & Renewable Energy. ❖36 years of Corporate & Professional experience in the field of Oils & Fats, Oleo-chemicals & Biofuels. ❖22 years as Executive Director of CAROTINO Sdn Bhd in Malaysia, responsible for all Palm Oil downstream businesses of the group. ❖Worked with the Unilever Group in India at a Senior Management level. ❖President of the Malaysian Biodiesel Association; actively involved in the implementation of the Biodiesel program in Malaysia since 2001. ❖Fellow of The Institution of Chemical Engineers( FIChemE) ❖Fellow of the Malaysian Institute of Management (FMIM) ❖Member of the Program Advisory Committee (PAC) of MPOB 2011-2016 ❖4 Patents in the field of Oils & Fats ❖Is a Distinguished Toastmaster (DTM)

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The Covid-19 pandemic has affected the global economy very badly. Most countries and industrial sectors are seeing a very weak outlook. The Palm Oil industry has also been affected but fortunately as 80% of Palm Oil is still used for edible applications, the effect has not been as pronounced as in other sectors like Airlines, Tourism, Hotels, Property etc.

There has been a significant demand destruction even for Palm Oil due to the sharp decrease in demand from the HORECA sector affecting imports from major consuming countries like India & China. With demand for Crude Oil dropping sharply leading to a steep fall in Crude Oil prices, the viability of the Biodiesel business has also weakened significantly. National mandates both in Indonesia and Malaysia are under pressure. However, there is a silver lining in the dark clouds as the world has seen the benefits of almost 5.5% reduction in GHG emissions during this global lockdown. This has got Climate Change experts, Policy makers, NGOs and consumers thinking about a new world towards a greener economy with a greater share for renewables. This augurs well for the Palm Oil industry as well in terms of looking at National Biodiesel mandates from a national & regional perspective and there are clear opportunities that are emerging from a strategic point of view.

On the Sustainability front, many enterprises are increasingly committing themselves to traceability for regulatory compliance and achieving sustainability goals. This has come into sharp focus during this pandemic in discussions on supply chain resilience, traceability and end to end visibility. This is of paramount importance in the Palm Oil Supply Chain. Companies typically spend millions of dollars annually to have visibility to the last mile of supply chain to address this pain point. All such initiatives are siloed and does not include value propositions to other stakeholders in the supply chain, and thus it gets highly complex and less successful. It is also impractical and prohibitively expensive for small stakeholders to be part of many such ecosystems driven by different enterprises. A new “Collaborative Connected Digital Supply Chain Platform” on a Secured Cloud where all stakeholders can conduct their supply chain transactions with minimum effort and at low cost powered by a proprietary energy saving Blockchain platform could connect enterprises to every stakeholder in their supply chain seamlessly providing real time Digital Traceability with Geo-spatial analytics with specific value propositions individually and collectively. Everybody will have a winning proposition in this networked model. For the first time small holders in the Palm Oil Supply Chain will be included at no cost to them. This will enable small holders to embrace sustainability and get adequately remunerated for their efforts. This could be a great opportunity for the Palm Oil industry to demonstrate real time dynamic traceability and visibility with Geo-spatial analytics to prove that Palm Oil is indeed produced sustainability and conforms to NDPE norms. This should appease EU countries and the vocal NGOs who have been very critical of Palm Oil’s sustainability.

Another area during this crisis that the world has shifted its attention to is food safety. EFSA has clearly outlined guidelines for the levels of food contaminants such as 3MCPDE & GE in refined Palm Oil products at 2.5 & 1 PPM respectively. he Palm Oil industry has another big opportunity to adapt new locally developed technologies that are cost-effective both from a CAPEX & OPEX Perspective to produce refined Palm Oil products that can comply with 1.25 & 0.5 PPM limits respectively. This will enable Palm Oil to be on par or better than other refined vegetable oils and capture a bigger market share because of its superior quality, versatility and price competitiveness.

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Questions & Answers (4) :

Husain

3 years ago

Very Nice Presentation. I liked your idea of DIBIZ blockchain system for traceability. However if only EFSA has set the standard for GE & 3MCPDE which contributes to less than 5% of palm oil exports why should the whole palm oil industry comply to it? Especially because it requires additional capex by refiners.

U.R.Unnithan:
The 3MCPDE & GE limits is a food safety issue and therefore cannot be compromised. EFSA has taken the lead but large consuming countries like India & China would also expect the same food safety standards as EU. It will be too late if the industry doesn't prepare itself in advance to meet these standards and some of these large markets start demanding it. We now have a very cost-effective technology that is low in CAPEX and OPEX (less than $2/MT) for the industry to implement.
3 years ago

Vaishakh

3 years ago

Excellent presentation! You spoke about a platform for smallholders where, big corporations, regulatory bodies, farm equipment suppliers, farm consultants can communicate through the platform. Can any other organisation who are into value added services (fintech companies) for small farmers join the DIBIZ ecosystem. Also, speaking of supply chain, how does DIBIZ solve the kernel oil chain which is also difficult to trace in the current scenario?

U.R.Unnithan:
The DIBIZ Platform will offer competitive Trade Financing options through Fintech partners. This would be a huge advantage for Palm Oil Industry players like refineries who find it difficult to raise competitive working capital facilities. This will also open avenues for SME & Small Holder financing. The DIBIZ Platform covers all product transformation in the Palm Oil Supply Chain including Palm Kernel Oil and its derivatives. This will be a unique feature that will allow end to end tracebaility even in an Oleo-chemical or Specialty Fats business that has so many downstream products.
3 years ago

Yusufu

3 years ago

This paper is well presented and the points are synoptic. Yes, the global lockdown resulted in 5.5% GHG emissions. What effect does the palm oil have on the GHG reduction? Is there any simpler form of supply traceability for small and medium size stakeholders?

U.R.Unnithan:
Sustainable Palm Biodisesl with Methane capture in Mills by LCA has 60-70% lower GHG emissions than Petroleum Diesel. The traceability system on the DIBIZ Platform is a very user friendly system with an APP for small holders as well. This enables real time end to end Digital traceability and visibility with Geo-spatial analytics. The DIBIZ Platform is made available at no charge to small holders and a nominal charge for other stakeholders on the Supply Chain.
3 years ago

Mohd Feroize

3 years ago

From newspaper report, it has been mentioned that government did provide funds to smallholders to produce MSPO sustainable palm oil. Based on your presentation, it appears that the amount is far short of that require by smallholders to comply to MSPO as you claim the smallholders got problem to comply to sustainability requirement due to lack of funds. Am I right? Is it the reason why there is low rate of compliance among smallholders? Everytime smallholders ask for grants from MPOB like replanting grants, MPOB would impose guidelines on how the trees is to be planted even before the MSPO requirement was implemented. How far does it differs from that of MSPO requirement?

U.R.Unnithan:
Training of smallholders towards sustainability is tedious, time consuming and expensive. The current resources are inadequate to accelerate the process. Digital methods of communication and training will make this process faster. Smallholders also need to be incentivized to produce sustainable crop. A Digital connected supply chain Platform will enable reaching the benefits to smallholders
3 years ago