Certification and Sustainability in Palm Oil Industry: The Case of Malaysian and Indonesian Palm Oil Companies
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Cluster Research Grant, 2017
Abstract
As one of the plantation sectors, palm oil industry is highly significant contributes to the economic growth. However, it has been criticized for the environmental issues such as deforestation and open burning. In addition, due to increasing awareness of sustainability and environmental issues by stakeholders, palm oil companies are under pressure to operate and produce sustainably as encouraged by “United Nation Sustainable Development Goals (SDGs) Goal No. 12”. Many palm oil companies are under external pressures to improve their environmental performance by having the Certified Sustainable Palm Oil (CSPO). As the largest palm oil producers, the continuous issue faced by the Malaysian and Indonesian palm oil companies is how to remain profitable, yet sustainable after taking consideration the requirement to subscribe for any environmental certifications. This study aims to compare the differences between MSPO-certification with ISPO-certification. The study also aims to analyze the impact of local and international sustainable certifications and other determinants of profitability toward financial profitability on the listed Malaysian and Indonesian palm oil companies from 2011 until 2016. Review of literature will be used to identify the differences of MSPO and ISPO certifications. Meanwhile, empirical quantitative method and multiple regression analysis will be conducted to analyze the effect of CSPO on firm financial profitability of palm oil companies for both countries. CSPO is expected greatly increase the profitability of palm oil companies. Companies that subscribed for any CSPO are expected to have higher profit compare to non-members companies. Thus, the findings of this research will encourage non-member companies to own CSPO certifications to boost their profits and goodwill.
Project Leader
