Environmental Index for Palm Oil Mill

Palm oil mill has been regarded as a profit making industry for the past decades. Besides revenue from the
palm oil production itself, the abundance of biomass could generate high economic return to the palm oils mill
by converting it to value added products. However, the palm oil industry currently suffered various criticisms
and negative reports from the international non-government organizations on the environmental issue. This
paper presents the development and the applicability of environmental index (EI) for palm oil mill in order to
enhance the competitiveness of the industry. The methodology will include the index development and identify
area of weaknesses (hotspot). The index will be able to identify performance of the mills in Environmental
aspect against benchmarks and differentiate every mills performance. By this, the mills can easily identify its
hotspot and take necessary steps to improve. The system will also benefit the marketing team to market its
products (CPO, PKO etc.) to niche markets that seek uptake from mills with lowest footprints (Carbon, water,
energy etc.). The results can be used not only to evaluate the performance of an operating process against
standard benchmarking but also to establish the best environmental practices among palm oil industry. It is
anticipated that the development of environmental index will be an important instrument for supporting
sustainable operation for palm oil mill.

1. Introduction
Some of the research done regarding environmental issues on palm oil area are waste utilization through
thermochemical conversion liquefaction (Awalludin et al., 2015) and innovation on effective utilization of waste
to become renewable energy (Yusoff, 2006). Other than that, eco-labelling for carbon footprint modelling
which can help to measure the value taken of product and services thus reducing impact to the environment
(Choong and Alison, 2013). Most of sustainability trend research from 2004 to 2013 in Malaysia dominate to
technology and residue use area which include to the palm oil mill effluent (POME) treatment and value added
product from the POME. The other hand, index related research is the ENERGY STARĀ® energy performance
indicator. The ENERGY STAR industry program focuses on encouraging and enabling sustainable corporate
energy management (Gale et al., 2008). Meanwhile, Environmental performance index (EPI), is a global
metric of environmental performance between the countries to protect ecosystems and human health from
environmental harm (NRE, 2014). Tan et al. (2015) proposed a development of the Low Carbon Indicator
(LCCI) for the research that focused on evaluation, implementation and standardization of low carbon cities
(LCC) by measure on waste management, environment control, economic factor and municipal solid waste
(MSW) of the country. Thus, it can be said that Malaysia is still lack of research in palm oil mill area as most of
the research only focused on palm oil plantation area. On top of that tool or application that can measure the
palm oil mill environmental index is needed. The results can be used not only to evaluate the performance of
an operating process against standard benchmarking but also to establish the best environmental
performance among palm oil industry.

First, extensive review on previous work is conducted to review the drawback of the existing index system.
Secondly, from the availability of the data and literature reading, the potential factors and indicators are
identified. Then, the indicator will be classified according their group called as parameter. This parameter will
represent the indicator grouping for each environmental aspect. Once the indicator, parameter and aspect
have been identified, standard data collection step are started through palm oil related agencies such as
FELDA, RSPO and MSPO and from the industrial study. The data collected are varies in term of unit and
scale, to make it dimensionless, data normalization method is needed to ensure the consistency and accuracy
of the data. The SI are analysed using radar chart so area of weaknesses (hotspot) are clearly identified. The
methodology flowchart of environmental index for palm oil mill as shown in Figure 1.
2.1 Review and raw data collection on current practice in palm oil industry
First step, comprehensive review on palm oil mill and management will be conducted to understand the
current practices in palm oil industry. The raw data will be gathered from selected palm oil mill or previous
studies to develop framework of the index. Besides, source of data could be palm oil mill manual, discussion
with plant manager or staff and data extraction from palm oil mill current data system. Palm oil mill will be
classified with different category such as big scale mill, small scale mill, and their technology.
2.2 Indicators and parameter selection
In depth, parameter is a benchmarks of the category and obtained from previous study, palm oil policies and
literature. Therefore, parameters obtained are assigned to one of the suitable category, water or air. Indicator
is a tool to measure the parameter and monitor the sustainability level. Generally, indicators are selected
based on the relevance, performance orientation, transparency, data quality, data sustainability and data
custodian (NRE, 2014). Table 1 profiled the indicators and parameters available.

2.3 Data gathering and establishment of standard or target value
Standard value will be obtained from related authorities such as FELDA, DOE and etc. Besides, certain value
will use the industries target as a standard value. For instant, FELDA target to increase Oil Extraction Rate
(OER) production annually more than 21.94 %. Thus, 21.94 % can be used as a benchmark to be achieved by
the indicator. By having the standard value, it can be determined the performance of each indicator as
opposed to the target or specify standard. However, in case of the indicator does not have any target or
standard, trend line data from the industry will be used to determine the best condition to be set as our target.
2.4 Proximity to Target (PTT)
The indicator collected are different in unit and dimension. Each indicator either positive (type A) or negative
indicator (type B), where the positive indicates the high value equates good performance and vice versa
(Sieting, 2015) the concept of Proximity to Target (PTT) is illustrated in Figure 3. PTT is a simple approach of
measure on how close each mill indicator compared to the palm oil standard. Thus, indicators are normalized
using Eq(1) for type A indicator and Eq(2) for type B indicator to get their PTT score.
2.5 Weightage Average
In this step, it required expert view to give weight to the parameter using questionnaire and interview because
not every parameter have same value of importance. Might be this parameter will be more important than
another parameter so we will take expert view and opinion to give rating to the parameter.
2.6 Index Calculation
Figure 4 shows calculation flow steps to obtain the index value. It starts from normalize data using PTT,
averaged it according their parameter, sum up to the aspect score and lastly obtain the index.

2.7 Sustainability Index Profiling and Analysis of Index
Environmental Index Profiling is a method to collect and clustered the result according to their own mill.
Therefore, easier to compile and make comparison between the mill. The analysis of Sustainability Index is
presented using radar chart. Radar chart are selected because it gives explicit results analysis by clearly
shows areas for improvements. The outer ring of the web which mean 100 % score, so towards the outer ring
it shows a better result. Radar chart allows the industries to quickly recognize area which they perform well or
to identify area for improvement.

3. Preliminary Result
Analysis results and interpretation of the Environmental Index of Palm Oil Mill. It can be e analyses in various
way, such as index profiling, bar and radar chart. Up to this part 8 indicators were identified and classified into
3 parameters that will be grouped into environment category.
3.1 Database
Database include category, parameter, list of indicator, parameter limit of indicator

A new systematic approach to analyse palm oil mill environment index performance has been developed.
Using the database and index calculation, this system is able to determine the EI performance rating between
palm oil mill industries. Besides, it can give information to the industry the area of weaknesses (hotspot) that
should give an attention.



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