Sustainable Palm Oil Sales Surge as Demand Meets Supply

For 10 years the Roundtable on Sustainable Palm Oil (RSPO) has been on a mission to convert 100 percent of the world’s palm oil into a more sustainable and responsible commodity. It has been a long road, in part because of the world’s rapidly-growing demand for food and businesses’ reluctance to add what they perceive to be additional costs to their supply chains. But RSPO is now making real and measurable progress. Last week the Zurich, Switzerland-based organization announced that the demand for sustainable palm oil is outpacing supply for the first time.

According to RSPO, sales of sustainable oil, based on what the organization traces through supply chains, spiked almost 65 percent during the first two quarters of 2014 compared to last year. That is a total of over 1.1 million metric tons so far this year. Meanwhile sales of RSPO’s certified GreenPalm certificates, which companies can purchase to offset their use of conventionally sourced palm oil, grew by almost 38 percent.

These results bode well for RSPO, which has gained traction in Europe (in part because of directives calling for increased production of biofuels) but has lagged in other parts of the world. Overall demand for palm oil keeps rising for several reasons, including hydrogenated fats being phased out by manufacturers due to health concerns. Palm oil lacks any noticeable scent, boasts a natural preservative effect allowing it to extend the shelf life of food products and produces high yields compared to similar plant-based oils.

But as a result, the demand for palm oil has wreaked environmental impact, especially in southeast Asia. Indonesia and Malaysia combined account for over 90 percent of global palm oil production, with the rest spread between Papua New Guinea, other southeast Asian nations, Latin America and Africa. A host of environmental and social problems have ensued, from land rights violations to deforestation—and the loss of orangutan habitat has caught the attention of many activists who now vigorously protest the production of palm oil.

RSPO now estimates the world’s annual production capacity of certified sustainable oil stands at 18 percent. That figure is impressive considering how difficult and slow it can be for a large company to enact major changes within a supply chain. The Wall Street Journal has noted the change underway in palm oil sourcing, and some of the world’s largest companies are making the shift to RSPO certified palm oil. Kellogg’s, Cargill, and ConAgra are among the recent firms that have committed to sourcing sustainable palm oil. Other companies, including Dr. Bronner’s, source from regions where the orangutan population is not threatened.

Now over half the world’s suppliers have committed to either producing or trading sustainable palm oil, but much work remains to be done: many companies home to some of the world’s most popular brands are still moving too slowly. With some estimates suggesting deforestation is accountable for 20 percent of the world’s greenhouse gas emissions, companies can no longer overlook climate change-related risks to their portfolios—and risks from infuriating their stakeholders and in due time, their stakeholders.

Image credit: RSPO

Leon Kaye has lived in Abu Dhabi for the past year and is currently spending some time in Uruguay. Follow him on Instagram and Twitter. Other thoughts of his are on his site, greengopost.com.