The Messy Business of Sustainable Palm Oil

Palm oil is in about half of the packaged products in the supermarket -- everything from cleaning products to Pop Tarts benefits from the vegetable oil's viscous and visual properties. So we know that. And we know the heavy global demand for palm oil contributes to massive deforestation in sensitive ecosystems in Malaysia, Indonesia and other growing regions around the world.

The enormous demand and global supply chain mean that, historically, traceability is quite a challenge. Palm grown and harvested by small landholders and subsistence farmers gets collected and sold as a commodity, and it goes through many refiners and dealers along the way before it reaches your breakfast cereal.

NGOs and activist organizations have pressured food companies and other consumer-facing brands to adopt "no deforestation, no peat and no exploitation" palm oil policies, since these brands have the most to lose if their customers discover the problems in their supply chains. However, middle managers, palm oil refiners and dealers are the ones who actually have to do the work of cleaning up supply chains.

Which is why it's so exciting that IOI Loders Croklaan (IOI LC) is ramping up its traceability. The wholly-owned subsidiary of IOI Group (more on that later), decided to focus on traceability in 2012. This year it reached 94 percent traceability. That's traceability to the mill level (as opposed to the farmer).

Sourcing to the mill level only addresses part of palm oil's big problem problem, since each mill may procure palm from more than 100 local growers who are the ones doing the deforesting. However, it's a huge first step, since IOI LC currently sources palm from over 800 mills. "Once you know where the oil is coming from you can engage with your supplier," IOI LC's sustainability director, Ben Vreeburg, explained to TriplePundit by phone.  

Now that IOI LC has a high degree of traceability in place, the next step is to run a risk analysis using satellite imagery to identify hot spots: mills in sensitive areas. Once high-priority mills are identified, IOI LC will go in person to engage, meet with suppliers and encourage the mills to become RSPO certified. Sounds good, right? Yes, and ...

IOI LC is the downstream processing arm of IOI Group, one of the world's largest producers and manufacturers of palm oil, with hands on 10 to 15 percent of the world's supply. IOI LC does the processing and trading, but IOI Group has the plantations. So for palm oil experts, the fact that these traceability commitments come from IOI LC and not the parent company, which has large holdings throughout the supply chain, is suspicious. The direct control provided by IOI Group's holdings is part of the reason IOI LC was able to reach such a high degree of traceability in three short years, so why aren't they leading the sustainability charge?

What does "sustainable palm" mean, anyway?

The Roundtable on Sustainable Palm Oil (of which IOI Group is a founding member) is the leading game in town when it comes to sustainable palm certification. However, NGOs and activists say that it's too weak. The Union of Concerned Scientists' Calen May-Tobin wonders, "How can something that causes deforestation and massive amounts of carbon emissions be called sustainable?" And he explained in a recent blog post:

"[UCS and] a number of other NGOs, including World Wildlife Fund, a founding member and longtime advocate for the RSPO (PDF), recognize that the RSPO principals and criteria are not strong enough and that to end forest and peatland destruction from palm oil expansion we must move beyond the RSPO’s minimum requirements."

Given that deforestation is the biggest issue when it comes to conventional palm, RSPO's weak attention to it is certainly problematic.

Deborah Lapidus, tropical deforestation expert and consultant to Rainforest Foundation Norway, stated, "RSPO gives lip service to no deforestation but has a definition so weak that it doesn't protect the vast majority of forests and it still allows RSPO certified companies to clear carbon-rich peatlands."

Vreeburg called RSPO a "dynamic process," explaining that it's the industry standard and the principals will continue to be adjusted to restrict growing in high carbon stock areas and sensitive areas like peatland.

I'm always reluctant to criticize a standard as too weak if it's the only thing going. When asked what alternative NGOs proposed, Lapidus explained: "We are calling on companies to adopt no deforestation, no peat and no exploitation policies. These policies have been adopted by the vast majority of major palm oil traders and large growers as well as dozens of consumer companies." She further elaborated that these stronger standards are currently in use by Wilmar International, which manages 45 percent of global palm oil trade. They aren't out of reach for global multinationals.

IOI LC released a strong sustainability policy last November that happily does go beyond RSPO standards. However, Lapidus expressed concern that the policy came from IOI LC rather than the parent. Parent company IOI Group did agree three months later that it would be beholden to its subsidiary's policy:

But there does appear to be a bit of tail wagging the dog. While IOI LC is moving beyond RSPO, IOI Group is struggling to keep up and is currently at risk of being suspended from RSPO over compliance issues.   

While the battle over standards rages on, there are currently 12 million tons of RSPO-certified palm oil (a mix of mass balance certificates and physical palm oil) on the market, and current demand from companies is less than half that.

Lapidus chalks the weak demand up to the weak RSPO standard, pointing out: "Kellogg, Nestle, Dunkin' Donuts, General Mills, Mars and dozens more have set no deforestation, no peat and no exploitation requirements for suppliers."

"Consumer companies want to be able to assure their customers and investors that they are not selling products made on top of destroyed forests; RSPO can't provide that assurance and therefore can't give companies the protection from reputational risk that they are seeking."

So, the consumer-facing brands have moved beyond RSPO, but can the growers catch up? Vreeburg expresses concern over the lack of demand, stating: "If you want to drive change on the ground, the best signal is by buying [RSPO] certificates." He went on to describe the pressure growers are under: "It’s not motivational if you produce 12 million tons and the demand is only [6 million]." 

While demand is certainly a big piece of the puzzle, grower-level education plays a key role as well. IOI LC's "hot spot" approach to working with mills and farmers strikes the right mix of practicality and progress -- one hopes they'll be able to complete their mission before another Greenpeace campaign targets a beloved brand.

Image credit: Greenpeace