Palm oil is an amazingly versatile and widespread ingredient found in everything from biscuits and bread to shampoo and toothpaste. But huge global demand is driving the destruction of tropical forests in Indonesia and Malaysia – contributing to climate change and forcing orangutans and other species to the edge of extinction.
As a result, fmcg manufacturers are coming under increasing pressure to improve palm oil sourcing policies and drive positive change in the sector. Some are doing better than others. So to celebrate International Orangutan Day (19 August), we take a look at the approach taken by six fmcg brands and retailers noted to be ‘leading the way’ on palm oil sustainability in WWF’s 2020 Palm Oil Buyers scorecard.
Nestlé – deploying satellite monitoring across 100% of its supply chain
One of the biggest challenges for major fmcg businesses when it comes to ensuring sustainable palm oil supply is identifying and monitoring their indirect suppliers.
In 2018, Nestlé became the first global food company to deploy a satellite-based monitoring system, the Starling service, to keep an eye on 100% of its palm oil supply chain around the globe.
Starling, which was developed by Airbus, Earthworm Foundation and SarVision, uses a combination of satellite imagery and on-the-ground expertise to monitor land cover change and forest cover disturbance in near real time. “Our ‘eyes in the sky’ will monitor our palm oil supply chain 24/7, regardless of their certification status,” said Benjamin Ware, global head of responsible sourcing for Nestlé at the time.
In addition to publishing a full list of its suppliers, the Kit Kat and Nescafé producer vowed to blacklist suppliers who failed to comply with its responsible sourcing policy, which makes explicit provisions for the protection of peatland and high carbon stock (HCS) land.
Nestlé has partnered with organisations like the Earthworm Foundation to conduct supplier assessments, which it uses to inform the development of action plans with “defined milestones and deadlines to act upon risks and identified opportunities for improvement”.
If a supplier fails to effectively manage the identified risks or meet agreed deadlines, they are removed from Nestlé’s supply chain. Since 2018, the fmcg giant has removed 14 upstream suppliers from its supply chain.
In 2020, Nestlé reported 96% of its palm oil was traceable to mill, while 70% was traceable to plantation and 85% was responsibly sourced.
It had previously committed to achieving 100% responsibly sourced palm oil by 2020, with an ambition to achieve 100% RSPO certified sustainable palm oil by 2023 – ensuring the smallholder farmers in its upstream supply chain had time to achieve certification.
Called Beneath the Surface, the interactive video platform allows viewers to “directly experience some of the challenges Nestlé faces in sourcing palm oil”.
Marks & Spencer – holding palm oil importers to account
M&S estimates it uses about 5,500 tonnes of palm oil a year in products such as biscuits, bread, ready meals and cosmetics. But it hasn’t let the fact it buys less than 0.01% of the world’s palm oil stand in the way of a strong sustainable sourcing policy.
Not only has 100% of the palm oil used in its products met RSPO standards since 2010, but 69% of its certified palm oil is ‘segregated’, meaning it is fully traceable to more sustainable sources. It recently set a target for all palm oil in its food products to be sourced from RSPO segregated sources by March 2021.
Around 120 of M&S’s suppliers use palm oil and they are required to report their performance to the retailer each year, even if they use very small amounts. “We ask all our suppliers to report annually on their usage of palm oil, where it comes from (to refinery) and whether it is certified or not,” says M&S. “We use this information to engage major importers who have much greater influence over traceability and production than we do, and to ensure their practices match our goals and commitments.”
Although the retailer says RSPO certification is “the only mainstream way to source sustainable palm oil”, it recognises that “gaps exist in the RSPO standard relating to the protection of high carbon value forest, peatland and exploitation of workers and indigenous communities”. It has therefore developed additional criteria that must be met by palm oil suppliers as a condition of participating in the M&S supply chain.
M&S also helped form the Palm Oil Transparency Coalition (POTC) to develop approaches to manage issues not covered by the current RSPO standard and enable retailers to hold palm oil importers to account. “The POTC completes an annual assessment against a range of sustainability criteria including deforestation and human rights. Their assessment enables us to benchmark the progress of importers and have dialogue with these producers to step on progress in these challenging areas,” it says.
Ferrero – sourcing 100% segregated sustainable palm oil
Ferrero is recognised as a leading light on palm oil sustainability – and was ranked as number one out of 173 global companies by the WWF on its Palm Oil Buyers Scorecard.
In January 2015, the Kinder and Ferrero Rocher maker became one of the first global companies to source 100% RSPO certified segregated sustainable palm oil, and in 2016 it achieved 100% traceability to plantations. That same year, Ferrero started a pilot project with the Starling satellite monitoring service, focusing on selected palm oil plantations within its supply chain in Peninsular Malaysia, Sabah and Indonesia.
In February 2021, Ferrero committed to 100% satellite monitoring of its palm oil supply chain using the Starling service. “By providing data that shows where potential deforestation occurs, Starling enables us to identify grievances in the supply chain and drive positive change on the ground,” says Levi Boorer, customer development director at Ferrero UK & Ireland.
The company has also recently updated its palm oil charter to underline it’s “commitment to playing a leading role in the sustainable transformation of the palm oil sector to benefit the environment and people living and working in palm oil producing communities”.
This includes a principle of no deforestation, and Ferrero has been working with the Earthworm Foundation to develop and implement its own zero-deforestation verification protocol, to demonstrate to external stakeholders the level of progress and compliance in achieving zero deforestation in its palm oil supply chain.
“At Ferrero, we continue to strengthen our commitments and progress as shown in our updated palm oil charter, which has been based on the company’s ongoing learning journey and insights generated by close collaboration with stakeholders at every level, from suppliers to NGOs through to academic partners,” says Boorer.
“Our ambition is to be a force for good, behind a palm oil industry where palm oil production creates value for all. Where smallholders and farming communities are thriving, the rights of workers in mills, refineries and plantations are unequivocally respected, and environmental values actively protected.”
L’Oréal – going beyond RPSO certification
L’Oréal directly purchases less than 310 tonnes of palm oil every year. Since 2010, 100% of this palm oil has met RSPO standards, via the segregated model, which is one of the most demanding.
But the biggest challenge for L’Oréal is ensuring the sustainability of palm oil derivatives used in ingredients purchased from suppliers – such as glycerol, fatty acids and ingredients used in products for their emollient or foaming properties.
L’Oréal estimates it consumes palm oil or palm kernel oil derivatives in a quantity approximately equivalent to 75,000 tonnes of palm oil every year. These derivatives are 100% certified, but not through the segregated model. By the end of 2020, 95% of its physically certified purchases were RSPO certified under the mass balance model, with the remainder covered by the RSPO book & claim model.
So to ensure all of the palm oil in its products is deforestation-free and sustainable, L’Oréal decided to go beyond RPSO certification. Since 2014, it has mapped its entire supply chain to trace derivatives back to their origin – which it claims is “an unprecedented approach within the oleo-chemicals sector”.
To date, its research has made it possible to trace 98% of its derivative volumes back to refineries, 92% back to mills and 27% back to plantations. L’Oréal’s goal is to achieve 100% traceability, a first step towards achieving its aim of zero deforestation among suppliers.
L’Oréal is also committed to supporting independent smallholders. Through a multi-stakeholder partnership, L’Oréal helps to connect independent smallholders to the market demand for zero-deforestation palm oil, which it claims helps foster “sustainable agricultural practices”.
Finally, L’Oréal has created a ‘sustainable palm index’ which includes criteria for assessing palm oil derivatives suppliers based on factors such as their commitments, sustainable sourcing practices and compliance with L’Oréal zero-deforestation policy. In 2017 it made this index publicly available to help drive wider change in the sector.
The Co-op – funding reforestation in Borneo
The Co-op was the second highest ranking UK retailer on WWF’s scorecard. In 2020, it used 7,431 tonnes of palm oil in its own-brand food and non-food products. All this palm oil was certified as sustainable under one of the RSPO certification schemes. Like M&S, it’s working towards having 100% segregated palm oil in its own-label supply chain.
The Co-op is also engaging with selected brands and suppliers on their use of palm oil this year. “We’ll assess the palm oil used in animal feed for our fresh protein and dairy products and publish our findings in 2022,” it says. The retailer already publishes a list of traders who provide most of the palm oil used in its product and will “continue to engage with our key traders based on the findings of the annual POTC report”, it says.
Aware it can’t make change alone, the Co-op actively participates in the RSPO, the Retailers’ Palm Oil Group and the Palm Oil Transparency Coalition. Alongside other UK retailers, it is also pushing for the government’s due diligence proposals on tackling deforestation in supply chains to be strengthened.
The retailer is also working with Chester Zoo to support a conservation project in Borneo. “We’ve funded some of their reforestation, which aims to reverse deforestation and restore wildlife (including orangutans) in a former palm oil plantation devastated by overproduction,” it says. It plans to continue restoring former palm oil plantations, with the aim of planting 50,000 trees by the end of 2025. By the end of 2021, Co-op also wants to identify project opportunities to support independent smallholders, who “are a key part of the palm oil supply chain”, it adds.
Mars Wrigley – simplifying and verifying its supply chain
Complex palm oil supply chains can make monitoring and enforcement tricky. Which is why Mars decided to radically simplify its supply chain as part of its Palm Positive Plan, which was published in 2019.
Mars has committed to reducing its mill count from 1,500 to fewer than 100 by 2021, with plans to halve that again in 2022. This will be coupled with “meaningful engagement on human rights, and on-the-ground and satellite verification processes to monitor deforestation,” it says.
The Mars, Twix and Snickers maker believes a shorter supply chain will enable it to deepen relationships with its suppliers, thus increasing accountability, influence and connectivity. It will also allow it to employ satellite mapping to monitor land use across its supply chain and work directly with tier one suppliers as they build capabilities to monitor, address and prevent human rights risks in their supply chains.
In its supply chain to its Asia-Pacific businesses, for example, Mars is now sourcing from UniFuji – a partnership between United Plantations and Fuji Oil. This has reduced operations from 780 mills to just one. Palm oil is grown on one plantation and processed through one mill and one refinery before reaching Mars.