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Unilever and Walmart aim to transform sustainable palm oil supply

By Caroline Scott-Thomas+, 05-Nov-2012

Related topics: Fats & oils, Market Trends, Sustainable sourcing

Unilever and Walmart are hoping to drive increased production of certified sustainable palm oil, as they unveiled new purchasing commitments at the Roundtable on Sustainable Palm Oil (RSPO) annual meeting in Singapore last week.

Unilever, which purchases 3% of all global palm oil has been a key player in driving demand, with its commitment to buy only certified sustainable palm oil (CSPO) by the end of 2015, and Walmart also outlined new commitments to CSPO at the meeting, including sourcing 100% sustainable palm oil for its private label products by the end of 2015.

Unilever announced at the meeting that it was on track to meet its current commitment three years ahead of schedule, by the end of 2012. However, with about 90% of that supply covered by GreenPalm certificates, it has decided to go further, committing to buying 100% segregated sustainable palm oil by 2020.

Unilever’s global director, sustainable sourcing renewables and smallholder development, Cherie Tan said: “We want to be able to say that the palm oil we use can be traced to origin…Because of the huge volumes that we purchase this is a very complex task. Ultimately there will be a tipping point,” she said, at which the entire supply chain will become sustainable and traceable.

Three routes to sustainable palm oil

Segregated: Physically separate CSPO supply, kept apart from non-certified palm oil throughout the supply chain. Guarantees that an end product contains only CSPO.

Mass balance: Allows refiners to mix certified and non-certified oil to avoid the cost of segregation. Companies handling this mixed oil can only sell the amount originally bought as sustainable as CSPO.

Book and trade: Also known as GreenPalm after the firm running the system for RSPO, book and trade allows companies to buy certificates from established suppliers for the palm oil they use, with payments going directly to CSPO producers. This is separate from the physical trade in palm oil.

“We believe that this should be the norm and not the exception.”

Tan said that the company’s palm oil consumption has remained more or less flat over the past few years, as health-driven measures to reduce fat in food products have been offset by increased use in personal care products.

Walmart’s purchasing ‘too small’ to transform supply

Julian Walker-Palin, UK-based global palm oil project captain for Walmart, said that the world’s biggest retail chain had found itself in the unusual position of having too small a percentage of the market to make a big impact in transforming supply. This is a company used to making demands of its suppliers, but Walker-Palin said that Walmart only buys about 0.5% of the world’s total palm oil supply.

“In October 2010 we set out our goal to use only sustainable palm oil from segregated sources by 2015 where possible, but on that journey we also recognised the place for GreenPalm certificates and mass balance,” he said. “…Our purchasing is too small by ourselves to transform the supply chain.”

Walker-Palin said that Walmart had assumed that traders would be proactive in approaching the company with mass balance or segregated CSPO, but found that this was not the case. Instead, it contacted 10 of the world’s largest processors and traders, and collaborated with seven of them on sustainable sourcing.

“We now have what we believe is the first directory of availability,” he said.

“We found that there is mixed availability in different markets of mass balance and segregated palm oil, and we found that some CSPO was available across all of our markets, except for India and China.”

 The company has now procured enough GreenPalm certificates to cover 50% of its markets, he said.

“We cannot drive the change in the palm oil supply chain because our volumes are too low, but we can use our scale to drive uptake among many geographical markets, especially in China and India.”

Walker-Palin also suggested that more effort could be made to communicate the importance of sustainable palm oil to consumers, considering that consumer demand so far has not been a major market driver.