Special edition: Sustainable sourcing

Cargill on sustainable palm oil: The low hanging fruit has been captured, now the hard work begins

By Elaine WATSON

- Last updated on GMT

' I’m optimistic we can do it, we’re just having to work in bite-sized pieces'
' I’m optimistic we can do it, we’re just having to work in bite-sized pieces'

Related tags: Sustainable palm oil, Palm oil

As the pressure to source sustainable palm oil has intensified, several big names in the US from Kroger and Walmart to McDonald’s and Dunkin Donuts have said that by 2015, they will only use RSPO (Round Table for Sustainable Palm Oil) certified products.

But not all of them have spelled out precisely how they will reach this goal, Cargill’s product line manager for tropical oils Mohit Gupta tells FoodNavigator-USA.

“Are they all going to have fully traceable physical sustainable palm oil in all their products by 2015, or are they going to go out and buy a bunch of GreenPalm certificates on December 31, 2014?”

Cost remains a major hurdle

On the plus side, he says, many firms have now moved beyond the "education and awareness"​ stage.

“Originally this was being driven by corporate affairs people",​ he observes. "Now, commercial people are involved.”

But cost remains a hurdle, and fully traceable, certified sustainable products - especially fractions and palm kernel oil derivatives - are expensive, especially for firms that don’t supply the kinds of foods where consumers will pay a premium just because they see the RSPO logo on pack, he observes.

“To buy fully traceable segregated palm kernel stearin, you could be looking at paying 20-40% more, or higher."

Contains? Contributes? Supports?

As a result, he says, most palm oil users are still relying on mass balance (a mix of RSPO certified and regular) palm oil, or buying GreenPalm certificates (which guarantee a tonnage of palm oil equivalent to the tonnage you use has been produced from RSPO-certified plantations).

However, GreenPalm certificate holders can’t claim that their products physically contain​ sustainable palm oil, only that they have "supported​" its production, says Gupta.

Mapping the supply chain

The priority for Cargill - which says all palm oil it supplies to Europe, the US, Canada, Australia and New Zealand will be RSPO-certified by 2015 (2020 for other markets) - is mapping its supply chain so it can see exactly where the oil it ships out is coming from, says Gupta.

And while this might seem like basic stuff, it’s actually pretty complex, he reveals.

For example, while Cargill has refineries in Malaysia, it has no plantations there, and the oil it processes comes from scores of plantations - many of which are very small - and is then co-mingled at every stage of the supply chain before it is shipped on to China, Brazil and the US (where the demand for sustainable products is patchy at best).

Meanwhile, less than half of the oil Cargill ships from Malaysia comes from its own refineries, which means keeping tabs on what is moving through its supply chain is not as straightforward as you might think.

Similarly, while Cargill owns plantations in Indonesia, it has no refineries there, and the oil it ships from Indonesia - which is from multiple other plantations as well as its own - might end up in Europe (where there is a stronger demand for sustainable palm oil), or India (where most buyers are not that bothered).

We’re starting in Malaysia where we have a bit more control

To add to the complexity, Cargill’s European refineries “are very independent, so they don’t have to buy from us”​, says Gupta.

“Our goal right now is mapping out our supply chain. We’re starting in Malaysia where we have a bit more control and then we’re looking to do the same in Indonesia, at least at one port.”

The aim will then be to incentivize those along the chain to get RSPO certified. “We believe in the principal of inclusion, not exclusion”, ​adds Gupta, who says Cargill is encouraging all of its suppliers to gain RSPO certification and continues to work with smallholders to help them increase yields sustainably.

Cargill also has policies in place for responsible palm production on all of its own plantations including commitments to not plant on high conservation value forests; to not develop new plantations on deep peat land or land that would threaten biodiversity; and a strict no-burn policy for land preparation.

But encouraging the owners of plantations it doesn't control that it’s worth their while to get RSPO-certified is not always easy, he says.

If you are running a small plantation in the heart of ​Kalimantan [in Indonesia] and you’re not close to a port where there’s demand ​[for RSPO-certified oil], the extra cost of getting it to a place where you are going to get a premium​ might not be worth it.”

For these smallholders, a better option might be GreenPalm, he says, where they will only get a small premium (currently $2.40/t) but at least it’s guaranteed, regardless of who buys their oil or where it ends up.

However, not all growers see this as sufficiently attractive right now, he adds.

I’m optimistic we can do it, we’re just having to work in bite-sized pieces

So where do we go from here?

As Gupta is not convinced that enough plantations in Indonesia and Malaysia will get RSPO-certified in the next couple of years such that the costly process of segregating RSPO oil becomes unnecessary, firms like Cargill only have one option, he says.

“The low hanging fruit has been captured and people are realizing that there needs to be more alignment in industry, with companies such as Cargill trying to map their supply chains and establish exactly where our oil is coming from and then work with all the suppliers along that chain to find solutions.

“But I’m optimistic we can do it, we’re just having to work in bite-sized pieces.”

Related topics: Market Trends, Sustainability, Fats & oils

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