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Palm oil: Why shared responsibility is needed to cement sustainability improvements

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There is a disconnect between the reputation and reality of palm oil. Popular media paint palm oil as a primary driver of deforestation. Yet, the data reveal a different picture, showing how the efforts of organizations such as Golden Agri-Resources​ (GAR) have addressed the localized issues associated in the past with palm oil production. By partnering with sustainable producers, food manufacturers can position palm oil as a traceable, low-impact ingredient that resonates with modern consumers. 

Even at its peak, deforestation linked to palm oil was more localized and less severe than headlines suggested. An analysis by the French Agricultural Research Centre for International Development (CIRAD)​ debunked a claim that conversion to large-scale monoculture palm plantations drove 40% of global deforestation, using the underlying data to show the true figure was 2.3%.1​  

The crop has been a driver of deforestation in parts of South-East Asia, though. From 1990 to 2008, palm oil caused the deforestation of 2.9 million hectares of Indonesia. That is a fraction of the 7.5 million hectares lost to agriculture in Indonesia over that period, let alone the 25 million hectares deforested in total, but is still a sizable amount of land.

Recognizing the problem, the palm oil industry has acted to reduce the environmental impact of the crop. Deforestation in Indonesia due to palm oil peaked in 2009.2​ Since then, annual deforestation due to palm oil has fallen steadily, improving the overall situation in Indonesia in the process.  

Primary forest loss in Indonesia fell in 2017, 2018 and 2019, according to data from the University of Maryland, bringing losses down to levels last seen at the start of the century.3​ Indonesia achieved a third consecutive year of improvement in 2019 despite an intense fire season, leading the World Resources Institute to state it “may have turned a corner in its efforts to reduce deforestation.” Loss in protected forests and peat areas is very low.

How the palm industry reduced deforestation

The declining impact of palm oil on forests is the result of a concerted effort. Major palm oil suppliers have adopted No Deforestation, No Peat, No Exploitation (NDPE) policies to ensure their operations are sustainable and protect the rights of workers, local communities and indigenous people. By 2017, 84% of palm oil imported into Europe was covered by NDPE policies and 99% was traceable to the mill level.4

Initiatives undertaken by GAR illustrate the progress the industry has made. GAR operates 46 mills and buys from more than 400 mills run by third parties. In working to improve oversight of its supply chain, GAR combined technology and a human touch. Technology enables GAR to quickly find and respond to incidents of deforestation but cannot drive change in isolation. Rather, the full power of technology is only realised when it is paired to supply chain engagement and personal relationships.

The combination is proving effective. GAR achieved full traceability to the mill by the end of 2015. Having passed the milestone, GAR began working to achieve full traceability to the plantation​. GAR met that goal for its mills at the end of 2017, before using the experience gained to strive for full plantation-level traceability across its entire palm oil supply chain.

Working with its mills showed GAR what technology, systems and processes are needed to achieve plantation-level traceability. The experience enabled GAR to answer key questions, such as what relationships are needed, what level of trust is required and what pushback from third-party suppliers is likely.

Equipped with answers to those questions, GAR is working to achieve traceability to the plantation level across its entire supply chain. The initiative has seen GAR work with its third-party mills to equip them to share information about their sources of fresh fruit bunches. GAR is well on its way to hitting its target of having all mills it buys from traceable to the plantation level by the end of 2020.

The move to full traceability is doing more than just giving GAR additional data on its supply chain; it is also enabling the company to get to know its suppliers better and uncovering opportunities to work with them to improve practices.

Why shared responsibility for palm is needed

The actions of GAR and other palm oil suppliers have gone a long way to eliminating the problems caused by the production of the ingredient. However, there is only so much that any one party can achieve. Having laid the foundation for the rehabilitation of palm oil, suppliers now need food manufacturers to choose to work with responsible growers and traders and share responsibility for continued improvement. 

Companies that accept shared responsibility and work collaboratively with suppliers to constructively tackle the lingering challenges facing palm oil, rather than reacting with fear to the negativity about the ingredient, will be rewarded.

The supply chains established by companies such as GAR position palm oil as an ingredient that is a good fit with the environmental, ethical and health concerns of consumers. Almost 40% of people polled in the UK have a strong interest in farming and food production.5​ The figure rises toward 50% of people in younger demographics.

That interest is increasingly affecting purchasing criteria. In 2016, 39% of consumers said they would switch to another food brand if they provided more information about their ingredients.6​ By 2018, the figure had risen to 74%.7​ Sourcing palm oil from suppliers that trace ingredients to plantations enables companies to meet consumer demands for end-to-end oversight of the supply chain.

Palm oil sourced from sustainable, traceable supply chains addresses other consumer concerns, too. Companies with traceable, NDPE-compliant supply chains are getting more money into the hands of farmers, thereby aligning themselves with the large majority of European consumers who are in favour of helping people in developing countries.8​ 

The efficiency of the palm crop and nutritional benefits of its oil are further positives​. Palm produces more oil per hectare than other vegetables such as sunflower and rapeseed and requires lower levels of fertilizers and pesticides. From a health perspective, palm oil is a good source of antioxidants, carotenes and tocotrienols, is trans-fat free and does not need hydrogenation.

Changing the palm oil narrative

The transformation of palm oil supply positions the food industry to tell a new, more positive story about the ingredient. Rather than view palm oil use as a negative, manufacturers can emphasize its sustainability and environmental credentials, the positive effects it has on communities in developing countries and its nutritional quality to frame it as a good fit for the demands of consumers.

Food brands that tell that story will facilitate the continued use of an ingredient with a tolerance to variable temperatures, desirable mouth feel, suitability for fortification and other characteristics that make it an attractive option in a wide range of applications including confectionery and bakery. In doing so, companies will position themselves to deliver the sustainable, traceable foods demanded by consumers without compromising on sensory attributes or changing their formulations.    

References

1.      Baron, V., Rival, A. & Marichal, R. No, palm oil is not responsible for 40% of global deforestation. The Conversation. Retrieved April4​, 2018 (2017).

2.      Austin, K. G., Schwantes, A., Gu, Y. & Kasibhatla, P. S. What causes deforestation in Indonesia? Environ. Res. Lett.14​, 024007 (2019).

3.      We Lost a Football Pitch of Primary Rainforest Every 6 Seconds in 2019. https://www.wri.org/blog/2020/06/global-tree-cover-loss-data-2019​ (2020).

4.      CHOOSING SUSTAINABLE PALM OIL: Progress report on the import and use of sustainable palm oil in Europe​. https://www.idhsustainabletrade.com/uploaded/2019/01/EPSO_Vormgeving2019_DEF_31012019.pdf​.

5.      CONSUMER INSIGHTS​. https://projectblue.blob.core.windows.net/media/Default/Consumer%20and%20Retail%20Insight%20Images/Reports/TrustAndTransparency2994_190911_WEB.pdf​.

6.      Label Insight, Inc. 2016 Transparency ROI Study – Label Insight. https://www.labelinsight.com/transparency-roi-study​.

7.      Label Insight, Inc. 2018 FMI Transparency Imperative Report – Label Insight. https://www.labelinsight.com/transparency-imperative-report​.

8.      Consumer attitudes and policy-maker views on sustainable consumption and production: a baseline evaluation​. https://files.fairtrade.net/publications/2019_TFLF_Baseline_MgtResponse.pdf​.

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