Sustainable palm oil: Nestlé supply deal may be a game changer
A recent decision by food giant Nestlé to re-instate a previously banned palm oil supplier on sustainability grounds may help make the business case for more sustainable palm oil. Alex Wilson reports
Mid-September 2011 was a significant moment in the world of sustainable palm oil.
After months of long conversations between Greenpeace and the Forest Trust, and a lot more hard work on sustainability policies and improved practices, food giant Nestlé resumed purchasing from the Indonesian Palm Oil producer Smart.
In March 2010 Nestlé had dropped Smart and its parent company Golden Agri-Resources (GAR) as a supplier of palm oil, as a result of Greenpeace campaigns against the company. The campaign group had accused SMART of rainforest destruction for the planting of oil palm trees in Indonesia.
Smart is ultimately part of the controversial Sinar Mas group, which owns Smart’s parent firm, Golden Agri Resources. The exact connections between all the companies in the group are not easily available, but Sinar Mar links to Smart on its corporate website.
In turn, Sinar Mas is ultimately controlled by the Widjaja family, which also owns Asia Pulp & Paper, a company held to be one of the world’s most irresponsible by environmental campaign groups, and a long standing Greenpeace target.
High profile campaigns, focusing on the emotive issues of the destruction of rainforests and the decline habitats of Orang-utans, by organisations such as Greenpeace have made many large buyers wary of controversial palm oil companies in recent years.
Unilever, a company that now drives much of the work around sourcing sustainable palm oil via industry body the Roundtable on Responsible Palm Oil (RSPO), has also been a target of Greenpeace in recent years.
The sustainability steps taken by SMART and its parent company Golden Agri-Resources, include a partnership with specialist NGO The Forest Trust. GAR is also in regular contact with Greenpeace with regard to their sustainability work.
Notably GAR announced that Smart received RSPO certification of its first plantation on the 16th September.
Andy Tait, a senior campaigner from Greenpeace says that: “On paper GAR’s sustainability commitments are now the strongest in the palm oil industry.”However, claims Tait, more broadly, huge problems remain in the palm oil industry. RSPO standards aren’t strong enough to stop deforestation, Tait asserts, claiming that “a number of their producer members have not adhered to RSPO standards.”
Greenpeace is supportive of Nestlé’s recent decision to begin working again with GAR. Tait says that it’s important that Smart/GAR and Nestlé receive recognition for their recent speedy work on improving the sustainability of their palm oil and that others now follow their lead.
Unilever, the world’s biggest individual corporate buyer of Palm Oil, has been less quick than Nestle to resume dealings with GAR and its associate companies. The company released a statement shortly after Nestlé revealed its decision saying that they would not yet be following Nestlé’s example.
However, Unilever’s cautious position could soon be changing; Peter Heng, GAR’s Director of Communication and Sustainability told Ethical Corporation that: “We are in an initial stage of discussion with Unilever to resume business.”
Scott Poynton from The Forest Trust (TFT) highlights the advances that Golden Agri-Resources have made.
These include establishing GAR’s own Forest Conservation Policy closely following Nestlé’s own guidelines. These in themselves exceed the requirements for RSPO certification.
Poynton says GAR has embarked on establishing exactly which of their forested land falls into the category of valuable ‘High Carbon Stock’ (forest which has locked in a lot of carbon, removing it from the atmosphere, crucial in the fight against climate change) and then ruling it out for development.
GAR, says Poynton, who has worked personally with the company, have also been doing the same for ‘High Conservation Value Forest Areas’ and for peat lands.
In addition, they have adapted their supply chain to allow Nestlé to get guaranteed Palm oil from a particular plantation. TFT has visited these plantations on behalf of Nestlé and verified that they meet the company’s Responsible Sourcing Guidelines.
This move towards direct traceability for the Palm Oil industry is a first. The industry has traditionally been unable to guarantee the traceability of produce since many oil aggregator business models are based on mixing oils from a variety of sources together for transport. In Scott Poynton’s view, GAR’s efforts are very important, since as the industry leader, where they go, other producers will have to follow to remain competitive. Poynton also points to concrete evidence of the financial benefits of significant announcements around sustainable oil. GAR’s shares rose 3% after the announcement by Nestlé.
Another aspect of the business case for sustainable oil could be tax benefits. The Dutch Product Board for Margarine, Fats and Oils (MVO) has called on the EU to abolish import duty on RSPO certified sustainable Palm Oil. The current duty is 3.8% and removing this could make sustainable oil much more attractive to business customers, a potential boost in profits for producers.
The problem of persuading producers of the financial benefits of more sustainable palm oil does not stop at the big Indonesian producers, however. Herakles Farms, an American company is planning to cultivate a huge palm oil plantation in the poverty stricken West African nation of Cameroon.
Many conservation groups and NGOs such as the World Resources Institute, have expressed grave concerns about the project. The site of the plantation would be adjacent to the Korup National Park, they say. Campaigns claim the new plantations would threaten highly bio diverse rainforests and the migration routes of rare species such as forest elephants.
Scott Poynton says he sees huge reason to be concerned about African palm oil developments, but makes the point that if palm oil producers and traders want to be able to sell to companies such as Nestle, then they will have to adhere to the firm’s ‘No Deforestation’ Responsible Sourcing Guidelines.
With campaign groups and some major corporations remaining sceptical about the ethical standards of palm oil, producers will need to make further efforts to step up to the expected standard if they want to sell to the largest corporate buyers.
But the challenge remains a big one, at the moment; the percentage of palm oil production that is RSPO certified stands at only 10%. There is clearly much work to do. Campaigners such as Greenpeace and NGOs such as TFT clearly believe the actions of companies such as Nestlé in encouraging and rewarding suppliers that do improve their standards is a positive, if limited, sign for the future.
The award for Best Supplier Engagement is one of the categories at this year's Ethical Corporation Awards - See full details on the judges and the awards criteria here: http://events.ethicalcorp.com/awards