Palm oil: the persistent procurement problem

The latest WWF analysis of the commodity mirrors the sorry story of food industry scorecards past. Nick Hughes reports.

Why are we talking about palm oil now? Environmental charity WWF has just published its latest palm oil scorecardwhich assessed the performance of 227 major retailers, manufacturers and hospitality companies on key actions they need to be taking to support a sustainable palm oil industry.

And what did it find? Amid some positive signs the overall picture is pretty gloomy. While there’s been progress since the first scorecard was launched in 2009, corporate efforts still fall “drastically short” of what is needed to protect some of the world’s most vital forests and natural ecosystems.

Remind me again why palm oil is so important? It’s the world’s most traded vegetable oil, revered by food and cosmetics manufacturers for its versatility and affordability. Palm oil is used in everything from pizza and chocolate to shampoo and deodorant albeit its use is lower in foodservice than in grocery, especially where caterers cook from scratch. It’s also widely used as a cooking oil in Asian and African countries, and as animal feed and a biofuel.

But that all comes at a cost? Exactly. WWF says irresponsible palm oil production is a significant driver of deforestation, ecosystem conversion, biodiversity loss, and greenhouse gas (GHG) emissions. Unsustainable production also threatens the lives of people living and working in palm oil producing landscapes in the form of land grabs, displacement, and human rights violations.

So give me the top line results from this year’s scorecard? Those 227 companies assessed scored an average of 13.2 points out of 24. Half are still not sourcing 100% roundtable on sustainable palm oil (RSPO) certified sustainable palm oil (CSPO), an outcome WWF says is “inexcusable” given a sufficient supply.

Although a majority of companies have committed to sourcing palm oil that is free of deforestation and human rights abuse, as few as 9% of respondents apply their commitments to all ecosystems at risk – for example savannahs and peatlands – while only 13% have commitments that protect the rights of all stakeholders who might be negatively impacted by palm oil production such as workers and local communities. Perhaps most damning of all, more than a third (85) of the companies WWF approached failed to provide any information on their palm oil usage and sustainability efforts.

Is there any positive news? There is some. More than half (52%) of businesses are taking action beyond their own supply chains by actively participating in sustainability platforms aimed at driving industry-wide transformation. Similarly, 39% of respondents are investing in projects aimed at supporting change on the ground in palm oil producing landscapes, such as smallholder capacity building and forest protection.

WWF also points out that the rapid progress made by several companies across a variety of sectors and markets since 2020 shows that sustainable palm oil is achievable, no matter where a company might be on its sustainability journey. Arla Foods, for example, has moved up from the ‘middle of the pack’ category and is now ‘leading the way’ according to the scorecard.

So who were the standout performers? Coop Switzerland topped this year’s scorecard with a score of 22.4. Other food companies considered to be ‘leading the way’ on palm oil include familiar names like Ferrero (21.7) and Mars (21.1). WWF says these companies are prioritising the use of physical supplies of CSPO, extending their sustainability requirements to suppliers and monitoring them for compliance, and taking action beyond their own supply chains to support the transformation of the palm oil sector.

I don’t see any foodservice and hospitality businesses among the star performers? Correct, although that’s partly because they don’t feature prominently in the scorecard full stop – hospitality businesses account for only 5% of assessed companies given their lower consumption volumes. Still, they have the lowest response rate of just 47% with Culinor, Elior, InterContinental Hotels Group, Ixom, JD Wetherspoon, Leon, Mitchells & Butlers and Pizza Pizza all failing to engage with the scorecard. Hospitality companies also have a lower average score than both manufacturers and retailers. This sorry story mirrors similar scorecards from down the years.

Is there any positive news for the sector? There are signs of encouragement for sure. Sodexo rates the best performer ranking ‘well on the path’ with a score of 16.6. McDonald’s (13.4) and Restaurant Brands International (13.2), meanwhile, are among those considered ‘in the middle of the pack’. Most positive, arguably, is the fact that hospitality companies who responded to the scorecard reported a CSPO uptake level of 99%.

That sounds impressive. So where are businesses falling down? The sector lags behind on a number of fundamental aspects. Only 14% of hospitality companies require suppliers to have traceability to the palm oil mill or plantation — the lowest share of all sectors represented in the scorecard. Hospitality companies also perform well below the global average when it comes to having systems in place to monitor supplier compliance with both environmental and social requirements (14%). Of particular concern to WWF is how little action hospitality companies are taking beyond their own supply chain, even though all respondents are members of the RSPO. For instance, none reported making investments in palm oil producing landscapes.

Isn’t the answer for businesses to stop using palm oil in products? If only it were that simple. WWF points out that when cultivated sustainably, palm oil can deliver significant economic and social benefits to local communities across the globe – particularly in countries like Indonesia and Malaysia where 85% of the world’s palm oil is produced. Oil palm cultivation is a primary source of income for an estimated 4.5 million people in both those countries, contributing to poverty alleviation, employment and income creation and helping stimulate rural infrastructure and local economic growth.

Aren’t consumers boycotting products with palm oil though? That’s certainly an option that some people are choosing. Recent Nestlé research showed that around one in five millennial shoppers (17%) avoid purchasing products containing palm oil with almost half (45%) saying they avoid products containing unsustainably sourced palm oil. But avoiding palm oil altogether is not a silver bullet solution. Nestlé recently created an interactive video platform that gives members of the public a better insight into the complexity of the palm oil supply chain and shows how the choices they make under different scenarios can lead to a range of outcomes and consequences for producers, including the exclusion of small-scale farmers from the supply chain. 

Are there alternatives to palm oil that are more sustainable? That depends on how the alternative is produced but there’s no guarantee it will be more sustainable. Palm oil is a productive crop with a yield far greater than any other vegetable oil. Replacing it with other vegetable oils like sunflower, soybean or rapeseed could require as much as four to 10 times more land to produce the same amount of oil, potentially causing greater harm to nature and wildlife. WWF says any decision to remove palm oil from products should be underpinned by robust evidence on how this can help reduce the global pressure of unsustainable vegetable oil production on biodiversity, ecosystem services and habitat conversion. 

So what should businesses do? As a first step, WWF is calling on palm oil buyers to join the RSPO and cover the entirety of their palm oil purchasing with certified product. It also wants companies to ensure that individual supply chains are free from deforestation and conversion of natural ecosystems, and respect the human rights of all impacted stakeholders.

But isn’t the UK government banning palm oil linked to deforestation in any case? Not quite. The UK government plans to make it mandatory for large companies, including those in the food and drink sector, to carry out due diligence checks to ensure there is no illegal deforestation in their supply chains for forest-risk commodities such as soya and palm oil. However, the proposed measures contained in its Environment Bill will still allow products that result from legal deforestation to be sold in the UK; as such the legislation will have limited effect as well as being difficult to implement and enforce, according to campaigners.

So we still need to worry about palm oil? We do indeed. WWF cites estimates that palm oil demand could increase four to six times by 2050 meaning there’s a real risk existing problems are exacerbated without urgent action. In short, it’s time for companies to step up to the plate.

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