Palm Oil

Palm oil production has more than tripled during the past two decades. Palm oil expansion in Indonesia and Malaysia is the leading cause of rainforest destruction, carbon dioxide emissions, and human rights abuses. 

This brief provides a summary of the main environmental and social factors that affect palm oil production worldwide; however, it spotlights key players in the U.S. value chain and provides examples of actions being taken by companies operating or headquartered in the U.S.

KEY TAKEAWAYS

  • Palm oil production has more than tripled during the past two decades. It is used in many goods that people use regularly, from processed foods and cosmetics, to detergents, chocolate and biofuel.
  • Palm oil sourcing has attracted significant and growing attention and debate by NGOs, investors, companies and consumers due to the commodity’ssignificant environmental and social challenges.
  • The palm oil sector employs millions, and a large proportion are smallholders. However, the rapid expansion of production is linked to human rights challenges and nearly 4 percent of global greenhouse gas emissions.
  • About 85 percent of palm oil is grown in Indonesia and Malaysia, where its production is the leading driver of deforestation and habitat loss of endangered animals, notably orangutans and Sumatran tigers.
  • Investors should address business risk in the palm oil supply chain through direct engagement with their portfolio companies and by supporting relevant policies and multistakeholder collaborations.

Environmental and Social Factors that Drive Risks

Commodity Background

Palm oil is found in more than half of all packaged products purchased by Americans (food and non-food) though it is often only a minor ingredient. Common usage in food products include margarine and chocolate. Common usage in health and beauty products include cosmetics and candles. A small percentage of palm oil is used in energy production including electricity and heating.

Top Production Regions

Indonesia and Malaysia are the leading palm producers with 85 percent of global production.

CERES

Supply Chain

Since supplies from different sources are mixed together at multiple stages, it is difficult to trace palm oil through the supply chain.

CERES

Company Examples

Kellogg Company

At Kellogg Company, in 2015, 100 percent of the palm oil the company uses in the U.S. and Canada was RSPO mass balance certified. The company requires that suppliers trace palm oil to plantations that are independently verified; meet its principles for protecting forests, peat lands, and human and community rights; and comply with RSPO. 

Mondelez

Mondelez met its pledge to make all of its palm oil 100 percent RSPO certified in 2013. At the end of 2015, 90 percent of the palm oil sourced by the company was traceable back to the mill and 91 percent was from suppliers with published policies. It has acted against suppliers that did not comply; at the end of 2015, it confirmed plans to exit 11 suppliers.