Bringing transparency to the palm oil supply chain

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By Jesse Klein

January 24, 2022

Palm oil plantation
Palm oil struggles with deforestation issues but is one of the most efficient crop for producing oils. Image via Shutterstock/Yusnizam Yusof. 

Palm oil has become an ingredient that is demonized in sustainability coverage, although it’s technically responsible for 1 percent of deforestation, according to a 2018 report. By comparison, beef and soy production drive more than two-thirds of habitat loss in Brazil. Between 2001 and 2015, cattle resulted in 111 million acres of deforestation, four times that of palm oil over the same period. And according to experts such as Chris Sayner — vice president of corporate sustainability at Croda International, a chemical company that supplies ingredients to big personal care brands including L’Oreal and Unilever — the alternatives, coconut oil and soya oil, produce lower yields and so are less efficient uses of land and resources. 

“It’s why the NGOs do support palm,” said Sayner. “Because switching away from palm would send you to coconut or soya or a mix of different oils, all of which would demand more land and make the problem worse. None of them say move away from palm. What they say is source palm sustainably.” 

But deforestation related to palm oil cultivation is still a big issue for high-producing countries such as Malaysia and Indonesia. Palm oil is an integral ingredient in half of all supermarket products, according to Rainforest Rescue, and 70 percent of every shampoo, conditioner, soap, toothpaste, perfume and other personal care or beauty products. It’s an emulsifier that suspends the active ingredients. Sayner called it the “workhorse ingredient.”

To make the cultivation of palm oil more sustainable, transparency into the supply chain is key. That’s the mission of Action for Sustainable Derivatives (ASD), a collaborative initiative from BSR, which has brought together 23 of the largest personal care companies including Croda, Chanel, Estee Lauder and L’Oreal to engage their suppliers and create a map of palm oil supply chains.

Last year was the collaboration’s third year in operation, and its 2021 report outlined the supply chains for 825,000 tons of palm-based materials, 230 suppliers and distributors including mills, plantations and refineries. According to the report, of the refineries and mills it requested information from, between 85 and 90 percent reported transparency metrics to ASD.

“Transparency or visibility of production in a supply chain is a tool, not an end goal,” said Edwina McKechnie, associate director of BSR, the parent organization behind ASD. “There are unique challenges for palm primarily due to a highly fragmented and complex supply chain.”By being a collaborative initiative, we’re making suppliers better able to respond to various different end-users requests by making it a comprehensive, singular ask.

McKechnie outlined four to 10 supply chain links between a palm plantation and the consumer including mills, refineries and crushers. And according to Sayner, palm oil sometimes goes through double-digit transformations before it arrives in the shampoo bottle. ASD brings together the consumer product producers using palm oil to help everyone in the supply chain navigate the complicated, opaque and independent companies downstream. The goal is for the consumer brands to better understand who is in their supply chain and for ASD to be able to investigate the sustainability and practices happening in those chains to report back.

“Suppliers are getting similar requests [on sustainability], but they’re not streamlined,” said Ricki Berkenfeld, manager at BSR. “By being a collaborative initiative, we’re making suppliers better able to respond to various different end-users requests by making it a comprehensive, singular ask.” 

And of course by pooling all these groups together, the personal care brands have a bigger influence over the supply chain than if one company was acting alone.

“If all of us were attempting to do this work individually, it’s a huge effort,” Sayner said. “At Croda, we buy over 300 palm-based raw materials from over 100 suppliers to our 14 plants around the world. That’s so much complexity, and our customers, like L’Oreal and Estee Lauder, they’re buying hundreds and hundreds of these ingredients from different suppliers.”

Bottles of palm oil
Palm oil in different phases of refinement. Image via Shutterstock/Nabilah Khalil

Basically, it gets unwieldy quickly, and ASD takes some of that burden off consumer companies. 

To do this, ASD uses its Sustainable Palm Index (SPI), an evaluation scorecard aligned closely to the Roundtable on Sustainable Palm Oil (RSPO) guidelines — a common commitment made by many palm oil users and suppliers that addresses sustainable sourcing, human rights issues and deforestation in the palm oil supply chain. The index questionnaire asks questions such as “Who is the manufacturer and distributor?”; “What type of palm oil?” (There are two: one from the fruit and one from the kernel); “What is the purity?”; “What percentage of your supply chain has a no-deforestation commitment?”; “What percentage has been verified?”

Then ASD uses that information to create supply chain maps that are evaluated for risk based on location and the companies involved in the process. 

“We check the methodologies,” said Arnaud Bonisoli, a project manager from Transitions, a sustainable development consultancy agency, who works on managing the ASD program. “What kind of commitment are they doing? What kind of practices? What kind of transparency? What kind of grievances are linked? What kind of resolution to those grievances do they have?”

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ASD collects this information and distributes it to its members. The information can help buyers understand if a supplier has had deforestation issues or human rights violations. The grievances can be investigated and then acted upon. But ASD also has to concern itself with confidentiality. According to Bonisoli, the personal care and additives industry is highly concerned with privacy. The recipes for Chanel’s perfumes or Aveeno’s skincare line are protected, and if a competitor learns where these brands are sourcing their ingredients, it’s possible to reverse engineer a similar product. 

“We act on a black box principle,” Bonisoli said. “Every information that we do collect, we share it only in aggregate.” 

ASD also cannot tell its members what suppliers to buy from and which to avoid for antitrust reasons. ASD simply provides as much information as possible about suppliers to the brands and allows them to make independent internal decisions about which they buy from. But ASD and its members still feel they are stronger as a unit. 

“Our aggregate consumption of palm within the membership is heading towards a million tons,” Sayner said. “We’ve got some leverage here. We’ve got a voice in the industry. We can’t make much noise as individual companies, but together we are trying to do good things in the palm supply chain.”Show comments for this story. 

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