Home Cover Story Lipsticks, Burgers & Orang-utans: Deforestation Riddled Supply Chains

Lipsticks, Burgers & Orang-utans: Deforestation Riddled Supply Chains

By Raminder Chowdhary

The truth runs deeper than you think! This punchy short film titled ‘Unseen’ was realeased by WWF to create awareness among consumers about the importance of choosing products made of sustainable palm oil.

Countless agricultural commodities form the building blocks of thousands of products that are manufactured and traded globally by corporations. Over the past decades, the demand for agricultural produce for feed, fuel and food purposes has been a key driver of deforestation and responsible for over 50% of it. Among those who are indirectly contributing to this devastation are the large corporations of India – collectively the largest single market for a key commodity – Palm oil.

Forests cover around 30% of the planet’s surface providing habitat for over 80% the earth’s terrestrial biodiversity, are the source of livelihood to over 1.6 Bil people and provide unrecognized ecosystem services for our food, energy, climate and water security. Approximately 15%¹ of all greenhouse gas emissions are caused by deforestation in the tropics and subtropics – equivalent to the global transport sector. Yet, we are losing them at an unprecedented pace. Over the past 50 years, over half of the natural forest cover of our planet has been lost.

Enter the global corporations: The “big four” commodities – palm oil, soy, beef and paper/pulp are the building blocks of countless products traded globally. Conversion of forests to agricultural commodity plantations has been the largest single cause of deforestation in recent years. As demand for these commodities grows, we can expect global agricultural cropland to expand by 42% by 2050². This demand cannot be met without incurring significant business and environmental risk. Complex global supply chains are generating positive forest footprints leading to the creation of unexpected reputational, operational and valuation risks for most corporations.

Not convinced – consider the scale of impact of a single corporation. Take the case of Wilmar International. The company is an agri-business conglomerate and one the largest palm oil cultivators. It is a discloser to the CDP’s forests program and hence committed to zero deforestation. If it delivers on its commitments, the expected savings could be more than 1.5 Gigatonnes of CO₂ by 2020 – roughly equivalent to the combined annual carbon emissions of Central and South America from energy consumption³.

Now that I have your attention, let us have a closer look at the biggest of the big four – Palm oil. An edible oil used globally and found in a wide variety of products including chocolate, soap, shampoos, cookies and cosmetics. Other industries where it is used are livestock, meat sector, and bio fuels. Some of the best Palm oil plantations can generate up to 10 times more oil per unit area than soybean, rapeseed or sunflower⁴. Hundreds of thousands of small farmers depend on Palm oil for their livelihoods. Over 50 Mil Tonnes of Palm oil is produced annually and over 85% comes from Malaysia and Indonesia⁵. Palm oil production is also rapidly expanding into other areas of the world, including western and central Africa, Latin America and Papua New Guinea⁶. India and China are the largest importers. So much for facts.

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Data Source: FAO 2013 (Production in Mil Tonnes)

The Problem: The growth in demand for palm oil is fueling deforestation and depletion of peat lands. A study by Carlson et al. (2012) found that deforestation for development of oil palm plantations in Indonesian Borneo is becoming a globally significant source of CO2 emissions⁷. Cutting down or burning tropical rain forests to plant oil palm releases large quantities of stored carbon⁸. Many of Indonesia’s national parks have suffered deforestation due to illegal logging and palm oil plantations. Palm oil plantations have replaced the habitat of many endangered species, including primates such as the orang-utans.

Several reports from Greenpeace from 2007 onwards (Cooking The Climate, Frying The Forest & Palm Oil’s New Frontier) and a 2009 report from Environmental Investigation Agency (EIA) titled Permitting Crime have highlighted the problems of land grabbing, destruction of peatlands and rain forests, exploitation of communities, etc

We the Consumers need to realize that leading global brands in fast foods, packaged foods and personal care are using a commodity that is causing the destruction of rain forests and peat lands. Before you react to this – great news is that Palm Oil can be produced sustainably when large corporations commit to deforestation free palm oil in their complex supply chains. Distressing is to know that many companies are lagging far behind. How can we as consumers differentiate? The Union of Concerned Scientists (UCS) prints a Palm Oil Scorecard evaluating the commitments made by leading Corporations. The 2015 scorecard raises an important question – why are so many of the world’s biggest brands still using unsustainably produced palm oil and contributing to deforestation and peat land destruction? Guess which global corporations had no commitment to using certified sustainable Palm oil – Target, Costco, Wendy’s, Dominos, Walgreens, DQ, etc. (Interestingly, after the report we saw new commitments rolling in at an unprecedented pace.) Keep in mind, these are commitments and we have to see how these translate into actions.

A 2013 Report by WWF assessed 130 retailers, food service companies and manufacturers from Europe, Japan, US, India and Australia. The findings were astounding and the report named and shamed a large number of global buyers. Of the 130 companies surveyed, fewer than half purchase palm oil that meets the social and environmental standards set by the The Roundtable for Sustainable Palm Oil (RSPO), a voluntary scheme that now covers about 40% of palm oil production. This was quickly followed up with a punchy short film titled Unseen. The report questioned that with certified palm oil so easy to source, why are so many companies failing to hit their own sustainability targets?

The report identified many buyers in the 100% club. Unilever (including Hindustan Lever), for instance, one of the largest palm oil buyers in the world and a founding member of RSPO, buys all its palm oil from certified providers. 24 of the 78 manufacturers in the study do likewise. UK supermarket brands Sainsbury, Tesco, Waitrose, M&S and Asda feature in a similar leading list of 21 retailers that buy 100% certified.

Then there were the laggards. A second tier of companies like Procter & Gamble and McDonald’s that bought just 13% of their palm oil from certified sources. At 17%, PepsiCo is another big name on the laggard list.

The Future lies with India

India has emerged as the World’s single largest importer of Palm oil, buying nearly one fifth (9.2 Mil Ton) of the total global production (50 Mil Ton). Palm oil constitutes nearly half of the total edible oil industry in India where consumers are lower and middle income households who are very price conscious. Certified palm oil could add to price and deforestation is not a priority. The government is promoting palm oil cultivation in India under its Oil Palm Area Expansion Program by earmarking $ 50 Mil as grants and subsidies, yet sustainability does not seem to be priority under the program.

The report card of the largest buyers is dismal in ensuring that their supply chains are deforestation free. The key lies with large importers and processors who buy directly from plantations in South East Asia. As this article was written 43 companies were registered members of RSPO. The 2013 scorecard of palm oil buyers published by WWF highlights that most registered members were not procuring with sustainability certifications (CSPO). See chart from report below.

Data Source:  WWF Palm Oil Scorecard 2013
Data Source: WWF Palm Oil Scorecard 2013

Browsing the websites of most of the companies (in the table) above does not provide any information if any progress has been made to shift to certified palm oil sourcing since 2013. If they have, then they need to publicly state their commitments.

Special mention must be made here of Hindustan Lever who have been the pioneers of sustainably sourced palm oil. 100% of their requirements are covered under the Book and Claim Certificates (next best alternative to direct CSPO procurements) with public commitments to shift to traceable CSPO by 2020 

What needs to be done

• Palm Oil Plantation Companies: Those managing plantations need to ensure they are improving yields from existing plantations and expanding only into areas with low carbon storage
• Companies in palm oil related business need to ensure that their supply chains are not responsible for deforestation and peat land depletion. Buy from RSPO certified sources. India as the largest importer of Palm oil has a big role to play in this.
• Downstream retailers and consumers can play a crucial part in ensuring that supply chains are deforestation free. Insist on product labelling that is clear on whether certified sustainable palm oil has been used.
• Most governments need to enact product labelling laws ensuring that manufacturers are not concealing ingredients by using generic titles. Like “vegetable oil” for palm oil. 

Notes
1) van der Werf GR, et al. (2009) CO2 emissions from forest loss. Nat Geosci 2:737–738; Baccini A, et al., Estimated carbon dioxide emissions from tropical deforestation improved by carbon-density maps (2012) (2012) Nat. Clim. Change 2, 182
2)  http://www.nature.com/ nclimate/journal/v4/n10/ full/nclimate2353.html
3)  https://www.cdp.net/CDPResults/CDP-global-forests-report-2014.pdf
4) RSPO. (2006) Factsheet: Palm Oil
5) USDA. (2012) Oilseeds: world markets and trade
6) IFC. (2010) Key issues in the palm oil sector
7) Carlson KM, et al. (2012) Carbon emissions from forest conversion by Kalimantan oil palm plantations. Nature Climate Change, Letters
8) Achten WMJ, et al. (2011) Implications of biodiesel-induced land-use changes for CO2 emissions: case studies in tropical America, Africa, and Southeast Asia. Ecology and Society 16, 14

Raminder ChowdharyAfter working for various MNC’s for 20+ years as a supply chain specialist Raminder Chowdhary changed tracks and set up One Earth Foundation – an NGO focusing on conservation of natural eco-systems, preservation of ancient wisdom and environmental education. A regular speaker on various regional and national forums promoting the need for higher levels of corporate participation in social and environmental issues facing us today-Raminder holds Master’s Degrees in Economics and Business Admn. He has successfully implemented projects in the sectors of TK & TCE preservation, special needs groups, livelihood challenges for indigenous communities, water, large scale forest and lakes stewardship drives and engaging students in various ecological initiatives.