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January 06, 2004
Many Companies Cannot Verify Whether Their Palm Oil Is Produced Sustainably
by William Baue
An ISIS Asset Management report finds that few companies can trace the source of their palm oil up
their supply chain to confirm whether or not it is produced sustainably.
SocialFunds.com --
If you do not know much about palm oil, you may not be alone. It turns out that many companies who
use this commodity in their products cannot ensure whether their palm oil is produced in a
sustainable manner or not, according to a new report. The report surveys 24 companies held by ISIS Asset Management, a socially responsible
investment (SRI) firm, including Cadbury Schweppes (ticker: CBRY.L), Colgate-Palmolive (CL), Compass Group
(CPG.L), Procter
& Gamble (PG),
and Unilever (UN). With current demand of 22.5
million tonnes per year, palm oil has become the single largest traded edible oil in the world, and
demand is projected to almost double to 40 million tonnes by 2020.
 Although two-thirds (67 percent) of the
responding companies feel they manage the risks of the ecological impacts on their supply chains
adequately, more than four-fifths (83 percent) do not appear to know where their palm oil
originates.
“Only a limited portion of companies were able to identify their ultimate
suppliers,” states the report, entitled New Risks in Old Supply Chains: Where Does Your Palm Oil
Come From? “Few could trace their supplies to a given country and fewer still to a particular
plantation.”
“Assurances about sustainability were extremely general and presented little
or no independent verification of the claims,” the report continues. “Several were so generic
(i.e. naming a specific country from which palm oil is sourced and claiming, incorrectly, that all
the oil from that country is sustainably produced) as to be of little or no use.”
Palm oil
comes from the dark orangish-brown fruits of the oil palm tree, which resembles the coconut palm.
The subtitle of the report, From lipstick to ice cream: a survey of palm oil use and supply
chain management, suggest the wide spectrum of palm oil’s commercial uses--as a component of
food, cosmetics, detergents, and chemicals.
Only a portion of the palm oil on the market
is grown sustainably, with much of the increase in production displacing rainforests and indigenous
communities. Companies with foresight recognize the importance of tracking their supply chains
accurately and disclosing transparently the sustainable production of the palm oil they use.
“The study reveals that some companies have the situation broadly under control, at least
insofar as palm oil sourcing is concerned,” the report states. “Unsurprisingly, some of those that
perform well in this specialized area--such as Unilever, Body Shop, and Marks & Spenser--are the
so-called ‘usual suspects,’ well-known for their commitment to matters of sustainable development.”
“Other companies, such as Cadbury Schweppes and Compass Group, have been able to source
from suppliers that are known to produce in line with sustainable development objectives,” the
report adds.
The report finds that many companies’ stated policies regarding the
sustainable production of commodities in their supply chain do not match their actual practices,
and often have no way of verifying their commitments. The report therefore recommends that
companies change their walk to match their talk. The report also recommends that companies take
action to ensure the sustainability of the palm oil they use. For example, it recommends joining
the Roundtable on Sustainable Palm
Oil, an initiative promoting sustainability sponsored by the World Wide Fund for Nature (WWF) in cooperation with industry representatives
including Unilever and the Body Shop.
Encouragingly, the report finds that almost a
quarter (21 percent) of the surveyed companies are developing or considering developing supply
chain policies specifically relating to palm oil. Three of these proactive companies are doing so
even though they consider themselves to be dealing adequately with the issue already. And the very
conducting of the survey itself spurred action.
"Several companies noted that the ISIS
survey stimulated further internal action on this issue," the report concluded.
©
SRI World Group, Inc. All Rights Reserved.
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