For palm oil and derivatives to be truly sustainable requires true collaboration along the supply chain. We report from BASF’s second Sustainable Palm Dialogue
Palm oil and its derivatives are essential ingredients in personal care, as well as in food and many other industries. About 71 million tonnes/year of palm oil (PO) and 12.2 million tonnes/year of palm kernel oil (PKO) are consumed worldwide. PO now accounts for nearly 40% of all vegetable oil use.
Many environmental problems are associated with palm, particularly the destruction of forests and peatland to create plantations, mainly in Indonesia and Malaysia, the associated loss of wildlife habitats and biodiversity, fires and pollution. Palm has a truly terrible image and many consumers and NGOs are kicking back against it.
However, millions of livelihoods depend on palm. And, largely because of their high yields and high concentrations of C12-14 chains, PO and PKO are essential ingredients in oleochemicals that cannot readily be substituted with other renewables. To so do, the World Wildlife Fund agrees, “does not solve problems, but relocates and aggregates them”. The real challenge is making palm consumption sustainable.
Industry has responded with multiple initiatives, notably the Roundtable on Sustainable Palm Oil (RSPO), which uses the mass balance (MB) model to monitor the supply chain, thus ensuring that all participants maintain their commitment to sustainable production. At present, about 17% of all PO and 19% of all PKO is RSPO-certified; about one third of this is traded on the merchant market.
Sustainable palm is a complex issue and requires co-operation from farm to formulator. With this in mind, BASF held its second Sustainable Palm Dialogue at In-Cosmetics 2017 in London in April, bringing together speakers from all stages of industry and NGOs. Panels were held on how to live up to joint responsibility, the tools and technology that can solve problems and, perhaps most importantly, how to achieve faster market uptake.
BASF itself is one of the world’s largest users of palm derivatives, with an estimated 508,000 tonnes/year of PO exposure, equivalent to about 785,000 hectares of land. The company has 19 RSPO-certified sites, publishes an annual ‘Palm Progress Report’ and has set itself a target of all its palm-based oils being RSPO-certified as sustainable and with upstream traceability back to the oil mill by 2020. By 2025, this will be extended to all significant palm fractions and derivatives.
Michael Zens, who heads the fatty alcohols and oleo-surfactants department of BASF Personal Care & Nutrition, said that transparency and common understanding are vital. “What will really foster market uptake is that we are not fighting against each other like in the past. We now have NGOs working together with plantation owners, with us as chemical manufacturers and with our customers. We all now see that there is a common goal and achieving that through the whole supply chain is a first major step in getting faster market uptake.”
One key goal, in his view, is having a clearly understood system, without multiple competing certifications. The advantage of RSPO is that it is a multi-stakeholder platform that can foster physical market transformation. BASF believes MB to be the best way to achieve that.
Secondly, Zens said, all must be aware this is not cost-free and will fail if the costs are not passed through to the final consumer. This is especially the case if, as BASF and others present agreed, the smallholders who still account for 40% of palm production, are to be properly involved in securing change on the ground.
“Lastly, there is transparency – we need to have clear goals and communicate on them,” said Zens. “We can make a lot of commitments but if we can’t prove what we did right, we will fail. Sourcing sustainable raw materials is not enough: we must also have certified sites, because otherwise we lose this transparency along the way. We must also be very transparent upstream as well as downstream so that we can move towards a goal.”
Next downstream is the formulator, such as Switzerland’s Mibelle Ltd., which is part of a wider group making personal care products for retailers and other brands. The company, according to Emma Baxter, head of the technical department in the UK, believes itself to have been the first to start buying MB material and continues to drive this, whether or not customers demand it.
“Multiple company departments have been impacted by the company’s palm journey,” Baxter noted. “For quality, it is all about audits, paperwork and the policies we need to have in place. For compliance, it is about information from our suppliers about which products contain palm. For product development, it is about formulating products that meet the briefs we have on MB raw materials, which are limited in supply.”
One major issues with palm is that it can get almost anywhere, including many non-palm ingredients that might be formulated with palm derivatives – rose extract, for example, is made with glycerine. Information from suppliers is critical for formulators like Mibelle.
“We rely on our suppliers and we need to be able to formulate the product to deliver what customers want; we can only do that if raw materials are available, so we are constantly demanding MB raw material,” Baxter said.
Some suppliers understand certification but some do not, which limits the ingredients Mibelle can use. Similarly, some customers want MB grades while others do not, which further complicates the supply chain. Some are ready to pay for the true cost of their palm policies, while others want Mibelle to absorb the costs and others still are wary of the whole subject because they see it as ‘too technical’.
“We also have to consider customers’ customers,” said Baxter. “We may supply them fully MB formulations but they aren’t making a claim about that, their claims are about making hair shiny or skin soft. Until MB interests them, this factor will limit what we can do.”
Retailers also have increasingly stringent palm policies. Mareike Felix, who has responsibility for palm sourcing at Aldi International Services, said that the German supermarket chain has an international resource strategy of increasing the share of sustainably sourced raw materials in its products and decreasing the socially and ecologically negative impacts of its sourcing.
For food products, which account for 80% of Aldi’s palm footprint, the key target of sourcing all palm-derived ingredients from physical supply chains, i.e. MB, segregated and identity-preserved PO, was achieved on schedule in most markets by the end of 2015. The company is seeking to do the same for non-food palm ingredients by the end of 2018. If it cannot be done, the remaining volumes will be covered with credits so as to mitigate the impacts on the ground.
“The next big challenge will be derivatives and fractions – how can we source them sustainably and transform the market?” Felix asked. “One insightful experience for us has been interaction with suppliers and the chemical companies that supply them, understanding the challenges in derivatives and fractions, especially for non-food products.”
Information exchange with players from the supply chain, certification bodies and NGOs, she agreed with other speakers, is crucial. It is also vital but difficult to distinguish PO, PKO and their derivatives and fractions. Clearing that up would be a good first step.
Including smallholders is also vital to Felix – “if we exclude them, we will never get to market transformation, because we will exclude 40% of the palm produced”. There are various ways to include them through independent smallholder certificates, adapting a standard to meet their needs and engaging with groups on the ground in different ways. Aldi is investigating all of these.
“The third key point is collaboration between all of us, learning from each other and exchanging views openly about current and future challenges so that we don’t lose too much energy in each player advancing for themselves but are all going ahead jointly,” Felix concluded.
Very few attendees agreed with the supposition that the consumer will really drive demand for responsible sourcing in the near future. However, said Rachel Kent of The Forest Trust, a speaker from an earlier session, to sit back and wait for that would be almost to put the onus on NGOs to do a big campaign, like Greenpeace’s ‘orang-utan Kit Kat’ campaign against Nestlé in 2010.
“We as an industry need to get beyond that, take responsibility ourselves and make sure that our products are responsibly sourced, not wait for consumer to tell us that’s what they want,” Kent said. “Otherwise we are putting the balance of power into the NGOs and that is now what we are about as an industry.”
“Everyone on every panel today is in favour of doing something,” Zens agreed. “Now it is a case of getting closer together and talking more intensively, because everyone has something to offer. If we as industry leaders show commitment to having and achieving goals, the rest of the industry will have no choice but to follow us, because if not they will be left behind in time.”
Summing up, Jan-Peter Sander of BASF Personal Care & Nutrition, said: “Transparency is increasing and that is what we have need. We have more or less common goals but sometimes different timelines, so we need to be innovative in terms of brining all this together to achieve our targets. There is no other way to achieve that – the sooner the better and, yes, we should not wait for the consumer. We and all of you will continue our journey to sustainable palm oil.”