Palm oil is the most widely used vegetable oil on earth and demand continues to grow. There are issues around sustainable production and processing, however, and consequently there are various developments in the industry. Find out more and what Triodos is doing to support improvement.

What is palm oil?  

Palm oil is a highly saturated vegetable oil extracted from the fruit of the oil palm tree. It is the most widely used vegetable oil on earth and demand continues to grow. It is used primarily in food products such as cooking oil, shortening, margarine, milk fat replacer and cocoa butter substitutes.

Rapid and ill-managed expansion  

The oil palm produces more oil on less land than any other crop and can therefore be a sustainable producer of vegetable oil. However, fast-growing demand for palm oil has led to rapid and ill-managed expansion of palm oil production, resulting in serious environmental and social consequences such as deforestation, loss of natural habitats, illegal fires and land conflicts with indigenous people. To address these concerns, in 2004 the Roundtable on Sustainable Palm Oil (RSPO) was formed and has since developed and implemented global standards for sustainable palm oil. The RSPO unites stakeholders from seven sectors of the palm oil industry, including oil palm producers, palm oil processors or traders, consumer goods manufacturers, retailers, banks and investors, plus environmental and social watchdogs. The RSPO Principles and Criteria for Sustainable Palm Oil Production were adopted in November 2005 and a system for supply chain certification has also been developed. In 2013, 15 per cent of the world’s palm oil was certified as sustainable, up from 10 per cent in 2011. Unfortunately, however, demand continues to lag behind supply – only 52 per cent of the certified palm oil is bought – in spite of many RSPO members having pledged to source only certified palm oil by 2015.

Increasing the pressure  

Several new initiatives are increasing the pressure on the palm oil supply chain to improve its sustainability. One such initiative is the Palm Oil Innovations Group (POIG), which was established after a review of the RSPO Principles & Criteria in 2013. The POIG consists of progressive palm oil companies and environmental and social non-governmental organisations, and its Charter explores ways to increase the market demand for innovative palm oil products. The POIG aims to build on the current RSPO standards and commitments by encouraging and demonstrating innovation with regard to deforestation, carbon stocks, biodiversity and social relations. Investor pressure is also increasing and several collaborative engagement initiatives have developed.

What does Triodos do?   

For the past six years Triodos has required companies using palm oil to show their commitment to biodiversity impact reduction by either being a member of the RSPO, or by having a corporate target for the use of RSPO-certified palm oil. We have recently tightened our standards and now require companies that use palm oil to be both a member of RSPO and to have a target to source 100% RSPO-certified palm oil, preferably by 2015, and from a segregated supply chain. In 2013, Triodos Investment Management also joined the UNPRI initiative that focuses on palm oil growers, and encourages them to take responsibility for ensuring the sustainability of their product.

Best practice

International retailer of body, face and home products, l’Occitane, has a clear position statement about palm oil, which explains what palm oil is, why it is controversial and why the company continues using it. l’Occitane is a member of the RSPO and has set a target that by 2015 all its soaps will be made with traceable and sustainable palm oil. At the same time, the company has started a project for the supply of palm oil from old village palm groves in West Africa. The land is farmed organically and the oil is fair trade. 

Note: The issues explored in this article are relevant for sustainable investments on the stock market. Triodos Bank believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.