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Responsible purchasing of palm oil: a guide for manufacturers and retailers

Palm oil

PALM OIL AND DEFORESTATIONRecent expansion of palm oil plantations, especially in Southeast Asia, has replaced tropical rainforests which contain some of the world’s most biologically diverse ecosystems and are home to endangered species such as orang-utans, elephants, rhinos and tigers. Oil palm plantations have also been linked to social impacts, including loss of land, air pollution, a decline in ecosystem services such as water quality, and disregard for the rights and interests of local communities.

By purchasing certified sustainable palm oil (CSPO) from responsible growers, companies can help stop the destruction of forests in Southeast Asia (the source of 85 per cent of the world’s palm oil), Africa and Latin America. CSPO is palm oil that has been produced in plantations that

are developed and managed according to robust environmental, social and economic standards. By buying CSPO, manufacturers and retailers reinforce the incentives for their suppliers, and the palm oil growers they buy from, to act more sustainably.

What can companies do?

Many products found on retail shelves contain palm oil or its derivatives, including chocolate, baked goods, processed foods, cosmetics, pharmaceuticals, detergents and many others. Palm oil is a highly efficient crop and versatile oil, accounting for 65 per cent of all vegetable oil traded internationally. Global production of palm oil has increased tenfold since 1980, driven largely by population growth and rising incomes. Conservative estimates see at least a further 50 per cent growth by 2050.

The impacts of this rapid expansion of palm oil have been both positive and negative. On the one hand, oil palm has contributed to unprecedented economic growth and rural development especially in Southeast Asia. On the other hand, it has been a major driver of deforestation, destroying the habitats of critically endangered species, displacing local communities and contributing to harmful climate change. Palm oil buyers have a key role in ensuring that the future expansion of the industry has only positive impacts.

Why do we need sustainable palm oil?

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WWF believes that the Roundtable on Sustainable Palm Oil (RSPO) is the most credible, global standard for certifying the sustainability of palm oil. The RSPO is a not-for-profit association that unites stakeholders from across the palm oil industry to develop and implement global standards for CSPO production and trade. It includes environmental and social non-government organisations, such as WWF and Oxfam, as well as oil palm producers, processors and traders, consumer goods manufacturers, retailers, banks and investors. The RSPO website offers a range of useful information, including guidance for sourcing sustainable palm oil and an online market directory of where to source it.

WWF believes that the RSPO is the only independent, international standard and institution capable of transforming the global palm oil market. The RSPO is the benchmark for other standards and the minimum standard that responsible users of palm oil should adopt. At the core of the RSPO are eight principles addressing the key impacts of palm oil production (see graphic). WWF encourages retailers and manufacturers to join the RSPO, and to purchase CSPO as part of a time-bound action plan.

Recently, a range of other approaches to sustainable palm oil have emerged. These include standards developed by national governments and industries, such as the Indonesian Sustainable Palm Oil (ISPO) standard (based on legal compliance) and the Malaysian Sustainable Palm Oil (MSPO) standard. These standards can help ensure adherence with minimum good practice and legality but currently lack the wide acceptance, rigor and independence of the RSPO. At the same time some palm oil growers, traders, manufacturers and retailers have committed to build on the RSPO principles and criteria in an effort to deliver more ambitious environmental and social outcomes. For example, the Palm Oil Innovation Group (POIG) aims to verify performance against a set of best practice indicators that build

on the RSPO standard. These include additional measures and safeguards around issues such as greenhouse gas emissions, hazardous chemicals

and traceability.

The table overleaf illustrates the actions and commitments that palm oil buyers can take in order to minimise their impacts and support best practice. The core of such a policy is a time-bound commitment to purchase CSPO. Building on the foundation of the RSPO, responsible brands should also demand best practice from their CSPO suppliers.

Who certifies sustainable palm oil?

SOURCE: RSPO

a membership-based organization

TRADEMARK

of palm oil globally is certi�ed by the RSPO

Published in March 2014by the Roundtable on Sustainable Palm Oil

The expansion of plantations to meet global demand for vegetable oils could happen at the expense of forests,

wildlife and communities.

Global demand for vegetable oil is growing fast

HOW RSPO OPERATES

Why is palm oilso popular?

The RSPO was established in 2004 to promote the production and use of sustainable palm oil for People, Planet, and Prosperity.

RSPO worldwide impact

Design: Catalyze Sustainability Communications & ActivDesign

Find out more at www.rspo.org

+16%

Globally produced RSPO-certi�edsustainable palm oil

Some of the brands witha RSPO Trademark License

Some of the global companies committed to100% RSPO certi�ed sustainable palm oil

Committed to Smallholders

Banks / Investors

Palm Oil Processorsand Traders

Environmental NGOs

Consumer Goods Manufacturers

Retailers

Oil Palm Growers

SocialNGOs

Transforming themarket to makesustainable palm oilthe norm

Highyielding

Relativelycheap

Mostversatile

Commitmentto transparency

Compliance withapplicable lawsand regulations

Commitment tolong-term economicand financial viability

Use of appropriatebest practicesby growers and millers

Responsible developmentof new plantings

Commitment to continuousimprovement in key areasof activity

1

2

4

Environmental responsibilityand conservation ofnatural resourcesand biodiversity

Responsible considerationof employees, and of individualsand communities affectedby growers and mills

5

6

7

8

3

8 PRINCIPLES

As of early 2014, RSPO certi�ed palm oil

plantations cover an area approximately 27 times the

size of Singapore island—and this continues

to grow fast.

CSPO volumeCerti�ed production areaMembership

RSPO Smallholders Support Fund grants up to 100% of certi�cation cost to smallholders.

Successful certi�cation of smallholders around the world.

Grower certi�cationSupply chain certi�catesTrademark licensees

2004

Roundtable onSustainablePalm Oil ( )

INTERNATIONAL CERTIFICATION

SCHEME

for growers to be RSPO certified

Research has found that many �rms that switched to

producing sustainable palm oil reaped signi�cant returns on their investments. In some

cases, switching to sustainable production was economically

transformative for the business.

- WWF, CDC and FMO, 2012

ORDINARY MEMBERS AFFILIATE MEMBERS SUPPLY CHAIN MEMBERS

GENERAL ASSEMBLY (GA)

BOARD OFGOVERNORS

STANDING COMMITTEES

WORKING GROUPS/TASK FORCES

RSPO SECRETARIAT

9.7

mill

ion

mt

1,97 m

illion h

ecta

res

1400+ from over 7

0 countri

es

50 companies; 223 m

ills

548 companies and 1125 facilities

154 licensees in over 26 markets

Most widelyproduced

Netherlands

France

United Kingdom

Switzerland

India

Australia

China

Italy

Belgium

Denmark

Sweden

Germany

USA

Nations committedto 100% RSPOcerti�ed sustainablepalm oil

Nations showingpositive momentum

PAPUA NEW GUINEA 5,32%

CAMBODIA 0,21%

COLOMBIA 0,23%

IVORY COAST 0,07%

SOLOMON ISLANDS 0,33%

BRAZIL 1,51%

THAILAND 0,46%

ECUADOR 0,07%

MALAYSIA 43,95%

INDONESIA 47,85%

2012

/13

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The commitments, actions and communications described below cover the use of palm oil products by any company, including palm oil, palm kernel oil, and any derivatives and fractions. They include disclosure of palm oil use, time-bound plans to move to 100 per cent sustainable palm oil, and regular reporting on progress toward this goal.

COMMIT Make a public statement on palm oil and sustainability that demonstrates your commitment to source more responsibly.

• Publicly acknowledge the environmental and social impacts of palm oil.

• Announce your intention to start sourcing palm oil more responsibly.

• Join the RSPO and participate actively.

• Inform your suppliers of your plans to source sustainablepalm oil and encourage them to join the RSPO also.

ASSESSAssess your supply chain and start buying certified sustainable palm oil (CSPO).

• Develop systems to identify products containing palm oil andits derivatives, and relevant suppliers.

• Request documentation from your suppliers as to their sources of palm oil.

• Start buying physical CSPO (identity-preserved, segregated or mass balance) and cover the rest of your needs with book & claim/GreenPalm certificates.

ACT Develop and implement a time-bound plan for the responsible sourcing of palm oil.

• Make a time-bound public commitment to purchase 100 per cent physical CSPO from responsible growers that are already or very close to 100 per cent RSPO certified and aredemonstrating best practice (e.g. see POIG Charter).

• Develop a robust system to monitor progress.

• Seek assurance from your suppliers that they can meet your needs.

• Purchase increasing volumes of physical CSPO, where available.

PROGRESSDemonstrate progress towards purchasing CSPO from growers implementing best practice.

• Report progress towards sourcing palm oil from RSPOmembers that are implementing best practice.

• Communicate progress to customers and other stakeholders.

• Encourage other businesses to follow your example.

• Ensure that unknown or unsustainable palm oil and itsderivatives are eliminated from your supply chain.

A framework for responsible purchasing of palm oil

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•MARKET TRANSFORMATION INITIATIVE • 2014WWF.ORG.AU/MARKETS ALMOIL

WWF and palm oilWWF works with major companies and their supply chains to change the way key global commodities are produced, processed and consumed worldwide. By creating demand for more responsible products, significant environmental results can be achieved. WWF focuses its efforts on commodities and sectors with the greatest impact on priority places for biodiversity conservation and humanity’s ecological footprint.

As part of this effort, WWF seeks to ensure that forests of high conservation value (HCV) and habitats of important species are no longer threatened by the expansion of oil palm. WWF believes that this goal can be supported by promoting the use of CSPO, through cooperation with stakeholders throughout the supply chain.

Why we are here

www.panda.org

To stop the degradation of the planet’s natural environment andto build a future in which humans live in harmony with nature.

For more information visit:

wwf.org.au/palm_oil

© 1986 Panda symbol WWF ® WWF is a registered trademark

What supply chains are available for sustainable palm oil?There are currently four RSPO certified supply chain options that reward RSPO certified growers. Three of them (identify preserved, segregated and mass balance) also guarantee, to different degrees, a physical supply of CSPO to the end user. The fourth option (book & claim/GreenPalm) does not guarantee physical CSPO in the oil you buy but does match your palm oil purchases against a certified supply, allowing a brand to ‘support sustainable production’.

For more information on supply chain options for CSPO, visit http://www.rspo.org/en/RSPO_Supply_Chain_Factsheet

Book & claim / GreenPalm

Untraced palm oil with a trading scheme to support equivalent

certified sustainable production

Identify-preserved or segregated CSPO

CSPO that is fully traceable, kept separate from uncertified palm oil and

meets the RSPO criteria

The minimum when the other two options are

not available

100% SUSTAINABLE Companies should aim for this physical supply chain option

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Mass balance CSPOThe supply chain handles a mix of

CSPO and uncertified palm oil but does not keep them separate

A temporary solution when the best is

not available

Sourcing sustainable palm oil: commitments and actions for manufacturers and retailers – 1

SOURCING SUSTAINABLE PALM OIL: COMMITMENTS AND ACTIONS FOR MANUFACTURERS AND RETAILERS The following are actions we ask of retailers and manufacturers to ensure they are avoiding negative impacts of the palm oil in their products including third party brands. These negative impacts include threats to people, wildlife and the climate. The commitments, actions and communications described should cover all of their use of palm oil, palm kernel oil and any derivatives and fractions used globally. Each action should be accompanied by full disclosure of their palm oil usage, an ambitious timebound plan to move to 100 per cent sustainable palm oil, and regular reporting on progress to achieve this goal.

The Roundtable on Sustainable Palm Oil (RSPO) is the only credible, global and independently verified certification standard for palm oil. By sourcing RSPO certified sustainable palm oil (CSPO), consumer-facing companies that use palm oil are best positioned to use their influence and purchasing power to significantly change the way the global palm oil industry operates. Relying on company-own commitments or second-party systems may manage the reputational risk to brands in the short-term but it will not necessarily help the transformation of the global industry. The RSPO and CSPO should form the foundation of a sustainable sourcing policy for all companies that use palm oil products. Any additional sourcing requirements should build on the RSPO by requiring palm oil to come from companies that are not only RSPO certified but also implementing best practices in eliminating the negative impacts of palm oil cultivation.

A NOTE ON RSPO SUPPLY CHAINS

WWF supports the longer term aim of the RSPO to see CSPO become a bulk commodity grade in its own right – traded separately from other palm oil – so that companies can be assured that their use of palm oil does not continue to allow the trade in uncertified and potentially unsustainable palm oil. It is therefore important to establish segregated supply chains for CSPO.

However, WWF also acknowledges the need for a flexible approach to chain of custody in the short term to enable the RSPO system to become operational as quickly as possible. The wholesale move to segregated (SG) supply chains (including identity-preserved (IP)) will only be feasible when economies of scale are achieved. This scaling-up can be helped by creating early demand for CSPO through the use of book & claim (B&C) and mass balance (MB) supply chain systems.

The situation is different across the major palm oil markets, and therefore WWF has a different approach in, for example, the emerging Asian markets, than it does in the more mature CSPO markets of Europe. In Europe, where sufficient volumes of product derived from the physical supply chains of CSPO are more readily available, it is becoming easier to source segregated CSPO. There is no excuse for companies in Europe not to buy as much segregated CSPO as possible and cover the rest of their full use of palm oil with book & claim. However, WWF realizes that, from a business perspective, the lower costs and simpler logistics of the mass balance and book and claim supply chains may make it more attractive for companies buying palm oil, and may thus support the fast early growth in demand for CSPO, especially in markets like China and India.

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Sourcing sustainable palm oil: commitments and actions for manufacturers and retailers – 2

COMMIT MAKE A PUBLIC STATEMENT ON PALM OIL AND SUSTAINABILITY THATSHOWS YOUR INTENTION TO SOURCE RESPONSIBLY• Publicly acknowledge the problems associated with unsustainable palm oil.

• Demonstrate public support for sustainable palm oil sourcing to help conserve both thenatural environment and the livelihoods of people.

• Start to motivate your suppliers.

Expectation: A company should be able to do this immediately, given the level of public awareness of the issues and the reputational risks involved.

MAKING PUBLIC STATEMENTS, POLICIES AND COMMITMENTS OTHER ACTIONS COMMUNICATING WITH YOUR SUPPLIERS PURCHASING CERTIFIED SUSTAINABLE

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• Publish a statement about theenvironmental and social impacts of palmoil in a publicly available source, such asyour website, sustainability or CorporateSocial Responsibility (CSR) report, orgeneral procurement policy.

• Publish your intention to start responsiblysourcing palm oil in ways that conservethe natural environment, minimizeclimate change and support thelivelihoods of people.

• Announce your support for and intentionto join the RSPO.

• Check to see if there is a national orsectoral commitment to sustainable palmoil and sign on. (more info)

• Become a member of the RSPO andparticipate in the roundtable processessuch as voting in its General Assembly,attending its annual conference andcontributing to the various workinggroups and taskforces as appropriate.

• Ensure that you are reporting annually tothe RSPO.

• Inform your suppliers of yourintention to shift to sustainablesourcing of palm oil.

• Encourage your suppliers tojoin the RSPO.

• Encourage your suppliers to work towardsRSPO supply chain certification.

• Consider supporting suppliers withtraining and resources.

Sourcing sustainable palm oil: commitments and actions for manufacturers and retailers – 3

ASSESS ASSESS YOUR SUPPLY CHAIN AND START BUYINGCERTIFIED SUSTAINABLE PALM OIL• Identify products that use or contain palm oil, their suppliers, volumes and origins.

• Start to shift your sourcing to RSPO certified sustainable palm oil (CSPO)

Expectation: Depending upon the quantity of products and complexity of the ingredients/supply chain, this could take up to two years. However, companies should prioritize and take earlier action on the products that contain the largest proportion of the palm oil they use.

MAKING PUBLIC STATEMENTS, POLICIES AND COMMITMENTS OTHER ACTIONS COMMUNICATING WITH YOUR SUPPLIERS PURCHASING CERTIFIED SUSTAINABLE

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• Announce that your company is setting upa system to identify how much palm oilyou are using, in what products andfrom which sources.

• Announce that you have started to buycertified sustainable palm oil products.

• Make public your total use of palmoil products.

• Develop and implement systems thatidentify products with palm oil and theirsuppliers, i.e. an inventory of all food andnon-food products that contain palm oil.

• Identify volumes of palm oil per productand total palm oil (CPO, PKO, derivativesand fractions) used. (more info)

• Gather documentation and verifiableevidence to identify all possible origins ofpalm oil derived from suppliers1.

• Categorize the volumes of palm oil inall products into the following threecategories:a) Sustainably produced sources, which

is RSPO certified and produced bycompanies implementing best practice(more info)

b) Certified sustainable sources, which isRSPO certified in accordance with thePrinciples and Criteria.

c) Unknown and possibly unsustainablesources including conventional palmoil from RSPO members.

• Ask for CSPO from your suppliers.

• Demand as much CSPO from physical sources as possible.

• Require documentation and verifiableevidence from your suppliers as to theirsources of palm oil and whether they are:a) Sustainably produced sources, which

is RSPO certified and from companiesimplementing best practice (such asfrom verified POIG members).

b) Certified sustainable sources, which isRSPO certified in accordance with thePrinciples and Criteria.

c) Unsustainable sources including thatof unknown origin and conventionalpalm oil from RSPO members.

• Report on your use of CSPO and progress towards using 100 per cent CSPO at least in the RSPO annual reports.

• Cover 100 per cent of your palm oil use bypurchasing CSPO via any combination ofthe RSPO supply chain systems.

• Source as much CSPO as possible fromphysical supply chain options (includingmass balance, segregated or identity-preserved).

• Cover all of the remaining volume withbook & claim certificates.

With the availability of a range of RSPO supply chain options including book & claim there is no reason for a company to not be covering 100 per cent of their use of palm products with CSPO.

1 In order to eliminate unsustainable palm oil from supply chains, traceability is required back to the field level. Responsible suppliers are those that are able to trace all the palm oil they sell back to known and verifiably sustainable sources. In most cases suppliers may only know which company they sourced from. If they do know more about the original source of the palm oil it may be only that they can identify a country of origin or a particular grower or only whether the grower was an RSPO member or not. However, unless the palm oil they sell is 100 per cent segregated, RSPO certified they cannot guarantee that the oil they supply is free from some unsustainable sources. And if you have additional requirements you will need to ensure that this is from companies that have been verified as implementing best practices such as the POIG Charter. Tracing supplies right back to the field is a huge undertaking for brands. It may not be necessary to invest in such traceability IF companies source CSPO from suppliers which can deliver that level of traceability themselves.

Sourcing sustainable palm oil: commitments and actions for manufacturers and retailers – 4

ACT DEVELOP AND IMPLEMENT A TIME-BOUND PLAN FOR THE RESPONSIBLE SOURCING OF PALM OIL• Include a goal of 100 per cent physical supply from suppliers that are implementing best

practice (such as independently verified Palm Oil Innovation Group (POIG) members).

Expectation: This should be undertaken as soon as the inventory of palm oil use and suppliers is completed.

MAKING PUBLIC STATEMENTS, POLICIES AND COMMITMENTS OTHER ACTIONS COMMUNICATING WITH YOUR SUPPLIERS PURCHASING CERTIFIED SUSTAINABLE

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• Make a time-bound public commitmentto purchase 100 per cent physical CSPO(MB, SG). It may be that different targetsare appropriate for the different uses ofpalm oil if some are more readily availablethan others.

• Make a time-bound commitmentto source physical CSPO only fromresponsible growers that are already orvery close to 100 per cent RSPO certifiedand are demonstrating best practice(such as independently verified POIGmembers).

• Demonstrate senior management supportfor these targets.

Retailers selling own-brand and third-party brands should have time-bound plans for both.

• Establish a robust monitoring system foreach of these time-bound plans so thatprogress can be publicly reported.

• Consider joining POIG as a supporter.

• Communicate these time-bound plans toyour suppliers.

• Seek assurance from suppliers that theycan comply.

• Work with suppliers to support theirefforts to move to physical CSPO.

• Signal your intention to delist suppliersthat are unable or unwilling to comply.

• Purchase increasing volumes ofphysical CSPO.

• Purchase physical CSPO from verifiedbest performers (such as independentlyverified POIG members).

Sourcing sustainable palm oil: commitments and actions for manufacturers and retailers – 5

PROGRESS DEMONSTRATE PROGRESS TOWARDS PURCHASING PHYSICAL CSPO FROM GROWERS IMPLEMENTING BEST PRACTICE• Move from purchasing palm oil certified by book & claim or mass balance systems to fully

segregated or identity preserved CSPO.

• To avoid reputational risk, move towards purchasing this CSPO only from growers that have been independently verified to be implementing best practice on issues such as the conversion of peat and other high carbon areas, the use of hazardous chemicals and due diligence in sourcing independent fresh fruit bunches into mills. At present such issues are only covered by voluntary best practice guidance in the RSPO so they currently have to form part of an additional verification process such as that being developed by the POIG.

Expectation: Companies should have achieved this stage no later than 2 years after achieving 100 per cent physical CSPO sourcing.

MAKING PUBLIC STATEMENTS, POLICIES AND COMMITMENTS OTHER ACTIONS COMMUNICATING WITH YOUR SUPPLIERS PURCHASING CERTIFIED SUSTAINABLE

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• Report progress towards sourcing responsible palm oil from RSPO members that are implementing best practice.

• Communicate to your customers directly about your progress on the sustainable sourcing of palm oil.

• Report publicly on social, labour and environmental company performance using Global Reporting Initiative or equivalent approach.

• Join the Palm Oil Innovation Group and work with them to develop targets for sourcing CSPO from responsible growers.

• Document and verify evidence demonstrating that increasing volumes of physical CSPO from growers engaged in best practice are being sourced and progress is being made towards your public commitment.

• Support the strengthening of the standards and systems within the RSPO.

• Work with suppliers to shift to purchasing 100 per cent physical CSPO.

• Work with suppliers to ensure that the CSPO comes from responsible growers that are already 100 per cent RSPO certified and are implementing best practice (e.g.: independently verified POIG members).

• Ensure that unknown and unsustainable palm oil is eliminated from your supply chain.

• Delist suppliers that are unwilling or unable to comply.

• Continue to increase proportion of physical CSPO towards 100 per cent purchased from suppliers engaged in best practice (e.g.: independently verified POIG members).