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Palm oil

Worldwide around 34 million tonnes of palm oil is produced each year. Palm oil is processed in many products such as margarine, biscuits, soap, shampoo and even fuel. Originally the palm trees used for palm oil only grew in Africa. In the twentieth century they were also planted in other countries around the equator, such as Malaysia and Indonesia. These are now the most important palm oil producing countries. Most palm oil is produced on large scale plantations which include a crushing mill.

Did you know…

 

  • The Rotterdam harbour is the main depot in the EU for crude palm oil.
  • Palm fruit bunches weigh around 40 to 50 kilos. The fruits are the source of crude palm oil (CPO), palm kernel oil and palm meal.

Most important export countries

  1. Malaysia
  2. Indonesia
  3. Netherlands
  4. Papua New Guinea
  5. United Arab Emirates

Most important production countries

  1. Malaysia
  2. Indonesia
  3. Nigeria
  4. Thailand
  5. Colombia

Production chain

Palms are mainly cultivated on big plantations of 15,000 hectares. Small farmers own 37 to 40% of the palm oil plantations. Within 48 hours the fresh fruit bunches need to be crushed in the mill otherwise they will perish. The mills are therefore located near or around the plantations. Within these mills fresh fruit bunches are crushed and the Crude Palm Oil is extracted. This crude oil is then transported to the refineries in either the country of origin or in the importing country.

Problems

Wages are low: there are inequalities based on gender, duration of the contract and in the wages given by domestic or foreign owned plantations. Workers handling dangerous chemicals (such as Paraquat) without proper protection are also a common practice in the production of this commodity. In Indonesia, untitled land is often lent out to palm oil companies (for periods as long as 90 years). In many cases this has led to conflict with communities that have lived on these lands for generations and hold customary rights over it. Palm oil expansion is also problematic since it is an important cause for deforestation. It has been estimated that roughly 65 per cent of the palm oil production area in Indonesia has been established at the expense of tropical forests. Corruption in the palm oil sector is mainly linked to obtaining plantation permits. The risk of local officials falsifying the official condition of the forest to allow clearcutting is high. Moreover, village chiefs and other locally influential people can easily be bribed for in order for them to agree to the conditions. In some cases the army or company guards are hired to prevent local protests against these illegal activities.

Major Chain Issues

In the palm oil sector, Fairfood International has identified the following major chain issues:

Major chain Production stage
Corruption Whole Chain
Violation of Land Rights Production
Insufficient Income and Income insecurity Production
Degradation of Natural Ecosystem Production
Forced Labour Production
Unhealthy and Unsafe Working Conditions Production
Water Mismanagement and Contamination Production

Solutions

The guide below shows certification schemes whose standards indicate a match with some or all of Fairfood’s researched major issues for this commodity. To learn more about the schemes, click on their logo.


Global Gap
Rainforest Alliance
ProTerra Certified
EcoSocial
UTZ Certified
IMO Fair for Life
Roundtable on Sustainable Palm Oil

Production
Production
Production
Production
Production
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Customised sustainability initiatives
In addition to making use of standards and certification schemes, major issues in this commodity could also be addressed in a customised manner. The box below outlines a few examples of initiatives that deal with sustainability issues in this particular sector. Companies could join some of the platforms or roundtables mentioned below. These could serve as a stepping stone to increased sustainability. Other initiatives, in the form of corporate programmes and chain partnerships, could serve as inspiration for replication by other companies within the sector. To learn more about any of the initiatives, click on their logo. 

Roundtable
 In 2004, the World Wildlife Fund (WWF), in collaboration with other stakeholders, founded the Roundtable on Sustainable Palm Oil (RSPO). The RSPO’s goal is to promote sustainable palm oil by facilitating cooperation and dialogue between the various stakeholders in the sector. In 2005, the RSPO’s principles and criteria (P&C) for sustainable palm oil were accepted. Independent, RSPO-approved certification bodies audit processors and suppliers under the P&C standard. RSPO utilises a Book & Claim certificate trading system for its investors. The initiative has about 220 members, to date; including NGOs, plantation holders, processing industry members and corporations. The initiative addresses all of the priority issues for the oil palm sector with their P&C standard.
Chain partnership
 In 2008, Solidaridad Network, the Roundtable on Sustainable Palm Oil (RSPO) and the World Wildlife Fund (WWF) founded the Palm Oil Producer Support Initiative (POPSI) support program for producers of palm oil. The overall objective of POPSI is to support smallholders and plantation workers to obtain certification in the RSPO Principles and Criteria. POPSI targets 35,000 smallholders and 100,000 plantation workers in Central and Latin America, Asia and Africa. The initiative initiates awareness campaigns along with co-funded POPSI pilot activities. Since POPSI utilises the RSPO principles and criteria, they also use RSPO’s verification system and, consequently, address all of the priority issues in the palm oil sector.