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Sustainable Sourcing Guide for Palm Oil Users a Practical Handbook for US Consumer Goods and Retail Companies

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Sustainable Sourcing Guide for Palm Oil Users a Practical Handbook for US Consumer Goods and Retail Companies Sustainable Sourcing Guide for Palm Oil Users A practical handbook for US consumer goods and retail companies May 2015 Sustainable Sourcing Guide for Palm Oil Users May 2015 CREDITS Conservation International ACKNOWLEDGMENTS: www.conservation.org The project partners would like to acknowledge the generous Building upon a strong foundation of science, partnership, and support to the David & Lucile Packard Foundation. field demonstration, CI’s mission is to empower societies to responsibly and sustainably care for nature, our global biodiversity, for the well-being of humanity. PHOTO CREDITS: WWF US © Benjamin Drummond www.worldwildlife.org © Conrad Savy © Vaara WWF’s mission is to conserve nature and reduce the most © Conservation International / photo by Tory Read pressing threats to the diversity of life on Earth. © Will Turner © Benjamin Drummond © Photo by Tim Cronin / CIFOR AUTHORS: © Benjamin Drummond Melissa Thomas (Conservation International) © Conservation International / photo by Tory Read John Buchanan (Conservation International) © Conservation International / photo by Tory Read David McLaughlin (WWF US) © Photo by Craig Morey Don Grubba (Sustainable Development Initiatives) PUBLICATION DATE: May 2015, Revised 2019 Sustainable Sourcing Guide for Palm Oil Users May 2015 TABLE OF CONTENTS 01. About Palm Oil 5 + Palm oil and the palm oil supply chain 6 + The risks of unsustainable palm oil production 9 + Given the risks, why not boycott palm oil altogether? 10 + Why business must act now 15 02. About Sustainable Palm Oil 16 + The importance of 100% industry conversion 17 + The Roundtable on Sustainable Palm Oil (RSPO) 18 + Sustainable palm oil initiatives 22 + Smallholders in the palm oil supply chain 27 03. Palm Oil in the US Market 31 + The US palm oil market in context 32 + How CSPO uptake can influence sustainable production at origin 33 + Key barriers to uptake in the US 34 04. Transitioning the US Market to 100% Physical CSPO 35 + RSPO supply chain options for sourcing CSPO 36 + The RSPO supply chain options and continuous improvement 41 + Transitioning markets via sustainability tipping points 42 + Achieving sustainability tipping points in the US 44 Sustainable Sourcing Guide for Palm Oil Users 3 May 2015 TABLE OF CONTENTS 05. Taking Action: Applying the Sourcing Guide to Your Business 46 + Step 1: Understanding your palm oil footprint and supply chain 47 + Step 2: Understanding sustainability issues 53 + Step 3: Understanding costs and premiums 58 + Step 4: Developing your action plan 61 Appendices 69 + Abbreviations 70 + Glossary of Terms 71 + References & Additional Resources 74 - Industry Reports, Data Sources, Useful Links & Resources - Major Suppliers to the US Market: Commitments & Progress Reports - Industry Initiatives + Checklist for palm oil users 81 + Expectations for palm oil processors & suppliers 82 + Contacts 83 Sustainable Sourcing Guide for Palm Oil Users 4 May 2015 ABOUT PALM OIL + Palm oil and the palm oil supply chain + The risks of unsustainable palm oil production + Given the risks, why not boycott palm oil altogether? 01 + Why business must act now Sustainable Sourcing Guide for Palm Oil Users 5 May 2015 WHAT IS PALM OIL? Palm oil is the most widely Palm oil is an edible vegetable oil derived Palm and palm kernel oil are incredibly from the fruit of the oil palm tree (Elaeis versatile. Their many uses range from used vegetable oil in the guineensis). cooking oil and shortening, to specialized world – it’s used for cooking, blends and ingredients that can be found in In 2015, oil palm trees were planted and about half of all packaged products – snacks as a source of energy, and can harvested on over 20 million hectares and baked goods, frozen foods, soaps and be found in half the products (almost 50 million acres) of tropical area detergents, even toothpaste. Palm oil is also around the world – mostly in Indonesia and increasingly used as feedstock for biofuels. on supermarket shelves. Malaysia where approximately 85% of all palm oil is produced, but increasingly in When you consider this crop efficiency and South and Central America, Africa, as well versatility, combined with a relatively low as other parts of Asia. cost of production, it’s no surprise that global demand for palm oil has more than doubled Oil palm trees are incredibly efficient, in the last ten years. yielding more oil on the same amount of land than any other leading oil crop – four to ten This exceptional growth has brought times more than soy, rapeseed (canola), or economic and employment benefits for sunflower. millions of growers, but it has also brought unprecedented threats to forests, wildlife, The fruit of the oil palm tree grows in and people where oil palm is grown and bunches and consists of a fleshy outer pulp harvested. with a single seed or “kernel”. Palm oil is extracted from the pulp of the fruit and is For this reason, companies, NGOs, used mainly in food products. This differs governments, and other stakeholders are from palm kernel oil (or PKO), which comes working together to move the entire palm oil from the seed. Derivatives of PKO are often sector toward a more sustainable future. used in personal care products. Sustainable Sourcing Guide for Palm Oil Users 6 Source: FAO, RSPO, USDA Foreign Agricultural Service May 2015 HOW IS PALM OIL PRODUCED? AND WHAT DOES THE SUPPLY CHAIN LOOK LIKE? Oil palm is grown by both smallholders and on large plantations. Trees begin bearing fruit after three years 1 and have a productive life of up to 25 years. Trees produce continuously and fruit bunches are harvested every few weeks. Fresh fruit bunches (FFBs) are then taken to a mill, where the oil is extracted with pressure and steam from 2 both the fruit itself (which yields crude palm oil, or CPO) and the kernel or seed (which yields palm kernel oil, or PKO). From the mill, the extracted oil is The refined oil and fractions are then transported to downstream taken to refineries to be refined ingredient manufacturers who may sell as is or process it further into 3 and/or processed into primary 4 more complex fractions and derivatives for use by consumer goods palm oil fractions, such as palm manufacturers. The end products containing palm oil and/or palm oil stearine and olein. fractions are then sold by retailers to consumers. Sustainable Sourcing Guide for Palm Oil Users 7 Source: RSPO, SDI May 2015 WHY IS PALM OIL SO POPULAR? Versatile Trans-fat Free Palm oil and its derivatives can be Palm oil has a long shelf life and found in approximately half the doesn’t require hydrogenation - the products on supermarket shelves. process which can result in trans- fats. Economic Driver Palm oil is the most Inexpensive The palm oil industry provides widely used vegetable oil Compared to other vegetable oils, millions of jobs and generates palm oil is relatively inexpensive billions of dollars in export revenues in the world, representing to produce. for producing countries. up to 40% of total consumption. Highly Productive Efficient Oil palm produces four to ten times Oil palm grows on a range of soils, more oil per hectare than any other requires relatively few inputs, and vegetable oil crop. bears fruit year-round, making it an attractive crop for smallholders. Sustainable Sourcing Guide for Palm Oil Users 8 Source: Soyatech, IFC, RSPO, Industry interviews May 2015 WHAT ARE THE MAJOR SOCIAL & ENVIRONMENTAL RISKS OF UNSUSTAINABLE PALM OIL PRODUCTION? Deforestation Climate Species Exploitation Because oil palm is only grown in Forests are often cleared and The destruction of forests may The development of large-scale the humid tropics, the burned to make way for also mean the loss of important oil palm plantations has also led development and expansion of plantations, releasing significant habitat area for highly threatened to social conflict between plantation area often comes at amounts of greenhouse gas species like orangutans, tigers, companies, governments and the expense of tropical rainforest. emissions – especially when elephants, and rhinos. communities over land tenure and development occurs on peatlands usage rights, as well as where carbon-rich wetland soils numerous labor and human rights can store even more carbon than abuses including forced and child the forests themselves. labor. Sustainable Sourcing Guide for Palm Oil Users 9 May 2015 IF THE RISKS ARE SO HIGH, WHY DON’T WE JUST BOYCOTT PALM OIL ALTOGETHER? PRICE EFFICIENCY INDUSTRY ECONOMY Over the past five years, Palm oil yields more oil per If major sustainability Oil palm provides critical while price fluctuations hectare than any other markets in the US and economic benefits to across major vegetable crop. Therefore, boycotting Europe boycott palm oil, producing countries, oils have followed similar palm oil could have producers will simply turn generating employment trend patterns, palm oil has unintended consequences to other markets with fewer and income opportunity for remained the lowest cost for forest and/or incentives for improved millions of famers, as well vegetable oil option. Palm communities as more land social and environmental as billions in export oil is also a versatile will be required to produce practices. revenues for governments. ingredient, substitutes for the same amount of oil. which may be impractical or costly to produce. Sustainable Sourcing Guide for Palm Oil Users 10 Source: IMF, Soyatech, RSPO, IFC, Industry presentations May 2015 BECAUSE ITS ONE OF THE LOWEST COST OILS. From 2009-2016, while price fluctuations across major vegetable oils have followed similar trend patterns, palm oil has remained the lowest cost vegetable oil option. PRICE $1,800 $1,600 $1,400 $1,200 $1,000 SunflowerSunflower RapeseedRapeseed $800 SoySoy Palm Oil $600 Palm Oil $400 $200 $0 2009 2010 2011 2012 2013 2014 2015 2016 Sustainable Sourcing Guide for Palm Oil Users 11 Source: IMF May 2015 BECAUSE OIL PALM IS MORE PRODUCTIVE THAN OTHER LEADING OIL CROPS.
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