Sustainable palm oil
Average read time: 14 minutes
Our ambition is to make sustainable palm oil commonplace. To achieve this, we’re stepping up our work with partners to create a deforestation-free supply chain by 2023.
The importance of palm oil
Palm oil is a highly versatile crop. It has many uses – like foaming, binding and stabilising – which is why it’s a key ingredient in so many products from food and beauty to household cleaning. It’s the most land-efficient oil crop – with a much greater yield per hectare than other oils like sunflower, rapeseed or soy. For these reasons, it’s now the most commonly produced vegetable oil in the world.
The palm oil industry brings money, trade and jobs to producing economies and employs millions of smallholder farmers. In Indonesia and Malaysia, 4.5 million people rely on the palm oil industry for their livelihood.
Issues facing the palm oil industry
Palm oil has grown into a major global industry over recent decades. Farmers today produce over 70 million tonnes of palm oil each year – that’s more than double what they were producing just 20 years ago. Palm oil plantations now cover an estimated 27 million hectares – an area bigger than the size of New Zealand.
But palm oil only grows in tropical regions, which are also home to a number of local and indigenous communities and a host of flora and fauna. Rising demand has meant that, in some areas, rainforests are being cut down to make way for new planting – driving climate change and biodiversity loss. And the expansion of palm oil plantations has led to a range of human rights issues including land conflicts between plantation companies and local communities.
These are all major challenges that must be urgently addressed – by us, and by everyone involved. Palm oil brings economic benefits to millions of people, but to be truly sustainable, the industry needs to change. As a major palm oil buyer, we have an important leadership role to play in transforming the industry for the better.
Why doesn’t Unilever just stop using palm oil?
According to the WWF (Opens in a new window), palm oil supplies 35% of the world’s vegetable oil on just 10% of the land. To get the same amount of oil from other sources like soybean or coconut, you would need anything between 4 and 10 times more land. Rather than solving the problems associated with palm oil today, it would simply shift them elsewhere, and continue to affect people, habitats and species in other parts of the world.
Our approach to sustainable palm oil
For more than 15 years, Unilever has been at the forefront of driving industry-wide change to ensure a sustainable future for palm oil.
By the end of 2020, we sourced 94.3%* of our palm oil and palm kernel oil from a number of physically certified sources: RSPO Mass Balance, RSPO Segregated or an equivalent standard that is independently verified by a third party. 5.3% of our volumes were from the purchase of RSPO independent smallholder certificates. We didn’t reach our original Unilever Sustainable Living Plan (USLP) target in 2019 partly because we faced a bottleneck in supply of RSPO-certified materials in Africa.
As a member of the Consumer Goods Forum, in 2010 we committed to achieving zero net deforestation associated with our four most important deforestation risk commodities: paper and board, beef, soy – and palm oil. Despite years of working on sustainable sourcing over the last decade, we haven’t yet managed to eliminate the challenges – and in 2020 we missed our target.
It’s clear that we need to do more. In 2020 we committed to achieving a zero deforestation supply chain by 2023 for the crops with high deforestation risk (palm oil, paper and board, tea, soy and cocoa). This means getting visibility of that crucial first mile – from where the commodity is sourced to where it is first processed. It also means increasing traceability and transparency through using emerging digital technologies, empowering farmers and smallholders, and working with the industry, NGOs and governments on the ground.
Working in our own operations
Engaging our palm oil suppliers
To achieve our zero deforestation goal, our suppliers play a crucial role.
We engage with our suppliers proactively – to clearly communicate our expectations. Our outreach is underpinned by our People and Nature Policy (PDF 2.04MB) (Opens in a new window), which we launched in 2020, replacing our Sustainable Palm Oil Sourcing Policy. It has four key principles that we require all our palm oil suppliers to adhere to throughout their operations and supply chains.
Our four principles for sustainable sourcing
- Protecting natural ecosystems from deforestation and conversion
- Respecting and promoting human rights
- Transparency and traceability
- Being a force for good for nature and people.
We treat allegations of supplier non-compliance with our policy very seriously – and deal with issues in a consistent and systematic way through our palm oil grievance procedure.
Increasing traceability in our supply chain
We want to know the exact plantations where our palm oil is grown. This allows us to identify and address both environmental and human rights risks - and build trust with our suppliers.
We have a four-step programme to drive traceability in our supply chain:
- Tracing back to palm oil mills
We can identify a universe of mills for 99% of our core volumes – and publish our list of suppliers publicly (PDF 283KB) (Opens in a new window).
- Identifying key risks
We work with expert partners to monitor environmental and social risks in specific mills – and take steps to help suppliers comply with our palm oil policy.
- Targeting investments
By directly investing into areas where our palm oil is grown, we’re driving long term, sustainable change.
- Working with smallholders
We support inclusive business models for smallholders, enabling them to participate in sustainable supply chains along with larger producers.
Using technologies for improved transparency
Unilever believes that complete transparency is needed for radical transformation. We want this to be the start of a new industry-wide movement.Marc Engel, Chief Supply Chain Officer
Technology has a huge potential to disrupt and transform the palm oil supply chain and improve traceability and transparency. We are actively using satellite data, geolocation, blockchain and AI, working with major tech firms and innovative start-ups to build new approaches to monitoring and traceability.
Getting full visibility of the supply chain through to the smallest supplier will radically improve our knowledge of what is happening on the ground. We can then monitor land use, manage risks and direct investment into sustainability activities. We’re already using satellite and radar technology to give us early warning of deforestation. And we work in partnership to support organisations, such as the World Resources Institute (WRI) Global Forest Watch (Opens in a new window) platform, that make land use monitoring publicly available.
Using technology to track palm oil
Palm oil starts its life as a fruit in a tree – and its journey from the plantation to our factories has many steps. It may change hands several times through traders before it gets to the refinery - where it is mixed together with other small batches to be processed. Only after this point does it enter our direct supply chain.
To get a better view of this ‘first mile’ from the farm to the palm oil mill, we’re running a pilot in Indonesia with Orbital Insight, a California-based tech company that specialises in geospatial analytics.
This is using cell phone geolocation data to track the palm oil moving between individual farms and plantations that supply the mills in our supply chain. It’s a big step forward for traceability – and it’s been successful even in very remote areas.
We are now scaling the project to cover all of our palm oil supply in South East Asia and are exploring how it might apply to other crops and other locations. We see huge potential and we want partners and peers to join us on this journey so we can end deforestation together.
Sharing the location of our suppliers
Mapping and tracking is a great way to get to know our supply chain. And we believe we’ll make greater progress towards industry-wide transformation by sharing the information we have.
We’ve shared a list of direct palm oil suppliers (PDF 283KB) (Opens in a new window), the names and locations of more than 1,600 mills (PDF 536KB) (Opens in a new window) ,and 180 palm oil facilities1 (PDF 247KB) (Opens in a new window) (such as refineries and oleochemical plants sourcing from many mills) that were declared by our direct suppliers. These form our ‘mill universe’ of our direct and extended supply chain.
Mill locations help us pinpoint where palm fruit is processed which tells us more about where oil palm plantations are located – and therefore where the risks might be greatest.
The Universal Mill List
The Universal Mill List (UML) (Opens in a new window) brings greater transparency and promotes an industry-wide shift toward a single, harmonised and verified set of information for palm oil mill locations. Created by the World Resources Institute, Rainforest Alliance, Proforest and Daemeter, it identifies and maps over 1,850 mills across 26 countries to provide a better framework for companies looking to monitor and report on their commitments.
The UML combines data from processors, traders and consumer goods manufacturers, the Roundtable on Sustainable Palm Oil (RSPO) and Rainforest Alliance. Unilever contributes data to ensure that there is continual improvement in the accuracy and coverage of the Universal Mill List.
Addressing concerns with our palm oil suppliers
We know serious issues, including human rights issues, exist within the palm oil industry. So, as well as working alongside our suppliers to help them improve their standards, we need to respond whenever concerns about a particular supplier are brought to our attention – and to make sure our response is transparent and appropriate.
We want to be the first to know and act when issues are identified within our supply chain. To assist with this, we launched a public palm oil grievance procedure encouraging people to notify us when issues arise.
We monitor our supply chain via a regular Deforestation and Burnt Area Monitoring Report through our partnership with Aidenvironment and we have made a recent investment to support the earlier detection of deforestation using radar detection (Opens in a new window), which will be made publicly available through WRI’s Global Forest Watch platform.
We suspend suppliers linked to deforestation. We’re open to allowing suppliers to work with us again if they are able to show they have improved their practices in line with best industry standards. This includes providing a recovery plan for any recent deforestation or new development on peat that occurred in their supply chain.
Our grievance procedure for sustainable palm oil
Our Grievance Procedure for Sustainable Palm Oil (PDF 1.01MB) (Opens in a new window) provides a framework for handling, investigating and resolving both social and environmental issues within our supply chain in a timely, transparent and effective manner.
The process includes three important steps:
- An acknowledgement of the grievance and a preliminary review to determine whether the grievance is applicable to our supply chain.
- An in-depth review of the grievance, working with the supplier and an independent organisation to develop a time-bound action and remediation plan.
- Actions implemented by the supplier to resolve the issue, with the outcomes monitored.
We’ll often involve an independent organisation to collate further information and outline the requirements that the supplier must adhere to. We’ve found that it’s better to work with suppliers to help improve practices and resolve issues. However, we’ll take appropriate action consistent with our policy against suppliers who are unwilling or unable to comply.
In line with our Grievance Procedure and our commitment to a sustainable palm oil industry, if you have a palm oil grievance, you can email us at email@example.com (Opens in a new window).
Since January 2019 we’ve maintained a public list of palm oil grievances, see our Palm Oil Grievance Tracker (PDF 622KB) (Opens in a new window).
We believe that being open and transparent about the partners we do not want to work with is key to achieving our commitment to a deforestation-free supply chain by 2023.
In 2020 we took another step towards transparency by introducing a list of suspended Direct Palm Oil Suppliers or Oil Palm Growers. This document publicly communicates previous direct palm oil suppliers or indirect oil palm growers that have been suspended from Unilever’s supply chain due to grievances brought to our attention alleging non-compliance against the People and Nature Policy (PDF 2.04MB) (Opens in a new window) and/or Unilever’s Responsible Sourcing Policy (PDF 8.25MB) (Opens in a new window) or due to the fact that it could not be confirmed that these companies were in compliance with our policy at a group level.
Partnering to transform the industry
Tackling the complex social and environmental issues in the palm oil supply chain requires more than policy commitments – it requires the transformation of an industry. To do this, we need to go beyond our own supply chain. Through partnerships, advocacy and committed work on the ground, we're helping to lead real progress towards our vision of a supply chain in which sustainable palm oil is commonplace.
We were a founding member of the Roundtable on Sustainable Palm Oil (RSPO) (Opens in a new window) in 2004, a globally recognised certification standard to drive sustainable production in palm. The RSPO is made up of representatives from growers and buyers, commodity traders, non-profit environmental and social groups, and other influential organisations. We also work with the Tropical Forest Alliance (TFA), a global public–private partnership in which partners take voluntary actions to reduce the tropical deforestation associated with sourcing palm oil, soy, beef, and paper and pulp.
Is certification of palm oil the best solution?
Certification is one of the ways to help transform how palm oil is produced and traded, and the RSPO has played a key role in setting and maintaining standards for the industry. However, alone it’s not enough – it has not led to the end of deforestation or the other challenges facing the sector.
Although many companies now support palm oil certification, only around 20% of the total industry volume is certified. That’s why we’ve developed a number of additional sustainability programmes with our partners such as using satellites and geolocation technology as well as working directly with governments, NGOs, suppliers and smallholders to drive transformation - as we strongly believe that all these things are essential to promote widespread change.
Working with smallholder farmers
Around 40% of the world’s palm oil is produced by smallholder farmers – which means smallholders are a key part of the puzzle to ensure the long-term future of the oil palm sector. A key part of our supplier sustainability programme involves engaging with smallholders on the ground.
We are supporting projects jointly with our implementation partners to help smallholders improve their productivity, attain certification so that they can continue accessing global supply chains, and improve their income and livelihoods.
The aim of these projects is to improve profitability for oil palm farmers by improving the sustainability of farming practices, professionalising smallholder farming business and promoting RSPO certification. We also purchase RSPO Smallholder credits, creating a market for smallholder-grown palm.
Partnerships with a local context
Unilever has committed to a jurisdictional approach to projects in various priority landscapes in Indonesia and Malaysia. That means we are not just working alone, we are aligning our efforts with a broad range of stakeholders to pool resources, knowledge and know-how in specific locations. This involving working with governments, businesses, NGOs, smallholder farmers and other stakeholders around shared goals of conservation, supply chain sustainability and sustainable economic development.
This approach offers the potential to drive significant changes in palm oil production as we work together to accelerate and scale initiatives. Partnerships like these can overcome challenges that no one entity – be it government, NGO or business - could solve alone.
We are supporting five jurisdictional projects:
- Aceh with IDH Sustainable Trade Initiative (Opens in a new window)
- North Sumatera with Conservation International (Opens in a new window)
- Riau with Proforest and Daemeter (Opens in a new window)
- Central Kalimantan with Inobu (Opens in a new window)
- Sabah, Malaysia with WWF
The impact of climate change on palm oil
Climate change will impact many aspects of our world – and we are taking proactive steps to find out more. A partnership with Potsdam Institute for Climate Impact Research is helping us to model the potential financial impact of climate change on our palm oil supply chain.
This work shows us that climate change is likely to affect yields, prices and availability of palm oil in the future.
Doing everything we can to eliminate deforestation in our supply chain will minimise the risk to our business in a number of ways: ensuring resilient supply, limiting climate impact and protecting our reputation as a responsible business.
The future of palm oil
Solving the challenges in the palm oil industry is essential – the lives and livelihoods of millions, our planet’s health and the success of our business depends on it. The future of palm oil can be sustainable and we are fully committed to our vision of a deforestation-free supply chain by 2023.
We’ll regularly update our stakeholders on our progress as we move forward on the journey and continue to play a key role in the industry as we strive for change.
Since 2017, we have reported only core volumes of palm oil under this KPI. Core volumes exclude derivatives of palm fatty acid distillates (which are by-products of the refining process), tail ingredients and materials processed by third-party manufacturers.