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a palm oil farmer collecting palm oil

This issue relates to the following Sustainable Development Goals

  • Climate action
  • Life on land

Sustainable palm oil

Average read time: 17 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.

a palm oil farmer pushing a wheelbarrow of palm oil

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?

Stopping the use of palm oil simply shifts the problems elsewhere. According to the WWF, 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. By staying connected with the palm oil industry, we can help address its problems, rather than simply shift the problems elsewhere. We are committed to procuring a sustainable supply of palm oil that is both positive for people and nature.

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 sustainably sourced 99.6% of our core volumes of palm oil and palm kernel oil, 94.3% of which came 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.

Despite our efforts around sustainable sourcing over the last decade, years of working on sustainable sourcing over the last decade, we haven’t yet managed to eliminate its challenges – and it's clear that we need to 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), 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

We frequently engage with all our direct suppliers to understand compliance and progress towards the implementation of our policies - including our People and Nature Policy.

The principles of our policy are also embedded in the contracts we have with our suppliers. As we move to a zero-deforestation supply chain, we are being more selective about who we work with and the areas we source from. By the end of 2020, 98% of our palm oil (crude palm oil and its derivatives) and 54% of our palm kernel oil (PKO and its derivatives) was sourced from lower risk1 mills. We’re working in parallel on systems and processes to be able to have this assessment translated into independently verified deforestation free origins.

We monitor the performance of suppliers through a combination of tools that includes our own independent verification mechanism, the use of traceability technology, and reporting tools such as the No-Deforestation, No-Peat, and No-Exploitation Implementation Framework (NDPE IRF).

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:

  1. Tracing back to palm oil mills and plantations
    We can identify a universe of mills for 99% of our core volumes – and have visibility of over 17 million hectares of oil palm plantations and farms around the world. We also publish our list of suppliers publicly (PDF 283KB).
  2. Identifying key risks
    We work with expert partners to monitor environmental and social risks in specific mills, plantations and surrounding areas – and take steps to help suppliers comply with our palm oil policy.
  3. Targeting investments
    By directly investing with our suppliers, landscape programmes in areas where our palm oil is grown, we’re driving long-term, sustainable change.
  4. Working with smallholders
    We support inclusive business models for smallholders, including trainings and certification, enabling them to participate in sustainable supply chains alongside larger producers.

Tracking our forest footprint

Tropical rainforest vegetation

We are conducting a forest footprint mapping exercise (PDF 9.02MB) of our palm oil supply chain. This is an important step to gaining even more accurate visibility of our sourcing locations.

Through a combination of supplier information, concession boundaries and landbanks, indicative sourcing algorithms, deforestation alerts, biodiversity and carbon layers, and social indicators, we aim to achieve an unprecedented view of our sourcing that helps prevent and address any potential risks.

We have begun with an area of particular importance due to its proximity to one of the last remaining tropical rainforests – The Leuser National Park and Ecosystem in Aceh, Indonesia. Having an improved understanding of this sourcing area will allow us to act quickly when we see issues occurring and, most importantly, help us to prevent them from happening at all.

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. We are partnering with Descartes Lab to receive deforestation and conversion alerts, which we overlay with the sourcing areas in our supply chain. To make land-use monitoring publicly available, we work in partnership with organisations such as the World Resources Institute (WRI) Global Forest Watch platform.

Using technology to track palm oil

View of the Asia from space

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, especially in partnerships where supply chain actors opt into the use of the tools.

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 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 are great ways 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), the names and locations of more than 1,600 mills (PDF 536KB) ,and 180 palm oil facilities (PDF 247KB)1 (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) brings greater transparency and promotes an industry-wide shift towards a single, harmonised and verified set of information for palm oil mill locations, using a public and standardised method. Created by the World Resources Institute, Rainforest Alliance, Proforest and Daemeter, it identifies and maps over 2,000 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 Earthqualizer and Aidenvironment and we have investments to support the earlier detection of deforestation using radar technology, 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) 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 palmoil.grievances@unilever.com.

Since January 2019 we’ve maintained a public list of palm oil grievances, see our Palm Oil Grievance Tracker (PDF 653KB).

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) and/or Unilever’s Responsible Sourcing Policy (PDF 8.25MB) 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) 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 increase profitability and incomes for farmers, professionalising smallholder farming businesses and promoting RSPO certification.

Another way we are supporting smallholders is through the purchase of credits. We believe that, by purchasing RSPO Independent Smallholder credits, we can directly incentivise independent smallholders and support their livelihoods by creating a market for smallholder-grown oil palm. Unilever has been one of the largest buyers of independent smallholder RSPO credits since 2017. In 2020, Unilever purchased over 43,000 tonnes of RSPO independent smallholder credits from 37 smallholder groups – representing over 50% of independent smallholder groups currently RSPO certified across Indonesia and Thailand. 

We’re also investing in programmes that help independent mills improve their practices and achieve certification. We’re increasing our sourcing from independent mills because these mills are critical into transforming the supply chain and creating a positive impact in the fast-moving consumer goods industry, particularly for smallholder farmers.

Through these programmes we’re actively investing in increasing the number of certified farmers, farmer groups and the volume of certified oil palm fruit in the global market. We also want to ensure and ensuring a strong and sustainable connection between the smallholders, the mills they supply and our own supply chain. So far, we estimate our programmes have reached 15,000 smallholder farmers.

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:

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.

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Mills assessed by Unilever for progress against key parameters of our strategy such as deforestation and deforestation risk, certification status, management systems and controls and management of non-compliance and grievances, among other points.