Firms must 'eliminate' palm oil from supply chains

05 August 2021 3 min. read

The infamously damaging palm oil supply chain is eating itself, according to a new study. Experts have warned that its skyrocketing demand and unsustainable production practices mean firms should seek to remove it from their supply chains.

Grown industrially in only a handful of tropical nations, palm trees produce high-quality oil used primarily for cooking. While historically it was used most in developing countries, its versatility has seen it become a major commodity in the world’s leading economies. Used in food products, detergents, cosmetics and, to a small extent, biofuel, while it rarely factors into the Western diet, more than half of all packaged products consumed in the US contain palm oil.

This has seen it quickly become a keystone produce for a number of economies, who have ramped up the growing of palm tree plantations to cash in on foreign demand – something which has devastating, wide-ranging and well-documented impacts on the local and global stages.  

Most of the worlds supply of palm oil comes from Indonesia and Malaysia

Rainforests are being clear-cut and burned to produce palm oil – something which both threatens the existence of orangutans, pygmy elephants, and Sumatran rhinos, and has accelerated climate change due to the vast amounts of carbon greenhouse gases this process produces. Meanwhile, palm oil production is also responsible for human rights violations as small landowners and indigenous people are driven from their land to make way for plantations. To top it all, investigators have put a spotlight on palm oil producers that use physical and sexual violence and forced child labour.

If all that weren’t enough to convince businesses to divest in the toxic crop, however, a new report from Kearney has outlined one more reason why palm oil alternatives need to be sought out quickly.  According to the study, palm oil supplies are “under threat amid a perfect storm of skyrocketing demand and unsustainable production processes.”

Due to booming demand, the annual production of palm oil quadrupled between 1995 and 2015, and it is expected to quadruple again by 2050. However, the climate impacts the industry has had are increasingly circling back on it, and will soon make fulfilling demand impossible. Around 84% of the world’s palm oil is produced by two countries: Malaysia and Indonesia. According to Kearney, both of the nations are “starting to face serious consequences of climate change,” including heavy rains, severe flooding, landslides, rising sea levels and temperatures.’

As such, supplies will likely dwindle, and prices explode in the coming decades – something which means the use of palm oil will not only be bad for ‘optics,’ it will also be bad for business. Kearney noted that continued investment in the produce would become “a high risk, with the long-term supply (and costs) under threat,” and added that it would be better for firms to absorb the costs associated with switching to alternatives now, rather than be stung further down the line by “skyrocketing” costs.

The report concluded, “[It is] crucial to ensure that the demand for palm oil is in check and does not continue to accelerate toward total supply destruction. If ever there was a time to redesign, reformulate, and reinvent, it’s now… Using verifiably 100% certified sustainable palm oil from organisations such as the Roundtable on Sustainable Palm Oil is the first step on this journey, but given the severity of the supply risk, the goal should be to eliminate its use altogether.”