Palm Oil a Major Source of Greenhouse Gases

Rob Berridge

Rob Berridge
Senior Manager of Investor Programs, Ceres

Investors are working to slow the rate of tropical deforestation and promote sustainable agriculture for three main reasons: 1) to reduce global greenhouse gas emissions (GHGs); 2) to mitigate a host of devastating environmental and social problems; 3) to help companies minimize reputational risk and respond to mounting pressure from NGOs.

The problem: Worldwide, land use accounts for 31 percent of annual GHGs with about 17 percent of that from deforestation. According to the EPA, this is more than the transportation sector’s 13 percent contribution! These emissions threaten climate stability and the global economy.

A key driver of tropical deforestation is palm oil. Consider Indonesia, the world’s largest palm oil producer. It has the 16th largest economy globally, but is the third largest emitter of GHGs. A major cause is the cutting and burning of carbon-rich rainforests and peatlands to make way for palm oil plantations. Destruction of Indonesian peatlands alone is currently responsible for 4 percent of annual global GHGs.

Palm oil is the most widely used oil on earth (in food, personal care products, and fuel), demand is growing rapidly, and production is expanding worldwide. In addition to the climate impacts, palm plantations are a significant source of human rights abuses (including slavery and child labor), land grabs, and threats to endangered species such as the orangutan.

The solution: Palm oil can be produced sustainably and without deforestation. Palm oil expansion is achievable using previously degraded forestland rather than standing rainforests. In fact, while the volume of certified sustainable palm oil (CSPO) has grown 5-fold since 2009, the supply of CSPO currently exceeds demand by more than 50 percent.

A commitment to sourcing certified sustainable and responsible palm oil was set recently by Unilever (the world’s largest purchaser of palm oil) and, surprisingly, by Wilmar, which grows, trades or refines 45 percent of the world’s palm oil, and was formerly accused of driving extensive deforestation.

These sourcing policies include purchasing 100 percent CSPO, no deforestation (broadly defined), no development on peatlands, no exploitation / human right abuses (including grievance mechanisms and verification), and the establishment of supply chains that are traceable to the plantation. Safeway just made a strong public commitment along these lines.

Hopefully, these new commitments on palm oil are a harbinger of companies adopting responsible sourcing policies for all of the key commodities that lead to deforestation including, soy, beef / leather, and paper / wood. Nestle has a forestry sourcing policy that can serve as a model to other companies.

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