Three products can be obtained from the harvested palm oil fruit. They are palm oil, palm kernel oil and palm kernel pellets. About 80 percent of world’s palm oil production is used in the food industry, e.g. as an important vegetable fat in margarine and confectionary. Palm oil is also suitable for the production of biofuels, and is therefore an important renewable raw material alternative to mineral oils. In contrast to palm oil, palm kernel oil, which is obtained as a secondary product from the kernels of the oil fruit, is only used to a limited extent in the food industry. Its main application is in the oleochemical industry as a base material for the production of surfactants (washing active substances) for laundry detergents, household cleaners and cosmetics. In 2007, the world market for palm oil and palm kernel oil amounted to about 42.4 million metric tons.

A variety of raw materials can be used to produce surfactants, i.e. washing active substances, for laundry detergents, household cleaners and cosmetics. They include mineral oil, coconut oil and the oil of palm kernels. The quality of the surfactants is independent of the raw material source. At Henkel, about 35 percent of the surfactants in its laundry detergents and household cleaners are based on renewable raw materials, especially palm kernel oil. However, Henkel does not manufacture surfactants itself (and, therefore, neither buys nor processes palm kernel oil directly), but rather purchases them from raw material suppliers on the world market. The palm kernel oil and palm oil used to produce the surfactants purchased by Henkel from its suppliers account for less than 0.2 percent of the world total. Within the laundry detergent and household cleaner industry, however, Henkel’s products, whose surfactant ingredients are derived to about 35 percent from renewable raw materials such as palm kernel oil, play a leading role. To support the responsible management of raw materials here, too, Henkel has participated in the Round Table for Sustainable Palm Oil (RSPO) since 2003.

Round Table for Sustainable Palm Oil

The Round Table for Sustainable Palm Oil (RSPO) arose out of an initiative by the World Wide Fund for Nature (WWF) and a number of interested representatives of the business sector, aimed at finding suitable ways of cultivating palm oil sustainably and combating the exhaustive cultivation of rainforests and the destruction of wetlands, especially in Indonesia. Initially, in 2002, the initiative took the form of informal cooperation between a number of companies, trade associations and the WWF. Today the initiative has more than 340 members, including oil palm growers, producers of consumer products, retailers, banks, investors and non-governmental organizations (NGOs). In August, 2003, the RSPO was officially established in Kuala Lumpur, Malaysia. The establishment meeting was attended by 200 participants from 16 countries – including Henkel. The initiative is headquartered in Zürich and the secretariat is located in Kuala Lumpur. The members come together once each year at a round table meeting, and workgroup meetings are also held. In 2008, Henkel attended the sixth RSPO meeting (RT6) in Nusa Dua, Indonesia. As a visible sign of its commitment, in April 2008, Henkel became an official member of the Round Table for Sustainable Palm Oil.

Aims of the RSPO

The aim of the RSPO is to advance the sustainable production of palm oil and prevent exhaustive cultivation of rainforests. A primary objective of RT5 was the approval of a certification and marketing model for palm oil from sustainable cultivation, which is flexible and takes account of the different conditions under which palm oil is produced, processed and traded. The long-term aim of the RSPO and of Henkel is that 100 percent of produced palm oil and palm kernel oil should come from sustainable cultivation.

Certification model for palm oil and palm kernel oil from sustainable cultivation

As palm oil is purchased on the world market rather than directly from the producers, the RSPO has established a certification procedure and three marketing models for palm oil from sustainably cultivated palm oil plantations: segregation (physical separation of sustainable and normal palm oil streams), mass balance (controlled, constant mixing of sustainable and normal palm oil), and the Book & Claim system.

While the segregation of palm oil – the main product – enables the raw material to be tracked directly from the plantation until it is used in an end product, in the short and medium term it is scarcely implementable in the supply chain from palm kernel to surfactant. Although the segregation of sustainably cultivated palm kernel oil is possible, it requires considerable investment in new pipelines, transport resources (tanker ships, trucks, rail cars) and silos, involving a lot of time and money. Henkel has therefore decided to focus on the Book & Claim system. This separates the certificates for sustainably produced palm oil and palm kernel oil from the physical product streams. In Henkel’s view, the establishment of the Book & Claim system for palm kernel oil offers excellent opportunities for creating significant incentives for all participating market players to support sustainable cultivation of palm oil and palm kernel oil, so that new markets could open up for sustainable palm kernel oil.

How does the Book & Claim system work?

The Book & Claim system is based on the trading of certificates that stand for a corresponding quantity of sustainably produced palm oil and palm kernel oil. The certificates are traded separately from the physical product streams. A familiar example of such a certificate trade is the eco-electricity that is traded in Germany in accordance with similar criteria. The system is relatively simple. Plantations that satisfy the strict conditions of the RSPO – including the precondition that rainforest should no longer be extensively cleared – receive certificates for their sustainably produced palm oil and palm kernel oil. A special platform has been established for trade in these certificates. This is run by the GreenPalm company. On the GreenPalm trading platform, the producers of palm oil register how much of their RSPO-audited and certified palm oil they wish to sell. On the basis of this registration, the certificates can then be traded on the market. By purchasing certificates, purchasers can document that an equivalent quantity of sustainably produced palm oil has entered the supply chain. The certificates give smaller producers, who are not involved in international trade, a financial incentive to produce sustainably. Henkel believes that the Book & Claim system currently offers the best prospects for sustainable palm oil and palm kernel oil cultivation – provided the processes are traceable and transparent.

Palm kernel oil certificates for Terra Activ household cleaners

To advance and establish the Book & Claim system for palm kernel oil, Henkel has become the world’s first company to purchase palm kernel oil certificates. The certificates are for its newly launched Terra Activ brand products, which have been available since October 1, 2008. Henkel is therefore the first company to ensure that palm kernel oil from sustainably cultivated oil palms can enter the supply chain for the production of surfactants. The purchase of the certificates became possible after the RSPO defined criteria for sustainable palm oil cultivation and the first palm oil plantation (United Plantations, Malaysia) was approved as satisfying these criteria.

Terra Activ household cleaners and laundry detergents offer top performance and are produced from ingredients that have to conform to special strict environmental criteria. On average, 85 percent of the ingredients of Terra Activ household cleaners are based on renewable raw materials. The ingredients also satisfy demanding biodegradability criteria. Henkel has therefore set a new benchmark with regard to performance and responsibility and is playing a leading role worldwide in the laundry detergent and household cleaner industry. “Performance based on Sustainability” is the name of the strategy behind these developments.