Our contribution to the sustainable cultivation of palm oil
Our understanding of sustainability and corporate social responsibility extends to the sustainable management of raw materials and the conservation of natural resources. The use of renewable raw materials in particular, such as palm oil and palm kernel oil, requires close consideration to be given not only to the economic consequences but also, and especially, to the ecological and social impacts. Our vision is therefore that, in the future, whenever palm oil and palm kernel oil are used in our products, this oil should be derived from sustainably cultivated sources.
Compared to other oil crops, the oil palm produces the highest yields per hectare, which accounts for the fact that it now takes first place among the oil-producing plants cultivated around the world. In Asia and Africa, palm oil is used for cooking, frying and roasting – just as rapeseed oil is in Europe and soy oil in the USA. As a result, 70 percent of the annual harvest is consumed directly in Asia. The use of palm oil for energy purposes (e.g. as biodiesel) currently accounts for approx. 5 percent.
In addition to palm oil, the oil palm yields a second kind of oil: palm kernel oil. While palm oil is obtained from the flesh of the fruit, palm kernel oil is obtained from its seeds. The two oils have very different chemical compositions and are used for different purposes: Palm oil, which accounts for approx. 90 percent of the total oil volume, is an important raw material primarily for the food industry. Palm kernel oil – the remaining 10 percent – is seldom used in this area because of its chemical structure.
Palm kernel oil is mainly used as an important raw material for producing surfactants, the washing active substances in laundry detergents and household cleaners and in cosmetic products, and is therefore of interest to Henkel. The types of oil plants indigenous to Central Europe are currently not suitable for industrial production of powerful surfactants. Given this situation, the only current alternatives to palm kernel oil are mineral oil, natural gas and coconut oil.
The palm oils that Henkel utilizes indirectly through its suppliers of surfactants or other raw materials account for less than 0.2 percent of the world total, most of this being palm kernel oil as a basis for surfactants.
One of the key objectives of our research and development is to find substitutes for ingredients that are based on mineral oil. The reasons for this include the limited availability of mineral oil, climate protection, and the ecological risks associated with the extraction of mineral oil. Before making any decision, we naturally always consider the environmental, economic and social aspects of each particular alternative as part of the overall appraisal. Regarding the oil from oil palms, our vision is that, in the future, whenever palm oil and palm kernel oil are used in our products, this oil should be derived from sustainably cultivated sources. For this reason, Henkel actively supports the implementation of sustainability criteria in the supply chain of palm oil and palm kernel oil.
We engage in many different activities aimed at promoting sustainable palm oil:
- Roundtable on Sustainable Palm Oil (RSPO): Henkel has actively participated in the RSPO since 2003, and became an official member in April 2008. The RSPO is currently the only institution setting any criteria for sustainable palm oil and palm kernel oil. Even if these criteria are still insufficient in our view, the RSPO is on the right track. If we and the other stakeholders represented in the RSPO were to stop pursuing this track, there would be no chance of improving the situation at all. Detailed information about the RSPO can be found below.
- Palm Oil Coalition: To promote the concept of sustainable palm oil and palm kernel oil production even more effectively, Henkel joined the Palm Oil Coalition in October 2009. Its members include representatives from globally operating companies in the consumer goods and food industries as well as from non-governmental organizations such as Greenpeace, Oxfam, the WWF and others. Their common goal is to enforce the protection of rainforests by shifting their sourcing of palm oil entirely to sustainably managed sources by an agreed date.
- Raw material suppliers: Henkel maintains a dialogue with raw material suppliers to encourage them to switch their production operations to sustainable palm (kernel) oil. Since we do not manufacture the surfactants ourselves but purchase them from our raw material suppliers, Henkel is thus at the end of a long supply chain.
- Forum on Sustainable Palm Oil: Together with the German Association for International Cooperation (GIZ), industry partners and the WWF, Henkel initiated the “Forum on Sustainable Palm Oil” in 2011. The goal of this platform is to promote the use of sustainably produced palm oil and palm kernel oil. The Forum’s work is based on the standards defined by the RSPO, which it intends to refine and amplify.
Our ambition and our goals
Our ambition is to operate sustainably and in a socially responsible manner throughout the entire value chain. Because of this, we take the problems that can occur through extensive cultivation of palm oil plantations very seriously and, together with a number of different stakeholders as our partners, we work toward sustainable and thus ecologically and socially responsible palm oil and palm kernel oil production.
The foremost goal is that, whenever palm oil and palm kernel oil are used as the basis for ingredients, this oil should be derived from sustainably cultivated sources. As early as 2009, Henkel committed to covering its product ranges throughout the company with certificates for sustainable palm kernel oil and to complete this step by 2015. To underscore this clear commitment to sustainable palm oil production, we have been purchasing certificates for sustainable palm kernel oil for our entire product portfolio of laundry detergents and household cleaners since 2012. This ensures that for the quantity of palm kernel oil used in the production of surfactants for Henkel’s laundry and home care products a corresponding quantity of sustainable palm kernel oil will be produced and enter the supply chain for surfactant production.
The RSPO and certificate trading
The RSPO arose out of an initiative by the World Wide Fund for Nature (WWF) and a number of interested representatives of the business community, aiming to promote the sustainable cultivation of palm oil and palm kernel oil. Today, the RSPO has several hundred members, including oil palm growers, producers of consumer products, retailers, banks, investors and non-governmental organizations. The association is headquartered in Zürich and the secretariat is located in Kuala Lumpur. At the fifth Round Table (RT5) in 2007, it was decided to build up a certification and marketing model for palm oil from sustainable cultivation. A primary objective was that the certification model should be flexible and take account of the different conditions under which palm oil and palm kernel oil is produced, processed and traded.
In addition to the certification procedure, the RSPO has established three different, but formally equivalent, marketing models for palm oil and palm kernel oil from sustainably managed palm oil plantations:
- Segregation, or the physical separation of sustainable and normal palm oil streams
- Mass balance, or the controlled mixing of sustainable and “normal” palm oil or palm kernel oil, and
- The Book & Claim system, including certificate trading.
As surfactant manufacturers purchase the starting material, palm kernel oil, on the world market rather than directly from the producers, the Book & Claim system is currently the most suitable one for raw materials based on palm kernel oil. Although it is possible to segregate sustainably produced palm kernel oil from normal palm kernel oil, 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. In 2008, we collaborated with the trading platform GreenPalm to expand the system so that it would cover palm kernel oil as well as palm oil, and then became the world’s first company to purchase such certificates. This became possible after the first palm oil plantation was approved as satisfying the RSPO criteria for sustainable palm oil cultivation.
How the Book & Claim system works
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 sustainability criteria of the RSPO receive certificates for their sustainably produced palm oil and palm kernel oil and can sell these certificates.
A special platform was established for trading Book & Claim certificates. This is run by the GreenPalm company. On the trading platform (www.greenpalm.org), the producers of palm oil and palm kernel oil register how much of their RSPO-audited and certified output they wish to sell. On the basis of this registration, the certificates for sustainable palm oil and palm kernel oil can then be traded on the market.
Why certificates are important
Users can purchase these certificates quickly and directly. This gives plantation owners an economic incentive to produce palm oil sustainably. Moreover, the proceeds from the sale of certificates go directly to the producers. This makes it possible to provide direct support for local initiatives (e.g. by small farmers) without any major logistic effort.
By purchasing certificates, buyers can document that an equivalent quantity of sustainably produced palm oil or palm kernel oil has entered the supply chain. The trading system is completely transparent, and the prices obtained and quantities involved can be found on the GreenPalm website.
The greater the demand for certificates, the more sustainable palm oil and palm kernel oil there will be on the market. In this way, the market will switch to sustainable production in the medium and long term.
Since we obtain surfactants from our raw material suppliers, and are thus at the end of a long supply chain, the purchase of certificates is the only possibility for Henkel to support sustainable palm oil production, alongside our activities in the RSPO, the Palm Oil Coalition, and the Forum on Sustainable Palm Oil.
Henkel’s leading role and the company’s contribution to the sustainable cultivation of palm oil is recognized by external stakeholders, as well. The WWF rated Henkel among the top performers in its international Palm Oil Buyers’ Scorecard in November 2011, awarding the company the highest possible score (nine out of nine points). In this ranking, the WWF considered more than 130 companies, including 64 from the German consumer goods and retail industries, to assess their contributions to a sustainable palm oil economy.