A sustainable palm oil production for the protection of the rain forest
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. In particular, the palm and palm kernel oil that we use should not contribute to deforestation of either primary rain forest or secondary rain forest with significant ecological value. This also includes High Carbon Stocks forests.
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, which represents 90 percent of plantation yield, the oil palm also 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 is particularly important as a raw material for the food industry. Palm kernel oil, which is the remaining 10 percent, is less used in this area due to its chemical structure. The supply and demand for palm oil therefore also determines the available quantity of the side product, palm kernel oil.
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.
In total, through our suppliers of surfactants and other raw materials, we indirectly use less than 0.2 percent of the palm oils produced worldwide, and primarily palm kernel oil for our 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. The palm oil and palm kernel oil we use should not contribute to deforestation. For this reason, Henkel actively promotes the establishment of sustainability criteria in the supply chain for palm oil and palm kernel oil.
Since, unlike palm oil, palm kernel oil only represents 10 percent of plantations’ yield, the approaches and solutions used must cover both palm oil and palm kernel oil. This is the only way that the market as a whole can be changed. Current data, however, indicate a major imbalance in the demand for sustainable palm oil and sustainable palm kernel oil. In relative terms, the demand for sustainable palm kernel oil is much higher than for sustainable palm oil. It will therefore be essential to raise the demand for sustainable palm oil so as to also increase the supply of sustainable palm kernel oil. Achieving a significant and permanent change in the market is only possible by addressing palm oil, which represents 90 percent of plantations’ yield.
As shown by the following examples, we are taking a variety of approaches to achieving sustainable palm oil production. Our involvement has developed continuously over the past ten years and more and will continue to do so in the future. As is so often the case for complex challenges, there is a shared goal, but the best and fastest path to reaching this goal often has to be changed to reflect new developments and findings. This is also the case here.
- 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. Its criteria and mechanisms cover primary forest protection and a few social criteria. In our current view, however, these criteria are inadequate when it comes to the protection of secondary forests and peatland. The RSPO criteria nevertheless represent an important foundation that can be built on. Further information on RSPO is provided below.
- Henkel is one of the signatories to an initiative by the Consumer Goods Forum to fight global deforestation and protect biodiversity. The member companies have committed to take individual and joint action to stop global deforestation and achieve the goal of “Zero Net Deforestation by 2020”.
- Forum on Sustainable Palm Oil: Together with the German Association for International Cooperation (GIZ), industry partners and the WWF, our Laundry & Home Care business unit established the Forum on Sustainable Palm Oil in Germany in September 2013. The Forum wants to build on existing RSPO standards to further improve the sustainability criteria for the production of palm and palm kernel oil in the palm growing countries. The goal is to significantly increase the share of segregated and certified palm oil and palm kernel oil from sustainable production and related derivatives such as surfactants in the German, Austrian and Swiss markets.
- Small farmer program: Our Laundry & Home Care business unit, the Solidaridad development organization and other partners started a three-year program in Honduras in the summer of 2013 aimed at improving the livelihood of 7,500 small farmers and 5,000 workers. We would like to continue providing even more targeted support in the future aimed at small farmers and local initiatives in the palm-growing countries.
- Raw material suppliers: Henkel maintains a dialogue with raw material suppliers to encourage them to switch their production operations to sustainable palm and palm kernel oil. Since we do not manufacture the surfactants ourselves but purchase them from our raw material suppliers, we are at the end of a long supply chain. We are working with our partners to establish full traceability of the palm and palm kernel oils they purchase for ingredients based on these oils, such as surfactants, by 2020.
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. The palm and palm kernel oil we use should not contribute to deforestation of either primary rain forest or secondary rain forest with significant ecological value. This also includes High Carbon Stock forests.
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. Since we purchase our surfactants from raw material suppliers, we are at the end of a long supply chain. By buying certificates, we can provide support for sustainable palm oil production in the growing countries. This is because the certificates give plantation operators an economic incentive to produce palm oil sustainably. The proceeds from the certificates also directly benefit the producers, which means that local initiatives can be directly supported without requiring major logistical efforts. For these reasons, we have long considered the Book & Claim system to be the best for indirect purchases of palm kernel oil. As already mentioned, however, in the present circumstances we feel it makes sense to modify and amend this approach and supplement it with other measures and initiatives aimed at reaching the same goal. This includes, in particular, working with our partners to establish full traceability of purchased palm and palm kernel oil by 2020.
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 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 particularly suitable 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. That is why we decided to focus on the Book & Claim system first. 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 local initiatives are important
Building on these certificates, we would like to further increase our support for sustainable palm oil production with even more specific targeting of small farmers and local initiatives in palm-growing countries in the future. We need solutions and projects that enable small farmers to access the market and increase productivity on their plantations.
We aim to change the entire market in this way, so that only sustainably produced palm and palm kernel oil is available in the future.
The first example of this is the three-year program started in Honduras in the summer of 2013 by our Laundry & Home Care business unit, the Solidaridad development organization and other partners. Our common goal is to create a sustainable supply chain for palm and palm kernel oil that can be certified under the RSPO criteria. This project is aimed at making Honduras the first country to be changed over almost completely to sustainable palm oil production.
The small farmers participating in the program will receive training and assistance in optimal agricultural practice and better plantation management until the end of 2015 to allow them to increase the productivity and yield of their plantations. Worker training covers the key areas of health and safety and supports application of the RSPO sustainability criteria. The WWF, Netherlands development organization SNV and Proforest initiative are important partners of the project.