Executive Briefings

From Minerals to Palm Oil: Another Supply-Chain 'Conflict'

Blood diamonds. Conflict minerals. And now, conflict palm oil.

From Minerals to Palm Oil: Another Supply-Chain 'Conflict'

Palm oil can be found in countless food and packaged products, from pizza and ice cream to lipstick and shampoo. It's said to be the most widely consumed vegetable oil on the planet. But it's also one of the most controversial ingredients in the modern-day consumer's diet.

Start with the health concerns. Palm oil has been accused of contributing to a diet that’s high in saturated fat, leading to a greater risk of heart disease and high blood pressure. But an even bigger issue surrounding palm oil today is one that’s tied to global supply chains: specifically, where is it being sourced? And what are the resulting environmental and social impacts?

“Conflict” palm oil is any variety of the substance that’s associated with deforestation and human rights abuses, according to Robin Averbeck, senior campaigner with the Rainforest Action Network. Due to its relatively high yield and low production costs, palm oil encourages monoculture farming, leading to the clearing of vast stretches of forest. Palm oil plantations destroy the habitats of numerous indigenous species, including the orangutan, environmental advocates say.

There’s also a more direct human cost – one that causes human rights advocates to place palm oil in the same category as “blood diamonds” from parts of Africa, and mined minerals from the Democratic Republic of the Congo. Averbeck says the lure of palm oil results in “land grabbing” by governments and agricultural interests at the expense of local residents. “Concessions are handed out to palm oil companies without recognition of the rights of communities,” Averbeck says. In addition, RAN charges, palm oil production has been associated with forced and child labor in Indonesia and Malaysia.

A new report from RAN and Rainforest Foundation Norway, entitled “Palm Oil Sustainability Assessment of Indofood Agri Resources,” lays out the case against one major Indonesian producer. It alleges that the clearing and burning of rainforests, as well as human-rights violations, constitute “business as usual” for Indofood Agri, which reportedly is the sole maker of PepsiCo-branded products in Indonesia.

RAN also criticizes PepsiCo Inc. for allegedly excluding Indofood from the requirements of its own palm oil policy, “allowing the company to bypass the stricter environmental and social standards and all but ensuring that deforestation and human and labor rights will continue to taint the snack food giant’s supply chain.”

PepsiCo is one of a group that RAN has dubbed the “Snack Food 20” – major users of palm oil that also include Campbell Soup Co.; General Mills Inc.; Kellogg Co.; Kraft Food Group Inc.; and The Hershey Company.

While some have voluntarily begun addressing environmental and human rights violations associated with palm oil production, “None have yet adopted and fully implemented adequate safeguards to eliminate conflict palm oil from entering their supply chains and contaminating their products,” RAN charges.

The Bureau of International Labor Affairs, part of the U.S. Department of Labor, cites Indonesian palm oil production for the use of child labor, and the Malaysian equivalent for child and forced labor, on its annual list of labor rights abuses. (The two countries have been on the list since 2010, Averbeck notes.)

The global extent of rights abuses associated with palm oil is “very murky,” Aberbeck says. Other countries where violations have been reported include Sierra Leone and Guatemala. But much of the focus remains on Malaysia and Indonesia, which together produce around 85 percent of the world’s palm oil.

So what’s to be done? Averbeck says companies needed to move beyond the Roundtable on Sustainable Palm Oil, an initiative formed in 2004 among manufacturers, retailers, traders, non-governmental organizations and other entities. RSPO has issued standards for sustainable palm oil, and certifies companies that adhere to them. But RAN believes the group “lacks strong safeguards against deforestation, and has a poor track record of upholding community or workers’ rights.”

Palm oil has at least one thing in common with conflict minerals from the DRC. Both are subject to the California Transparency in Supply Chains Act, the first attempt by an individual state to address modern-day slavery in the global supply chain. The law requires large retailers and manufacturers doing business in California to disclose “efforts to eradicate slavery and human trafficking from [their] direct supply chain for tangible goods offered for sale.” But, like the rules enforced by the U.S. Securities and Exchange Commission for disclosure of conflict-minerals content in manufactured goods, the California law is no more than a reporting requirement. It doesn’t mandate that companies take steps to eradicate human trafficking and slavery from their supply chains.

The name of the game, then, is public shaming. The SEC, State of California and the U.K.’s Modern Slavery Act were crafted under the assumption that companies will act to eliminate human-rights abuses in order to protect the reputation of their brands. Similarly, RAN and other rights advocates view their palm oil campaign as a means of promoting supply-chain transparency among global producers.

That’s no easy task. As with conflict minerals, the palm oil supply chain is long and complex, involving many stages of production and sale. The oil is often refined multiple times before making its way into a final product. So producers must find a way to track the provenance of their palm oil back to its origin at the farm.

“We’re really at the early stages” of that effort, Averbeck says. Many consumer brand producers have managed to trace the ingredient to the mill, but “there’s no way to verify the [existence] of land grabbing and child labor if you don’t know the plantation.”

Laggards in that effort will come under increasing pressure from groups like RAN and the Alliance to End Slavery and Trafficking (ATEST) to promote transparency in their supply chains. But the true test will be administered by the public. Do consumers care enough about the issue to tie their purchases to the human-rights record of goods producers? The marketplace will provide the answer.

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Palm oil can be found in countless food and packaged products, from pizza and ice cream to lipstick and shampoo. It's said to be the most widely consumed vegetable oil on the planet. But it's also one of the most controversial ingredients in the modern-day consumer's diet.

Start with the health concerns. Palm oil has been accused of contributing to a diet that’s high in saturated fat, leading to a greater risk of heart disease and high blood pressure. But an even bigger issue surrounding palm oil today is one that’s tied to global supply chains: specifically, where is it being sourced? And what are the resulting environmental and social impacts?

“Conflict” palm oil is any variety of the substance that’s associated with deforestation and human rights abuses, according to Robin Averbeck, senior campaigner with the Rainforest Action Network. Due to its relatively high yield and low production costs, palm oil encourages monoculture farming, leading to the clearing of vast stretches of forest. Palm oil plantations destroy the habitats of numerous indigenous species, including the orangutan, environmental advocates say.

There’s also a more direct human cost – one that causes human rights advocates to place palm oil in the same category as “blood diamonds” from parts of Africa, and mined minerals from the Democratic Republic of the Congo. Averbeck says the lure of palm oil results in “land grabbing” by governments and agricultural interests at the expense of local residents. “Concessions are handed out to palm oil companies without recognition of the rights of communities,” Averbeck says. In addition, RAN charges, palm oil production has been associated with forced and child labor in Indonesia and Malaysia.

A new report from RAN and Rainforest Foundation Norway, entitled “Palm Oil Sustainability Assessment of Indofood Agri Resources,” lays out the case against one major Indonesian producer. It alleges that the clearing and burning of rainforests, as well as human-rights violations, constitute “business as usual” for Indofood Agri, which reportedly is the sole maker of PepsiCo-branded products in Indonesia.

RAN also criticizes PepsiCo Inc. for allegedly excluding Indofood from the requirements of its own palm oil policy, “allowing the company to bypass the stricter environmental and social standards and all but ensuring that deforestation and human and labor rights will continue to taint the snack food giant’s supply chain.”

PepsiCo is one of a group that RAN has dubbed the “Snack Food 20” – major users of palm oil that also include Campbell Soup Co.; General Mills Inc.; Kellogg Co.; Kraft Food Group Inc.; and The Hershey Company.

While some have voluntarily begun addressing environmental and human rights violations associated with palm oil production, “None have yet adopted and fully implemented adequate safeguards to eliminate conflict palm oil from entering their supply chains and contaminating their products,” RAN charges.

The Bureau of International Labor Affairs, part of the U.S. Department of Labor, cites Indonesian palm oil production for the use of child labor, and the Malaysian equivalent for child and forced labor, on its annual list of labor rights abuses. (The two countries have been on the list since 2010, Averbeck notes.)

The global extent of rights abuses associated with palm oil is “very murky,” Aberbeck says. Other countries where violations have been reported include Sierra Leone and Guatemala. But much of the focus remains on Malaysia and Indonesia, which together produce around 85 percent of the world’s palm oil.

So what’s to be done? Averbeck says companies needed to move beyond the Roundtable on Sustainable Palm Oil, an initiative formed in 2004 among manufacturers, retailers, traders, non-governmental organizations and other entities. RSPO has issued standards for sustainable palm oil, and certifies companies that adhere to them. But RAN believes the group “lacks strong safeguards against deforestation, and has a poor track record of upholding community or workers’ rights.”

Palm oil has at least one thing in common with conflict minerals from the DRC. Both are subject to the California Transparency in Supply Chains Act, the first attempt by an individual state to address modern-day slavery in the global supply chain. The law requires large retailers and manufacturers doing business in California to disclose “efforts to eradicate slavery and human trafficking from [their] direct supply chain for tangible goods offered for sale.” But, like the rules enforced by the U.S. Securities and Exchange Commission for disclosure of conflict-minerals content in manufactured goods, the California law is no more than a reporting requirement. It doesn’t mandate that companies take steps to eradicate human trafficking and slavery from their supply chains.

The name of the game, then, is public shaming. The SEC, State of California and the U.K.’s Modern Slavery Act were crafted under the assumption that companies will act to eliminate human-rights abuses in order to protect the reputation of their brands. Similarly, RAN and other rights advocates view their palm oil campaign as a means of promoting supply-chain transparency among global producers.

That’s no easy task. As with conflict minerals, the palm oil supply chain is long and complex, involving many stages of production and sale. The oil is often refined multiple times before making its way into a final product. So producers must find a way to track the provenance of their palm oil back to its origin at the farm.

“We’re really at the early stages” of that effort, Averbeck says. Many consumer brand producers have managed to trace the ingredient to the mill, but “there’s no way to verify the [existence] of land grabbing and child labor if you don’t know the plantation.”

Laggards in that effort will come under increasing pressure from groups like RAN and the Alliance to End Slavery and Trafficking (ATEST) to promote transparency in their supply chains. But the true test will be administered by the public. Do consumers care enough about the issue to tie their purchases to the human-rights record of goods producers? The marketplace will provide the answer.

Comment on This Article

From Minerals to Palm Oil: Another Supply-Chain 'Conflict'