How Golden Agri could help make half of all palm oil sustainable

The world's largest palm oil companies may have a reputation for being the bad guys when it comes to the environment, but it might surprise you to learn that the industry increasingly appears to be turning a corner.

Such is the extent of the transformation undertaken by a number of leading suppliers that it now looks as if half the world's palm oil will be officially classed as sustainable by the end of 2015, making it significantly easier for cosmetic and food companies to source raw materials that are not contributing directly to deforestation.

Late in February Golden Agri Resources (GAR) which produces an estimated 5 percent of the world's palm oil, made a significant announcement in a filing to the Singapore Stock Exchange — confirming it is committed to zero deforestation throughout its entire supply chain.

GAR long has been a leader in the drive for sustainable palm oil, becoming the first major company to commit to zero deforestation in its upstream activities — i.e growing palm oil — back in 2011.

But since then, the company has launched a downstream arm that buys palm oil from other suppliers and refines it for goods such as margarine and makeup, potentially leaving it open to charges that it is once again contributing to deforestation.

Scott Poynton, chief executive of The Forest Trust (TFT), which works with a wide range of companies to develop more sustainable forestry practices, explained that initially GAR was reluctant to commit its new arm to zero deforestation until the business was more established.

But then in December, Wilmar, the world's largest palm oil company, which also has a large downstream business, confirmed 100 percent of the palm oil used in its supply chain would be fully traceable by the end of 2015 .

"It was then that we looked at GAR and said: 'OK, now it's time for you to step up, because Wilmar has made the running," Poyton told BusinessGreen. "Everyone thought that the trading side was going to be really difficult, and it is because you're buying and selling and it's just on pieces of paper, so you don't always know where the oil comes from. GAR's view was that they didn't want to commit to something that they couldn't deliver. [But] when Wilmar stepped up it gave them the confidence to look at it more closely."

With Wilmar accounting for 45 percent of the palm oil market, and GAR accounting for 5 percent, the two together have committed half of the world's palm oil being produced in line with sustainability best practices by the end of 2015.

However, the other half of the market is yet to make such commitments, with companies such as Cargill and Musim Mas still accused of failing to adequately protect the rainforests and creatures that inhabit it, such as tigers and orangutans. Consumer products giant Proctor and Gamble is also facing protests from Greenpeace designed to force it to drop several suppliers that it believes are helping to clear rainforest in Borneo.

P&G so far has refused to shift its stance, but Poynton predicts it will only be a matter of time before all high profile brands move to sustainable certified palm oil, arguing that the industry is now broadly moving in a positive direction.

"I'm hoping what we're seeing is a situation where more and more of these companies are going to realize there's a new standard in the industry now and palm oil has got a bad reputation for causing deforestation and that they really shouldn't be engaged in that," he added. "More and more consumer companies and growers are following in the lead of the Nestles, of the Golden Agris and the Wilmars, and making some more commitments. I'm hoping this really brings the industry to a new place."

Greenpeace forest campaigner Annisa Rahmawati agreed that GAR and Wilmar's lead will place further pressure on other companies to follow suit.

"GAR's announcement to implement an ambitious Forest Conservation Policy for its downstream operations is a sign that the company takes its commitment seriously and is trying to minimise the impact it has on forests," she said. "The next step means putting this commitment into practice: GAR must now ensure that all the palm oil it refines and trades is not contributing to deforestation, climate change and social conflicts."

The industry may have a long way to go before it is hailed as an environmental champion, but the commitment to turning that corner is thankfully more evident than ever.

Top image of palm oil fruits by KYTan via Shutterstock. This story originally appeared at BusinessGreen.