BASF drives change in the palm-oil supply chain

This article is sponsored by BASF.

The palm oil industry is facing a dichotomous dilemma. Demand for this versatile vegetable oil has skyrocketed in recent years as it’s the most widely consumed ingredient in the world that can be found in nearly half of common consumer products, from cookies to shampoo. While the cost might be cheap in monetary terms, palm oil carries a hefty environmental price tag. As our population continues to grow, so does consumer demand for palm oil, which in turn calls for more palm plantations at the expense of biodiversity and ecosystems in the countries it is produced. This leads to deforestation, habitat degradation, climate change, loss of biodiversity and indigenous rights issues in the countries where it’s produced.

Background

Humankind has used the African oil palm (Elaeis guineensis) as a source of oil and other products for thousands of years. The history of palm oil stretches back with the oldest record of its use dating from 3,000 BC. In the late 1800s, archaeologists discovered palm oil in a tomb in Abydos, Egypt. While palm oil was pervasive in West Africa, its use in the international market expanded greatly because of the British Industrial Revolution and the expansion of overseas trade. As a result of this increased demand, Europeans started investing in palm oil production first in Africa and then expanding in Southeast Asia. The first commercial scale plantation in Malaysia was founded in 1917 and established in Tennamaran Estate in Selangor.

Since then, global consumption of palm oil and palm kernel oil has grown rapidly from about 4 million metric tons in the late 1970s to more than 70 million tons in recent years. The product is irreplaceable due to its unique chemistry and versatility. Major changes in consumer behavior, population growth and energy politics have been the key drivers. It is estimated that 4 million people work in the oil-palm sector in Malaysia and Indonesia, the producing countries of the product. In Borneo, for instance, more than 17 million acres of industrial palm plantations are in areas that were covered by primary forests 45 years ago.

Steps towards possible solutions

So, what can be done to start alleviating this global issue? Palm oil industries can improve environmental impact by practicing — sustainable sourcing — ensuring security of supply while managing environmental and social issues. This can be achieved through Roundtable on Sustainable Palm Oil (RSPO) certification and through traceability/transparency of their supply chain: identifying the origin of the oil sourced and making sure transformation work is required to achieve sustainable practices and human and labor conditions are respected on the ground.

Many companies, including BASF, have been committing to sustainable palm oil as a result. The company recently unveiled its plans to make a major part of its palm-based portfolio and its personal care specialties exclusively available as certified sustainable. The move to offer palm-based specialties only as certified in line with the RSPO “Mass Balance” standard is the latest move in BASF’s initiative Time for Change.  BASF is one of the largest manufacturers of palm kernel oil and its derivatives for cosmetics and food and commits to certified sustainable raw material.

“This is the first time that we have changed a portfolio of this size and complexity,” said Isabella Tonaco, head of global sustainability of palm [roducts, BASF. “We envision that by 2020, every personal care product contains a certified ingredient in it.”

BASF’s input

BASF has committed to switching about 330 palm-based products to “Mass Balance” in the course of 2018 globally. “Mass Balance” (MB) is one of the RSPO supply-chain standards that fosters the physical flow of certified raw materials within the oleo derivatives supply chain.

The company is one of the largest global manufacturers of ingredients for cosmetic products. The raw materials BASF uses mainly come from palm kernel oil and palm kernel oil derivatives, according to Tonaco. A palm oil kernel is about the size of a coffee bean. It is dark on the outside and light on the inside where it contains the fat component that BASF uses for products. Palm kernel oil is just one-tenth of the oil palm production.

RSPO is the nonprofit organization that’s driving the movement towards making certified sustainable palm oil the norm. BASF has been a member of RSPO since its inception in 2004.

“The efforts of BASF to transfer its full line of offerings to certified sustainable palm oil is noble. That’s the behavior I look to see and would point to as transformative,” said Dan Strechay, U.S. representative, outreach and engagement at RSPO. “As opposed to carrying certified and non-certified material, here’s a company that’s already making the move to provide 100 percent RSPO certified material. That means the products that the consumer ends up getting at the end of the day are going to support the production of certified sustainable palm oil.”

This is important, because once the industries start paying attention to certified sustainable products, consumers usually follow suit.

“The industry is accountable for driving change and consumers expect companies to deliver on their promises,” said Prerna Chatterjee, marketing manager, sustainability, Care Chemicals North America, BASF.

In addition to committing to sustainable palm oil, BASF is also collaborating with Henkel and development organization Solidaridad on the Farmer Field School program, which provides valuable agronomic and environmental knowledge that prepares smallholders for certification and has a measurable impact on their livelihood. As about 20 percent of palm oil and palm kernel oil grown are certified sustainable, these programs are crucial to the increase of certified sustainable palm. More than 900 farmers already have participated in the program and are sharing their knowledge with family members and other farmers from their community.

As for BASF, in 2017 the company traced almost 80 percent of its overall palm oil sourcing of more than half a million metric tons. The certified sustainable palm oil is 100 percent traceable and originates from 204 oil mills in Indonesia and Malaysia. By 2020, BASF vows to make all its palm kernel-based oil purchases RSPO-certified and traceable.

“We acknowledge our palm exposure as a lever to drive change,” Chatterjee added. “The impact we’re targeting with our recent portfolio change is to ensure a large-scale physical market transformation of the palm oil market.”

Click here for a video of an Indonesian palm farmer discussing her experience in the palm oil industry.