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Palm Oil: Now, for the Good News...

Reporting on ESG progress isn't all gloom and doom. Nor is it all about pointing fingers at the "bad guys". It's oftentimes the good news that gets us motivated to continue to strive for a sustainable planet - especially when we see the real, measurable benefits of doing so. Recent good news comes out of the palm oil sector.

First the basics. Palm oil is an edible vegetable oil that comes from the fruit grown on the African oil palm tree. The tree is now grown in Asia and North & South America, coinciding with an increase in its oil demand globally. The versatile oil is found in approximately 50% of products sold in supermarkets including bread, ice cream, and other processed foods, as well as cosmetics like makeup and soap.

Malaysian Palm Oil Production

Source: Bloomberg

Despite its global presence, palm oil has many risks. First, it has a high saturated fat content, known to be harmful to cardiovascular health. And not only is it bad for human health, as it also has extremely harmful effects on the planet.

Here's why. When palm oil is produced, the fruit is collected from trees which have an average lifespan of 28-30 years. Sounds fruitful, right? The problem is that when the trees grow too high to reach the fruit, the entire tree is cut down to make room for new trees. This process contributes to deforestation of the rainforest According to the World Wide Fund for Nature (WWF), the conversion of rainforest into plantations is a major contributor to climate change, as the process releases high amounts of C02 into the atmosphere. Furthermore, this conversion exacerbates the loss of animal habitat for endangered species.

Additionally, palm oil is linked to labor exploitation which lead the U.S. State Department to link the industry in Malaysia and Indonesia to exploitation and trafficking.

The problems associated with palm oil have been evident for years encouraging businesses, government and end-users to take measurable action. According to Chain Reaction Research, deforestation from palm oil had reached a 4-year low, not seen since 2017, specifically, in Indonesia, Malaysia, and Papua New Guinea. Last year alone, the 10 largest deforesters cleared approximately 8,000 ha, or 42 percent of total deforestation.

Surely, Covid-related, supply chain issues and higher commodity prices have contributed to deforestation reduction. But ongoing initiatives have helped in this regard well before the outset of Covid-19.

First, the Roundtable on Sustainable Palm Oil (RSPO), established in 2004, promotes the production and use of sustainable palm oil for people, the planet and prosperity. Forty percent of the world’s palm oil producers are members of the RSPO, as well as many product manufacturers, retailers, environmental and social non-governmental organizations (NGOs).

Second, many companies linked to international supply chains are covered by No Deforestation, No Peat, No Exploitation (NDPE) policies. But this number needs to increase, particularly considering that none of the 10 largest deforesters in 2021 can be conclusively linked to the NDPE market. Here is the list:

Top Ten Deforesters in 2021

Source: Aidenvironment

Bottom line - things are looking better with respect to palm oil production and use. But more needs to be done. Whether you are a producer, investor, government official, public advocate or consumer, you can make a difference. After all, we are all in this together.

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