Palm oil

We bought around 420 000 tonnes of palm oil in 2015 – around 1% of the global production – from a number of processing companies that source oil from Malaysia, Indonesia and other countries.

We mainly use palm oil as a cooking oil and as an ingredient in food categories, such as confectionery and culinary.

Verification and certification

Our category-specific requirements for palm oil require our suppliers to source oil from plantations that:

  • Comply with local laws and regulations;
  • Do not come from areas cleared of natural forest after November 2005;
  • Respect the FPIC of local and indigenous communities;
  • Protect high-carbon-value forests;
  • Protect peatlands; and
  • Comply with the principles and criteria of the Roundtable on Sustainable Palm Oil (RSPO), the industry-wide certification body that promotes the growth and use of sustainable palm oil products.

The Nestlé RSG also goes beyond the RSPO standard. The RSG makes explicit provisions for the protection of peatland and high-carbon forest, which are critical in combating deforestation, and for preventing social conflict arising from potential disputes over land rights and land acquisition.

Traceability in the supply chain

Nestlé is working with its suppliers towards plantation-level traceability for all our foods and beverages, but in the palm oil supply chain there has been a lack of available information. To address this, we use our Traceability Declaration Document (TDD), which suppliers complete quarterly to declare the supply chain linked to our foods and beverages. Although information gaps remain, the TDD allows for unprecedented transparency and facilitates discussions with suppliers to address those gaps.

The information obtained is used to determine which mills and growers are prioritised for assessments, so that we can better understand their practices and provide ways to strengthen policies, systems and practices against our RSG. This is a necessary first step to reach our ultimate goal of having our entire supply chain RSG compliant.

Although there are many challenges, we remain determined to collaborate with others to make progress towards our goals. Together with TFT, we have made major progress in engaging with leading suppliers – notably Sime Darby, Wilmar International, Cargill and a collaboration between Golden Agri-Resources in Indonesia and Oleofats in the Philippines – that have established traceable supply chains that are also assessed against the RSG. For example, Florin AG, based in Switzerland, has established its own Palm Oil Sourcing Policy that aligns with our own – all the oil it purchases is traceable, RSPO certified and deforestation-free.

GreenPalm certificates

We have almost reached our newly stated, more ambitious target for increased traceability and supplier engagement. However, we also recognise that until traceability becomes feasible for all supply chains, including for complex blends of palm-based derivatives, GreenPalm certificates will have a role to play in supporting producers of certified sustainable palm oil.

Since 2010, we have used RSPO GreenPalm certificates to offset our purchases of palm oil and contribute to the development of best practice in the palm oil industry. This mechanism has helped us demonstrate our sustainability commitments to suppliers, plantation owners, customers and consumer communities. But it was always a temporary solution while we identified palm oil origins and started to assess and help remediate the root causes of deforestation and poor labour conditions.

Following last year’s decision to phase out the use of RSPO GreenPalm certificates to offset our purchases of palm oil, we have begun working towards this aim. In January 2015, we started phasing out the purchase of GreenPalm certificates for the palm oil that is traceable back to the mill and began diverting resources to partnership activities to support palm oil smallholders.

As a first step towards supporting smallholders, Nestlé is funding Rurality, a key initiative started by TFT. Rurality aims to engage with smallholders, identify scaleable improvement opportunities and build a train-the-trainer model that facilitates the sharing of best practice. As Rurality develops, we will align it with our Rural Development Framework, and TFT is currently identifying five countries to work with.

Nestlé’s relationship with IOI

The suspension of palm oil producer IOI by the Roundtable on Sustainable Palm Oil (RSPO) has focused attention on IOI’s practices and its commercial relationships. Following the suspension, Nestlé immediately ceased sourcing from the IOI plantations at the centre of the concerns raised. We also asked our partner organisation The Forest Trust (TFT) to look into how the company responded.

Alongside TFT, we carried out an assessment of IOI’s no-deforestation action plan. We do not believe it goes far enough in tackling the issues raised by the RSPO suspension. Nestle will therefore not award any new business to IOI group and we will also phase out all existing contracts, with an expected completion date of August 31, 2016.

We remain in dialogue with IOI however, which reflects our approach of engaging with our suppliers to help them improve practices. Nestlé recently met senior leaders at the company, who have listened to our concerns and expressed a determination to improve further. We will continue to phase out our contracts, but at the same time share ideas and best practices with IOI to help them meet the standards expected of major palm oil producers.

We will provide a further update later in 2016 on how we feel the company has acted to address the issues being faced.

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