Palm oil

Palm oil is used as a cooking oil and as an ingredient in foodstuffs, especially in confectionery and culinary items. In 2016 we bought 420 000 tonnes of palm oil. Our supplies come from processing countries that source palm oil, mostly from Malaysia and Indonesia.

How we source palm oil

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 Free, Prior and Informed Consent (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 Responsible Sourcing Guideline also goes beyond the RSPO standard. The Responsible Sourcing Guideline 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.

Palm oil supply chain challenges and solutions

There are numerous challenges within the palm oil industry. Deforestation is a major issue, and the focus of many campaigns by non-governmental organisations (NGOs), governments and other bodies. We discuss this issue in more detail in the Pulp and paper section.

Another issue is the frequent lack of transparency in supply chains, and a lack of available information. To address this, we use our Traceability Declaration Document, which suppliers complete quarterly to declare the supply chain linked to our foods and beverages. Although information gaps remain, the Document allows for unprecedented transparency and facilitates discussions with suppliers to address those gaps.

Deforestation

Deforestation is a major environmental issue associated with palm oil production. Poor forest management and the loss of high conservation value (HCV) areas remain a challenge. Rising consumer demand means tropical rainforests and associated peatlands have been cleared to make way for plantations, which contribute to greenhouse gas emissions, soil erosion, water pollution and a loss of biodiversity.

In 2010, Nestlé made a ‘no deforestation’ commitment (pdf, 205Kb), stating that all of its products, globally, will not be associated with deforestation by 2020 (we also support the Consumer Goods Forum’s ambition for zero net deforestation by 2020). This commitment was the first of its kind by a food company, and covers all the raw materials we use to make our foods and beverages, as well as our packaging.

Land rights

Another challenge within the supply chain is land tenure and acquisition, with farmers’ land subject to ‘landgrabs’ by others. We have been gathering data and insights on the status of farmers’ property rights, and are developing an action plan to address this issue.

The Rurality initiative

Nestlé is working with partners The Forest Trust (TFT) on a major initiative, Rurality. Rurality aims to connect key stakeholders in palm oil supply chains, share innovation and knowledge, and connect farmers with bodies such as research centres and schools and to the consumers.

The initiative began with a Rural Dynamics Diagnostic phase, in which Rurality field officers assess farmers’ environments, their farming systems and household economics, and their challenges and needs. This phase was also important in building trust with the farmers. The information gathered enabled a transformation strategy to be designed to identify opportunities for change to strengthen the farmers and help them overcome their challenges.

Following this, four projects involving over 400 farmers began in 2016, in Ghana, Côte d’Ivoire, Malaysia and Indonesia. Initial actions have included training on practical topics such as use of appropriate tools, safety equipment and fertilisers, organising field visits to success stories to share ideas, and building awareness of the importance of forest conservation. Supported by Nestlé’s funding, Rurality will continue to grow in 2017.


How we assess suppliers

We are working with our 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.

Our Traceability Declaration Document provides information that is used to determine which mills and growers are prioritised for assessments. This enables us to gain a better understanding of their practices and provide ways to strengthen policies, systems and practices against our Responsible Sourcing Guideline. This is an important step towards our goal of having an entirely Guideline-compliant supply chain.

Together with TFT, we have made major progress in engaging with leading suppliers that have established traceable supply chains that are also assessed against the Responsible Sourcing Guideline. One, Florin AG, has established its own palm oil sourcing policy that aligns with our own, only purchasing oil that is traceable, RSPO certified and deforestation-free.

Our annual objectives

Our annuall objectives chart. Total volume: 420 000 tonnes. Percentage of volume traceable [link to definition on responsible sourcing page]: 91.5% (2016 target: 80%) to mill. Percentage of volume Responsibly Sourced [link to definition on responsible sourcing page]: 57% (2016 target: 70%)

Our progress to date

As a first step towards supporting smallholders, Nestlé is funding Rurality, an initiative of TFT that aims to engage with smallholders, identify scalable improvement opportunities and build a train-the-trainer model that facilitates the sharing of best practice. As Rurality develops, we will align our Rural Development Framework with it. Rurality aims to, among other things, help farmers improve production through training, collaboration and best practice, develop their financial management and investment capacities, diversify activities, and mitigate the impact of palm oil plantations.

So far, hundreds of farmers have been interviewed in Ghana, Indonesia, Côte d’Ivoire and Malaysia, as we begin to identify and understand issues that affect them. We have begun organising field visits to successful farms, building awareness on the importance of forest conservation, and have conducted information sessions with farmers to develop their knowledge of the market.

Looking ahead

We will continue working with TFT to develop and grow the Rurality project. As we gather more information, we will be able to implement more activities. These will include capacity building and developing good agricultural practices, improving access to tools and equipment, developing farmers’ associations, and developing KPIs to monitor performance.