Palm oil

Oil palm fruits

Palm oil is the most cost-competitive, versatile and widely produced vegetable oil.

When produced responsibly, it can support millions of livelihoods and reduce pressure on forests and sensitive ecosystems. Because effective management of risks requires industry-wide change, we are committed to collaborating with our partners, suppliers and industry peers to drive innovation and industry-wide transformation.

Our palm oil supply chain

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Our approach to sourcing palm oil sustainably

Our Responsible Sourcing Standard (PDF, 2Mb) makes explicit provisions for the protection of peatland and high carbon stock (HCS) land. These are critical in combating deforestation and for the prevention of social conflict arising from potential disputes over land rights and land acquisition.

Our category-specific requirements for palm oil mean our suppliers must source oil from origins that:

  • Comply with local laws and regulations.
  • Are not areas cleared of natural forest after December 31, 2015.
  • Respect local and indigenous communities’ rights to free, prior and informed consent.
  • Protect HCS land.
  • Protect peatlands.
  • Comply with the principles and criteria of the Roundtable on Sustainable Palm Oil, the industry-wide certification body that promotes the growth and use of sustainable palm oil products.

To address challenges in our palm oil supply chains, we start by understanding where the palm oil comes from and how it is produced. We then partner with expert organizations and industry to resolve any issues identified.

Continuous improvement

We work together with our direct suppliers to continuously improve the sustainability practices of our upstream supply chain, all the way up to smallholder farmers. We also work with partners like Earthworm Foundation to conduct supplier assessments and identify gaps. This then informs the development of action plans with defined milestones and deadlines to act upon risks and identified opportunities for improvement.

When a supplier fails to effectively manage identified risks or meet agreed deadlines, we take decisive action. To provide assurance of this, we have removed the following 14 upstream supply chain companies from the Nestlé supply chain since 2018:

  • DTK Opportunity
  • Korindo Group
  • Indonusa
  • PACIFIC INTER-LINK (HSA)
  • PTT Green Plc
  • Salim Group/Indofood
  • Noble
  • Posco Daewoo
  • Cilandri Anky Abadi
  • PT. Indo Sawit Perkasa 
  • PT. Kallista Alam 
  • PT. Laot Bangko 
  • PT. Surya Panen Subur 
  • Samling 

In 2018, we stopped sourcing palm oil from Olmeca (REPSA) following noncompliance with our Responsible Sourcing Standard. We continued to engage them on a regular basis, developing a joint time-bound action plan to address the main issues that led to the suspension. These include social and environmental risks, a lack of stakeholder engagement and transparency and the management of grievances. Since then, we have seen good progress from the company and ended the suspension in October 2020. We will, however, keep engaging and monitoring REPSA's progress against their action plan. We remain committed to closely monitoring, assisting and taking action as needed with all suppliers in our supply chain.

Transparency

To hold our suppliers and ourselves accountable and drive industry-wide transparency, we have published a list of our Tier 1 suppliers and their mills in our supply chain (pdf, 8Mb), along with the country of origin. These suppliers and mills supply 96% of the total volume of palm oil we source annually, which was our volume traceable to mill in 2020. However, assessing and monitoring conditions on the ground requires us to go further upstream, which is why we are focusing on traceability to plantation, which we have now achieved for 70% of our volume.

Aligned with our commitment to supply chain transparency, we published a palm oil transparency dashboard in 2019. The dashboard shares detailed information on how we are using Starling satellite monitoring to advance our strategy to end deforestation. It also includes data on deforestation alerts (pdf, 107Kb) in different supply chain origins, an overview of how we respond to these alerts and where we see the need for collective action and engagement.

In 2020, we continued our work with OpenSC, a platform founded by WWF-Australia and Boston Consulting Group Digital Ventures. We have completed the initial phase of our project in South America, where we were testing key technologies, such as satellites and internet of things (IoT) devices, to track palm fruits from farm to mill and onward to Nestlé. We also initiated a coffee-related project with OpenSC to explore the applicability of our approach toward social and environmental monitoring in coffee regions. In 2021, we intend to test the outcome of this collaboration with consumers on at least one Nestlé product.

Natural capital

In 2010, we made a deforestation-free commitment for our supply chains, stating that all of our products, globally, will not be associated with deforestation by 2020. For the last 10 years, we have been using a combination of tools, including supply chain mapping, certification, Starling satellite monitoring and on-the-ground verification, to make deforestation-free (pdf) palm oil a reality. As of December 2020, less than 70% of the palm oil we source was assessed as deforestation-free. We will continue to work with smallholder farmers and large suppliers alike to be close to 100% deforestation-free by 2022.

To accelerate our palm oil commitment, we have partnered with Airbus and Earthworm Foundation to implement Starling, a satellite-based service, to monitor 100% of our global palm oil supply chains. Starling provides highly detailed optical and radar images of land across huge areas, so even small changes in tree cover are clearly visible. We then use the platform to directly monitor deforestation risk within our supply chain and prioritize where to take action.

In 2020, we utilized Starling to conduct an in-depth analysis of every single point of origin identified in our supply chain. This included monitoring over 8000 farm boundaries, as well as the area surrounding more than 1600 mills, to determine whether origins were verifiably deforestation-free or whether further supplier engagement and investigation were needed. We also used Starling to take an important step toward evolving our strategy from a focus on no deforestation to a forest positive approach. This means we will aim to source from suppliers that are actively conserving and restoring forests while promoting sustainable livelihoods and respecting human rights. We began by carrying out a Forest Footprint pilot exercise (pdf, 2Mb) across Indonesia’s Aceh province to better understand forest- and peatland-related risks within our supply chain. We also wanted to gain insight into risks to the rights of Indigenous peoples and communities. The pilot exercise helped us better understand our exposure to future deforestation and land rights conflict risks in Aceh. Despite some limits to the process, we believe it is an important basis for helping us develop our forest positive strategy for the future.

In addition, we are participating in a coalition of palm oil producers and buyers to support and fund the development of a new, publicly available radar-based system for monitoring forests. The system, Radar Alerts for Detecting Deforestation, has been developed by Wageningen University in the Netherlands and Satelligence, and is facilitated by the World Resources Institute.

Read more about our commitment to eliminate deforestation from our supply chain.

Beyond working directly within our own supply chains, we are also committed to conserving natural landscapes around our supply chains. This is because we recognize we can only address deforestation through collaborative work at a jurisdictional level and through addressing conservation and restoration in combination with no-deforestation. Our initiatives aim at working with a variety of stakeholders, beyond the scale of individual plantations.

Nestlé, alongside Earthworm Foundation and several other companies, continued to support two landscape initiatives in Indonesia that use multi-stakeholder sustainable land use planning and support for local communities to help end deforestation. In Aceh Tamiang, despite limitations due to COVID-19 restrictions, forest-frontier communities advanced the conservation of the Leuser Ecosystem, developing demonstration plots and expanding techniques learned through the initiative’s capacity-building work.

In several villages where oil palm replanting is underway, intercropping was tested and deployed to give farmers an additional source of income while oil palms matured. This reduced pressure to encroach on nearby forests. Additionally, a women’s farmer group used proceeds raised by selling crops produced on demonstration plots toward purchasing several cows. In Southern Aceh, although several activities were postponed due to COVID-19 restrictions, we made significant progress with a producer with large-scale recent deforestation. Our efforts are leading to an expected public commitment to no deforestation.

La Encrucijada Biosphere Reserve is an area of protected mangrove and wetland habitats in southern Mexico. It is also home to hundreds of families who produce a variety of crops, including palm oil. Nestlé, Grupo Bimbo, palm oil supplier Oleofinos, Earthworm Foundation and staff from the reserve are working together on a conservation initiative in the area. The project will develop farmer resilience, conservation and restoration (including eliminating invasive palm oil saplings propagating in the Biosphere), and land use planning, including preventing the expansion of palm oil in the reserve.
 
In East Kalimantan, Indonesia, we supported awareness-raising on the need to protect high conservation value forest habitat for orangutans via a workshop. The workshop, which was attended by seven plantation companies, resulted in a commitment from participants to protect orangutan habitats and established a dedicated orangutan security taskforce responsible for doing so.

Our pledge to commit to net zero emissions by 2050 will push us to seek new innovations for offsetting and insetting emissions through conservation and restoration/reforestation activities at the forest source with our palm oil suppliers. In our Climate Change Roadmap, we have outlined steps we will take, including reforesting key areas, conserving existing forests and peatlands and capturing methane emissions from palm oil mill effluent.

In 2020, Nestlé completed the planting of one million trees in Sabah, Malaysia, under Project RiLeaf. For the next phase, we have committed to plant three million trees over three years under Project RELeaf, a reforestation initiative in palm oil-producing landscapes across Sabah and Peninsular Malaysia. The project will focus on restoring riparian zones and forest ecosystems, establishing wildlife corridors, mitigating human-animal conflict and protecting critical water supplies.

Protecting children and workers

In 2017, we commissioned the Danish Institute for Human Rights, and Earthworm Foundation to conduct a labor rights assessment of Nestlé's Indonesian palm oil supply chains. Based on the recommendations coming from this assessment, Nestlé developed its first comprehensive Action Plan on Labor Rights in Palm Oil Supply Chains in 2018.

In 2018, Nestlé commissioned Verité to conduct a Management Systems Assessment of how we manage labor rights challenges in our palm oil supply chain globally. In 2019, Verité deepened this assessment by conducting in-depth reviews of two of our suppliers in order to understand how Nestlé Responsible Sourcing Standard translates to practices throughout the supply chain. Verité conducted comprehensive labor and occupational health and safety assessments of seven mills and 11 in Indonesia and Malaysia that collectively employ over 4,000 workers, including interviews with over 200 workers. The results and recommendations made in this assessment led to an upgraded Nestlé's Labor Rights Action Plan for Palm Oil (pdf, 400Kb).

Our action plan includes working with Verité to implement a Program Assurance Framework to ensure requirements for zero exploitation are cascaded throughout our supply chain to all stakeholders. It will also help us effectively assess, address and monitor labor rights risks.

Recognizing that the labor issues we face must be addressed at an industry level, Nestlé, in collaboration with other companies, is supporting the development of a Verité toolkit. The toolkit will help palm oil producers understand and assess their systems and practices against key labor standards.

Since the launch of our labor rights action plan, we have undertaken several initiatives to address labor challenges. With our supplier Sime Darby Plantation, we have piloted a worker voice system, co-developed by the Responsible Business Alliance and solution developer ELEVATE. The system is designed to offer a helpline for palm oil workers in Malaysia to report human and labor rights abuses. In 2020, we expanded the helpline to cover Sime Darby’s upstream operations across six regions, reaching 1705 new workers at mills and estates. Training sessions provided support to foreign migrant workers from India, Indonesia, Bangladesh, Nepal, Sri Lanka and Myanmar, and included Malaysian workers.

The helpline was promoted through on-site trainings for community leaders and push messages via digital marketing materials, such as posters and stickers, that could be shared with factories. The system is projected to cover all Sime Darby workers by the end of 2021 and reach 26 751 foreign migrant workers, the majority of whom are from Indonesia, India, Bangladesh and Nepal.

Plantations may have target-based payment systems where workers are paid based on, potentially unrealistic, daily targets. This system can result in payments below minimum wage, excessive working hours or bringing family members, including children, to assist. To address this issue, we are participating in a project with Earthworm Foundation to improve systems for the plantation workers of 13 companies in our upstream supply chain. As part of this, in 2020, we supported the development of Fair Target-Setting and Wage Policies in Oil Palm Plantations guidelines (pdf, 2Mb). The guidelines aim to enable more small and medium-sized palm oil companies in Indonesia to set appropriate targets and fair compensation policies for their workers. Additionally, 26 third-party suppliers participated in a training session and focused group discussion on fair targets and payments.

Nestlé has supported several key initiatives to promote responsible recruitment, including:

  • Funding the development of a human rights-based due diligence tool on ethical recruitment to support palm oil producers in establishing transparency in their recruitment practices and identify risks.
  • Training 12 assessors in identifying forced labor risks associated with migrant workers’ recruitment during typical site assessments. In 2021, follow-up work with the trained assessors will be conducted to support them in overcoming challenges they encounter in putting the training into practice.
  • Supporting research by Earthworm Foundation into the recruitment practices and costs among small and medium-sized third-party suppliers, involving 58 workers, one recruitment agent and four companies/employers.
  • In addition, to support our suppliers with the adoption of the Human Rights Based Due Diligence Tool on Ethical Recruitment, we funded the development of supplier training modules and a supplier performance matrix this year. The performance matrix will allow our suppliers to track and measure progress as it relates to improvements in their recruitment practices. The pilot will take place in 2021.

The presence of children on plantations is a risk in some parts of our palm oil supply chains. For instance, in Sabah, Malaysia, palm oil workers are predominantly Indonesian migrants who move to plantations with their families. As a result, thousands of children live on palm oil plantations, often undocumented and without access to basic services such as education and schooling.

In 2020, we continued the work started in 2018 with Earthworm Foundation to help protect these children. Following the development of a Directory of Services for Vulnerable Children (pdf, 2Mb) for plantations in Sabah in 2019, a Child Risk Assessment Framework (pdf, 2Mb) has been developed to support palm grower companies to:

  • Identify potential risks faced by children on palm oil plantations.
  • Develop policies, procedures and interventions to minimize risk by responding in a timely manner to the identified potential risks.
  • Remediate adverse impacts discovered.
  • Review whether adequate measures have been taken to prevent, eliminate or reduce these risks.

The Framework covers topics such as education, childcare, maternity protection, healthcare, nutrition, birth registration and child sexual exploitation prevention. A training model on the use of the Framework has also been developed and this will be rolled out with select suppliers starting in 2021.

In 2020, we also continued to support a program developed by our supplier Wilmar to protect children living on plantations, in collaboration with Business for Social Responsibility. It included holding a series of stakeholder consultation workshops on Implementing Wilmar’s Child Protection Policy for Indonesian plantation companies, government representatives, trade unions and industry associations. Following the workshops, Wilmar published its Child Protection Policy Implementation Manual (pdf, 2Mb). The next phase of the program will be a pilot of the manual’s approach and further refinement with the aim to adapt it for more generic applicability outside of Wilmar’s supplier base.

In 2019 in East Kalimantan, Indonesia, we supported Earthworm Foundation in its multi-stakeholder engagements with the government and suppliers on two themes: children on plantations and fair employment for casual workers. These consultations included a workshop for 54 representatives from palm oil companies, the government, civil society organizations and labor unions. Participants discussed challenges and co-created a draft action plan laying out how they can address these issues.

Smallholders account for 40% of global palm oil production. Nestlé is supporting seven smallholder projects across our global supply chain with the aim of balancing livelihoods and forest protection.

In 2019, data provided through Starling satellite monitoring identified the prevalence of small-scale forest clearance patterns within and around our supply chain. This corroborates scientific literature that points to an increase in clearances by smallholder farmers. Based on this, we reviewed all the smallholder initiatives we are funding this year to integrate or strengthen their forest protection components. We used Starling to prioritize communities where deforestation risks are higher and employed High Carbon Stock Approach mapping to identify key areas for conservation. These actions took place in parallel with activities to improve livelihoods, as building smallholders’ resilience and forest conservation must go hand in hand. In November 2020, we participated in a panel on this topic at the Innovation Forum’s Sustainable Landscapes and Commodities Forum in London and a subsequent Innovation Forum podcast with our supplier Grupo Palmas and partner Earthworm Foundation.

Six of our collaborative smallholder projects have been developed with Earthworm Foundation under its Rurality program in Indonesia, Malaysia, Côte d’Ivoire, Ecuador, Brazil and Peru. Additionally, Nestlé has partnered with PepsiCo, Oleopalma, Femexpalma and Proforest on the Holistic Program in Mexico. Our aim is to tackle small-scale deforestation while helping build smallholder resilience and livelihoods through production practices that respect forests and people. These projects should create value for everyone along the supply chain: smallholders, mill operators, dealers, suppliers and Nestlé. Depending on the area, these initiatives focus on agricultural practices, diversification, forest conservation and sustainable production.

As an example, over 10 000 farmers have been involved in a Rurality project in North Sumatra, Indonesia, with Earthworm Foundation. In 2020, our supplier, Golden Agri-Resources, and the Rurality teams provided technical support on oil palm cultivation to 384 farmers through training sessions and small group coaching. These resources were designed to support them in increasing crop productivity by 10% and improving fertilizer management. The project also included a diversification program through which Rurality trained 603 farmers and extension facilitators on rice farming on marginal land and ginger intercropping with palm trees. The project has led to the development of participatory community land use plans with 58 villages, including agreements for the protection of nearly 35 000 hectares of forest. Work with four villages also took place to rehabilitate degraded forest areas.

Collective action and engagement

To address key challenges in our palm oil supply chains, we cannot work alone. That is why we continue to collaborate with industry partners to achieve lasting change.

Based on insights from our satellite monitoring, supplier engagement and Forest Footprint pilot, we prioritized collaboration in 2020 around addressing the increasing trend of small-scale clearance outside of concessions. We also focused on the need for common monitoring and reporting frameworks and collaboration around landscape-level interventions.

High Carbon Stock Approach (HCSA) Steering Group: Nestlé joined the HCSA Steering Group in October 2018 to help make the HCSA a core part of our Responsible Sourcing Standard, the norm in tropical forest conservation. In 2020, we continued our work to advance the application of the HCSA toolkit through the following initiatives:

  • In Mexico, following the launch of our 2019 landscape-scale HCSA trials with Earthworm Foundation over a 240 000-hectare landscape, we initiated further efforts to apply HCSA at scale. The ambition is to produce a publicly available indicative land cover map covering the four palm oil-producing states in Mexico. This map would then form the basis for further field work to identify HCSA forest at farm level, accompanied by approved protocols to guide farm and ejido (a communal land structure) level engagement. A proposal for this second trial was submitted to the HCSA Steering Committee in Q4 2020. Together, we envision that these trials will provide solutions to the methodological and cost barriers associated with ensuring zero deforestation in Mexico, where smallholders dominate the palm oil sector.
  • In Tocache, Peru, we are building from a pilot indicative HCSA study conducted in 2019 that found a total of 62 500 hectares of forest, of which 12 695 hectares are inside smallholder sourcing areas. We have worked with our suppliers in the region to build small farmer HCSA forest identification protocols as well as HCSA Holistic Farm Plans to support smallholders in improving their resilience while also conserving forest. The positive reception of this methodology by local stakeholders and applicability of this toolkit at farm level have served as an inspiration to replicate the HCSA trial in 2021 in the four main Peruvian Amazon hubs for agricultural expansion: Tocache and Huayabamba in San Martin, Pucallpa in Ucayali, and Yurimaguas in Loreto.
  • To enable the use of the HCSA by smallholders, our co-funding continued to support the trialing of a simplified HCS-HCV1 approach for smallholders by SPKS, an HCSA member and smallholder and farmer support organization based in Indonesia. SPKS conducted field trials in West Kalimantan, Indonesia between December 2019 and January 2020 to test the draft version three of A Simplified Approach to Identify, Manage and Monitor HCSA Forest and High Carbon Value Areas: A Practical Guidance and Checklist for Smallholders. Four villages participated in the trials. The fourth draft version of the Simplified Approach for smallholders was updated based on lessons learned from these trials. Due to COVID-19, some aspects of the simplified approach were not yet fully tested though and will continue in 2021.

Roundtable on Sustainable Palm Oil (RSPO): We continue to increase our sourcing of RSPO-certified palm oil, with a preference for the physically segregated RSPO SG certification, working toward 100% RSPO certification by 2023. In 2020, we reported our 2019 certified sourcing: 102 155 MT of RSPO SG palm oil and palm kernel oil (22%) and an addition 118 280 MT of Book & Claim Credits (26%). We will report our 2020 numbers in 2021, in line with the RSPO ACOP reporting cycle. It will include continued progress toward our RSPO commitments plus the purchase of RSPO Independent Smallholder Credits. We are also the consumer goods manufacturer representative to the RSPO Assurance Standing Committee.

Consumer Goods Forum (CGF): As Board members of the CGF, we are actively involved in its different initiatives, including those that address challenges in the palm oil sector. We are working with other members as part of its Palm Oil Working Group, which seeks to address both environmental and labor rights challenges at the industry level.

In 2020, the CGF launched the Forest Positive Coalition of Action, comprised of 18 member companies committed to moving efficiently and quickly toward a forest positive future. With a collective market value of USD 1.8 trillion (CHF 1.6 trillion), these member companies are in a leading position to leverage collective action and accelerate systemic efforts to remove deforestation, forest degradation and conversion from key commodity supply chains. In 2020, the focus was on developing and committing to the Coalition’s Charter and driving stakeholder engagement through Commodity Working Groups. The Group also released a Version 1.1 Palm Oil Roadmap of the CGF Forest Positive Coalition of Action (pdf, 2Mb). Our aim in participating in the implementation of these roadmaps is to drive collaborative efforts to accelerate the removal of commodity-driven deforestation and human rights abuses from individual supply chains and drive transformational change in key commodity landscapes.

Palm Oil Collaboration Group (POCG): As a member of the POCG, we work together with other brands, traders and producers to accelerate effective implementation of the No Deforestation, No Peat, No Exploitation (NDPE) commitments, including by: 

  • Co-convening the Production and Protection Beyond Concessions (PPBC) Working Group. Through existing deforestation monitoring and response systems, we are able to obtain regular deforestation alerts. Where these alerts occur inside a concession with known supply chain links, it is possible to use existing commercial relationships to take action by engaging through our supply chain. However, most alerts that we find through these systems increasingly occur outside of concessions where it is more difficult to apply these existing approaches and many different actors (inside and outside of the supply chain) must be involved. To address these challenges, companies must work together with other stakeholders, including local governments and civil society, to implement longer term forest and livelihood-positive actions that proactively, holistically and inclusively address deforestation outside of concessions. The PPBC Working Group was formed with the aim of scaling up this action through proactive interventions, action protocols, and targeted monitoring. 
  • Utilizing the No Deforestation, No Peat, No Exploitation Implementation Reporting Framework (NDPE IRF). The NDPE IRF is a reporting tool designed to help companies systematically understand and track progress in delivering NDPE commitments in their palm oil supply chains. This tool is critical to aligning the industry around a common reporting approach, and to reporting not only the achievement of NDPE compliance but also the progress in driving transformation toward compliance. In 2020, we engaged several suppliers in generating NDPE IRF profiles representing the supply chains that we source from, including seeing the first profiles independently verified via the first version of the verification protocol developed this year. We aim for this to become a standard reporting tool for all our palm oil suppliers, enabling us to report using the tool for our palm oil supply base.

Palm Oil Transparency Coalition (POTC): Nestlé became a member of the POTC, a pre-competitive coalition to remove deforestation and exploitation from the palm oil production sector in 2020. As part of POTC, we work collaboratively with the other company members to assess the first importers of palm oil on their approaches to addressing deforestation and exploitation in order to promote transparency and encourage progress beyond certification. 

One Planet for Biodiversity (OP2B) coalition: In 2019, we joined the newly created OP2B, an international business coalition on biodiversity with a specific focus on agriculture. One of the three pillars of the coalition aims to eliminate deforestation and enhance the management, restoration and protection of HCV natural ecosystems. Specific actions within the value chains of the coalition members were defined in 2020. We are contributing to the work of OP2B, committing to work with farmers throughout our supply chains to encourage initiatives that restore land, replant trees and enhance biodiversity.

1High Conservation Values: significant biological, ecological, social and cultural features of the environment, such as endangered species or water resources

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