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. Nestlé is committed to using 100% responsibly sourced palm oil by 2020. Because effective management of risks requires industry-wide change, we are also committed to working together with our partners, suppliers and industry peers to drive innovation and industry-wide transformation.
Our palm oil supply chain
With 40% of global palm oil being produced by smallholders, our supply chain is complex. In 2019, we sourced our palm oil through 88 suppliers, originating from at least 1624 mills (which can be many tiers upstream in our supply chain) in 24 countries. Most of the palm oil that we source originates in Malaysia and Indonesia, though we also receive supplies from across Latin America, West Africa and other parts of Asia.
Our approach to sourcing palm oil sustainably
The Nestlé Responsible Sourcing Standard (pdf, 2Mb) makes explicit provisions for the protection of peatland and high-carbon-stock (HCS) land, which 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 require our suppliers to 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’ right to free, prior and informed consent.
- Protect HCS land.
- Protect peatlands.
- 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.
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.
We work together with our direct suppliers to continuously improve the sustainability practices of our upstream suppliers, all the way up to smallholder farmers. We also work with partners like Earthworm Foundation to conduct supplier assessments and identify gaps. This leads to the development of action plans with milestones and deadlines to act upon risks and improvement opportunities identified during assessments.
When a supplier fails to effectively manage identified risks or meet agreed deadlines, we take decisive action. To provide assurance of this, disclosed below are 10 upstream supply chain companies that have been removed from the Nestlé supply chain since 2018:
- DTK Opportunity
- Korindo Group
- PACIFIC INTER-LINK (HSA)
- PT. Indo Sawit Perkasa
- PT. Kallista Alam
- PT. Laot Bangko
- PT. Surya Panen Subur
- PTT Green Plc
- Salim Group/Indofood
- Posco Daewoo
- Cilandri Anky Abadi
Our objective is that 100% of the palm oil we source in 2020 will be responsibly sourced. We remain committed to closely monitoring, assisting and taking action as needed with all suppliers in our supply chain.
Providing supply chain disclosure
To hold our suppliers and ourselves accountable as well as driving industry-wide transparency, we have published the lists 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 93% of the total volume of palm oil we source annually, which is our volume traceable to mill. However, assessing and monitoring conditions on the ground requires us to go further upstream, and so we focus on traceability to plantation, which we have now achieved for 62% of our volume.
Aligned with our commitment to supply chain transparency, we published a palm oil transparency dashboard in 2019. This shares more detailed information about how we are using Starling satellite monitoring to advance our strategy to end deforestation.
In 2019, we also initiated a blockchain pilot with OpenSC, a platform founded by WWF-Australia and Boston Consulting Group Digital Ventures. The initial palm oil pilot began in the Americas and is intended to test various technologies, including blockchain, to increase palm oil traceability and bring proof to consumers that it is sustainably sourced.
View our palm oil transparency dashboard
Committing to no deforestation
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 palm oil a reality. As of April 2020, 70% of the palm oil we source was verified deforestation-free (pdf, 200 Kb). We will continue to work with smallholder farmers and large suppliers alike to close the gap.
Pioneering satellite technology to combat deforestation
To accelerate this commitment in palm oil, 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 from 2019. 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 directly to monitor deforestation risk within our supply chain and to prioritize where to take action.
Using radar to detect deforestation
Nestlé has also joined 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 (RADD), has been developed by Wageningen University in the Netherlands and Satelligence, and facilitated by the World Resources Institute. RADD is the first radar-based monitoring system on this scale that will make deforestation alerts publicly available (via Global Forest Watch) and marks a further step toward Nestlé’s no-deforestation commitment.
Beyond working directly within our own supply chains, we also work to conserve natural landscapes around our supply chains. These initiatives aim at working collaboratively with a variety of stakeholders, beyond the scale of individual plantations.
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 that includes farmer resilience, conservation and restoration (including eliminating invasive palm oil), and land use planning, such as 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 in which seven plantation companies participated. The workshop resulted in a commitment from participating companies to protect orangutan habitats and established a dedicated orangutan security taskforce responsible for doing so.
We also supported two further landscape initiatives in Indonesia with Earthworm Foundation and several other companies, aimed at ending deforestation via multi-stakeholder sustainable land use planning.
Nestlé Malaysia has continued to plant trees as part of project RiLeaf, which aims to protect the Kinabatangan River in Sabah, Malaysia. To date, 880 000 forest seedlings have been planted in degraded or deforested areas in the Kinabatangan wetlands, covering both riparian zones and forest corridors.
Collaborating for results
We cannot address the key challenges in our palm oil supply chains alone, and therefore we continue to increase our collaboration with industry partners to achieve lasting change. We remain active members of the Consumer Goods Forum’s Palm Oil Working Group and the High Carbon Stock Approach Steering Group.
In 2019, we joined the Roundtable on Sustainable Palm Oil Assurance Standing Committee as its consumer goods manufacturer representative and the newly created One Planet Business for Biodiversity, 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 high-value natural ecosystems. Specific actions within the value chains of the coalition members will be defined in 2020.
Working toward net-zero emissions
Our recent Climate Pledge to commit to net-zero emissions by 2050 will also push us to seek new innovations to offset and inset our emissions through conservation and restoration/reforestation activities at the forest source with our palm oil suppliers.
Protecting children and workers
Assessing the challenges
Working with the Danish Institute for Human Rights, Earthworm Foundation and Golden Agri-Resources, a key supplier, Nestlé carried out the industry’s first collaborative human rights impact assessment (HRIA) in its upstream palm oil supply chain in 2017, focusing specifically on the labor rights of workers. Based on the HRIA’s findings, we have developed the Nestlé Action Plan on Labour Rights in Palm Oil Supply Chains (pdf, 400Kb), focused on tackling labor rights issues in our supply chain. It focuses on addressing a number of labor issues, including labor rights abuses, health and safety in mills and on plantations, and child labor.
In 2018, NGO Verité conducted a systems review of how we manage labor rights challenges in our palm oil supply chain. In 2019, it went one step further by conducting in-depth reviews of two of our direct suppliers. The objective was to understand how our Responsible Sourcing Standard (pdf, 2Mb) translates to practices throughout the supply chain. Verité conducted comprehensive labor and occupational health and safety assessments of seven mills and 11 estates in Indonesia and Malaysia that collectively employ over 4000 workers, including interviews with over 200 workers.
The assessment found that Nestlé and our assessed suppliers have policies in place that do cover the entire supply chain; however, gaps inhibit these policies from being enacted at all upstream sites. In 2020, Verité will work with Nestlé to update our Action Plan on Labour Rights in Palm Oil Supply Chains (pdf, 400Kb) and to strengthen these supplier management systems to more effectively address labor rights challenges.
Promoting labor rights
Since the launch of the 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, to create a helpline for palm oil workers in Malaysia to report human and labor rights abuses.
We have also supported the development of guidelines on targets and payments systems that will be published in early 2020 to enable more small- and medium-sized palm oil companies in Indonesia to set appropriate targets and fair compensation policies for their workers.
Driving responsible recruitment
Nestlé has supported several key initiatives to promote responsible recruitment:
- Funding the development of a human rights-based due diligence tool on ethical recruitment, to support palm oil producers to establish 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.
- 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.
Addressing risks of children in plantations
The presence of children in plantations is a risk in some parts of our palm oil supply chains. For instance, palm oil workers in Sabah, Malaysia are predominantly Indonesian migrants moving to plantations with their families. Therefore, thousands of children live on palm oil plantations, often undocumented and without access to basic services such as education and schooling. To address these risks, we supported the following actions:
- The development of a Directory of Services for Vulnerable Children in plantations in Sabah, Malaysia.
- The development of a Child Risk Assessment Framework.
In East Kalimantan, Indonesia, we supported Earthworm Foundation in its multi-stakeholder engagements with the government and suppliers on two themes: children in plantations and fair employment for casual workers. These consultations included a workshop bringing together 54 representatives from palm oil companies, 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. Further consultations informed the development of two guidelines for suppliers, one on each topic. Both tools are a preliminary means to raising awareness of how to identify child labor or the exploitation of casual workers and the immediate steps suppliers can take to reduce such risks. These documents will be shared with suppliers over the coming months and will be publicly released in the first quarter of 2020.
Smallholders account for 40% of global palm oil production. Nestlé is supporting eight smallholder projects across our global supply chain with the aim of balancing livelihoods and forest protection.
Seven of these are collaborations with Earthworm Foundation under its Rurality program in Indonesia, Malaysia, Ghana, Côte d’Ivoire, Ecuador, Brazil and Peru. Additionally, Nestlé has partnered with Pepsico, Oleopalma, Femexpalma and Proforest on the Palm Oil Holistic Program in Mexico.
The aim is to include more smallholders in our supply chains while developing their resilience and capability to produce responsibly. 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 efficiency, self-sufficiency, diversification, innovation and infrastructure.
More than 600 farmers have been involved in a Rurality project in North Sumatra, Indonesia, with Earthworm Foundation. The project has led to the development of a participatory community land use plan that includes agreement for the protection of 3830 hectares of forest.
In 2019, data provided through Starling satellite monitoring showed us the prevalence of small-scale forest clearance patterns within and around our supply chain. This corroborates scientific literature pointing to an increase of clearances by small-scale farmers. Based on this, we reviewed all the smallholder initiatives we are funding this year to integrate or strengthen their forest protection component. We used Starling to prioritize smallholder communities where deforestation risks are higher, and we employed High Carbon Stock Approach mapping to identify 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 2019, we participated in a panel on this topic at the Innovation Forum Sustainable Landscapes and Commodities Forum in London and a subsequent Innovation Forum podcast with our supplier Golden-Agri Resources and partner Earthworm Foundation.
Collaborating for greater impact
Along with other palm oil buyers and our supplier Wilmar, we launched a program to protect children living in plantations in Indonesia, in collaboration with Business for Social Responsibility (BSR). The collaboration includes developing a Child Protection and Safeguarding Implementation Manual and a series of capacity-building workshops to enable suppliers to learn, discuss and implement pragmatic measures to strengthen the rights and protection of children.
We also collaborate through:
- Sharing suppliers’ experiences.
- Working with stakeholders to protect children.
- Hosting workshops to strengthen employees’ rights.
- The Rurality initiative.
- Helping protect land rights in Indonesia.
- Responsible recruitment of palm oil workers.
- Our first human rights impact assessment.
- Rural Development Framework (pdf, 2Mb)
- Commitment on Child Labour in Agricultural Supply Chains (pdf, 200Kb)
- Corporate Business Principles (pdf, 1Mb)
- Responsible Sourcing Standard (pdf, 2Mb)
- Commitment on Farm Animal Welfare (pdf, 1Mb)
- Natural Capital: Water in Agriculture (pdf, 6Mb)
- Natural Capital: Biodiversity (pdf, 4Mb)
- Nestlé Cocoa & Forests Initiative Action Plan (pdf, 900Kb)
Download the updates on our responsible sourcing activities on palm oil: