Rainforests in Indonesia and Malaysia have been destroyed to make space for palm oil production  © AFP/Getty Images
Rainforests in Indonesia and Malaysia have been destroyed to make space for palm oil production © AFP/Getty Images

Why firms must 'eliminate' palm oil from supply chains

26 May 2021

Firms must switch to palm oil alternatives in order to protect producer nations from the impacts of climate change, a report has warned.

In the report consultancy Kearney said palm oil supplies are “under threat amid a perfect storm of skyrocketing demand and unsustainable production processes”.

Palm oil, which is a prevalent ingredient in many products such as packaged foods, shampoos and soaps, and pharmaceuticals, has been linked to a wide range of environmental and human rights issues. 

The destruction of rainforests in the two largest palm oil-producing nations – Indonesia and Malaysia – is threatening to cause the extinction of orangutans, pygmy elephants, and Sumatran rhinos, as well as producing vast amounts of greenhouse gases. 

While 84% of the world’s palm oil is produced by the two countries, both are “starting to face serious consequences of climate change”, such as heavy rains, severe flooding, landslides, rising sea levels and temperatures, Kearney said. 

The use of palm oil has rapidly shifted from something that has bad optics for individual companies to something that is “a high risk, with the long-term supply (and costs) under threat”. 

Kearney added it is better for firms to absorb the costs associated with switching to alternatives now as “the cost [of palm oil] will skyrocket as the supply is compromised”.

It said the production of a commodity is “directly threatening the long-term supply and viability of the commodity itself” as demand for palm oil has risen sharply over the years. 

Annual production quadrupled between 1995 and 2015, and it is expected to quadruple again by 2050. 

The report said: “This is crucial to ensure that the demand for palm oil is in check and does not continue to accelerate toward total supply destruction. If ever there was a time to redesign, reformulate, and reinvent, it’s now,” it said.

“Using verifiably 100% certified sustainable palm oil from organisations such as the Roundtable on Sustainable Palm Oil is the first step on this journey, but given the severity of the supply risk, the goal should be to eliminate its use altogether.”

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