May 20, 2008

What's palm oil got to do with orangutans?

Source: The Economic Times - June 4, 2008

Palm oil is everywhere. This globally traded vegetable oil is found in thousands of products you buy off the shelf, including ice cream, chocolate, biscuits, crisps, lipsticks, toothpaste, soap, detergents, cosmetics. It is also present in things you eat like Maharaja Macs and gulab jamuns.

On May 1, the world's largest consumer goods company Unilever pledged it would switch to palm oil that did not sign a death warrant for orangutans. Wilmar, the world's largest palm oil producer and owner of 'Fortune' brand in India, said it is double-checking operations to ensure orangutans remain safe. But why are palm oil suppliers and consumers so concerned about orangutans, and should you worry too? ET helps you join the dots.

Palm oil is the world's cheapest oil. India, China and EU make up the world's largest consumers of palm oil. UK is the second-biggest importer of palm oil in EU, behind the Netherlands. Since 1995, there has been a 90% increase in palm oil use in the EU and this will rise drastically as companies use palm oil to make biodiesel.

US agribusiness giants Archer Daniels Midland (ADM), Bunge and Cargill are among the largest global traders of palm oil.

Wilmar International, also an ADM affiliate, has been under attack from NGO Friends of Earth (Netherlands) for allegedly using unsustainable practices in its plantations. Wilmar has refuted the charges.

Cargill is the fourth-largest exporter of palm oil from Malaysia and holds 14,000 acres of plantations in Indonesia and Papua New Guinea. Unilever and Nestle are the top users of palm oil globally. For every 20 litres of palm oil produced in Indonesia, one litre ends up in Unilever's hands.

But palm oil's very success has sealed the fate of orangutans, whose population has declined 90%, along with hundreds of other animal species that live in rainforests.

Originally from Western Africa, the oil palm (Elaeis guineensis) has become the plantation crop of the 21st century. Where heat and regular rainfall combine, it can flourish.

And Southeast Asia has become its home with ever-increasing areas being given over to this high-yielding crop. Each decade since 1980, palm oil production has doubled, mostly in Malaysia and Indonesia.

These two countries produce lion's share of total global output, which is projected to double by 2020.

Keen to cash in on demand, plantation owners have been rapidly clearing rainforests by chopping or setting fire to the vegetation. As forests get cleared, orangutans, facing starvation, desperately seek food in the developing plantations, and are considered an agricultural pest. It is estimated that no less than 5,000 orangutans are killed every year.

At this rate, complete extinction of one of our closest relatives would occur within 10 years.
Activists, NGOs and even some government bodies in the EU raised an outcry against this wanton destruction of rainforests and animal life and called for a boycott of palm oil.

It touched a chord and even retailers such as Sainsbury?s and Tesco began talking of saving the orangutan and rainforests. Realising that their most valuable customers may soon refuse to do business, Indonesia and Malaysia rapidly began damage control.

Plantation owners, along with players such as Unilever, Nestle, Tesco, Sainsbury's, agreed to establishing a Roundtable for Sustainable Palm Oil (RSPO) in 2004 that would certify production of oil from non-destructive plantations.

The certification criteria were agreed at the end of 2007 and are now being applied on a two-year trial basis. So within the next few months, the first tankers of sustainable palm oil will become available.

Unilever chairman Patrick Cescau said on May Day it will start using certified palm oil as it becomes available in the second half of 2008 and have all the palm oil it uses in Europe fully traceable by 2012. That's not all.

Last week, food made from sustainable palm oil hit UK supermarket shelves for the first time. The first food containing certified sustainable palm oil will be Sainsbury's fish fingers.

By August 2008, it will be the first supermarket to use certified sustainable palm oil in the 3 million bars of own-label soap it sells annually. It will also convert all its own brand products to using only sustainable palm oil by 2014.

The big question now is whether RSPO would make a genuine difference or is simply an eyewash to help companies appear politically correct. It's too early to tell. But everyone seems to agree that RSPO certification will make maximum difference if all players in the supply chain insist on only buying sustainable palm oil.

Meanwhile, a new generation of orangutan babies can hope for a longer life.