Palm oil: a controversial product

Post with image

While palm oil producing plantations are not the sole cause of deforestation, they are a good place to start when it comes to taking action, and as a matter of urgency!

A study commissioned by the European Union suggests that 40% of the deforestation of Indonesia’s primary forests is due to extensive oil palm plantations. Deforestation has shrunk the natural habitats of many species drastically, including the orangutan and the tiger, which are now threatened with extinction. The phenomenon has become critical in Asia, on the islands of Borneo and Sumatra, and in Latin America. In Malaysia, only 12% of primary tropical forest has survived.

Thirty years ago, palm oil was almost absent from basic consumer goods (consumer staples). Nowadays it’s in almost everything – margarine, spreads and biscuits, as well as cosmetics, detergents and biofuels.

Some economic agents – including both manufacturers and retailers – have pledged to use only sustainable palm oil, i.e. oil which is:

  • Produced on plantations not employing children
  • Made by producers who are not in conflict with local populations
  • Not produced on land once the site of primary or peat swamp forests.

Others have decided to ban the use of palm oil outright.

Many companies justifiably believe that in the internet age, any violation of ethical or sustainable development rules is just a click away from being made public knowledge by “the guardians of the temple”, i.e. specialist NGOs.

A company’s reputation could be lastingly tarnished if it doesn’t take corrective action as quickly as possible. Some even engage the services of these NGOs to enhance their sustainable practices.

These standards naturally extend to their suppliers. They now use satellite surveillance to take mapping samples of how well suppliers meet these standards.

At its own level, BNP Paribas Asset Management has taken up the challenge and includes environmental criteria linked to the production and sale of palm oil in its ESG assessment in investments.

Written on 04/10/2017

Alexandre Jeanblanc

Investment Specialist, SRI

Leave a reply

Your email adress will not be published. Required fields are marked*