Cosmetics brands join forces to increase influence over palm oil producers

ASD increased supply chain transparency for the niche derivatives market

Suppliers in various sectors have recently found themselves under pressure from their customers to become more sustainable – little more than the palm oil sector.

The commodity is one of the world’s most useful substances, found in almost half of the packaged goods you can buy in your supermarket, from pizza, donuts and chocolate to deodorants, shampoo, toothpaste and lipstick. , as well as for use in animal feed, as cooking oil and as a biofuel in many markets.

The ubiquity of the substance is a result of its versatility – it is semi-solid at room temperature, so it helps to keep spreads, and since it is resistant to oxidation it can extend shelf life. Its high temperature stability means that it helps make fried products crisp and crisp, and it does all of these things without affecting the appearance or smell of the products because it is odorless and colorless.

It is also a very efficient crop compared to other vegetable oils, which makes it attractive to growers as it can provide a stable income.

However, there are issues with its versatility and popularity. It is a major driver of deforestation in some of the world’s most sensitive and biodiverse forests, particularly in Southeast Asia but also in Africa and Latin America. There are also issues related to the exploitation of migrant workers, child labor and sexual harassment, says Arnaud Bonisoli, partner at Action for Sustainable Derivatives (ASD), an industry-led collaboration that aims to encourage responsible production and supply of palm oil derivatives.

Most of the palm oil (around 90%) comes from the fruit, with the remaining tenth coming from the almond. While food companies source their supplies directly from refineries, cosmetics and healthcare companies use derivatives – chemically processed palm oil. This adds more steps to the supply chain, increasing its complexity and fragmentation.

While there are a number of initiatives aimed at making the palm oil sector more sustainable, such as the Sustainable Palm Oil Roundtable (RSPO), palm oil users and palm kernel oil derivatives struggle to have the same influence with suppliers as food brands. Part of the reason is that although they represent 70% of the palm derivatives market, they buy a very small proportion of the total palm oil volumes, giving individual buyers very little money. influence on suppliers. Another factor is that the buyers of derivatives are very distant from the producers because the oil has gone through several stages of processing before reaching the end customers.

ASD, founded in 2019, is an attempt to tackle this – its 23 members now account for around 1 million tonnes of demand for palm derivatives and more are in the process of signing up for the initiative, and they include leading brands such as Chanel, L’Oréal, Estée Lauder and Natura. Last year, the initiative achieved transparency on 825,000 tonnes of palm-based material, nearly double the volume covered in its first year of operation, and it intends to double the volume covered again by this time. 2023.

Although this represents only about 1% of total world palm production, it represents 10-20% of the market for PKO-based oleochemicals. The group has 90% transparency in supplies to refineries and crushing plants, 86% transparency in factories (compared to 81% last year) and 36% transparency in plantations, compared to an industry average included. between 1% and 25%.

“About 80% of the supply chain is shared by all suppliers of derivative products,” explains Bonisoli. “Each new member who joins ASD has the same actors involved in the supply chain, which creates more leverage for ASD. “

Some ASD members submitted a resolution to the RSPO, calling for making more robust its mass balance system – which allows tracking of sustainable sources of palm oil and PKO. While many palm oil buyers want certified supplies to be segregated, this is difficult to do for derivatives due to the high level of processing involved, so the mass balance approach is crucial to identify and trace. sustainable sources of derivatives.

Perhaps counterintuitively, switching to other derivative sources that offer an alternative to palm, such as coconut and soybeans, is not ideal because they are much less productive. The “idea” is to prevent the uncontrolled substitution to other sources of derivatives, which offer an alternative to palm but are much less productive, and could lead to a transfer or an increase in environmental and deforestation risks in d ‘other landscapes,’ Bonisoli said.

“We work on transparency, we engage with suppliers, disseminate best practices and improve knowledge. It’s a tough supply chain, with really expensive products, changed over and over. So it’s very difficult to get things done on these issues, but we are working to change that. “

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