Transformational Change Needed. Palm Oil Industry Hits Tipping Point

The Business Times in Singapore had a front page story last week that made many – palm oil companies as well – sit up and take notice. The palm oil industry has reached a tipping point. Two palm oil giants who together trade about half the global supply – Wilmar International and Golden Agri Resources – have declared that their sustainability policies would apply not just to their own plantations, but also to those of their suppliers. And one of the biggest palm oil users in the world  - Unilever – who have instituted some of the strictest policies and practices, is continuing with its overarching Sustainable Living plan, but boss Paul Polman really wants to see transformational change in the way all businesses operate. Read More

Sustainability: new ball game for palm oil firms

But higher bar set by Wilmar, Golden Agri won’t have big immediate impact: analysts

By Andrea Soh in Business Times (28 April 2014)

The palm oil industry has reached a tipping point.

In the last five months, two palm oil giants who together trade about half the global supply – Wilmar International and Golden Agri Resources – have declared that their sustainability policies would apply not just to their own plantations, but also to those of their suppliers.

About half of all fresh fruit bunches bought by Wilmar come from third parties, while the amount for upstream palm oil player Golden Agri is much lower, at 7 per cent.

The two palm oil groups’ resolve to set a new sustainability standard in the industry has prompted others like First Resources to look into doing the same.

“Although our third-party purchases are small, we will be reviewing our procurement policies with the aim of incorporating our sustainability values into our supply chain,” said a First Resources spokesman.

The pressure from non- governmental organisations (NGOs) such as Greenpeace has been mounting for a decade, but the catalyst for these recent developments was the changing tide of sentiment among consumer goods firms.

A month before Wilmar’s announcement last December, Unilever – the world’s largest user of palm oil at 1.5 million tonnes a year, or 3 per cent of global production – committed to buying only palm oil that can be traced to known sources by the end of this year.

The Anglo-Dutch group uses palm oil in products such as its Dove shampoo and Flora margarine.

Unilever’s decision follows similar commitments by Ferrero, Nestle, Kellogg and L’Oreal to buy certified palm oil, or oil that comes from plantations managed and certified according to certain sustainability criteria.

Since then, the tide has swept along more palm oil buyers. M&M maker Mars and Colgate-Palmolive late last month announced their plans to use only certified palm oil by the end of next year; Procter & Gamble, which was recently the target of a global Greenpeace campaign, committed on April 8 to ensuring no deforestation in its palm oil supply chain.

Europe, the third-largest import market for palm oil after India and China, has led the demand for sustainability in the palm oil sector. In France, food companies have started using “palm oil-free” labels as a badge of honour.

Concern is growing that the palm oil industry will suffer if it remains deaf to these demands from its customers.

Said Wilmar CEO Kuok Khoon Hong at its results briefing in February: “If this clash continues, maybe the EU governments will stop using palm oil for biofuels under pressure from all their consumers. You can see some very big companies already saying that they don’t use palm oil. It’s a selling point (for them).”

“If they stop using palm oil for biofuel, if all the big consumers there stop using palm oil, crude palm oil (price) may drop by US$200-300 a tonne. What’s the point of planting another 15,000 hectares (then)?” he asked.

Wilmar has therefore decided to take the lead in the industry. “We’re hoping for other companies, other plantations to join us, to try to make the whole industry sustainable.”

But these changes will not come without cost, say analysts.

While the impact on the profitability of palm oil firms would not be significant in the short term, “(it) could slow down their ability to grow due to the more stringent policies that they have adopted”, said CIMB analyst Ivy Ng.

A Wilmar spokeswoman conceded that its business will be affected in the short term. “We recognise that this is something we have to do, both for the business and the environment. We believe the long-term benefits will outweigh the challenges facing us in the short term,” she said.

Committing to sustainability, however, is only a first step, said Greenpeace head of forest campaign Bustar Maitar. “The next step – and a big one – after that is to actually implement the policy itself.”

This will be important in gaining the trust of the market, said Scott Poynton, executive director of Forest Trust, a Swiss non-profit organisation. “There’s still a lot of cynicism and mistrust about these companies. If they can prove that they are not just greenwashing, they will start winning confidence back from the broad market and the NGO community.”

Challenges abound for palm oil firms. For one thing, the definitions of peat land and high carbon forest are hazy. Standards are also always moving higher.

In view of this, Carey Wong, an analyst at OCBC, says a continual raising of the bar may bode well for the industry ultimately.

“We believe it is a good thing – it raises the standard for the whole industry and makes them appear on a par with practices in the Western world,” he said.

Customers who are more discerning are also willing to pay more, he added. “So that could still be a ‘win-win’ for the companies that are RSPO-certified, for example.” RSPO, or the Roundtable on Sustainable Palm Oil, is an industry body that promotes the use of sustainable palm oil products.

And there may be no two ways about it – those who refuse to adapt will be left behind. Said Mr Poynton: “In time, the buyers will desert them. The change is coming. Their resistance will ultimately be undermined.”

Source: www.valuebuddies.com/thread-5058-post-81043.html

Unilever struggles to sell customers on Sustainable Living

By Jessica Shankleman  (29 April 2014):

Unilever has seen the total environmental impact of its products rise 5 percent during the past four years, as it acquired a new shampoo business and struggled to convince consumers to use less energy for hot showers.

The consumer products giant yesterday released an update on its ambitious Sustainability Living Plan, through which it aims to halve the greenhouse gas impact of its deodorants, food, detergents and other products between 2010 and 2020, confirming it is on track to meet the overarching goal for its full value chain despite challenges in some areas of the business.

The report revealed the company has made good progress on a number of fronts, including slashing the carbon emissions impact of its manufacturing processes by 32 percent compared to 2008, primarily through the installation of advanced clean technologies and encouraging more efficient behavior by employees.

The company confirmed it has also made strides in reducing emissions from its transport fleet and refrigeration technologies, and has slashed energy use from its offices.

However, Unilever revealed its overall emissions per consumer rose by 5 percent since 2010, mainly because it acquired Alberto Culver, which produces a number of major brands including TRESemme, Alberto VO5 and St. Ives.

As such, the company admitted it was likely to miss a target to get 200 million consumers to buy products and tools that will help them to reduce their greenhouse gas emissions while washing and showering by 2015.

“Two thirds of our value chain GHG impacts are in consumer use, primarily heated water for showering and bathing, which is more difficult for us to influence,” the report stated. “External factors such as decarbonizing energy grids and effective carbon pricing will play a critical role in reducing GHG emissions, as well as product innovation and consumer behavior change.”

Paul Polman, chief executive of Unilever, said it had been easier to achieve environmental targets directly within the company’s control, but it was now looking to develop more innovative solutions to reduce consumer energy use.

“We’re making good progress in reshaping our business for sustainable, equitable growth,” he said. “But we need to do more.”

Unilever also today added three new targets to its Sustainable Living Plan, aiming to boost fairness in the workplace, improve gender equality and develop an “inclusive business.”

“We have always recognized the bigger role that businesses need to play, and now is the moment for Unilever to step up and expand efforts in key areas, driving transformational change where we know we can make the biggest impact,” added Polman. “In this way we will leverage our scale and work collaboratively in partnership with others to reach a tipping point in areas that will make a significant difference.”

Despite the difficulty of convincing consumers to cut their environmental impact, Unilever has been broadly applauded by green groups for taking leadership in the battle to reduce carbon emissions.

“It is really exciting to see a huge multi-national business take such a bold and progressive approach to how it recognizes and leverages its size, scale and influence,” said Ben Kellard, head of sustainable business at Forum for the Future, in response to the latest report. “Learning and adapting is important in any business strategy, but it’s even more impressive when companies, like Unilever, revise an already innovative plan with the intention of bringing about broader change on a global scale. We hope this new plan — which includes stepping up plans to tackle several major global sustainability challenges — helps Unilever to achieve the scaling up of the delivery of sustainability across its business and brands that we believe it is capable of.”

This article originally appeared at Business Green.

Source: www.greenbiz.com