Sustainable Nutella: A New Report on Palm Oil Supply Chain Transparency

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It’s been a difficult few years for Nutella, that delicious chocolate hazelnut spread made by Ferrero.

First, it was linked to the loss of critical natural habitat for orangutans, due to one controversial ingredient: palm oil. Then, more recently, dramatic headlines claimed Nutella consumption have bigger health implications than ingesting all that sugar. “Could Nutella give you CANCER?” screamed the Daily Mail. And that was also due to one controversial ingredient: palm oil.

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Palm oil gives Nutella its spreadability, smooth texture and long shelf life, so the matter is not as simple as switching it out for a less controversial oil. And Nutella is far from the only product – food or otherwise – that relies on palm oil as an ingredient. So what’s the problem with palm oil?

First of all, for those who are not well-versed in oils, palm oil is an edible oil derived from the fruit of the oil palm. Oil palms originated from Western Africa, but they can be grown in any hot climate with abundant rainfall. Today, Indonesia and Malaysia are major exporters of palm oil, which has surpassed soy oil as the world’s most popular vegetable oil. According to the World Wide Fund for Nature (WWF), global demand for palm oil is expected to double by 2050 to 240 million tons.

The Problem with Palm Oil

There’s a dark side to this growing demand, as keeping up with the world’s appetite for palm oil is leading to deforestation; loss of habitat for endangered species; air, soil and water pollution; and climate change. To be clear, the problem is not the crop itself, which brings in significant revenue to the countries where it is grown; rather, the issue is its non-sustainable production. The palm oil industry is rife with exploited and slave labor, including child labor.

In Indonesia and Malaysia, for example, palm oil plantations are maintained by around 3.5 million workers, many from poorer neighboring countries such as Bangladesh and the Philippines. As Eric Gottwald, legal and policy director at the International Labor Rights Forum, told The Guardian, “It is a very abusive system that includes labour-trafficking, debt bondage and unfair payments.” Many workers are recruited in their hometowns, by agents who charge fees for getting them jobs on the plantations.

Many everyday items, from your favorite shampoo to the blueberry muffin you eat at breakfast to the detergent you use to do laundry, contain palm oil. It is in the supply chains of Ferrero, Procter & Gamble, Cargill, Nestle, Kellogg, Unilever… you get the point. Last November, Amnesty International reported that many companies, including some of the ones mentioned above, have sourced palm oil from Indonesian plantations where children as young as eight were subjected to hazardous working conditions.

Taking Steps Toward Transparency

A new report came out this month on improving transparency in the palm oil supply chain. Titled “Reporting Guidance for Responsible Palm,” the report is a collaborative effort from well over a dozen organizations, including Ceres, Oxfam and Rainforest Alliance. It aims to advise all those involved in the palm tree supply chain, from growers and traders to the manufacturers to the retailers, on how to improve supply chain transparency and reporting.

For each of the above players, the report gives recommendations as related to supply chain transparency, human rights, environmental issues, smallholders (small, family-owned farms), land acquisition and other areas. Under the topic of human rights, for example, the report recommends reporting labor-related information on company-owned mills and plantations, focusing on issues such as whether retention of worker documents is prohibited, whether the reimbursement of labor recruitment fees is required, the percentage of permanent and contract workers and the percentage of unionized workers.

And as for environmental and land concerns, the report suggests that companies report how they are addressing land conflicts and describe the spatial monitoring methodology employed in evaluating fires and deforestation. “For both fires and deforestation,” the report recommends, “describe the area monitored… the definitions of what is being monitored (e.g., rate of fire activity, rate of tree cover loss)… and the percent of total mills in the supply chain falling under this monitoring methodology.”

In addition, the report encourages companies to track the number of smallholders they work with and to “include any measures to support productivity increases, sustainable farming strategies (such as no deforestation, intercropping, certification, [good agricultural practices and best management practices]), cooperative or scheme development, and access to inputs, financial tools and markets.”

Aim for more supply chain transparency by reporting the percentage of physical palm oil supply from traceable mills (ones where the name, exact location and owner are known). The report recommends that manufacturers report their direct palm oil suppliers, as well as their criteria for suspending or excluding suppliers and the names of suspended suppliers.

Now, whether consumers really care about orangutans’ habitat loss is an unsettled question. Studies have shown that while consumers care about ethical and sustainable sourcing, they don’t necessarily follow through en masse with their wallets.

But, in case you were wondering, the link between palm oil and cancer is unproven (for now).

Before getting into sustainable sourcing, make sure you know the fundamentals first — check out this free guide: Sourcing, Contracting and Supplier Management Landscape Definition and Overview.

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First Voice

  1. Cancer Survivor:

    One has to ask why Denmark is the world’s cancer capital, followed by France, Australia, Belgium, Norway, US, etc — but not Indonesia and Malaysia though they produced 90% of global palm oil, as well as consuming them?

    Nutella uses palm oil refined below 200C so no chance of cancer — but cigarettes that have been proven to cause cancer are sold openly in public.

    What next? Ban the sun cause its rays may or may not cause cancer?

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