The Supply Side: Wal-Mart’s 2015 rule for sustainable-only palm oil nears

by The City Wire staff ( 58 views 

The clock is ticking for Wal-Mart suppliers from soap manufacturers to lipstick and consumers packaged goods (CPG) companies to ensure the goods they sell to the retail giant contain certified sustainable palm oil (CSPO) by 2015.

In 2010, Wal-Mart made a public commitment to source 100% CSPO by the start of 2015 and it’s an important milestone the retailer plans to meet. The goal was one of several set by corporations coming under pressure from environmental groups to help stem the deforestation taking place in Malaysia and other developing countries to make room for tree plantations helping to fuel global demand.

“Palm oil is a commodity which is present in around 50% of all the products we sell. It is in everything from detergents to sandwiches, as it is an extremely versatile oil. Palm oil often only amounts to a very small percentage of a product, so it is often an ‘invisible’ ingredient simply listed as ‘vegetable oil’ in the ingredients list,” Wal-Mart notes on its website.

Supplier compliance to the rule has been mixed thus far, according to the World Wildlife Fund (WWF) who is keeping tabs on the conversion to CSPO for retailers and suppliers alike. (Link here for a PDF report from WWF.)

Wal-Mart said the first thing it did in 2010 was to look at its own use of palm oil in the markets where it operates.

“Through this process of calculation we realized that Wal-Mart is accountable for 84,000 tonnes of palm oil and derivatives, or only 0.5% of global palm oil usage, so although we are a large business we use a relatively small amount of palm oil,” the retailer said.

WWF gives Wal-Mart, the retailer, a palm oil sustainability score of 7, out of a possible 12 for 2013. The score card notes that just 9% of the palm oil used by Wal-Mart last year was CSPO. WWF notes Wal-Mart commitment to 100% by 2015.

Wal-Mart’s ASDA business garnered a score of 11 with a 100% CSPO usage. Other retailers posting high scores include: IKEA at 12 and Tesco at 11. Target and Costco both scored a 0.

WWF reports that in 2011 only 47% of the palm oil that the assessed companies reported to be using was certified. Many had set themselves the target of reaching 100% by 2015 – but WWF said it  “had doubts they were on course to achieve this.” In 2011, WWF concluded that no company in the world had an excuse not to be using 100% CSPO. By 2013 WWF revealed which companies have met that challenge and in return are poised to meet the 2015 deadline with Wal-Mart. 

Unilever reached 100% CPSO used in 2012, while United Biscuits, L’Oreal and Johnson and Johnson each reached the 100% milestone in 2010. H.J. Heinz and Nestle were each at 94% CPSO used in 2013.

The Hershey Company reached 50% CPSO used in 2013, according to WWF. The candy company said it has recently achieved the 100% usage goal a full year ahead of schedule.

Hershey said it will also work with its suppliers to achieve 100% traceable and sustainably sourced palm oil by the end of 2014.

“The Hershey Company is committed to continuous improvement and transparency in our sustainable sourcing efforts,” said Frank Day, vice president of Global Commodities. “Our move to source 100% traceable palm oil is the latest step forward in our efforts to ensure we are sourcing only sustainably grown palm oil that does not contribute to the destruction of wildlife habitat or negatively impact the environment.”

The Kellogg Company scored only a 2 on the WWF 2013 scorecard for sustainable palm oil usage. The low score was attributed to Kellogg not sharing its relevant information.

"As a socially responsible company, traceable, transparent sourcing of palm oil is an important concern, and we are collaborating with our suppliers to make sure the palm oil we use is not associated with deforestation, climate change or the violation of human rights," said Diane Holdorf of Kellogg.

Kellogg also noted in its recent sustainability report that it has urged its partner Wilmar — a large palm oil trader controlling 45% of that market — to adopt the commitment to eliminate deforestation from its supply chain.

"Kellogg's commitment to verifying that the palm oil it uses is not linked to illegal and high risk deforestation provides critical protection for both shareholders and the environment," said Leslie Samuelrich, president of Green Century, an environmental advocacy group.

Mars scored a 9 with 56% of is palm oil usage being certified in 2013, according to WWF. In March, the company announced two major new green policies and outlined a new sourcing charter designed to ensure all its suppliers are providing fully sustainable and traceable palm oil by 2015 — or have plans in place to do so — and setting out a strategy for addressing how its sourcing of beef, pulp and paper, and soy indirectly can contribute to deforestation.

"We're looking to build out a whole suite of policies across all materials and all issues," Barry Parkin, chief sustainability officer at Mars, told BusinessGreen. "The deforestation and palm oil policies are just another step in that effort, which you'll see us filling out over the next few years."

The new policies are set to cover land use, water use and social metrics such as human rights, Parkin revealed. Palm oil and deforestation are being tackled first because the company sees them as two of the most pressing challenges facing the global company.

Wal-Mart’s largest supplier, Proctor & Gamble, scored a 7 by WWF reporting 13% of its palm oil usage certified sustainable under the CSPO guidelines. P&G said last month that 100% of the palm oil it purchases is certified as sustainable under the RSPO guidelines as a Roundtable member. And now it is adding a commitment to no deforestation in its palm oil supply chain.

P&G said it will establish traceability of palm oil and palm kernel oil to supplier mills by Dec. 31, 2015, and it will ensure no deforestation in the palm supply chain to plantations by 2020.

“These goals go beyond our current commitments. P&G will continue to work with each of our suppliers, and we will invest in and work directly with small local farmers, where much of our supply comes from, to improve their production practices,” said Len Sauers. “This is the most complicated aspect of the palm supply chain, where P&G believes we can make a significant and lasting impact.”