“Future-proof supply chains”: RSPO solutions for sustainable oleochemicals in personal care

05 Dec 2023 --- In part one of this interview, Personal Care Insights sits down with Francesca Morgante, senior manager of Market Transformation at Roundtable on Sustainable Palm Oil (RSPO), to unlock the role of oleochemicals and future-proof supply chains.

Derived from natural fats and oils, oleochemicals are widely used in hair care and skin care products, such as soaps and shampoos. They offer a viable alternative to petrochemicals and are arguably better for the planet. However, certified and environmentally sustainable sourcing methods determine the benefits of these chemicals.

“One challenge we’re facing is that the food sector is not buying enough Certified Sustainable Palm Oil [CSPO], so we’re not getting enough Certified Sustainable Palm Kernel Oil [CSPKO]. We need to increase availability. We cannot do without it,” says Philippe Provost, sourcing director of Oleochemicals at L’Oréal, speaking on a panel at the RSPO Annual Roundtable Conference.

“Demand is outstripping supply for sustainably-produced palm oil products in the oleochemical sector. Without addressing this imbalance, the risk is that prices will increase and degrade demand for these sustainable alternatives. Golden Agri-Resources (GAR) is working hard to increase the supply of sustainably produced palm oil products to meet this need.”

Enrique Naz Melon, deputy CEO at Sinarmas Cepsa, comments: “The first step is increasing production. GAR’s replanting program replaces aging, less-productive trees with more efficient plants to increase the amount of oil we can produce from the same planted area. At the same time, we’re looking to increase smallholder certification through initiatives like the Sawit Terampil project, which recently added 270 independent farmers to our RSPO-certified supply chain.”

At least 70% of all cosmetics contain palm oil or palm kernel oil derivatives, shares Morgante.Below, Morgante talks about the challenges of oleochemicals, market demands shaping the sector and how certifications impact the supply chain following the RSPO Annual Roundtable Conference on Sustainable Palm Oil, which ended last month in Jakarta.

What challenges does the oleochemicals sector face, especially in light of new legislation and specific market dynamics?
Morgante: The post-2020 era has seen the oleochemical market undergo unprecedented shifts. Driven by multinational corporations, the demand for CSPKO has consistently outpaced its supply. With at least 70% of all cosmetics containing palm oil or palm kernel oil derivatives, the market for CSPKO is only set to grow, creating the need to ensure that the sector evolves sustainably.

Two main challenges are insufficient RSPO Certified palm kernel crusher plants and insufficient uptake of CSPO.

With palm oil and palm kernel oil being key feedstocks, how do you see the sector adapting to evolving market demands?
Morgante: The oleochemicals sector is a particularly challenging one, not only in light of the new legislation but also of specific market dynamics. Around 8% of palm oil and 70% of palm kernel oil used globally goes into producing “oleochemicals.”

Regarding vegetable oils, palm and kernel oil represent the most significant oleochemical feedstocks. A far more tremendous amount of palm oil is produced than palm kernel oil because 1 tonne of palm kernel oil equates to about 10 metric tons of palm oil.

Therefore, to advance the supply of CSPKO, it is detrimental to increase the demand for CSPO. Mature markets like Europe and the US have almost reached their potential, so a significant shift should happen in China, India and Indonesia, to name the largest CSPO consumption markets, to balance the supply of CSPKO adequately to market demands.

How is the RSPO Supply Chain Certification standard impacting the oleochemical supply chain?
Morgante: The RSPO Supply Chain Certification standard is designed to certify all the derivatives along the supply chain. PKO is produced by palm kernel crusher plants (KCP). To supply CSPKO, crushers need to be RSPO Supply Chain Certified.

From left to right: Julian Conway McGill of Glenauk Economics, Provost of L’Oréal, Samantha Jacobs of Natura &Co; Naz Melon of Sinarmas Cepsa and Harshal Thakare of Galaxy Surfactants (Image credits: RSPO).If crushers are not certified, the material is downgraded to conventional, creating a bottleneck in the supply of certified material. With the new EU’s Deforestation-free Regulation in place, the RSPO working groups and Board of Governors have been discussing the implementability of the regulation by the sector.

Producing fully traceable, legal and deforestation-free palm kernel oil derivatives used in home and personal care is challenging because the supply chain is long and complex.

How is RSPO’s Oleochemicals Task Force addressing market tightness, especially considering pandemic disruptions?
Morgante: RSPO revived the Oleochemicals Task Force when the market restrictions were observed in 2019. This tightness continued during the pandemic years, and this is predicted to persist.

The Oleochemicals Task Force concluded the work with an engagement plan to:

• Address the losses in the supply chain by raising awareness amongst the actors with unsold CSPK/CSPKO volumes: RSPO-certified mills (CSPK), Independent Smallholder Groups (IS-CSPKO) and using spatial mapping for connecting certified mills with certified crushers.

• Increase the overall CSPO/CSPK supply by accelerating the review of new management units joining RSPO, an outreach program for uncertified KCP and engagement of non-RSPO grower companies.

In part two of this Key Interview, Morgante will unveil 2030 projections for the market, challenges in tracing back to sourcing due to mixing materials and how downstream players can mitigate shortages in the supply chain.

By Venya Patel

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