“Future-proof supply chains”: Sustainable palm oil challenges, solutions and 2030 projections

20 Dec 2023 --- The growing need for sustainable palm oil is creating certification prospects for downstream players. However, the EU’s deforestation regulation may intensify the scrutiny of uncertified palm oil blended with certified sustainable materials.

Personal Care Insights checks in again with Francesca Morgante, senior manager of Market Transformation at Roundtable on Sustainable Palm Oil (RSPO) and also connects with Samantha Jacobs, head of Human Rights and Critical Raw Materials at Natura &Co to learn more about shortages in palm oil supply chains, difficulties in source tracing and 2030 projections regarding global demand and supply.

The Brazilian global personal care cosmetics group is involved with the Sustainable Palm Index and Action for Sustainable Derivatives. The latter is a collaborative initiative evaluating palm-based derivative suppliers based on their level of sustainability commitments, processes, achievements and No Deforestation, No Peat, No Exploitation practices.

How can mainstream players help mitigate current supply chain shortages?
Morgante: A critical factor in the current shortages is that only a few RSPO-certified palm kernel crushers are in the supply chain. RSPO is working with members, including new palm kernel crushers, to certify them. This would help lift the tightness in the market in the short and intermediate term.Natura &Co has achieved more than 90% traceability and more than 70% physically certified palm.

It has to be recognized that the high demand was generated by a long-lasting commitment toward sustainable sourcing from major personal care and home care products, leading multinational manufacturers globally. This sector has stepped up successfully and can be seen as a driver of further change. Now, downstream players may see this achievement compromised by the lack of RSPO-certified materials, which should be avoided.

Jacobs: In 2020, Natura &Co committed to full traceability or certification of the supply of our critical materials by 2025: palm oil, cotton, paper, mica, alcohol and soy. So far, the Group has achieved more than 90% traceability and more than 70% physically certified palm.

In 2023, Natura &Co committed to advancing processes to identify, prevent and mitigate human rights risks across its supply chain and operations by 2027, engaging with potentially affected stakeholders, promoting access to remedy and using our leverage for positive impact.

These two goals work together, and more effective due diligence comes with greater transparency. The more we understand the people’s experiences within our value chains, the more we can drive positive impact or support the remediation of human rights issues.

What are the main traceability challenges in mixing conventional material in Mass Balance?
Morgante: Mass Balance (MB) is an example of good impacts on the ground. One challenge is that it cannot easily be traced back to its source due to mixing it with conventional material. However, incoming legislation demands more evidence of legality and deforestation- and conversion-free production of certain products placed on the European market.

RSPO already has an IT system to trace material between growers and refineries — PalmTrace. RSPO is further developing this system to allow companies to provide information on certified and conventional materials throughout the supply chain as required by the EU’s Deforestation-free Regulation (EUDR). Under EUDR, using MB would still be possible if companies could trace where uncertified components come from and prove they were produced legally and deforestation-free.

Jacobs: The complexity of supply chains makes traceability and transparency difficult to achieve — this can make it challenging to engage with the people in our value chain, understand their experiences and how we can use our leverage to promote their interests.

This is where our human rights due diligence goal comes into bear. We remain committed to identifying, preventing, mitigating and remediating human rights harms in our value chain. Therefore, we commit to exploring ways to understand what is happening for the people who produce our materials.Under EUDR, using MB would be possible if companies can trace uncertified components and prove they were produced legally.

What are your 2030 projections for the global demand and supply of palm oil and palm kernel oil?
Morgante: Overall, Certified Sustainable Palm Oil (CSPO) and Certified Sustainable Palm Kernel Oil (CSPKO) uptake as a percentage of total palm oil and palm kernel oil usage by RSPO Members is showing encouraging growth and uptake levels in key oleochemicals markets such as Europe, North America and Japan. Toward 2030, RSPO would like to leverage our members’ current progress in sustainable sourcing to continue increasing CSPO and CSPKO uptake in the global oleochemical sector, especially in major markets such as China, India, South Korea, Indonesia, Malaysia and Thailand.

However, RSPO does not have in-house forecasting analysis. For overall industry trends, RSPO refers to independent, reputable sources such as Oil World and the US Department of Agriculture for forecasts on overall palm oil and palm kernel oil demand and supply trends.

How can the industry prepare for predicted global defictis in palm oil needs?
Morgante: Private initiative and legislation can reinforce one another, being also the case for the EUDR and responsible sourcing. There is no green lane for RSPO members who hold Supply Chain Certification, meaning they will still need to demonstrate compliance, but they are better prepared to do that, they are more equipped with tools and knowledge than those that are not certified.

Previously, Personal Care Insights revealed the forces shaping the market and how certifications impact the supply chain following the RSPO Annual Roundtable Conference on Sustainable Palm Oil in Jakarta last month.

By Venya Patel

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