Blog: Palm oil and the balancing act between sustainability, price and demand

Sam Webb | 23 November 2011

As demand for palm oil looks set to spike over the coming decades, companies will face a struggle between cost, sustainability and public demand for ethically-sourced palm oil. An environmental charity said companies are moving in the right direction, but more must be done - and fast.

The current high demand for palm oil has made it an incredibly profitable crop. Today (23 November) Papua New Guinea-based sustainable palm oil producer New Britain Palm Oil announced its nine-month profit before tax jumped 183% to US$209m as a result of high demand.

Palm oil is widely available, cheap and versatile, so it's little surprise it is used in many packaged food products ranging from ice cream, margarine, biscuits, cakes, breakfast cereals, soup stock, snacks, ready meals and instant noodles, to name but a few.

Research from environmental charity WWF claims that it makes up roughly a third of the 151m tonnes of vegetable oil produced worldwide. The research also shows that demand isn't set to slow down at any time soon - it is forecast that 77m tonnes will be needed in 2050 to help feed the world's growing population.

However, this valuable crop can have a devastating effect on the environment. Palm trees grow in tropical environments and tropical forests are often cleared for oil palm production, which, the WWF says, can be very damaging to wildlife, communities and the wider environment.

Yesterday the charity published its Palm Oil Buyers' Scorecard 2011, a report rating companies' commitments to sustainable palm oil, which is produced with minimal ecological damage.

The signs are encouraging - in the last two years more and more companies throughout the globe have joined the Roundtable on Sustainable Palm Oil (RSPO) and committed to increase their use of sustainable palm oil.

However, it sounded a note of caution that change is not coming quick enough. A statement in the Scorecard said: "Companies must start pushing harder to source fully traceable sustainable palm oil. Only then will the whole supply chain begin to be cleaned of unacceptable palm oil from sources that may have contributed to deforestation."

The problem appears to be price. As margins worldwide continue to be squeezed, companies are unwilling to pay a premium for sustainable palm oil

WWF's figures show how stark the reality is - In 2011, just 10% of global palm oil is certified to the RSPO standard, and just half of that is sold.

 

 

 

 


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