Supply Chain

After reflecting on our 2018 achievements, GAR looks forward to continuing our sustainability implementation efforts in the new year. What does 2019 hold in store for the palm oil industry? Here are five trends we believe will drive the palm oil sector in the new year:

1. Supply chain transparency

As the 2020 deadline for ‘No Deforestation’ policies looms, we expect increasing pressure from buyers and NGOs for setting cut-off dates, publishing concession maps and boundaries, and exclusion of non-compliant suppliers. In 2017, GAR achieved 100 percent Traceability to the Plantation (TTP) for all our owned mills. Since then, we have been working on the second phase, which is complete TTP for our third-party mills and suppliers by the end-2020.

Together with other palm oil growers, GAR has published owned and subsidiary concession maps via the RSPO on the Global Forest Watch (GFW) map platform. In addition, we also publish our supply chain maps (owned and third-party mills) on the GAR Sustainability Dashboard. To find out more about our traceability efforts, read here. Supply chain traceability remains an important first step for GAR in getting closer to our suppliers and developing meaningful support programmes and interventions that help others in the palm oil industry achieve the same kinds of sustainability commitments as GAR has set out in its GSEP.

2. Landscape approaches

As we make progress in de-linking deforestation from our supply chains, we believe the best way forward with smallholders and rural commodities is through a landscape approach, ideally with support from the local governments. Why is the local government needed? They have jurisdiction to clarify land use with communities, and can help the private sector facilitate necessary discourse with communities, especially when it comes to setting aside areas for conservation.

For example, GAR is working with Cargill, Danone, Musim Mas, Neste, PepsiCo, and Unilever with help from Daemeter and Proforest, on landscape development in Siak and Pelalawan. The goal of the programme is to transform large parts of both districts into more sustainable landscapes, which:

• Produce “deforestation and exploitation free” palm oil
• Maintain or enhance key conservation areas

There is interest in these landscape approaches from regional and national governments as well as international funders and investors. The recognition that farming takes place in a landscape with wider activities, interests, and pressures also means a more holistic and comprehensive assessment of pressures on forests and the opportunities to protect them can be made.

3. An increased focus on the health and nutrition of palm oil in food

Concern about the nutritional value of palm oil has been growing steadily in the last couple of years, with repeated mentions of legislation on issues of trans-fatty acids and 3-MCPD. With consumers placing pressure on governments and food manufacturers to provide healthier food, we believe this topic is set to steer conversations on palm oil in 2019.

The World Health Organisation’s (WHO) announcement to phase out artificial trans-fatty acids from the global industrial food supply by 2023 (in a bid to reduce cardiovascular disease), has sent legislators and food manufacturers scrambling to understand more about the foods and processes that cause trans-fatty acids – one of which is partial hydrogenation of vegetable oil. Palm oil’s unique composition removes that need for partial hydrogenation, making it naturally trans-fat-free and a suitable solution to the discussion of ‘how-to’ remove trans-fats from our diets.

Similarly, for 3-MCPD, the European Food Standards Authority’s (EFSA) report about the health consequences of co-contaminants created during the refining of edible oils (like palm oil) has stakeholders delving deeper into the topic. Food manufacturers especially are looking into reducing levels of it in food. Our R&D department is implementing several strategies to reduce 2- and 3-MCPD and GE esters. We are using new internationally approved identification methods to test for these substances, and also actively working on installing and testing new mitigation technologies. Learn more about our work on food and health here.

4. Labour and fair employment

Decent work conditions in the palm oil sector were one of the key issues highlighted in 2018, as NGOs published reports on labour, flagging violations of human rights within palm oil companies. A watchful eye in this area is expected to continue in 2019, especially with regard to employment and contracting practices in Indonesian palm oil plantations.

While we continue to improve on our labour practices, we believe the private sector must collaborate to address this challenge. For example, GAR and Wilmar, in collaboration with Business for Social Responsibility (BSR) conducted labour assessments, focusing on Riau, North Sumatra, and Central Kalimantan. The goal of this assessment was to improve and find solutions to solve complex labour challenges. Brand companies should continue to support the initiative, by purchasing certified sustainable palm oil.

GAR is taking this collaboration approach further through involvement in the Decent Rural Living Initiative – a pre-competitive collaboration with other growers, facilitated by Forum for the Future focused on how to enable the working conditions in the palm oil industry that result in decent rural livelihoods in rural communities.

5. Biodiesel B30 implementation in Indonesia

In September 2018, the Indonesian government made 20 percent biodiesel blend (B20) mandatory in all diesel engine vehicles, in order to boost domestic palm oil consumption, help palm farmers earn better income from their crop, reduce greenhouse gas emissions, and reduce fuel imports. Since the B20 implementation, the programme has hit its targets and is estimated to have saved US$ 1 billion from the import of diesel.

With the relative success of the programme, the Indonesian government is planning to double the consumption of B20 in 2019 (to 6.2 million kilolitres), and is even looking to accelerate its plans for B30. Initially slated for 2020, Indonesia has announced plans to speed this up, with road tests for B30 set to begin in January 2019. Malaysia has also followed suit, with their B10 programme set to launch in February 2019, and talks of increasing this to B20 by 2020.

Southeast Asia’s interest in biodiesel is in stark contrast with Europe’s current concern about palm oil in biofuels. GAR believes sustainably produced palm oil should be able to play a role in sustainable energy provision, both in providing domestic fuel security in producing countries and helping consuming countries to transition to low carbon fuel options, especially in the transport sector where change is still relatively slow.

As 2018 drew to a close there was a general uptick in the campaigning noise around palm oil and its environmental impact. 2019 is likely to continue that general trend, so it will be more important than ever for the industry as a whole to communicate its continuing efforts to apply more sustainable agricultural practices, as well as the natural advantages of palm oil to critics and supporters alike.

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