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Article

23 Jul 2020

Author:
Morgan Gillespy and Reuters Events

Chinese companies are under growing pressure from consumers, brands and investors to source palm oil more sustainably, expert says

“Why China is key in the battle against palm oil deforestation”, 21 July 2020

… A recent CDP report on the palm oil industry, The Hidden Commodity, focused on the unique role of China to transform this value chain and protect Asia’s tropical forests. While palm oil is used all over the world, China imports 7 million tons annually, and recent trends suggest it could soon overtake India as the top importer of palm oil globally…

A staggering 85% of the world’s palm oil, and almost 100% of China’s imports, is produced in just two countries: Indonesia and Malaysia. This has often been at the expense of clearing vital tropical rainforest…

… Companies producing or sourcing palm oil are facing increasing demands for sustainability, from customers, investors, consumers and policymakers…

Many international buyers (such as Carrefour and Firmenich SA) that source from China have made commitments to only buy palm oil products certified by the Roundtable on Sustainable Palm Oil (RSPO). If Chinese suppliers do not comply with these policies, they may see contracts terminated and business lost.

Investors are demanding action too. A group of 58 investors with $7.9 trillion in assets has signed a paper on Investor Expectations on Sustainable Palm Oil, which calls on companies to become RSPO members, adopt No-Deforestation, No Peat, No Exploitation (NDPE) policies, set time-bound plans, and regularly report on progress…

If unsustainable palm oil production continues to drive destruction of tropical forests, the ultimate result will be spiralling dangerous climate impacts and biodiversity loss. This poses many risks to business.

The shifts in market demand, consumer preferences and policy direction described above all contribute to significant reputational and regulatory risks to business if they do not take concerted action…

But too many companies are overlooking the physical risks. Companies producing and sourcing palm oil are exposed to physical risks caused by current and future climate change…

The opportunities to be gained, combined with the risks of inaction, make the business case for action on sustainable palm oil crystal-clear.

But that action can only happen when there is accountability, which requires transparent, standardised disclosure…

As the market shifts and the climate crisis intensifies, the time is now for full value-chain transformation to protect Asia’s vital forests. China is in a powerful position to lead the way.

[Also referred to Fujian Sunner Group, Unilever, Wilmar, ING bank and OCBC bank]

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