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Supply Chain
P&G Studying Smallholder Practices to Ensure Deforestation-Free Palm Oil

Separating sustainable sources from non-sustainable sources in the production of palm oil and palm kernel oil is highly complicated, but Procter & Gamble is attempting to address the problem as part of its recently upgraded commitment to a zero-deforestation palm oil supply chain. The Company announced Thursday it is conducting an in-field study to understand the practices of smallholder farmers — and how they can be improved to protect local forests.

The Malaysia Institute for Supply Chain Innovation (MISI), a global leader in supply chain management and logistics, is fielding the study, helping to facilitate the research and working with P&G to develop action plans. P&G says it will report the findings and develop an action plan to address them by the end of September.

“We want to make the sourcing of palm oil and palm kernel oil sustainable from start to finish — and still economically viable for local farmers who depend on the crop to support their families,” said Len Sauers, VP of Sustainability at P&G. “We already work with larger suppliers to trace the origin of our supply chain, but small farmers — in places like Malaysia and Indonesia — account for 35-45 percent of palm oil production. We need to understand their needs and practices so we can create innovative solutions to the problem.”

“This is a complex supply chain involving thousands of small farmers who interact with others, so the product changes hands many times between the growers, traders, millers, buyers, and ultimately the purchasing company. As a result, separating sustainable sources from non-sustainable sources is almost impossible,” said Mahender Singh of MISI. “We are targeting zero deforestation by fostering an inclusive ecosystem that supports small farmers’ challenges.”

In April, P&G announced new goals to help ensure zero deforestation in its palm oil supply chain. But after extensive campaigning from Greenpeace, the company expanded its commitment to not only eliminate palm oil-related forest destruction from its products, but to also provide full traceability for all palm oil and derivatives. The goals call for traceability of palm oil and palm kernel oil to supplier mills by December 31, 2015, and to plantations by 2020.

The goals also call for P&G to extend work with suppliers, industry peers, NGOs, academic experts and other stakeholders to promote industry-aligned standards and practices for sustainable palm oil sourcing.

“We are working in partnership with industry experts, large suppliers and small farmers to make a significant and lasting impact,” Dr. Sauers said. “In support of this commitment, we will develop tools and best practices that we can share with other companies facing the same opportunities we’re facing in establishing traceability from farm to purchase.”


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