Not if but how: the palm oil of the future

Alexandra Pinzon

Protecting forests is vital as we ramp up the race against climate change. Recently, awareness has grown of the impacts of uncontrolled palm oil expansion. However, this must be placed into context against broader vegetable oil and agricultural production. Soybeans and palm oil are key raw materials for meeting the growing demand for vegetable oils (see graphic below). Yet they are also two of the biggest drivers of deforestation worldwide. Therefore, identifying sustainable methods for producing oils is an urgent issue.

Figure 1 — increasing vegetable oil demand, from OECD data

While vegetable oils can be made from several difference sources, according to the FAO the most significant crops that go into vegetable oils are are soybeans (35% of production), canola (20%) and oil palm (45%). The same FAO data also shows that oil palm only uses 12% of the area under cultivation for these three crops, with canola at 19% and soybeans at 69%. Therefore, palm oil is a much more efficient crop, producing significantly more oil on significantly less land than soy, its fellow deforestation risk commodity. If our objective is to protect forests and biodiversity, and to mitigate climate change, outright rejection of palm oil, the most efficient of the vegetable oils, is not the answer.

Sustainable palm oil can help meet environmental targets

Figure 2 — area under cultivation for key crops by country. Data from the FAO.

The graphs above show that canola is largely produced in countries which have already been heavily deforested. Soybeans, on the other hand, are produced in a mix of countries. Some are more environmentally risky than others. For instance, soy has been linked to deforestation in Brazil, and poses a threat to the Chaco in Paraguay and Argentina, whereas there is little tropical forest in the USA. Palm oil is almost entirely produced in developing tropical nations with significant forest cover.

Unless the projected demand for vegetable oils does not materialise, more oil will have to be produced. This blog has shown that oil palm is the most land efficient means to provide it. Meeting the additional demand with soybeans (even when the best yields are achieved) would require over 5 times more land than producing the same amount of palm oil. This would have devastating effects on irreplaceable ecosystems, particularly in Latin America, and make global climate targets unachievable. Canola (at maximum yield) would be less land intensive than soybeans, but would still require significantly more land than palm oil.

It increasingly seems that palm oil is a reasonable choice, in principle. The issue is HOW it is produced.

Figure 3 — land take to meet future consumption by crop. Our calculations from FAO data.

The RSPO standard, which is the go-to reference for frontier and established oil palm markets alike, must urgently be strengthened. This can be supported by companies going beyond what this framework requires — in terms of traceability and environmental monitoring — in order to meet their own sustainability commitments.

Understanding risk and supporting smallholders

Companies and financial institutions are increasingly exposed to risks to their bottom lines if they are linked to deforestation and environmental degradation. Complete RSPO certification along the full supply chain, as a requirement phased in for all producers, is a key element to ensure zero deforestation palm oil. This can be boosted by full supply chain traceability, a previously daunting objective now made achievable by new technologies.

Smallholders will need support to meet this standard, lacking the resources of larger producers. Every stakeholder has a role. Purchasing companies and investing financial institutions can require greater compliance, NGOs can build capacity and monitor performance, and governments can provide assistance to producers to help them meet their own sustainable development goals. As discussed in our sustainable palm oil briefing, everyone can benefit from sustainable palm oil production.

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