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Palm Oil Fueling Deforestation
By Michael Schweibinz

In the recent movement to avoid foods high in trans-fat, processed food companies in the United States have turned to palm oil as an alternative to partially hydrogenated oil.

Palm oil is also a primary ingredient in common consumer goods including soaps and cosmetics. From an industrial standpoint, palm oil is an extremely productive crop. It is versatile and offers a far greater yield than other vegetable oils at a seemingly much lower cost.

However, the cost of convenience may be higher than investors and consumers originally thought. Palm oil is extracted from the fruit of the oil palm tree and can only be harvested in tropical environments.

The increased demand is fueling the deforestation of vast acreages of rainforest to clear land for increased production. Native species in the rainforests of Indonesia and Malaysia are paying the highest price for this alternative crop—their lives.

The Rainforest Action Network (RAN) recently launched an ambitious campaign called “The Last Stand of the Orangutan” which seeks to spread awareness about palm oil in the snack-food industry. The report calls attention to the fact that few regulation and safeguards are in place to prevent the use of palm oil associated with deforestation and human rights violations.

Some companies are taking steps to address the palm oil conflict. Established in 2004 to promote the production and use of sustainable palm oil, The Round Table on Sustainable Palm Oil (RSPO) is dedicated to working with food and cosmetic manufactures to guarantee the production of a sustainable crop.

Campbell Soup Company announced an initiative focused on overseeing all aspects of their palm oil production chain, including initial procurement from suppliers, and is working with the RSPO to ensure their products are made with Certified Sustainable Palm Oil.

Kellogg Company has also announced their plan for tighter palm oil regulations. Although the company is only responsible for 0.1% of global consumption of palm oil, they have recognized palm oil as an important aspect of corporate social responsibility. Working with the RSPO, Kellogg expects that more than 90% of the palm oil used in their products will be sustainably grown.

Following suit, PepsiCo introduced their Sustainable Farming Initiative (SFI) in 2012. The SFI illustrates a framework with sixteen sustainability indicators with specific criteria and global standards. Pepsi plans to expand their SFI in the coming years, and intends to lend a hand in the sustainable production of all of their crops.

According to research found by the World Wildlife Foundation, (WWF), “many firms that switched to producing sustainable palm oil reaped significant returns on their investments. In some cases, switching to sustainable production was economically transformative for the business.”


Mention of specific companies or securities should not be considered a recommendation to buy or sell that security. Past performance is no guarantee of future results.

Posted: November 7, 2013