The Chain: Mars, General Mills, Colgate-Palmolive, Orkla All Move to End Deforestation

In just the past two weeks, four major consumer-facing companies have committed to sourcing deforestation-free palm oil. Following in the footsteps of major palm oil traders like Wilmar and GAR, these consumer company commitments represent the proliferation of no-deforestation policies throughout the palm oil supply chain.

Mars, Inc., the owner of well-known snack brands such as M&Ms and Twix, committed to fully traceable, deforestation-free palm oil by the end of 2015, and will announce policies for other similar commodities (i.e. pulp and paper, soy) this year. General Mills, which operates many popular cereal and snack brands in the United States, also committed to sourcing 100% of its palm oil from responsible, traceable sources by 2015. Colgate-Palmolive, another major U.S. brand, also issued a no-deforestation palm oil policy. However, Colgate-Palmolive’s will not fully implement its policy until 2020, clearly lagging behind its peers and drawing some criticism from environmental groups.

Even outside the U.S. market, companies are committing to deforestation-free sourcing. The Norwegian consumer goods giant Orkla also committed to deforestation-free palm oil. Importantly, Orkla owns MTF Foods, a major brand in India, potentially signaling a first-mover towards deforestation-free palm oil in that market.

Overall, we’ve seen an acceleration of commitments from consumer companies, due to a number of factors: rising pressure from NGO campaigns, awareness about greater availability of deforestation-free palm oil in the wake of the Wilmar and GAR commitments, consumer demand, and, increasingly, a “bandwagon effect”. At the same time, there is significant work to be done on establishing traceability to actually implement these commitments, and there is some continued resistance to these policies from some palm oil industry players (notably Sarawak producers) who have put deforestation or peatland conversion at the heart of their business plans.

Notwithstanding those challenges, however, this latest wave of commitments suggests that consumer company demand for deforestation-free commodities is rising, and producers and traders that can meet the demand will enjoy expanded market access, while other producers may see a narrowing of their customer base, particularly at the high end of the market.