Last Friday, the palm oil industry crossed an important threshold: Golden Agri-Resources (GAR) announced a decision to source only palm oil produced without deforestation. This means that now, a majority of the world’s traded palm oil is covered by deforestation-free sourcing policies, heralding a clear shift in the market towards responsible commodity production.
GAR has long been a significant player in the palm oil industry, and is the second-largest palm oil grower in the world. In 2011, responding to Nestlé’s Responsible Sourcing Guidelines, GAR worked with the sustainable products nonprofit TFT and Greenpeace to establish a landmark Forest Conservation Policy for the palm oil it grows. GAR’s 2010 policy did not apply to the palm oil it traded – which, at the time, was minimal. Over the past year, however, GAR has dramatically expanded its trading operation and now controls about ten percent of global palm oil trade.
GAR’s new policy puts them in line with the “No Deforestation, No Peat, No Exploitation” policy announced by Wilmar on December 5. Wilmar controls about 45 percent of the global palm oil trade. Together, GAR and Wilmar trade most of the palm oil in the world – thus, GAR’s new policy represents the tipping point beyond which most of the palm oil in the world will be responsibly sourced.
This announcement signals that the palm oil industry is rapidly evolving towards responsible production based on key criteria banning deforestation, peatland expansion, or human rights abuses. Consumer companies, many of which also have deforestation-free policies, now have several different options to source deforestation-free palm oil. Companies that continue to deforest could face challenges in market access as their sustainability risk profile increases over those of their competitors.