The Chain: Unilever Commits to Increased Smallholder Inclusion, Deforestation-Free Supply Chain by 2023


June 25, 2020

On June 15th, the consumer goods company Unilever announced new measures to combat climate change and protect biodiversity. The measures commit Unilever to a deforestation-free palm oil supply chain by 2023 and net-zero emissions by 2039. The company plans the establishment of a EUR 1 billion (USD 1.12 billion) Climate & Nature Fund, which will be used over the next ten years to fund landscape restoration, reforestation, carbon sequestration, wildlife protection, and water preservation projects.

The policy also includes a specific focus on smallholders. Chain Reaction Research (CRR) has previously highlighted the deforestation risk by smallholders in the palm oil sector and their use of use of fire to clear land. How to incorporate smallholders into sustainability policy implementation and strict certification criteria has been a longstanding dilemma for the palm oil industry. Unilever has committed to accelerating smallholder inclusion by developing initiatives that help smallholders secure legal land rights, improve access to finance and financial inclusion, and encourage restorative practices.

Unilever’s new commitments are an addition to its existing No Deforestation, No Peat, No Exploitation (NDPE) sourcing policy for its palm oil operations, which the company adopted in 2016 and came after years of NGO coverage of Unilever’s links to deforestation and its unsustainable sourcing decisions.

Unilever is a member of the Consumer Goods Forum (CGF). Unilever’s membership in the CGF includes a commitment to ensuring a deforestation-free palm oil supply chain by 2020.

Unilever is unlikely to meet its 2020 commitment. Analysis by Chain Reaction Research in February this year showed that Unilever has been purchasing from six of the top 10 largest deforesting companies in Indonesia and Malaysia in 2019. These six companies were responsible for over 20,000 hectares of forest and peat conversion.

Unilever’s new policy delays meeting its 2020 commitment to 2023. Unilever says it “will increase traceability and transparency by using emerging digital technologies – such as satellite monitoring, geolocation tracking and blockchain – accelerating smallholder inclusion and changing our approach to derivates sourcing.” The policy also includes a commitment to regenerate nature and increase local biodiversity, as well as “look beyond forests, peatlands and tropical rainforests, and to protect other important areas of high conservation value and high carbon stock.”

Any new commitments to ensure deforestation-free supply prompt questions about why companies have not met 2020 commitments and whether more CGF members will follow Unilever in adopting a later date by which supply chains will be deforestation-free.

Unilever is not the only CGF member continuing to source from deforestation-linked companies. The second-largest deforester of 2019, the Indonesian company Jhonlin, appears in the supply chain of 12 CGF members (including Unilever). The third-largest deforester, Mulia Sawit Agro Lestari, appears in the supply chains of eight CGF members. Eight also buy from the fourth-largest deforester, Tunas Baru Lampung, and three buy from Indonusa, the fifth largest. Of the remaining five, two growers combined supply to 16 CGF members.

Commitments by agricultural companies to de-couple their industries from deforestation have dominated sustainability discourse for many years. In 2019, Forest 500 warned that almost half of 500 agricultural companies and financial institutions engaged in palm oil, cattle, soy, and timber supply chains were unlikely to meet 2020 commitments. Rainforest Action Network has also this year continued to highlight palm oil companies failing to meet their 2020 commitments. It remains to be seen if other companies will follow Unilever’s lead, both in smallholder inclusion and delaying 2020 commitments.

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