Our contribution to the sustainable cultivation of palm oil

Our understanding of sustainability and corporate social responsibility extends to the sustainable management of raw materials and the conservation of natural resources. The use of renewable raw materials in particular, such as palm oil, requires close consideration to be given not only to the economic consequences but also, and especially, to the ecological and social impacts. Our vision is that, in the future, whenever palm oil and palm kernel oil are used in our products, this oil should be derived from sustainably cultivated sources. As early as 2008, we became the first company worldwide to purchase certificates for sustainable palm kernel oil – for our Terra brand cleaning products. Building on this, we are now planning the next steps to align our overall product portfolio to sustainable palm oil and palm kernel oil, intending to complete this transition by 2015. As one of these steps, we are already purchasing, from 2012 onwards, certificates for sustainable palm kernel oil to cover our entire range of laundry and home care products.

Background: The oil palm and worldwide cultivation of palm oil

Photo Palm Tree

Compared to other oil crops, the oil palm produces high yields, is easy to cultivate and bears fruit all year round, which accounts for the fact that it now takes first place among the oil-producing plants cultivated around the world. The fruit of the oil palm yields two kinds of oil: palm oil and palm kernel oil. Most of the world’s palm oil production, up to 90 percent, is used in the food industry, e.g. as a vegetable fat in margarine and confectionary. Palm oil is also suitable for the production of biofuels as an alternative to mineral oils.

In contrast to palm oil, palm kernel oil is only used to a very limited extent in the food industry. It is mainly employed in the oleochemical industry as a feedstock for the production of surfactants (washing active substances) for laundry detergents, household cleaners, and cosmetics.

Whereas the world market for palm oil amounted to 50.6 million metric tons in 2011, the market for palm kernel oil had a volume of only about 5.7 million metric tons.

The use of palm kernel oil by Henkel – responsibility across the entire value chain

Photo coconut

Up to now, only certain starting materials can be used for large-scale production of surfactants, i.e. cleaning active ingredients, for laundry detergents, household cleaners, and cosmetics. These are mineral oil, natural gas, coconut oil and the oil of palm kernels. The types of plants indigenous to Central Europe are currently not suitable for large-scale industrial surfactant production involving volumes of many thousand tons.

One of the key objectives of our research and development is to find substitutes for ingredients that are based on mineral oil. The reasons for this include the limited availability of mineral oil, climate protection, and the ecological risks associated with the extraction of mineral oil. Before making any decision, the ecological, economic and social aspects of each particular alternative must always be considered as part of the overall appraisal. The surfactant ingredients used in our laundry detergents and household cleaners are derived to about 30 percent from renewable raw materials as feedstock. Our products therefore play a leading role within the laundry detergent and household cleaner industry. However, Henkel does not manufacture surfactants itself, but rather purchases them from raw material suppliers on the world market. The palm kernel oil and palm oil that Henkel utilizes indirectly through its suppliers of surfactants or other raw materials account for less than 0.2 percent of the world total.

Our ambition is to operate sustainably and in a socially responsible manner throughout the entire value chain. Because of this, we take the problems that can occur through cultivation of palm oil plantations very seriously and, together with a number of different stakeholders as our partners, we work toward sustainable and thus ecologically and socially responsible palm oil and palm kernel oil production. Our vision is that, in the future, whenever palm oil and palm kernel oil are used in our products, this oil should be derived from sustainably cultivated sources. Our aim is that, from 2015 onwards, all of the palm oil and palm kernel oil supplied in the form of raw materials for our products should be covered throughout by RSPO certificates for sustainably cultivated palm (kernel) oil. To underscore this clear commitment to sustainable palm oil production, we are now accelerating this process for our laundry detergents and household cleaners, the largest of our product categories containing surfactants. From 2012 onwards, Henkel is purchasing certificates for sustainable palm kernel oil for its entire product portfolio in this business sector. This ensures that for the quantity of palm kernel oil used in the production of surfactants for Henkel’s laundry and home care products a corresponding quantity of sustainable palm kernel oil will be produced and enter the supply chain for manufacturing surfactants.

Strong partnerships for sustainable palm oil

Cultivation of the oil palm has soared in recent years. Renewable raw materials can, however, only make a positive contribution to sustainability aspects such as climate protection if the conditions under which the crops are cultivated are ecologically compatible and socially responsible. For this reason, Henkel actively supports the implementation of sustainability criteria in the supply chain of palm oil and palm kernel oil.

To achieve this goal together with partners, Henkel has been participating in the Roundtable on Sustainable Palm Oil (RSPO) ever since 2003 and became an official member in 2008. The RSPO arose out of an initiative by the World Wide Fund for Nature (WWF) and a number of interested representatives of the business community, aiming to find suitable ways of cultivating palm oil sustainably and combating the exhaustive cultivation of rainforests and the destruction of wetlands, especially in Indonesia. Initially, in 2002, the initiative took the form of informal cooperation between a number of companies, trade associations, and the WWF. In August 2003, the RSPO was officially created in Kuala Lumpur, Malaysia. The inaugural meeting was attended by 200 participants from 16 countries – including Henkel. Today (at the beginning of 2012) the RSPO has 570 members, including oil palm growers, producers of consumer products, retailers, banks, investors and non-governmental organizations. The association is headquartered in Zurich and the secretariat is located in Kuala Lumpur.

The aim of the RSPO is to advance the sustainable production of palm oil. At the fifth Round Table (RT5) in 2007, it was decided to build up a certification and marketing model for palm oil from sustainable cultivation. A primary objective was that the certification model should be flexible and take account of the different conditions under which palm oil is produced, processed and traded.

To promote the concept of sustainable palm oil and palm kernel oil production even more effectively, Henkel engages in dialogue with other partners above and beyond the RSPO. In October 2009, Henkel joined the “Palm Oil Coalition.” Its members include representatives from globally operating companies in the consumer goods and food industries as well as from non-governmental organizations such as Greenpeace, Oxfam, the WWF and others. Their common goal is to enforce the protection of rainforests by shifting their sourcing of palm oil entirely to sustainably managed sources by a defined date. Furthermore, Henkel initiated the “Forum on Sustainable Palm Oil” jointly with industry partners, the WWF and the German Association for International Cooperation (GIZ). The goal of this platform is to promote the use of sustainably produced palm oil and palm kernel oil. The Forum’s work will be based on the standards defined by the RSPO, which it intends to refine and amplify.

Certification model for palm oil and palm kernel oil from sustainable cultivation

As palm oil is purchased on the world market rather than directly from the producers, the RSPO has established a certification procedure and three marketing models for palm oil from sustainably managed palm oil plantations: segregation (physical separation of sustainable and normal palm oil streams), mass balance (controlled mixing of sustainable and normal palm oil), and the Book & Claim system.

While the segregation of palm oil – the main product – enables the raw material to be tracked directly from the plantation until it is used in an end product, in the short and medium term it is scarcely implementable in the supply chain from palm kernel to surfactant. Although the segregation of sustainably produced palm kernel oil is possible, it requires considerable investment in new pipelines, transport resources (tanker ships, trucks, rail cars) and silos, involving a lot of time and money. Henkel has therefore decided to focus on the Book & Claim system. This separates the certificates for sustainably produced palm oil and palm kernel oil from the physical product streams. In Henkel’s view, the establishment of the Book & Claim system for palm kernel oil offers huge potential for creating significant incentives for all participating market players, even on short terms, to support sustainable cultivation of palm oil and palm kernel oil, so that new markets can open up for sustainable palm kernel oil.

How does the Book & Claim system work?

The Book & Claim system is based on the trading of certificates that stand for a corresponding quantity of sustainably produced palm oil and palm kernel oil. The certificates are traded separately from the physical product streams. A familiar example of such a certificate trade is the eco-electricity that is traded in Germany in accordance with similar criteria. The system is relatively simple. Plantations that satisfy the strict criteria of the RSPO receive certificates for their sustainably produced palm oil and palm kernel oil. A special platform has been established for trade in these certificates. This is run by the GreenPalm company (www.greenpalm.org). On the GreenPalm trading platform, the producers of palm oil and palm kernel oil register how much of their RSPO-audited and certified output they wish to sell. On the basis of this registration, the certificates can then be traded on the market. By purchasing certificates, buyers can document that an equivalent quantity of sustainably produced palm oil or palm kernel oil has entered the supply chain. The trading system is completely transparent, and the prices obtained and quantities involved can be found on the GreenPalm website. The certificates give smaller producers, who are not involved in international trade, a financial incentive to produce sustainably. Henkel believes that the Book & Claim system currently offers the best prospects for sustainable palm oil and palm kernel oil cultivation – provided the processes are traceable and transparent. The long-term goal is and remains that of ensuring that all surfactants available in the market come from certified sustainable palm kernel oil.

Palm kernel oil

To foster and establish the Book & Claim system for sustainable palm kernel oil, Henkel collaborated with GreenPalm to expand the system so that it would cover palm kernel oil as well as palm oil, and then became the world’s first company to purchase such certificates for palm kernel oil. Henkel was thus the first to ensure, in October 2008, that palm kernel oil from sustainably cultivated oil palms could enter the supply chain for the production of surfactants. This became possible after the RSPO defined criteria for sustainable palm oil cultivation and the first palm oil plantation was approved as satisfying these criteria.

External recognition

Henkel’s leading role and the company’s contribution to the sustainable cultivation of palm oil is recognized by external stakeholders, as well. The WWF rated Henkel among the top performers in its international Palm Oil Buyers’ Scorecard 2011, awarding the company the highest possible score (nine out of nine points). In this ranking, the WWF considered more than 130 companies, including 64 from the German consumer goods and retail industries, to assess their contributions to a sustainable palm oil economy.

Last updated: March 8, 2012