Is it possible to produce sustainable palm oil?

Term Paper, 2019

25 Pages, Grade: 1,0

Julia Franziska (Author)


Table of Contents

1. Introduction

2. Historical Background
2.1. Africa
2.2. Asia

3. Process

4. Business
4.1. Supply (Value) Chain
4.2. Companies
4.3. Smallholders
4.3.1. Insetting
4.4. Certifications

5. Usage
5.1. Cosmetics
5.1.1. Dr. Bronner’s and L’Oréal
5.2. Food
5.2.1. Ferrero and Mars Inc
5.3. Energy

6. Risks
6.1. Health Risks

7. Consequences
7.1. Rainforest Destruction
7.2. Human Rights Challenges

8. Conclusion

9. Works Cited

1. Introduction

Palm oil is a multiplayer, functioning as an ingredient in our everyday food, as an essential ingredient in our cosmetic products and as an energy supplier. We use it on a daily basis, while brushing our teeth with the “Colgate” toothpaste after we ate “Nutella” on toast. After we filled our diesel car with palm oil biodiesel, we probably wash our hands with a “Dr. Bronner’s Magic Soap”. In all these products, palm oil is the fundamental ingredient. But where does it come from and how can we identify the problems that occur within the palm oil production?

The edible oil seems to be promising, but in fact causes deforestation, carbon dioxide emissions and the loss of biodiversity. The industries, as well as the end consumers are not aware or do not want to be aware of the fact, that the climate is changing and one essential reason for that is the irresponsible production of palm oil.

With the help of organizations like “Greenpeace” and “Amnesty International”, it is possible to find out what consequences palm oil production already has. According to Greenpeace UK “An area the size of a football pitch is torn down in Indonesia’s rainforest every 25 seconds, with palm oil driving the destruction.” (Nicholls). This leads to my research question: Is it possible to produce sustainable palm oil?

In order to answer my research question, I want to connect its history, as well as the biological process onto the consequences palm oil production already has. Within my essay I will focus on the business and usage of palm oil, showing its unique variety. With the help of examples of different companies, which use palm oil as an ingredient for their products, one has the possibility to form his own opinion on the aspects of sustainability within the palm oil sector.

My goal is to raise awareness of the use of palm oil products and to eliminate preconceptions according the palm oil industry in general.

2. Historical Background

2.1. Africa

The history of palm oil production and its controversy can be traced back to 3,000 BC, when “archaeologists discovered palm oil in a tomb located in Abydos, Egypt.” ( In the Middle of the 15th Century European travelers used palm oil as a local food source on their way to West Africa ( Palm oil also became important in order to develop caravans and ships of the Atlantic slave trade in the 16th and 17th Century ( In the 18th century the British industrial revolution used palm oil mainly from West Africa to create candles and machines ( This rising export industry may have been the replacement of slave trade, at least according to historians: “(…) historians considering this topic suggest that the rise of the palm oil trade was linked to the decline of the slave trade.” (Northrup 354). Palm oil was the most lucrative business at the African West Coast during the 1830s and seemed to have an even more promising future (Northrup 354). By the 1850s a small town in Nigeria, Oguta, became a famous palm oil station due to the growth of trade in parts of the Owerri-Okigwe divisions (Ekechi 35-36). The growth of trade was made possible through the improvement of transportation systems by the colonial officials. What occurred as a benefit for the inhabitants in the first place, turned out to demand a lot more sacrifices than the people had expected. Parts of the land of indigenous people like the “Igbo” had to be destroyed and the “Igbo” were relocated in order to create new palm fields (35). Not only the landscapes were highly engrossed, but also the hard work of the slaves was demanded (36). At the end of the century, Oguta’s palm oil trade had been dominated by “The Royal Niger Company”, a European firm, which exploited the regions’ resources (36-37). According to “The Economist”, “the oil palm is native to west Africa, but most of today’s production is small-scale; exports barely exist.” Most of the production of today’s palm oil is located in Asia, but as their resources and governmental restrictions are getting harder to circumvent, companies have been coming back trying to negotiate with West Africa in order to lease new landscapes for palm-oil production (

2.2. Asia

In the early 19th Century European traders introduced oil palms to Southeast Asia due to the humid and therefore more sufficient climate in order to grow oil palms ( The arrival of the Dutch colonial government in Indonesia implemented “development, educational, and health programs,” but this also led to a strong surveillance over the inhabitants of Indonesia (Obidzinski 8). In 1870, the Dutch oil palm investors received “lands at nominal rent, sparking start of plantation boom.” ( During the 1910s, first palm oil plantations were set up in Indonesia and Malaysia in order to replace the “unsuccessful” coffee production that occurred until then ( The expanding oil production and therefore the growing usage of the Indonesian landscape had an impact on the livelihood of local farmers. “They have to walk farther to collect forest products or to open new fields for shifting cultivation. (…) Because of diminishing forest products and services, they had to shift to on-farm activities, such as food crop cultivation (for those who still owned land) or off-farm work (e.g. construction).” (Obidzinski 10). The ongoing deforestation not only led to flash floods and as a consequence to a worsening of the water quality and quantity, but also caused several “skin diseases” and “crop pests” (10). Even until now, not as much has changed within the palm oil production and its consequences. In 2009 until 2010, “neighbo(u)ring communities and former landowners also expressed concern about air pollution from dust and smoke coming from the plantation and mill site. They mentioned soil erosion as a major problem, (…) because of higher rainfall.” (10). As Indonesia and Malaysia produce more than 85% of the world’s palm oil, there is still a path of trial and tribulation to achieve better regulations (

3. Process

The production of palm oil demands a complex procedure, that involves “the reception of fresh fruit bunches from the plantations, sterilizing and threshing of the bunches to free the palm fruit, mashing the fruit and pressing out the crude palm oil. The crude oil is further treated to purify and dry it for storage and export.” (Poku). The methods are almost the same in Africa as well as in Asia. The general palm oil processing unit operations can be best shown in this flow diagram by Abbildung in dieser Leseprobe nicht enthalten(Fig.1: Poku)

Within this process, palm oil gets distinguished into palm and palm kernel oil. Palm oil is made by “simply steaming and pressing the fleshy part of the fruit”, while “palm kernel oil is extracted from the fruit’s seed” ( In addition to that, “palm oil is often used for edible purposes while palm kernel oil is mainly used for non-edible purposes such as making soaps, cosmetics and detergents.” (

4. Business

The business of palm oil production has been expanding for several years and there is no end in sight. Palm oil production demands a specific environment in which palm trees can grow and flourish. Having a humid climate, countries like Indonesia and Malaysia belong to the “Top Production Regions” (Ceres 3).

Abbildung in dieser Leseprobe nicht enthalten

(Fig. 2: Ceres)

As one can identify, Indonesia and Malaysia produce circa 90 percent of the global production. The global production value amounts to 37.3 Billion USD (Ceres 3). This enormous profitability shows why industries struggle with quitting palm oil usage. Numerous companies in cosmetics and food production rely on that sector.

4.1. Supply (Value) Chain

The value chain of palm oil production begins with the palm oil harvest on plantations and ends with margarine we find in our supermarkets. This is a simplified presentation by “engagethechain” of how a value chain of palm oil looks like:

Abbildung in dieser Leseprobe nicht enthalten

(Fig. 3: Ceres)

Companies like “Cargill” function as traders in this chain. The company buys palm oil from local companies which manage the plantations, having smallholders and workers under their control. “Cargill” sells its palm oil to manufacturers like “Mondelez” or comparable brands, which manufacture their products and sell them in, i.e. local supermarkets. The environmental and social impacts this chain has, cannot be summarized in a diagram.

4.2. Companies

From the “Royal Niger Company” that existed from 1879 until 1900 to “Cargill”, one of the largest companies selling palm oil, not much has changed. Its market share of palm oil trade is estimated to include 25 percent of the produced palm oil worldwide. “Cargill” sells palm oil, which source can be traced back to Sumatra, where the last orangutans live (Motlagh). Therefore, the multinational concern participates in one of the largest deforestation cases of one of the most important rainforests on the planet. Alongside the endangerment of the orangutans, other species like seldom tigers, elephants and rhinos are exposed to wildfires which threaten their lives (Motlagh). Various petitions tried to stop this dilemma, but frequently failed because of the lack of evidence due to the adherence to the required regulations. What most of the end consumers do not know is, that “Cargill” also imports palm oil to Germany, where it gets processed into margarine or candles, which we can purchase in our local supermarkets (Motlagh). Another company, called Wilmar International, the “world’s biggest palm oil trader”, is confronted by “Amnesty International” accusing them of human rights violation ( “Amnesty International investigated the Indonesian palm oil plantations that supply (…), Wilmar, and found forced labour, low pay, exposure to toxic chemicals and discrimination against women - employed as casual workers, without pensions and medical insurance.”. Wilmar responded by letting its workers “sign a document which stated that the abuses outlines in Amnesty International’s report were not taking place on their plantations.” ( As the workers live in constant fear of losing their jobs or being relocated, separated from their families, most of them seemingly consented to sign. Neither of these companies seem to be fully committed to an industrial change, that has been needed since a long time.

4.3. Smallholders

Smallholders on palm oil plantations can be distinguished in five different models (Glenday i). First there are the “small-scale independent farmers linked to supply chain via local agents”, they are theoretically independent and can choose whoever they want to sell their palm oil. In reality, they are often dependent on their local agent, who buys the palm oil at first and then sells it at much higher prizes to local traders. Frankly, the profitability for the local agent is much higher than for the farmers. The “larger-scale independent farmers linked to supply chain via local traders or mills” sell palm oil from their plantations which vary a seize from ten hectares and often up to hundreds of hectares. These smallholders sell their oil “directly to a local trader (collection point) or mill” (Glenday 7), which makes them relatively independent. Since those farmers are not under the management of a certain company, they are not bound to observe the given fair-trade standards and due to that “they are a growing driver of deforestation and use of fire to prepare land.” (Glenday 7). “Farmer groups or farmer-managed cooperatives that trade directly with mills” are a group of smallholders who trade together with “mid-stream mills” (Glenday 7). They work “cooperatively” in order to observe certification requirements (Glenday 7). “Smallholder farmer managed plots linked with company plasma schemes” are farmers, who claim loans from companies in order to develop oil palm plots. In return, the farmers are obligated to sell their palm oil to the company (Glenday 7). The last model is called, “company-managed, smallholder-owned plantations (leased community-lands)” and it includes, that “the company effectively leases the land from the farmers and manages the plantation on their behalf, treating the landowner as shareholders and providing a dividend for their stake in the plantation.” (Glenday 8).

Despite the fact, that dependant smallholders could be exposed to exploiting companies as well, independent smallholders have had another problem: “(…) they do not receive training, supervision or support from companies, and only receive limited support from the government. They get limited information about good agricultural practices. This has led to lower productivity and a lower concern for sustainability. For example, small farmers often purchase cheap, low-yield seedlings and burn land to make way for crops.” (Suhada). This problematic takes the need of sustainability to a new level.

4.3.1. Insetting

Smallholders are often not the ones who profit, as well as they heavily struggle keeping up with the national standards of their palm oil production. To help these smallholders, “a number of forward-thinking companies” came up with a new idea, which is called “Insetting” (Noor 8). “Insetting originated as an alternative to climate change offsetting and describes the process of sourcing opportunities for mitigation activities outside the immediate confines of the company’s boundary, by identifying and supporting actions that are of relevance (and benefit) to the company’s upstream stakeholders (…).” (Tipper/Noor 8). It means that sustainable activities are being added “directly into a business’s supply chain and (this) leads to the build-up of human capital in the communities involved.” (Finlayson). “Currently the majority of insetting initiatives are aimed at delivering environmental benefits, such as carbon sequestration, protecting and restored natural ecosystems, and improving water quality (…).” (Smelday/Noor 8). According to “”, the “working example of insetting” is the “African-orphan-crops consortium” funded by Mars Inc. Bruno Roche (Finlayson).

4.4. Certifications

The most known certifications regarding sustainable palm oil production are assigned by the “Roundtable on Sustainable Palm Oil (RSPO)”. RSPO was founded in 2004, established by the WWF, the initiative sets global standards for the palm oil industry. According to its website, “Palm oil producers are certified through strict verification of the production process to the stringent RSPO Principles &Criteria for Sustainable Palm Oil Productionby accredited Certifying Bodies and can be withdrawn at any time in case of infringement of the rules and standards.” Its criteria are dependent on the country, furthermore the culture, as well as the environment and include, i.e. minimum wages ( Then there are local certification systems like the “Indonesian SustainablePalm Oil(ISPO)” and the “Malaysian Sustainable Palm Oil (MSPO)” systems, which are bound to their respective government.


Excerpt out of 25 pages


Is it possible to produce sustainable palm oil?
Ruhr-University of Bochum  (Englisches Seminar)
Catalog Number
ISBN (eBook)
ISBN (Book)
Business English, Sustainability, Palm Oil
Quote paper
Julia Franziska (Author), 2019, Is it possible to produce sustainable palm oil?, Munich, GRIN Verlag,


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