Stakeholders from across the palm oil sector recently convened at Solidaridad Network’s first UK event, exploring this topic.
“There are three to seven million small-scale farmers producing palm oil today, who are responsible for producing 25 to 30 per cent of the world’s total palm oil supply,” reported Heske Verburg, managing director of Solidaridad Europe. “The question is, how can we establish a system that includes and supports small-scale farmers to produce palm oil in a more sustainable way?”
The event was an opportunity for Solidaridad to share key findings from its Palm Oil Barometer 2024, which will be published in early 2025, with regards to sustainability, prosperity, and the growing burden carried by smallholders.
The triple threat faced by small-scale farmers
Solidaridad used the analogy of a house of cards to convey the fragile situation of many smallholder farmers, who are beholden to myriad external conditions beyond their control, with fair pricing as a foundational card.
Regarding supply chain resilience, “three key global developments make the topic of smallholder inclusivity particularly relevant,” noted Verburg: “Increasing vulnerability with respect to climate-change-related extreme weather events; increasing price volatility; and tightening sustainability requirements.”
Farmers are “at the forefront of climate change, as they are impacted directly by wildfires, drought, and topsoil erosion”, agreed Maggie Charnley, head of the UK government’s International Forests Unit (IFU). “We therefore have a responsibility to support adaptation in the countries from which we are procuring our raw materials.”
Verburg shared data highlighting enormous fluctuations in palm oil prices over the past two decades, with the market proving no less jittery in recent years – skyrocketing from US$535 in December 2018 to $1,780 in March 2022, then dipping back down to $804 in October 2023.
Conflating the precarious situation are the incoming EUDR and CSDDD regulations, meaning companies operating in Europe will need to eliminate deforestation from their supply chains, and address human rights issues faced by their suppliers – two very different goals to be pursued in tandem, with both likely to place additional burden on small-scale farmers.
“When we’re demanding more from supply chains, the challenge is: How do we ensure the money goes to the producers, and how do we ensure they don’t absorb the risks? These are complicated problems,” noted Charnley.
Driving equitable supply chains
Featuring views from retailers, producers and manufacturers, the event’s panel discussion – moderated by Emily Fripp of sustainable sourcing consultancy Efeca – highlighted the vital role corporates can play in driving sustainable and equitable supply chains.
Lana Fadel, EU sustainability manager at SD Guthrie – one of the world’s largest producers of certified sustainable palm oil – highlighted how being vertically integrated, gave SD Guthrie “visibility and control” across its entire supply chain, “ensuring ethical sourcing and the inclusion of all smallholders”.
She advised that engagement with smallholders was tailored to the unique contexts in producer countries Malaysia, Indonesia, Papua New Guinea, and Thailand. “Although no one size fits all, it all comes down to one thing: security of supply,” Fadel emphasised. “By aligning with local requirements and building strong, trusted relationships with smallholders, we ensure both the sustainability and resilience of our supply chain.”
Fiona Wheatley, central responsible sourcing manager at Bakkavor, a supplier in fresh prepared food, said having access to relevant information in order to “respond appropriately” was clearly important for supply-chain-wide visibility and control. Moreover, “understanding the importance of a multi-stakeholder approach” was key for Bakkavor, which launched its [environmental, social, and governance] ESG Trusted Partner strategy a few years ago, and whose UK operation procures 99.9% of its palm oil from RSPO-certified and segregated sources.
Adjusting procurement practices is vital for progress
Mirjam Hazenbosch and Imogen Fanning of the Zoological Society of London (ZSL) helped to both open and close the event with insights from their work on the SPOTT ranking, which over the past decade has evaluated progress in the palm oil industry’s ESG public disclosures. While it was “encouraging that more than half of assessed companies provide evidence of monitoring deforestation in their operations”, remarked Fanning, less than one-quarter extend this monitoring to their suppliers, “highlighting the urgent need for a comprehensive approach that holds all parts of the supply chain accountable and ensures commitments translate into action on the ground”.
Yet without adjusting the procurement practices of companies, “it will be impossible to tackle the persistent sustainability issues in global commodity sectors,” stressed Solidaridad’s palm oil expert, Marieke Leegwater, who outlined the four principles of procurement for prosperity: policy, pricing, partnerships, programmes. These, she said, “indicate how companies can design procurement practices that create more smallholder-inclusive value chains, taking into account the four aspects of farmer inclusivity: ownership, voice, risk and reward.”
Through such adjustments, companies can support the sector to make the urgent shift from “sustainable sourcing” to “inclusive procurement”, Leegwater said, to equip smallholders with the resources they need to transform their activities, and ensure a more ethical and resilient palm oil sector.