Our ambition is to operationalise sustainable and deforestation-free palm oil. To achieve this, we’re stepping up our engagement with suppliers and smallholders while increasing the traceability and transparency of our supply chain.
The importance of palm oil
Palm oil is a highly versatile crop. It has many uses – like foaming, binding and stabilising – which is why it’s a key ingredient in so many products from food and beauty to household cleaning. It’s the most land-efficient oil crop, with a much greater yield per hectare than other oils like sunflower, rapeseed or soy. For these reasons, palm oil is now the most commonly produced vegetable oil in the world.
The palm oil industry brings money, trade and jobs to producing economies and employs millions of smallholder farmers. In Indonesia and Malaysia, 4.5 million people rely on the palm oil industry for their livelihood.
Farmers today produce over 70 million tonnes of palm oil each year – that’s more than double what they were producing just 20 years ago. But the rapid expansion of the industry has meant that, in some areas, rainforests are being cut down to make way for new planting – driving climate change and biodiversity loss. And the expansion of palm oil plantations can lead to a range of human rights issues including land conflicts between plantation companies and local and indigenous communities.
These are all major challenges that must be urgently addressed – by us and by everyone involved. To be truly sustainable, the industry needs to change. As a major palm oil buyer, we have an important leadership role to play in transforming the industry for the better.
Our approach to sustainable and deforestation-free palm oil
For more than a decade, Unilever has been at the forefront of driving industry-wide change to ensure a sustainable future for palm oil.
By the end of 2023, we sustainably sourced 86% of our core palm oil[a] volumes (with 100% for palm oil and 74% for palm kernel oil, and their derivatives), with 72% coming from certified sources: RSPO Mass Balance, RSPO Segregated or an equivalent standard that is independently verified by a third party. We buy the remaining 14% from RSPO independent smallholder credits, in which we continue to be one of the largest buyers of these credits.
Our sustainable sourcing figures for palm oil reflect the challenges we face particularly when it comes to sourcing certified sustainable palm kernel oil – as well as the progress we’ve made advancing our strategy to engage independent mills. To drive real change in the industry, we decided to go beyond relying on the existing limited certified supply base (where in some cases, we aren’t always able to gain full traceability), moving to purchase volumes where we can assure volumes are deforestation-free. We’re focused on engaging this section of the industry that has been mostly left out of the sustainable supply chain – independent mills and their smallholder supply base. More information about how we are working with smallholder suppliers can be found here.
Our cross-commodity policy, which covers all our conversion-risk crops (palm oil, soy, paper and board, tea and cocoa), enhances our supplier requirements around no deforestation, human rights, transparency and traceability, and updates and builds on our previous commitments.
Our suppliers play a crucial role in helping us meet our goals. We engage with them proactively to clearly communicate our expectations. Our interaction is underpinned by our cross-commodity People and Nature Policy (PDF 2.04 MB), which we launched in 2020, replacing our Sustainable Palm Oil Sourcing Policy.
It has four key principles that we require all our palm oil suppliers to adhere to throughout their operations and supply chains:
Protecting natural ecosystems from deforestation and conversion
The principles of our policy are embedded in the contracts we have with our suppliers. As we move to a deforestation-free supply chain, we are focusing our sourcing and being more selective about who we work with and the areas we source from.
Working towards a deforestation free palm oil supply chain
Our efforts on sourcing sustainable palm oil is a key part of our approach but we need to go further. We are therefore increasing the traceability and transparency of our supply chain - including that crucial first mile from where palm oil is sourced to where it is first processed - using emerging digital technology solutions. Find out more about how we’re working to achieve a deforestation-free supply chain for palm oil.
By the end of 2023, 97.1% of our in-scope palm volumes[b] were deforestation-free, based on our deforestation-free requirements.
We want to know the exact plantations where our palm oil is grown. This allows us to identify and address both deforestation and environmental risks, as well as human rights risks – while building trust with our suppliers.
We have a four-step approach to drive traceability in our palm oil supply chain:
Tracing back to palm oil mills and plantations: We have traceability to mill of 99% and traceability to plantation of 98.7% for in-scope volumes – and have visibility of over 20 million hectares of oil palm plantations and farms around the world. We also publish our list of suppliers publicly (PDF 116.26 KB).
Identifying key risks: We work with expert partners to monitor environmental and social risks in specific mills, plantations and surrounding areas, and take steps to help suppliers comply with our palm oil policy.
Targeting investments: By directly investing with our suppliers through landscape programmes in areas where our palm oil is grown, we’re driving long-term, sustainable change.
Working with smallholders: We support inclusive business models for smallholders, including trainings and certification, enabling them to participate in sustainable supply chains alongside larger producers.
Mapping and tracking is an effective way to improve our understanding of our palm oil supply chain. And we believe we’ll make greater progress towards industry-wide transformation by sharing the information we have.
Technology has huge potential to disrupt and transform the palm oil supply chain and improve traceability and transparency. We are actively using satellite data, geolocation, blockchain and AI, and working with major tech firms and innovative start-ups to build new approaches to monitoring and traceability.
Getting full visibility of the supply chain through to the smallest supplier will radically improve our knowledge of what is happening on the ground, especially in the critical ‘first mile’ from where raw materials are grown to where they are first processed. This is where the greatest deforestation risk lies.
Through technology, we can monitor land use, manage risk and direct investment into sustainable activities. We’re already using satellite and radar technology to give us early warning of deforestation.
Tackling the complex social and environmental issues in the palm oil supply chain requires more than policy commitments – it requires the transformation of an industry. To do this, we need to go beyond our own supply chain. Through partnerships, advocacy and committed work on the ground, we're helping to lead real progress towards our vision of a supply chain in which sustainable palm oil is commonplace.
We were a founding member of the Roundtable on Sustainable Palm Oil (RSPO) in 2004, a globally recognised certification standard to drive sustainable production in palm. The RSPO is made up of representatives from growers and buyers, commodity traders, non-profit environmental and social groups, and other influential organisations. We also work with the Tropical Forest Alliance (TFA), a global public–private partnership in which partners take voluntary actions to reduce the tropical deforestation associated with sourcing palm oil, soy, beef, and paper and pulp.
We have been partnering with local governments, civil society organisations, communities, smallholder farmers, palm oil producers and buyers, and on-the-ground facilitators, to support the design and implementation of strategic programmes we believe can positively transform different palm oil production landscapes.
Where there is the potential for collaboration and impact, we make long term commitments as we understand that it will take time and continuous work from everyone involved to generate the desired impact and firmly embed sustainability into the architecture of each landscape. This approach offers the potential to drive significant changes in palm oil production, as we work together to accelerate and scale initiatives. Partnerships like these can overcome challenges that no one entity could solve alone.
“We’re pleased to be supporting these collaborative approaches to sustainable development and even more proud to inspire others to join us. In sharing this report, we hope to offer fresh insights into our partnership work on the ground as we detail some of the learnings and early successes we’ve achieved through each of the landscape programmes we support.”
Wlliem Uijen, Chief Procurement Officer, Unilever
Working with smallholder farmers
Around 40% of the world’s palm oil is produced by smallholder farmers, which means they are a key part of the puzzle to ensure the long-term future of the palm oil sector. A key part of our supplier sustainability programme involves engaging with smallholders on the ground.
We are supporting projects with our implementation partners to help increase profitability and incomes for farmers, professionalising smallholder farming businesses and promoting RSPO certification.
Another way we are supporting smallholders is through the purchase of credits. We believe that, by purchasing RSPO Independent Smallholder credits, we can directly incentivise independent smallholders and support their livelihoods by creating a market for smallholder-grown oil palm. Unilever has been one of the largest buyers of independent smallholder RSPO credits since 2017. In 2023, Unilever purchased over 126,000 tonnes of these credits from 52 smallholder groups representing more than 22,000 independent smallholders and covering an area of around 70,000 hectares across Indonesia, Thailand and Malaysia.
We’re also investing in programmes that help independent mills improve their practices, achieve certification and increase our sourcing from them. These mills are key to transforming the supply chain and creating a positive impact in the fast-moving consumer goods industry, particularly for smallholder farmers, who form a critical part of the supply base for these mills. By doing so we help to ensure a strong and sustainable connection between the smallholders, the mills they supply and our own supply chain.
At the beginning of 2024 we began a broader three-year human rights programme to accelerate and upscale our work to achieve positive impacts on people.
We know serious issues, including human rights issues, exist within the palm oil industry. So, as well as working alongside our suppliers to help them improve their standards, we need to respond whenever concerns about a particular supplier are brought to our attention – and to make sure our response is transparent and appropriate.
We want to be the first to know and act when issues are identified within our supply chain. To assist with this, we launched a public palm oil grievance procedure encouraging people to notify us when issues arise.
We suspend suppliers linked to deforestation. We’re open to allowing suppliers to work with us again if they are able to show they have improved their practices in line with best industry standards. This includes providing a recovery plan for any recent deforestation or new development on peat that occurred in their supply chain.
Our People and Nature Grievance Mechanism (PDF 178.27 KB)provides a framework for handling, investigating and resolving both social and environmental issues within our supply chain in a timely, transparent and effective manner.
The process includes three important steps:
An acknowledgement of the grievance and a preliminary review to determine whether the grievance is applicable to our supply chain.
An in-depth review of the grievance, working with the supplier and an independent organisation to develop a time-bound action and remediation plan.
Actions implemented by the supplier to resolve the issue, with the outcomes monitored.
We’ll often involve an independent organisation to collate further information and outline the requirements that the supplier must adhere to. We’ve found that it’s better to work with suppliers to help improve practices and resolve issues. However, we’ll take appropriate action consistent with our policy against suppliers who are unwilling or unable to comply.
In line with our Grievance Procedure and our commitment to a sustainable palm oil industry, if you have a palm oil grievance, you can email us at palmoil.grievances@unilever.com.
We believe that being open and transparent about the partners we do not want to work with is key to achieving our commitment to a deforestation-free supply chain by 2023.
In 2020 we took another step towards transparency by introducing a list of Suspended or No-Buy List of Palm Oil Companies (PDF 453.55 KB). This document publicly communicates previous direct palm oil suppliers or indirect oil palm growers that have been suspended from Unilever’s supply chain due to grievances brought to our attention alleging non-compliance against the People and Nature Policyand/or Unilever’s Responsible Partner Policy (PDF 4.45 MB) or due to the fact that it could not be confirmed that these companies were in compliance with our policy at a group level.
We report on core palm oil volumes that include all volumes of palm oil and palm kernel oil, but excludes palm fatty acid distillates (PFAD), which are a by-product of the refining process, and tail ingredients used in our products.
