Make value chains more sustainable – but how? The case of palm oil

The production of important agricultural commodities often clashes with concerns for sustainable development. One critical case is that of palm oil. “Can, should, or must we do without palm oil?” Opinions diverge on the question – even in ecological circles. Read on for answers to ten frequently asked questions as well as some possible ways of approaching oilseed commodities from the tropics.

Fruits of the oil palm. Photo:

Albrecht Ehrensperger, Gaby Allheilig

Why is palm oil so important?

Palm oil is the most widely used vegetable oil in the world. Its global market share is 40 percent. The reasons for its boom in recent years involve its valuable properties for numerous products, including heat resistance, neutral taste, and a long shelf life. At least equally important, however, is the fact that oil palms produce very high yields per hectare. Depending on the cultivation system, they yield 1 to 4 tonnes of oil per hectare, whereas peanuts, rapeseed, sunflowers, and soybeans produce only 0.5 to 1.5 tonnes per hectare.

What are the most serious ecological impacts of palm oil production?

Oil palms only grow in the low-lying, humid tropics and subtropics – regions with very precious, sensitive ecosystems. Especially in the main growing regions of Indonesia and Malaysia, which supply about 85 percent of the global market, palm oil production is one of the greatest direct and indirect drivers of rainforest clearing and the draining or burning of peat bogs. This leads to enormous greenhouse gas emissions; the effluent of palm oil mills also causes high methane emissions. As a result, Indonesia is one of the world’s biggest emitters of greenhouse gases. Further, because the sector relies on large volumes and industrial cultivation, oil palm plantations destroy the habitats of numerous animal and plant species: 37 percent of the total species loss caused by oil plants worldwide is attributable to palm oil. Finally, soil erosion, heavy use of pesticides, air pollution, and water pollution are all problems associated with industrial cultivation in monocultures – of oil palms and other crops.

Can palm oil be replaced with more sustainable vegetable oils?

In view of the massive added land use that would be required to produce the same volume of oil from other crops, and considering the specific characteristics of palm oil, there is presently no other oilseed that can fully replace palm oil. A major reduction in consumption of plant-based oils for food, cosmetics, and biofuels would be needed. Besides, shifting to other oil crops could give rise to similar problems. More important than giving up one oilseed or the other, therefore, is making production of these commodities much more sustainable. After all, “free of” does not mean that a particular good is sustainably produced.

Why do producer countries stick to palm oil despite these problems?

For the main producer countries of Indonesia and Malaysia, palm oil is an important economic factor. There is also potential for the sector to play an interesting role for small farmers and rural development if it creates dignified jobs and gives rise to new infrastructure – in the areas of education and healthcare, for example. However, particularly in Southeast Asia’s major cultivation areas, the palm oil sector continues to threaten the livelihoods of indigenous populations. In addition, as is often the case in tropical plantation agriculture, there are human rights violations, child labour, and – especially for women – very poor working conditions.

Ultimately, the political will in producer countries is decisive, as well the will of decision-makers along the whole value chain, when it comes to determining whether the production of palm oil – and other agricultural commodities – is sustainable or not. There are large differences between countries and sometimes even within the same country.

Do smallholders produce “cleaner” palm oil than plantations?

Smallholders usually don’t use their land solely to grow oil palms. As a result, their farms typically display more niches for different species. However, there’s a risk that they will apply agrochemicals improperly due to lack of training. For both social and ecological reasons, the goal of any sustainability strategy should be to promote the share of smallholder farms, as well as to include, train, and provide them with greater support – technically and legally. The latter can help, for instance, to strengthen their position in terms of land and labour rights.

Is certified palm oil an alternative?

A study by the Research Institute of Organic Agriculture (FiBL) has shown that organic and fairtrade certification combined with the certification of the Round Table on Sustainable Palm Oil (RSPO) results in substantially improved sustainability. The sustainably managed oil palm plantations analysed performed better than other production systems. However, the study looked at Ghana, Madagascar, Côte d'Ivoire, Brazil, and Columbia, rather than Indonesia and Malaysia. According to the FiBL report, deforestation directly related to oil palm cultivation appeared critical only in Brazil. However, the FiBL authors also conclude that even among certified businesses there is considerable room for improvement regarding greenhouse gas emissions, biodiversity, and soil erosion.

What are the most important starting points to make existing palm oil plantations more sustainable?

One of the most important levers is the mandated conversion of plantations to eco-friedly production. This means banning use of mineral fertilizers and herbicides, halting soil erosion with appropriate measures, and promoting greater diversity in cropping areas. Additionally, gains can be made by improving the technology of oil mills to reduce wastewater – and by feeding by-products back into the cycle, whether for compost or biogas production. All of this requires technical guidance and investment.

Since the share of ecologically produced (organic) palm oil remains marginal in Southeast Asia in particular, additional measures are needed along the value chain that incorporate both ecological and social criteria, as described above. Advancing such processes effectively will require support of new market channels and elimination of price distortions, for example by reducing trade barriers to sustainable palm oil. At present, Switzerland applies equally high tariffs to certified and conventional palm oil. On behalf of sustainability, it is useful to differentiate import tariffs – thereby favouring sustainably produced palm oil over conventional – while supporting the conversion process at the same time.

How can species loss and greenhouse gas emissions be reduced?

Certified plantations are important. But problems of this magnitude demand additional, more comprehensive measures, as they are the result of land use changes across entire regions. One innovative model that approaches things at this level is that of so-called Verified Sourcing Areas. Within a given region, it promotes direct cooperation between buyers of agricultural commodities and coalitions of local actors. They all voluntarily commit, among other things, to protect forests and peatlands and to combat poverty in production areas. Additional measures at the legislative level also offer ways of achieving improvements – provided the regulations are actually implemented and compliance is monitored.

What can importing countries like Switzerland do?

In general, the goal must be to build up value chains and markets for certified agricultural commodities that fulfil what the label promises. This requires trade agreements that include sensible, verifiable sustainability criteria. For countries that lack corresponding agreements, industry-level solutions should be sought. Besides market incentives, there is a need for adjustments to value chains, import channels, and certification systems. All these measures should be combined with corresponding investments, support programmes, and development cooperation. Last but not least, importing countries must make their own policies coherent across all sectors.

What can science contribute to sustainable palm oil production?

This ranges from the development of suitable processes and monitoring systems to the optimization of new cultivation systems like palm oil agroforestry and technological innovations that enable medium-term reduction of palm oil production. One crucial issue, however, is that the palm oil industry might massively expand across Africa and Latin America, endangering up to 270 million hectares of biodiversity hotspots and numerous species found there. It is essential to better anticipate such developments and to make data and tools available that can steer expansion plans in a sustainable direction from the start.

Swiss referendum on trade agreement with Indonesia

In anticipation of the Swiss referendum on 7 March 2021, CDE is periodically publishing facts and scientific insights on palm oil. We seek to shed light on the issues from different angles: