PepsiCo adopts stricter, greener rules for palm oil in products

KUALA LUMPUR - US food and drink giant PepsiCo Inc said on Tuesday it would introduce stricter rules for the palm oil used in its goods - including a retrospective ban on working with firms linked to deforestation - and enforce them for its business partners.

In a first for the consumer goods industry, the tighter policies would apply to companies in joint ventures with PepsiCo like Indonesian food maker Indofood, forest experts said.

Palm oil is the world's most widely used edible oil, found in everything from margarine to breakfast cereals and soap.

But its production has faced scrutiny in recent years from green activists and consumers who have blamed it for forest loss, fires and worker exploitation.

Under PepsiCo's new policy, the major international buyer of palm oil has strengthened its commitments to protect, restore and monitor forests and peatlands.

It has pledged not to purchase palm oil from any direct or indirect supplier involved in deforestation over the last four years.

The multinational will also launch initiatives to stop human rights abuses among plantation workers on the ground.

A 2019 investigation by green group Rainforest Action Network (RAN) revealed palm oil from an illegal plantation in an Indonesian rainforest home to endangered orangutans had found its way into the supply chains of major brands including PepsiCo.

Besides nurturing biodiversity, forests are regarded as key to efforts to curb climate change as they store planet-warming carbon.

RAN, which has highlighted issues with palm oil sourcing by major snack food companies since 2013, was involved in shaping PepsiCo's new policy.

While other consumer goods firms have applied similar pledges to their palm oil suppliers, PepsiCo is the first major brand to extend the policy to its business partners and all other firms in its partners' groups, said Robin Averbeck, RAN's agribusiness campaign director.

This means any company that makes PepsiCo products using palm oil, as well as plantation firms in the same group -anywhere in the world - must also comply, she said.

PepsiCo's new policy positions it as a "front-runner in the industry", said Averbeck.

PepsiCo said in an emailed statement its goal was to ensure that "all our palm oil is free from deforestation, new development on peatlands, and exploitation of people".

"These updates to our policy and approach reflect our ongoing determination to have a positive impact through additional actions that contribute to a sustainable palm oil system by working with peers, suppliers, civil society and others," it added.

Indofood did not respond to requests for comment.

After becoming a target of high-profile campaigns against tropical forest loss, global household brands that buy and use palm oil agreed in 2010 to ensure their supplies did not contribute to deforestation within a decade.

But backers of the non-binding commitment, which include PepsiCo, have struggled to meet it, as it left implementation to individual companies and lacked a clear reporting process, said a consumer goods body grouping those firms.

Brands and major buyers have also been criticized by industry officials and environmental activists for not buying larger amounts of palm oil certified as green and ethical.

PepsiCo's stipulation that its palm oil suppliers and business partners should have no link to deforestation since the end of 2015 could be retrospectively checked through satellite monitoring, Averbeck said.

She urged PepsiCo to disclose publicly all grievances linked to its agricultural supply chain, adding that the roll-out of the new rules should be verified independently.

"If they are implemented and it brings other actors along with them, it could have an enormous impact on the industry," she told the Thomson Reuters Foundation. 

(Reporting by Michael Taylor @MickSTaylor; Editing by Megan Rowling. Thomson Reuters Foundation)

Burning issue: Indonesia fires put palm oil under scrutiny

SINGAPORE -- A brutal Indonesian forest fire season that left Southeast Asia choking in smog has renewed scrutiny of major palm oil and paper companies, with activists accusing them of breaking promises to halt logging.

The monster blazes sent a pall of acrid smoke over the region for weeks, closing schools and airports and causing a spike in respiratory ailments.

Mostly lit to clear land for agriculture, they were the worst seen in the country since 2015.

Leading companies have in recent years pledged not to log any more pristine rainforest, not to use burning to clear land and to cut ties with smaller suppliers who don't abide by their rules -- but critics say such vows now ring hollow.

"They do not live up to the commitments, and are not addressing the fact that we are now in a climate crisis," Annisa Rahmawati, a senior forest campaigner at Greenpeace, told AFP.

"They are still doing business as usual."

Industry players, however, insist they have gone to great lengths to stop burning and trees being cut down in their operations.

Singapore-listed Wilmar International, the world's biggest palm oil trader, committed in 2013 to a no-deforestation policy and says it has stopped sourcing from 17 suppliers that did not comply with their rules.

Production of Palm oil -- used in numerous everyday goods from shampoo to biscuits -- has been blamed by environmentalists for driving massive deforestation.

Consumer goods companies are paying more attention to where they source palm oil and other materials. 

Some of the world's largest brands -- including Nestle and Unilever -- pledged in 2010 to reach net zero deforestation within a decade through "responsible sourcing" of cattle, palm oil, soya and other commodities.

But after that pledge was signed, the pace of tree-felling linked to commodities increased dramatically and at least 50 million hectares of forest worldwide has been destroyed Greenpeace said -- an area about the size of Spain.

Firestarters

Fires are used as a cheap way to clear agricultural land in Indonesia every year during the dry season.

Experts say it is hard to know who is responsible for the blazes in the hardest-hit areas -- Indonesia's Sumatra island and the Indonesian part of Borneo -- which are home to myriad companies of varying sizes and numerous small-scale farmers.

Big firms insist they have "no-burn" policies in place and often blame smallholders for starting fires they say then spread to their plantations.

Indonesia has made some arrests over the blazes but in many cases it remains unclear who started the fires -- and who ordered them.

While larger companies have vowed not to source from smaller ones that break strict environmental rules, critics say they are not monitoring their supply chains carefully.

"The biggest challenge is the industry-wide lack of traceability of the origins of palm fruit," said Nur Maliki Arifiandi, from WWF Indonesia.

"This has allowed continuing deforestation, often caused by real smallholders as well as land speculators and rich, powerful people to open more natural forest areas and plant illegal oil palm plantations." 

Some industry watchers say commitments by big firms have helped and official figures show the rate of forest loss in Indonesia declined in recent years. 

Burning issue 

But critics say problems persist -- this week Greenpeace said in a new report that palm oil and pulpwood companies with links to land burned between 2015 and 2018 rarely faced serious government sanctions.

And last year the NGO accused palm-oil giant Wilmar, as well as other consumer brands including Colgate-Palmolive, Hershey, Nestle, and Unilever, of continuing to buy from groups that were destroying the rainforest.

At the end of 2018 Wilmar, Unilever and Mondelez committed to a mapping and monitoring platform for the palm oil sector, which Greenpeace supported at the time as a potential breakthrough in cleaning up supply chains. 

But the NGO pulled out of the project last month, saying the companies were not serious about the project.

Wilmar insists it sticks to its commitments and says it continues to work towards a supply chain free from deforestation from 2020. 

Activists, however, doubt such goals are within reach.

"We are asking companies to be more serious in implementing their targets on the ground," WWF Indonesia's Arifiandi said.

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Indonesia president vows to fight EU palm oil rules

Indonesia's president promised Friday to fight the European Union over plans to restrict the use of palm oil in biofuels.

Brussels wants to limit the materials that can be used in fuel that is counted towards its renewable energy targets.

It has set a 2030 limit for phasing out palm oil, which environmentalists say drives deforestation and climate change. 

But the plans have angered big palm oil producing nations like Indonesia and Malaysia, whose economies are dependent on the commodity.

In an interview with Bloomberg News published Friday, Indonesian President Joko Widodo said he was determined to get the EU to change its rules.

"For me, if there is discrimination like that, I will fight because of the 16 million farmers and workers in this business," he said. "Palm oil is a strategic commodity for Indonesia." 

Palm oil and its associated industries contribute roughly four percent to Indonesia's GDP and provide a livelihood for six percent of the population.

Jakarta last year earned $17.8 billion from exports of the oil, which is used in a wide range of products from food to cosmetics.

Palm oil company shares have dropped nine percent this year because of worries over the restrictions.

Both Indonesia and Malaysia — which together produce about 85 percent of the world's palm oil — have previously warned they will retaliate.

The president — known locally as Jokowi — insisted that after his landslide election win in April he had the mandate to take bold actions to bolster Indonesia's economy.

He said steps would include lowering corporate taxes, easing labor laws, and lifting restrictions on foreign ownership.

"I know better the problems," he said. "Because this is my last term, so I have no burden. I have nothing to lose."

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Nutella maker fights back on palm oil after cancer risk study

ALBA, Italy - The $44 billion palm oil industry, under pressure in Europe after authorities listed the edible oil as a cancer risk, has found a vocal ally in the food sector: the maker of Nutella.

Italian confectionery firm Ferrero has taken a public stand in defense of an ingredient that some other food companies in the country are boycotting. It has launched an advertising campaign to assure the public about the safety of Nutella, its flagship product which makes up about a fifth of its sales.

The hazelnut and chocolate spread, one of Italy's best-known food brands and a popular breakfast treat for children, relies on palm oil for its smooth texture and shelf life. Other substitutes, such as sunflower oil, would change its character, according to Ferrero.

"Making Nutella without palm oil would produce an inferior substitute for the real product, it would be a step backward," Ferrero's purchasing manager Vincenzo Tapella told Reuters. He features in a TV commercial aired in Italy over the past three months that has drawn criticism from some politicians.

Any move away from palm oil would also have economic implications as it is the cheapest vegetable oil, costing around $800 a ton, compared with $845 for sunflower oil and $920 for rapeseed oil, another possible substitute.

Ferrero uses about 185,000 tonnes of palm oil a year, so replacing it with those substitutes could cost the firm an extra $8-22 million annually, at those prices. The company declined to comment on these calculations.

The European Food Safety Authority (EFSA) said in May that palm oil generated more of a potentially carcinogenic contaminant than other vegetable oils when refined at temperatures above 200 degrees Celsius. It did not, however, recommend consumers stop eating it and said further study was needed to assess the level of risk.

The detailed research into the contaminant - known as GE - was commissioned by the European Commission in 2014 after an EFSA study the year before, into substances generated during industrial refining, identified it as being potentially harmful.

EFSA does not have the power to make regulations, though the issue is under review by the European Commission. The spokesman for Health and Food Safety, Enrico Brivio, said guidance would be issued by the end of this year. Measures could include regulations to limit the level of GE in food products, but there will not be a ban on the use of palm oil, he added.

The World Health Organization and the U.N. Food and Agriculture Organization flagged the same potential risk that EFSA had warned of regarding GE, but did not recommend consumers stop eating palm oil. The U.S. Food and Drug Administration also has not banned the use of palm oil in food.

The issue became a hot consumer topic in Italy after the largest supermarket chain, Coop, boycotted palm oil in all its own-brand products following the EFSA study, describing the move as a "precaution". Italy's biggest baker, Barilla, also eliminated it and put "palm oil-free" labels on its wares.

The retailers' decisions followed pressure from activists, including Italy's main farming association Coldiretti and online food magazine Il Fatto Alimentare, which called on all food firms to stop using palm oil.

High temperatures are used to remove palm oil's natural red color and neutralize its smell, but Ferrero says it uses an industrial process that combines a temperature of just below 200C and extremely low pressure to minimize contaminants.

The process takes longer and costs 20 percent more than high-temperature refining, Ferrero told Reuters. But it said this had allowed it to bring GE levels so low that scientific instruments find it hard to trace the chemical.

"The palm oil used by Ferrero is safe because it comes from freshly squeezed fruits and is processed at controlled temperatures," Tapella says in the TV ad, which was filmed at the firm's factory in the northern town of Alba and was accompanied by full-page ads in newspapers carrying the same message.

EFSA declined to comment on the possible risks of refining palm oil at lower temperatures.

ITALIAN SALES HIT

Ferrero is by no means the only big European food firm to keep using palm oil in its products since the EFSA report. The likes of Unilever and Nestle use it in products including chocolate, snacks and margarine.

The two companies said they were monitoring the contaminant issue and were working with their suppliers to keep GE at lowest possible levels.

Ferrero is the only big European food company to mount such a public defense of the use of the ingredient in its products following the EFSA opinion.

The company told Reuters it carried out "hundreds of thousands of tests" on contaminants in both the palm oil it uses and finished products.

Retail sales of Nutella in Italy fell by about 3 percent in the 12 months to the end of August, which Ferrero partly blamed on rivals promoting products as palm oil-free.

To address consumer concern the company launched its advertising campaign in September and says it is now showing results.

Nutella sales in Italy rose 4 percent in the last four months of 2016, said Alessandro D'Este, the head of Ferrero's Italy business.

Global Nutella sales have been unaffected by the EFSA opinion and are growing at 5-6 percent annually, the company said. Family owned Ferrero, which is not publicly listed, did not disclose its sales for Europe outside its home market.

The group ended its fiscal year to August with total revenue of 10 billion euros ($10.5 billion), of which around 2 billion euros came from Nutella sales.

ENVIRONMENT CONCERNS

EFSA's 284-page study comes on top of environmental concerns that have dogged the palm oil industry for several years. Green groups have accused the industry of causing deforestation.

Several firms using the ingredient, including Ferrero, say they buy palm oil certified by the Roundtable on Sustainable Palm Oil, which works with producers to reduce the negative impacts of cultivation on the environment.

Tapella told Reuters that Nutella had contained palm oil since its creation in the 1960s and that the group relied only on palm plantations certified as sustainable.

Ferrero's advertising campaign has drawn some political fire.

The anti-establishment 5-Star Movement, which is running neck-and-neck with the ruling Democratic Party in opinion polls, has asked the Italian advertising authority to block Ferrero's campaign and fine it for misleading consumers on both health and environmental risks.

A spokeswoman for the advertising authority said it had yet to decide whether to reject the 5-Star complaint or take measures against Ferrero, adding that the process could take several more weeks.

The palm oil industry, dominated by producers in Malaysia and Indonesia, believes Ferrero is playing an important role in addressing what it regards as misconceptions among consumers.

"It is good that Ferrero has clarified that the palm oil they use is safe and sustainable," said Yusof Basiron, chief executive of the Malaysian Palm Oil Council.

He said Malaysian producers had not suffered any impact on their European exports after the EFSA opinion. The Indonesian Palm Oil Association also said there had been no impact.

(Additional reporting by Emily Chow in Kuala Lumpur, Paul Sandle in London and Silke Koltrowitz in Zurich; Editing by Mark Bendeich and Pravin Char)

source: news.abs-cbn.com