Palm Oil Industry ESG Thematic Report, 2023

Environmental, Social, and Governance (ESG) in the Palm Oil industry

Environmental, Social, and Governance (ESG) factors are a major strength when it comes to sustainability. These factors are being incorporated into organizations to identify and tackle risks, which eventually leads to operating in a sustainable manner.

Palm oil is a vegetable oil that has been extracted from the fruit of oil palm trees. The palm oil ESG factors point out several reasons why palm oil should be produced sustainably. To solve this problem, the Roundtable on Sustainable Palm Oil (RSPO), was set up in 2004, assists in the production of sustainable palm oil. The RSPO standards when adopted by palm oil producers lead to sustainableproduction of palm oil. Also, companies are encouraged to adopt policies that avoid deforestation, peatland conversion and human rights violations in their supply chains. Moreover, palm oil production causes deforestation, air pollution, soil erosion, climate change, and so on. Additionally, the utilization of sustainable palm oil can have some positive effects, such as protecting tropical rainforests and safeguarding its fragile biodiversity.

Impact Of Palm Oil Industry in Relation with UN - SDGS

This industry contributes to the achievement of the Sustainable Development Goals (SDGs). In Indonesia, the industry has lifted 10 million people out of poverty since 2000. Speaking about the same, Indonesian palm oil supports poverty reduction and inequality reduction. Palm oil expansion has resulted in 1.3 million people rising out of poverty. In 2020, palm oil exported 54.4% of vegetable oil and supplied 40% of all vegetable oil sold in the world, fulfilling SDG 2 (Zero Hunger). Palm oil is a food that provides fatty acids and energy to meet SDG 3 (Good Health and Well Being). The industry and plantations are committed to SDG 4 (Quality Education) by providing health and education facilities to workers and their families as part of the company's social responsibility. Apart from being an energy source, palm oil is relatively high in vitamin A. Additionally, Palm Oil significantly contributes to Indonesia's Sustainable Development Goals (SDGs) in nine areas, four insignificantly, and one insignificantly.

ESG Challenges

Palm Oil plantation has given rise to several challenges which have a direct impact on the environment. To name a few, when large forests are cleared for palm oil plantations, it leads to the loss or destruction of critical habitats and many endangered species. Forests are burned to make room for plantations, which contributes to the release of greenhouse gas emissions.

Further, the cleaning of forest areas also has a direct impact on wildlife. This eventually leads to the loss of habitat for the local tribes which creates an ecological imbalance.Moreover, the palm oil mill produces 2.5 metric tons of effluent for each metric ton of palm oil it produces. When released directly into freshwater, these effluents cause pollution. Additionally, improper arrangements for planting palm oil, especially on steep slopes, increase the risk of erosion and flooding.

Growth of The Palm Oil Market

The global palm oil market size in 2021 was 63.7 billion dollars and is expected to increase at a compound annual growth rate (CAGR) of 5.1% between 2022 and 2030. A growing number of industries are driving this market, including food, beverage, biofuels, energy, personal care, and cosmetics. Moreover, the theme emphasizes the direct and indirect impact of this globally.

Key Companies in this theme

    • ADM

    • Wilmar International Ltd.

    • Sime Darby

    • KLK Berhad.

Scope of The Palm Oil Industry ESG Thematic Report: 

    • Macro-economic and ESG-variable analysis of the industry, including regulatory, policy, and innovation landscape

    • Key insights on infrastructure developments and ESG issues affecting the theme

    • Identify key initiatives and challenges within the industry

    • Identify ESG leaders within the industry

    • Understand key initiatives and the impact of companies within the sector to fuel an informed decision-making process

    • Analysis of industry activities based on multi-media sources, including significant controversies and market sentiment

Key benefits of The Palm Oil Industry ESG Thematic Report: 

    • Developing a comprehensive understanding of macro-economic, Policies & Regulations and innovations affecting the sector, globally

    • Key insights into Infrastructure developments and ESG issues affecting the theme

    • Identifying ESG risks and opportunities to business among leading players in the industry

    • Obtaining a clear and relevant understanding of company actions, progress, and impact and find opportunities for investment