Palm Oil

Background

Palm oil, the most widely used vegetable oil, is a globally traded agricultural commodity used in approximately half of all consumer goods, such as packaged foods and personal care products, as well as biofuels. It is extracted from the fruit pulp of the oil palm. Palm kernel oil (PKO) is derived from the kernel or the pit of the oil palm fruit.

Palm oil is very popular for a number of reasons:

• It remains stable at high temperatures
• It has a smooth and creamy texture and it does not smell
• It has a natural preservative effect which extends the shelf life of products
• It needs less than half the land required by other crops to produce the same amount of oil

Increasing demand for palm oil has had measurable environmental and social impacts, including deforestation, habitat destruction and biodiversity loss.

Simply replacing palm oil with other vegetable oils is not viable, as that would require more land, and would likely lead to even greater deforestation. In addition, in palm oil producing countries like Indonesia and Malaysia, millions of farmers and their families depend on work in this industry.

Palm Action Plan

Building upon The Estée Lauder Companies (ELC) No Deforestation, No Peat, No Exploitation (NDPE) Policy, published in 2020, we have developed the following commodity-specific action plan to address palm-based ingredients (palm oil and its derivatives). This plan applies to all ingredients purchased directly by ELC and includes all sourcing regions and operations, and direct suppliers from whom we source palm-based ingredients.

While ELC is a comparatively low-volume user of palm-based ingredients relative to companies in other sectors, we are committed to taking concrete action with our suppliers to build sustainable and ethical palm supply chains.

ELC has identified the following three key focus areas where we intend to build upon current policies and procedures to further our progress on responsibly sourcing palm-based ingredients:

• Sustainable Procurement
• Monitoring & Transparency
• Community Engagement

Sustainable Procurement

ELC endeavors to source our palm-based ingredients responsibly and sustainably with respect for local communities and the environment by procuring ingredients from suppliers that can demonstrate adherence to the principles outlined in our Supplier Code of Conduct and NDPE policy. We assess compliance with these responsible sourcing policies through supplier performance, increased traceability and third-party certification to the Roundtable on Sustainable Palm Oil’s (RSPO) Principles and Criteria. RSPO’s Principles and Criteria requires that suppliers are aligned to sustainable palm sourcing principles, including but not limited to, the following:

• No deforestation, No conversion
  • Land clearing does not cause deforestation or damage any area required to protect or enhance High Conservation Values (HCVs) or High Carbon Stock (HCS) forest. HCVs and HCS forests in the managed area are identified and protected or enhanced.¹
  • No peatland development regardless of depth²
  • No burning in preparation of new plantings or re-plantings¹
• Free and prior informed consent (FPIC) to ensure protection and promotion of the rights of indigenous peoples and vulnerable communities
• Protection of human rights, including no forced labor, no harassment, no discrimination, and ensuring a safe working environment.

Since 2015, 100% of the palm-based ingredients ELC sources for its products are RSPO certified through a combination of RSPO certified physical supply chains and RSPO Book & Claim palm oil credits³. In 2019, ELC committed that at least 90% of its palm-based ingredients³ will be certified sustainable from RSPO physical⁴ supply chains by 2025. In fiscal 2022, we achieved our goal three years early, and we have revised our goal to 95% to reflect our elevated ambition. 

ELC plans to accelerate its sustainable palm procurement by:

• Continuing to build supplier capacity to make progress against our goal that at least 95% of our palm-based ingredients³ will be certified sustainable from RSPO physical⁴ supply chains by 2025.
• Offering training on our NDPE policy and Palm Action Plan to our key direct suppliers of palm-based ingredients and relevant Third-Party Manufacturers.
• Assess the sustainable palm sourcing practices of key palm suppliers and drive continuous improvement by leveraging an industry aligned methodology

Monitoring & Transparency

ELC is continuing to monitor our sustainable palm procurement by building transparency and confidence in our supply chain among partners and suppliers through industry collective action.

In 2019, the Estee Lauder Companies became a founding member of the Action for Sustainable Derivatives (ASD), a pre-competitive collaboration of brands and suppliers aimed at addressing responsible sourcing in complex derivative supply chains by collaborating to harmonize approaches on transparency, risk monitoring and evaluation. Through our membership in ASD, ELC is committed to establishing traceability to the point in the supply chain where suppliers can demonstrate that the palm ingredients meet our sourcing principles, and collectively monitor and address grievances. Progress on ELC’s palm traceability to mill can be found in our annual Citizenship & Sustainability Report.

Additionally, through our ASD membership, ELC leverages dynamic monitoring of our traced supply chain through a shared grievance dashboard. If evidence of a grievance is found, the grievance reports will be reviewed, investigated, and addressed through industry collaboration or ELC’s individual action.

We will continue our Monitoring and Transparency efforts by:

• Tracing our palm supply chain to achieve increased traceability to the mill and beyond;
• Driving industry alignment through our partnership with ASD; and
• Contributing to shared monitoring of risk, grievances, and continuous improvement plans, as needed.

Community Outreach

Globally, over 7 million smallholders rely on palm oil for their livelihoods.⁵ These small-scale farmers face significant challenges, including limited access to markets and finance; lack of training on agricultural best practices, which limits farm productivity; and land tenure insecurity. Effectively addressing these challenges requires action by governments, civil society, local communities, and private enterprise.

ELC is committed to supporting smallholder farmers by helping to build their capacity and improve their livelihoods with the goal of increasing their participation in the palm oil supply chain. Initiatives include:

Project Lampung

In 2019, the company launched Project Lampung in partnership with Solidaridad (a global NGO), BASF (a long-term supplier of ELC), the RSPO, Business Watch Indonesia (BWI), and the Indonesian Agency for Agricultural Extension (a local farmers association), to build the capacity of 1,000 smallholder farmers in the Lampung Province of Indonesia to produce sustainable palm oil and improve incomes and livelihoods. Read more here.

Mosaik Initiative

In 2020, the Estée Lauder Companies Charitable Foundation approved a grant to Action for Sustainable Derivatives to kickstart an innovative pooled-funding model to generate large-scale positive impact on the ground in priority production landscapes. With ELCCF and other donor support, in FY22 ASD helped to expand the Mosaik Initiative by NGO partner Kaleka (formerly known as Inobu) in two of the largest palm-producing districts in Central Kalimantan, Indonesia. The Kaleka Mosaik program fosters practices that recognize and help address the economic challenges that Indigenous smallholder farmers and their communities face.

Purchasing Independent Smallholder RSPO Credits

In addition to our expanded portfolio of palm-related positive impact projects, we procure Independent Smallholder RSPO credits, supporting direct market access for smallholders.

ELC remains committed to identifying opportunities to extend and scale our impact to create an inclusive and sustainable palm supply chain by:

• Continuing to invest in relevant partnerships and projects (including purchases of smallholder credits) that improve smallholder livelihoods and protect and restore the environment at a scale equal or greater to our palm sourcing impact.⁶

Commitment to Accountability

ELC recognizes this commitment is a journey and we expect to continue to evolve and establish best practices with our partners and other stakeholders. We plan to share and update our progress on priority areas, including RSPO physically certified sustainable palm volumes, traceability and community impact projects on an annual basis.

Visit the following resources for updates on progress towards our goals in our annual Citizenship & Sustainability Reports and through our RSPO Annual Communication of Progress.

¹ Land clearing since November 2005 has not damaged primary forest or any area required to protect or enhance HCVs. Land clearing since 15 November 2018 has not damaged HCVs or HCS forests.
² After 15 Nov 2018
³ Excludes palm-based ingredients not directly procured by ELC, such as those procured by Third-Party Manufacturers (TPMs) and certain acquired brands not yet fully integrated into the relevant ELC systems.
⁴ Physical supply chain refers to a palm oil supply that is sourced from certified plantations under the Mass Balance, identity Preserved or Segregated certifications. More information on RSPO certified supply chains can be found here.
⁵ https://www.rspo.org/smallholders
⁶ Palm sourcing footprint is calculated based on 2019 volume of palm and palm kernel oil-based derivatives purchased directly by ELC. Yield per hectare baseline estimate was calculated based on 2019 data from the USDA 2019 GAIN Report for “Indonesia Oilseeds and Products Annual 2019”.

Published: June 2021
Latest Update: June 2023