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P&G Partners with Malaysia Institute for Supply Chain Innovation on Palm Oil Sourcing

Posted: July 30, 2014

Separating sustainable sources from non-sustainable sources in the production of palm oil and palm kernel oil is highly complicated, but Procter & Gamble (P&G) is stepping up to address the problem. The company is conducting an in-field study to understand the practices of small farmers—and how those practices can be improved to protect local forests. P&G is partnering with the Malaysia Institute for Supply Chain Innovation (MISI) to field the study, fulfilling a commitment it made earlier this year as part of new goals to achieve zero deforestation in the palm oil supply chain.

“We want to make the sourcing of palm oil and palm kernel oil sustainable from start to finish—and still economically viable for local farmers who depend on the crop to support their families,” said Len Sauers, vice president of P&G sustainability. “We already work with larger suppliers to trace the origin of our supply chain, but small farmers—in places like Malaysia and Indonesia—account for 35–45% of palm oil production. We need to understand their needs and practices so we can create innovative solutions to the problem, just like we understand the day-to-day lives of consumers to meet their needs with innovative products.”

“This is a complex supply chain involving thousands of small farmers who interact with others, so the product changes hands many times between the growers, traders, millers, buyers and ultimately the purchasing company. As a result, separating sustainable sources from non-sustainable sources is almost impossible. We are targeting zero deforestation by fostering an inclusive ecosystem that supports small farmers’ challenges,” said Mahender Singh of MISI.

In April 2014, P&G announced new goals to help ensure zero deforestation in its palm oil supply chain. The goals call for traceability of palm oil and palm kernel oil to supplier mills by December 31, 2015, and to plantations by 2020. The newly announced six-month study supports these goals and will enable P&G to understand the small-farmer supply chain and how best to help local growers. P&G will report the findings and develop an action plan to address them by the end of September 2014. MISI is helping to facilitate this research and will work with P&G to develop the action plans.

The goals also call for P&G to extend work with suppliers, industry peers, NGOs, academic experts and other stakeholders to promote industry-aligned standards and practices for sustainable palm oil sourcing. “We are working in partnership with industry experts, large suppliers and small farmers to make a significant and lasting impact. In support of this commitment, we will develop tools and best practices that we can share with other companies facing the same opportunities we’re facing in establishing traceability from farm to purchase,” said Dr. Sauers.