The case for responsible sourcing of palm oil in China
As China is the second-largest buyer of palm oil in the world, Chinese companies can play a vital role in mitigating and eliminating deforestation and harmful labour practices from palm oil value chains as China sources the vast majority of its palm oil and its derivatives from Indonesia and Malaysia. Both countries have experienced an annual average loss of 350,000 ha of forest area between the years 2001 to 2016 due to palm oil expansion. Therefore, it is important for Chinese companies to look into addressing the potential issues in their supply chains to mitigate environmental, social and financial risks such as:
Operational risks caused by productivity reduction or supply disruption resulting from a compromised ecosystem, climate change or absence of a social license to operate in producing countries
Reputational risks due to reports linked to environmental destruction or human rights violations in the palm oil sector
Failure to meet headquarters’ demand for public commitments that have been made to ensure environmental protection and respect for human rights
Failure to meet market and customers’ demands, whereby ignoring deforestation, human rights abuses and customers’ concerns could hinder Chinese companies’ international expansion
Failure to meet investment requirements, such as reporting against the Equator Principles (EP) to determine, assess and manage environmental and social risk in projects
The support of Chinese supply chain actors for sustainable palm oil contributes to a positive impact on the environment, and efforts have been made by relevant ministries to promote and develop the responsible sourcing of palm oil in China. Moreover, many global brands operating in China have made pledges to use 100% RSPO-certified palm oil in recent years. The discussion paper provides case studies on 3 companies (i.e. COFCO, Yihai Kerry and AAK China) that have progressed in their responsible palm oil sourcing journey in China.