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Citing environmental concerns, growing list of companies stops sourcing Indonesian palm oil.
Still, the palm oil industry is a growing one. Thanks to unmet demand, prices are about $900 per ton, well above historical levels of about $500. Multinational companies routinely say they want to source sustainable palm oil, but that is proving difficult. A regulatory body, called the Roundtable on Sustainable Palm Oil, has been set up, but still only includes a small number of producers. Many critics have denounced the group as toothless and say is still too difficult to determine what is truly sustainable in such a dizzyingly complex supply chain.
And while companies may be sensitive to the opinions of Western consumers, growing demand in Asia is proving insatiable, said Thomas Mielke, director of Oil World, a German-based consultancy company.
“There are campaigns and they are having some impact on consumption in some European countries, but most of the growth takes place in India, China, Pakistan, in other Near East countries, in African countries,” he said.
Palm oil accounts for 37 percent of the world’s vegetable oil market, Mielke said, while being grown on just 5.5 percent of the land used for such crops.
“Satisfaction of world consumption of vegetable oils, which is a crucial item of the food diet, is not at all possible without palm oil,” he said. “For the same tonnage you need 10 times more land for soybeans in the Amazon.”
While the conversion of large swaths of rainforest into palm plantations has displaced traditional farmers and indigenous people who rely on the forests for their livelihoods, some argue that palm oil is essential for overcoming poverty. As a cash crop, oil palms earn farmers far more than regular staples such as rice.
World Growth, a free market advocacy group that supports the development of palm oil, argues that growing more of the crop will in the long run curb deforestation by cutting poverty and hence cutting down incentives for illegal land clearing. The group is reviled by environmental activists for pursuing an unabashedly pro-corporate and anti-regulation agenda .
“It is widely recognized that environmental sustainability is improved as a nation becomes more developed and poverty is reduced,” Alan Oxley, the group’s chairman, said in a recently published open letter to Britain’s Secretary of State for Environment, Food and Rural Affairs. “Conversely, restricting the growth of oil palm will hinder efforts to reduce poverty, which as we have previously observed, is the leading driver of deforestation.”
It is an argument that cuts little ice with environmentalists and will do little to calm companies skittish about their reputations with Western consumers.