Palm oil: how bad is it really? (Schroders)

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by Katherine Davidson, Portfolio Manager, Global & International Equities, and Elly Irving, Head of Engagement

Palm oil has a major PR problem – it’s associated with images of lush rainforest consumed by blazes and cute orangutans made homeless by logging. When Iceland (the UK supermarket chain, not the country) announced its intention to remove palm oil from all private label lines by the end of 2018, it saw a big (albeit short-lived) uptick in brand perception and purchase consideration. Should more companies, and consumers, be following their example and boycotting palm oil? We examine the two sides of the argument.

Promotion

The case against:

Palm oil drives more deforestation than nearly every other soft commodity, so why do supply chain practices continue to lag those of cocoa, coffee, barley and tobacco?

It is well documented that palm oil is a key driver of deforestation, and this forest loss – coupled with conversion of carbon-rich peat soils – is contributing to climate change. A recent study from the World Resources Institute suggests that emissions from global deforestation are greater than the emissions produced by the EU. Not only does the land cleared for palm oil plantations release greenhouse gases, it also increases flooding risk, contributes to soil erosion and destroys biodiversity. The land used to grow palm – mostly tropical rainforest – is exceptionally biodiverse: Indonesia accounts for only 1.3% of the world’s land area but 17% of all bird species and 12% of mammals.

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