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<\/p>\nFood systems contribute approximately one third of greenhouse gas emissions, and are therefore a crucial focus in global efforts to slow climate change.<\/p>\n
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Palm oil, the world\u2019s most widely used vegetable oil, could play a key role in these efforts, with improvements in its production having potential to bring significant emissions reductions. Although palm oil production has faced intense scrutiny due to its connection with deforestation, recent developments indicate that progress has been made.<\/p>\n
According to Trase, a commodity transparency initiative, palm-oil-related deforestation in Indonesia has been decreasing for almost 10 years, despite growth in production. Malaysia has experienced a similar trend. These two countries produce about 85% of the world\u2019s palm oil.<\/p>\n
The United Nations\u2019 climate change convention has emphasized the importance of decoupling agricultural production from forest loss, stating that ending deforestation will be critical to achieving global net-zero emissions by 2050.<\/p>\n
The Council of Palm Oil Producing Countries, an intergovernmental body led by Indonesia and Malaysia, asserts that the industry is on track to achieve net zero. Some industry experts even believe this goal can be reached by 2040, a decade before the UN\u2019s target. However, it is essential to consider the necessary actions for palm oil producers, companies and countries, and examine the integrity of their commitments to meeting this challenge.<\/p>\n
What is net zero and what does it mean for companies?<\/strong><\/p>\n The Paris Agreement, adopted in 2015, aims to limit global warming to well below 2C above pre-industrial levels, while \u201cpursuing efforts\u201d to restrict the increase to 1.5C. In 2018, the UN\u2019s climate science body, the IPCC, published a special report that emphasized the need for rapid transitions in various sectors to achieve the 1.5C target, including a 45% reduction in global net CO2 emissions by 2030 (from 2010 levels) and reaching net-zero emissions by 2050.<\/p>\n Using the IPCC definition, \u201cnet-zero\u201d emissions refers to a balance between human-driven greenhouse gas emissions and removals over a specified period.<\/p>\n In the world of business, the Science Based Targets initiative (SBTi) was established in 2015 to help the private sector set emissions reduction targets based on scientific evidence. The initiative validates whether a company\u2019s climate targets align with a 1.5C or 2C pathway, considers the year of net-zero commitment, and ensures robustness, credibility, and accountability in climate action.<\/p>\n Critics argue that \u201cnet-zero\u201d targets can be misused if companies focus more on carbon removal and offsetting than on reducing emissions. To address this, frameworks like SBTi are crucial for companies to establish time-bound targets and demonstrate progress through transparent reporting and monitoring. Crucially, SBTi does not recognize carbon offsetting as emission reductions and requires separate reporting of offsets and removals.<\/p>\n What climate targets exist in the palm oil industry?<\/strong><\/p>\n Pressure to confront sustainability challenges has driven efforts to produce and promote certified sustainable palm oil, and to eliminate deforestation and exploitation from supply chains. Managing the impacts of the Covid-19 pandemic and war in Ukraine has been a significant focus for the industry, but addressing climate change and emissions, especially those related to deforestation and peatland use, has also continued to grow in importance.<\/p>\n While the palm oil industry has been relatively slow to start working with SBTi on net-zero target setting, some major palm oil producers, including Malaysian firms Sime Darby and IOI Corporation, and Singapore-based Wilmar International, have made climate commitments. Though their targets have yet to be validated under the SBTi, many palm oil producers are experienced in working with sustainability frameworks that require them to disclose greenhouse gas emissions data.<\/p>\n Reporting emissions is a requirement for certification by the Roundtable on Sustainable Palm Oil (RSPO), the industry\u2019s leading sustainability standard. The RSPO\u2019s emission calculator, PalmGHG, has been used for over a decade to assess emissions related to land use, management practices and energy consumption.<\/p>\n Consumer goods manufacturers at the other end of the palm oil supply chain, including Unilever, Nestl\u00e9 and Mars, have already adopted science-based net-zero and emissions-reduction targets. Many of these companies have recognized the importance of eliminating deforestation and land-use emissions to achieve climate targets. For example, Nestl\u00e9 committed to becoming deforestation-free by the end of 2022 for palm oil and several other key commodities. It claims to now be 95.6% deforestation-free for palm oil and outlined that the final percentage points are hardest to reach due to the challenge of reaching smallholders. This is exactly why the cooperation and commitment of palm oil producers will be essential to realize such targets.<\/p>\n How are emissions accounted in the palm oil industry?<\/strong><\/p>\n The Greenhouse Gas Protocol is widely used for accounting emissions. Developed by the World Resources Institute and the World Business Council for Sustainable Development, it helps companies build inventories of their emissions. It\u2019s also a requirement for companies seeking recognition of their targets by the SBTi. The protocol categorizes a company\u2019s emissions into three scopes.<\/p>\n Scope 1 refers to direct emissions from company-owned and controlled sources, such as combustion in boilers, and vehicle emissions. Scope 2 covers indirect emissions from purchased energy consumed by the company. Scope 3 includes other indirect emissions throughout the value chain, including the extraction and production of purchased materials, transportation, and the use of sold products and services.<\/p>\n Under SBTi, if a company\u2019s Scope 3 emissions are less than 40% of their total emissions, then they are only required to report their scope 1 and 2 emissions. However, for most business in most industries, Scope 3 accounts for over 70% of their carbon footprint.<\/p>\n Palm oil companies that operate both upstream (with plantations and mills) and downstream (with refining and oleochemical production) are considered \u201cvertically integrated\u201d in the supply chain. Their greenhouse gas emissions reporting for Scope 1 and 2 is often divided into upstream and downstream sections. But calculating and reporting on Scope 3 emissions is challenging due to supply chain complexities and a lack of traceability in the palm oil sector.<\/p>\n Scope 3 emissions require intensive supply chain risk management, engagement with suppliers and other stakeholders, and outreach efforts. While SBTi generally only requires targets to be set for Scope 3 when they account for 40% or more of a company\u2019s total emissions, Scope 3 emissions in the palm oil industry are often excluded from greenhouse gas inventories due to difficulties collecting data.<\/p>\n The industry faces significant traceability challenges due to the involvement of so many independent mills, dealers, and millions of smallholders. Currently, not a single palm oil producer has published Scope 3 emissions in their greenhouse gas inventories, although some have begun mapping them.<\/p>\n For RSPO member companies, the PalmGHG calculator helps companies track emissions related to land-use change, peatland management, fertilizer, palm oil mill effluent, and more. It also includes calculations for carbon sequestered from any forests conserved within a concession and from the oil palms themselves. It calculates net greenhouse gas emissions by subtracting sequestered carbon from emitted carbon.<\/p>\n These efforts seem to have had an impact, with RSPO-certified palm oil found to generate about 35% less emissions than non-certified palm oil per kilogram of processed oil. The difference is attributed to factors such as peatland use (RSPO members are less likely to plant on peat), crop yields (they tend to have higher yields) and treatment of palm oil mill effluent (they are ahead on methane capture technology).<\/p>\n SBTi\u2019s Forest, Land and Agriculture (FLAG) initiative and the Greenhouse Gas Protocol\u2019s upcoming guidance on the land sector and GHG removals will provide additional frameworks for land-intensive sectors to account for emissions, carbon removal and storage. These initiatives are expected to complement the RSPO\u2019s emissions calculator, enabling companies to estimate their net emissions, set science-based targets and work towards net zero.<\/p>\n How can palm oil emissions be reduced?<\/strong><\/p>\n Several strategies can help reduce emissions in the industry. Firstly, preventing plantation development on tropical peatlands and upholding no-deforestation commitments. Implementing peatland management systems can also prevent fires and further emissions on existing peatland plantations. Preserving primary and secondary forests \u2013 those regenerating largely through natural processes \u2013 within oil palm concessions is important, as these forests store more carbon than plantations.<\/p>\n Addressing palm oil mill effluent is another key area. Treating it using anaerobic digestion simultaneously captures and utilizes methane, whilst providing an economic return through the generation of biogas. This practice is becoming more widespread among plantation companies, helping to reduce emissions and generate energy.<\/p>\n Managing fertilizer use is another essential for mitigating emissions. Chemical fertilizers, which emit nitrous oxide, a particularly potent greenhouse gas, must be carefully managed. Organic residues, such as palm fronds and empty fruit bunches, can be utilized as alternatives with lower carbon footprints.<\/p>\n Transitioning to renewable energy sources, such as solar power and biomass waste, to power production processes can reduce emissions from energy consumption in both upstream and downstream operations. Optimizing energy efficiency and increasing production efficiency at mills and refineries can further reduce emissions per unit of production.<\/p>\n How can palm oil producers remove carbon from the atmosphere?<\/strong><\/p>\n Living plants, through photosynthesis, capture CO2 from the atmosphere and store it in their tissues, including their leaves, stems and roots. This carbon can also be transferred to the soil through plant roots or plant material. To meet the goals of the Paris Agreement and achieve net-zero emissions will require significant removal of atmospheric carbon. Therefore, nature-based solutions, like forest restoration, improved forest management, agroforestry and soil rehabilitation, will be essential.<\/p>\n However, carbon offsetting, which involves payment for carbon removals elsewhere, has drawn criticism for potentially undermining emissions reduction efforts and lacking transparency. Crucial to ensuring integrity will be frameworks like SBTi, which emphasize the need for clear and transparent communication on carbon removal and offsetting to avoid greenwashing and false accounting.<\/p>\n In the palm oil industry, atmospheric carbon removal is primarily accounted for by the growth of oil palm crops and by forest conservation within concession areas. The RSPO\u2019s PalmGHG calculator considers these factors when calculating net emissions.<\/p>\n Under the Greenhouse Gas Protocol and SBTi, carbon removal accounting becomes more complex, requiring separate reporting of emissions and removals, with a focus on removals on land owned or operated by a company rather than through purchased offsets. The upcoming guidance from the protocol will provide further clarity on carbon removal calculations in the land sector, offering opportunities for the industry to progress towards net zero.<\/p>\n What about palm oil\u2019s indirect emissions?<\/strong><\/p>\n Scope 3 emissions encompass all the indirect emissions throughout a supply chain, including raw material production, logistics, distribution, manufacturing, retail, product use and end-of-life. Reducing Scope 3 requires collaboration among different companies in the supply chain. While it presents significant challenges for emissions accounting, it also presents opportunities for cooperation. Working with suppliers, including independent mills, dealers and smallholders, will be key. However, without traceability, it\u2019s difficult to ensure compliance with sustainability policies, let alone to measure emissions and implement reduction measures. Collaboration, investment outreach, engagement and incentives, such as preferential sourcing and fair prices, will be essential for progress.<\/p>\n One area which may offer solutions around Scope 3 is regenerative agriculture. Though it remains relatively new to the palm sector, practices such as intercropping and cover cropping, mulching and biochar application can enhance soil health, increase biodiversity and lock carbon into the soil. These methods can reduce reliance on emissions intensive chemical fertilizers and improve yields.<\/p>\n While implementing regenerative practices into massive commercial plantations may pose challenges, it holds significant potential for smallholders, of which there are an estimated 7 million across the global palm oil industry. These small-scale farmers can benefit from diversified income streams, and make savings due to reduced fertilizer use, as well as potential income from the carbon market.<\/p>\n Dr Reza Azmi, executive director of Malaysian social enterprise Wild Asia, emphasizes the importance of collaboration between commercial actors and smallholders to scale up regenerative practices, maximize the climate and biodiversity benefits of oil palm, and improve traceability through investment and incentives. He stresses that there are significant opportunities for the industry and its supply chains to support smallholders in adopting sustainable farming practices.<\/p>\n