Unilever PLC is negotiating to build a $100 million palm-oil processing plant in Indonesia, an attempt to accelerate its commitment to sourcing the oil in ways that don’t destroy the environment.
Unilever is trying to more closely trace the source of the palm oil it uses at a time when the industry is falling short of goals to make extraction of the key ingredient less insidious. The harvesting of palm oil has become a hot-button environmental issue for the role it plays in deforestation in countries such as Indonesia and Malaysia, where rain forests have been cleared to make way for palm-oil plantations. In the process, orangutan, tiger and rhino habitats have been destroyed.
Unilever is in advanced discussions with the Indonesian government to build the plant, which would make sustainable palm-kernel oil in Sumatra and turn out about 10% of Unilever’s annual consumption. The company hopes to break ground on the plant later this year.
The Anglo-Dutch company is the world’s biggest consumer of palm oil, using 1.36 million tons of the ingredient a year to make products such as Dove soap, Magnum ice cream and Vaseline lotion.
The company’s new goal, which will be formally announced on Tuesday, is that within eight years all of the palm oil it buys will come from traceable sources that are certified as sustainable. Last year, only 27,000 tons, or about 2%, of the palm oil Unilever bought came from such sources.
“I am not aware of anyone else who has made that commitment, particularly on our scale,” says Marc Engel, Unilever’s chief procurement officer.
The thirst for palm oil is rapidly expanding, thanks to the widespread application of it and its derivatives in products ranging from cakes to lipsticks. Last year, the world consumed about 50 million tons of the oil, according to the World Wildlife Foundation. About five million to six million tons came from plantations certified as sustainable by the Roundtable on Sustainable Palm Oil, or RSPO, an organization comprising producers, buyers and environmental groups.