Palm oil importers remain unprepared for new EU deforestation free due diligence requirements.

21st March 2023

Published today, the 2022 palm oil importer and trader assessment for the Palm Oil Transparency Coalition (POTC) and the Consumer Goods Forum Forest Positive Coalition highlights the progress, challenges, and opportunities the palm oil sector faces surrounding the sustainable production of palm oil.

This is the POTC’s sixth reporting period, supported and developed by 3Keel as its Secretariat and research partner.

Engaging the palm oil traders this year highlighted that traders are still underperforming against NGO expectations on environmental and social issues, with action on social issues continuing to lag behind action on environmental issues. 

The development of key regulations and guidance documents in 2022 highlights increasing scrutiny on companies in the palm oil supply chain, including retailers and consumer goods companies, and the importance of monitoring importer progress in this context. Importer action in response to these new regulations, including the EU Deforestation Regulation (EUDR) and Forest, Land and Agriculture (FLAG) guidance published by the Science Based Targets initiative, were of special interest this year.

The EUDR requires that palm oil and certain palm oil derivatives being placed on the EU market for the first time must be proven to have been produced legally and be deforestation-free. To prove that relevant forest risk commodities are deforestation-free, the regulation requires, in the case of palm oil, full traceability to plantation. We found that trader ambition is out of step with due diligence expectations on traceability, with many traders having either no traceability to plantation target or a target of 2030. It is expected that untraceable volumes will be shifted to outside the UK and EU markets as a result.

Some of the other key highlights from the report include:

  • Smallholders are at risk of exclusion from supply chains as lack of transparency from middle actors makes it difficult for smallholder supply to meet importer traceability and deforestation targets, including due diligence expectations.
  • There are no time-bound plans in place for meeting and verifying human rights commitments.
  • There is misalignment amongst major palm oil handlers in their methodologies for calculating and achieving verified deforestation-free palm volumes.
  • Free, Prior and Informed Consent (FPIC) policies predominantly cover only new plantations, thereby excluding expansion, and are not being effectively implemented.
  • Science-based targets (SBTs) are being set by companies, but there is limited action taking place to reduce emissions despite the new FLAG guidance increasing expectations for companies with SBTs.

3Keel has supported and developed the Palm Oil Transparency Coalition as its Secretariat and research partner since 2016. 

Download report here