January 06, 2004 - An ISIS Asset Management report finds that fewcompanies can trace the source of their palm oil up their supply chain toconfirm whether or not it is produced sustainably.

SocialFunds.com -- If you do not know much about palm oil, you may not bealone. It turns out that many companies who use this commodity in theirproducts cannot ensure whether their palm oil is produced in a sustainablemanner or not, according to a new report. The report surveys 24 companiesheld by ISIS Asset Management, a socially responsible investment (SRI)firm, including Cadbury Schweppes (ticker: CBRY.L), Colgate-Palmolive(CL), Compass Group (CPG.L), Procter & Gamble (PG), and Unilever (UN).With current demand of 22.5 million tonnes per year, palm oil has becomethe single largest traded edible oil in the world, and demand is projectedto almost double to 40 million tonnes by 2020.

Although two-thirds (67 percent) of the responding companies feel theymanage the risks of the ecological impacts on their supply chainsadequately, more than four-fifths (83 percent) do not appear to know wheretheir palm oil originates.

Only a limited portion of companies were able to identify their ultimatesuppliers, states the report, entitled New Risks in Old Supply Chains:Where Does Your Palm Oil Come From? Few could trace their supplies to agiven country and fewer still to a particular plantation.

Assurances about sustainability were extremely general and presentedlittle or no independent verification of the claims, the report continues.Several were so generic (i.e. naming a specific country from which palmoil is sourced and claiming, incorrectly, that all the oil from thatcountry is sustainably produced) as to be of little or no use.

Palm oil comes from the dark orangish-brown fruits of the oil palm tree,which resembles the coconut palm. The subtitle of the report, Fromlipstick to ice cream: a survey of palm oil use and supply chainmanagement, suggest the wide spectrum of palm oil’s commercial uses--as acomponent of food, cosmetics, detergents, and chemicals.

Only a portion of the palm oil on the market is grown sustainably, withmuch of the increase in production displacing rainforests and indigenouscommunities. Companies with foresight recognize the importance of trackingtheir supply chains accurately and disclosing transparently thesustainable production of the palm oil they use.

The study reveals that some companies have the situation broadly undercontrol, at least insofar as palm oil sourcing is concerned, the reportstates. Unsurprisingly, some of those that perform well in thisspecialized area--such as Unilever, Body Shop, and Marks & Spenser--arethe so-called ‘usual suspects,’ well-known for their commitment to mattersof sustainable development.

Other companies, such as Cadbury Schweppes and Compass Group, have beenable to source from suppliers that are known to produce in line withsustainable development objectives, the report adds.

The report finds that many companies’ stated policies regarding thesustainable production of commodities in their supply chain do not matchtheir actual practices, and often have no way of verifying theircommitments. The report therefore recommends that companies change theirwalk to match their talk. The report also recommends that companies takeaction to ensure the sustainability of the palm oil they use. For example,it recommends joining the Roundtable on Sustainable Palm Oil, aninitiative promoting sustainability sponsored by the World Wide Fund forNature (WWF) in cooperation with industry representatives includingUnilever and the Body Shop.

Encouragingly, the report finds that almost a quarter (21 percent) of thesurveyed companies are developing or considering developing supply chainpolicies specifically relating to palm oil. Three of these proactivecompanies are doing so even though they consider themselves to be dealingadequately with the issue already. And the very conducting of the surveyitself spurred action.

"Several companies noted that the ISIS survey stimulated further internalaction on this issue," the report concluded.