Palm oil has overtaken salt - it's in everything, writes Gareth Hutchens.

23/07/2010 (Sydney Morning Herald) - CONSIDER two Mars bars. They both contain palm oil. But whereas one uses oil sourced from a sustainable plantation, the other uses oil from plantations associated with the deaths of endangered orang-utans or tigers. Which would you buy? The answer may be obvious to you, but for businesses involved in using palm oil, the products of which range from shampoos and chips to lipstick and salad dressing, the problem is more complex.

Palm oil is so versatile and high yielding it is considered a super crop, but is fast becoming a pariah in a world of health conscious and environmentally aware consumers.

The venerable CSR will soon discover the sort of attention palm oil attracts, having sold its sugar and renewable energy division, Sucrogen, to Singapore-based agribusiness Wilmar International this month. Wilmar is a leading producer and the world's largest processor and merchandiser of palm oil, and has attracted strong criticism from green groups.

In the same week as the Sucrogen sale, Sinar Mas, an Indonesian pulp and paper supplier with interests in Australia - it supplies companies such as PaperlinX and Woolworths - was criticised for its large palm oil investments, which are linked to the destruction of rainforests.

Having been on the front line for some time both Sinar Mas and Wilmar are aware of the reputational risk that comes with palm oil production. But for most Australians and Australian businesses, palm oil has enjoyed a low profile until now.

As a biofuel, it puts global food supplies under pressure. Every time land is cleared to make way for an oil palm biofuel plantation, precious land cannot be used to produce food. It is inextricably linked to the destruction of rich peatlands and the habitats of endangered species and yet each year Australians unwittingly consume an estimated 10 kilograms of the oil per capita.

Health groups link its use in food products to heart disease. Heart Foundation national director Susan Anderson says consumers need to know whether products contain palm oil. ''From our perspective, whether sourced sustainably or not, palm oil still contains 50 per cent saturated fat and is still bad for human health,'' she says. Labelling laws do not require it to be listed on food ingredients and more often than not it is simply labelled with the less specific ''blended vegetable oils'', or goes by obscure aliases such as Cety alcohol, Elaeis guineensis and cocoa butter equivalent.

Yet palm oil is firmly in the sights of environmental activists if it comes from an unsustainable source, and companies using it could have an acute reputation risk.

An example was Greenpeace's attack on Nestle in a graphic advertisement - an office worker unwraps a Kit Kat, only to bite on an orang-utan's finger. It forced the company to commit publicly to sourcing and using sustainable palm oil. Following repeated and targeted campaigns against Sinar Mas, which supplies some of the world's largest food and packaged goods companies, global corporate giants Unilever, Kraft and Carrefour have suspended palm oil supplies. A recent Greenpeace report, How Sinar Mas is Pulping the Planet, put further pressure on Australian companies to review their supplier contracts to consider the real source of their palm oil and paper.

With an estimated 135,000 tonnes of palm oil or more imported into Australia each year, countless local companies are vulnerable to similar attacks here. Goodman Fielder, Australia's largest food manufacturer, accounts for an estimated 70 per cent of local imports. The owner of well-known brands such as Meadow Lea, Wonder White, and Praise, it refines and sells the oil to multinationals Nestle, Smith's, Sara Lee and Arnott's, among others.

Woolworths now claims on its website to be ''stepping up its commitment'' to sustainable palm oil in Woolworths brands, and the Coles website says it ''aim[s] to use'' sustainable palm oil in its Coles branded products. These two together command more than 20 per cent of market share.

In response the Australian food industry is increasingly looking to the Roundtable on Sustainable Palm Oil (RSPO), a not-for-profit organisation that promotes the growth and use of sustainable palm oil. Formally established in 2004, it has more than 400 members globally and takes responsibility for certifying sustainable palm oil from producers. But with just eight Australian-based members, the industry has been slow to catch on. The Australian Food and Grocery Council only announced this month, six years after the RSPO was established, that it had become a member.

Yet the RSPO has been branded as a greenwashing exercise as its guidelines are purely voluntary and members that fail to abide by its rules are not penalised. Critics say this allows RSPO members to buy the appearance of action. And despite signing up to the RSPO the grocery body is still blocking attempts to introduce mandatory labelling for palm oil-related goods in Australia. It argues that labelling for things like palm oil for environmental reasons has little to do with consumers' health.

According to AFGC chief executive Kate Carnell: ''From a health perspective, it's important for consumers to know how much saturated fat is contained in a product, not where the saturated fat is sourced from.''

At the moment it seems that Australian business is having it both ways. It can look to be leading the charge towards a sustainable future, while opposing attempts to make worthwhile initiatives mandatory or binding.

Dr Attracta Lagan, director of business ethics consultancy Managing Values, says one of the hardest things for modern corporations to come to terms with is that they don't decide whether they're a good company any more - the consumer does.

''All companies today are being asked to step up to meet higher standards of accountability because we live in a very visible age where people can see how companies are operating around the world. They want to ensure that the companies they're dealing with are seeming to be part of the solution to some of the inequalities that exist in the world, rather than exploiting those inequalities.''

Palm oil has thrown up an ethical debate in the global food and fuel industry. To the developing nations that rely on it, the oil palm provides a livelihood for hundreds of thousands of people treading the fine line between poverty and subsistence. Almost as valuable a commodity as crude oil on global markets, the palm oil fruit produces nearly 10 times more oil per unit area than soybean, rapeseed or sunflower. To Malaysia and Indonesia - which between them account for 85 per cent of the world's palm oil crop - it is the future.

According to Phillip Lawrence, director of Eco Logical Strategies, there are critical and praiseworthy reasons why the industry has been promoted in Indonesia, and we cannot deny such countries the right to grow important cash crops. ''In the context of a developing country the creation of jobs is critical for poverty alleviation in rural areas of the country,'' says Lawrence.

''Just like soya in Brazil, canola in Europe, corn in the US and wheat, cotton and rice in Australia, and also dairy products in New Zealand, palm oil is an important crop to the Indonesian national economy.''

But, as for Australian business, it seems companies will have to continue to give attention to the concerns of consumers, and to look for ways to increase transparency in their supply chains and labelling.

And this, according to Dr Lagan, would benefit business in the long term.

''Transparency is always good for business, it's just that sometimes it might cost you in the short term. But in the long term it's always good for sustainable business.''