EU requirement for full palm oil supply chain traceability opens up possibilities

Go beyond compliance and take advantage of a fully traced supply chain

By: CarbonSpace Team
June 30, 2023
Palm oil is the subject of much scrutiny. Because of its use in many products ranging from food to cosmetics, demand for palm oil has rapidly grown, and palm plantation expansion has contributed to significant deforestation.

But if deforestation is eliminated and ecosystems are regenerated, an environmentally sustainable palm oil industry is possible.

One key reason to work towards a sustainable future for palm oil in particular is that it’s one of the most efficient oil crops. It requires significantly less land, fertilizer, energy, and pesticides than other types of oil trees.1

The Roundtable on Sustainable Palm Oil (RSPO) is an organization working towards a sustainable palm oil industry by bringing together voluntary members from across the supply chain to develop sustainable production standards through consensus.

Two CarbonSpace team members attended RSPO events this month. Our CEO Geza Toth spoke on the panel “The role of downstream actors in sustainable palm oil / Downstream Due Diligence” at the European Sustainable Palm Oil Dialogue in Frankfurt, Germany.
Geza and team at RSPO’s Sustainable Palm Oil Dialogue in June 2023
Our Senior Sales Manager, APAC Shira Omar attended the public consultation for the Revised RSPO Principles & Criteria and RSPO Independent Smallholder Standard.

Here’s more about the hot topics at the events, the opportunities we see for the palm oil industry in the near future, and a look at the role CarbonSpace plays in building a sustainable palm oil future.

Deforestation diligence
The EU recently passed a new regulation requiring deforestation diligence for companies sourcing any of seven commodities: palm oil, soy, cattle, cocoa, wood, coffee and rubber. Companies must know and provide the exact locations from which they source these commodities and ensure no deforestation has taken place since December 31, 2020.

The regulation is a hot topic in the palm oil industry, of course. Now that deforestation diligence is law, companies need solutions for traceability and detection. And because up to 40% of palm oil production area is managed by smallholders, supply chain traceability will be a challenge at first.2

But achieving traceability creates opportunities beyond compliance. If companies sourcing palm oil will soon have fully traced their supply chains, there’s an opportunity to do more than just deforestation assessment but to track additional ecosystem metrics as well and communicate those.

Benefits of supply chain monitoring, beyond deforestation diligence
If companies will soon know the location of plantations, why not perform the deforestation assessment and monitoring that can lead to further sustainable sourcing decisions and communication around ecosystem regeneration at the plantation level?

Net ecosystem exchange (NEE) monitoring achieves these goals, tying together sourcing and sustainability indicators through a single metric. NEE represents the net exchange of CO2 between the atmosphere and the major ecosystem carbon pools. It’s a primary gauge of ecosystem carbon sink strength and productivity.

The key benefits of NEE monitoring for palm oil plantations are:
Supplier assessment: Assess thousands of smallholders without the need for onsite visits or physical samples, checking for both deforestation and ecosystem health
  • Identify champion suppliers
  • Target interventions in areas needing improvement
  • Implement premiums for supplier contracts
Insetting and offsetting data: Obtain net carbon sequestration figures for insetting (production areas) and offsetting (ecosystem corridors, peatland restoration areas, other conservation areas) calculations
Carbon intensity updates: Update emission factors on the product or mill level with primary, validated data
Claims: Make claims (SBTi, Paris Agreement, narrative) based on primary supply chain data
These are just some of the opportunities that come with primary carbon data from a traced supply chain.

Supply chain transparency is not about blame and shame. By conducting deforestation diligence and further ecosystem level monitoring, companies can measure their impact, make improvements, and communicate the true climate value of sustainably-managed palm oil production. Go beyond stating “no-harm” and monitor positive ecosystem regeneration.

Deforestation free, sustainable palm oil is possible with a traceable supply chain. Let’s get to measuring.

  1. Palm Oil Coverage. State of Sustainability Initiatives. (2022, January 5).
  2. Get involved as a smallholder - RSPO. Roundtable on Sustainable Palm Oil (RSPO). (2023, March 31).