Sustainable Palm ‏(Kernel) Oil

At Henkel, we recognize our responsibilities regarding the purchase and use of ingredients based on renewable raw materials. For this reason, we are committed to ensuring that the ingredients for our products are made from sustainable palm oil and palm kernel oil. With this in mind, we work both with the companies from which we source our raw materials and with other partners to exert influence on the palm oil supply chain, from smallholders to consumers. We have set ambitious targets for 2025 and, building on existing certifications, we intend to develop our supply chains to ensure full NDPE compliance ‏(No Deforestation, No Peat, No Exploitation). We aim to guarantee that the palm oil and palm kernel oil used as ingredients in our products do not contribute to the deforestation of primary or secondary rainforests with significant ecological value. These include peat lands and other high-carbon stock areas. In addition, we intend to continuously develop traceability and transparency. We also aim to further improve the livelihoods of smallholders while playing our part in climate protection and adaptation to climate change.

Our purchase of palm oil-related materials accounts for less than 0.2 percent of the palm oil and palm kernel oil produced worldwide. The majority of this is palm kernel oil as the basis for surfactants that we use in our detergents and cosmetic products. These materials are at the end of a long and often highly complex supply chain. For this reason, Henkel is committed to driving progress toward achieving sustainable practices across the palm oil industry – along the entire value chain.

We support the physical transformation toward the use of certified products in the industry and the shift in the market toward certified sustainable palm oil products. A multi-stakeholder approach is at the core of our initiative for sustainable management of palm oil and palm kernel oil. Through partnerships, projects and dialog, we engage with key players and are expanding our contribution to sustainable practices in the palm oil industry.

Partnerships

Henkel is a committed founding member of the Forum for Sustainable Palm Oil ‏(FONAP) in Germany and is a member of various working groups. The collaboration of companies, NGOs, associations and political bodies is pursuing the target of significantly increasing the proportion of sustainably produced palm oil, while also improving existing standards and certifications.

We have partnered with Solidaridad on initiatives in Ghana, Honduras, Indonesia, Colombia, Mexico, Nicaragua and Nigeria since 2013. The focus was on training in best practice approaches, including climate- friendly agriculture, along with exerting an influence on policy and involving stakeholders. Many of our projects were successfully completed in 2020 and 2021. In 2021, we were engaged in projects in Colombia, Nicaragua and Nigeria. Building on the very good collaboration with Solidaridad, we have developed specific plans for the next few years to expand the commitment further.

In November 2019, Henkel joined the cross-industry initiative Action for Sustainable Derivatives (ASD) as a founding member, together with other leading consumer goods manufacturers and companies in the oleochemicals industries. 
The primary objective of the initiative is to generate more transparency in the complex value chain for palm derivatives. The resulting shared aspiration is to assess identified risks and to promote the sustainable production and procurement of palm oil and palm kernel oil derivatives. The initiative aims to facilitate the sharing of best practices and solutions in order to comprehensively transform the complex palm oil derivatives sector. In addition, the harmonization of requirements, tools and criteria will create fair conditions of competition for companies and their direct suppliers. It will also reduce the burden on upstream stakeholders in the supply chain. After two years working together, we have achieved collective transparency for 825,000 tons of palm-based materials – nearly double the volume covered during the first year of ASD. This represents around 1.1% of the global palm production and 20-25% of the palm kernel oil-based oleochemicals market.

We are also actively involved in the Roundtable on Sustainable Palm Oil ‏(RSPO). The RSPO standard increasingly includes compliance with human rights along the entire supply chain, in addition to environmental aspects. In April 2021, our Global Supply Chain organization was again successfully certified in line with the RSPO’s supply chain standard.

Preservation of biodiversity 

Conserving species diversity and biodiversity is important to Henkel, as intact ecosystems and soil biodiversity are essential as a basis for sustainable agriculture and raw material production. By promoting smallholder projects in the palm oil and palm kernel oil sector, we are giving consideration to ecological aspects while supporting climate-friendly agriculture.

Building on our 2020 objectives, we have set more far-reaching targets for 2025 that we believe will address the key priorities for successfully transforming the palm oil industry. These targets are focused on the specific challenges where we can make our strongest contribution. The targets for 2025 are:

1. Cover 100 percent of our demand with oils whose responsible sourcing is certified or externally confirmed: 
   We plan to continue to expand the certification of our raw materials in accordance with RSPO’s Mass Balance model. We are also aiming at certification according to the RSPO’s segregation model for the portion of palm oil and palm kernel oil that is directly sourced. We have achieved considerable progress in recent years with a wide range of measures. In fiscal year 2021, we were able to source 93 percent of our total demand for palm oil, palm kernel oil and its derivatives, which are mainly used by Henkel, as certified raw materials in line with the RSPO’s Mass Balance supply chain model. Despite this strong achievement, we still encounter a lack of availability of RSPO-certified palm oil and palm kernel oil in some of the markets where we operate and for a number of selected derivatives of palm-kernel-oil-based raw materials used in small quantities. In these circumstances we maintain an intensive dialog with our suppliers to look for solutions or rely on the import of certified raw materials. These challenges continued to be compounded in 2021 by shortages in RSPO certification as a consequence of the COVID-19 pandemic. We are confident that we will make further progress in the years ahead, yet we must acknowledge that full transition of our global supply chains to sustainable palm and palm kernel oil remains challenging. 
2. Establish full traceability and transparency of the palm oil and palm kernel oil used in our products: 
   From our activities, we have learned that there is a need for further optimisation with regard to transparency and traceability and that cross-industry initiatives are necessary to make the achievement of the “zero net deforestation” target verifiable. In 2021, we increased traceability rate to the mill to 84 percent and 42 percent to the plantation by engaging with our key suppliers to map our joint palm-based supply chain1. We did this with the support of an external sustainability consultancy. As part of our supplier management activities, we collaborate intensively with our strategic suppliers to ensure the procurement of sustainable raw materials. We use the Sustainable Palm Index (SPI) to assess the progress of our suppliers with respect to their level of supply chain knowledge, sustainable sourcing practices and compliance with the NDPE Principles and human rights. We once again used the SPI to create a compliance profile of our major suppliers of palm oil-based raw materials in 2021. This tool helps us to identify potential improvements and define action plans together with our suppliers. 
3. Improve the livelihood of smallholders and protection of nature: 
   Smallholders produce 40 percent of the world’s palm oil, yet their productivity and quality levels are much lower compared to large plantations. They often lack access to technical knowledge and to financial services that are crucial to improving their production. Some smallholders are also concerned that access to the palm oil market will be limited if their harvests do not meet the criteria set out by the RSPO. This is because many major buyers of palm oil have committed to buying only oil products that are certified as sustainable. 
   We are building on the success of our collaborative projects with smallholders and will continue strengthening our commitment to integrate raw materials delivered by these smallholders into our supply chain. Greater consideration is also given to ecological aspects while supporting climate-friendly agriculture and a positive impact on biodiversity. To date, around 36,400 smallholders have been reached on some 340,000 hectares under cultivation. 

¹ The survey was conducted in 2021 based on the supplier data for 2020.