Palm oil, the environmental dilemma - Amundi

Palm oil, used mainly and on a massive scale today by the agri-food and cosmetic industries, is severely criticised.

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Thanks to its high yield and very interesting physical properties for these industries, palm oil is the most consumed vegetable oil in the world. With 62 million tonnes produced annually, it represents 38% of the world production of vegetable oil but occupies less than 10% of the surface of vegetable oil crops. Indonesia and Malaysia are the main producers and provide 85% of palm oil.

However, oil palm cultivation is accused of contributing significantly to the destruction of primary forests, mainly in Indonesia and Malaysia, causing irreversible harm to biodiversity and huge fires, with extremely serious health consequences on local populations and on those of neighbouring countries. Oil palm cultivation also gives rise to many social conflicts due to the non-respect of local communities’ rights to their land, and this holds true for all producing countries.

Finally, palm oil has often been called into question for its high content in saturated fatty acids, which are believed to increase the risk of cardiovascular disease.

This study by Amundi draws up a situational analysis of environmental and social issues related to oil palm plantations by studying a sample of listed companies. Local legislations, private or government certifications, corporate initiatives are all vectors to improve practices. However, despite a significant amount of data and information provided by the various stakeholders, it is very difficult to draw up a clear mapping of the responsibilities of companies, national and local governments and other stakeholders, because transparency, communication and practices vary widely from one party to another.

Some issues are still insufficiently considered by companies and other stakeholders, notably the social issue of human rights, or the environmental issue of greenhouse gas emissions and effluents.

That said, there is a positive development in the practices and transparency shown by companies, even though the sector is regularly affected by very significant controversies.

Under these conditions, the Best-in-Class approach is the best option given the difficulty of substituting other vegetable oils for palm oil, with its attractive characteristics and high yield.

Date of publication: June 2017

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