Sustainability performance assessment for palm oil producers

Posted on 22 Feb 2021
Updated on 22 Feb 2021
2-minute read

ISF designed an evaluation tool to measure the environmental impact of palm oil production, and applied it to nine operations in order to guide sustainable investment.

Palm oil is one of the most versatile vegetable oils used in the world today, with applications ranging from food and pharmaceuticals to cosmetics, cleaning products and biofuels. However, palm oil production is a major driver of deforestation and habitat loss in some of the most biodiverse areas in Asia and Africa. There are also concerns regarding the exploitation of workers and the land rights of local communities. Investors can play a key role in influencing the behaviours of the companies they invest in and their supply chains. For this reason, Stewart Investors commissioned ISF to assess the sustainability performance of nine key palm oil producers and their change over the past ten years. ISF developed an assessment framework to assess the environmental, social and governance sustainability of palm oil producers.

This included environmental criteria for deforestation, biodiversity, pest management and emissions, social criteria for decent work, community impacts and land rights, including for smallholders and governance criteria for responsible sourcing, transparency, and conflict and grievance mechanisms.

A total of 37 indicators sit under the criteria that were derived from certification bodies in the palm oil sector. The scores were calculated using a sustainability performance spectrum that assessed the company’s level of action against each indicator from 0 (no action) to 5 (systemic action). The results vary significantly between the highest and lowest performing companies, showing that there is still a wide range of action being taken on sustainability by palm oil producers, and plenty of room for improvement.