We continue to engage vendors and work with our partners to support transformation of the palm industry towards a sustainable supply.
It is used in hundreds of products by a wide range of companies.
The majority of the world’s palm oil comes from South East Asia. Palm products are raising concerns, because of the increasing deforestation of indigenous forest in this region, which is being converted to plantations for agriculture products, like palm oil. Concerns include environmental and social issues arising from deforestation, abuse of worker rights and the impact of those on local communities.
We believe that advocacy and helping instil practises and structure in the industry is the best approach to create lasting change. Simply banning some agricultural products, will likely mean production will shift to other agricultural commodities. With an additional 1 billion people in the world by 2030, we need to transform food production to deliver sustainable nutrition. We need to make sure food production is efficient, and does not drive further deforestation or environmental degradation, but in fact helps protect and restore ecosystems.
Achieving change will help the tens of thousands of people involved in the industry as well as the environment. Part of our approach includes collaboration with similar minded organisations and NGOs who are working on the ground. This includes transparency of our supply chain and traceability of the product we use. We are committed to sourcing only sustainably harvested palm oil, and are working with suppliers to achieve this by 2020.
We have been active in palm product sustainability since 2009 and have done the following:
Been an RSPO member since 2009. The RSPO is committed to making sustainable palm oil the norm
Established a Palm Product Standard in 2016 to ensure the products we use meet sustainability best practice. All our vendors of palm products must publicly commit to “No Deforestation, No Peatland Development, and No Exploitation” and have business processes in place to meet compliance
Fonterra worked with The Forest Trust (TFT), a leading NGO supporting sustainability transformation in the palm industry, to evaluate performance of our supply chain and compliance with our standard. So far, we have confirmed 96.7 percent traceability to mill – knowing the source
All our Palm Kernel Expeller, a by-product of the palm oil industry, is supplied by Wilmar International, who was the first to implement ‘No Deforestation, No Peat, No Exploitation.’ They have a strict ban on deforestation and exploitation of labour
Palm oil is used for a variety of reasons including to enhance texture and to bond (emulsify) ingredients or to provide supplementary fats. Palm Kernel Expeller (PKE) is a by-product of the palm oil industry and is used a supplementary feed for cows, such as during drought when grass growth is low. We sell PKE through our rural retail stores.
PKE is brought into New Zealand by a joint venture between Wilmar International and Fonterra. The joint venture company is called International Nutritionals Limited. Wilmar was the first to implement a ‘No Deforestation, No Peat, No Exploitation Policy’ and is leading industry suppliers in changing practises, working with The Forest Trust to drive sustainability transformation on the ground.
Palm oil and palm kernel oil are vegetable oils derived from palm fruit which are widely used by food manufacturers globally in an extensive range of products. Both are used by Fonterra as an ingredient in some products to enhance texture and to bond (emulsify) the ingredients, or to provide supplementary fats.
Sustainability is a priority for us, and this includes being careful about where we source our ingredients. We support the production of certified sustainable palm oil and Fonterra is a member of the Roundtable on Sustainable Palm Oil (RSPO).
In 2017, Fonterra procured 15,847MT of palm oil ingredients, all of which was from one of the following RSPO supply chain models:
7 per cent was from RSPO-certified segregated sources where sustainable palm oil from different certified sources is kept separate from non-certified palm oil throughout the supply chain
51 per cent was from ‘mass balance’ sources, where sustainable palm oil from certified sources is mixed with non-certified palm oil throughout the supply chain
42 per cent was from ‘book and claim’ sources, where the supply chain is not monitored but credits are purchased from RSPO-certified growers
As part of the commitments outlined in the Fonterra Palm Products Standard, we are working towards a goal of 100 per cent of our palm oil supply coming from RSPO-certified segregated supply by the end of 2018. We are facing challenges with supply chains in markets outside of Australia and New Zealand, and we are continuing to work with suppliers to achieve this target.
We expect to achieve the following for direct palm oil purchases:
1) 100 per cent Segregated supply by the end of 2018 for Australia and New Zealand (representing approximately 70 per cent of the total volume of palm oil procured by Fonterra)
2) 100 per cent Mass Balance supply for all regions by December 2019
3) 100 per cent Segregated supply for all regions by the December 2020
We will continue to work with suppliers during this time and will transition supply as soon as possible.
All Fonterra Brands New Zealand products fully comply with Australia, New Zealand and international food safety standards, and all Tip Top and Kāpiti ice creams and ice blocks are palm oil free.
Palm Kernel Expeller (PKE)
PKE can help meet cows’ nutritional needs, in particular, during adverse weather such as droughts when grass growth is low. Pasture is, and will remain, the main source of feed in New Zealand – it’s one of our competitive advantages.
Our farmers’ cows that supply milk to Fonterra New Zealand consume on average 85 per cent of their diet as grass, which can also include grass silage, hay and forage crops. PKE represents less than 5 per cent of total feed consumed by our farmers’ cows.
PKE sold by Fonterra’s Farm Source stores in New Zealand is bought through International Nutritionals Ltd (INL), who import it from a single source, Wilmar International. Wilmar have led the palm industry, being the first to implement a "No-deforestation, No-peat, No-exploitation” policy.
The majority of the PKE sourced by INL originates from Wilmar’s own facilities in Malaysia and Indonesia, with a small portion from third-party suppliers.
We have 94 per cent traceability to mill, and 19 per cent traceability to plantation for PKE imported for the year to December 2017.
We have been working closely with The Forest Trust and our suppliers to increase traceability and transparency, as well as support sustainability transformation in the palm sector.
Fonterra also believes that protecting New Zealand from foreign bio-security risks is of utmost importance. We fully support the Ministry for Primary Industries (MPI) ongoing actions to strengthen New Zealand’s biosecurity systems, and we import exclusively from MPI-approved facilities.
The Wilmar processing plants are located in gated industrial complexes beside export ports and are ISO9002 certified. The PKE is mechanically processed under high temperatures and shipped within a month of production. As an additional precaution, all PKE is fumigated prior to shipment and there are several physical inspections on arrival.
For further information on our PKE supply chain refer to: