‘We are on a learning journey that goes beyond the baseline for responsible palm oil’: Ferrero updates Palm Oil Charter

Ferrero launched its first Palm Oil Charter in 2013 to tackle deforestation and social issues in its palm oil supply chain. This public commitment on sustainable palm oil focused on ensuring supplies were 100% RSPO certified segregated sustainable palm oil that could be traced back to plantations. It required suppliers to not clear High Carbon Stock forests, use fire to clear land or plant on peat soils.

Progress has been significant. By 2015, all of Ferrero’s palm oil was RSPO-certified and traceable. The company also reports ‘active membership’ in POIG (Palm Oil Innovation Group) and HCSA (High Carbon Stock Approach). These efforts have not gone un-noticed. In 2020, the WWF Palm Oil Buyers Scorecard rated the Luxembourg-headquartered confectioner as number one out of 173 businesses for its sustainable palm sourcing policies.

“With a score of 21.5 out of 22, WWF ranks Ferrero as leading the industry of major global retailers, consumer goods manufacturers and food service companies. Ferrero is especially recognised for its efforts that address the issue of deforestation in tropical areas and for the transparency of its supply chain. This result is a very important recognition for our efforts in sustainable palm oil and a great encouragement to continue our journey,”​ a spokesperson for the company told FoodNavigator. “That said, deforestation is a global challenge, a shared responsibility for all actors in commodity-based supply chains and no single company can tackle deforestation alone.”​

Indeed, recent years have seen the industry rally around efforts to reduce palm-linked deforestation - and it would appear that this drive is seeing some success. In its 2019-2020 Global Forest Review, the World Resources Institute found that, in contrast to a 12% increase in global rainforest destruction, Indonesia and Malaysia represented a ‘bright spot of hope’ for tropical forests with primary forest loss declining for a forth year in a row in both countries. WRI linked this to governmental action as well as commitments made by the private sector. No Deforestation, No Peat and No Exploitation (NDPE) Commitments now cover 83% of the palm oil refining capacity in the countries, the NGO noted.

Moving beyond 'high certification standards' 

As the food sector begins to see the green shoots of work to sever palm’s links with deforestation, for Ferrero, the time is ripe to accelerate action. 

“We take a continuous improvement approach to our value chain and understand the environmental and societal challenges tied to the palm oil industry... We look forward to continue our learning journey and go beyond high certification standards with concrete actions that contribute to a more sustainable industry,”​ Marco Gonçalves, Ferrero's Chief Procurement & Hazelnut Company Officer said.

To this end, the company has updated its Palm Oil Charter to progress from what it described as the ‘baseline’ standards for sustainable palm oil it set out in 2013.

“Our first Palm Oil Charter served as a driver for the development of our responsible palm oil supply chain; a public commitment that aimed to address the leading causes of deforestation and social issues. Since then, we have been on an ongoing learning journey that goes beyond what we consider to be the baseline for securing a responsible palm oil supply chain,​” the spokesperson elaborated.

“We understood the importance to strengthen our commitments and actions and decided to do this through an updated Charter. Based on our continuous improvement approach, in this journey we better understood the specific challenges in the palm oil sector and how to address these by benchmarking and investigating current practices. We also understood the importance of developing clear responsible sourcing commitments that we have included in the Charter, to achieve a supply chain that is fair, sustainable and transparent.”​

So, what does the future of Ferrero’s sustainable palm oil strategy hold?

A key learning for Ferrero on its journey to sustainable palm oil has been the importance of transparency. Since 2018, the company has published a list of mills and fresh fruit bunch (FFB) sources (including smallholders) that it sources from every six months. It also makes the Universal Mill List identification numbers public so that identification and tracking is made as easy as possible for stakeholders.

Collaboration is also crucial. Ferrero says sourcing principles are based on insights generated by close collaboration with stakeholders at every level, from suppliers and NGOs through to academic partners. The new Charter has been developed with Earthworm Foundation, a non-profit organisation focused on positively improving value chains.

According to Bastien Sachet, Earthworm Foundation CEO, the Charter builds on a ‘successful implementation of previous commitments’ and therefore ‘associates words to action’. “Ferrero is demonstrating its commitment to driving environmental and social excellence linked to strong core values and long-term change,”​ he said, characterising the Charter as an industry leading approach. “This Charter will inspire other companies to raise their own bar, as collective leverage and action remains critical to scale impact beyond one company’s supply chain,”​ Sachet noted.

Accelerating action on ‘deeply rooted, complex and interconnected’ environmental and social issues

Ferrero’s new Charter outlines further actions it will take to improve the social and environmental impact of the palm it sources, tackling three strategic areas where environmental and social issues are ‘deeply rooted, complex, and interconnected’. These span human rights, environmental protection and supplier transparency.

On human rights, Ferrero’s 2013 Charter required suppliers to respect ‘the right to Free, Prior, and Informed Consent of indigenous and local communities’ and the ‘strengthening the rights of workers’. The company is moving beyond these ‘essential rights’ by helping smallholders build resilience in the face of environmental and economic volatility through collaboration with governments, NGOs and other stakeholders.

“Changing and extreme weather conditions mean that smallholders have fluctuating yields from year to year making it difficult for them to plan for the future. These changes can also lead to increasing issues with pests and diseases that negatively affect plantation yields. Smallholders are also particularly exposed and vulnerable to the volatility of commodity market prices, which deeply affect their economic resilience. In order to overcome these challenges, we are committed to supporting smallholders in transitioning towards farming businesses models which aim to create greater resilience from agronomic and economic perspectives,”​ we were told.

An example of this work is Ferrero's initiative with local NGO Wild Asia to support and track progress of a project called ‘Group Scheme for Small Producers’ (WAGS). Supported by Ferrero since 2018, the project upskills smallholders by enhancing their productivity and sustainable management practices.

Again demonstrating the overlap between social and environmental goals, the Sustainable Agriculture Network (SAN) - launched in 2020 and fully funded by Ferrero - implements advanced Integrated Pest Management (IPM) and biodiversity conservation practices in Malaysian palm oil production.

Within its environmental ambitions, the Nutella maker has said it wants to become a ‘positive driver to regenerate biodiversity, soils, and water systems’. Building on its 2013 target of a 'no-deforestation' supply chain – including no planting on peat and no using fire to clear land – the company has said it will use the Starling Satellite Monitoring System to identify potential deforestation in the roughly one million hectares of our supply chain.

EU Mandatory Due Diligence a ‘game changer’ for sustainable palm

Echoing the sentiment that Ferrero alone cannot drive the transition to sustainable palm, Francesco Tramontin, VP of Ferrero Group Public Policy Center and EU Institutional Affairs, reiterated the group’s support for EU due diligence legislation proposals.

Last month, the company threw its weight behind an ‘effective EU law’ to address EU-driven global deforestation when it signed a public statement alongside 40 other companies from the CPG and retail space.

Ferrero said it ‘welcomes’ the European Commission’s upcoming proposals on Mandatory Due Diligence and new legislation to minimise the risk of deforestation and forest degradation linked to products distributed throughout the EU. According to the company’s assessment, effective EU legislation is ‘urgently needed’ to tackle these issues and establish a ‘level playing field’ for more sustainable ingredients.

“Our new Palm Oil Charter is an example of Ferrero’s commitment and actions towards responsible palm oil sourcing. But sector-wide change is needed. In this spirit, we believe that proper EU rules applicable to all relevant companies – coupled with the right cooperation framework with producing countries – can be a game-changer in driving palm oil supply chain systemic transformation, as well as preventing negative environmental and human rights impacts,”​ said Tramontin.