Unilever details how it is evolving its purchases of palm oil to include direct sourcing from independent mills and smallholder farmers; efforts will increase availability of traceable and deforestation-free supply chains for palm oil production

At Unilever, we support and encourage the use of sustainable and deforestation-free palm oil. However, sourcing the traceable palm oil that we require can be challenging, due to high demand for the limited supply of these materials.

That’s why we are evolving how we buy palm oil to include direct sourcing. It allows us to get closer to the origin of our materials and improve the livelihoods of the people we are working with, while increasing the availability of traceable and deforestation-free palm oil.

What is direct sourcing?

Direct sourcing involves working with primary producers and mills to source our palm oil directly. We’re doing this because to drive real change in palm oil production, we see the need to engage sections of the industry that have traditionally been left out of the sustainable supply chain. This includes independent mills and independent smallholder farmers, who are among the most important stewards of the land and, in Malaysia and Indonesia alone, represent approximately 40% of the total area for oil palm production ¹ .

Without support, these independent mills and smallholder farmers – who are not contracted to sell to big producers and suppliers – have little access to the resources needed to adopt sustainable practices, which are increasingly important, given the growing regulations on traceable and deforestation-free commodity supply chains.

This is why we have begun directly purchasing palm oil for our North Sumatra processing facility, Unilever Oleochemical Indonesia, from nearby independent mills. We are currently working with 12 independent mills, investing in programmes that help them improve their sourcing practices, including smallholder mapping and learning to monitor, report and verify deforestation in their supply base. The aim is that mills and their smallholder supply base will eventually achieve Roundtable on Sustainable Palm Oil (RSPO) or Indonesian Sustainable Palm Oil (ISPO) certification.

Purchasing directly from mills creates demand for sustainably produced palm oil which gives smallholders, mills and suppliers an incentive to change their processes to pursue higher levels of sustainability. It also means that more of the profits go straight to the people growing and processing the oil palm fruit. This builds the smallholders’ ability to increase the income available from their existing crops, which can lessen the incentive for more forests to be cleared for farmable land.

With consent from the smallholders and farmers, we also partner with the mills to map the smallholder farmers that supply them.

Mapping pinpoints the precise location of a plantation and clarifies the location of the smallholders in our supply chain. It helps identify links between smallholders and mills so we can gain more traceability and transparency in our supply chain. It also helps mills to strengthen their relationship with the smallholder farmers, who usually sell to whoever offers the best price and are not committed to selling to any one mill.

Our impact through smallholder programmes

Putting our smallholders on the map

As a first step, we have already achieved half of our target to map 40,000 smallholder farmers. Through mapping, we can also develop a better understanding of the specific challenges faced by smallholders, so we can tailor our programmes to better suit their needs and support them in getting trained and certified.

Ultimately, our direct sourcing strategy will not only ensure Unilever has a traceable and deforestation-free palm supply chain but will also help to increase the amount of certified sustainable and verified deforestation-free palm oil within the industry as a whole.

It also helps us fulfil our ambition to create a demonstrable impact for people and planet, bringing us closer to closing the gap to a living income and protecting and restoring the environment.