9 May 2014

Palm oil and deforestation

What are biofuels produced from?

Biofuels are produced from biomass. In practice, any biodegradable material can be used to produce fuel or fuel gas. This includes agricultural products such as vegetable oil, cereals, and sugar; organic waste and residues from industry and municipalities can also be converted into fuel. There is no shortage of possibilities out there. The renewable fuels story is just beginning and the emphasis at the moment is on waste and residues. Public discussion seems to have become stuck on palm oil, however, so let’s dig a little deeper.

A small step for an oil company, but a giant leap for the palm oil trade

The global palm oil trade has been based on a very simple model: collecting oil palm fruit from growers, pressing it to produce oil, transporting the oil to nearby ports, and shipping it to storage facilities in places like Rotterdam, from where it is sold in bulk to customers worldwide.

More than 50 million tons of palm oil are produced annually. The biggest customer, the food industry, has had a modest set of requirements when it comes to the quality of the palm oil it buys: free fatty acid content, the amount of impurities and water it contains, and color. The country of origin, let alone the province or pressing plant where it comes from, has not been an issue or even recorded. All of us use numerous products containing palm oil produced and supplied like this on a regular basis, whether we know it or not.

Neste Oil’s arrival on the palm oil market some 10 years ago brought a completely new way of doing business and transformed the traditional, complicated network of agents and trading houses. Neste Oil bypassed the traditional system by working directly with palm oil producers, which it selected on the basis of how committed they were to sustainability in their operations.

Was such a radical change necessary? It was essential, as the old system was incapable of tracing a batch of oil back to the plantation where it came from. Neste Oil’s approach could do this and enabled the company to know where the raw material it bought came from. It also ensures that Neste Oil can be sure that forestland has not been cleared to produce it, that plantations have not been carved out of wetlands or peat land, and that operations are above board in all other respects. This is further confirmed by verification carried out by impartial third-party experts.

Neste Oil has brought a completely new way of doing business in the palm oil industry.

Using the mass balance principle

The first shipment of completely segregated palm oil arrived at Neste Oil’s Porvoo refinery in the early summer of 2008. European regulations do not require such a strict form of traceability, however. They state that a sufficient degree of certainty can be achieved using the mass balance principle – based on detailed accounts kept by producers, logistics companies, and fuel refiners – to determine a product’s origin. It should be noted that this requirement only covers biofuel producers; the majority of palm oil users, which buy over 80% of commercial palm oil, are allowed to continue using the traditional trading system.

Deforestation is continuing, action is needed now

The world’s rainforests and biodiversity are under threat on a number of fronts today. Population growth, poverty, mining, construction, irresponsible forest usage, and the uncontrolled expansion of agriculture are among the most prominent factors. Oil palm plantations have also expanded into areas where they should not, in Southeast Asia for example.

All of this means that it is extremely important to recognize the impact that all forms of land use have on the environment and create the methods needed to make traceability possible and ensure that land is protected. The criteria and methods already adopted by the biofuel industry set a good example here.

A recent project led by the Food and Agriculture Organization (FAO) investigated what happened to the world’s forests between 1990 and 2010 with the help of over 900 experts from 178 countries. The conclusion was clear: 135 million hectares of forest were lost during these two decades, equivalent to the combined surface area of Italy, Spain, and France. Luckily, the pace of this destruction is declining. All the same, deforestation in South America and Africa is continuing at a worrying rate.

The global food industry has shown some welcome initiative in supporting a number of sustainability-related projects. Getting the giants in the industry involved in active sustainability-related work is essential to stopping the loss of the world’s forests. Deforestation is such a massive phenomenon that the biofuel industry alone cannot stop it.

Forestland is still being lost a rapid pace. 10 hectares are lost for ever every minute, equivalent to the island of Lauttasaari in Helsinki every half hour and the Black Forest in Germany every 42 days. Efforts aimed at preventing deforestation have become a priority for many people around the world. What we need now is more evidence that these efforts are succeeding.

Read more about Neste Oil's sustainable supply chain from our Sustainability Report.

Stopping deforestation requires real actions and successes.

Pekka Tuovinen
Sustainability and Supplier Compliance, Neste