Walmart’s Challenge: Sourcing Sustainable Palm Oil by 2015

Abstract

Walmart has made a public commitment to source 100% certified sustainable palm oil (CSPO) by 2015. This ambitious target poses some big challenges for the organization due to the complexity of the palm oil supply chain. To foster collaboration and transparency among the various stakeholders in the supply chain, from growers down to retailers, Walmart opened a dialogue with the Consumer Goods Forum (CGF), World Wide Fund for Nature (WWF), and the Roundtable on Sustainable Palm Oil (RSPO) with a view to identify key barriers to achieving our goal.

Keywords: Walmart, 2015 goal

Background situation

As the world’s largest retailer, making a publicly stated goal of sourcing 100% certified sustainable palm oil (CSPO) by 2015 has been an important milestone for Walmart. We recognize that palm oil itself is not inherently ‘bad’, and the oil palm crop has significantly higher yields of vegetable oil than soy, rapeseed, and coconut crops. Palm oil production also supports the growth of the emerging and developing economies of the countries where oil palm is grown, primarily in Indonesia and Malaysia. For these reasons, using alternative vegetable oils in our products is not the right solution for Walmart.

The challenges which we have been faced with in sourcing sustainable palm oil and implementing our policy have a lot to do with the complexity of the palm oil industry itself.

Palm oil is a commodity which is present in around 50% of all the products we sell. It is in everything from detergents to sandwiches, as it is an extremely versatile oil. Palm oil often only amounts to a very small percentage of a product, so it is often an ‘invisible’ ingredient simply listed as ‘vegetable oil’ in the ingredients list. To further compound the issues, we have found that demand for sustainable palm oil is not an important issue for our consumers around the world.

Options and action

One of the first actions we took after making our commitment in 2010 was to contact all our suppliers to calculate the amount of palm oil that we use in each of our global markets. Through this process of calculation we realized that Walmart is accountable for 84,000 tons of palm oil and derivatives, or only 0.5% of global palm oil usage, so although we are a large business we use a relatively small amount of palm oil.

With these findings come certain issues: firstly the palm oil supply chains are extremely complex, from the growers, to the mill, to traders/processors, and finally to the refineries where palm oil is split up into different derivatives and fractions; therefore tracing palm oil from source is very difficult. Also, it quickly becomes expensive to keep the supply chains for greater transparency, and at the volumes we are currently using this is not cost effective in the early stages. However, we still want to source CSPO and are aware that in order for the supply chains to increase in efficiency and become affordable to all, we need to act together as an industry.

With this in mind, we started discussions with the Consumer Goods Forum (CGF), World Wide Fund for Nature (WWF), and the Roundtable on Sustainable Palm Oil (RSPO) about the need to come together to discuss the availability of CSPO globally. This culminated in a meeting on 15 June 2012 in Washington DC where it was agreed that this group could support each other in achieving greater uptake of sustainable palm oil by driving collaboration between users and producers of palm oil. A possible focus of this group could be to improve the current conversation flows between stakeholders to make clear our joint requirements for CSPO in order to increase the demand for CSPO.

An important internal initiative for Walmart was the launch of  ‘Lunch and Learns’; this entails different stakeholders within the palm oil industry presenting to the Walmart markets via video conference once a month. So far we have had the RSPO talking about supply chain certifications, GreenPalm explaining the book & claim supply chain option they offer, and Unilever, WWF, and Greenpeace, amongst others. At the last session in August, Cargill presented on how they as traders are supporting the availability of sustainable palm oil. These sessions increase the awareness in the Walmart markets and allow associates to put questions to the experts, building up their knowledge about palm oil and why it is important that the Walmart goal for 2015 is implemented within their respective businesses.

In order to gain a deeper insight into the barriers which Walmart is going to face in working towards the 2015 goal in sourcing sustainable palm oil, we have taken on an intern who is writing her MSc thesis on sustainable palm oil. Her research so far has taken her in three directions. Firstly, she has interviewed key stakeholders and experts within the palm oil industry, from growers, to the WWF, to the RSPO, building up a holistic picture of the current complexities of the sustainable palm oil supply chains. Secondly, she has been interviewing sustainability officers in each of the Walmart markets individually, in order to gain a local perspective on a global issue and understand the specific barriers which each market is facing in sourcing CSPO. Lastly, she has contacted the 10 largest processors and traders to identify who is currently supplying CSPO in segregated and mass balance form, and this information will be passed on to the Walmart buying teams who will then be able to go straight to the traders and start purchasing CSPO.

Outcomes and conclusion

Walmart recognizes that the journey to 100% CSPO is not going to be an easy one: at the moment there appear to be barriers at each point along the supply chain, ranging from cost, to lack of knowledge, to lack of time and resources. That would make a compelling case to revise our original goal; however, we are committed to delivering on this. Furthermore, our scale of operation affords us the ability to encourage the industry to act together, and it is important that this collaboration begins to happen now – 2015 is not too far away but it is an important milestone for Walmart and other companies that have made similar commitments, and we hope it will be a turning point for the palm oil industry.

Prepared by: Julian Walker-Palin in 2012
Position: Former Head of Sustainability, Asda, & Walmart Global Palm Oil Lead
Company: Walmart Inc.

Current Walmart Palm Oil Contact: Mark Eastham
Position: Sustainability Manager, Walmart Inc. & Walmart Global Palm Oil Lead
Contact: Mark.eastham@walmart.com