PepsiCo announced it will stop sourcing palm oil directly — or indirectly from suppliers — from Indofood, one of Indonesia's largest palm oil companies. The beverage and snack company's action follows similar announcements from Cargill; palm oil traders Bunge Loders Croklaan, Wilmar and Golden Agri Resources; and Musim Mas, a major Indonesian palm oil processor.
PepsiCo suspended sourcing palm oil from the company's subsidiary IndoAgri in January after complaints of labor abuses surfaced from plantations and were investigated by the Rainforest Action Network, the International Labor Rights Forum and Indonesian labor rights group OPPUK. The complaints claim there is child labor, low wages and hazardous working conditions, according to Reuters.
Some PepsiCo snacks are produced in Indonesia under a joint venture with Indofood, Reuters noted, but PepsiCo said the joint venture has suspended sourcing palm oil from IndoAgri "pending further progress and visibility" regarding the complaints.
Palm oil is the most used vegetable oil in the world and is also one of the most common ingredients in U.S. food products, according to the Rainforest Action Network. It is known for its smooth and creamy texture and lack of smell — and it's also inexpensive, has a long shelf life and boasts higher yields compared to other oils.
However, palm oil production is controversial because of its environmental impacts. When rainforests are cleared and burned to plant oil palms, it destroys habitat for wildlife such as tigers, elephants and orangutans. Forest-dwelling people are also affected, and deforestation creates greenhouse gas emissions, the World Wildlife Fund has said. According to the United Nations, palm oil plantations in Southeast Asia are a major source of environmental degradation and biodiversity loss.
Palm oil plantations are notorious for using child labor, as well as forcing adults into work. According to a November 2016 report from Amnesty International, Wilmar, the world's leading palm oil processor and merchandiser, sets quotas so high that many children are forced to work alongside their parents and don't go to school. Adult workers are paid low wages — which are often deducted if quotas are not met — and are exposed to toxic chemicals. Wilmar supplies manufacturers including Kellogg, Nestlé and Unilever, Amnesty International said.
Unless PepsiCo's palm oil suppliers change their labor policies and other practices, the company may need to continue finding the ingredient elsewhere. In a list published this past spring, PepsiCo indicated there are 39 other suppliers — including Archer Daniels Midland, Bunge, Cargill and Wilmar. According to ValueWalk, in 2016 PepsiCo purchased 480,000 metric tons of palm oil from 60 direct suppliers, so it could be a significant loss for any companies dropped from its supply chain.
PepsiCo was one of the U.S. food makers making progress on the World Wildlife Fund's most recent palm oil scorecard, which assesses efforts to reduce use of the ingredient and find more sustainable sources. It's likely the company wants to keep building on that reputation, so it reportedly cooks some snack products in sunflower or canola oil.
Since PepsiCo and other U.S. manufacturers have repeatedly been criticized for not doing enough to reduce palm oil use and enhance traceability, consumers will likely be watching to make sure these latest sourcing decisions and transitions to other options continue.
While it takes time, effort and investment, it's not impossible for food makers to phase out the ingredient and become palm oil-free. Enjoy Life Foods received an international certification to that effect this past spring and says eight of its snack products now carry it. In the competitive beverage and snack segments, such moves could be a big draw for consumers looking for sustainability, traceability and a willingness to shift to mission-based manufacturing.