Problems With Palm Oil | Cost of Production

When the food industry started using palm oil on a large scale in the 1990s, it was meant to be a healthy alternative to animal-derived fats like butter and tallow. Today, palm oil is often synonymous with environmental and ethical issues resulting from intensive production in parts of Southeast Asia. Problems with palm oil stem from an unrelenting global demand and developing economies' willingness to supply.

Where Does Palm Oil Originate From?

Indonesia and Malaysia produce most of the palm oil we consume today. Although the oil palm tree, Elaeis guineensis Jacq., is not native to these countries, they offered a favourable climatic and economic setting for the palm oil industry to flourish.¹ What started as a small enterprise in the 1980s grew exponentially in the late 90s.¹ During the early production years, this palm oil boom was thought to benefit everyone involved. Several industries, such as food processing, cosmetics, and biofuels, were able to use palm oil to bring down their production costs and reduce dependence on animal-based fats. In return, the Indonesian and Malaysian economies received a big boost. The expansion of oil palm plantations has been possible because of financial support from many European banks and investors from the Middle East, China, and India.²

What Are the Environmental Impacts of Palm Oil?

Today, oil palm agriculture is arguably the greatest immediate threat to biodiversity in Southeast Asia.³ This is attributed to large-scale land clearing of tropical forests to make way for palm plantations. When forests are converted into plantations, the health of entire ecosystems is threatened. This leads to a loss of biodiversity and endangers the survival of certain species impacted by drastic habitat changes.

Palm Oil Effects on Animals

The critically endangered Bornean Orangutan is perhaps the most notorious example of an animal impacted heavily by palm oil production. Bornean Orangutans are native to the forests of Borneo - an island territory shared by Indonesia, Malaysia, and Brunei. Between 2000 and 2018, Borneo lost 6.3 million hectares of forest cover.⁴ Of this, 39% was taken down for creating new oil palm plantations.⁴ Many animals, including orangutans, were rehabilitated into adjacent forests. Rehabilitated animals often fail to adjust to their new environments due to competition from existing inhabitants.⁴ Those that stay back on the plantations are known to damage oil palm crops, leading to conflict with farmers concerned about loss of income.⁵ Some other animals that have been pushed to the brink of extinction because of unchecked forest conversion include the Sumatran Elephant, Bornean Pygmy Elephant, Sumatran Rhino, and Sumatran Tiger.⁶

Editor's note: Oil palm is the most efficient oilseed crop in the world. It takes significantly more land to produce the same amount of oil using different crops. For this reason, some industry experts would prefer to see palm oil become more sustainable rather than switch to different, less efficient crops that could further drive deforestation.

Human Impacts

Besides wildlife, these forests are home to millions of Indigenous people. As experienced by other Indigenous people worldwide, substantiating land rights over forests can be a legally challenging process. Due to lack of agency, Indigenous people may be forced to settle for less than commensurate compensation that governments offer them for moving out of the forest.² In many regions in Indonesia and Malaysia, they are offered employment in the plantation or a share in the profit earned from producing palm oil. Often, these promises are not kept.² In recent years, media reports and civil society organisations have shed light on hazardous working conditions on palm oil plantations and in mills.⁷ Child labour, bonded labour, ill-treatment of workers, withholding of wages, misleading terms of employment, and threats of violence are known to be rampant in the industry.⁷

Palm Oil and Pollution

Another concern that arises from deforestation is air pollution. The technique for taking these forests down is known as ‘slash and burn’. This method involves cutting down trees and then setting the remains on fire to create a clear field. Burning several hectares of forest at once gives rise to haze – an atmospheric phenomenon in which dust and smoke obscure the clarity of the sky.⁸

The production process itself also contributes to pollution. Wastewater generated during production is known as palm oil mill effluent (POME). It releases large amounts of greenhouse gases and must be treated before being discharged.⁹ If untreated, POME is released into ponds or rivers, where it endangers the lives of fish and water birds.⁹

Can Palm Oil Be Sustainable?

Palm oil has become so deeply intertwined in our lives that simple, direct actions such as boycotts against products are unlikely to improve the situation.³ In 2018, the sector directly employed 721,000 smallholders and labourers in Malaysia and 4 million in Indonesia.¹⁰ Through related activities, it employed a further 11 million in the two countries.¹⁰ If consumers around the world were to suddenly boycott all products containing palm oil, it would leave hundreds of thousands of workers in Southeast Asia without employment.

But can palm oil be sustainable? Although the current situation appears bleak, researchers remain optimistic about the possibility of turning around the problems with palm oil.³ Through collective action, the palm oil we consume can be produced more responsibly. As consumers, we can make a difference by pushing our favourite food brands to use palm oil that has been certified for sustainability. Whenever possible, purchasing from brands that declare their palm oil as certified for sustainability can help nudge the food industry in the right direction. As citizens, we can ask our governments to do more as well. Governments of producing countries play an important role in helping the palm oil industry become more sustainable. Intergovernmental organisations (such as the United Nations) and relevant civil societies must continue to pressure the Indonesian and Malaysian governments to stop converting forests into insufficiently regulated palm plantations.³ Industries that purchase palm oil on a large scale and governments of countries where these industries are incorporated must demand that the oil they purchase is certified for environmental and social sustainability.³

Find out more about how palm oil is made and how we use it