A food company’s perspective

Nutella is made by Italian company, Ferrero. It is a delicious ‘chocolate’ spread made of sugar, milk, cocoa, hazelnuts, lecithin (soy), vanillin (an artificial flavour) and palm oil, which is where the controversy about this product begins.

Palm oil is used because it gives Nutella its creamy, smooth texture and is said to heighten the flavour of its ingredients. By using palm oil the hydrogenation process that would produce unhealthy trans fats is avoided. And it lengthens the shelf life of the product because it has a high stability to oxidation. So palm oil is a key ingredient in this top-selling product with a worldwide market. It is said that a jar of Nutella is sold every 2.5 seconds around the world, helping to make the chocolatier company, Ferrero SpA extremely profitable.

But how ‘sustainable’ is the palm oil used in Nutella? Ferrero claims that it is ‘100% certified segregated RSPO’, which means that all the palm oil used in Nutella is kept separated from other, non-certified palm oil, throughout the entire supply chain. In November 2013, the company further strengthened its commitment to responsibly sourcing palm oil through the Ferrero Palm Oil Charter, in order to guarantee that the palm fruit oil used in Nutella does not contribute to deforestation, species extinction, high greenhouse gas emissions or human rights violations. According to Ferrero, its Palm Oil Charter addresses the leading causes of deforestation and creates the optimal balance between the conservation of the environment, community needs and economic benefit and viability.

They are committed to making sure that their palm oil suppliers are:

1. Providing fully traceable oil, while including smallholders.
2. Not clearing High Carbon Stock forests.
3. Not using fire to clear land.
4. Not planting on peat soils.
5. Protecting orang-utans and other endangered species by maintaining High Conservation Value areas.
6. Reporting on the greenhouse gas emissions of their production.
7. Respecting human rights, including the right to Free, Prior, and Informed Consent of indigenous and local communities.
8. Recognizing, respecting and strengthening the rights of workers.
9. Not using paraquat (a herbicide).
10. Actively fighting corruption.

Ferrero has revamped its Palm Oil Charter as of June 2021 to address pressing challenges in a rapidly evolving industry. The Charter aims to go beyond traditional certification standards, such as RSPO, and takes a multi-stakeholder approach involving suppliers, NGOs, and academic partners.

The Three Pillars of the Updated Charter:

1. Human Rights & Social Practices: Ferrero underscores the importance of an equitable and inclusive palm oil value chain. Their commitment extends beyond essential human rights to helping smallholders and local communities build resilience against environmental and economic volatility. They also involve indigenous communities in decisions related to land expansion for agriculture.
2. Environmental Protection & Sustainability: Ferrero is committed to a ‘no-deforestation’ supply chain. The company also uses the Starling Satellite Monitoring System to monitor potential deforestation across one million hectares in their supply chain.
3. Supplier Transparency: Ferrero is fostering a fully transparent approach across its value chain. This includes publishing lists of mills from which they source palm oil, action plans, and yearly progress reports. They also maintain an “Integrity Helpline” to confidentially report any grievances or instances of non-compliance.

Why is the update significant?

• It builds on the success of the initial Charter from 2013.
• Ferrero is setting an example for other companies to elevate their own commitments.
• It comes ahead of the European Commission’s upcoming “due diligence” regulation aimed at minimising the risk of deforestation.

In November 2015 Ferrero became a member of POIG Palm Oil Innovation Group, which is an initiative to reform the palm oil industry, building upon the RSPO standards and commitments. Further, in October 2019, Ferrero became member of HCSA (High Carbon Stock Approach) steering group, which is an initiative with the aim to identify forests in need for protection from deforestation.

As for traceability, the statistics are impressive. As of December 2015, Ferrero could trace the source of 99.5% of their palm oil to individual plantations. This came from 63 mills and 301 plantations located in: Peninsula Malaysia (75.87% of total volumes), Papua New Guinea (18.17%), Insular Malaysia (3.67%), Brazil (1.2%), Indonesia (0.91%), Guatemala (0.1%) and the Solomon Islands (0.08%). 6.34% of the palm oil purchased (by volume) came from approximately 20,941 smallholders or small farmers.

The company’s actions to tackle deforestation in an accountable way have been supported by Greenpeace, who considers Ferrero one of the first and more progressive companies in the world in the implementation of a relevant ‘No Deforestation’ policy.

Why should Ferrero be so assiduous in addressing these challenges? Firstly, they are consumer-facing, they sell large volumes of their product at relatively low margins into supermarket chains and other retailers, so maintaining worldwide volumes are critical to profitability. Because their chocolate hazelnut spread is a ‘luxury’ item, not a food necessity, they are vulnerable to shifts in consumer preferences. It means they need to stay ahead of the game when it comes to potential boycotts of their product because of environmental or human rights violations, whether perceived or real. When palm oil gets bad press, they want to be able to differentiate their practice from that of the rest of the industry. Finally, because of their dominance in the markets for premium palm oil they are among a small group of palm oil users that can cajole and pressure their supply chains to adhere to the highest standards. Other users of palm oil that are not under this level of public scrutiny have fewer incentives to become more responsible to the same extent and over realistic time periods.

Opponents argue that despite current practices, the plantations Ferrero buys from have replaced tropical rain forest and rare species habitats in the past, even if they aren’t expanding into it currently. It’s a complicated situation because Ferrero’s commitments don’t change the expanding impact of the palm oil sector as a whole.