Palm oil and soy have created festering social and ecological problems over the past several years for a bevy of reasons. In the case of palm oil, food manufacturers shifted away from hydrogenated oils, which are bad for your heart, to an ingredient that is bad for the Earth’s lungs. The surging demand for palm oil has led to deforestation, human rights violations and the destruction of wildlife habitat, notably in Indonesia and Malaysia. WWF has also decried the threat of mono-crop palm oil plantations in Africa and Latin America.
Soy production has also been problematic, with the conversion of the Amazon rain forest into vast soybean plantations that supply animal feed and meet the growing demand for protein worldwide. In addition to soil erosion and pesticide runoff, many small farmers have been pushed off their land as soy has become the commodity of choice on large plantations in Argentina, Brazil and Paraguay.
Now the food and commodities giant ADM, which has reached over US$80 billion in revenues, says it will develop a no-deforestation policy in a move to source soy and palm oil more responsibly. The change occurred after a shareholder proposal, submitted by Green Century Capital Management and the New York State Common Retirement Fund, requested that ADM set quantitative goals for a reduction in supply chain impacts from deforestation.
Usually shareholder activism poses a huge uphill battle when it comes to convincing companies to change their business practices. In this case, however, ADM decided to rework its policy on how it sources these raw materials. The announcement will be made next month at ADM’s annual shareholder meeting. In return, Green Century Capital Management and the pension fund agreed to pull the shareholder proposal. So, what is going on?
Part of the reason for this changing tone in the food production sector is the growing revulsion at what is occurring within the palm oil industry. The emotional appeal over the destruction of orangutan habitat, for example, is a difficult one to ignore. Furthermore, at a time of growing desertification, drought and environmental degradation, the surging demand for soy and palm oil threaten the world’s rain forests — the destruction of which contributes even more carbon emissions into the Earth’s atmosphere.
According to Green Century Capital Management, ongoing droughts and extreme weather have contributed to a decline in ADM’s profits over the past few years. Reining in the producers and suppliers of soy and palm oil in order to clean up the global food industry is one way to decrease risks related to climate change. In addition, improved environmental stewardship will secure the viability of these corporations’ operations — a point the activist investor NGO Ceres has been making to companies in all sectors for over 25 years.
Customer preferences are also changing as more have become aware of these products' impacts on the planet and people. In the case of soy, consumption of soy milk here in the United States has been in decline. The soy latte inhalers of a few years ago have switched to almond milk, which of course is also problematic. Similar trends could happen to food products containing palm oil if improvements are not made soon.
Some companies, including Dr. Bronner’s, avoid sourcing palm oil from Southeast Asia period. Other firms, such as ADM, are following the standards of the Roundtable on Sustainable Palm Oil, which recently kicked out some members that were not complaint with the organization’s reporting requirements.
Meanwhile, the dominoes in the industry keep falling, and in a more positive way. Cargill, the largest palm oil supplier in the U.S., has shifted toward a more sustainable palm oil sourcing policy. Last summer, ConAgra said it would do the same after shareholder pressure. In contrast, the movement to switch toward more responsible soy has been quiet. Hopefully ADM’s announcement will give those organizations working on cleaning and greening the soy industry a second wind.
Image credit: Achmad Rabin Taim
Leon Kaye, Executive Editor, has written for Triple Pundit since 2010. He is also the Director of Social Media and Engagement for 3BL Media, and the Editor in Chief of CR Magazine. His previous work can be found at The Guardian, Sustainable Brands and CleanTechnica. Kaye is based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas.