Sustainable Palm Oil Supply Chains : Complexity, Custody and Contention

Paper delivered at the 21st Logistics Research Network annual conference 2016, 7th-9th September 2016, Hull. Abstract Purpose: The sustainability of oil palm cultivation is highly contentious. Demand for the product is strong, albeit with the market being largely divided between the bulk sale of oil to Asian markets and premium certified sustainable palm products to Europe. These disparate end-user markets place different production demands on upstream suppliers. This paper will explore the complex and contentious nature of sustainability in the context of the palm oil supply chain. Specifically, this study considers the economic, ethical and environmental aspects emerging from efforts to create sustainable palm oil supply chains with a view to developing supply chain ‘regulation without government’ as a possible solution. Research Approach: Case-based research involved empirical observation of upstream actors, document analysis and consequent theory testing through semi-structured interviews with growers, mills, refiners, certifiers of sustainable palm oil, NGOs, retailers and leading European manufacturers of palm oil containing products. Findings and Originality: Different interpretations of sustainability have created conflict at the point of production with what are perceived to be Western values regularly conflicting with the perceived needs of palm oil producing countries. Traceable supply chain custodies created by large downstream manufacturers may isolate smallholders and reduce their ability to be incorporated into some certification schemes. Though downstream actors can pay a significant value-chain premium for certified products, due to a wider lack of global demand for certified palm oil, sustainable products are ending up in other supply chains with no premium being paid to growers. Research Impact: The presented study is relatively unique in palm oil research for its empirical grounding, bringing together the first-hand insight, thoughts and perceptions of stakeholders throughout the supply chain. Additionally, this paper contributes to the reactive-proactive continuum theory for sustainable supply chain practices by discussing how key stakeholders influence behaviour. Practical Impact: Insights from this research will help raise awareness of the supply chain dynamics of the palm oil industry, the challenges faced by upstream buyers and how well-meaning efforts to support socio-economic development, from various stakeholders, potentially harms efforts to drive sustainable production of oil palm. Alternative routes for developing sustainable supply chains should be initiated from within the supply chains rather than solely through external activism. The implications of this are far-reaching as the consumer base for palm oil continues to grow globally