Palm Oil Dashboard

Kao recognizes that its business is dependent on natural capital and strives to procure natural resources sustainably. In particular, we position palm oil and palm kernel oil, which are the main raw materials for surfactants widely used in our main products such as detergents and shampoos, as its most important natural resources.

Palm oil and palm kernel oil are widely used as raw materials for food, biodiesel fuel, detergents, cosmetics, etc., and are the world’s most produced oils from oil palms. More than 80% of palm oil and palm kernel oil are produced in Indonesia and Malaysia, in the tropical region between 20 degrees south latitude and 17 degrees north latitude across the equator. The volume of palm oil produced continues to increase yearly due to the world’s increasing demand for oils and fat, and the area of farms continues to expand.

The oil palm fruit (FFB/Fresh Fruit Bunch), which is the raw material for palm oil, can be harvested throughout the year, and the yield per unit area (oil amount) is large. Due to its high production efficiency, it has higher price advantage compared to other oilseed crops. In addition, the millions of oil palm smallholders in Indonesia and Malaysia make a living by selling oil palm fruits, making it an important local industry. However, in palm oil production areas, illegal deforestation and the development of carbon dioxide-rich peatlands for the development of new farms have an impact on biodiversity and an increase in carbon dioxide emissions. There are issues such as disputes over land ownership registration between farm development companies and indigenous peoples, and human rights issues for workers working on farms. In addition, independent smallholders lack the skills to improve productivity, and the limited knowledge and means of acquiring palm oil certification is a major issue.

In order to solve these palm oil issues, plantation companies and oil suppliers involved in the palm oil industry, companies using palm oil around the world, and NGOs are promoting activities to solve these issues and we are also promoting sustainable palm oil procurement initiatives.

Kao commits deforestation free for sustainable procurement by 2025, and requires all of its third-party suppliers, their corporate groups defined by Accountability Framework initiative (AFi), and their investee companies including joint ventures to adopt the No Deforestation, No Peat, No Exploitation (NDPE) policies, to prohibit conversion and degradation of natural ecosystems, to preserve biodiversity, High Conservation Value Forests (HCVF) defined by HCV Network, High Carbon Stock Forests (HCSF) defined by HCSA (High Carbon Stock Approach) and peatlands, to prohibit use of fire for development, and to respect the human rights of all people involved in the supply chain and the rights of workers, indigenous people, and local communities, regarding all their forest-risk commodities’ supply chains, including palm oil. We are proceeding to seek and confirm strict compliance with Free Prior Informed Consent (FPIC) of the communities. We have a zero-tolerance policy in place for its supply chains regarding violence, criminalization or intimidation of Human Rights Defenders (HRDs).

We ensure suppliers and our entire supply chain through its suppliers to comply with the above policies thoroughly, prioritize purchasing from those suppliers who implements them and conducts due diligence. When finding non-compliant suppliers, we request them to make improvements, confirm improvement status, and retain the option to terminate its business contracts with them in accordance with its corporate protocols.

To begin with its dialogues with local oil palm smallholders, cooperating with oil suppliers by means of traceability information and satellite monitoring, we are strengthening its activities in these areas to address key challenges in improving sustainability. We will also update external stakeholders such as NGOs, and further encourage improvements through dialogues with them.

To address challenges in sustainable palm oil procurement supply chains, Kao is promoting the following activities.

To promote supply chain transparency, Kao regularly obtains latest traceability data from suppliers and discloses the list of mills on our supply chain. We identify the location of mills on mill map and monitor and verify the risk of illegal deforestation since our cut-off date of November, 2018 and the development of carbon dioxide-rich peatlands by means of the satellite monitoring data from GLOBAL FOREST WATCH and EARTH DATA NASA, information of peatland from PROTECTED PLANET within a range of 50 km from a palm oil mill, NDPE survey to suppliers and information from NGOs. When finding risks, we request suppliers to confirm situations, make improvements and confirm improvement status. In addition, we regularly exchange information with our major suppliers to confirm the latest monitoring status of grievances and to strengthen our supply chain's compliance with NDPE. Moreover, we conduct a Palm Oil Forest Footprint assessment partnering with Earthworm Foundation, an international non-profit organization that supports the development of sustainable supply chains, to gain a deeper understanding of the risks and opportunities within our palm oil supply chain. By understanding the environmental risks such as forest and peatland development in our sourcing areas, as well as the rights of indigenous peoples and local communities in customary land, We aim to formulate strategies for a sustainable supply chain.

Kao regularly conducts NDPE Survey to our direct suppliers in palm oil supply chain to assess their NDPE commitments and compliance. Intending to perform a comprehensive and independent survey using expert knowledge, we partner with Preferred by Nature, an international non-profit organization that supports sustainable business practices, to develop the survey instrument, conduct the survey, and prepare the report.

We also promote human rights and environmental due diligence of our suppliers by utilizing Sedex, an international platform supporting responsible sourcing, and the CDP Supply Chain Program. In addition, we identify human rights and environment risks in our supply chains through third-party on-site audits (SMETA audits).

Through these activities in collaboration with third-party organizations, we deepen dialogue with our suppliers and utilize the findings to promote responsible procurement activities.

The SMILE (SMallholders Inclusion for better Livelihood & Empowerment) Program is a collaborative effort among Kao, Apical Group, a leading vegetable oil processor, and Asian Agri, a plantation and palm oil company, to establish a sustainable palm oil supply chain. Over the 11 years from 2020 to 2030, the program aims to support approximately 5,000 independent oil palm smallholders in North Sumatra, Riau, Jambi in Indonesia, which are especially important areas for our sourcing, in order to improve productivity and secure sustainable palm oil certification (RSPO). Smallholders participated in the SMILE program in 2020 saw an average yield increase of 56% (FY2021 results). In addition, we purchase RSPO credits from independent oil palm smallholders who participate in SMILE Program and provides the Adjuvant series which is an agrochemical spreader expected to reduce the use of agrochemical by getting the agrochemical to adhere better to the plant surface.

The Kao Grievance Mechanism (KGM), managed in collaboration with Caux Round Table Japan (CRT Japan), an NPO that forms a network of business leaders to promote sustainable and socially responsible business, is a grievance mechanism that targets independent oil palm smallholders in Indonesia who link our supply chain. KGM aligns with UN Guiding Principles’ effectiveness criteria for grievance mechanism, prioritizing independent oil palm smallholders’ (farmers’) accessibility and continuous consultation for user-centric design and performance improvement.

Under KGM, Kao, which uses palm oil, and the CRT Japan, together with oil suppliers and plantation companies, receive complaints from independent oil palm smallholders (farmers) in the local language (Indonesian) via a smartphone system (Suara Petani (Farmer’s voice)) jointly developed by the two companies about matters such as human rights violations and land disputes, and inquiries about matters closely related to plantation operations (obtaining RSPO certification, labor safety during plantation work, the timing of replacing oil palms, how to purchase fertilizer, etc.). We investigate, address, resolve and follow up the received complaints and reports them with regular disclosure of the grievance list.

We are stepping up our efforts to address fundamental societal and environmental issues, particularly human rights, by monitoring risks related to human rights and the environment, as well as improving the productivity of independent oil palm smallholders. We visit target areas to promote awareness of the Kao Grievance Mechanism and strive to maintain an effective grievance mechanism. When finding non-compliance on our supply chain, we request suppliers to make improvements, confirm improvement status, and retain the option to terminate its business contracts with them in accordance with its corporate protocols.

Kao has been a member of Roundtable on Sustainable Palm Oil (RSPO), which is a non-profit organization established in 2004 for the purpose of sustainable palm oil production and use, since 2007 and has been procuring RSPO-certified products. We have also been a member of the Japan Sustainable Palm Oil Network (JaSPON), which is a non-profit organization that promotes the procurement and consumption of sustainable palm oil in Japan, since its establishment in 2019. In addition, we purchase independent smallholder credits from SMILE program and from the independent oil palm smallholders supported by WWF Indonesia.