Unilever: Developing a Sustainable Palm Oil Supply Chain

Unilever is dedicated to actively addressing sustainability challenges in the palm oil industry.

The latest evidence of this commitment comes in the form of a new, long-term partnership between the FMCG powerhouse and PT. Perkebunan Nusantara IV (PTPN IV), a state-owned plantation company in Indonesia.

It marks the next chapter in the pair's near-decade-long relationship aimed at developing a sustainable palm oil supply chain that delivers positive impacts for both people and nature. 

"Over the years, we have worked together to improve traceability and transparency of our supply chain," explains Willem Uijen, Chief Supply Chain Officer at Unilever. "Today, we took a step forward to further deepen the integration of our value chains by signing a long-term contract for the supply of palm to Unilever and a mutual commitment to expand PTPN IV’s asset base to produce more sustainable volumes in the future.

"In the past 10 years, Unilever has invested over US$360m in building a world-class oleochemicals facility in Indonesia for the production of sustainable and traceable palm oil derivatives. This deal helps Unilever to continue to leverage this facility to deliver products in line with our people and nature goals.

"This purpose-driven, public-private partnership is key to making the palm oil supply chain more efficient and sustainable, while bringing everyone, including smallholders, along."

Transparency and traceability in palm oil sourcing

Unilever is laser-focused on making its supply chain more transparent, allowing stakeholders to track progress and hold the company accountable. To achieve this, it publishes lists of its palm oil suppliers, including mills and tier-1 suppliers, along with details of their refineries and facilities.

While certified palm oil supply remains limited, Unilever is moving beyond certification alone, shifting its focus towards sourcing from independent mills and smallholder farmers who have historically been excluded from sustainable supply chains.

Independent smallholders often operate without support, leading to low productivity and financial instability, which increases pressure on forests. By working directly with these farmers, Unilever enhances sustainability, traceability and visibility in its supply chain.

Since 2016, Unilever has supported more than 21,000 independent smallholders in Indonesia and Malaysia through training in good agricultural practices. These initiatives help farmers improve productivity, raise incomes and supply high-quality sustainable palm oil.

In addition to agricultural training, Unilever provides guidance on business management and financial skills, equipping smallholders with tools for long-term success.

Supporting smallholders through technology and certification

Unilever has introduced smallholder hubs to provide structured support, aiming to reach an additional 40,000 farmers through new centres in Aceh, North Sumatra and Riau province in Indonesia. In 2023, work began with the first smallholder groups.

Through collaboration with partners such as Fortasbi, IDH and the World Resources Institute, Unilever collects data on farmers’ land, tree quality, soil conditions and challenges, helping the company to tailor support and unlocking economic value for smallholders.

To promote sustainable production, Unilever assists farmers in obtaining the necessary legal documents for certification. Certification not only verifies sustainable practices but also allows farmers to access financial support for replanting oil palms, an expensive but essential process for improving yields.

So far, Unilever has helped more than 8,000 independent smallholders gain certification from the Roundtable on Sustainable Palm Oil (RSPO). It remains one of the largest buyers of Independent Smallholder RSPO credits, purchasing more than 100,000 ISH credits in 2023, generating additional income for farmers.

Most of Unilever’s palm oil still comes from large-scale plantations, many of which were established before its no-deforestation commitments. To ensure compliance with its People & Nature Policy, Unilever embeds sustainability requirements in supplier contracts and collaborates with plantations to implement responsible practices. Its work with PTPN IV since 2018 has provided resources and technical expertise to achieve RSPO certification.

Enhancing traceability with digital innovation

Traders play a crucial role in the palm oil supply chain, purchasing fresh fruit bunches from independent farmers and selling them to mills. However, as fruit from multiple sources is often mixed at collection points, it becomes difficult to verify whether it was produced sustainably.

To address this challenge, Unilever has explored digital solutions for improving traceability. It trialled a crowdsourcing app developed by Premise, which enables users to upload photos and data about collection points, providing greater visibility into the supply chain.

Additionally, in 2023, Unilever partnered with PemPem, a company that has developed an app to digitise transactions and track the flow of fresh fruit bunches from smallholders to mills. PemPem acts as a market intermediary, securing fairer prices for smallholders while improving supply chain transparency. Unilever has onboarded ten mills and 10,000 farmers in Riau and North Sumatra through PemPem, with trading volumes expected to grow in 2024.

Investing in mills

Mills remain a key link in Unilever’s drive for sustainability. The company has trained several dozen in responsible sourcing and production practices, guiding them in the implementation of RSPO best management practices and the High Carbon Stock Approach, an initiative that identifies and protects forests.

When onboarding a mill, Unilever develops a sustainability roadmap embedded in its contract, ensuring compliance with environmental and ethical standards.

Unilever also requires independent mills to disclose where they source fresh fruit bunches, increasing transparency. By leveraging technology partnerships, it is mapping smallholder farms, providing agricultural training and promoting sustainable livelihoods. These efforts aim to reduce deforestation risks while strengthening the economic stability of smallholders.

Ultimately, Unilever’s approach highlights the importance of collaboration, innovation and accountability in transforming the palm oil industry.

As the company continues to drive sustainability initiatives, it remains focused on ensuring fair treatment for smallholders and greater traceability throughout the supply chain.

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