Problems with Palm Oil | Cost of Production

Originally published on in May 2020.

When the food industry started using palm oil on a large scale in the 1990s, it was meant to be a healthy alternative to animal-derived fats like butter and tallow. Today, palm oil is often synonymous with environmental and ethical issues resulting from intensive production in parts of Southeast Asia. Problems with palm oil stem from an unrelenting global demand and developing economies’ willingness to supply. This versatile vegetable oil has been turned into an environmental nuisance.


Indonesia and Malaysia produce most of the palm oil we consume today. Although the oil palm tree, Elaeis guineensis Jacq., is not native to these countries, they offered a favourable climatic and economic setting for the palm oil industry to flourish.1 What started out as a small enterprise in the 1980s, grew exponentially in the late 90s.1 During early production years, this palm oil boom was thought to benefit everyone involved. Several industries such as food processing, cosmetics, and biofuels were able to use palm oil to bring down their production cost and reduce dependence on animal-based fats. In return, the Indonesian and Malaysian economies received a big boost. The expansion of oil palm plantations has been possible because of financial support from many European banks and investors from the Middle East, China, and India.2


Oil palm agriculture today is arguably the greatest immediate threat to biodiversity in Southeast Asia.3 This is attributed to large scale land clearing of tropical forest to make way for palm plantations. When forests are converted into plantations, the health of entire ecosystems is threatened. This leads to a loss of biodiversity and endangers the survival of certain species impacted by drastic changes to habitats.


The critically endangered Bornean Orangutan is perhaps the most notorious example of animals impacted heavily by palm oil production. Bornean Orangutans are native to the forests of Borneo – an island territory shared by Indonesia, Malaysia, and Brunei. Between 2000 and 2018, Borneo lost 6.3 million hectares of forest cover.4 Of this, 39% was taken down for creating new oil palm plantations.4 Many animals, including orangutans, were rehabilitated into adjacent forests. Rehabilitated animals often fail to adjust to their new environments due to competition from existing inhabitants.4 Those that stay back on the plantations are known to damage oil palm crops, leading to conflict with farmers concerned about loss of income.5 Some other animals that have been pushed to the brink of extinction because of unchecked forest conversion include the Sumatran Elephant, Bornean Pygmy Elephant, Sumatran Rhino, and Sumatran Tiger.6


Besides wildlife, these forests are home to millions of Indigenous people. As experienced by other Indigenous people all around the world, substantiating land rights over forests can be a legally challenging process. Due to lack of agency, Indigenous people may be forced to settle for less than commensurate compensation that governments offer them for moving out of the forest.2 In many regions in Indonesia and Malaysia, they are offered employment in the plantation or a share in the profit earned from producing palm oil. Often, these promises are not kept.2 In recent years, media reports and civil society organisations have shed light on hazardous working conditions on palm oil plantations and in mills.7 Child labour, bonded labour, ill treatment of workers, withholding of wages, misleading terms of employment, and threats of violence are known to be rampant in the industry.7


Another concern that arises from deforestation is air pollution. The technique used for taking these forests down is known as ‘slash and burn’. This method involves cutting down trees and then setting the remains on fire to create a clear field. Burning several hectares of forest at once gives rise to haze – an atmospheric phenomenon in which dust and smoke obscure the clarity of the sky.8

The production process itself also contributes to pollution. Wastewater generated during production is known as palm oil mill effluent (POME). It releases large amounts of greenhouse gases and must be treated before being discharged.9 If untreated, POME is released into ponds or rivers, where it endangers the lives of fish and water birds.9


Palm oil has become so deeply intertwined in our lives that simple, direct actions such as boycotts against products are unlikely to improve the situation.3 In 2018, the sector directly employed 721,000 smallholders and labourers in Malaysia, and 4 million in Indonesia.10 Through allied activities, it employed a further 11 million in the two countries.10 If consumers around the world were to suddenly boycott all products containing palm oil, it would leave hundreds of thousands of workers in Southeast Asia without employment.

But, can palm oil be sustainable? Although the current situation appears bleak, researchers remain optimistic about the possibility of turning around the problems with palm oil.3 Through collective action, the palm oil we consume can be produced in a more responsible manner. As consumers, we can make a difference by pushing our favourite food brands to use palm oil that has been certified for sustainability. Whenever possible, purchasing from brands that declare their palm oil as certified for sustainability can help nudge the food industry in the right direction. As citizens, we can ask our governments to do more as well. Governments of producing countries play an important role in helping the palm oil industry become more sustainable. Intergovernmental organisations (such as the United Nations) and relevant civil societies must continue to pressure the Indonesian and Malaysian governments to stop converting forests into insufficiently regulated palm plantations.3 Industries that purchase palm oil on a large scale, and governments of countries where these industries are incorporated must demand that the oil they purchase is certified for environmental and social sustainability.3

  1. Giacomin (2018). “The Emergence of an Export Cluster: Traders and Palm Oil in Early Twentieth-Century Southeast Asia.” Accessed 11 April 2020.
  2. Colchester (2011). “Palm oil and indigenous peoples in South East Asia.” Accessed 10 April 2020.
  3. Wilcove & Koh (2010). “Addressing the threats to biodiversity from oil-palm agriculture.” Accessed 12 April 2020.
  4. “Palm oil to blame for 39% of forest loss in Borneo since 2000: study.” Reuters. 2019. Accessed 12 April 2020.
  5. “Orangutans Are Hanging on in the Same Palm Oil Plantations That Displace Them”. Scientific American. 2020. Accessed 13 April 2020.
  6. “Endangered species threatened by unsustainable palm oil production”. World Wildlife Fund. 2020. Accessed 12 April 2020.
  7. “Responsible Palm Oil Production: Guidance document links promise to progress”. Business & Human Rights Resource Centre. Accessed 24 April 2020.
  8. “Burning in palm oil plantations causes haze in populated cities in Indonesia, Malaysia & Singapore”. Business and Human Rights Resource Centre. 2020. Accessed 12 April 2020.
  9. Hosseini (2013). “Pollutant in palm oil production process”. Accessed 24 April 2020.
  10. “Palm Oil: Economic and Environmental Impacts”. European Parliamentary Research Service Blog. 2018. Accessed 13 April 2020.

Read the article on the FoodUnfolded website.


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