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Iceland's managing director has revealed that the palm oil ban has come at a cost of "millions of pounds" to Iceland
Speaking at The Economist’s Sustainability Summit in London late last week, Walker was asked to explain why he had committed the supermarket to removing palm oil from all of its own-brand lines last year, and how alternatives were sourced.
He revealed that although the pledge had been made public in April 2018, work to develop a strategy to remove the oil from Iceland’s food, health and beauty lines had begun almost two years before, after a trip to Indonesia inspired him to “leverage” the company’s scale to “take a stand against deforestation”.
“We genuinely believe in doing the right thing and have quite a long history as a corporate activist,” Walker said, citing his father Malcolm Walker’s decision to ban genetically modified (GM) food from Iceland products in the 1990s, shortly after founding the chain.
“We are good at taking a principled stand and hopefully affecting wider change. With palm oil, the urgency of the crisis could not be ignored. We saw a window of opportunity to help organisations like Greenpeace lobby for zero-deforestation palm oil at a time when 146 football pitches of rainforest were being chopped down every hour in Indonesia.”
Iceland’s palm oil ban was unprecedented in the UK’s supermarket sector and, according to Walker, has cost the business “millions of pounds” in sourcing alternatives and re-designing product recipes and formulas. However, it also led to Iceland’s deforestation-themed 2018 Christmas advert being the most-watched of the year after it was controversially banned by regulators for being “political”. In total, 70 million people watched the advert, which features an orangutan that has lost its forest habitat to palm oil farming.
Walker was therefore asked by Economist editor Daniel Franklin whether he had made the pledge for ethical or financial reasons. He immediately denied making the shift for short-term financial gain.
“I certainly didn’t do it for sales,” Walker said.
“When the advert was banned, people were saying it was a PR masterstroke but, although it was the most-viewed Christmas advert of all time– it didn’t do anything for sales. But, of course, it does build a platform to grow the corporate reputation of the brand which, in the long-term, makes good business sense.”
Walker added that Iceland was largely able to take such a long-term view on environmental issues due to two key factors – the business is both privately-owned and family-run. This business model means the company does not have to produce quarterly financial disclosures, which, according to Walker, gives its board the “freedom” to “take a longer-term view for the good of the planet”.
Avoiding unintended consequences
During the discussion, Walker was also asked which alternative raw materials Iceland is now using in place of palm oil, and how the company guarantees that these materials are sourced in a way which avoids deforestation, water wastage, excessive pesticide use and other degenerative agricultural practices.
The question comes as organisations such as WWF are lobbying for the improvement of palm oil supply chain practices instead of an immediate shift to alternatives, due to the fact that palm oil is higher-yielding than any other vegetable or fruit oil source.
Walker argued that he is not “anti-palm oil” but felt that an overarching ban on the material could help the supermarket “take a clear stand and raise awareness” better than the development of a sustainable sourcing programme could.
“I’ll be the first to admit that palm oil has many business benefits – it’s cheap, versatile and malleable throughout the manufacturing process,” he said. “Nothing is wrong with sustainable palm oil, but I didn’t believe there was enough of it available on the mass market to use it and to encourage others to do the same.”
Walker noted that since Iceland announced its pledge, big players in the palm oil sector have made a series of moves to scale up the production of sustainably grown palm, potentially spurred by the supermarket’s activism. Sourcing giant Wilmar International, which supplies 40% of the world’s palm oil, recently pledged to ensure that its supply chains are classed as “deforestation-free” by 2020, for example. Elsewhere, the Roundtable on Sustainable Palm Oil (RSPO) has bolstered the environmental requirements needed to meet its eco-label standards.
These moves, Walker argued, could enable more food and drink and consumer goods companies to alter their palm oil portfolio and include a higher proportion of sustainably sourced raw materials.
Iceland, however, will continue to focus on alternatives such as rapeseed and coconut oil, which will be sourced from areas which are classed as having low deforestation risks and low biodiversity value – such as rapeseed farms in Lincolnshire.
Environmentalism for everybody
When asked to detail how the palm oil phase-out had worked behind-the-scenes, Walker explained that it had cost Iceland millions of pounds upfront and taken more than two years of “tireless” work.
Specifically, it required Iceland to assess the environmental and social sustainability of supply chains in alternative materials; to end its existing palm oil contracts on good terms and to re-design all own-brand lines which previously contained palm oil.
Despite the time and costs involved with the palm oil phase-out, Walker added that Iceland would strive not to pass these costs onto its customer base. The decision to take a financial hit in order to make alternatives to unsustainable palm oil more available, he said, was made in a bid to “keep sustainability accessible to everyone” and engage as large a group as possible in the brand’s activism.
“There is a demand for sustainable products and it is growing all the time, but some people can’t afford to pay extra for that,” Walker concluded.
“Internally, we regularly talk about democratising environmentalism because it’s currently a very middle-class thing. What excites me is that if we can get our customers to really care about these issues and make decisions based on that, that’s where we can really start to impact change.”
Walker’s comments echo the findings of a recent survey of 2,000 UK adults which found that 25% believe making sustainable choices would be too expansive for them. Similarly, Friends of the Earth’s chief executive Craig Bennett has argued that most companies offering “eco-friendly” products and services are “stuck” in a “white, middle-class ghetto” and failing to engage working-class consumers.
Sarah George
If you look at companies like Unilever, with its massive profits, it could easily use the old alternatives to #palmoil. But will not, because it puts profits before people and planet. The WWF, is at fault as well, as it knew about the problems in 2005, but continued to support a failed certification system. That is why, I no longer support the #wwf.